Lords Sitting of 22 July 1975

Preamble
The House met at half past two of the clock: The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Leicester.

NHS ADMINISTRATIVE STAFF
Lord WALLACE of COSLANY: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps are being taken to avoid an excessive growth of administrative staff in the re-organised National Health Service operating against the primary objective of patient care.
Lord WELLS-PESTELL: My Lords, my noble friend will be aware that my right honourable friend the Secretary of State for Social Services has expressed dissatisfaction with the management arrangements resulting from the form of reorganisation introduced by the previous Administration. However, we are doing our best to ensure that management costs are kept to the minimum necessary to maintain an acceptable standard of patient care. A planning system is being introduced to ensure that health authorities bring commitments, including staff employed in administration, into balance with resources according to established priorities. Authorities are fully aware of the need for strict economy in appointments to management posts generally.
Lord WALLACE of COSLANY: My Lords, while thanking my noble friend for that Answer, may I express my sympathy with the Secretary of State for the legacy she inherited? May I ask my noble friend whether he is aware that drastic economies can and must be made by the reorganised Service without affecting the care of patients? Would he agree that in any event there is a logical case for either the reduction or the abolition of Regional Health Authorities, where much planning is done in ivory castles but
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very little by way of practical care for the patient?
Lord WELLS-PESTELL: My Lords, broadly speaking, the Government would accept what my noble friend has said. Nevertheless, we are in a position where we have to accept the reorganisation and structure as it is. We are not unmindful that a good deal has to be done on the administrative side. This is a matter which my right honourable friend has very much in mind, and in hand.
Lord PANNELL: My Lords, may I ask my noble friend whether the Secretary of State has looked at the way in which the salaries of the administrative staff have spiralled? Will he also look into the question of how far their salaries are fixed by bodies over which the Minister appears to have no control?
Lord WELLS-PESTELL: My Lords, I can say to your Lordships that we have this matter in mind. Some senior and middle management grades are subject to control by the Department. These are posts which start at about £4,008, rising to £4,983. An allocation of a quota of posts has been imposed on each region.
Baroness SUMMERSKILL: My Lords, can my noble friend tell me how the ratio between the administrative and nursing staffs has altered, and to what extent?
Lord WELLS-PESTELL: My Lords, the ratio of administrative and clerical staff to consultants, doctors, nursing and ancillary staff is as follows. In 1970, there was one administrative person as against 7·6 consultants, doctors, nurses and ancillary staff. The ratio fell in 1971 to one as against 7·5; it fell again in 1972 to one as against 7·4; and in 1973 the ratio was one as against 6·9. I am sorry that I cannot give your Lordships the 1974 figures, because these are not available.
Lord ABERDARE: My Lords, is the noble Lord aware that there are naturally difficulties in any reorganised Service, because it takes time to settle down? Is he also aware that the reorganised National Health Service absorbed whole departments from the local authority health departments? Therefore, necessarily, the administrative staffs increased and I do not think it either generous or right of

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the noble Lord to blame all his difficulties on the previous Government.
Lord WELLS-PESTELL: My Lords, I was not aware that I had done that. I merely said that I did not like it, which is rather different. It is not true to say—I am not suggesting that the noble Lord said this, but he may have implied it—that all the staff employed by local authority health departments were transferred on 1st April 1974. The fact is that we are alive to the situation, and I want to assure your Lordships that we are dealing with it.
Lord SLATER: My Lords—
Several Noble Lords: Order!—
The LORD PRIVY SEAL (Lord Shepherd): My Lords, with respect to my noble friend, the noble Baroness, Lady Robson, has been trying unsuccessfully for some moments to put a question.
Baroness ROBSON of KIDDINGTON: I thank your lordships very much. I am very polite, my Lords, so I do not start speaking until I get on my feet. May I ask if the noble Lord, Lord Wells-Pestell, agrees that, irrespective of whether or not one agrees with the present structure of the National Health Service, a large part of the high administrative costs can be attributed to the proliferation of designated posts at all levels of the Service coming out from the departments? Is the noble Lord aware that it seems to many working within the Service that posts such as area linen service managers and sector administrators are unnecessary at this time of shortage of money? Also, will the noble Lord agree that the Whitley machinery is to a certain extent being used to advance career structures by creating posts at high levels?
Lord WELLS-PESTELL: My Lords, we are not unmindful of what the noble Baroness has said, but I said in my Answer to my noble friend that a planning system is being introduced to ensure that health authorities bring these commitments into balance with resources and priorities. This is one of the matters we are dealing with.
Lord PLATT: My Lords, is the Minister aware that this is the fourth time that I have tried to speak? Will Her Majesty's Government accept that improvements and economies which could
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be made in the Health Service can be made only by the co-operation of the administrative and medical staffs, and that this co-operation has been made a great deal more difficult by the re-organisation of the Health Service?
Lord WELLS-PESTELL: My Lords, I do not think any useful purpose would be served by my saying that I agree. What we must give our minds to is the fact that certain difficulties exist. It is not much use thinking in terms of the past, but rather we should deal with the problems that face us at the moment and try to do something about them.
Lord SLATER: My Lords, is my noble friend aware that I should not have been so keen to ask the question which I am now going to ask if it had not been for his first Answer, which suggested that the previous Government were responsible for the changeover? Can my noble friend tell me, as a past member of a hospital management committee, whether the new organisation which now exists is more efficient than the organisation it replaced?
Lord WELLS-PESTELL: My Lords, I do not think the Government are in any way questioning peoples' efficiency. What we are concerned about is keeping some trends within certain limitations.

NHS AUTHORITIES: CHAIRMEN'S REMUNERATION
2.44 p.m.
Lord WALLACE of COSLANY: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what is the annual cost of fees and allowances paid respectively to chairmen of Regional Health Authorities and chairmen of Area Health Authorities in the reorganised National Health Service.
Lord WELLS-PESTELL: My Lords, chairmen of each of the 14 Regional Health Authorities and 90 Area Health Authorities in England and the eight Area Health Authorities in Wales are entitled to taxable remuneration of £2,000 per annum. Not all chairmen have drawn

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their remuneration. Chairmen are also entitled to travelling and subsistence allowances at prescribed rates.
Lord WALLACE of COSLANY: My Lords, is my noble friend aware that this provision is an absolute nonsense and is not justifiable? Many unremunerated members of Area Health Authorities and Regional Health Authorities do as much work, if not more, and do not ask for any reward other than that of giving service to the Health Service. Should not this arrangement be abolished?
Lord WELLS-PESTELL: My Lords, the thinking of the Government is that it is desirable to have a level of remuneration so that the responsibilities which go with the job of being chairman can be fully discharged. It is felt that, in the circumstances, some remuneration is desirable.
Lord WALLACE of COSLANY: My Lords, is my noble friend aware that this procedure was never carried out when we had hospital management committees taking equal responsibility in those very difficult days, and there is no justification for it? Would it not be advisable to have a general debate on this question and to seek to amend the Act?
Lord WELLS-PESTELL: My Lords, obviously I will take note of what my noble friend has said and will certainly see that his remarks are conveyed to my right honourable friend the Secretary of State.
Lord INGLEWOOD: My Lords, may I ask the noble Lord whether a way has yet been found whereby co-opted members of these authorities are entitled to the same allowances as appointed members, when both categories do exactly the same work?
Lord WELLS-PESTELL: My Lords, that is a slightly different question from the one I have been asked to answer. It is a matter I should like to look into and if I have anything to say about it I will write to the noble Lord.
Lord INGLEWOOD: My Lords, I thank the noble Lord.

CIVIL AVIATION POLICY
Lord BALFOUR of INCHRYE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, before making any Ministerial announcement of a new civil aviation policy prepared by Government Departments, they will consider setting up an independent committee, on the lines of the former Edwards Committee, in order to allow private and Government operators and other interested parties opportunity for their views on future civil aviation policy for the United Kingdom to be made known to and considered by that committee, which would report its findings and recommendations to Her Majesty's Government.
The MINISTER of STATE, DEPARTMENT of INDUSTRY (Lord Beswick): My Lords, the airlines and other interested parties were given an opportunity to make their views known in the course of the Review of Civil Aviation Policy which has recently been completed. My right honourable friend the Secretary of State for Trade considers that it would be in the best interests of the airline industry if he were to end uncertainty by announcing his decisions on the Review as soon as possible.
Lord BALFOUR of INCHRYE: My Lords, may we expect in the near future, before the Summer Recess, a declaration by Her Majesty's Government of policy on civil aviation? Secondly, would it not command a wider measure of public support and support from operators, Government and private, if before such a policy declaration was made, the policy proposed had been reviewed and its possibilities, present and future, reported upon by an independent committee of experts such as the Edwards Committee on whose Report the present policy is founded?
Lord BESWICK: My Lords, I was a great supporter of the kind of review we had which resulted in the Edwards Report, but I do not think it would have been advisable to have another wide-ranging and long-sitting committee

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again going into the industry. As to the first part of the noble Lord's question, although the Governmental machine tends to become a little snarled up at this time of year, I hope it will be possible to make a statement before the Recess.
The Earl of KINNOULL: My Lords, can the Minister give an undertaking that, if a major decision is to be made possibly affecting the future of British Caledonian, the evidence the Government have as a result of this Review will be published before that decision is made?
Lord BESWICK: My Lords, I suppose it depends upon what one means by a "major decision". If a decision was so major—I am talking in hypothetical terms—it may even be necessary to have legislation. As for the evidence given to the Review Committee, I shall see whether it is possible to publish factual statistical information.

ISRAEL AND THE UNITED NATIONS
2.50 p.m.
Lord JANNER: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they are taking about,

(1) the decision of the Jeddah Conference urging the exclusion of Israel from the United Nations, and

(2) the violation of the UN Charter by some of the Special Agencies which refuse to allow the full participation of Israel in their activities.

The PARLIAMENTARY UNDERSECRETARY of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, we are closely watching the situation referred to in the first part of the Question, and are in touch with a number of Governments about it. As for the second part, UNESCO is the only specialised Agency which has limited the participation of Israel in its activities. The United Kingdom voted against the UNESCO resolution which invited the Director-General to withhold assistance from Israel in the
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fields of education, science and culture. We voted in favour of Israel's being allowed to participate in the European Regional Grouping.
Lord JANNER: My Lords, I thank my noble friend for the first part of his reply. In the event of the kind of strategy that at present is being used against Israel by five or six of the specialised Agencies and the ultimate consequent result, that a resolution was passed at the Jeddah Conference, is ray noble friend prepared to say categorically that if these vicious schemes are pursued to the extent of receiving a satisfactory reply to those views at the United Nations he will join America in vetoing any such suggestion? May I further ask him whether he will reconsider the matter of the specialised Agencies because four or five, if not more, of the specialised Agencies have passed resolutions against Israel although they know very well that Israel is foremost in her work in carrying out the objectives of those specialised Agencies?
Lord GORONWY-ROBERTS: My Lords, UNESCO is the only specialised Agency which has limited the participation of Israel in its activities. Other Agencies may from time to time have passed resolutions or expressed opinions on certain matters involving Israel. On the first point in my noble friend's question, we shall certainly vote against any move to suspend or expel Israel from the United Nations Organisation.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, is there not a general point of great importance here? Is it not essential for the future of the United Nations that it should be the Parliament of mankind and not a select company of the elect of mankind? If we start to exclude Members of whom we do not approve, I wonder how many Members the Government think will be left?
Baroness GAITSKELL: My Lords, is it not becoming very urgent—
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I should like an answer to my question.
Lord GORONWY-ROBERTS: My Lords, the answer is that the noble Lord has put fully and conclusively the view of

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Her Majesty's Government on the situation.
Baroness GAITSKELL: My Lords, in view of the fact that the procedures in the United Nations are becoming so complex and so unfair, may I ask the Minister whether it is not very urgent at this time that both Britain and the Western countries should get together to oppose this double standard, in view of the Afro-Asian majority in the United Nations and in view, too, of the double standards about human rights? If we do not do this, is it not possible that Britain herself will be on the list for expulsion because she has suspended certain human rights in Northern Ireland during the Emergency there?
Lord GORONWY-ROBERTS: My Lords, my noble friend draws attention to the unmistakable implications of the kind of policy and attitude which for some years now has increasingly been adopted by certain countries in the United Nations Organisation. I think we could join what my noble friend has said to what has been said by the noble and learned Lord, Lord Hailsham of Saint Marylebone. Together their views represent the view of Her Majesty's Government and, I believe, that of the whole House in relation to this serious threat to the survival of the United Nations as an organisation.
Lord MAYBRAY-KING: My Lords, is the noble Lord aware that, despite the Jeddah decision, this is a critical point of time in Middle East relations? There is a possibility of peace in the Middle East, and most of the Members of this House will wish both our friends in Egypt and our friends in Israel to agree to the settlement which is now within their grasp.
Lord GORONWY-ROBERTS: My Lords, there is certainly the possibility of a settlement. The discussions which are now taking place hold out some hope for such a settlement, and it is precisely at that point that the danger of this kind of move is most marked.
Lord PAGET of NORTHAMPTON: My Lords, does not the difficulty go a little further? Now that the United Nations is a Fascist organisation, in the
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sense that a permanent majority are ruled by one-Party States subject to dictatorship, and a racialist organisation, in the sense that a permanent minority deny equal rights to their citizens because of religious and racialist reasons, is not the point coming when we shall have seriously to consider whether our continued membership is consistent with our principles?
Lord GORONWY-ROBERTS: My Lords, I am certainly very glad to join my noble friend in any denunciation of religious and racial prejudice.
Lord GLADWYN: My Lords, may I ask the Minister whether or not it is a fact that in 1952 Egypt refused to abide by a perfectly valid decision of the Security Council regarding the free passage of Israeli merchantmen through the Suez Canal, and that there was then no question of Egypt being excluded from the Security Council or expelled from the United Nations?
Lord GORONWY-ROBERTS: My Lords, with great respect, it may be more helpful if we do not go into historical detail and apportion blame in a situation whore, as my noble friend Lord Maybray-King has said, there is the possibility of a settlement if everybody will behave with basic common sense and good will.
The Earl of ONSLOW: My Lords, is the noble Lord aware that many of us who think that the Arabs have been badly done by and badly treated by the establishment of the State of Israel and by their further expansion, believe that it is not in the interests of the Arabs for this narrow-minded attitude of mind to be taken to the expulsion of Israel not only from the United Nations but also from the Agencies of the United Nations?
Lord JANNER: My Lords, may I ask the noble Lord a further question? In addition to the United Nations Agency which he has mentioned—UNESCO—there is the World Health Organisation and the recent Women's Year meeting which was held in Mexico when, of all things, a resolution was passed in which an attack was made on the basic principles of the most democratic country in the Middle East, Israel, where women's

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rights are fully respected and where a woman has been Prime Minister. Is it not a fact that we abstain on some of these occasions from voting against such resolutions, and does not my noble friend realise that by doing so we are giving an incentive to those who wish to destroy Israel to carry on with their work of destruction?
Lord GORONWY-ROBERTS: My Lords, I repeat that the only specialised Agency which has limited Israel's participation is UNESCO. I repeat also that from time to time other Agencies have no doubt misused the agenda and procedure to express opinions on the behaviour of one State or another, often that of the State of Israel. I want to make absolutely clear to my noble friend that this country has consistently resisted any attempt to condemn Israel on political grounds during discussion on the agendas of Special Agencies. Sometimes a resolution has been tabled which contains the gravamen of the purpose of the Conference but mixed with it a political attack. In such a situation, an explanation of abstention of vote is recognised to be a resistance to the political part of the resolution while an acceptance of the proper part of the resolution relating to the proper business of the Conference.
Lord BROCKWAY: My Lords, while very strongly welcoming the decision of Her Majesty's Government to oppose the exclusion of Israel from the United Nations on the principles so admirably stated by the noble and learned Lord, Lord Hailsham, may I ask whether it is relevant to the present situation, and not just past history, that we should also urge Israel to carry out the resolutions which were adopted by the Security Council and which Israel has ignored?
Lord GORONWY-ROBERTS: Yes, of course, my Lords, and the resolutions to which my noble friend refers have the unanimous support of the entire UNO; and the negotiations now going on, with some prospect of success, as I have said, are designed to get the various parties together to observe and implement precisely those resolutions. This is not an easy matter, and it is not helped by partisan moves of this kind to exclude one of the parties from membership of the world authority.
Lord SHEPHERD: My Lords, I suggest that we should now move to next business.

PEERS' EXPENSES
3.2 p.m.
Lord SHEPHERD: My Lords, there was no selfish thought in my mind when I made that suggestion! It has been the normal practice in the past with matters relating to expenses, particularly car travel, that a Resolution should be moved in your Lordships' House at the same time as in another place. My understanding is that another place will not be debating these matters until a very late hour tonight, if not a very early hour tomorrow morning. Therefore I suggest that, in those circumstances, it may be prudent not to move this Motion this afternoon but to take it on another day. In not moving the Motion, it does not in any way affect the operative date under which these proposals will be brought forward.

IRON AND STEEL BILL [H.L.]
3.3 p.m.
The LORD CHANCELLOR (LORD ELWYN-JONES): My Lords, I beg to move that the House do now resolve itself into Committee on Recommitment on this Bill.
Moved, that the House do now resolve itself into Committee on Recommitment.—(The Lord Chancellor.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Earl of LISTOWEL in the Chair.]
The CHAIRMAN of COMMITTEES (THE EARL OF LISTOWEL): This Bill has been amended by the Joint Committee on Consolidation Bills. There are further Amendments to be considered in Committee on recommitment this afternoon and I will therefore go through the Bill in the usual way.
Clause 1 agreed to.
Clause 2 [General duty of the Corporation]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 1:
Page 2, line 35, leave out ("in pursuance of section 4(4) of this Act") and insert ("from

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time to time with the approval of the Secretary of State").
The noble and learned Lord said: Where the British Steel Corporation carry out any measure of reorganisation or work of development which involves a substantial outlay of capital, they are required to act in acordance with a general programme settled from time to time with the aproval of the Secretary of State. This duty, imposed by Section 4(2) of the Iron and Steel Act 1949 as revived by Section 7(1) of the Iron and Steel Act 1967, is reproduced in Clause 4(4) of the Bill. Section 4(3) of the 1949 Act as so revived further requires the Corporation to act,
"in accordance with a general programme settled as aforesaid"
in discharging duties under Section 3(1)(d) of the 1967 Act with respect to the promotion of research and the doing of work to enable the results of research to be turned to account.
It is this latter provision, re-enacted in Clause 2(1)(d), which is now proposed to be amended. Under the existing statutory requirements the Corporation may carry out research work in accordance with a general programme approved by the Secretary of State which is not part of the general programme of reorganisation or development involving substantial capital expenditure so approved and the Amendment is required in order to make that clear, as I hope it does. I beg to move.
On Question, Amendment agreed to.
Clause 2, as amended, agreed to.
Clauses 3 to 15 agreed to.
Clause 16 [Borrowing powers of the Corporation and publicly-owned companies]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 2:
Page 14, line 18, leave out from the first ("the") to ("any") in line 19 and insert ("repayment of").
The noble and learned Lord said: This is a paving Amendment for Amendment No. 3. The opportunity is taken to improve the wording of Clause 16(2)(e) to substitute the words "the repayment of any money" for the words "the payment of any money" which now appear
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in Section 19(2)(e) of the Iron and Steel Act 1967. I beg to move.
On Question, Amendment agreed to.
Clause 16, as amended, agreed to.
Clause 17 agreed to.
Clause 18 [Commencing capital debt of the Corporation]:
On Question, Whether Clause 18 shall stand part of the Bill?
The LORD CHANCELLOR: Under Section 18(1) of the Iron and Steel Act 1967 as amended by Section 1 of the 1969 Act, the Corporation are treated as having assumed on 28th July 1967, which was the vesting date under the 1967 Act, a debt of £133,988,359·20 due to the Secretary of State. Since the Bill was introduced it has been drawn to the attention of the draftsman that this commencing capital debt was repaid in full by the Corporation on 29th July 1974. The provisions of Clause 18 concerning this debt, the rate of interest payable, the arrangements for repayment and other terms of the debt, and the disposal of sums received by way of interest or repayment of the debt, are therefore no longer required, and Clause 18 is now unnecessary.
On Question, Clause 18 disagreed to.
Clause 19 agreed to.
Clause 20 [Limit on borrowing by, and investment in, the Corporation]:
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 3:
Page 17, line 18, leave out ("the debt referred to in section 18(1) of this Act") and insert ("their commencing capital debt, being the debt of £133,988,359·20 which the Corporation were treated as having assumed on 28th July 1967")
The noble and learned Lord said: This Amendment is consequential on the omission of Clause 18, relating to the Corporation's commencing capital debt. Although that debt has now been paid off, it is necessary to retain in paragraph (a) of Clause 20 a reference to the moneys borrowed for the repayment of that debt, as under the enactments which this clause reproduces, these moneys are excluded from the limit on the total of the moneys

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which may be borrowed by, or invested in the Corporation. I beg to move.
On Question, Amendment agreed to.
Clause 20, as amended, agreed to.
Clause 21 [Accounts of the Secretary of State]:
The LORD CHANCELLOR: I beg to move Amendment No. 4, which is purely consequential upon leaving out Clause 18.
Amendment moved—
Page 17, line 31, leave out ("18(2)").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 21, as amended, agreed to.
Remaining clauses and Schedules agreed to.
House resumed: Bill reported with the Amendments.

INDUSTRY BILL
3.12 p.m.
Lord BESWICK: My Lords, I beg to move that the House do again resolve itself into Committee on this Bill.
Moved, that the House do now again resolve itself into Committee.—(Lord Beswick.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Earl of Listowel in the Chair.]
Clause 2 [General purposes and functions.]:
Lord ABERDARE Lord ABERDARE moved Amendment No. 29:
Page 2, line 42, leave out ("industrial democracy in") and insert ("good industrial relations in, and appropriate means of employee involvement in the affairs of,").
The noble Lord said: I beg to move Amendment No. 29. We are discussing Clause 2 of the Bill which includes the purposes for which the Board can exercise their functions. We made considerable improvements in this clause in the course of yesterday's Sitting, and we now come to the purpose in paragraph (d) which says:
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"promoting industrial democracy in undertakings which the Board control".
The purpose of the Amendment is to define rather more closely the words "industrial democracy" and to substitute the words,
"good industrial relations in, and appropriate means of employee involvement in the affairs of undertakings which the Board control".
We put down this Amendment following on Amendments that were put down and which found favour in Committee in the course of the Scottish and Welsh Development Agency Bills. In the course of the fairly extensive debates we had on both those Agency Bills, opinions were expressed that the term "industrial democracy" was hopelessly vague, and could mean anything to anybody. In one instance, in the course of the debate on the Scottish Development Agency Bill on 10th June 1975, the noble Lord, Lord Taylor of Gryfe, for example, expressed an opinion which I should like to quote. The noble Lord said:
"When I read this phrase in the Bill I consulted a variety of sources—for example, the Institute of Management, the Institute of Personnel Management and some trade unions—and I got a variety of interpretations as to what 'industrial democracy' means. To that extent it is dangerous to put it in the Bill because if people are trade unionists, they feel that industrial democracy means something different. In these days with the popularity of the concept of workers' control. 'industrial democracy', for many trade unionists, involves a degree of workers' control."—(Official Report, 10/6/75; col. 174.)
That was the opinion of the noble Lord, Lord Taylor of Gryfe. All I would say is that it is open to a multitude of different interpretations. To some on the extreme Left it can mean worker control of industry. To the TUC it seems to mean worker directors on the board. To the CBI, it probably means appropriate ways of involving those in the employment of the company, in a particular firm, with the fortunes of that firm. To others it means greater influence for shareholders, or for others still, it may mean a more democratic form of election of trade union officials. It covers a whole spectrum of different concepts. There is no exact definition of the term.
I really do not think that it is right in a Bill of this sort to lay a legal obligation on the National Enterprise Board to promote something which nobody can define. Therefore, I think it important that we

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should find more exact words. We have repeated in this Bill the words which have been inserted in the Scottish and Welsh Development Agency Bills, as a result of decisions taken by your Lordships. Even in the course of discussing the matter then, we were quite freely saying that these particular words may not be exactly right, and that we would be open to any suggestions to improve them. I would hope that the Government, too, might help us, if they prefer other words that more accurately define what they have in mind, rather than this vague phrase "industrial democracy". Or if they prefer, let us amend the interpretation clause to give the definition of what these words mean. But so far as I am concerned at the moment, these are the words which seem to come nearest to what we have in mind. I hope your Lordships will agree that this is a sensible Amendment. I beg to move.
Baroness WOOTTON of ABINGER: It may well be true that the phrase "industrial democracy" is rather vague. The same is true of the word "democracy" without any kind of prefix. There is one thread running through every use of that term, which is that it implies that movements and initiatives should come from the bottom upwards as well as the top downwards. An important difficulty about the words suggested by the noble Lord, Lord Aberdare, is that they seem to me to be essentially paternalistic and to come from the top downwards. We are to have "good industrial relations"—that can be two-way!—"and appropriate means of employee involvement". Who decides what is appropriate? Who decides the measure of involvement. It seems to suggest that this should come from the top downwards.
I am reminded of the famous remark alleged to have been made by the late Beatrice Webb when she was about to marry Sidney Webb, her fellow industrial/social investigator. She said: "When we are married, Sidney will decide all the important things. I shall decide all the unimportant things. I shall decide which are the important things." I think the noble Lord, Lord Aberdare, must have taken that as his motto in choosing his form of words.
It appears to me that management has decided what are the important things, and the workers, or the employees, or the
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shareholders, as the case may be, are to be left with the unimportant things. Therefore, I suggest that the words "industrial democracy" have a clear, though not exact and precise meaning. They have a very clear indication about movement from the bottom up, not just from the top down. There is the implication of a two-way movement. The words chosen by the noble Lord, Lord Aberdare, have a paternalistic ring, as coming from papa to the children.
3.20 p.m.
Baroness LEE of ASHERIDGE: I should like to support what Lady Wootton has said, and perhaps put before the Committee one further argument. Industrial life has taken away all pride of craftsmanship from very many men and women. Even in the mining industry, as some of my colleagues on these Benches know, the old miner had a great sense of craft, and this is true throughout practically the whole of industry. How can we give back to men and women a sense of achievement, of craftsmanship, of creating something? Of course, we cannot go back to handloom weaving, but we can give them this sense of belonging—whether they are making boots, motor cars or whatever it may be—if they are consulted on a dignified basis; if their minds and hearts are involved as well as their hands; if they, too, are thinking, "What is wrong with our foreign market? How can we increase exports?", if it is an exporting industry; if they feel that far from endangering their job they are improving it when they have suggestions about new ways of doing things that could be labour saving. What is deeply wrong at the moment is that so many men and women, who have no capital at all except being able to earn their daily bread, say, "Well, it is their affair. Let them get on with it." If we could only change that mood into: "This is our affair, too; we are involved in all those senses", I think that is the one great revolution that could save this country from chaos and worse.
I am not enthusiastic about the wording. I think we might as well stick to "industrial democracy", although I agree with what has been said by the noble Lord, Lord Aberdare, that that, too, is a phrase that can be used in many senses. But what is important is that we should understand the reality, should understand

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that there is a very high level of trade union leadership in this country, that we have men on the shop floor who are as fit, and sometimes fitter, for management as those at the top. I am not saying that they are all good at the bottom and all bad at the top, and I am not saying it the other way round, because neither would be true. But we still have an opportunity in this country to do something in this field of involvement that could help to bring Lenin's prophecy true; because even Lenin said once upon a time, a long time ago, that this might be the one country that could go forward to form a civilised democratic socialism without all the agony and suffering of a bloody revolution.
Lord ROCHESTER: We on these Benches would be happier for the paragraph to be amended in the way suggested in this Amendment, for the Bill would then emphasise the importance not of the general concept of industrial democracy—significant though that term is so far as the Liberal Party is concerned—but of more precise things that, as the noble Lord, Lord Aberdare, said, everyone can understand in the same way; namely, good industrial relations and employee involvement. As I see it, and I may be wrong, this Amendment is in some sense a protestation against the idea that our industrial problems can be solved merely by passing laws; for example, that information should be disclosed to representatives of relevant trade unions.
It seems to me also that, more positively, it is something of an affirmation that what we should together aim at is the every day involvement of employees in the affairs of their companies, particularly at the level where they are most affected by decisions that are taken; namely, the shop floor level. I know from my own experience that this is something that employees really want, perhaps more than anything else in this sphere, and that when they get it they are satisfied. I would, if I may, respond to the noble Baroness, Lady Wootton, by saying that in my experience involvement of this kind can, and does, emanate from the bottom and work up, and that improvements in this sphere are often initiated by workpeople rather than by management alone. For these reasons we are in sympathy with the terms of this Amendment.
Lord LEE of NEWTON: I think it was Winston Churchill who suggested that democracy is the worst system, with the exception of all others. When we begin to try to define "industrial democracy" we get into an even worse situation than when we try to define "political democracy". Industrial democracy presupposes that there is equality on the two sides, and that can never be. Indeed, in terms of industrial democracy trade unions must always be a permanent opposition; in other words, they cannot have an election in which they change places with the employer and assume his responsibility. It is a different type of responsibility.
Although I agree with a great deal of what the noble Lord, Lord Aberdare, said about the words "industrial democracy" I suggest that the words in his Amendment do not form the basis of that which we all understand by industrial democracy. As he said, within the trade union movement itself there are some who advocate workers' control as being the equivalent of industrial democracy, but many other trade unions would not accept that at all. Indeed, throughout the TUC one finds that some trade unions will give it that interpretation, while others say, "Management is no concern of ours. Our job is to get the best terms and conditions for our members". Both attitudes are defensible, but you cannot marry the two. This is one of the problems which we meet when we try to define how far we go with industrial democracy.
In the days when there was pretty massive unemployment and people were threatened with even more, I accepted reductions in piecework prices, and so on, in order to win a contract. The winning of that contract determined whether or not many hundreds of my people retained their jobs. But I would never have accepted reductions had the firm not opened its books to me and proved to me that unless we could tender at a certain level we would not get that contract. There is nothing in the noble Lord's Amendment which would have induced me to accept lower conditions in order to get a contract. Unless we can decide how we bring together problems of this sort, I think the expression "industrial democracy", which is now widely understood, must remain.

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I said that there is a great division, a very honourable division, between trade unions and their leadership as to their attitude towards industrial democracy, meaning either workers' control or that it is their job to get the best conditions they can for their members. But in spite of those differences, there is a general acceptance that where you improve conditions of employment, where you are taking the workforce more and more into your confidence—in other words, some of the things which my colleagues in the Government are trying to achieve in other ways—and as long as it can be seen that advances are taking place, we are fulfilling that which we understand by industrial democracy.
I thoroughly agree with what my noble friend Lady Wootton said. These things can hardly be defined. I suppose these are the reasons why the French think we are illogical, but the fact is that ours work and theirs do not. At this stage, I would ask the noble Lord not to press too far with this kind of Amendment. There is a huge fund of good will within the TUC and the CBI. Both of them are now meeting to try to find new ways of working the NEDC arrangements. Again, we are thinking in terms of how we can improve the performance of the Little Neddies. These are both spheres in which employers and trade unions are meeting to try to find a common answer to these difficult problems. Therefore, if we begin to delete at this stage such expressions as "industrial democracy" from our legislation, it would be a very backward step indeed.
Baroness EMMET of AMBERLEY: I wonder whether I might suggest a simple solution, because I am sensitive to the criticism the noble Baroness, Lady Wootton, has made about the words "appropriate means". If those two words were left out the Amendment would read:
"good industrial relations in, and of employee involvement in the affairs of,"
It seems to me that that would take out the two offending words which have been mentioned by the noble Baroness.
3.33 p.m.
Lord BRUCE of DONINGTON: I hope that we shall be able to persuade
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the noble Lord, Lord Aberdare, to withdraw his Amendment. In my view, this subsection is one of the most important parts of the Bill because it provides the opportunity for us to be able to extend not merely worker involvement in industry or in the affairs of the companies where they happen to be, but also progressive worker participation in the affairs of the company until we get rather nearer to what becomes generally understood as industrial democracy.
We are a long way off those days when, if one went to the industrial Midlands or to parts of the East End of London, one saw notices outside factories saying, "Hands wanted". In those days all the managements of the firms were interested in was "hands". They did not even want people; they did not want people's thought. They merely wanted "hands", physical labour within their factory. I know we have progressed a good deal since those days, but in my mind I somehow detected just a trace, and perhaps more, of that philosophy in the Amendment put forward by the noble Lord.
If one goes into an industrial firm these days, be it large or small, one most depressing thing to be observed is the amount of wasted talent and intellect of the people employed. Most people who work in factories these days use only a small fraction of their understanding of the world, its events, their knowledge of techniques, and even their knowledge of economics and management. Only a fraction at any one time of a person's real capability is used within the factory in which he or she works. This is part of our general social problem. It means that men and women, knowing perfectly well that they have capabilities far beyond the limited capabilities that are used by them on the production line, become frustrated. They lack purpose, they feel themselves condemned for a long period of time in doing a job that is really far below their capabilities. A good number of social ills arise from this.
Returning to the factory or the workshop itself, over the country as a whole the quality of management it not very even. There are companies with exceptionally good managements. There

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are companies, to which I alluded yesterday, which must have very bad managements indeed, and where the attitudes of the workers in the factories must reflect a degree of discontent and must ultimately cause the whole production within the factory to be far lower than it could properly be. The steps taken in this Bill, the purposes that are asked for in this Bill, are very modest. There are other countries in Europe, notably Germany, the Netherlands, Belgium, Austria, Norway, Sweden, where worker participation in the management of industry is given the full force of law. That is not even asked for in this Bill.
One has only to go to Germany to find out just how worker participation works. An employee in a factory feels that he is really part of the undertaking, and can use an ever increasing amount of his own intellect towards guiding its destinies. As is well known, already in Germany they have supervisory boards where, by law, about half of the persons on the board represent the management, about half the trade unions, with the odd sprinkling of so-called independent and neutral people to hold the balance. It is quite true that the German performance in industry as compared with our own has been considerably better owing to a far better rate of capital investment, to which I have referred in earlier speeches that I have been privileged to make here, but there can be no doubt that part of the success of German industry is due to the fact that in Germany the worker, in relation to management and to the enterprise in which he works, occupies a far higher status, a far more equal status than his counterpart at present has in many, indeed most, of the industrial companies in this country.
I hope that the noble Lord, Lord Aberdare, will have second thoughts about his Amendment. If he leaves the Bill as it is I do not think he will find that the forces of violent revolution, of Leftist subversion, will be let loose on the country, because we in this country always proceed gradually, step by step, and this clause in the Bill is just one step in one of the most important Bills ever to come before your Lordships. Therefore I hope that the whole Committee will put itself solidly behind this clause.
Viscount MASSEREENE and FERRARD: I would agree to a certain extent with the noble Lord who has just sat down when he says that there are many employees who would like to take an active interest in their company. However, with reference to what the noble Baroness opposite said about the difficulties of employees acquiring capital, may I point out that there are many firms in this country who give shares to their employees, but I am afraid it has not been very successful. They have found that the majority of the employees sell them instantly. I do not know how they spend the money, whether on beer or gambling, but apparently they do not want to acquire capital. If you give them free shares, why do they not keep them and amass them?
The Earl of ONSLOW: Will the noble Viscount give way for one moment?
Viscount MASSEREENE and FERRARD: No; I am sorry, I will not give way. I have often spoken in this House in encouragement of employees taking an active interest in the management of their company. I have tried it. I have appointed a worker to the board of a company. While he was a very intelligent person we found that once he was on the board many other employees—and I much prefer the word "employee" to "worker"; everybody works—disregarded him.
Baroness WOOTTON of ABINGER: Does the noble Viscount think it is characteristic of industrial democracy or any democracy that he should appoint? Democracy implies that the movement comes from below. When the noble Viscount says, "I appointed a person to the board", does he think that that is a democratic method of choosing that person?
Viscount MASSEREE NE and FERRARD: I am afraid I cannot agree with the noble Baroness. The ancient Greeks invented democracy, and the democracy of ancient Greece was a democracy of the élite; Greece was founded on the slave State. When the noble Baroness says that democracy comes from below I really cannot agree with her. I certainly agree that here, in this country in these times, we have a completely different democracy

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from that of the ancient Greeks. I do not quarrel with that at all; but I would certainly quarrel with the democracy of the ancient Greeks. I am saying that I am all for worker participation—for those workers who want it—in the management of their company. But many of them may not have the knowledge to understand the problems of management or capital. Perhaps some firms run management courses. That is an excellent idea. Do the nationalised industries run courses for their workers to teach them about management and capital? Perhaps they do; I do not know. To appoint a workers' committee to run a company when the workers have had no experience in management or economics or capital is the same as if I was appointed to a committee to advise on nuclear fission, about which I know absolutely nothing. I am all for participation, but for Heaven's sake let us have sensible participation! There is another point here—
A Noble Lord: Shut up!
Viscount MASSEREENE and FERRARD: No, I will not shut up! We hear the cry, "No taxation without representation"—I quite agree that that does not apply to your Lordships—but you might as well say in regard to workers' control, "No control without financial responsibility". What is sauce for the goose is sauce for the gander. We have to be very careful in the use of this vague term "industrial democracy" that we do not fall into industrial anarchy. I will now sit down and would say that I heartily support the Amendment.
The Earl of ONSLOW: I wonder—
Lord LOVELL-DAVIS: Would the noble Earl give way for a moment? We have gone on for a very long time on this one Amendment and we have a long way to go. I wonder whether I might be allowed to answer.
The Earl of ONSLOW: Just four seconds. I was very sympathetic to the Amendment moved by the noble Lord, Lord Aberdare, until I listened to the speech by my noble friend Lord Massereene and Ferrard and also to the speech of the noble Baroness, Lady Lee of Asheridge. It seems to me absolutely right that workpeople or staff—call people
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who work for you what you will—should have the maximum say in how an industry is run, and it is also to the sensible employer's interest. I speak only from my own experience in agriculture. I do not employ very many men but I get an enormous amount of sound advice from them, and I think the more that industry follows this sort of practice and not that of, "Oh, they don't know anything about it", as epitomised by the speech of the noble Viscount, Lord Massereene and Ferrard, the better.
Viscount MASSEREENE and FERRARD: Nonsense!
The Earl of ONSLOW: That attitude explains to me why in some industries we have very bad industrial relations. I should like to make one point. The words "industrial democracy" have certain shibboleths attached to them. In other words, it has become a bit of class warfare, and the Amendment, as proposed by my noble friend Lord Aberdare, and the point then taken by the noble Baroness, Lady Wootton, changed for the better by my noble friend Lady Emmett, would seem to me to get it about right. It takes that element of sloganising out of the words "industrial democracy". But because of my sympathy for the Amendment of the noble Lord, Lord Aberdare, please do not let anybody think that I should like anything other than the maximum amount of use of human beings' brains and the dignity of the people who work for you. It is in the employers' interest so to do and that seems to me a good bargain.
Lord LOVELL-DAVIS: This Amendment has come up with monotonous regularity in various stages of the Scottish Development Agency and the Welsh Development Agency Bills in both Houses, and here it comes again in connection with the Bill before us, having been thoroughly aired in another place. The noble Lord, Lord Aberdare, has said that the Amendments to the Scottish and the Welsh Agency Bills found favour in your Lordships' House. They certainly did not find favour on this side of the House, and of course they are being reinstated in another place.
Noble Lords have argued that the term is imprecise, and unclear, but I think it is clear to all those who have thought

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objectively without unreasonable prejudice about the concept against the background of our past and present industrial problems. Our industrial achievement has been and is constantly handicapped by the lack of proper contact, of shared involvement between the management and the managed, between those who contribute one thing and those who contribute another, both essential to the common end. As the noble Lord, Lord Rochester, pointed out, this is not the whole story, but anyone who has tried to create and sustain enthusiasm in a company where there is a lack of a sense of identity with the aims of the company—what my noble friend Lady Lee referred to as a sense of belonging—will know how hopeless a task it is. That is why progressive companies—and unhappily I have seen more of them while abroad on business than I have here at home—already operate some form of industrial democracy, taking employees into their confidence and involving them in decision-making.
We are talking about participation and, as my noble friend Lord Bruce has said, perhaps this is the most important matter. To achieve it means fundamental changes in attitudes, in the class structure of industry and in the balance of power and responsibility in industry. It is not just a matter of handing out a few shares as suggested by the noble Viscount, Lord Massereene and Ferrard. His whole approach and the tone of his intervention were utterly at variance with my view of what constitutes industrial democracy. Increasingly, speaking to ex-colleagues—directors and managers of companies, even those who are not exactly cheer-leading for the present Government—I find that the concept of industrial democracy carries much wider acceptance than one would imagine to be the case from what has been said by noble Lords opposite during the Welsh and Scottish Development Agency Bills, and during the passage of this Bill.
The words "promoting industrial democracy" have been used quite deliberately in the Bill, because the Government are committed to a far-reaching extension of industrial democracy in both the public and private sectors of the economy. The Government have announced their firm intention to introduce legislation in the 1976–77 Session and the NEB will be
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expected to be among the first to implement the proposals which the Government make. The word "democracy" has been used advisedly. "Employee involvement" is too weak a term. "Industrial democracy" does not mean just involvement, but involvement in a way which parallels political democracy. It means provision for the proper democratic representation of everyone who contributes to the performance and success of a company.
It is not necessary to define "industrial democracy" in detail; it can take many forms, just as different countries have evolved different forms of political democracy appropriate to their circumstances. As my noble friend Lady Wootton pointed out, it is a two-way movement, not a movement from the top to the bottom. The difference between industrial democracy and employee involvement is the difference between sharing decisions and consulting about decisions, and that is not simply involvement when and if it suits management on terms dictated by management, which is just the sort of paternalism to which my noble friend Lady Wootton referred.
To attempt to provide a watertight legal definition of "industrial democracy" for the purposes of this Bill would be an impossible task and a quite unnecessary one. The fact remains that the broad concept is fundamental to the solution of our industrial problems. My noble friend Lord Bruce of Donington put his finger on the salient point in my argument, when he said that we cannot afford to waste, as we are wasting, the talent available to us. We must draw out and use the full potential of all our people, because it is there if we want to use it. I hope, therefore, that the noble Lord, Lord Aberdare, will accept my argument and decide to withdraw his Amendment.
Lord ABERDARE: We have had a great deal of advice from all quarters of the Committee and, in my view, it has been a valuable debate. There is not much difference between what we and the Government are seeking to achieve, and I agree with my noble friend Lord Onslow on that subject; he seemed to have the ideas which we share in common. In particular, I was deeply interested in what was said by the noble Baroness, Lady Lee of Asheridge, when she spoke

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of the need to involve the minds and hearts of workers. This is precisely what we meant by our use of the word "involvement" in the Amendment, but she did not like our form of words, nor did the noble Baroness, Lady Wootton. There is the difficulty that the words are imprecise and it is difficult, once one starts defining them, not to have people criticising various aspects of them. Nevertheless, what we are after is involvement, or what the noble Lord, Lord Bruce or Donington, preferred to call "participation", which seems to be much the same sort of word; the noble Lord, Lord Bruce, is always very challenging and it is difficult to avoid wanting to spend hours arguing with him.
Let me simply say that the situation in Germany is extremely different from what it is here. First, the trade union organisation is different and usually they have to deal with only one trade union in a major industry and not, as in our case, with a large number. Secondly, the whole system of encouragement of free enterprise and profitability is a very different scene there from what we have, but I will not go into a long discussion of that at this stage. With one thing the noble Lord, Lord Lovell-Davis, said I agree entirely, and I wish that I had said it; namely, that a great many firms in this country already practise what we have in mind. It can take various forms in different firms and this is something about which we shall have to think more closely, but for the present I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
3.55 p.m.
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN moved Amendment No. 31:
Page 2, line 44, at end insert—
"( ) promoting invention and innovation in industrial undertakings; and".
The noble Lord said: This Amendment is brief and simple. It is designed simply to ensure that the four functions of the Enterprise Board as set out in Clause 2 shall be increased by one; namely, that it shall be a function of the Board to assist in the promotion of invention and industrial innovation in industrial undertakings. This Amendment may not be politically exciting, but I urge it on the Government
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as being of immense potential importance to the United Kingdom economy. It conforms with the general main purposes of the Bill and it is the duty of the Government at all times to foster and assist, and always to be seen to be fostering and assisting, the development of invention and innovation for the benefit of industrial undertakings.
Of course, the main object of improving innovation in companies is to improve their profitability and, to borrow words which were used in your Lordships' House yesterday, this should assist in enthusing and revitalising industry. I should, perhaps, declare some interest in this matter, in that only recently I have been elected President of the Institute of Inventors and Patentees, and all my professional life at the Bar has been concerned with inventions and technical matters both nationally and internationally.
The word "innovation" in an industrial context is often misunderstood and, as your Lordships will be aware, it is often the subject of a plethora of platitudes. It may be of help, therefore, if I reminded the Committee of the definition of "innovation" as adopted by the Central Advisory Council on Science and Technology, and it is a definition which, as many of your Lordships will know, is accepted not only by experts in the United Kingdom but also in America. The definition is that innovation comprises the technical, industrial and commercial steps which lead to the marketing of new manufactured products and to the commercial use of technical processes and equipment. I emphasise at this stage that in this definition the word "marketing" in relation to innovation is important and that the words "commercial use" are of importance in understanding what is meant by innovation.
Quite simply, the development of innovation in an industrial undertaking involves a wide range of talents among employees, from research to marketing, and this aspect is sometimes not fully understood. Successful innovation in an industrial undertaking therefore implies taking a new process or a new product to the stage where it earns substantial profits for the undertaking. As your Lordships will be aware, successive Governments have from time to time emphasised

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the importance of supporting the development of innovation and they have referred to the benefits in industrial undertakings. It has been said that if an industrial undertaking does not innovate it will decay. However, it is well known—and to some extent I agree with the noble Lord, Lord Bruce of Donington, on this—that a large number of United Kingdom industrial undertakings, particularly at management level, fail to appreciate the factors which are crucial to determining success in innovation.
It seems to me, therefore, that the Government should seek every opportunity, directly and indirectly, to enthuse and revitalise industry by referring to the need to promote and by assisting to promote innovation along the general lines to which I have referred. This is not merely a matter of increasing the efficiency of a firm or increasing its international competitiveness. At the present time many United Kingdom firms can improve their efficiency and competitiveness without much innovation. In this Committee noble Lords who have spoken for the Government have described the important purposes of this Bill and the need, as I have said, to enthuse and revitalise industry. My Amendment is an attempt to help the Government in their declared tasks, directly arid indirectly, to assist the growth of the economy, and in that way to encourage the increase in profitability of British industry by making some reference to invention and innovation as a function of the Enterprise Board.
It may be that the wording in the Amendment is capable of some improvement, but I hope that the Government will take an opportunity of making reference to invention and innovation in some form or other as a declared function of the National Enterprise Board, rather than merely allow this important aspect of industrial development to be inferred from the very general terms of Clause 2. I beg to move.
Lord BESWICK: First, I feel that it is appropriate to congratulate the noble Lord, Lord Lloyd of Kilgerran, on his appointment, election or selection as President of the Institute of Inventors. I wish him well. The spirit underlying his Amendment and what he said command great support from this side of the Committee, and I assure him that it will be
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our view that the National Enterprise Board will have failed unless it promotes new technologies and ideas, and gives assistance to those companies which are promoting such technologies and ideas. However, the difficulty of accepting the wording which is proposed and, indeed, of putting this duty into the clause as one of the primary functions of the NEB, is that there is already, as the noble Lord will know, a body in existence which has specifically these responsibilities. I refer, of course, to the National Research and Development Corporation. I feel that it would be a mistake to appear to be duplicating the work of the Corporation, though I am certain that there will be close collaboration between the two organisations. I believe therefore that, though I give an assurance that it will be an objective of the NEB to see that new technologies are assisted and promoted, it would be unwise to have this apparent conflict or duplication between the Board and another body which has been set up specifically for the purpose in question.
Lord LEE of NEWTON: While I agree with what my noble friend has said, there is perhaps an aspect of the proposals of the noble Lord, Lord Lloyd of Kilgerran, which we could look at; that is, the question of innovation in the way we treat human beings. In some industries, we have now reached the stage of assembly lines where it would be an appropriate punishment to place people who commit criminal offences. I feel that a great deal ought to be done to try to spare those who are condemned to this kind of operation from the hours of monotony which they endure. I believe that this has a profound effect upon industrial relations in general. I shall not go into detail for reasons of time, but I could prove that in some industries a great deal of time lost in industrial disputes emanates from this terrible monotony of repetitive processes which the human mind ought not to be asked to endure. In the context of the noble Lord's remarks, I feel that we really should look in the field of innovation at what we are doing to human beings and should try to rectify that.
Lord BESWICK: While agreeing with what my noble friend said, I hope that this is a factor which will be borne very much in mind in the development of

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industrial democracy. Industrial democracy itself will fail unless it takes account of the needs to which the noble Lord has called our attention.
Lord LLOYD of KILGERRAN: I am obliged to the noble Lord for the sympathetic way in which he has received my efforts to suggest to the Government that they should be very specific in supporting innovation, and in putting the words which I proposed into the Bill. He referred to the National Research and Development Corporation, but the function of that body is quite different from that which it is anticipated the National Enterprise Board will have. So far as I understand it, the NRDC receives and exploits inventions on behalf of individuals and firms, and I have been very closely associated with some of its activities. However, I rather had in mind that the Government, by means of education, example and assistance, should try to get over the difficulties which management in some parts of industry finds at the present time in conceiving what is meant by "technical innovation" in its broadest sense. I believe it is fair to say that I am in some way reflecting the views expressed in a recent paper by the Government Scientific Adviser, Sir Ian Maddox. However, in view of the assurance given to me by the noble Lord, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.8 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 32:
Page 3, line 3, at end insert—
("( ) In carrying out its functions under subsection (2) above, the Board shall ensure that on all appropriate occasions all relevant parties are consulted and for the purposes of this subsection the expression "relevant parties" shall particularly include employers, employees, shareholders, customers, and suppliers.")
The noble Lord said: The purpose of the Amendment, even if it is not acceptable to the Government, is to obtain some assurance that the National Enterprise Board, when they start their operations, will enter into consultation with all those people whose interests are liable to be affected when the Board have carried out their purpose. Certainly, in the course of their work they will be involved in, for example, schemes of reorganisation within
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a firm which may well be of advantage to that firm but which will have important repercussions on other people. The Amendment attempts to list some of the people whose interests could be affected, calling them "relevant parties". They are, first, the employers, for it would hardly be feasible that the National Enterprise Board should plan to reorganise a firm without consulting those who run it. However, for accuracy, they are included. Next come employees. I cannot imagine that any of your Lordships would object to consultation with employees after the debate which we have had on Amendment No. 29.
However, important people whose interests are not so often considered nor, indeed, so frequently mentioned in the Bill are, first, the shareholders, though it is they who are the owners of the company and who have certain legal rights under the Companies' Acts. They certainly have to be consulted about major changes in a company's status and we would hope that they would be taken fully into the confidence of the National Enterprise Board and of their firm's board of directors when any plans were formulated about the reorganisation of that firm.
Finally, there are the customers and suppliers, whose interests are very real but who often tend to be overlooked. Decisions taken by a company can vitally affect the interests of those who supply it and of those who buy goods from it, and only too often such firms are presented with a fait accompli and suffer unnecessarily for want of prior consultation. It is for this reason that we have put down the Amendment. It seems sensible and practical to require the National Enterprise Board to consult in the course of their operations. I have no reason to suppose that they would not do so, but I hope that the noble Lord will give us some assurance at least, even if he cannot accept the Amendment. I beg to move.
Lord BESWICK: I am glad to give the noble Lord the assurance he asks for. Any successful company will have to consider the interests of, and get the opinions of, those bodies concerned in any area of decision-making. As the noble Lord said, there are too often cases in industry where customers and suppliers are not

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properly consulted. This would not apply to a successful company in this country. There are shareholders in many companies who would say they are not consulted as closely as they would wish and many shareholders who do not seem to want to be consulted when the annual general meeting is called. Nevertheless, if we are to have a new spirit in industry the widest area of consultation should be encouraged.
I think it would be onerous to have these words in the Bill. It would be unreasonable to expect the National Enterprise Board, or companies working as associates of the National Enterprise Board, to be bound by Statute to consult all these people. Admittedly, the Amendment includes the words "where appropriate", but I give the assurance that where appropriate they would be consulted. On that basis, I hope the noble Lord will feel able to withdraw the Amendment.
Lord ABERDARE: I am grateful to the noble Lord and beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.12 p.m.
The Earl of BALFOUR The Earl of BALFOUR moved Amendment No. 33:
Page 3, line 5, leave out ("or elsewhere").
The noble Earl said In moving this Amendment I should like also to speak to Amendment No. 34. I would refer your Lordships to the subsection which reads:
"The Board may do anything, whether in the United Kingdom…".
or outside the United Kingdom to facilitate the functions specified in subsection (2). Let us look at that subsection. It says that the functions of the Board shall be "…maintaining or developing…the establishment…of any industrial undertaking" overseas; or "promoting or assisting the reorganisation of an industry" overseas; or perhaps, if our Amendment is defeated in another place, "extending public ownership into profitable areas of manufacturing industry" overseas; or, perhaps, "promoting industrial democracy in undertakings which the Board control", or may in future control overseas.
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So far as I can see, they have powers here to take over a publicly-owned security or property that might be overseas. Let us not forget that the Government have no capital as such. If they want to do anything, they must borrow money, usually at a very high rate of interest as it is at the moment; and, I would say, at a higher rate of interest than they could ever expect to get in dividends from capital invested in industry. Furthermore, we must remember that when the Government are spending money on an enterprise, such as the National Enterprise Board, they are using taxpayers' money. There is nothing here that could encourage taxpayers or encourage faith in the pound. Perhaps this is the Government's intention. I beg to move.
Lord MELCHETT: Before getting on to the extravagant language of discouragement of faith in the pound, I hope that I may be able to set the noble Earl's mind at rest. I think the Amendment is based on a simple misunderstanding. As I understand it, the National Enterprise Board have to exercise their power in conformity with their purposes. Their purposes are set out in Clause 2(1) and they are specifically limited to the United Kingdom. It may help the Committee if I explain why the National Enterprise Board will have power to operate outside the United Kingdom. In exercising their purposes through the exercise of its functions, the Board may need to establish facilities abroad; for example, sales outlets. Rolls-Royce and British Leyland, both vested in the National Enterprise Board, already have extensive operations overseas. In our view and I am sure the noble Earl will agree, it would be very damaging to the interests of these companies and to the national interest if the NEB were obliged to discontinue these activities and operate solely through foreign agents. That is the purpose of the words to which I think the noble Earl is objecting. I think he is misunderstanding slightly the basis on which the clause is to operate and I hope he will feel able to withdraw the Amendment.
The Earl of BALFOUR: I merely read out the words in the Bill and I do not think I misread them. If in line 6 the Government care to delete the word "functions" and put in "purposes" and

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accept my second Amendment and put in "(1)", then I should agree with every word the noble Lord said. Let me remind the Committee of the Government Amendment, Amendment No. 42, which says that they can go into overseas aid, which is on the next page of our massive Marshalled List. I think I must ask for some further explanation.
Lord MELCHETT: Perhaps we can leave Amendment No. 42 until we get to it; I do not think it has anything to do with the Amendment we are now discussing. I still think that the noble Earl does not fully understand the position. The purposes for which the Board may exercise their functions are set out in Clause 2(1)—the purposes are set out and not the functions; and the purposes are limited to the United Kingdom. To fulfil various purposes within the United Kingdom, it may be necessary to establish, for example, overseas sales outlets. That is why it is necessary to give the Board powers to do things overseas. They may not, as the noble Earl said they may, buy up publicly-owned companies in other countries. That would have nothing to do with the purposes set out in Clause 2(1), all of which are limited to the United Kingdom. I hope that with that further explanation I have satisfied the noble Earl.
The Earl of ONSLOW: I should like a litttle explanation of Clause 2(1)(d) which reads:
"…the promotion in any part of the United Kingdom of industrial efficiency and international competitiveness".
Presumably where it says, "and international competitiveness", this could mean that to promote international competitiveness it would be sound commercial practice to buy up a company overseas which could be a subcontractor making parts or spare parts for you. Does the Bill allow this to happen? As I understand it, it could. I believe that Fords in Germany have parts made in England to be shipped to Germany. You could have an industrial company in this country having spare parts made overseas by a subcontractor and it could promote international competitiveness to buy up that subcontractor.
Lord MELCHETT: We dealt with this at length yesterday when we pointed out that the Board would have power
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to set up a new company in this country to make spare parts if, for example, it helped the balance of payments. I think that paragraph (b) is clear. It says:
"the promotion in any part of the United Kingdom".
That is where we are: in the United Kingdom. We are promoting industrial efficiency and international competitiveness in the United Kingdom. I do not think it can be said that we are promoting international competitiveness in the United Kingdom to start firms in Peru or Bolivia. If one wants to promote international competitiveness in the United Kingdom one sets up companies in the United Kingdom to produce spare parts. That is the position under the Bill. I think it is clear and it has been accepted by both sides of the Committee in another place and by noble Lords opposite.
The Earl of BALFOUR: Would the noble Lord have another think between now and Report stage regarding the drafting? I have not been completely satisfied. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.20 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 35:
Page 3, line 10, at end insert ("provided that disposal of these securities is achieved as soon as is practicable and reasonable.")
The noble Lord said: This is an Amendment which we discussed earlier on the Scottish and Welsh Development Agency Bills. Once again, we are anxious to establish that the National Enterprise Board will not just be a body which collects more and more companies and never disposes of the ownership of any of them. That that is not the intention, certainly in the case of the Scottish Development Agency, is clear from what the noble Lord, Lord Hughes, said in the debates on that Agency on 10th June at column 191 of Hansard. He said:
"…what I accept is a right conception of the way to use money—to have a rolling fund."
That is precisely what we hope will be the objective of the National Enterprise Board. We hope that they will not go on getting greater and greater capital sums out of the Government in order to acquire more and more companies, but

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will make use of the capital they already have, so that when they have a reasonable opportunity of selling off a company they will do so; in other words, they will use their capital in the way the noble Lord, Lord Hughes, speaking for the Government, said was the right conception, as a rolling fund.
There is nothing unreasonably restrictive about the Amendment. It is slightly different from what we had in the case of the Agencies, which used the words, "reasonably practicable". What we now suggest is that the disposal of the securities should be practicable; in other words, there must be some body available to buy them. Secondly, it must also be reasonable; in other words, there is no question of the shares being sold when it would not be profitable so to do, nor when there were other good reasons why they should not sell. The Board are left with entire discretion as to whether disposal is practicable and reasonable, so I should not have thought there would be a great inhibition on their activities. What I am anxious to establish from the noble Lord is that the Board will from time to time sell or dispose of their shares in one or other of the companies under their control. I beg to move.
Lord LOVELL-DAVIS: As the noble Lord, Lord Aberdare, has said, this Amendment is an old friend. Once again I am sorry to have to tell him that it is not an Amendment which we can accept. However, I can assure him on one or two points. The fact is that the nation has to participate fully in the rewards which come from the use of public capital. The Amendment is an attempt to impose a restriction on the NEB which noble Lords opposite would never think of applying to a private holding company, and for which there is no justification. If the NEB are to make a significant contribution to and mark on the industrial scene, they must be able to employ their investment funds in the way they consider best to further their objectives. This Amendment, if accepted, would make that impossible. As my noble friend Lord Mackie of Benshie pointed out on a similar question during the Committee stage of the Scottish Development Agency Bill, it is not practicable to ask people to run a company in a businesslike way if they are forced to sell their
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holdings. This is the matter of dispute here.
The White Paper stated that the NEB will in general retain the holdings they acquire. The idea of a permanent public share in profitable industry, in return for increased investment through the mobilisation of public funds, is central to the philosophy underlying the NEB. But the Bill states clearly that the NEB has the power to dispose of holdings. Like any other company, they would dispose of them when they wished to do so, when it was necessary for them to do so. But we feel it is not right that they should be forced to dispose of their shareholdings. We feel it is right that where the Board help to develop a company they should take an appropriate share of the equity of the company. The holdings acquired have to be managed as efficiently as possible on behalf of the nation. Disposal may be appropriate from time to time, but a specific requirement for holdings to be disposed of as soon as is practicable and reasonable is not in the public interest.
The NEB will be providing risk capital with the prospect in the long term of high rewards, but also substantial risk. The nation, as will any private investor, must participate fully in the rewards which may come from the use of the Government's resources. We feel that this Amendment, if pressed, would devalue the NEB and turn them into an institution for putting splints onto the legs of lame ducks and then returning them to the duckpond. But the Government have always made clear that the NEB have a wider role than this. They are also to be a State holding company, to acquire, hold and manage on a long term basis State holdings in industry. I do not want to keep referring to other countries in any sense which appears detrimental to ours, but the fact is that in many other developed countries it is taken for granted that there should be such an institution.
Baroness WOOTTON of ABINGER:This Amendment appears to cut right at the root of the conception of the NEB which is held on this side of the Committee, and presents an entirely opposite conception. I should have thought it was contrary to the conception held by noble Lords opposite, that that the NEB would be an element in a mixed economy. This

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does not make it an element in a mixed economy; in a mixed economy there is an equal sharing, or sharing on equal principles, in which each party is free to acquire its resources, dispose of its resources and extend its resources as circumstances may dictate. It appears that this Amendment imposes a rule that when you have got hold of a good thing you must get rid of it as fast as you can. That is not a rule which is imposed on private enterprise. This cuts not merely at any possible development of the NEB into a more extended collective mixed economy, but cuts across the rule of a mixed economy which I believe is acceptable to noble Lords opposite.
The Earl of ONSLOW: If the NEB buy up a badly run company and inject capital into it, or buy a big equity shareholding, and then feel that the shares in that company have become over-valued—which has happened—and, as the noble Lord rightly said, the nation is fully entitled to the rewards from its capital, in circumstances like that the selling off of shares at a profit to raise further capital for the NEB would surely be a sensible way of raising money, as opposed to going cap in hand to the taxpayer. Furthermore, the Board must not just hoard for the sake of hoarding. Could the noble Lord give an undertaking on that?
Lord MACKIE of BENSHIE: The noble Lord addressed me as his noble friend, which I am happy to accept. Perhaps there has been a slight mistake. I said that any enterprise, national, mixed or otherwise, must not be restricted regarding its having to sell. But I made no secret of the fact—and, in fact, I stipulated it—that I hoped the Scottish Development Agency would encourage new enterprises and would not sit holding fat and perhaps over-priced shares. I should like to make that clear, in view of the earlier quotations.
Lord LOVELL-DAVIS: I entirely accept what the noble Lord said, and I hope he did not take any offence when I quoted him. I did not quote him out of context in any unfair way. Regarding the remarks of the noble Earl, Lord Onslow, this is quite within the terms of the Bill The Agency is free to dispose
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of any acquisitions. It might well make good sense at a certain time to dispose of a shareholding in order to get the best possible price and generate the capital. Under the terms of the Bill the Agency would be free to do that.
Lord ABERDARE: I am not sure that there is not some discrepancy between what the noble Lord has just told us is the policy for the National Enterprise Board and what we were told by the noble Lord, Lord Hughes, was to be a rolling fund. He seemed to envisage much more use of the powers for disposing of shares by the National Enterprise Board than is obviously in the mind of the noble Lord who is replying today. May I just say to the noble Baroness, Lady Wootton, that I do not think she is being her usual logical self. We certainly have to operate a mixed economy, but that does not mean that we wish to see an extension of the public sector in that mixed economy, and therefore we do not approve of the National Enterprise Board buying their way into profitable areas of industry.
Baroness WOOTTON of ABINGER: I hope the noble Lord will forgive me, and that I am being logical. He intends, in a mixed economy, to impose limitations upon one part of it which he would not dream of imposing on the other part.
Lord ABERDARE: Not altogether, because the National Enterprise Board are financed by public money, and that is quite different from a private company operating on private money. I am anxious that when the National Enterprise Board run out of money, which they certainly will do, rather than the Secretary of State or the Treasury handing out further dollops of our money—and this was the point made by my noble friend Lord Onslow—some pressure should be put on the Board to disgorge some of the capital they have already acquired by employing some of the money they have had, and not continually to come back for more.
Baroness WOOTTON of ABINGER: If I may interrupt again, that is not what the Amendment says. It does not say that when the National Enterprise Board are rolling in money they must dispose of it: it says they must dispose of it as soon as it is reasonable and practicable.
Lord ABERDARE: The Amendment, of course, is not necessarily the last word. We should like to see a Board which helped companies in the private sector when it was thought wise so to do; but as soon as the company was back on its feet and capable of working profitably on its own, then we think there should be no further reason for the National Enterprise Board to continue to own it.
Lord BESWICK: Would the noble Lord help me by saying exactly what he does mean? Is he really saying that the NEB should help unprofitable organisations but not profitable ones? Is that the situation he wants to achieve?
Lord ABERDARE: I certainly think that the National Enterprise Board should indeed help a number of unprofitable enterprises. At the moment, for instance, they have taken over a company such as British Leyland. They may well bring British Leyland into such a position that it is once again a flourishing company. Then I would see no reason at all why, if there are those who are willing to put up the money which will show a profit to the National Enterprise Board, the Board should not dispose of that company and let it return to the private sector.
Lord BESWICK: That is not the question I asked. Does the noble Lord visualise a public body which is there only for the purpose of helping unprofitable companies and that when they become profitable the Board must dispose of them?
Lord ABERDARE: Yes, that is my concept of what the Government should be doing. They should be trying to help private enterprise through difficult periods, and trying to help companies to survive those difficult periods. We cannot go on with question and answer in this way. Our views on this matter are totally different, as I am sure the noble Lord would agree. I am interested to hear what the noble Lord has said, but I do not think it is very satisfactory from our point of view. We have been through this before, and so I will ask leave to withdraw the Amendment at this stage.
The Earl of ONSLOW: Before that is done, may I add just one more point in an attempt to back up what the noble Lord, Lord Aberdare, has said about British Leyland. It would seem to be
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very much in the national interest if, having bought British Leyland—and I suppose one ought to say one is a shareholder—at 10p per share, or whatever it is, then the National Enterprise Board could float off some of the shares which they own at, say, 25p per share. Thus the country has got a very good return on its money; it has made a very good deal. I see the point of a National Enterprise Board as being that they help where necessary and then they make a profit for themselves and for the country. Nobody—least of all I—would say that they should not make a profit, but they are doing nothing but good in that kind of situation.
Lord MACKIE of BENSHIE: Before the noble Lord replies, I should like to clarify a point which has been made. Surely the National Enterprise Board are not going to exist purely to rescue ailing companies in the private sector. Surely they would go in with prosperous companies, providing capital, and then they might reasonably, having made a profit, use such money as a revolving fund. Surely the Board would not be used just to help ailing companies? I should like to have some clarification on this, because this is surely not the concept behind the Bill.
Lord BESWICK: It is not our concept, but apparently it is the concept of noble Lords on the other side.
Amendment, by leave, withdrawn.
4.36 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 36:
Page 3, leave out line 11.
The noble Lord said: I spoke to this Amendment in moving Amendment No. 26 yesterday and I therefore hope that the Government are prepared to accept this Amendment without further debate.
Lord LOVELL-DAVIS: I am sorry to have to tell the noble Lord that we are not. This Amendment and those like it continue to astonish me. One of the great developments of recent centuries has been the evolution of the limited company. This has been a framework which has proved effective and flexible as a means of organisation. A particular aspect of it has been the group of companies with wholly-owned subsidiaries. That has proved a remarkably successful form of

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organisation, permitting delegation of responsibility and decentralisation, while preserving at the same time the accountability of those to whom the delegation is made and the ultimate power of control in the centre which is needed to prevent fragmentation. I am surprised that noble Lords opposite should seek to impede the NEB's use of a system which has contributed greatly to the efficiency in the market economy.
It is worth pointing out that the previous Government formed Rolls-Royce (1971) Limited as a new company to manage the Government's acquisition of assets of the old company from the receiver, and formed the Govan Shipbuilders to look after its Clyde shipbuilding activities. If it was right for them to form bodies corporate, why is it now not right for the NEB to do so? Perhaps they do not want the NEB to do anything directly but only to help other companies to do things, as the noble Lord, Lord Aberdare, has just admitted. The function of establishing new industrial undertakings is a vital and central part of the NEB's role, and without it the NEB's potential for contributing to industrial regeneration and economic recovery would be seriously inhibited. Shorn of this power, the NEB would be in no position to initiate actions designed to improve industrial efficiency and combat unemployment, particularly unemployment in the hardest-hit assisted English areas.
They would be something like a State merchant bank, able to provide advice and financial assistance and to manage Government holdings in industry transferred to them. They would still be able to expand through the acquisition of manufacturing concerns. But important though these activities would be, the NEB would not be able to make the positive new contribution to industrial development which is essential. Fears that this power will be used to establish undertakings which would undermine the public sector through unfair subsidised competition are unfounded. We have already made this point many times. The NEB will be subject to proper commercial discipline, and the Treasury and the Secretary of State must ensure that the various financial objectives, taken together, will result in an adequate return on capital.
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Noble Lords opposite must admit that it is part of their philosophy that fair competition can be only stimulating and beneficial to industrial effort. The Opposition argue that this function of the NEB is damaging to industrial confidence. I am surprised that they do not seem to appreciate the benefits it will have for the private sector. One of the most fruitful areas of the Board's activities, as the Prime Minister has indicated, will be the field of joint ventures with the private sector; and this could be a potent weapon in the struggle against unemployment. The White Paper spoke of a closer, clearer and more positive relationship between Government and industry. It is in that spirit that the NEB will conduct their affairs. To speak of the damage to confidence is to damage confidence. A better understanding of what the NEB can do for the private sector in partnership with it would do a great deal to boost industrial confidence, and I believe that this will come about in time, just as it did in the case of the IRC.
Lord ABERDARE: I am absolutely astonished that the noble Lord should not see that this particular Amendment hangs together with Amendment No. 26. We have already removed from the Board the power to establish an industrial undertaking. What is the difference between establishing an industrial undertaking and forming a body corporate? This is precisely the same Amendment as we moved on the Scottish and the Welsh Development Agency Bills. We moved the first Amendment to the purposes and functions. We debated them. There was a Division on it, which the Government lost, but they were, in my view, reasonable and practical about it and accepted the consequential Amendments.
Lord BESWICK: The noble Lord is talking about establishing new undertakings. Suppose the NEB were not establishing a new undertaking, but already have responsibility, or part responsibility, for an undertaking and wish to form a body corporate out of a division of that undertaking, with everyone agreeing that that was a sensible method of direction and holding that particular activity. Is the noble Lord then going to deprive

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them of this opportunity of using this modern means of corporate ownership?
Lord ABERDARE: I am interested to hear that point of view because it certainly was not raised in the case of either the Scottish or the Welsh Development Agency Bills. The noble Lord is one ahead of his colleagues. But if that is a serious argument which the noble Lord put forward, which I will accept, will he agree that I should put down a further Amendment at Report stage limiting this power to forming bodies corporate within companies that are already owned by the National Enterprise Board? Is that agreeable to the noble Lord?
Lord BESWICK: The noble Lord is free to do anything he likes on Report stage, and I have no doubt he will do so. Certainly what I put forward was put forward as a serious consideration.
The Earl of BALFOUR: May I say a few words here? If your Lordships will look at Clause 9(3) it will be seen that, the Board having acquired a 30 per cent. share, they go to the—
Lord BESWICK: The noble Earl is very considerate. I wonder whether he will allow me—
The Earl of BALFOUR: I want to say only a few words; I shall not be long. It is an important point. The Board have acquired a 30 per cent. share. They then take advantage of the third part, get permission of the Secretary of State and form a body corporate and take over the rest under Clause 2(4)(b)—the provision we are dealing with now. I am certain I am quite right. In other words, so far as I can see, this is a straightforward process of nationalising everything that the Board can possibly nationalise.
Lord BESWICK: The noble Earl is dealing there with an entirely different sphere of the Secretary of State's activities, not necessarily anything to do with the NEB at all. I suggest we wait until we reach Clause 9 before we deal with it.
Lord ABERDARE: I am in some difficulty, but if the noble Lord, Lord Beswick, is seriously prepared to think about this point I will bring it up again at Report stage. I have had an opportunity
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of thinking about what he said. I hardly think it is a formidable point because the National Enterprise Board, controlling companies as they do, are not likely to want to set up a new company as a subsidiary of a subsidiary, when the whole point of public liability companies is rather more suited to the private sector than to the corporate sector. However, on the understanding that I shall return to the matter with an Amendment at Report, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.46 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 37:
Page 3, line 22, at end insert—
("( ) Unless the Secretary of State otherwise directs in accordance with the provisions of section 6 of this Act, the powers mentioned in paragraphs (a), (c) and (d) of subsection (4) above may be exercised only in connection with the Board's function of providing finance for persons carrying on or intending to carry on industrial undertakings.")
The noble Lord said: Amendment No. 37 is a probing Amendment. It takes some words which appear in the Scottish and the Welsh Development Agency Bills and applies them to this Bill with a view to inquiring from the Government why it is that the two Agencies have this restriction on their powers while the National Enterprise Board do not. In the case of the Scottish Development Agency and the Welsh Development Agency, they each have power to acquire, hold and dispose of securities, to form partnerships with other persons, and to make loans. But they are each restricted in the exercise of those powers in that, without direction or approval from the Secretary of State, they may exercise them only in connection with their function of providing finance for persons carrying on, or intending to carry on, industrial undertakings.
I want to inquire why this restriction is not laid upon the National Enterprise Board, and whether, therefore, the Board could exercise powers in England, Scotland and Wales which were not available to either the Scottish or Welsh Agencies because they are limited in this way. I beg to move.
Lord LOVELL-DAVIS: I should like initially to discuss this Amendment in a

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broader way. In our view, the Amendment is unsatisfactory because the Board do not have the function of
"providing finance for persons carrying on, or intending to carry on, industrial undertakings."
Their functions are set out in Clause 2(2) and the power described above might or might not arise in the course of all of them. The power described in subsection (4)(a), "to acquire, hold and dispose of securities", should certainly not be exercisable only in providing finance or when directed by the Secretary of State. It is, for example, one of the specific functions of the Board, set out in Clause 2(2)(b) against which no Amendment was raised, that the Board should promote and assist reorganisation. This is a most useful function of the IRC and will be a valuable function of the NEB.
It is very likely that we will provide for acquiring, holding and disposing of securities. It is desirable that the NEB should be able to carry out this function on their own initiative on a commercial basis and free from the political atmosphere which might be generally created by a direction from the Secretary of State. More generally, it is the Government's intention—and one I should think the Opposition will welcome—that the NEB should be a body normally acting independently, not merely as the arm of the Secretary of State.
I will not argue in detail the need for the power to form partnerships, but it could be a necessary power to enter a joint venture with private industry. Many of us on this side of the Committee feel that such partnerships, which bridge the gap between nationalised and privately-owned industry, may be a valuable role of the National Enterprise Board. As to why this point is not written into the Scottish Development Agency and the Welsh Development Agency Bills, there is no reason why it should be. A point we must make clear is that those Bills were not necessarily drawn up on precisely the same lines because in certain respects the Agencies fulfil different purposes.
The Earl of ONSLOW: Is the noble Lord absolutely certain that the NEB do not have the power to provide finance for persons carrying on, or intending to
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carry on, industrial undertakings? Clause 2(4)(c) says:
"to form partnerships with other persons".
A partner in a partnership is somebody who has unlimited liability. Whether or not this is the intention of the wording I do not know, but if you form a partnership with someone presumably you find finance for them. This paragraph distinctly allows the Board to provide finance for persons with whom they may go into partnership. It says so.
Lord BESWICK: The point is that the Welsh and Scottish Development Agencies have certain functions which the National Enterprise Board do not have to perform. For example, they have certain functions to perform in environmental matters. The restriction was imposed upon them because of those functions peculiar to the Scottish and Welsh Development Agencies. These are not shared by the National Enterprise Board, and because the National Enterprise Board do not have the same functions as the Scottish and Welsh Development Agencies it was not thought necessary to have the same restrictions. I hope that answers the point.
Lord ABERDARE: The noble Lord has put his finger on the answer I was hoping to obtain. Therefore, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.51 p.m.
Lord DRUMALBYN Lord DRUMALBYN moved Amendment No. 38:
Page 3, line 27, at end insert ("and without prejudice to the generality of the foregoing it is hereby further and specifically declared that the Board shall be required to comply with the provisions of section 33 of the Companies Act 1967 and shall be subject to the provisions of Part V of the Fair Trading Act 1973.")
The noble Lord said: I beg to move Amendment No. 38. The Amendment places on the National Enterprise Board a requirement to comply with Section 33 of the Companies Act 1967 which says that if any person acquires shares in a company, the nominal value of which, taken together with any shares he already has, give him one-tenth or more of the nominal value of that share capital he must notify the company in writing of the occurrence and the date of the event whereby he came to have one-tenth of the capital or more. Equally, he must notify

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the company of the occurrence, date and event whereby he ceased to hold one-tenth of the share capital.
The object of this part of the Amendment is to invite the Minister who is to answer—the noble Lord, Lord Melchett, because he has already dealt with this point to a certain extent—to say, first, whether the National Enterprise Board, described as "a body" in Clause 1, is a person within the meaning of Section 33 of the Companies Act. I believe that the noble Lord, Lord Melchett, said this yesterday and no doubt he will confirm it. Secondly, whether the Bill gives power to the National Enterprise Board to acquire shares from nominees, including subsidiary companies, and, if so, in what clause it does this—for example, Clause 2(4)(a) appears to give the Board themselves power to acquire shares; thirdly, if it does give that power, whether the Board would be able to acquire shares through different nominees so that it could hold more than 10 per cent. of the share capital without the company knowing that it was holding more than 10 per cent. This may or may not be done with the object of warehousing. Assurances have been given that the Board will not indulge in warehousing but I do not see any such prohibition in the Bill.
One must remember that the Board will have lawyers. They will look only to limitations on their actions which are inserted in the Bill or contained in directives. There is a great deal of latitude in the interpretation of guidelines. I understood the noble Lord to say that guidelines should be issued, but they are not legally binding unless the Bill makes them so, which it does not appear to do. I incurred the displeasure of the noble Lord, Lord Beswick, during the Second Reading debate by using the words "weaseling into profitable shares". I am not convinced that under the Bill there is no possibility of their doing so. The National Enterprise Board is an agency of the Government. We are entitled to expect open government, especially since, it is public not private money that is being employed in investment by the Board.
I turn to the second part of the Amendment. The Government have stated that it is their intention that the National Enterprise Board will be subject to the
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provisions of the Fair Trading Act so far as monopoly practices are concerned. If that is their intention, surely there should be no objection to putting it into the Bill. In this connection we are dealing with Part V of the Fair Trading Act which relates to mergers and the power of the Secretary of State to refer them to the Monopolies Commission where more than a certain proportion of the total supply of a commodity or services will be supplied by the two companies which it is proposed to merge. That proportion is now 25 per cent. In other words, if the merger results in the two companies holding more than one-quarter of the total supply in this country the matter can be referred to the Monopolies Commission. This appears in Sections 63 and 64 of the Fair Trading Act. Section 65 deals with enterprises which cease to be distinct enterprises.
My question is whether it is the intention of the Government that these activities should be subject to reference to the Monopolies Commission in the same way as any other mergers would be subject to reference to the commission, since the result would be a monopoly within the meaning of the Fair Trading Act. There is a difference between not authorising the disregard by the Board of any enactment and making them subject to the supervision of the Office of Fair Trading and the Monopolies Commission. There is no suggestion that this would come under Clause 2(3). This is quite beside the point because that deals only with the disregarding by the Board of any enactment. However, this would not arise under Part V of the Fair Trading Act.
I hope that the noble Lord has considered this point and will be able to reply. I hope also that he will be able to satisfy your Lordships that there will be no obstacle to the activities of the Board being investigated by the Monopolies Commission in the same way as those of any other organisation, should mergers be involved. I beg to move.
4.59 p.m.
Lord CULLEN of ASHBOURNE: I should like to add my name to this Amendment which has been moved by my noble friend, in particular the question of making use of the names of nominees. It is very important that the

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National Enterprise Board can be identified as a purchaser. I am not suggesting for one moment that the National Enterprise Board would wish to purchase shares by stealth but there is no doubt that a company would attach great significance to the appearance of the National Enterprise Board on its shares register.
In the event of shares being bought by another company—perhaps a company in the same line of business—there is always the possibility that this purchase is the forerunner of take-over negotiations. However, the purchase of shares by the National Enterprise Board could be the forerunner of eventual nationalisation. As I said earlier, I am not suggesting that the National Enterprise Board would wish to acquire shares by stealth. In fact, I expect that, since the Government hope to develop a spirit of partnership between the National Enterprise Board and industry, the National Enterprise Board would not buy shares in a company without having informed that company beforehand of their intention.
I would go further, and hope that the NEB would not buy shares in a company without that company's consent. There could be a number of reasons for a company to resist the inclusion of the NEB on its share register, since the potential threat of nationalisation could damage its prospects. In any event, it is important that purchases should be made in the name of the NEB or in that of a subsidiary company. Clearly, if a good spirit is to be engendered between the NEB and both industry and other investors, it is vital that the behaviour of the NEB should be immaculate.
Lord MACKIE of BENSHIE: Before the noble Lord replies, I should like to say that this Amendment appears to me to be entirely reasonable. If the Government wish for the confidence of industry in the National Enterprise Board, it should surely be seen that they are acting in an open manner and will not choose nominees to take over companies. In other words, their reasons for buying shares in any company should be seen to be reasonable, right and proper and there should certainly be no need to resort to nominees or anything else.
Lord MELCHETT: Before the noble Lord, Lord Mackie of Benshie, intervened I was not going to start off by saying that the effects of the Amendment would be virtually nil, because as I understood it the noble Lord, Lord Drumalbyn, was really seeking information. Section 33 of the 1967 Companies Act and all relevant provisions of the Fair Trading Act 1973 will automatically apply to the National Enterprise Board as they do to any other person, and I think I made it perfectly clear to the Committee when we were discussing Amendment No. 18 that for this legal purpose the National Enterprise Board is a legal person. In addition, this has been made even plainer, if possible, by adding subsection (5) to Clause 2 in Committee in another place. That subsection states that the National Enterprise Board will not be exempted from any statutory requirements or obligations which could be held to apply.
Under Section 33 of the Companies Act, any person who builds up an interest in more than 10 per cent. of the voting shares in a company, whether directly or indirectly, must notify the company. If I may stress this, it is absolutely clear that that provision is binding on the National Enterprise Board. There is also no doubt that it is a person in the legal sense and Section 33 must therefore apply. For that reason, there is no need to spell it out in the Bill as this Amendment would do. The same is true with regard to the application of the fair trading legislation and in particular to Part V of it.
On the monopolies and mergers legislation, which the noble Lord, Lord Drumalbyn, raised, the NEB will be subject to the full range of that legislation as well but, in our view, it is desirable to go further to ensure that the NEB do not even embark on a course which might result in their being referred to the Monopolies Commission; in other words, to ensure that there will be no question of their being involved in undesirable activities. Arrangements which will be set out in the guidelines will therefore be made for the National Enterprise Board to consult the Director General of Fair Trading, before doing anything which could lead to a reference. The Director General of Fair Trading is aware of these proposed arrangements, and I should like to stress that these do not imply any form of special treatment of

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the NEB in the sense of special treatment being any special privilege, but rather the reverse. It is our intention to take special care that the NEB are not involved in this legislation. I think we got slightly off the point in discussing nominees, shareholders and warehousing, which will arise on a later clause, and it might be desirable if I were to leave them to that stage in the Bill when my noble friend Lord Beswick will deal with the matters in detail.
Lord DRUMALBYN: I am grateful for what the noble Lord has said and I am quite prepared to leave the question of nominees until later. But I am not certain that the noble Lord was right when he said that even greater care will be taken with the National Enterprise Board than is taken in the case of other mergers. He said that care will be taken that no question can arise of a reference to the Monopolies Commission and, in order to ensure that, there are to be consultations with the Director General of Fair Trading. If by that he means that the Director General of Fair Trading will give a sort of prospective exemption from the provisions of Part V and any possible reference, then that is not—and I stress this strongly—carrying the matter further. It is making very considerable reduction.
Lord MELCHETT: If I may—
Lord DRUMALBYN: No, please allow me to continue. The Director General of Fair Trading cannot possibly assume the mantle of the Monopolies Commission and say whether or not something will be in the public interest. He would have to refer the matter to the Monopolies Commission before he could say that. I do not understand, if what the noble Lord is saying is that the Director General will be consulted with a view to a reference to the Monopolies Commission before a merger takes place. But that is not what he said. If not, one has to admit that the National Enterprise Board will be more favourably treated than other enterprises, because, in effect, that reference will exempt them from a reference to the Monopolies Commission. That is not right.
Lord MELCHETT: I do not think I said that any consultations with the Director General of Fair Trading would
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exempt the National Enterprise Board from legislation which affected everybody else. In fact, I was particularly careful to say that the fair trading legislation applies to the National Enterprise Board, and I also prefaced my remarks about the consultations with the Monopolies Commission by saying that the National Enterprise Board would be subject to the full range of the monopolies and mergers legislation. There is absolutely no question about that.
What I am trying to do—and I am sorry to have got myself into trouble; I should have kept quiet—is to convince noble Lords opposite of how fair, reasonable, conciliatory and sensible we are being in the whole range of activities which the National Enterprise Board will be carrying out. We are going to take extra special trouble to make sure that the Board never even get into the position where they might be felt to be infringing this legislation, and therefore there will be prior consultation. But that does not detract from the fact that they will be subject to the same rules and laws as everybody else, where they are relevant.
Lord DRUMALBYN: I understand now what the noble Lord is saying. When he says "to make sure" he means do their best to take steps to ensure that this will not happen, so that here will not be a reference. He is not saying that there cannot be a reference afterwards. I take that point. I am sorry if I misinterpreted what he said, and I am glad that there will be this additional step taken before any merger can take place which may lead to investigation by the Monopolies Commission. Does the noble Lord wish to intervene?
Lord BESWICK: I think my noble friend had it absolutely right and I believe he satisfied the noble Lord, Lord Drumalbyn, but the noble Lord might like to take it into account because I think he was implying earlier that there would be some special arrangement between the Director General of Fair Trading and the NEB which was not accorded to other bodies. If he looks at Clause 76 of the Fair Trading Act 1973, it says:
"It shall be the duty of the Director to take all such steps as are reasonably practicable for keeping himself informed about actual or prospective arrangements or transactions

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which may constitute or result in the creation of merger situations qualifying for investigation."
Having kept himself informed, he makes recommendations to the Secretary of State if he thinks fit. He would be keeping himself informed by having consultations with the NEB, and he would warn the NEB that if they proceeded along this course it would be his duty to make a recommendation to the Secretary of State.
Lord DRUMALBYN: That is the other side of the coin. He is watching, and the Secretary of State is watching. I appreciate that. This was a probing Amendment and I beg leave to withdraw it.
Amendment, by leave, withdrawn.
Clause 2, as amended, agreed to.
Clause 3 [Exercise of Board of powers to give selective financial assistance under Industry Act 1972]:
5.10 p.m.
The Earl of BALFOUR The Earl of BALFOUR moved Amendment No. 39:
Page 3, line 37, at end insert ("and that direction shall not be varied without approval from the Select Committee on nationalised industries").
The noble Earl said: Unfortunately, this was a case where my Amendments were put down before those of the Government. But I am hoping that where the Secretary of State has given directions to the Board, the Board could not vary them without going back to someone—in my Amendment I named the Select Committee on Nationalised Industries. But I was concerned with the wording of that part which is being deleted in the next Amendment. I will be brief in my speech. I hope that the point I have tried to cover is covered by the next Amendment. I beg to move.
Lord BESWICK: I would suggest to the noble Earl, Lord Balfour, that this Amendment is unnecessary. The power to vary directions has been put in so that financial assistance can be withdrawn, or its terms varied, where appropriate. If the Secretary of State agrees to give assistance himself under the 1972 Act, he can withdraw it if he feels such a course is necessary. We are suggesting the same freedom should exist when assistance is channelled through the National
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Enterprise Board. Specific safeguards are provided in subsection (5) for companies receiving selective financial assistance through the National Enterprise Board. A direction from the Secretary of State varying or revoking a previous direction would not release the NEB from any contractual obligation to implement the initial direction. It will be for the other place to decide which Select Committee will oversee this particular aspect of the activities of the Board. It would not be within the competence of the House of Lords to say to a Commons Select Committee what it should investigate and what it should not.
The Earl of BALFOUR: Of course I did not wish to insult the other place. I wished to insert the Select Committee on Nationalised Industries because I thought that would be the most appropriate Select Committee, and I hope it is not taken as meaning any offence. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord MELCHETT Lord MELCHETT moved Amendment No. 40:
Page 4, line 3, leave out from beginning to ("nothing") in line 5.
The noble Lord said: With the permission of the Committee, I should like to speak to Amendments Nos. 52, 53 and 287 while dealing with this Amendment No. 40. These are all straightforward, tidying-up Amendments under which a general provision is made that the various powers for the Secretary of State to give directions to the National Enterprise Board, both general and specific (under Clause 6) or relating to the retention of interests in the media (under Clause 8) and for the Secretary of State to determine the Board's financial duties (under Clause 5), may be varied or revoked by subsequent directions or determinations. This is a standard provision which allows for the necessary flexibility in the exercise of control over the National Enterprise Board by the Secretary of State. It is probably already implicit in the powers to give directions and to make determinations, but I hope your Lordships will agree that it is desirable for it to be made clear. I beg to move.
Lord ABERDARE: Since this is a very appropriate Amendment, "leave out from beginning to 'nothing' ", we have no quarrel with it, although I have not been

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so clever as to look so far ahead at Amendment No. 287 to see why this Amendment was merely a tidying-up Amendment. However, I have no objection to it.
On Question, Amendment agreed to.
Lord MELCHETT: I spoke to Amendment No. 41 when I was speaking to Amendment No. 16. I beg to move.
Amendment moved—
Page 5, line 27, at end insert—
("(18) For the avoidance of doubt it is hereby declared, without prejudice to the generality of section 1(7) above, that powers exercised by the Board under this section are not exercised on behalf of the Crown or of any Government department.")—(Lord Melchett.)
On Question, Amendment agreed to.
Clause 3, as amended, agreed to.
5.15 p.m.
Lord MELCHETT Lord MELCHETT moved Amendment No. 42.
After Clause 3 insert the following new clause:
Overseas aid
". The Board may, with the consent of the Secretary of State, enter into and carry out agreements with the Minister of Overseas Development under which the Board act, at the expense of that Minister, as the instrument by means of which technical assistance is furnished by the Minister in exercise of the power conferred by section 1(1) of the Overseas Aid Act 1966; and the Board may, with the consent of both the Secretary of State and' the said Minister, enter into and carry out agreements under which the Board, for any purpose specified in the said section 1(1), furnish technical assistance in a country or territory outside the United Kingdom against reimbursement to them of the cost of furnishing that assistance."
The noble Lord said: The purpose of this Amendment is to ensure that the National Enterprise Board has power to make the skills and experience which it will develop available to Governments and other authorities and bodies of the developing countries, if it is invited to do so. The Minister of Overseas Development provides technical assistance as well as financial assistance to developing countries in a wide range of matters. This assistance includes the provision of experts, training, consultancy services, surveys, equipment and research. Many public bodies in Britain possess experience and skills which can be of value to developing countries, and my right honourable friend the Minister of Overseas
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Development, at whose request the Amendment has been put down, is anxious that as many as possible of such bodies should have the power to provide technical assistance overseas. A number of public corporations already have these powers. For example, the National Coal Board has helped a number of developing countries with its extensive knowledge and experience of mining technology; and the NEB's managerial and entrepreneurial skills might in due course be particularly useful to developing countries seeking to establish new industries.
There is no question of the NEB being obliged to comply with any request from the Minister of Overseas Development or from a developing country. The object of the Amendment is to ensure that there should be no legal obstacle to the assistance being provided, if all involved so desire in any particular case.
The new clause covers two rather different situations. The first is where the NEB and the Minister for Overseas Development enter into an agreement for technical assistance to be provided as part of the official British overseas aid programme, in which case the consent of the Secretary of State for Industry is required before the agreement is concluded. The costs would then be met out of the overall amount available for the overseas aid programme. The second provides for a direct agreement between the NEB and the Government of the developing country, or with some other appropriate body, including an international organisation, which would not form part of the aid programme, but for which the NEB would be reimbursed directly by the Government or organisation assisted. In these cases, the consent of both the Secretary of State and the Minister for Overseas Development would be required.
The provision of technical assistance overseas will of course be a very minor part of the NEB's activities, and in our view unlikely to occur at all in the early years of the Board's existence in which it establishes its organisation and develops its expertise over its wide range of duties and functions in the United Kingdom. In the longer term, the main practical application of the new clause, so far as can be foreseen at present, is for the NEB to be able to release staff for assignments in developing countries for the provision of technical advice and

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training. I hope your Lordships will agree that this clause is thoroughly worth while, and a constructive addition to the Bill. I beg to move.
Lord ABERDARE: We have no quarrel with this clause. However, I should like to ask whether this is consistent with Clause 1(7). This new clause allows the Board to act as the instrument of the Ministry of Overseas Development. Clause 1(7) says:
"It is hereby declared that the Board shall not be regarded as performing any function…as the servant or agent of the Crown…"
If, as the noble Lord, Lord Melchett, suggested, the Board is to act on behalf of, or in conjunction with, overseas companies, I wonder whether it would not be acting as the servant or agent of the Crown in such a case. Perhaps this is an unfair technical question to ask, but if the noble Lord would look at it, I should be grateful.
The Earl of BALFOUR: May I ask a second question? Should we not be considering taking better advantage of the facilities in the European Economic Community arrangements in this field, rather than trying to stand on our own feet? I sympathise with this Amendment, but I feel that with our present financial crisis it is, perhaps, not quite the right kind of thing, particularly where there are obviously costs involved.
Lord DRUMALBYN: Those of us who have spoken for the Department of Trade and Industry are of course, familiar with this kind of clause, and we have no objection to it, but on one understanding; that is, that the intention should not be that there should necessarily be any kind of channelling to the NEB of these operations for technical aid, or even between the National Enterprise Board and Governments. In other words, Her Majesty's representative abroad would not necessarily suggest that the best or only agency to help the overseas Government would be the National Enterprise Board.
I am sure it is not intended that this should be so, but I remember occasions when we have been handling legislation of this kind in the past. Those who give expert assistance of this kind, and are highly organisated to do so, would not be in any way by-passed. Indeed,
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it would be highly desirable that the National Enterprise Board should work with them, and possibly even direct foreign Governments towards them, rather than do the work themselves, where appropriate—I do not say in every case, but where appropriate. If that were so, I do not think anything but good could come of this, but I think it is important that one should not envisage the building up of some kind of nationally-sponsored expertise of this kind. When Governments are giving advice to foreign Governments on whom they should employ, they should be very careful always to advise the best firm for the job and not necessarily a firm because it has public money in it.
Lord MELCHETT: I certainly take the point the noble Lord, Lord Drumalbyn, has made, and, of course, it would always be our view that the people most suited to do the job should do it. The purpose of this Amendment is merely, as I have said, that where it is felt that the National Enterprise Board have some appropriate skill or expertise to offer countries overseas should not be denied it. To turn to the point the noble Lord, Lord Aberdare, made, I think I am right in saying we have now amended Clause 1(7) by Amendments Nos. 16 and 17, which I moved and your Lordships accepted. In line 11 we deleted the words "servant or agent of" and in the next line we deleted the words "or any government department". I understand that with these Amendments, which we have already accepted, this new clause is now in line with Clause 1(7).
The noble Earl, Lord Balfour, raised the question of working with the EEC. Of course, we would hope that that would continue and expand, but I think the point is still valid that the skills and expertise which the National Enterprise Board will have should be available, when they are particularly appropriate, to countries overseas.
Lord ABERDARE: I think the noble Lord is not quite right, because we have not removed the words "servant or agent". I agree that we deleted the words, "or any government department". It now reads, so far as I know:
"It is hereby declared that the Board shall not be regarded as the servant or agent of the Crown…"

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It struck me that when dealing with an overseas Government, that overseas Government might consider, if the Board were acting on behalf of the Ministry of Overseas Development, that they were indeed dealing with a Crown body. I do not want to press it any further. I am sure the noble Lord will look into it.
On Question, Amendment agreed to.
5.25 p.m.
The Earl of BALFOUR The Earl of BALFOUR moved Amendment No. 43:
After Clause 3, insert the following new clause:
Appeal against the decision of the Board
".—(1) A body corporate, industrial undertaking or any person having an interest in a decision made by the Board in the exercise of its functions under section 2 or of powers conferred on it by section 2 or 3 above may at any time within a period of not more than four weeks from the date of the decision appeal to the Secretary of State against that decision.
(2) An appeal under this section shall be made by notice in writing to the Secretary of State, which shall indicate the grounds of the appeal and state the facts on which it is based; and on any such appeal the Secretary of State shall, if either the appellant or the Board so desire, afford to each of them an opportunity to appear before, and be heard by a person appointed by the Secretary of State for the purpose.
(3) Where an appeal is brought under this section from a decision of the Board, the Secretary of State may allow or dismiss the appeal, or may reverse or vary any part of the decision of the Board, whether the appeal relates to that part thereof or not, and may deal with the decision as if it had been made by him in the first instance.
(4) Where an appeal is brought under this section, the decision of the Board shall be of no effect pending the final determination or the withdrawal of the appeal.
(5) The decision of the Secretary of State on any appeal under this section shall be final."
The noble Earl said: A great deal of discussion took place in another place to the effect that there should be provision for an appeal against any decision that the Board may make. I have worded this Amendment very tightly so that there is no doubt whatever that the Secretary of State has the final say. But I feel that in anything of this nature, particularly in its first few years of operation, it is terribly easy for something to go wrong, and I hope that some appeal procedure can be provided for where there is disagreement.
This kind of appeal could even arise by controversy, which can happen in the best of organisations, between the National Enterprise Board and, say, the Scottish or Welsh Development Agencies. Without being specific, they both have functions under Sections 7 and 8 of the Industry Act 1972. Equally, it might very easily arise where there is a case of a great deal of unemployment in one area; the National Enterprise Board could come in and invest and develop some industry in that area that might have the subsequent effect of putting people out of work in another area. Let us be slightly more specific. Supposing there was a development of a certain new process of making paper, and they decided to back this up and gave tremendous advantage, say, to one of the leading paper companies like Wiggins Teape. It might then be detrimental to one of the main competitors, say the Inveresk Paper Group. If in that case the Inveresk Paper Group can go to the Secretary of State and appeal under the provisions of this clause, I hope that that will lead to democracy, not to the Board completely dominating the position, which it might otherwise do. I beg to move.
Lord LOVELL-DAVIS: With the greatest respect to the noble Earl, we feel that an appeals procedure of this sort would have some justification only if the NEB had powers of compulsion, or perhaps if they enjoyed monopolies enabling them to operate unfairly against other concerns. As has been made clear repeatedly in this Committee, the NEB will have no such powers or privileges. But to be effective the NEB must be able to operate with the same degree of freedom as a private sector body, against a background of accountability to the Secretary of State and through him to Parliament. The NEB will be subject to the City Code on Takeovers and Mergers, to the Fair Trading Act, and all the appropriate provisions of commercial law.
This Amendment would set up a procedure which, as drafted, could be used by any competitor to delay all commercial decisions by the Board and thus act as a means of harassment to the NEB in the day-to-day execution of its functions. It may be conceived as a means of protecting companies against takeover bids by the Board, but if the NEB decide

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to make an offer for shares in the company, the owners of the shares will be in exactly the same position as they would be if a private concern were making the offer. Under Clause 9, the Secretary of State's consent is necessary for any action of the NEB whereby they would, under the City Code, be in a position in which they were obliged to make a full takeover bid. The rights of individual shareholders are adequately protected. There is no need for an appeal to the Secretary of State, who would in the case of a takeover bid already have authorised the Board's actions.
The Earl of BALFOUR: At the very last the noble Lord said that the Secretary of State would have given the directions. I was under the impression that the Board could well act on their own after being given a broad direction. It is the very last words that the noble Lord said that I feel I should like to question again.
Lord LOVELL-DAVIS: In the matter of a take-over bid, yes, the Secretary of State would have to authorise the Board's actions. I do not know whether that is the point the noble Earl is querying.
Lord DRUMALBYN: What perhaps my noble friend has in mind that the Secretary of State should hear the other party before making up his mind in the case of a take-over of this kind.
Lord LOVELL-DAVIS: I think that the Secretary of State would no doubt take all matters into consideration, but what is being proposed here is an automatic right of appeal. That is a very different matter indeed.
The Earl of BALFOUR: I shall obviously withdraw this Amendment, but I should like to think that there is no way whereby the National Enterprise Board can act unfairly without the individual being able to go to the Secretary of State. If they could assure me of that, I should not take it any further. I beg leave to withdraw this Amendment.
Amendment, by leave, withdrawn.
Clause 4 [Transfer of publicly-owned property to Board]:
5.32 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 44:
Page 5, line 32, leave out from beginning to ("of").
The noble Lord said: I beg to move Amendment No. 44, and perhaps I may speak also to Amendment No. 46 as it is on the same point. The clause refers to the transfer of publicly-owned property to the Board, and it goes on "or the Board's nominees". Equally, subsection (2) states:
"Publicly-owned securities and other publicly-owned property may only be transferred to the Board or the Board's nominees with the consent of the Secretary of State…".
What I am seeking to find out is who are the Board's nominees, and whether it is desirable that there should be power to transfer publicly-owned property to their nominees. I beg to move.
Lord MELCHETT: The words that these two Amendments seek to delete were added to the Bill by the Government in another place because of a technical defect in drafting. Section 1(1) of the Companies Act 1948 provides that a company must consist of at least seven persons (or at least two in the case of a private company). When one company is wholly-owned by another, nominees of the controlling company must therefore hold some of the shares in the subsidiary for the requirements of the 1948 Act to be fulfilled. Thus it is also necessary for some shares in companies which are 100 per cent. owned by the Government (such as Rolls Royce 1971) to be transferred to the nominees of the NEB as well as to the Board, since in law the Board is one person. I hope that this answers the point which the noble Lord raised.
Lord ABERDARE: Yes, I understand. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord DRUMALBYN Lord DRUMALBYN moved Amendment No. 45:
Page 5, line 33, at end insert ("but any property or securities owned by any organisation established by Act of Parliament or by any of their subsidiaries shall not be transferred except with its consent to the transfer and to the terms and conditions on which the property or the securities, as the case may be, are to be transferred.").
The noble Lord said: We are here talking of the transfer of publicly-owned property and securities to the National Enterprise Board, and the purpose of this Amendment is to get some explanation from the Government of the policy they envisage in regard to transferring property or securities owned by nationalised industries, or by subsidiaries of nationalised industries, to the National Enterprise Board holding company. I understand that it is the intention to transfer publicly-owned securities in firms like ICL to the NEB or a holding company for that kind of operation. But do publicly-owned securities include holdings in subsidiaries of nationalised industries, whether wholly owned or part owned? If so, is it the intention that some of these subsidiaries, or shares in subsidiaries, should be transferred from the nationalised industries to the NEB, and will this be done with the consent of the nationalised industry or by direction, which power I understand Ministers possess under other Acts?
If it is with their consent, obviously the price to be paid is a vital consideration in the negotiations. Nobody will consent unless he thinks he is getting the right price for what he is disposing of. This is not like transferring non-revenue-making assets. We have often had discussions in this House on local authority Bills about the transfer of non-revenue-making assets from one local authority to another. It is nothing like that. Whenever we suggested that in some cases nationalised industries might do better to dispose of some subsidiaries, noble Lords opposite never tired of pointing out that the nationalised industry might lose some profitable assets. We explained that they would be paid for the assets and securities disposed of and so would be able to reduce their debts, and if the subsidiary was profitable the price paid for the assets would have reflected their profitability. I say that because the noble Lord made a slightly quizzical smile.
Lord BESWICK: Before the noble Lord leaves that point (because I am interested in this) may I ask him to tell me what was paid by British Caledonian for the assets involved in the West African routes when they were transferred from British Airways to British Caledonian?
Lord DRUMALBYN: I remember arguing at great length that it was a licence that was transferred and that that was not an asset. It seems incontestable that the price should be agreed before the assets are transferred, since the price is material to the transfer of assets. I appreciate that in cases other than nationalised industries this may not always be possible, and I have no doubt that is why the noble Lord is about to move some Amendments on the Marshalled List. I hope that the noble Lord will be able to tell us that transfers from the nationalised industries will fall under subsection (4), as he proposes to amend it, and not under his new subsection (5). I beg to move.
Lord SLATER: There is one thing that can be said, and that is that the noble Lord, Lord Drumalbyn, and the members of the Party to which he belongs are consistent in their approach to legislation. I should like to take the noble Lord's mind back to what they did with a nationalised undertaking, the Coal Board. The Coal Board had attached to it certain subsidiaries; it had pig flats, farms, et cetera, and these subsidiaries were making profitable returns. It was under the direction of the Government at that time that such assets were taken away from the National Coal Board and disposed of into other forms of operation, under new ownership. If I follow the Amendment as moved by the noble Lord, I begin to wonder whether a nationalised industry which has these most profitable assets will be forced into a situation where it must get rid of them and pass them on to this new Board that is to be set up.
My second point—if my noble friend will bear with me for a moment or two—is one in which I am very interested, because of other matters which I should like to mention regarding conciliation and so on. It is in regard to the National Health Service on which we had a Question on the Order Paper today. At one time in this country, under local government administration many hospitals had their own farms. I have in mind two hospitals in the constituency which I represented. They had four farms and then they received instructions through the Ministry of the noble Lord's Government that they had to dispose of their farms by sale to the highest bidder. This meant a

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great loss to the hospital service and to the patients. In one mental hospital there were over 2,000 patients who were receiving a form of treatment appropriate to the nature of their complaint, and the work which they did under proper supervision was taken away from them. When the noble Lord proposes this type of Amendment I begin to wonder where we stop, and where there will be enforcement in regard to nationalised industries which have these subsidiary undertakings. Are they to be taken away from them, if it can be proved that they are assets to an industry, to be passed on to the NEB?
Lord DRUMALBYN: I thank the noble Lord for what he has said, but I do not think he has understood the purport of the Amendment. I was inquiring what was to be the policy of Her Majesty's Government in regard to the transfer of assets from nationalised industries. I was neither advocating it nor discouraging it. I was merely asking what the policy would be, and I suspect that in any case it would have to be manufacturing assets and not farms.
Lord BESWICK: I, too, wondered a little about the solicitude of the noble Lord for public enterprise, but I can give him the assurance for which he asked. This clause—indeed the Bill—does not empower the NEB to acquire compulsorily the assets of a nationalised industry, nor does it empower the Secretary of State to take away any property from any organisation established by Act of Parliament, without the agreement of that body. If any transfer of assets is proposed by the Board, there would be a normal commercial transaction to effect it, subject to the consent of the Secretary of State in the appropriate manner as specified in the clause. If any transfer were proposed by the Secretary of State, he would have to obtain the agreement of the transferor. I can therefore assure the noble Lord that the Amendment is unnecessary. It may be desirable for certain of the assets of the nationalised industries to be transferred to the NEB. I cannot think of any at the moment, but there could be peripheral activities more closely allied to the activities of the NEB than those of the public corporation concerned. In that case it would, as I say, be a matter for consultation and agreement.
Lord DRUMALBYN: I am grateful for what the noble Lord has said, but I still attach importance to the necessity for having this agreed under subsection (4) and not subsection (5). It seems to me absolutely vital that there should be agreement on price before there is any question of transfer. I think that in making it clear that there is no power to acquire compulsorily, and that there is no intention on the part of any Minister of directing that any of these assets should be transferred to the NEB, the noble Lord has gone a long way towards satisfying me. It is interesting to note that this is put not in the active sense that the Minister will transfer, but that transfers may be made—it does not say from whom it leaves it wide open—of any aspect of publicly-owned assets. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord LOVELL-DAVIS Lord LOVELL-DAVIS moved Amendment No. 47:
Page 5, line 41, leave out from beginning to ("shall") at page 6, line 1, and insert—
("(4) Subject to subsections (5) and (6) below, if—

(a) the Secretary of State has given a consent under subsection (2) above; and

(b) the consideration for the transfer has been determined; and

(c) its amount exceeds £1 million, the Secretary of State").

The noble Lord said: Amendments Nos. 47 and 48 are proposed with the transfer of Government-owned property in mind. They are designed solely to fill a loophole which has been discovered in the provision requiring a statement to Parliament when the Secretary of State gives his consent for the transfer to the Board of publicly-owned property worth more than £1 million. It is possible that some of the publicly-owned shareholdings will be transferred to the Board, before the Board and the Government have reached agreement on the capital debt to be assumed by the Board as a result of the transfer.
It is clearly desirable that the Board's expertise should be brought to bear on the Government's shareholdings as soon as possible, but the valuation of shareholdings (particularly when they are not publicly quoted) can be a complicated and time-consuming business. With the Bill as it now stands, the Secretary of

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State could defer his statement to Parliament until the consideration for the transfer had been determined. The Government feel that Parliament is entitled to know about the transaction without such delay, so the Amendment provides for Parliament to be informed of everything other than the consideration, and for the consideration to be reported later. I beg to move.
On Question, Amendment agreed to.
Lord LOVELL-DAVIS Lord LOVELL-DAVIS: I beg to move Amendment No. 48.
Amendment moved—
Page 6, line 6, at end insert—
("(5) If the Secretary of State has given a consent under subsection (2) above before the amount of the consideration for the transfer has been determined, he shall lay before each House of Parliament, unless it appears to him to be unlikely that the amount of the consideration will exceed £1 million, a statement specifying the matters, other than the consideration, that are required to be specified in a statement under subsection (4) above.
(6) When a statement has been laid under subsection (5) above, the Secretary of State shall lay before each House of Parliament a statement specifying the consideration for the transfer as soon as practicable after its amount has been determined.").—(Lord Lovell-Davis.)
On Question, Amendment agreed to.
Clause 4, as amended, agreed to.
Clause 5 [Financial duties of Board]:
The Earl of BALFOUR The Earl of BALFOUR moved Amendment No. 49:
Page 6, line 14, at end insert—
("( ) The Treasury shall not give approval to a determination in subsection (2) above, which would enable the Board to use more than 7 per cent. of the maximum amount available under subsection (1) of section 7 in carrying out any powers in subsection (4) of section 2 in any one industry, unless it has been approved by resolution of the House of Commons.").
The noble Earl said: This Amendment is designed to ensure that the Board spread out some of the money which they can use, rather than limit it to any one company. Seven per cent. of the £700 million that would be available under Clause 7 would amount to £49 million, or £70 million if they had the higher figure. That limits the Board to being involved with no more than 14 companies and uses up almost the whole amount. I am still concerned that the Board could take a rather
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unfair advantage in the stock market and acquire a tremendous holding in one company. I hope that this will not happen, but I feel that under the wording of the Bill as it stands it could. I feel that the House of Commons, which deals with financial matters, should have the final say in any decision of this nature.
Lord MELCHETT: I was hoping that the noble Earl intended to give a rather more detailed explanation of where he got the figure of 7 per cent.; he obviously has a particular attraction to multiples of seven, because he is limiting the NEB to 14 companies. However, I think the noble Earl slightly misunderstood the purpose of this clause and the determinations made under it.
The purpose of Clause 5 is to enable realistic financial targets to be set for the NEB by the Secretary of State and the Treasury. It may be necessary to set different objectives for different types of activity or for different subsidiaries or groups of subsidiaries, because the Board will have such a wide range of activities. Different objectives may be necessary for assets acquired at the initiative of the Board and those vested in them by the Secretary of State, as an example. It may be necessary to distinguish between investment in profitable industry and investments made in order to promote reorganisation which may not be profitable for the first few years, and between investments in wholly-owned subsidiaries and those in companies which the Board do not control, and that is the purpose for the determinations made under this clause. I hope that that has put the matter straight for the noble Earl, and that he will feel able to withdraw the Amendment.
The Earl of BALFOUR: I wanted to ensure that the Board could not spend too much of their money on one enterprise. Having been reasonably satisfied by the noble Lord's reply, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
5.53 p.m.
The Earl of BALFOUR The Earl of BALFOUR moved Amendment No. 50:
Page 6, line 17, leave out ("taken together").
The noble Earl said: This is a probing Amendment, because I do not quite understand the meaning of the provision

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as drafted. When the phrase "taken together" is used, is it the Secretary of State and the Treasury taken together, or is it the Board and the Secretary of State or the Board and the Treasury? I am sorry to have to put it in such an obscure way, but I do not understand the expression "taken together" and I move the Amendment to discover with whom or with what these aspects are taken together.
Lord BESWICK: What should be taken together are the activities of the NEB. The requirement is that they shall have an adequate financial return on monies invested and that is "taking together" the activities of the NEB. Some activities may be very profitable, others less so, and it may, as my noble friend Lord Melchett said, on occasion be advantageous to take over or invest in something which at the moment is not profitable, but which eventually may become profitable. Taken together, all these investments must provide an adequate return.
The Earl of BALFOUR: I am grateful to the noble Lord for that explanation and I beg leave to—
Lord DRUMALBYN: Before my noble friend seeks to withdraw his Amendment, may I ask the noble Lord, Lord Beswick, whether he is right in saying that it is the activities which should be taken together? I thought it was the financial duties which should be taken together.
The Earl of BALFOUR: I, too, would like that question answered.
Lord BESWICK: I think the noble Lord, Lord Drumalbyn, has asked that question having read the rubric to the clause. The answer is that the financial duties are related to the activities.
The Earl of BALFOUR: I am grateful to the noble Lord for that explanation, and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord ABERDARE Lord ABERDARE moved Amendment No. 51:
Page 6, line 19, at end insert ("and that these duties are in accordance with the practice of fair competition in any case in which
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any private enterprise is in competition with any public enterprise").
The noble Lord said: While we are discussing the question of fair competition, perhaps it would be convenient if we discussed at the same time Amendment No. 58, which also deals with it. Unfortunately, there is a misprint in Amendment No. 58; the reference to "subsection (3) above" in the final paragraph should read "subsection (b) above". Consistently throughout the Committee stage, today and yesterday, we have heard from noble Lords opposite that the Board will compete with private industry but only in a fair way, and there is no question that they will indulge in any form of unfair competition. I have had, and have expressed, some doubts about whether it is possible to decide what is fair competition between a company backed by the NEB and a company in the private sector, but I am not concerned with that at the moment. What I am concerned to see is that the various assurances given by noble Lords opposite are expressed in the Bill.
We have repeatedly said that there is a feeling of doubt and worry on the part of the private sector of industry about the arrival of the NEB in their midst, and we have continually asked for some concessions to be made by the Government to try to ease that anxiety and so increase the confidence of the private sector in the actions of the NEB. To my mind, there is no doubt that to write into the Bill some requirement on the NEB that they should observe the rules of fair competition where private enterprise is in competition with public enterprise would be a big step forward, and it is for that reason that Amendment No. 51 has been tabled.
I hope the Government will feel able to accept this Amendment. They have asked for constructive Amendments, but we have not yet succeeded in having one accepted without a Division. This Amendment may not be in the right place and possibly it is not even correctly worded, but whatever its deficiencies may be I ask sincerely whether the Government would not accept the principle that underlies it; that somewhere in the Bill there should be a requirement on the Board to fulfil their duties in accordance with the practice of fair competition. We go on to Amendment No. 58, which gives

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the procedure whereby a private company which feels it has been adversely affected because of unfair competition could have some recourse to the Minister, who could take action and appoint a referee, as it were, a person to hear the complaint and the Minister could then take action if that person found that there had been unfair competition. I need not go through that Amendment in detail, because clearly set out is our proposal for this procedure. I hope that both Amendments will appeal, at least in principle, to the Government. I beg to move.
Baroness WOOTTON of ABINGER: Could the noble Lord make it clear why he is so sure that unfair competition will be only one way round? It has been known for large private enterprises to sell below cost in order to extend their markets.
Lord ABERDARE: What I am talking about is something new. We have not had this type of National Enterprise Board before, and it has caused a very great deal of apprehension in the private sector. What I am trying to do is restore confidence in the private sector. If the noble Baroness cares to put down another Amendment on her point, of course we shall consider it.
Viscount MASSEREENE and FERRARD: May I give an example of unfair competition? Where I farm in the West of Scotland, one is not allowed to take one's stock to market except in Government lorries, unless one owns a lorry. One cannot hire a lorry from a private firm. That is a complete State monopoly. It applies also to the steamers. I would call that unfair competition and when one has State monopolies which control all the electricity and the power, the noble Baroness will know how the public can be blackmailed as a result.
Lord HARMAR-NICHOLLS: The noble Baroness raised a point which, if left just like that, might give the appearance that there is another side to the coin which was so clearly described by my noble friend Lord Aberdare. If a private concern, by operating what is known as a "loss-leader"—selling an item at less than the true price in order to gain custom—does not judge the price level correctly and overdoes the reduction, it
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has to pay the cost by going bankrupt or getting into financial difficulties. On the other hand, if the body concerned is supported by rates or taxes, it may be encouraged to try to scoop the market by loss-leading or something of that kind and it will not have to bear the pain of overdoing it. I believe that that is a real distinction which should be borne in mind in listening to the comments of the noble Baroness which, if left alone, might seem impressive.
There are many examples of this, though not on the scale that could flow from the rather bigger agencies we are discussing now. For instance, I have always been very concerned that, at a time when the hotel and catering industry is facing great problems in terms of costs, rate increases and all the expenses which go with the trade, we should, in a university town during the vacations, have the universities—which do not have to set alongside their costs when competing with private enterprise the cost of rates and staffing, which come under the student section—competing with private enterprise. I do not want to discourage students from playing a part in the vacation nor to prevent the universities from trying to cover some of their expenses in this way, but I have always felt it a little unfair to the private traders, who have to pay their rates and taxes and who have to pay wages according to the rate set down by the Department of Employment, to have to meet this sort of competition which is really financed out of public funds.
We have an example in the Palace of Westminster. Many may not approve of the outside catering which has now been brought to the Palace of Westminster; though they will understand that, in order to keep the price of food at something like a level we can pay, that perhaps adds a little to the budget. But in this great city we have private industry which operates under great expense and with heavy commitments and, if it has to meet the competition of the Palace of Westminster, which does not have to pay rates or the overheads which go with other businesses, I think it unfair.
I quote these only as examples of the way that, even when it is well intentioned, one can kill the goose which lays the golden egg; that is, the private enterprise concerns which, at the end of the day, by

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their tax on profits and their rates, are usually paying for the upkeep of all these very desirable things. I believe that my noble friend Lord Aberdare was on a very fair wicket when he put it to the Minister that a provision ought to be written in to try to minimise the possibilities of this unfairness. It would not be deliberately intended. I gathered from the tone of my noble friend's words that he was not suggesting at this stage—though I do not rule it out as a risk—that anyone would deliberately undercut in order to bring down the private enterprise system. He is not arguing that. What my noble friend is saying is that—and I think the tone made it perfectly clear—it might be that an over-enthusiastic officer could, inadvertently and quite innocently, be doing things by using public money which would be unfair to private enterprise people who have not the same resources to fall back upon—resources which really do not belong to the people who are making use of them in this way.
I hope that, in answering the very reasonable plea made by my noble friend, the Minister will, in that spirit of trying to give confidence to the private enterprise industries, say that there will be no innocent or inadvertent unfairness and that this will be done by writing into the Bill that we must be very careful. I should have thought that the case was well made. I feel that it is very desirable and well within the spirit of what Ministers have been saying about the Bill during recent months.
Lord LOVELL-DAVIS: These lengthy Amendments basically follow Section 30 of the Iron and Steel Act 1967—a section which, incidentally, was repealed by the last Conservative Government.
Anyway, the 1967 provision was designed to meet a unique situation in which the private sector steel companies were competing with the nationalised sector in sales of finished steel and, at the same time, were dependent on it as a monopoly supplier of supplies of semi-finished steel. The NEB's position is in no way analagous, because they will have no monopoly power and will operate in competition with the private sector. The noble Viscount, Lord Massereene and Ferrard, quoted an instance which has
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nothing to do with the NEB. We are not talking about a State or any other monopoly. We are talking about the National Enterprise Board, who are not a monopoly. As we have said many times this afternoon, the full range of fair trading legislation will apply to the NEB, so that in their dealing with both publicly and privately-owned industry, they will be bound by all the existing legislation aimed at preventing restrictive trading practices.
The proposed Amendments make no attempt to define an unfair practice. Anyone losing a contract to the NEB or in any way bested by them could allege unfair practices, which could have a psychologically inhibiting effect on the public sector. As my noble friend Lady Wootton has said, there is no reason why this provision should apply only to unfair practice by public sector enterprises. Why should it not apply equally to unfair practices by the private sector? In any case, I am advised that the Amendments are technically defective. "Public enterprise" is defined to include all nationalised industries, yet the procedure requires all complaints to be dealt with by the Minister vis-à-vis the NEB. I am afraid that we cannot accept the Amendment.
Lord ABERDARE: I was not expecting that the noble Lord would accept the Amendment, but I was expecting that he might have been a little more helpful, in view of the way in which I moved the Amendment, in going some way to meet a proposal of this sort which would emphasise that the Board would compete fairly with private industry. When that has been said time and time again by noble Lords opposite, why cannot we put it in the Bill? I accept that it might not be all that effective and that one might not be able to carry it too far. All I am telling the Minister is that it would cause a great deal of anxiety to be removed from private industry if the assurances which have already been giver, could be put into the Bill.
Lord BESWICK: Why is the noble Lord so doubtful about the efficacy of the fair trading legislation?
Lord ABERDARE: Probably that is rather more formal than the fair trading I am thinking about. That covers certain

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activities only, and I wonder whether it is quite sufficient for what I have in mind, though I shall consider that point. I do not wish to press the Amendment at this stage. I should like to give the matter further thought and possibly return to it at a later stage. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord MELCHETT: I spoke to Amendments Nos. 52 and 53 with Amendment No. 40. With the leave of the Committee I should like to move them en bloc. I beg to move.
Amendments moved—
Page 6, line 22, at end insert ("and").
Page 6, line 23, leave out from ("provisions") to end of line 24.—(Lord Melchett.)
On Question, Amendments agreed to.
Lord ABERDARE Lord ABERDARE moved Amendment No. 54:
Page 6, line 24, at end insert—
("( ) shall specify the financial criteria for any decision of the Board on the making of any investment (otherwise than under section 7 or section 8 of the Industry Act 1972) in any enterprise, by indicating the minimum projected earnings of the investment required calculated on a discounted cash flow basis in real terms being a percentage equal to the text discount rate of the Treasury in operation at the time of its determination").
The noble Lord said: I beg to move Amendment No. 54 and I should like to speak to Amendments Nos. 55, 56 and 57. These are Amendments concerned with the gist of this clause. The clause states that the Secretary of State has a duty "to determine the financial duties of the Board", but it does not go very much further in defining what those duties shall be. The White Paper on which the Bill is based said that the National Enterprise Board are expected to operate in accordance with suitable financial objectives. Their financial objective will be to secure an adequate return on that part of the nation's capital for which they are responsible.
What I am trying to probe from the Government through these Amendments is what are these suitable financial objectives and what is an adequate return on capital. The noble Lord, Lord Melchett, in reply to my noble friend Lord Balfour on Amendment No. 49, went a
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little of the way and told us something about the Government's concept of an adequate return. He spoke of different returns in respect of different companies operating within the NEB ambit. Is it possible to go further in explaining how the financial duties laid on the Board will be determined?
Amendment No. 54 is intended to bring the Board into line with the nationalised industries generally and with the specific reference in the White Paper of November 1967, Nationalised Industries, a review of the economic and financial objectives. The Amendment refers to a "text" rate of discount. It should read "test discount rate". There is a textual mistake there. It refers to a test discount rate of the Treasury. The object of this Amendment is therefore to bring the Board within the same kind of overall framework as the nationalised industries so far as return on capital is concerned.
The next two Amendments, Nos. 55 and 56, are alternative ways of making a determination of this financial return. Amendment No. 57 stands on its own in requiring the Board in their annual report to specify how they have fulfilled their financial duties in the course of the year. I hope that the noble Lord may be able to help us towards the ideas that are set out in Amendments Nos. 54 to 56; but I hope that, in any case, he will be able to assure us that, whatever the financial objectives laid on the Board, they will be reported on in the annual report according to Amendment No. 57.
Lord BESWICK: I am sure this is another example where the noble Lord, Lord Aberdare, is trying to be constructive and I have considerable sympathy with the intention of the Amendments now before us. The difficulty is that although I agree with what he is after, if I may put it that way, these are not really matters which are appropriately included in legislation. As part of satisfying themselves that the duties they are imposing will result in an adequate overall rate of return on capital employed, the Government will require the Board to adopt a realistic test discount rate in assessing the desirability of investments. We will be discussing financial criteria and targets for the Board with the NEB organising committee.

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The evaluation of the projected rates of return on investments, as the noble Lord will probably understand, is not as simple as the Amendments suggest. It would be difficult to provide a form of words that would cover the range of eventualities which the NEB could have to face. The White Paper pointed out that financial arrangements would have to be carefully worked out to safeguard against uneconomic allocation of the nation's resources. The Amendments before us seek a minimum rate of return on the Board's capital of 5 per cent. in real terms. Acceptable rates of return on capital vary from industry to industry, and it would not be sensible to specify arbitrary definitions of an adequate return without reference to the types of activity which the Board undertake.
The noble Lord—and I am trying to call attention to the contradictions in the argument opposite—has indicated that on occasion it will be necessary to take an interest in or take over by agreement an organisation or a company which is not showing the necessary rate of return over a given time. Obviously different criteria will have to be applied in that case and life will be made difficult if we are to accept the policy of noble Lords opposite that when you get an adequate rate of return is the time when you should hand it back to the original owners.
Leaving that aside for the moment, I am trying to put it to the noble Lord that we are concerned with a somewhat complicated commercial exercise. The overall principle is that there should be a proper rate of return; and techniques have been evolved by the Treasury and by the sponsoring Departments for measuring and analysing the rate of return on investment of nationalised industries. That kind of technique will be applied in the case of the NEB. As an additional argument in trying to persuade the noble Lord that we are not unaware of the points that he is making, I would call his attention to Schedule 2 where he will find that the financial duties are set out in some detail.
Lord ABERDARE: I am grateful to the noble Lord. He has taken a great deal of trouble to answer the points I raised. Will these determinations be known generally and published or will
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they be presented to Parliament? Will they be in the annual report and will the annual report reflect the way in which the Board is fulfilling the different standards setting these cases?
Lord BESWICK: I should be misleading the Committee if I said that the form and content of the annual report has been determined already. That is not so. The Prime Minister has given an undertaking in one case, that of British Leyland, that there will be in the annual report the sort of information that people are asking for and the noble Lord is asking for. That was in the case of a very major investment. I can see that there could be smaller operations where it would be unsuitable or impracticable to include such information in the annual report. The general idea, I hope—and certainly this is the point I would express to my colleagues—is to give the maximum information possible in the annual report; but I could not give a guarantee in every case that all the detail that noble Lord has asked for will be set out.
The Earl of ONSLOW: In the annual report of the various companies would it be possible to separate in the financial account the amount put in for social and employment purposes? We do not like it, but it has been accepted by Parliament that the NEB should take over profitable firms. Those should be run, as is done by private industry, to make a profit. The NEB are also going to take over certain lame ducks which perhaps can never be made profitable. Can one have a separation of the social monies and the financial monies involved?
Lord BESWICK: We have made clear at earlier stages that this is exactly what will be done. Any activity undertaken at the behest of the Secretary of State through the provisions of Sections 7 and 8 of the 1972 Act, which involves the social consideration that the noble Earl has in mind, will be set out separately. Otherwise one would be detracting from the incentive which we wish the Board to have.
The Earl of BALFOUR: As my noble friend Lord Aberdare has spoken to other Amendments and mentioned Amendment No. 57, may I say a word on that? This is an important point. The Board are involved with public money and I would appreciate it if something on the lines

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of Amendment No. 57 could be considered by the Government, even if they do not accept that wording. It is basically a good Amendment and a lot of thought has gone into it. Parliament has a right to know where the Board have made a success or have not made a success. I feel it is possible, as the Bill is worded, for the Board to be rather secretive. I can understand this if they are acting commercially; this can be desirable in some cases. But as it is public money a full report of their activities is something of importance.
Lord BESWICK: I do not think I can add to what I have said to the noble Lord, Lord Aberdare. There will be a full report, and in that report there will be set out separately those activities which have been undertaken under the provisions of the 1972 Industry Act. Financial targets will have to be determined, and I am fairly confident that they will be published. The noble Earl spoke about secrecy; he is being unduly suspicious. There could be cases where confidential dealings of companies should not be set out in the annual report. But the idea will be to give the fullest possible information.
Lord ABERDARE: I am grateful to the noble Lord for his assurance. There is nothing in the clause which mentions any public knowledge of these determinations. The Secretary of State makes the determination with the approval of the Treasury and, after consultation with the Board, gives the Board notice of determination. The noble Lord has given us the assurance that in all normal circumstances this will be fully reported in the annual report, and I am satisfied with that assurance. I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
Clause 5, as amended, agreed to.
Clause 6 [General power of Secretary of State to give Board directions]:
6.25 p.m.
Baroness WARD of NORTH TYNESIDE Baroness WARD of NORTH TYNESIDE moved Amendment No. 59:
Page 6, line 26, leave out ("or specific")
The noble Baroness said: This is a small Amendment asking the Government to remove two words, "or specific". I
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hope that if I move the Amendment satisfactorily the Government will be able to acquiesce. Appropriately, in setting up statutory bodies it has been usual in the past to provide that Ministers should give only general directions. As an example, I want to quote the Gas Act 1972. I shall not read out all the details, because I imagine that the Gas Act 1972 will be very well known to Ministers opposite. I am sure the Committee will be delighted that I am not going to read out the details.
Several Noble Lords: Hear, hear!
Baroness WARD of NORTH TYNESIDE: I am glad about that! Using the words "or specific" has many disadvantages. Can the Minister explain in some detail the alteration in the Industry Bill? It seems a little odd that suddenly in this Bill the words "or specific" have been added. It seems to me rather extraordinary that in this new Bill which already contains many powers, the Board seem to be taking more powers. Having listened in very great detail for a long time to all the points which have been made, it seems to me that the Minister has enough new powers in the Industry Bill without waiting to add any more. I should have thought he would have been happier if he just had the usual powers of giving general directions, and I find it difficult to understand why he should suddenly want to take any new powers. Apart from that, there are certain very real disadvantages in the words that I am trying to remove by my Amendment. It is worth noting in passing that the powers in the Gas Act are given so that directions may be made in relation to matters which appear to the Secretary of State to affect the national interest. I am sure, from the general discussions that have gone on both on this side of the Committee and the Government's side of the Committee—
Lord DAVIES of LEEK: Will the noble Baroness give way?
A noble Lord: Why?
Lord DAVIES of LEEK: Because this is an absolutely vital point. In the Gas Act there is not the expression "after consultation with the Board". The Secretary of State cannot take these specific or general activities without first—and it is in the next clause of the Bill—having

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consultation with the Board. That is not in the Gas Act.
Baroness WARD of NORTH TYNESIDE: That is very interesting indeed; but I must move my Amendment in the way I want to move it. I was trying to get the agreement of the Government, not the agreement of the noble Lord opposite. I thank him very much indeed for the point he has made. He has as much experience as I have in politics, and one knows that in politics one can always produce an answer. I am trying to persuade the Minister to deal with the matter, and I must now go on with what I was trying to say. Whatever the noble Lord opposite may say, I am sure he agrees with me that it is very important that in this new Bill the Minister should be concerned with powers which help to—
Lord DAVIES of LEEK: I agree!
Baroness WARD of NORTH TYNESIDE: The noble Lord agrees; that is marvellous! If the Government wish to retain the words "or specific" in the Bill, words should be added which similarly limit the power of direction to major matters. I shall not go into further detail, but I would hope that the noble Lord opposite, having listened to this very long debate, would agree that the Minister had enough to do without wanting to add to his powers. Perhaps the noble Lord who is to reply will, for once—and I do not say more than "for once"—agree with me that through my Amendment, which is supported by my noble friends, we are all trying to help the Minister. He should not have to undertake further duties since we think he has already enough to do in looking after the national interest. I beg to move.
Lord ABERDARE: May I very briefly rise to support my noble friend, who has moved this Amendment with such eloquence that there is nothing for me to add, except to say that it seems to us that the Secretary of State should have powers of general direction. However, to give him powers of specific direction tends to give the impression that he might interfere with the day-to-day working of the Board. Since the Board members will be highly responsible people, it would not seem correct for the Secretary of State to do that. Therefore I fully support what
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has been said so eloquently by my noble friend.
Lord MELCHETT: The noble Baroness said that she had to convince the Minister and would not worry about my noble friends behind me, but I can assure her that we on this side take great note of what is said on the Benches behind us. Therefore, I think perhaps the noble Baroness could well have concentrated on convincing all of us on the soundness of her arguments, and not just myself.
The functions of the National Enterprise Board are more diverse and less clearly charted than those of other public corporations. The NEB will have at their disposal large sums of money and their terms of reference give them large areas of discretion. They do not have a simple single object, such as making gas or mining coal. Therefore it is more than usually desirable that the Secretary of State should have the power to intervene in the last resort; yet it is particularly difficult to foresee all occasions when intervention may be desirable and to provide specifically for them. Therefore a flexible power is needed. As I understand the noble Baroness, she was saying: "My Amendment may not be very good, but why don't you do it as it is done in the Gas Act?" She said also that we on these Benches knew a great deal about the Gas Act. I think she will see from what I have already said that even the wording of the Gas Act 1972 would not be acceptable. We want to be able to use the powers not only on matters of national interest but also because the Bill does not attempt to provide for direction on individual issues; rather it relies on the general terms of Clause 6.
To take a specific example, it is the general wish of your Lordships as a whole that the NEB should follow the provisions of the Takeover Code. It would be undesirable for this to be a matter of legislation. To write it in would be to delegate to the City Panel the powers to make Regulations which would bind the NEB, and this would be unconstitutional. But by use of specific directions we could ensure, if the NEB did not willingly agree, that the Board followed this Code. Would this affect the national interest? I would suggest to your Lordships that views would differ on this. To our minds, it illustrates the limitations and obscurities

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which this Amendment would bring with it. The fact that directions must be published in the Board's annual report means that the extent of Government control over the National Enterprise Board will be made public. This should help to reduce the informal pressures which have characterised relations between the Government and nationalised industries in the past.
The Chairman of the NEB will be able to resist informal pressures more successfully if he or she can point out to the Minister that there is provision for the Minister's wishes to be imposed openly and with binding force. The Government believe that this will provide a significant measure of increased public accountability. The Secretary of State will be answerable to Parliament for his or her use of the powers of direction, or for not using them in any particular case. Powers to issue general directions to nationalised industries have long been in existence but it has often been found, when the use of the powers was contemplated, that there was no clear line dividing the general from the specific. The powers have been used only on very rare occasions. Since it is important for the Government to be sure that they can exercise control over the NEB should the need arise, there needs to be a power for specific, as well as general, directions to be given.
I hope I have explained to the noble Baroness at some length and with detailed reference to the Gas Act 1972, why we do not find her Amendment acceptable. We therefore hope that she will see fit to withdraw it.
Baroness WARD of NORTH TYNESIDE: I find that reply very disappointing and rather disconcerting I am sure that the noble Lord will not really expect me to say that I understood what he said. It seems to me—though I fully understand that my mind will not necessarily correlate with his—easy to understand that if the Minister has the power to make general directions, that should surely be sufficient. I would hope that my Amendment would be fully supported by the CBI and the TUC and also by consumers and similar bodies of people who are interested in this new Industry Bill. I would have thought that, if the Minister had a general directive right in the national interest, that would he sufficient. Would the noble Lord explain to me
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how he will differentiate between the national interest, the general direction and the specific detail?—because, although I fully understand some of the difficulties of the Industry Bill, I would have thought the Minister would get more general cooperation if he accepted an Amendment of this kind. Even with my small experience of industry, I know very well that there can be too much interference with the people you have called upon to work for you. I do not like the Minister's reply one little bit.
Lord MELCHETT: May I say to the noble Baroness before anyone else intervenes—so that she remembers what she has said when I come to comment on the reply—that I am frankly astonished that she did not understand what I said. I am even more astonished that she should find it disappointing if she did not understand it.
Baroness WARD of NORTH TYNESIDE: That is rather silly.
Lord MELCHETT: May I suggest that the noble Baroness reads what I have said in Hansard at her leisure, and then she may find it a little more understandable. I thought what I had said was perfectly clear. Indeed the noble Baroness demonstrated that she had not understood my reply when she asked me how the Government were to differentiate between directions given in the national interest and specific directions. I was trying to make the point that this distinction is well-nigh impossible, and that is why the Amendment moved by the noble Baroness is not acceptable.
Baroness WARD of NORTH TYNESIDE: May I finish by saying that the noble Lord and I really have different interpretations of "understandable". I did not mean I did not really understand what he was saying; I was trying to be polite. Obviously the noble Lord does not understand how anybody like me can try to be polite and helpful. I would have said that what he was saying was nonsense, but I said it was "not understandable"—taking the blame on myself, which is quite unusual.
The Earl of ONSLOW: I was attempting to draw comparisons between hot air and the Gas Act, but I thought that might not be polite to your Lordships.

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There is much point in what the noble Baroness, Lady Ward, said. Earlier in this debate we spoke about industrial democracy and the right of people to be consulted and helped to run the concerns which the NEB own. If we give the Minister the power to say: "Move that chair from left to right"—the provision says "specific" even though he has to consult under the next paragraph—then of course he will be tempted to use that power. Of course, to speak about moving a chair from left to right is reductio ad absurdum. The Minister must be allowed to delegate. He must not be encouraged to interfere. The word "specific" actively encourages him to interfere in the day-to-day running of British Leyland, Rolls-Royce or whatever other company the NEB may take over. Ministers should be discouraged from this habit.
Lord MELCHETT: May I ask the noble Earl a question as he has returned to that point? Does he accept that the Minister would look rather silly when the annual report is published if it contains a statement to the effect that the Minister told the board of British Leyland to move a chair from left to right? That surely is the biggest discouragement to Ministers interfering in matters where they should not interfere. Maybe the noble Earl could also take on board a point I made and which was not answered by the noble Baroness. Do noble Lords opposite accept that the Takeover Code should apply to the NEB, and, if so, do they accept that there may be theoretical need for specific directions to be given to make sure that the NEB comply with that Code?
The Earl of ONSLOW: Perhaps it is not for me to answer wholly for people on this side of the Committee, but I should certainly like to answer that question for myself. I should have thought that that was not a specific instruction but a general instruction. He is not saying he will accept the Takeover Code, or amend it. It is surely a general instruction. Also, with the Government's assurances given by the noble Lord opposite that this is necessary, I should have thought that the National Enterprise Board would have done this in any event. If not, perhaps they ought not to be members of that Board.
Lord DRUMALBYN: May I ask the noble Lord a question, in all seriousness? We all know there have been great difficulties about giving general directions in the past. If there is a difficulty about distinguishing between general and specific directions, why bother to say "general" or "specific" at all? Might it not make things a good deal easier if it were merely stated:
"The Secretary of State may give the Board directions as to the exercise of their functions"?
For example, in Clause 3 the Secretary of State is given powers to direct, and the provision goes on to say: "the direction may specify…". Is that a general direction which becomes specific at certain times, or what is it? I should have thought that the time has now come to abolish the distinction between a general and a specific direction in cases such as this.
Lord MELCHETT: It looks as if we have got into trouble by being too honest again. Here we are making it perfectly clear that the Secretary of State will be empowered to make specific directions. As the noble Lord says, in the past this has not been the practice and it has caused difficulties. We are being honest and open about it and putting it quite clearly in the Bill. Had we put in the Bill,
"the Secretary of State may have power to give directions…"
I am absolutely certain that noble Lords opposite would have been standing up in this Committee and saying: "Here you are trying to sneak in new powers for the Secretary of State to give any sort of direction he wishes, without making it clear in the Bill that that is what you are doing." We are making it clear that we want the Secretary of State to be able to give specific powers, for the reasons I have given at great length and in great detail, and I think the noble Lord might accept that provision in the spirit in which it was included in the Bill.
Lord DRUMALBYN: I think the noble Lord is being unduly testy about this. It is a very serious and important matter. We are grateful to him for the explanation he has given. All I am saying is, on a much wider sphere, has not the time come to abolish this distinction between general and specific

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directions? If general directions cannot be given—and only one has ever been given to a nationalised industry, so far as I am aware—why continue to make the distinction? It is an important and serious matter and ought to be treated more seriously than the noble Lord treated it.
Lord BESWICK: May I assure the noble Lord that we are treating the point seriously. May I further suggest to him that if it were suggested to the present chairman of nationalised industries that there should be general and specific powers vested in the respective Secretaries of State, there would be cause for considerable concern. It would need a good deal more argument. As the noble Lord knows, there have been difficulties and they will not be solved just by having the kind of Amendment he suggests. On the other hand, as my noble friend has said, when we come to the NEB we are dealing with a completely different kind of animal. There are specific duties; there are small and large companies within their compass, and it may well be necessary to have a more selective instrument in the armoury of the Secretary of State. That is why this provision is in the Bill.
Lord DRUMALBYN: I am grateful for that explanation, but I still think there is a point here which is worth considering. We were not moving an Amendment; I was merely suggesting that the time has come to reconsider the whole matter.
Baroness WARD of NORTH TYNESIDE: Whatever may happen in the future, it is with very great regret that I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
6.47 p.m.
The Earl of BALFOUR The Earl of BALFOUR moved Amendment No. 60:
Page 6, line 30, at end insert—
("( ) The Secretary of State shall not give a direction to the Board concerning any one industry without considering, in consultation with the Board the effect of that direction on any other similar industry anywhere in the United Kingdom.")
The noble Lord said: To carry on from the last Amendment, I am here seriously concerned because the Bill states that the Secretary of State may give the Board directions of a specific character as to
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the exercise of their functions. The purpose of this Amendment is to ensure that when the Board have been given a direction—although the Bill says the Secretary of State shall consult the Board about any proposed direction—no one industry is treated as a special case to the detriment of another industry. May I remind your Lordships of earlier parts of the Bill. The NEB can go in for a joint venture or a partnership, make a loan or guarantee an obligation, or provide a service in relation to management.
Let us take a highly competitive industry such as tool-making or light engineering. With high unemployment in one area, the Board might feel that a development grant and other assistance—even the acquisition of shares and investment of capital—would put a particular tool-making or light engineering concern firmly on its feet so that it could employ many more people. It would, however, be disastrous if because this firm was made so much more competitive a lot of other small firms went out of business.
Lord DAVIES of LEEK: That is the purpose of private enterprise—
The Earl of BALFOUR:—or, so far as I can see, of nationalised industries. Let us take another example. Agricultural tractors are made by a number of companies, including British Leyland. It the National Enterprise Board spent a lot of money on research to develop the British Leyland tractor and make it a very good one, it would be a pity if that forced a considerable reduction in the sales of, say, Ford or David Brown or some other maker.
May I leave this as a general idea. In particular, I am asking that after a direction from the Secretary of State the Board should consider the effect of that direction on similar industry anywhere in the United Kingdom. It is up to the Government to be fair to all parties involved. Even with an organisation such as the National Enterprise Board there is a risk that for political, economic or social reasons some kind of favouritism might be created that could be to the detriment of another company, particularly with the kind of financial backing and, perhaps, political directive that they may have. I know that occasionally this kind of thing happens in private industry, but one has

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the Monopolies Commission to prevent too much of it—or perhaps action can be taken by the Government. Even if the Confederation of British Industry were brought in, this would be a safeguard. I beg to move.
6.51 p.m.
Lord BESWICK: May I say straight away that if the Secretary of State gave a direction to any one company—I am not quite sure what the noble Earl is talking about when he refers to a direction to an industry, because the Board cannot give a direction to an industry—it would have regard to the effect on other parts of that industry or other aspects of the British economy. May I remind the noble Earl—I am sure he will accept this—of the procedure which is involved? Clause 6(2) provides that the Secretary of State must consult the National Enterprise Board before giving any direction under Clause 6. A direction must be concerned with the discharge of the functions of the National Enterprise Board as specified in Clause 2. Clause 2 specifies that these functions are to be exercised only for certain designated purposes—the assistance of the United Kingdom economy, for example.
It would be quite inconceivable that the Secretary of State should give a direction which would have as its purpose the detriment of some other company or industry. The Secretary of State has in mind the assistance of the economy of the United Kingdom. The other function would be the promotion of industrial efficiency and international competitiveness in the United Kingdom. Again, the noble Earl will understand that it would be contrary to that function if the Secretary of State were to put out of business, as he said, two or three other companies. All of these functions of the National Enterprise Board imply a concern for the United Kingdom economy as a whole. I assure the noble Earl that whatever feelings he may have about Secretaries of State who are of a different political colour from his own, they all bear in mind the need to improve the economy of the United Kingdom as a whole. I hope he will accept that that will be in the background of any direction that is given.
The Earl of BALFOUR: I shall be very interested to read what the noble Lord has said. I am not sure that I agree entirely with what he has said, but at this stage I am quite prepared to withdraw the Amendment.
Amendment, by leave, withdrawn.
6.54 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 61:
Page 6, line 37, at end insert—
("( ) No direction given under this section shall empower or require the Board or any of its subsidiaries to do any act which a company incorporated under the Companies Acts 1948 to 1967 whose Memorandum of Association included the matters specified in section 2(2) of this Act could not do, nor shall any such direction exempt the Board or any of its subsidiaries from the duty to comply with any provision of law with which any such company would have to comply.").
The noble Lord said: I beg to move Amendment No. 61. Perhaps we could take in conjunction with it Amendments Nos. 62 and 63.
Lord MELCHETT: Could the noble Lord also speak to Amendment No. 64?
Lord ABERDARE: Amendment No. 64 relates to another point, but I will deal with it now. Amendment No. 61 is intended to ensure that no direction shall place the Board or any of their subsidiaries in a situation different from that in which a company in the private sector would be. Amendments Nos. 62 and 63 specify that the Board and their subsidiaries shall act in accordance with the best practice, and in accordance with the same extraneous influences as affect a company in the private sector. Therefore, these three Amendments are seeking to ensure that the giving of these directions does not require the Board to do anything which is not normal practice in the private sector.
The noble Lord asked me to speak to Amendment No. 64 at the same time. This is a very different point. It is a matter of finance and is a little complicated. Clause 7 makes provision for limiting the finance available to the Board. However, the Board's total assets also include acquisitions and income under Clause 2(4). For example, these are securities acquired under paragraph (a) of that subsection, land and other property

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acquired under paragraph (f) and income derived from services provided under paragraph (h). If the Board should find themselves approaching the financial limits under Clause 7, they could raise cash by stepping up their provision of services, by selling land or other property or by selling securities. The purpose behind Amendment No. 64 is to ensure that the Board's finances shall be governed by Clause 7, as is intended by the Government. Therefore, it is a slightly different concept from that which governs the other three Amendments. I beg to move the first Amendment, Amendment No. 61.
6.58 p.m.
Lord MELCHETT: I am very grateful to the noble Lord for taking these four Amendments together, in the hope that we may make a little faster progress than we have made to date. To take first Amendment No. 61, it is the Government's view that any directions to the Board to do things not covered by their general purposes and functions as set out in Clause 2, or to do things which other Statutes prohibit, would be ultra vires and would therefore not be binding on the Board. The Secretary of State does not have the power any more than the Board have the power to override or set aside laws made by Parliament. The Government have already amended Clause 2 to make it absolutely clear that there is nothing in that clause which shall be construed as authorising the disregard by the Board of any enactment or rule of law. Directions under Clause 6 relate to the exercise of the Board's functions. These are laid down in Clause 2 and are limited in the way set out in that clause. The Board cannot be directed under Clause 6 to do things which are outside the scope of those functions.
To turn to Amendments Nos. 62 and 63, the Board will be expected to have high standards, but the interpretation of what would constitute the "best practice" would be a matter of opinion. Where it is possible to be more specific, we are already meeting this point in the Bill. For example, Schedule 2 provides for the Board's statement of accounts to conform to the best commercial practice. The Government have also made it clear that the Board will follow certain appropriate codes of standards of general importance,
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such as the Takeover Code which I mentioned when I dealt with the previous Amendment. If noble Lords are concerned about any other specific code, we on this side would certainly be prepared to consider it. But a blanket requirement of the kind suggested in these Amendments begs the question of what is "best practice" or relevant, and is not therefore, in our view, appropriate. The obligation on the Secretary of State to consult the Board before giving directions will ensure that any possible conflict between the requirements imposed by directions and those of codes of practice observed by the National Enterprise Board can be identified, and taken into account before directions are made by the Secretary of State. In the unlikely event of the Board seriously failing to maintain appropriate standards, the power of direction will provide a means of ensuring that the shortcomings can be rectified.
So far as Amendment No. 64 is concerned, the White Paper indicated that in order to avoid conflict between its objectives and the interests of private shareholders, the National Enterprise Board will need a number of companies in which they hold 100 per cent. of the equity capital. In general, the disposal of minority interests in NEB subsidiaries seems unlikely to be something that the NEB would often want to do. However, there seems to be no reason to prevent the Board converting one of their wholly-owned subsidiaries into a joint venture which would be part owned by another company, if this is what the partner wanted. More generally, I do not see why the NEB should be prevented from selling part interests in their subsidiaries if there are willing buyers. I hope that that has answered the points raised by the noble Lord, Lord Aberdare, and that he will see fit to withdraw the Amendment.
The Earl of ONSLOW: Can the noble Lord tell us about the codes of practice which he mentioned, such as the City Takeover Codes of Practice? Can he later publish these Codes of Practice and will it be known what they are? Secondly, on the point of disposing of minority interests, surely this is where we go back to the discussion we had earlier when the noble Lord, Lord Lovell-Davis, said that the citizens of the State must be fully rewarded for its capital. Is this not

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something which in some cases should be encouraged, to get outside capital into something that the National Enterprise Board are doing, together with getting a good return to the State for the use of their capital.
Lord MELCHETT: The Takeover Code is already published and annually reviewed and I do not think it would be necessary for the Board to do anything more to publicise that Code. On the second point, if I understood it correctly—
The Earl of ONSLOW: The noble Lord specifically said "codes of practice" in the plural, and I wondered what other codes of practice he was talking about or whether it was only the takeover panel code—or does he not know?
Lord MELCHETT: I gave that code as a specific example and invited noble Lords opposite to suggest others if they wanted to. The noble Earl is saying that I did nothing of the sort. I was reading very carefully at the time, and I can assure the noble Earl that I know what I said and if he looks in Hansard he will see that I said: "If noble Lords are concerned about some other specific code, this could be considered"—and I said that we on this side of the Committee would be quite willing to consider it. I think the noble Earl is being a little uncharitable in murmering into his bow tie that I did not say that when in fact I did.
On the second point that he raised, the disposal of assets, I think he was arguing in favour of what I had said and not what the noble Lord on his Front Bench had said; namely, that the NEB, if they wanted to, should be in a position to dispose of assets in this way if there were willing buyers.
Lord ABERDARE: I am grateful to the noble Lord for what he has said, and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 6 agreed to.
Clause 7 [Financial Limits]:
7.5 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 65:
Page 7, line 5, leave out ("wholly owned").
The noble Lord said: Together with this Amendment, I should like to speak to Amendments Nos. 70 and 71 if that is convenient to the Committee. Clause 7 places a limit on the National Enterprise Board's borrowing powers of £700 million or up to £1,000 million with the consent of the Treasury. This limit applies to the Board and their wholly-owned subsidiaries. The point of this Amendment is to raise the question of the position of the Board and their borrowing powers with regard to those subsidiaries that are not wholly owned. For example, there could be a company in which the National Enterprise Board held 90 per cent. of the shares, and in that case they would not be inhibited by the overall borrowing control which relates only to wholly-owned subsidiaries and through that company the National Enterprise Board would be able to borrow without regard to the overall limits set on their borrowing powers with regard to the wholly-owned subsidiaries.
All I am asking is whether there is a loophole and whether there is a means by which the National Enterprise Board could borrow in excess of the £700 million limit without receiving consent from the Treasury. The idea behind these three Amendments is that they should include the borrowing by partly-owned subsidiaries in their overall limit but only in proportion to the National Enterprise Board's share of the equity capital of a company that was not wholly-owned. I beg to move.
Lord BESWICK: I can give an undertaking that there is not a loophole here so far as the purpose of the Clause 7 limit is concerned. The purpose of that financial limit in Clause 7 is to limit the public funds on which the NEB can call and the extent of borrowing which they can make and which would be directly competitive with the borrowing by the Government. Let us see what is involved here. In so far as public funds are invested in any subsidiary of the Board, whether or not wholly-owned, they will count against the financial limits. I think that is understood. If any borrowing by a subsidiary, wholly-owned or not, is guaranteed by the NEB so that their own credit is directly at stake, then again it will count against the financial limits specified in Clause 7.

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The Amendment which the noble Lord has moved would not therefore limit the call on public funds, and I hope that that is what he is primarily concerned with. However, I put it to him that if he wants to go beyond that purpose he would be wrong to maintain that the fact that Clause 7 includes only borrowing by the NEB's owned subsidiaries within the specified overall financial limit means that the NEB will have unlimited access to funds raised by non-wholly-owned subsidiaries which could then be used for its own purposes. This is not so. The Board will not be able to channel funds from non-wholly-owned subsidiaries to themselves without restraint. Paragraph 1(3) of Schedule 2 provides that the Board will be able to borrow in sterling only on a long-term basis from the Secretary of State, or with his consent and the approval of the Treasury, from the EEC Commission or from the European Investment Bank. Thus the NEB would only be able to borrow long-term from its non-wholly owned subsidiaries in a currency other than sterling. That, I suggest to the noble Lord, is a fairly remote possibility, and in any case this too would require the consent of the Secretary of State and the approval of the Treasury.
There is one case which I would put to the noble Lord, even if it were possible to do what he is suggesting. Let us suppose that the NEB had a substantial investment in a company which required to borrow, but the NEB was up against its financial limit. I am sure that the noble Lord would not wish to handicap that company by making it impossible to borrow in the market, simply because there was an equity holding of the NEB. That would be the effect of the Amendment and I am sure that is not the intention.
Lord ABERDARE: I am grateful to the noble Lord. I found those reassurances absolutely satisfactory and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
7.10 p.m.
Lord DRUMALBYN Lord DRUMALBYN moved Amendment No. 66:
Page 7, line 5, at end insert ("including any sums lent to the Board by the Secretary of State under paragraph 2 of Schedule 2.").
The noble Lord said: From what the noble Lord has just said it seems to me that this Amendment is unnecessary. It was put down purely in order to obtain clarification of the phrase "general external borrowing." Perhaps the noble Lord would confirm that. I beg to move.
Lord LOVELL-DAVIS: I am glad to assure the noble Lord, Lord Drumalbyn, that the sums lent to the Board under Schedule 2 paragraph (2), will, without doubt, count against the overall financial limit. "General external borrowing" clearly includes all borrowing, no matter from what source, other than the specific borrowing excepted under subsection (4). Paragraphs (1) and (2) of Schedule 2 mention the borrowing powers of the Board, and the powers of the Secretary of State to lend, so sums borrowed under paragraph (2) clearly constitute borrowing. I am assured that there is no doubt that the Secretary of State is "external" to the Board.
Lord DRUMALBYN: That is in contrast to internal financing? Is that it?
Lord LOVELL-DAVIS: Yes, that is right.
Lord DRUMALBYN: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
The Earl of BALFOUR The Earl of BALFOUR moved Amendment No. 67:
Page 7, line 12, at end insert—
("(e) the Board's liability on any holding or securities in any body corporate in which the Board holds over 25 per cent. of the share capital or where the Board has granted a loan or grant of not less than £5 million.").
The noble Earl said: In Clause 7(1) we are dealing with the aggregate amount which can be up to the limit in subsection (2). I wondered whether, in this aggregate, there should be some insertion in respect of the liability of the Board on any holding or securities in which the Board hold over 25 per cent. I am not an expert on company law, but I was under the impression you could have very distinct liabilities if you had more than a 25 per cent. holding or security of a Board, or perhaps its suppliers, or in some sales guarantee, or in spheres of this nature. This is very much a probing Amendment to try to discover whether the Board's acquisition of shares or securities, or that kind of thing, could place a liability on

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them that, perhaps, could be embarrassing. I beg to move.
Lord BESWICK: There ought to be a little probing on this side of the Committee, because I am not able to see what the noble Earl is really seeking to do so far as the wording of the Amendment is concerned. The purpose of the Amendment seems to be to make borrowings by non-wholly owned subsidiaries of the National Enterprise Board, and by other concerns assisted by the NEB, count against the financial limit of the National Enterprise Board, although in law they do not. The purpose of Clause 7 is to set limits to the amount of public funds available to the National Enterprise Board. I thought I made that clear on previous Amendments. All the money which the Board invest in shares or loan capital in companies, or give as grants, must be found from within this overall allocation, or from generated profits. There is no reason to deduct from the amount available the liability of companies to third parties, since these will not represent an enforceable call on the finances of the National Enterprise Board.
Of course, if the Board guarantee any borrowing by other concerns, the amount guaranteed will count against the limit by virtue of subsection (1)(b) of Clause 7. The Amendment would serve only to place a savage constraint on the amount of money available to the Board in the task they are undertaking. I am sure that, in the light of what I have said, that is not what the noble Earl is after.
The Earl of BALFOUR: I am very grateful for that explanation. This was a point I was not clear about. The noble Lord, Lord Beswick, has explained it, and I now understand it very much better. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
7.15 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 68:
Page 7, line 13, at end insert:
("( ) Payments made by the Board to the Secretary of State in accordance with sub-paragraph 5(3) of Schedule 2 below shall not for any purpose be deemed to be repayments of sums paid to the Board by the Secretary of State under sub-paragraph 5(1) of that Schedule.")
The noble Lord said: The purpose of this Amendment is somewhat similar to
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that of Amendment No. 64, in order to prevent contra-accounting and surreptitiously avoiding restrictions provided by Clause 7. The payments made by the Board to the Secretary of State under paragraph 5(3) of Schedule 2, in effect, are dividends on the public dividend capital which has been provided by the Secretary of State to the Board. Paragraph 5(3) closes by providing that these sums
"shall be paid into the Consolidated Fund".
The purpose of this Amendment is to ensure that such sums are regarded as income accruing to the public, and not as repayments of advances made in the form of public dividend capital. I beg to move.
Lord LOVELL-DAVIS: I can give the noble Lord, Lord Aberdare, the assurance he is seeking in this Amendment. It is already implicit in the provisions in the Bill relating to public dividend capital that the dividends the Board pay on PDC are not to be counted as repayments of that capital. There is a clear analogy between public dividend capital and equity in the private sector and, like equity, PDC is non-repayable. The dividends paid cannot therefore be deducted from the aggregate amount outstanding in respect of the PDC which has been paid to the Board, and there will not be any increase in the overall financial allocation of the National Enterprise Board as a result of dividends being paid on the Board's private dividend capital.
Lord ABERDARE: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
The DEPUTY CHAIRMAN of COMMITTEES (Lord Derwent): I must point out that, if Amendment No. 69 is agreed to, I will not be able to call Amendments Nos. 70 or 71.
The Earl of BALFOUR The Earl of BALFOUR moved Amendment No. 69:
Page 7, line 19, leave out subsection (4) and insert—
("(4) In subsection (1) above "general external borrowing" means—

(a) sums borrowed by the Board other than—

(i) sums borrowed from a body corporate which is one of the Board's wholly owned subsidiaries at the time of the loan;

(ii) any sums mentioned in subsection (1)(b) above; or

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(iii) sums borrowed by the Board for the purpose of giving assistance under section 3 above; and

(b) sums borrowed by a wholly owned subsidiary of the Board or from another wholly owned subsidiary of the Board;

but does not include any debt assumed by the Board under paragraph 6(1) of Schedule 2 below or any sums borrowed by a partially owned subsidiary of the Board.")
The noble Earl said: To a very great extent this is a probing Amendment, partly because of the wording in the Bill. I put down this Amendment because I really do not understand exactly what was involved in general external borrowing under subsection (4). I am not attempting to change what it is in subsection (4). I am not altogether happy with the wording in paragraph (b). Line 31 says:
"…sums borrowed by it when it was such a subsidiary other than sums borrowed from the Board…".
I am not quite certain in this case when it was a subsidiary, and when it was not. I have read this two or three times, and simply do not understand what paragraph (b) really means.
While I am speaking to this, I should like to ask one or two questions. Does the general external borrowing of the Board include fulfilling the powers under Clause 2(4), a direction of the Secretary of State under Clause 5 or 6, or provisions of Schedule 2, paragraphs 1 and 2? What about the cost of grants or loans under Clause 3? What capital expenditure are the National Enterprise Board allowed to spend in acquiring a proportion of share capital in various industries? How long is the £700 million supposed to last—one year, two years, or perhaps a few months? If I can come back to my Amendment, I hope I have not put anything in because I have misunderstood what is in the Bill. If there is a difference between us here, I would be grateful for an explanation. With those few words, I beg to move.
Lord BESWICK: I hope the noble Earl will not think me unhelpful if I say that the very cogent questions he posed were so complicated that I would like time to consider them. I will read Hansard, and, if necessary, write to him. The last question, as to how long the £700 million would last, is one I will not be able to answer, because we do not know. If there were the sort of débacle we had
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with British Leyland, it is possible that it would last a shorter time than otherwise. It depends how the enterprise goes. I could not give a sensible answer to that question. If the noble Earl is agreeable to my studying his questions and letting him have the best possible answers I can, I will undertake to do that.
The Earl of ONSLOW: I think that the amount of time this £700 million to £1,000 million is going to last seems extremely important. I quite understand the difficulties over some disaster like British Leyland, or whoever it might be. This would present enormous complications. But if that money is going to be used up, say, at the worst in six months or a year—I am taking the absolute worst now—presumably Her Majesty's present advisers would have to come back to Parliament and ask for more, and this would be a very unsatisfactory state of affairs. Can the noble Lord give an undertaking that he will try to get a more detailed forecast of the Government's thinking along these lines, how they propose to spend it, how they propose to invest it and so on and so forth?
Lord BESWICK: I cannot, and I do not think it is reasonable to ask. When this conception of the Bill first saw the light of day and was studied, I doubt whether anyone in the country thought that British Leyland would meet the sort of situation they eventually reached. I do not know what may happen in two or three months in other parts of the British economy. It would therefore be unreasonable to give any forecast at all. If the £700 million limit is reached, then it will be necessary for an appropriate Order to be laid before Parliament, before the House of Commons, and I have no doubt that the matter would be thoroughly discussed before the additional £300 million was made available.
The Earl of BALFOUR: I wonder whether I could press the noble Lord a little further, and if he could explain whether there is any difference between what I have put down in my Amendment and what is in the Bill? Have I got it right or wrong? Also, I am wondering whether "general external borrowing" covers the provisions in Schedule 2, paragraphs 1 and 2. I feel that quite a lot of money could be involved here, and it

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would be nice to have some idea of what these maximums are.
Lord BESWICK: I can comment on the Amendment the noble Earl has put down. What I cannot do is to give answers to the questions he posed, which in the main had nothing to do with the Amendment he has put down. If I may take the redraft of subsection (4), it appears to have three purposes. The noble Earl is saying explicitly that sums borrowed by non-wholly-owned subsidiaries of the Board do not count towards the Board's general external borrowing. This was implicit in the Bill any how, so that there is no difference there. He goes on to say that it includes in the Board's external borrowing, which counts towards its financial limit, sums borrowed by a wholly-owned subsidiary of the Board before it became a wholly-owned subsidiary of the Board. Such sums are specifically excluded at present. Then included in the Board's general external borrowing are sums borrowed by one wholly-owned subsidiary from another wholly-owned subsidiary. Such borrowings are specifically excluded at the present time.
The Earl of BALFOUR: I am very grateful for that explanation. I beg leave to withdraw this Amendment.
Amendment, by leave, withdrawn.
Clause 7 agreed to.
Clause 8 [The Board and the media]:
7.25 p.m.
Lord LOVELL-DAVIS Lord LOVELL-DAVIS moved Amendment No. 72:
Page 8, line 31, leave out from ("State") to end of line 37 and insert ("may direct that the Board or a subsidiary of the Board shall not be under any duty imposed by subsection (5) or (6) above during such time as the direction is in force.")
The noble Lord said: This Amend-men has two purposes, the first of which is to make the drafting of subsection (7) more concise. It is not really necessary to specify the duty of the Board in their own right and their duty in respect of their subsidiaries separately, as is at present done in subsection (7)(b). The second object of the Amendment is to make it rather clearer—although this was in fact implicit—that directions given by the Secretary of State to allow the Board
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or their subsidiaries to retain media interests are not intended to be permanent. The Government's intention is that these directions shall continue in operation only so long as there exists the danger of serious commercial injury to a newspaper or periodical if the National Enterprise Board or their subsidiaries are obliged to dispose of their interests. I beg to move.
On Question, Amendment agreed to.
Lord DRUMALBYN Lord DRUMALBYN moved Amendment No. 73:
Page 8, line 41, insert—
"( ) Where the Secretary of State has given any such direction as is mentioned in subsection (7) above, it shall be the duty of the Board to dispose of its interests in the body corporate as soon as is practicable and reasonable.")
The noble Lord said: I do not think it is possible to make clear what this Amendment and Amendment No. 75 are about without going in some detail into what the whole clause is about. I think perhaps it is unfortunate that we have such a thin Committee to discuss, at this time of night, a clause which has not been debated in another place; it was moved under the guillotine. It might have been more convenient if we had simply moved to leave out the clause and had a general debate on the clause at the start. I hone the Committee will bear with me if I explain what the clause is about and then explain the effect of my Amendments. All we have had so far are a few remarks about the Government's new clause and what the noble Lord, Lord Beswick, said in his Second Reading speech. He said then:
"The NEB might indirectly acquire an interest in a media company as part of a larger acquisition, but it will be required to divest itself of the interest, unless this would clearly harm the media company…"—[Official Report, 10/7/75, col. 912.]
By "this" he meant that divesting itself of the interest would harm the media company, as the noble Lord, Lord Lovell-Davis, has just explained.
The clause prohibits the Board and their subsidiaries from starting up as publishers of newspapers, magazines or other periodicals for sale to the public and from contracting with the IBA for the provision of programmes. This is as I understand it, and I hope the noble Lord will correct me whenever I am wrong. It

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also debars them from acquiring any of the share capital of a body corporate which engages substantially in either of those types of activity or the share capital of a holding company controlling companies which do so engage in those types of activity. Subsection (4) then, paradoxically, says that nevertheless the Board or one of their subsidiaries can acquire such share capital if the Secretary of State tells them to; that is by means of a direction. But if so, it goes on, in subsection (5), the resulting voting power must be so exercised as to secure the disposal of the business—that is, as it is described, the business of publishing or programme contracting—by the body corporate as soon as possible.
In passing, I would say that that is rather different from the Board divesting themselves of their interest, because there is no specific requirement on the NEB, so far as I can see, to divest themselves of their interest in a holding company one of whose companies—not the company for which help was originally envisaged—carried on such a business. It would be quite possible for a holding company to control a group of companies, some of which were engaged in publishing or in the provision of programmes, and one of which had got into difficulties, and the object of the Secretary of State was essentially to come to the aid of that one which had got into difficulties. There is possibly a drafting difficulty here, and perhaps the noble Lord would have a look at that.
Subsection (7), which we have just amended, says that the Secretary of State may direct that the Board or their subsidiary shall not be under a duty to exercise their voting power in that way while the direction remains in force; that is, to exercise their voting powers to secure the disposal of the business, not necessarily the whole business, as I have explained. This plainly envisages a situation where the company, or group, are in such a parlous situation that nobody will buy them out, so the Board or their subsidiary is, so to say, locked in. In that state they cannot exercise any power to control or influence the company or holding company, except in relation to financial or commercial matters, and my second Amendment is to leave out "or commercial".
My reason for putting down that Amendment is that in the business of publishing newspapers, magazines and periodicals, almost everything is a commercial matter. What is a commercial matter? It is the business of publishing; publishing news, opinions, features, advertisements and notices. That is the business, and it is all done commercially to sell the product. One might almost ask: what is not a commercial matter? But I suppose it would be possible to separate the purely financial aspects. If the aim is to prevent the Board from controlling or influencing what a paper prints, then it certainly cannot be achieved by allowing the Board to exercise control or influence in commercial matters.
I cannot understand the difficulty here, or why we have all these additional subsections. All that is needed is to have a clause clearly linking help in the case of the media to the powers under Sections 7 or 8 in the Industry Act 1972, but debarring the Board from taking any shares in publishing or broadcast contracting enterprises. Unfortunately, the Government have a "thing" about this: they have to take shares in it. Surely the Government are not so doctrinaire about the Board acquiring shares as to discard this quite obvious solution. There is no other way of preventing the Board from exercising control over commercial matters, which includes the whole gamut of what is printed. The result of this would be to retain only subsections (1), (2), (3), and (11), and to scrap subsections (4) to (10). The noble Lord may well say that that is not what my Amendment is about, but we are only at the Committee stage and, at the very least, I should have thought that the Government ought to accept both my Amendments and limit the powers of control to financial matters.
It is manifestly improper that the NEB should hold any shares in any media communicating with the general public. The Government clearly understand this and have gone to a great deal of trouble to try to limit their control over the content of the publications. In my view, they have failed and the noble Lord will have great difficulty in arguing that "commercial" does not include the whole gamut of the publishing industry. The Government clearly understand the difficulty, but unfortunately they have not yet grasped

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at the nettle and drawn the logical conclusion. I hope they will do so. In the meantime, I beg to move.
7.36 p.m.
Lord LOVELL-DAVIS: I should like to deal specifically with the two Amendments which the noble Lord has put down, and hope that the answers to his other questions will come out of it. If I may, I should like to take both Amendments No. 73 and No. 75. There is one point which I should like to clear up. He drew specific attention to subsection (4). He was asking why the NEB should be able to acquire share capital in a company engaged in media activities, if directed to do so under Clause 3. The fact is that this would simply be if it were necessary in terms of a rescue operation under the Industry Act, that is all, and this provision ensures that the Board would not be precluded from taking a shareholding in a newspaper under such circumstances if this were the most appropriate way of providing assistance. Having said that, the situation is that the Board must then divest themselves of that interest as soon as is practically possible.
The Government have already put down Amendment No. 72, to which I have just spoken, by which we intend to make the intention of Clause 8 explicit. The Amendment makes it clear that the Board and its subsidiaries are released from their duty to dispose of media interests only for so long as a direction from the Secretary of State is in force. The Secretary of State will maintain his direction only so long as he is of the opinion that without the direction serious commercial injury could be caused. The Government do not intend that directions should continue in force longer than necessary, and the Government Amendment is in line with the intention of this Amendment.
May I refer to this matter of "financial" and "commercial"? I hope that I shall be able to satisfy the noble Lord on this matter. I recognise the point that he is making, but I think that this is a reasonable answer to it. The purpose of the present wording of Clause 8(10) is to make it clear that in cases where the NEB, or one of their subsidiaries, are in a position to influence the editorial policy of a newspaper or television programme
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company, they should keep the use of their powers on a purely business footing and not use their position for political ends or propaganda purposes. In the strictest sense, limiting the Board's control to financial matters would not ultimately prevent the Board from exercising that control to influence editorial policy, if the content of the publication was so unappealing to the public that the newspaper was making severe financial losses. In such a case it would be quite right for the Board to secure the dismissal of an incompetent editor if it had a substantial stake in the company concerned.
But, by the same token, the provision that the Board's control of media companies is limited to commercial as well as financial matters is a reasonable provision. This will ensure that commercial problems may be the subject of action by the NEB before they are of such a magnitude as to be properly also regarded as financial matters. I think that this is also spelled out in subsection (10), which is a further safeguard intended to prevent the Board from interfering improperly with the editorial freedom of any publishing or programme contracting company in which it has acquired an interest. Taken together with both financial and commercial problems, I think that this is a reasonable protection.
I take the noble Lord's point—I am an old newspaper man myself—that "commercial" could extend over features and all sorts of things but in the sense in which I have explained it I think it is important that we should retain commercial as well as financial problems. There should be the ability of the Board to intervene before it became strictly necessary, before there is any serious financial trouble. I do not see how one could define that, except by this form of words.
The purpose of the clause is to ensure that the NEB do not abuse any financial interest in the media for political or propaganda purposes. I believe that it achieves that purpose well. As I say, I accept that the boundary between financial and commercial matters is not clear cut. But to limit the NEB wholly to financial matters might unduly limit their necessary power to secure efficient commercial management. I hope that this reply will satisfy the noble Lord and that, without going over them in detail, I have

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not left out any serious points he has raised.
Lord DRUMALBYN: The noble Lord has very courteously and painstakingly gone through my points, but I do not think he would expect me not to have anticipated the points he made. It was precisely because I thought that the Government thought in that way that I put down these Amendments. I do not quarrel at all with the Government's objective, as I understand it, in seeking to ensure that the National Enterprise Board should not be able to interfere with the editorial content and editorial responsibility. What I really take leave to doubt is that, however hard they have tried to secure this, they have secured that result by the drafting which the Government have adopted in this case. We are in a very great difficulty here. There has not been an opportunity to amend this in another place and it rests entirely with us. All I can say—subject to anything my noble friend may wish to say—is that at this stage and this hour of the night probably the best thing would be for us both to think further about this. I do not think we have a difference in purpose.
I have suggested a clear way out—by not allowing the Board to give assistance in any way which would give them any type of control—which would make certain that this result would be achieved. The noble Lord may feel that this is going too far, but it would still mean in normal practice that, if the assistance was given, there would at least be a representative on the Board who without any statutory requirement—and statutory requirement is the difficulty—would be able to influence the policy of the Board. I am sure he would have the sense not to influence it and he would not have the power to influence the editorial policy. This is the way that I am suggesting it should be dealt with.
I agree that the first of my Amendments is not necessary. The noble Lord has argued that "financial" in itself if left without "or commercial" would still enable the Board to intervene to get an incompetent editor sacked, but if the sales were going down at that rate I would not have thought it would be necessary for the Board to intervene. I think this formula should be looked at again and perhaps the noble Lord would
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be good enough to take it up with his right honourable friend. I am quite certain that we have no different objectives or aims in this case. It is merely a question of making sure by the way the Bill is framed and drafted that we achieve the objective.
Lord LOVELL-DAVIS: I take the noble Lord's point and I can assure him that we take this matter very seriously. We have tried very hard to put ourselves in the position where there is no question of interfering. It is difficult to work out the sort of formula which will satisfy that and at the same time give the proper sort of control and involvement with the commercial and financial operation. We have done the best we can, but we will certainly look at this again, as I am sure will the noble Lord, and if he has any further ideas on the subject no doubt he will get in touch with us.
Lord DRUMALBYN: I am grateful to the noble Lord and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord BESWICK Lord BESWICK moved Amendment No. 74:
Page 9, line 5, leave out ("activities such as are mentioned in paragraph (b) of that subsection") and insert ("the activities of a programme contractor").
The noble Lord said: This is a drafting Amendment: fewer words are involved in saying "the activities of a programme contractor" than in referring back to these activities as specified in subsection (1)(b), and the meaning of the subsection is more immediately evident. I hope that, being sensible, this will be accepted by your Lordships.
Lord DRUMALBYN: I welcome this as a great and unusual improvement.
On Question, Amendment agreed to.
Clause 8, as amended, agreed to.
Clause 9 [Other limits on Board's powers]:
7.48 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 76:
Page 9, line 11, leave out ("Neither") and insert ("Whenever").
The noble Lord said: I beg to move Amendment No. 76, and with this Amendment I should like to speak to

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Amendments Nos. 77, 78, 79, 81, 82, 84, 86 and 87. If these Amendments were to be incorporated in this clause subsection (1) would then read as follows:
"Whenever the Board or any of their subsidiaries intend to acquire any of the share capital of a body corporate otherwise than with the consent of the Secretary of State or in accordance with any general authority given by the Secretary of State, and its acquisition would entitle the Board to exercise or control the exercise of 30 per cent. or more of the votes at a general meeting of the body corporate; or the value of the consideration for its acquisition, together with the value of any consideration paid for share capital of that body corporate previously acquired, would exceed £5 million then the Board or the subsidiary as the case may be shall take no action to implement that intention until the Secretary of State has given his consent thereto, and the Secretary of State shall not give his consent otherwise than by giving a direction in accordance with the same procedures as are set out in Section 3 of this Act."
The present subsection restricts the activity of the Board and their subsidiaries to the extent that the Secretary of State's approval for the acquisition of shares in a company is needed if 30 per cent. or more of the voting rights in the company would be acquired or if the cost of the acquisition would exceed £10 million. The Amendment provides a slight further limitation in the restrictions, and also makes sure that the intention to acquire is made public. It makes a slight additional restriction, in that unless the intention to acquire is in accord with the consent already given by the Secretary of State, or with the general authority already given by him, action could be taken to implement the intention to acquire only when the Secretary of State has given a direction in accordance with Clause 3, which requires the Secretary of State to lay that statement before Parliament.
This is really the major objective that lies behind this series of Amendments. It is to ensure that when the Secretary of State gives his consent, it is by direction under Clause 3 and therefore comes to some extent within the control of Parliament. I should also mention that Amendment No. 86 reduces the figure of £10 million that is in the Bill as a restriction on the capital of the body corporate to £5 million. Again, this is a further restriction that we think would be valuable.
Lord MELCHETT: May I suggest for the convenience of the Committee that we discuss Amendment No. 85 which stands in the name of the noble Earl, Lord Balfour, as we are discussing Amendment No. 86 and they cover a very similar point?
The Earl of BALFOUR: I agree to that course, but I should like to mention before the noble Lord replies to my noble friend Lord Aberdare that in the original White Paper the figure was £5 million. I have not kept it to £5 million, although I think that despite inflation £10 million is very much too high. I therefore do not go quite so far as my noble friend Lord Aberdare, but certainly it should be reduced.
Lord MELCHETT: I am grateful to the noble Earl for referring to Amendment No. 85, because it covers broadly the same ground as Amendment No. 86, although the figures differ. Once again the noble Earl has plumped for "seven" and maybe one day he will tell us why he so favours the figure seven. On the long string of Amendments moved by the noble Lord, Lord Aberdare, the requirement for Parliament to be informed when the Secretary of State gives consent to specific acquisitions by the NEB is, in our view, unnecessary since when the Board are making a takeover bid the board of the company involved and the company's shareholders will be informed and the hid will become public knowledge. This is, of course, in line with the regulations in the City Code on takeovers and mergers.
The EARL of BALFOUR: The noble Lord referred to takeover bids. I thought it had been made perfectly clear at an earlier stage that any acquisition would he mainly in terms of assistance and that this clause would not be a stepping-off post for a complete takeover hid. Have I misunderstood the position? Is the idea of this clause that it should act as a first step to a complete takeover bid?
Lord MELCHETT: I think the noble Earl has misunderstood. It will be possible for the NEB to buy shares, if they wish to do so, in another company, and when I use the term "takeover bid" I am referring to takeover bids as defined by the City Code, and the noble Earl will

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be aware that this document runs to several pages. The existence of a takeover bid is laid out clearly and the normal commercial practice is laid out in great detail. As we have made clear throughout the Committee stage, the NEB will conform with these rules and regulations just as any other company would.
The other way in which this series of Amendments would affect the NEB is when an acquisition results in the ownership of more than £5 million, £7 million or £10 million worth of voting shares, depending on which one we take, but does not bring the NEB's or their subsidiary's share in the company concerned above the 30 per cent. limit, then there does not seem to be any particular need in our view for Parliament to be informed, because such an acquisition would not represent the acquisition of any significant amount of control over a company by the NEB. The acquisition would, in any event, figure in the Board's annual report.
Coming to the level at which the Secretary of State's consent for further acquisition will be required, as the noble Earl pointed out the figure was raised from the £5 million mentioned in the White Paper to the £10 million now in the Bill. The reasons for this were made perfectly clear in Committee in another place, and I have to tell noble Lords opposite that the Government see no reason to go back on their decision in this matter. The White Paper proposed the limit of £5 million by analogy with the limit of £5 million in the Industry Act 1972 for selective financial assistance under Section 8. The analogy is, however, of limited relevance since the 1972 Act is concerned with financial assistance, whereas the sums covered by this provision in this Bill are those paid by the NEB for the acquisition of shares in pursuit of their commercial objectives. Following consultation with the noble Lord, Lord Ryder, as Chairman of the Organising Committee, the Government decided that the Board's share acquisitions at a £5 million limit were unduly restrictive and it was for that reason that the figure of £10 million was substituted.
I think noble Lords will agree—indeed, the divergence of views already expressed
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underlines the fact—that there are no simple rules by which these matters can be determined. It was a question of reaching a reasonable balance between giving the Board, with the very distinguished and high quality of membership which we intended it to have, the necessary authority to do the job that has been laid down for it and the provision of a reasonable opportunity for the Government to check when big decisions are being taken, that what is intended accords with its purposes as approved by Parliament through this legislation. On advice and further reflection, we came to the conclusion that £10 million would provide a reasonable balance. The requirement that the NEB will need the Secretary of State's consent for acquisitions of more than 30 per cent. of a company's voting capital remains unchanged, as I have said, and provides an important control in cases where the cumulative costs of the NEB's acquisition of a company's shares are less than the £10 million figure.
The Earl of BALFOUR: It is the duty of any Government to produce a Bill which, so far as possible, is founded on the lines of the White Paper which preceded it. I therefore believe that to have increased the maximum of £5 million in the White Paper by 100 per cent., to £10 million, is taking things rather further than was intended at the time of the White Paper, which did not indicate that the Board would have anything like the extremely wide powers that exist in Clause 9. I do not think there is a provision in this Bill that would cause me more worry if I were a foreign investor putting money into this country than Clause 9. I entirely uphold what my noble friend has put forward. I think he has been absolutely right in moving the Amendment, which I feel is a very good one. It brings in Government control in a way which is almost totally absent in Part I of the Bill. We are almost at the end of Part I, which was considerably complained about in another place, and with good grounds. I feel that my noble friends Lord Aberdare and Lord Campbell of Croy have gone to a great deal of trouble over this and have put a lot of thought into it. I hope that, even if they do not move it at this stage, something will be done to try to bring in a measure of Parliamentary

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democracy which seems totally absent in this part of the Bill.
Lord ABERDARE: I thank my noble friend for his kind words on behalf of my noble friend Lord Campbell of Croy and myself. I agree with him that this was what I was after. I have wanted to get a little more not so much Parliamentary control as Parliamentary involvement in a particularly important field. It seems to me that where the NEB are to acquire control by exercising more than 30 per cent. of the votes or by an investment of more than £10 million—and I do not wish to quibble at this stage about whether it should be £10 million, £7 million or £5 million—that is of such major importance that it would not be unreasonable to expect the Secretary of State to inform Parliament.
I take the point made by the noble Lord, Lord Melchett, that any bid of this size would undoubtedly be revealed in the Press by the company concerned, but that does not seem to me to be quite as adequate or respectful to Parliament as it would be if the Secretary of State himself had to make a statement to Parliament saying that he had authorised an acquisition of this size.
Lord MELCHETT: I believe that the noble Lord is not entirely right, though of course his experience in these matters is much greater than mine. My understanding is that a company is under an obligation to publicise the position to all its shareholders and, after all, it is the shareholders who are affected by a takeover bid. It is much more important that they should know than that Parliament should know.
Lord ABERDARE: Perhaps I did not express myself very clearly. I realise that the company would inform the shareholders but Members of Parliament would learn about the bid only from the Press, whereas it seems to me that it would be more courteous and not over burdensome to the Secretary of State if he had to inform Parliament when giving consents of this size and importance. However, I will think about the matter and I do not wish to proceed further this evening. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
8.3 p.m.
Lord DRUMALBYN Lord DRUMALBYN moved Amendment No. 80:
p>Page 9, line 13, leave out from ("State") to end of line 14.
The noble Lord said: My noble friend Lord Aberdare read out the clause as it would have been had the Amendment been accepted. As it stands, it now reads:
"Neither the Board nor any of their subsidiaries shall acquire any of the share capital of a body corporate except with the consent of the Secretary of State or in accordance with any general authority given by the Secretary of State—

(a) if its acquisition would entitle the Board to exercise or control the exercise of 30 per cent. or more of the votes at any general meeting of the body corporate; or

(b) if the value of the consideration for its acquisition, together with the value of any consideration paid for the share capital of that body corporate previously acquired, would exceed £10,000,000."

The Amendment proposes to leave out the words,
"or in accordance with any general authority given by the Secretary of State".
One looks back at the White Paper which says that, within the framework of their constitution and the funds made available to them, the Board will be free to exercise their commercial judgment in carrying out the functions described by paragraph 24. They will, however, require the consent of the Government before they take a controlling interest in any enterprise—and I emphasise those words—or a minority interest exceeding £5 million. This is not the first time that the words,
"in accordance with any general authority given by the Secretary of State"
have been used. They have already been used in Clause 4 in relation to the transfer of publicly owned securities and other public property. The provision says that they may be transferred to the Board or their nominees only with the consent of the Secretary of State in accordance with his general authority. That is a perfectly understandable case for a general authority, but I do not know what the words mean in the present case. The Secretary of State could give a general authority in relation to a specific acquisition by indicating that there was a general authority to purchase certain shares, not at 105p or whatever it might

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be, but, for example, at up to 120p. That would be a general authority, I suppose, or it could be so interpreted. Alternatively, the Secretary of State might give a general authority for the acquisition of any of the share capital of a body corporate. In a case like that, the phrase "a body corporate" could mean any body corporate, but I am not certain whether that is intended. I feel that it it is extremely important to be absolutely clear what these words mean.
Personally, in view of what the White Paper says, I should be inclined strongly to resist any general authority to acquire shares over the limit specified in subparagraphs (a) and (b). I believe that we need a clear assurance that the first of the explanations which I offered is the right one and not the second. I beg to move.
Lord BESWICK: The noble Lord fairly stated what the position was, but he omitted to say that in another place on Report stage the Government accepted the Opposition's contention that the restrictions of the Board in Clause 9 should apply to all the Board's subsidiaries. That is a difference from the original wording of the Bill. The Government accepted that it should apply to all the Board's subsidiaries, rather than to their wholly owned subsidiaries only. So the Board will now require the Secretary of State's permission for them or any of their subsidiaries to acquire shareholdings of more than 30 per cent. in companies or to invest more than £10 million in the shares of the company.
Lord DRUMALBYN: I hope the noble Lord did not mean that I had omitted something. I merely read out what the clause said.
Lord BESWICK: I believe I said that the noble Lord had clearly stated the position, but it is important to note that there was this extension as a result of the proposals put forward by the Opposition in the other place. That makes a difference which I shall explain. It means that companies such as Rolls-Royce and British Leyland, if—as I imagine they will—they become the responsibility of the Board, will be subject to this requirement. I put it to the noble Lord that it would be a waste of resources and would mean unnecessary inefficiency if
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every small acquisition made by Rolls-Royce or British Leyland had to be the subject of an authority by the Secretary of State. What is intended here is a sort of general authority to a subsidiary which will enable it to carry on its business in a proper businesslike way, without having to come back to the Secretary of State for every minor acquisition it might conceivably make.
The clause as drafted gives the Secretary of State discretion whether or not to approve each specific acquisition. If he makes clear that there are certain classes of acquisition that he would certainly approve, that does not seem to widen his discretion. I understand the noble Lord's anxiety in this respect, but I hope he will accept that the present wording is designed not to give unlimited authority to anyone but simply to cover the category of cases I had in mind.
Lord DRUMALBYN: I am grateful to the noble Lord. As I understand it, I was substantially right; it is the first alternative I suggested. Each general authority is related to a particular firm to avoid the necessity, each time one wishes to make a further acquisition of shares of over this amount, to come back to the Secretary of State and get his authority for those purchases. Is that so, or is it a general authority relating to several firms, or is it a general authority that once you achieved the 30 per cent. you could go on acquiring shares in any firm which had already reached these limits?
In that case, the consent would be given at the point where you were about to achieve a 30 per cent. acquisition of shares, whether at one go or at several. After that, you might have a general authority to go on acquiring shares once you had reached those limits. Is that so? I am anxious that it should not mean that there should be a general authority which would dispense with the requirements in (a) and (b). That it is essential to avoid. The consent to exceed the 30 per cent. or the £10 million must be the subject of a consent related to the event in each case.
Lord BESWICK: I wish to be absolutely frank with the noble Lord. I know what the intention is. It is to relate it to the first case. Whether the effect would be to limit it to that case, I am not absolutely certain. I should like to take

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advice on this and we could return to it again at the Report stage.
Lord DRUMALBYN: The fact that we do not have a large number of speakers on this Amendment does not indicate that this is my opinion alone. It is a matter of considerable importance. I am grateful to the noble Lord for his willingness to look into it, and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
8.15 p.m.
The Earl of BALFOUR The Earl of BALFOUR moved Amendment No. 83:
Page 9, line 16, leave out ("30") and insert ("25").
The noble Earl said: I am not familiar with this position but perhaps I might briefly try to explain. As I understand it, if a person holds more than 20 per cent. of a company's shares he may consolidate his earnings as a holding company in respect of a profit and loss account. If a person holds more than 25 per cent. of a company's shares, he has the right to appoint directors to the board and has control of the dispersal of major assets or the raising of share capital. It is surely at the stage of 25 per cent. that the board have almost all the power they need. As I understand it, if a person (or for that matter the NEB) has 30·1 per cent. of the shares of a company he can then make a takeover bid for the balance of the shares.
The difference between the 30 per cent. in the Bill and the 30·1 per cent, which permits a takeover bid is really too narrow. I am not an expert in this field, but I would seriously ask the Government to consider that 30 per cent. is too high and too demanding. Again I say that I am certain that this is just the kind of thing which will not encourage investment in British industry, and particularly investment in which the Board have even a very small percentage of shares. I would ask the Government to consider this again in view of what they say in other places of trying to create confidence in British industry. I beg to move.
Lord MELCHETT: I think the noble Earl is being a little extravagant in talking about the Government discouraging investment and destroying the confidence
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of industry. So far as I am aware—and we have taken careful advice about this—there are no extra obligations which would fall on the NEB or any other person who acquired only 25 per cent. of a company. We are not aware of any additional obligations or liabilities which come into effect on a 25 per cent. holding. The 30 per cent. holding is the stage where the City Code on Takeovers and Mergers starts to bite and where an unconditional offer to the other shareholders must be made. It is for that reason that the 30 per cent. figure is in the Bill. If the noble Earl knows something that we do not know then we shall be interested to hear of it. My advice is that there is no special significance in the 25 per cent. figure, and therefore we have used the 30 per cent. figure in the Bill.
Lord DRUMALBYN: The special significance in the 25 per cent. is that it is lower than 30 per cent. If you allow the threshold to be raised to exactly the same threshold where the City Code and the Company Act bite, then you are in danger. At all costs the threshold here ought to be below that threshold; there ought to be a safety margin between the two. I do not say that 25 per cent. is the right figure; perhaps it could be 28 per cent. But it is too dangerous to bring it right up to the legal threshold. I think he is on to a very good point and I hope the noble Lord will look at it.
Lord MELCHETT: I do not see the terrible dangers that the noble Lord speaks of. The reason for the 30 per cent. is because at that stage the NEB will have to go to the Secretary of State to get his permission before making an unconditional offer. Thirty per cent. is the figure that the City Code lays down and the Government have nut that figure into the Bill. What terrible dangers arise between 29 per cent. and 28 per cent. or wherever the noble Lord envisages them, I fail to see.
Lord DRUMALBYN: It is only because we have been talking already in terms of a gradual build-up. It is very difficulty to say exactly at what point you are going to go over 30 per cent. It may be the Board would go to the Secretary of State for consent before reaching that particular level if they were acquiring shares gradually. There is considerable merit in getting a safety margin

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so that the Secretary of State's permission would have to be granted to exceed that margin, and that would carry with it implicitly the permission to go on above the 30 per cent. level. There is something to be said for this, and I hope the noble Lord will think about it.
Lord MELCHETT: I will certainly consider this matter, as the noble Lord has raised it. From looking at Clause 9, he will see that the Board will always have to go to the Secretary of State before they acquire 30 per cent. because they have to consult him when they are about to make an acquisition which will give them 30 per cent. That seems to be all the safety margin that could be needed. I do not think the noble Lord is disagreeing with me that 30 per cent. is the right figure before consultation should take place. The fact is the NEB will have to go to the Secretary of State when they are about to make an acquisition which will give them up to 30 per cent. But I will look at this matter again.
The Earl of BALFOUR: I feel there is a serious risk of going just over the 30 per cent. It is, so far as I can understand, a threshold figure between not having control and virtually being able to take over the assets of a company.
Lord MELCHETT: If I may correct the noble Earl, that is not the case at at which the Code on Takeovers and all. The 30 per cent. figure is the figure mergers says the company has to make its offer unconditional. I am being nodded at by noble Lords opposite who know a great deal more about that than I do, so I am sure I am right. There is no question of the Board having power to buy things up lock, stock and barrel. It is a provision to protect shareholders of the company, not for the benefit of the Board.
Lord DRUMALBYN: There are two cases: the Board could acquire a block of shares which would give them more than 30 per cent., or there is the case where they are building up their interest. Is there any circumstance that could lead to the Board inadvertently going over the 30 per cent. without knowing it, and therefore being involved in the Stock Exchange takeover requirements? If so, then the limit at which permission from the Secretary of State should be
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obtained should be below the point where the Board are obliged by law to bring into operation the legal provisions.
Lord MELCHETT: So far as I know, the answer is, "No". It would not be possible. It would be very difficult to buy shares by accident; but if, having considered the matter, I am advised that there may be occasions where the NEB could find themselves suddenly with more shares in a company than they thought they had, or buying more shares, I will let the noble Lord know. My first reaction is to say quite definitely, "No".
The Earl of BALFOUR: I am grateful for that assurance. If the noble Lord, Lord Melchett, will go into this I will he much obliged. I beg leave to withdraw the Amendment
Amendment, by leave, withdrawn.
8.25 p.m.
Lord ABERDARE Lord ABERDARE moved Amendment No. 91:
Page 9, line 33, at end insert—
("( ) Neither the Board nor any of their subsidiaries shall acquire any of the share capital of a body corporate otherwise than in the name of the Board or subsidiary as the case may be.")
The noble Lord said: The three Amendments which we put down, Nos. 89, 90 and 91, were all designed with the same object in view, which was to deal with "warehousing" by the NEB. I know very well from assurances I have had from the Government, and from the noble Lord, Lord Ryder, that the Board have no intention whatever of being involved in "warehousing". At the same time, it is right we should put a provision in the Bill. If it is obviously agreed on all sides that it should not happen, it is better to have it in the Bill where we can see it is prevented from happening.
The suggestions which were included in Amendments No. 89 and 90, which I have not moved, were those discussed in another place, that the NEB should let the board of a company know when they were bidding for the company's shares before they had officially to do so at the 10 per cent. level. Once they acquire 10 per cent. of the shares then, under the Companies Act, they have to disclose the fact to the board. This is where they are buying shares under 10 per cent. of the total, and where it would

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be possible to buy shares through nominees or subsidiary companies and build up a shareholding of more than 10 per cent.
I am attracted therefore only to the third Amendment, Amendment No. 91, which is a simple Amendment saying:
"Neither the Board nor any of their subsidiaries shall acquire any of the share capital of a body corporate otherwise than in the name of the Board or a subsidiary as the case may be".
This is a straightforward way for the Board to operate. It would mean that the board of directors of any company that was threatened with shares being bought by the NEB by keeping a close watch on its share register, could easily see whether the NEB or subsidiaries of the NEB were buying its shares. This would be a very helpful Amendment. It does not seem a difficult one, and I hope that the noble Lord will see his way at the end of this long day to accept at least one Amendment. I beg to move.
Lord BESWICK: Nothing would give me greater pleasure than to accept this Amendment, though I am sorry to have to say at the outset that I cannot do that in this form. But I have given assurances and I will repeat them. The Government have been committed all along to the basic principle that the NEB should, within a framework of Ministerial and Parliamentary control, be subject to neither more nor fewer restrictions than comparable private sector concerns. This means that, like the former IRC, they should have the power to make a contested takeover bid if there is a situation which seems to warrant that. They would be buying shares from willing sellers at mutually agreed prices—if the consent of the Secretary of State has been given. There will be no compulsory powers of acquisition. Up to that point I am sure we are in agreement. It is expected that acquisitions by the NEB will normally be with the full agreement of the existing management, but it would not be desirable for management to have an absolute right of veto over the right of the NEB to seek to acquire shares in a company. There may be cases where shareholders are dissatisfied with the management and wish to dispose of their shares, and the management will be against having
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another large shareholder. Nevertheless, it would be quite wrong to prevent shareholders from selling shares if they wished.
The requirement of Sections 7 and 8 of the 1972 Industry Act, providing for the Secretary of State to secure the consent of companies before acquiring their shares, is in any event not a convincing precedent. The Industry Act is concerned with financial assistance, and here we are dealing with something quite different. On the point of the name in which shares would be bought, we have made it quite clear that Section 33 of the 1967 Companies Act, which applies to a person, will apply automatically to the NEB, so that the normal safeguards against warehousing and acquisitions by nominees which apply to private sector companies bite on the activities of the NEB. Thus if the NEB, acting through nominees, were to build up an interest of more than 10 per cent. of the voting shares in a company, it would have to notify the company. That is the practice as required by the Companies Act.
I said on Second Reading, in response to questions put to me by the noble Viscount, Lord Watkinson, that the NEB would in no circumstances indulge in warehousing; that is, building up a major shareholding in secret by acting through a number of separate associates. This is going further than the Companies Act requires. As I have said, this undertaking will be honoured. I am advised that it will be technically impossible to require the NEB always to act in their own name. In fact, the Government have found it necessary to put down Amendments ensuring that securities may be transferred to nominees, so that the provisions of the Companies Act stating that a public company must consist of at least seven persons were not infringed. We referred to this point earlier. There may well be nominees simply to conform with the Companies Act, and it may be possible that those nominees would seek to buy shares at the behest of the subsidiary company. But I have given an undertaking that if those nominees each purchased less than 10 per cent. but together equalled 10 per cent. or more, that would be made known as if the NEB themselves or one nominee had bought 10 per cent. I hope that with that assurance the noble Lord will be able to withdraw his Amendment.
Lord ABERDARE: I understand the reason why the nominees were brought in on the previous occasion, but I still do not understand why these nominees need buy shares. I should have thought that the NEB or one of their subsidiary companies could certainly buy shares, and I really do not follow why there is any difficulty. I was simply following the words used by the noble Lord on Second Reading and trying to put something into the Bill which would reflect the fact that the NEB were certainly not going to indulge in any warehousing.
Lord CULLEN of ASHBOURNE: If nominees are used, will the names they use be identifiable ones? For example, if they are to be called "NEB nominees" or "British Leyland nominees" that is one thing; but if it is to be "Barclay's Bank nominees", that is quite another.
Lord BESWICK: So far as I know, there is no intention of surreptitiously buying shares for the purpose of warehousing, and I have given an undertaking in that respect. As regards making it a requirement that the nominee should say, "I am a nominee of the NEB or of a subsidiary company", I am not certain that it would be right to give that undertaking, in so far as such a requirement is not called for in the case of a nominee acting for any other private company. As I have said, we have openly said that the requirement placed upon other private companies will be placed upon the NEB. With that ought to go the fact that we do not place anything on the NEB additional to that which is placed upon a private company's nominee. However, there is one case that I think is reasonable. It would be quite wrong for a public company to act under cover of nominees to acquire more than 10 per cent.
Lord ABERDARE: I am grateful to the noble Lord and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord MELCHETT Lord MELCHETT moved Amendment No. 92:
After Clause 9, page 9, line 33, at end insert ("Part II").
The noble Lord said: In moving this important Amendment. I am glad to be able to assure the Committee that its implementation will be under the close
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personal supervision of my noble friend Lord Beswick, who has strong feelings about the matter. I beg to move.
Lord ABERDARE: The Government having accepted no Amendments of mine, I do not feel very well disposed towards accepting this one. But I would point out that the Amendment of my noble friend Lord Balfour—that is, Amendment No. 93—should surely come in front of this Amendment on Part II. But that is another day's work.
Lord BESWICK: Should we inadvertently accept the noble Earl's Amendment, we shall be in some difficulty. But I hope I shall be able to quote this as an additional reason for the Committee's not accepting it.
On Question, Amendment agreed to.
House resumed.

EUROPEAN COMMUNITIES COMMITTEE: SECOND SPECIAL REPORT
8.37 p.m.
The PRINCIPAL DEPUTY CHAIRMAN of COMMITTEES (Baroness Tweedsmuir of Belhelvie)The PRINCIPAL DEPUTY CHAIRMAN of COMMITTEES (Baroness Tweedsmuir of Belhelvie) rose to move, That this House takes note of the Second Special Report of the Select Committee on the European Communities. The noble Baroness said: My Lords, I beg to move that this House takes note of the Second Special Report of the Select Committee on the European Communities. This House enjoined the Select Committee, and I quote:
"to review the scope of its functions in the context of its terms of reference and to report to the House after a year's experience."
That year ended, of course, in the month of May, but owing to the referendum we thought it wise to postpone finishing our Report and having this debate until after the result was known.
I feel it an honour to present this Report on behalf of the 18 members of the Select Committee. They have, together with the 32 co-opted Members of this House, done an immense amount of work, and they have done so during a time when ever more serious economic difficulties crowd upon this country and inevitably upon each individual. But despite all this, the work of the Select Committee has been undertaken with

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energy, with skill and, I believe, with real interest. Whatever our political views—for we represent all Parties and none in this House—we have worked as a very happy team, and that has meant a great deal to their chairman. I should like to thank every noble Lord for his cheerful support.
Last November I inherited the excellent arrangements made by the noble Lord, Lord Diamond, of five Sub-Committees. I added a sixth. Perhaps the House may not always realise the responsibility which is placed on Sub-Committee chairmen. This includes studying the documents first, arranging the programme of work and the taking of evidence. During the year, three chairmen have left for other work: the noble Lords, Lord Drumalbyn, Lord Walston, and Lord Lloyd of Kilgerran. They have been succeeded by the noble and learned Lord, Lord Diplock, the noble Earl. Lord Selkirk, and the noble Lord, Lord Raglan. The European Parliament then claimed the noble Lord, Lord Bethell, who was succeeded by the noble Lord, Lord Pritchard. I should like to say, on behalf of all noble Lords who have worked with us, that we could not have done without the unstinted work of many people in this House We knew that we were short of staff. We knew we could not remedy it before the referendum, and many officers of this House have added our work to their normal duties; and to them, on behalf of the Committee, I should like to express our most deep gratitude.
I understand that it is the custom of this House that officers of the House should do all kinds of work. Nevertheless, I do not think it can continue to the same extent. Therefore, I am grateful to the Offices Committee for considering this problem this afternoon, and also to the Clerk of the Parliaments for the way in which he has so well tried to reallocate some of the duties within the staff of this House. I should like to say to the noble Lord the Leader of the House how glad I am that he is going to reply to this debate, because he has consistently been very helpful—maybe because he was a distinguished member of the Maybray-King Committee. But it has meant a great deal to us. I should like also to thank the Government as a whole and their Departments in work which,
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after all, has been novel to us all. Not that we have not had our problems—and where the Report lists them it is only because Parliament wished us to become as efficient as possible.
As chairman, I have had the task of sifting all the documents which come to us from the Commission. I have tried to exercise my judgment as to those documents which are of political or factual importance. These have been listed under "B." The others are listed as "A." I have added another category which is, B for information, where I do not wish the Sub-Committee to study the problem in depth, but I think they certainly should be aware of it.
From November, when this Committee was reconstituted in this Parliament, until 24th June, which is our cut-off date, there have been sifted 700 documents. Those which have been sifted as "B"—in other words, should be studied by the Sub-Committee—total 33·9 per cent. There are left for the Committee under consideration now 33 documents. The House will be aware that we have overcome the backlog and therefore we study the documents rather more closely and take wider evidence, and we have been helped from time to time with advice and research of five specialist advisers. It is not always easy to achieve the right balance between what is called in modern terms, I think, a study in depth and an appreciation of the broad political, legal and practical consequences of proposals.
For example, there is now sitting a Royal Commission on Environmental Pollution whose work will probably take about two years. When a proposal on an environmental question comes before us from the Commission, in a Regulation which is binding on this country or a Directive that we must carry out, or a Consultative Document which gives us the thinking for the future, we must remember that, however expert the knowledge which is available to us, we must try not to become too involved in the specialist detail but to study the Parliamentary and political consequences in the United Kingdom of the proposal and to make a report and recommend it either for information or debate. In the time from November until 24th June, the Select Committee have recommended for information 47 documents to this House; and for debate, 17.
When it come to debate, luckily it is possible to group some of these Reports together. But is it a tribute to the usual channels that we have discussed every single Report, except three. One is a very important document on energy, which is to be debated in the autumn; one is a long-term document from Lord Diamond's Committee which is on the harmonisation of VAT, and the other is on the budgetary powers of the European Parliament, which will be discussed together with an Affirmative Order which will be laid before the House by the Government.
We have been lucky in having the noble Lord, Lord Chelwood, as a former member of the European Parliament, to be a member of our Committee. He had hoped to speak tonight but simply cannot come here due to other engagements. Nor indeed can the noble Lord, Lord Hill of Luton, the chairman of Sub-Committee C, who I regret to say is unwell. But we have been fortunate in that we have managed to co-opt to our service the noble Lord, Lord O'Hagan, who has only so recently left the European Parliament. And, of course, whenever we are fortunate to have members of the Parliament with us such as the noble Earl, Lord Bessborough, they are very welcome to our Committees, as indeed are all Members of this House, who have the right to attend and to speak but not of course to vote. We manage to exchange the documents from the European Parliament so that we know what is being discussed in committee there; and I believe it is true to say that sometimes we have been in advance of some of debate which has happened in the European Parliament at Strasbourg.
When it comes to debates, I think I should like to draw the attention of the noble Lord the Leader of the House to a recommendation made in the Maybray-King Report—and he will recall this as a member of that Committee—that we should have certain Motions placed before the House from the Select Committee to approve certain documents; not only to take note, which is what we do now, but to approve the opinion of the Committee, because our terms of reference are wide enough not only to make a recommendation but also to express an opinion. There are occasions when it may well be that we shall need
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to have short urgent debates. I do not know how widely known it is that any noble Lord can put down a Motion for debate at the end of Business and it can be taken. I think it is rather interesting to recall that on three days in April we rose before 6 o'clock, on one day in June, and on one day in July. That is not taking into account the times when we rise before seven or before eight. Therefore there really is more time available, perhaps, than everybody realises.
It is incumbent on me to say about our terms of reference that we are content with them. We found them wide enough. We want no change. We should however like to have a larger number of members on our Select Committee. At the moment we are allowed to have about 15, which means 18 in practice. We should like to have about 22. Sometimes there are occasions when a member of the main Committee cannot attend a Sub-Committee and it would be very useful if we could have this number enlarged. We hope also that the Procedure Committee will consider a measure of continuity of the Committee. This was recommended in the First Special Report by the noble Lord, Lord Diamond. He recommended that it should be for the duration of a Parliament because then it avoids delay in setting up the Committee at the start of each Session. I understand that similar arrangements were proposed for the Committee in another place and these have been already granted.
Many people who do not serve on our Committees may think: "How is it that there is a Committee in another place and a Committee in this House? Surely, they are merely overlapping and doing the same work." I hope that one day we shall indeed have a Joint Committee, but I do not see it happening in the immediate future. Therefore, I should like to tell the House what it is that we are trying to do. We exchange all documents and there is therefore a tacit agreement not to duplicate if possible.
If, for example, we have taken evidence on some subject, another place will not take that evidence. And, of course, there are certain subjects, which are tacitly left to each Committee. For example, there is the Budget. That is discussed by another place, although we do now study the Budget as background

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to the economic decisions. However, if you take company law, some very far-reaching proposals are now being studied very carefully indeed by both Sub-Committee E, the Legal Committee, and Sub-Committee A, the Economic and Financial Committee. Therefore, I think that without saying so the study of company law is largely left to us.
There are, of course, some subjects which are of interest to both Houses. For example, both Houses have had debates on the stock-taking of the Common Agricultural Policy and no doubt both Houses will have further debates on energy. We have had freedom of establishment debates in Sub-Committee C, and we shall consider the Treaty of Lome and through it our relations with the developing countries in the Commonwealth—I hope in a general debate on this subject. This is studied by Sub-Committee B. Indeed, they are about to undertake a study of the different types of treaties which come before us. The Legal Committee is presided over by my noble and learned friend Lord Diplock. We in this House are extraordinarily fortunate to have him here and I would recommend every noble Lord who is genuinely interested in our future in Europe to read Annex C to our Report which was written by the noble and learned Lord, Lord Diplock, and which is termed "The Legal Structure of the EEC. Theory and Reality." It is on this that the future role of Parliamentary scrutiny is based in Part 2 of our Report. We are also very fortunate in having as Counsel to the Select Committee, Sir Charles Sopwith. I do not know whether it is realised that every document which conies from the Commission is studied by Sub-Committee E. We owe a very great deal to Sir Charles Sopwith for the enormous work he has undertaken. Our recommendations include some which are the responsibility of the Council and the Commission. When the United Kingdom takes on the Presidency, I hope it will be able to manoeuvre something to improve the procedure. However, some recommendations do, of course, involve the Government. I am glad to see that the recommendations we have made are the same as those which are recommended by the Select Committee on Procedure in another place. Therefore, I hope
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that in both Houses this will have an effect.
The noble Lord, Lord GoronwyRoberts, when winding up the debate on the First Report, said this in col. 636:
"It is a major aim of Her Majesty's Government to ensure that the views of Parliament can be brought to bear before British Ministers subscribe to decisions."
As a former Minister at the Foreign and Commonwealth Office, I felt, and still feel, that to be effective scrutiny must involve Parliamentary debate on important matters before the Ministers take decisions in the Council. However, I feel also that it is important that Ministers should not have their hands tied in Council to the irritation of their colleagues and the possible postponement or even loss of a decision. It follows, therefore, that if scrutiny is to work certain definite things must be done. First, one must take early warning of what is to come. The Maybray-King Report said, and I quote:
"Scrutiny should be carried out as early as possible."
In other words, we should be prepared before the formal document comes to us from the Commission. We do not ask to be involved in a formal way in what is colloquially known as the Avant-Projet strategy. We do not think this is our job but we do know that when the Commission has a working document which it circulates to all Nine Member countries it consults not only the civil servants of those countries but also the interested specialist organisations. Of course, members of the Select Committee and those who are co-opted are often members of these specialist committees. I do not think it is right that they should go to a meeting of a committee outside Parliament to find that there is a working document under study of which they are not aware. Therefore, I suggest that the Government should informally advise us of what is in the mind of the Commission and of what is being circulated in this country so that we are prepared in time for the arrival of the formal document.
So far as documents are concerned, I believe that the Explanatory Memorandum has been of very great help, but I suggest that added to it there should be the financial implications which are important for us and also details of the

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organisations which are consulted and what they said—not only that so-and-so was consulted but what their view was—because we shall have to find it out somehow, anyway. Perhaps it is most important to recall that the Maybray-King Committee recommended that the Select Committee on the European Communities should follow up any document which they had studied and recommended for debate—in other words, the important documents. When they reach the Council of Ministers, the Council often say: "We do not like this. We should like the working groups of the Council to look at it and to amend it". Often the result is that the document upon which a decision is made is, in fact, quite different from the document which came before us in the first instance. We have an extremely efficient organisation in Brussels and many members of my Committee and I are grateful to them for what they have done whenever we have visited Brussels. However, I suggest that it would not be difficult to have a document amended and brought up to date without revealing the negotiating position of the other Governments concerned.
There is a new procedure which is creeping into the European Communities. This is referred to by the noble and learned Lord, Lord Diplock, in Annex C to the Report. It is that we now have meetings of the Summit—it is called the European Council—which were not foreseen in the Treaties and, indeed, meetings of Foreign Ministers four times a year. Often they give guidelines on policy or else instruct the Commission that this and that should be done. Where there are major subjects like this, I suggest that the Government should inform us of what is going on. After the Referendum we now live within the political realities of the European Community. The object of the Select Committee is to take away some of the burden from this House. It follows that our evolving procedures should be as efficient as possible and I believe that as a member of the Community there will be more for us to do.
I submit that it may be that some of the methods of work of European scrutiny could be applied to the study of our domestic legislation as Parliament is forced to reform itself to cope with the
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pressures of a modern State. One day the European Parliament will no doubt take on our work after direct elections, but it may well be that even then the United Kingdom Parliament will still wish to have some insight into legislation proposed in a European context that will affect our daily lives. Until then, while scrutiny is directed to the interests of our national Parliament, I submit that the effect of working in this Select Committee is to acquire in a natural way the "feel" of a European dimension. So that in many ways it becomes clear where the interests of the national and the European dimensions can merge, and to that end I believe the work of the Select Committee is worth the doing and will grow now that we are firmly a member and can share in shaping our European future. I beg to move.
Moved, That this House takes note of the Second Special Report of the Select Committee on the European Communities.—(Baroness Tweedsnutir of Belhelvie.)
9.0 p.m.
Earl COWLEY: My Lords, I should first like to express the gratitude and thanks of my noble friends and myself to my noble friend Lady Tweedsmuir of Belhelvie for the remarkable work that she has carried out as Chairman of the Select Committee on the European Communities. Similarly, the whole House is, I am certain, grateful to all those noble Lords and noble Baronesses who are either members of the Select Committee itself or were co-opted on to one of its Sub-Committees, for without the tremendous effort that they have put into the running of the Scrutiny Committee it would not have achieved its objectives so successfully, and the mass of Regulations, Directives, secondary legislation and other documents emanating from Brussels would not have been examined with so much detail and thoroughness.
I believe that it is a testament to the Select Committee's work and selectivity that this House has been able to debate all except three of the Reports that the Committee has recommended for debate this Session. The bright prospects hinted at in the Select Committee's First Special Report, which the House debated last November, have certainly been borne out by this Second Special Report. While

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I recognise that it was not, and quite rightly so, within the Scrutiny Committee's terms of reference to get involved in the pro- and anti-Common Market divisions within the country, the result of the referendum has, as the Report states in paragraph 47, "removed one of the major obstacles to effective scrutiny". But of possible equal importance to the removal of the uncertainty about Britain's membership of the EEC was the decision by the Labour Party to take up its share of the seats available to it at the European Parliament. Perhaps in the future, with more Members of this House with a dual mandate, attendance at the Select Committee and its Sub-Committees will increase.
The ability of noble Lords who are also Members of the European Parliament to attend the Select Committee other than rarely was raised in the Report. I think the fact that they are unable to go as often as one might wish is a shortcoming, and it would be useful to the Committee as a whole to have another source of information and opinion. Furthermore, in view of the growing power and influence of the European Parliament in relation to the other EEC institutions, especially the Commission, it is not before time that this country decided to send a complete delegation to the Parliament at Strasbourg.
There are a number of points which I should like to raise on the Report itself. I personally feel that this document is an excellent summary of the workings of, and the problems faced by, the Select Committee during the last year, and many of these problems will be there next Session. I am glad that the Select Committee is working in close liaison with its opposite number in another place, and that there is a free exchange of information. However, it is important to remember that the remits of each Committee are not identical, since the Select Committee in this House deals with more than just secondary legislation. Consequently, it would be regrettable, to say the least, if the wider responsibilities of our Select Committee suffered because the financing and the staffing tended to be concentrated on the more limited remit of the Committee in another place. This was a point that I felt was being alluded to in paragraph 18 of the Report. Within
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this context, I hope that the noble Lord the Leader of the House will look at the facilities being offered by the Library of this House to see whether any improvements need to be made in this area.
Another problem that seems to have raised its head throughout the Report is the question of the effective dissemination of information, whether it is between the Select Committee and the public at large, or between the European Community and the Select Committee in this House via the Government. The Report is right when it states in paragraph 34:
"The Committee consider that it is important that both Parliament and public should be provided with fullest information about the European Communities. The Committee have been impressed during their work with the considerable lack of public understanding of the EEC. Efforts should be made in particular by the Government to overcome this lack of information."
So far as the public are concerned, much is dependent upon the willingness of the mass media to publicise the proceedings of the Scrutiny Committees in both Houses. Perhaps the mass media itself will look at the emphasis it places upon those proceedings.
The introduction of a broadsheet to be distributed to those noble Lords who request it has certainly helped so far as this House is concerned, and removed one of the criticisms that was raised in the November debate last year. Part of the problem, as the Report states in paragraphs 32(c) and 36, results from the interminable delay in the translation of Community documents into English and the printing of Select Committee Reports and evidence. For example, the Government have made time available this evening to debate this Second Special Report, and yet I was unable to get a copy of it from the Printed Paper Office until last Friday morning. Thus for many noble Lords who do not come to the House on Fridays unless it is sitting, for all intents and purposes the Report was not available until yesterday morning. I really do not think that 24 hours is enough time to give the Report the proper study that it merits and deserves. Thus I should be grateful if the noble Lord the Leader of the House could look into this problem and see whether any of the procedures of this House need to be changed in the light of this problem.

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While the Committee expresses its appreciation to the Government for the speed with which it supplies the EEC proposals and explanatory memoranda, it appears from paragraphs 39 to 42 that it is at Government level that many of the real shortcomings have to be solved. Unless there is proper and continual provision of information from the Government at all stages of the passage of EEC and secondary legislation, from its inception by the Commission to its adulthood as Community law, effective scrutiny becomes more difficult. The early warning mechanism suggested in paragraph 40, and mentioned also by my noble friend, would, I believe, be of great benefit to the Select Committee, especially if it was coupled to an early and late scrutiny procedure as recommended both in the Maybray-King and the Select Committee Reports. This would necessarily involve an increased burden upon Government Departments, since it would require more than the current provision of documents and memoranda being provided. Even the divulgence of more information on an informal basis would be an improvement, and a necessary one, in view of the tendency to alter secondary legislation after it has been scrutinised by this House. However, I should like to hear the views of the noble Lord the Lord Privy Seal on this point.
My Lords, I do not feel in my own mind that there is any real doubt about the need for better and more substantial information about the work being carried out by the Council of Ministers and at the more informal Summit meetings. This point was raised by my noble friend. However, the Government showed that their heart is in the right place when they stated in their White Paper, Membership of the European Community. A Report on Re-negotiation,
"The Government intend to continue to develop these arrangements "—
in other words, for Parliamentary scrutiny of EEC proposals—
"so as to make them more effective and to enable Parliament to express its views on draft Community legislation in the most appropriate way."
I hope and trust that the Government live up to these very worth while intentions.
In paragraph 44, the Report once again raises the question of the continuity of the Committee and advocates the appointment
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of the Committee for the duration of a Parliament, rather than just for one Session. An alternative solution might be to adopt the same procedure as that used for the appointment of members of the European Parliament from this House; in other words, the House would appoint the Committee until it decided otherwise. Thus, the disadvantages raised by the dissolution of the Committee at the end of each Session, and also the disadvantages which would equally apply if it was dissolved at the end of each Parliament, would be removed by this procedure, since the Committee could be extended over from one Parliament to another. I feel there are very convincing reasons for altering the present procedure. Perhaps the noble Lord the Leader of the House can say what consultations he has had on this question, and with what results. Perhaps he could also say what his attitude happens to be on this point.
My Lords, lastly I should just like to express once again the gratitude of those on this side of the House to those noble Lords and noble Baronesses, and the officials and experts who have assisted them, for their exceptionally hard work in making this Select Committee a viable and valuable entity.
9.13 p.m.
Lord WALSTON: My Lords, may I, first of all, thank the noble Baroness, Lady Tweedsmuir of Belhelvie, for the admirable way in which she has introduced this debate, and for giving us a chance of directing our attention to this Report of the Select Committee. More important, may I say how great a pleasure it has been to me to have the privilege of sitting under the firm, wise and benevolent chairmanship of the noble Baroness, and how admirably she has filled the gap left by my noble friend Lord Diamond. We have been lucky indeed in our two chairmen. For me, it is very much a source of sorrow that I am no longer a member of the Committee of the noble Baroness.
My Lords, in the broadest terms the general objectives of this Select Committee are to look at Community legislation, and to give this House the opportunity of discussing all legislation being proposed in the Community which appears to be of significance, and by so doing to enable our discusions in this

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Chamber to influence Government policy, and to give guidance to our Ministers when they go to Brussels as to the way this House is thinking—and, to a large extent, I believe, the country.
I believe that in the relatively short time that the Select Committee has been in existence it has done its job well. That does not mean to say that it has done a perfect job. It does not mean to say that its job cannot be improved. I am quite sure it can be improved and I am quite sure it will be improved. It is especially important that this should be done now that the referendum is behind us, now that we have confirmed our membership of the European Economic Community, and more than that, because we are now embarking on the second stage of the development in the Community; that is, towards direct elections to the European Parliament and with those direct elections the increased power, the increased authority of that Parliament.
I believe very strongly that the deliberations in both Houses of Parliament in this country will increase in importance as the powers of the European Parliament increase. So we cannot look back and say, "Soon we will have done our job. There will be a European Parliament and there is no more for us to do". We must say, "We have yet more jobs to do, yet more responsibilities to fulfill, and during this time we must perfect our organisation to see that we can do these jobs properly". Already I believe that the deliberations of the Select Committee have had some influence on the Government, but in order to enable us to exert yet more influence there are various things that are needed. They have already been mentioned by the first two speakers, but there are one or two of them I should like to emphasise and take up.
First, the Committee must have quick information as to what is being proposed and what is being carried out in Brussels by the Commission in their deliberations. There must be quick information so as to give the Select Committee and its Sub-Committees time to examine, time to take evidence, time to deliberate, and, after all those things have taken place, time for your Lordships here to debate the recommendations of the Committee. We must not fool ourselves; whatever influence the Select Committee may have in its
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recommendations, that influence is small compared with the influence of a consensus of your Lordships' opinion as expressed in full debate in this Chamber.
I believe, in addition to that, there is need, as the noble Earl, Lord Cowley, said, for increased public involvement in all our activities here. We already have a very considerable amount of involvement on the part of interested parties, trade associations and so on, who are well aware of what is happening in Brussels, what the proposals are, and are only too ready to give evidence before the Select Committee and its Sub-Committees on matters affecting them. But it is not only those with special interests who should be involved in this; it is the public at large.
There is still a feeling, a very understandable feeling, that the Community is run by faceless bureaucrats who issue edicts from their ivory tower in Brussels to which the whole of the country has to submit. But we know that is very far from the case. What we must do is to make sure that the ordinary people who are affected by this legislation not only know that we are at work here in this House, that the Select Committee is at work investigating all these proposals, but that they have the opportunity not only to come to listen to these deliberations but to participate, by giving evidence, expressing their own views. If that is done, if it is known that that can be done, there will then be no reason for people to think that it is the faceless bureaucrats who are controlling their lives; they will realise that they are participating in the legislation.
Lord INGLEWOOD: My Lords, if I may interrupt the noble Lord, would he not agree that it is extremely sad that his last few sentences, which are so very important to all the people in this country, are most unlikely to be given even one line in any national newspaper tomorrow?
Lord WALSTON: My Lords. I could not agree more with what the noble Lord has said. I frequently feel that it is very sad that the pearls of wisdom which drop from my lips and those of other noble Lords are ignored by all except the very select body who are in this Chamber tonight. In addition to this public involvement—the public at large—there is also,

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and must be increasingly, the closest possible contact with our British Government officials who are concerned with all aspects of Community legislation; those in Whitehall. and those in Brussels. It can be said that admirable contact has been established with them in the past, and for that we should all be grateful. That concept must be fostered and developed, because it is by an understanding of what is going on in their minds, what they understand is going on in Brussels, and by their understanding of the way that we think, that we can get the most effective results of our labours. I apologise: I say "our" the whole time as though I were still a Member of this Select Committee, but I should not do that and I shall try to be more accurate in my speaking.
There must also be closer liaison than in the past with the Commission in Brussels. As the noble Baroness said, there have been visits of herself and others of her colleagues to Brussels, and these have proved extremely valuable. It is not only what one has learnt in going there, but the personal contacts one has made which can, and must, develop over the months ahead, so that there can be the possibility of relying not only on official communication but on the sort of understanding which so often exists in any large organisation which can short-circuit occasionally some of the official methods of communication and bring about the right sort of co-operation and working together, which is the only way that can lead to full success.
There must also be an increasingly close liaison with the members of the European Parliament from this country. I am very new, and so I can speak with no experience whatsoever, but I have learned enough to know that the job of being a member of the European Parliament—and the noble Earl, Lord Bess-borough, will undoubtedly bear me out—is an arduous one, and it gives little time for attendance at the Select Committee and its sub-committees. But I am quite sure that, wherever possible, that should be done by members of the European Parliament. Even when it is not possible for them to attend at the meetings, to have understandings and conversations on a purely personal basis between Members of the Select Committee and Members of
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the European Parliament would be of enormous importance.
In addition to all these different ways of contacts and co-operation between the various people involved, it is important for the Select Committee to have as much forewarning as possible of what is in the minds of the Commission, or in the minds of those who are responsible for promulgating new legislation. I know that it is not strictly within the terms of reference of the Select Committee to attempt to influence legislation in the early stages; it is, strictly speaking, to report on that legislation which already has been promulgated. But undoubtedly the job of the Select Committee will be made much easier, and the efficacy of the objectives of the Committee—in other words, the control as much as possible by the Parliament of this country of its own destiny subject to legislation of the European Community—will be made very much easier if we know what is likely to happen and can be forewarned, and in that way forearmed, and discuss the matters before they actually become projects.
What I personally should like to see is the introduction of something on the lines of our own Government's Green Papers, so that we can debate in the early stages—first, in the sub-committees, then in the Select Committee, and then, if it is of sufficient importance, in this Chamber—the projects at the Green Paper stage, or the White Paper stage, before they come to be incorporated in a Bill.
My Lords, I repeat that I believe the Select Committee in its short life has done a good job. I am quite sure that it is a very important job, and I believe that under the wise guidance of its chairman and with the co-operation of all those concerned, it will continue to advance in its importance and significance so that at the end of the day, or even half way through the day, there will be every prospect of being able to say that the influence of the British Parliament on Community legislation—whether or not that be a directly elected Parliament—is sufficient to satisfy all of us who believe that we have a lot to offer to the proper workings of the European Economic Community.
9.26 p.m.
Lord DIPLOCK: My Lords, there is one respect in which I should wish to

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correct the balance of the Report on the activities of the Committee given by the noble Baroness who moved this Motion. She omitted to tell this House how much the work of that Committee owes to her chairmanship. A Committee can be as good as its Chairman; it cannot be better. The possibility of the Committee working as efficiently as it can has been due very largely indeed to her efforts.
In a debate which starts at 8.30 in the evening I am sure that this House would be grateful if I restricted myself to the one point arising out of this Report which I think is the most important. It is dealt with on page 11 of Annex C, the Child's Guide to the Common Market and deals with the question of enactment. One of the most important distinctions between Community and domestic legislation is that Parliament, largely by the Luxembourg Accord, can influence Community legislation before the legislation is made, but that exhausts its influence. It cannot secure subsequent amendment of that legislation if it has made a mistake. There is the difficulty of initiation, the difficulty of getting the consent of all the other Member-States.
There are two stages in Community legislation. The first stage—the proposal by the Commission, the consultation with the European Parliament—is legislation in public. We have no difficulty about that. The documents are there, we can consider them, criticise them or approve them. But in practice, after that stage, important amendments may be made, and frequently in the most important and difficult legislation are made, in the Council working groups. The danger is that these amendments are legislation in secret, and I regard as the most vital requirement that the Scrutiny Committee should have an opportunity to consider and report on these amendments before they finally come before the Council for decision. The problem, which we have to solve, is to ensure that that information gets to the Scrutiny Committee in time for it to be reported and for a debate if necessary to be held in this House.
The difficulties I understand, but they are, I believe, fairly easy of resolution. The working groups are really a combination of the Committee stage of a Bill in domestic legislation, and the negotiation
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of an international commercial convention and, as a result of the working group's activity, there emerges a document which contains two matters; first, all the amendments which have been proposed by any Member-State during the course of the working group's debates; and, second, indications of the bargaining stance or attitude of the various Member-States. That second part, the haggling that is going on, is rightly confidential and not to be disclosed, but on the first part, the amendments that have been proposed which are going before the Council and will be discussed and voted on then, there can be no objection to informing the Scrutiny Committee of what they are.
I have made inquiries of the legel services of the Community, and I understand that there is no objection—certainly, there ought not to be any objection—to disclosing what amendments are going before the Council and, generally, there would be no practical difficulty in the Government producing not confidential documents, of course, but simply the amendments that will come before the Council when it meets, so that there can be information and, if necessary, a debate on them because they make great differences to the original Commission's proposals. The procedure rules of the Community require that there should be at least 10 days between the Committee of Permanent Representatives, which is where the working group's document eventually gets before it gets to the Minister, and the Council meetings. It is important that we should not, by introducing this procedure, delay decisions in the Council, because such delays have accounted for a good deal of trouble and tension in the past.
One must bear in mind that it may be important, because the meeting of Ministers concerned—agriculture, or whatever it may be—will take place in the next 12 days or so, and if that meeting cannot be caught it may be delayed for another two or three months. So we must be careful not to cause that sort of delay. But I understand from the inquiries I have made that before—and indeed, some time before—the matter finally gets to Coreper, to use the acronym common in the Community, the Government representative on the working group would be able, without much

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difficulty, to provide a list of those amendments which were likely to go forward to the Coreper meeting and thence on to the Council. In the ordinary way, this would not be necessary because there would be time enough when it got to Coreper, but it might be necessary in some cases.
I would stress to the Government—for this seems to be the most important lesson I have learned during the nine months I have been a member of the Committee—that unless we can get some machinery for doing this we shall fail in the task that this House and another place ought to be carrying out in the Community structure, and which is necessary if the Community is to be a success; because to be a success it must carry the consent of the peoples of its Member-States as manifested through their Parliaments. I urge the noble Lord the Leader of the House to consider very carefully whether this can be done.
9.36 p.m.
The Earl of BESSBOROUGH: My Lords, as the hour is late, I shall try to obey the Egremont rules, but I felt that I could not leave the Chamber without congratulating my noble friend Lady Tweedsmuir on a most lucid and useful Report, of which I have carefully read every paragraph, and I nearly got through Annex C of the noble and learned Lord, Lord Diplock, while he was speaking. I was of course particularly interested in paragraph 20 regarding the Committee's relations in the European Parliament. It is true that members of the European Parliament have not so often been able to attend meetings of the Select Committee or its Sub-Committees. By a curious chance, when the Select Committee was first set up I was on certain occasions able to attend meetings which dealt with my particular specialities. Fortunately, they happened to fall on days following meetings of Committees of the European Parliament in Brussels, but recently the dates of these meetings have not dovetailed in very well. If it were possible—which I suppose would be very difficult—to arrange for meetings of the relevant Sub-Committees here to be on days when we were not in Brussels, Luxembourg, Strasbourg or elsewhere, I believe that the whole system could work more happily both at a European and a national level.
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There is no doubt that members of the European Parliament can sometimes act as a useful early warning system. There are no Council officials or national Government officials present at European Parliament Committees when the Commissioners and/or their officials address us in great detail and answer our questions off the record. That brings me to the very valid points which the noble and learned Lord, Lord Diplock, has just made. In his Annex, I see that he says that in so far as the Parliament is concerned, co-operation with the Council is less close. I believe that what he has said in regard to the Council Working Parties and the ability of the Scrutiny Committees to monitor their work is not impossible and I would strongly endorse what he has said. I hope the Government will take this matter up.
Of course, when it comes to a disagreement between the European Parliament and the Council, then we have the conciliation procedure that we are not monitoring at those points between the Commission proposals going forward and becoming adopted by the Council. At all events, so far as Parliament is concerned, I hope it will be possible to arrange a schedule of meetings which might enable members in our place on the Continent to come to meetings here more frequently. I hope the point made by my noble friend Lord Cowley will prove correct in so far as we now have more Peers—and I see some of them here tonight—who will be going to Brussels, Strasbourg and Luxembourg and therefore perhaps between us, on whichever side of the House we sit, we might be able to keep my noble friend's Select Committee and her Sub-Committees more frequently informed of thinking within the European Community institutions.
The flow of information must be two-way. I may say that in the case of one committee, as my noble friend mentioned, they have been so successful in catching up with the backlog, indeed, running neck and neck with a similar committee in Brussels, that in one case they were even ahead of us and I was able on a Monday or Tuesday to listen to evidence given by the competent officials from the Department concerned in one of the noble Baroness's Sub-Committees

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and then go to Brussels the next day and be able to take part in a similar debate on the same subject more intelligently and, I hope, more effectively.
My Lords, I am particularly glad that the Lords' Sub-Committees can meet in confidence without a transcript. This must facilitate a two-way flow of opinions and, I think, make the meeting more useful. Perhaps there should be more private meetings or meetings with the chairman of a Sub-Committee off the record. I think it important that the members of the electorate in this country should recognise that they can make representations on EEC Commission proposals through either their national or the European Parliament or through both.
My Lords, I am glad that the Select Committee have noted the informal new procedures which are evolving within the EEC without any formal modification of the Treaty: the Summit meetings, the D'Avignon procedure and the conciliation procedure which I have already mentioned. One criticism in the Select Committee's Report that I strongly endorse—and it also applies to the Committees of the European Parliament—is that the Commission proposals are sometimes presented to the Council at such short notice before the Council meets that the relevant Committee of the European Parliament and the relevant committee here often have insufficient time to give their opinion. This is a somewhat different case from that cited by the noble and learned Lord. Often we have insufficient time to give our opinion which certainly the European Parliament must do—and I underline the word "must"—under the terms of the Treaties.
I found this to be particularly so in regard to my own report on Energy Research and Development actions which the noble Earl, Lord Lauderdale, knows well. I was asked to get out the comments of my Committee on very first reading, even without a draft before me. We had to agree what our reactions were to these proposals. This was quite inadequate, almost ridiculous. In fact, due to the referendum, the Council did not hold its earlier meeting, as it thought it would, and the European Parliament's Committee could have taken more time over it.
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However, the Council have now adopted that programme and accepted certain suggestions by the European Parliament and its Energy Committee which will now be monitoring the programme closely as it is continuously reviewed.
I strongly endorse what the Select Committee says in paragraph 32 about the burdens laid on the staff of this House and the problems connected with printing requirements, and, if I may so describe it, the Byzantine folly of the four different sets of EEC reference numbers; namely, those used by the Commission, by the Council and the two adopted by the European Parliament. Now we even have a new number when the document comes to this House. This is ludicrous, and I strongly support the Committee's suggestion that Her Majesty's Government should seek to initiate on the Council a review of this situation. I hope that the Government will take this up as a matter of urgency.
However—and I come towards the end—by far the most interesting part of this Report is the beginning of Part II, pages 16 and 17 on the future role of the Parliamentary Scrutiny Committee and the analysis of the balance between the collective interest of the Community that is to say the "European dimension" and the possible conflicting interests of individual Member States, that is to say, the "National dimension". It is, of course, the responsibility of the Commission and, I would judge, the members of the European Parliament, to preserve the European dimension, not over-influenced by pressure from national Governments or national Parliaments, leaving it to that country's representative on the Council to safeguard national interests.
This, in my view, is the heart of the Report and is of very great interest. It poses the fundamental question as to whether European union is likely ultimately to develop into a federation or confederation of States, with the European dimension becoming more important than the national. In history nation States have retained considerable influence for many years before they have yielded powers to federal Governments. We remember how the Troubetskoys held out against the Tzars in Irkutz; how the Texans resisted, and perhaps to some extent still resent, incorporation into the

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United States. We know, too, that those federations created since the war have not been conspicuously successful. As Mr. Chase, the American Chief Justice, said in 1869:
"Federalism looks to an indestructible union composed of indestructible States".
For Europe I do not know what the ultimate framework will be. Whatever it is, whether on the lines of the Bertrand and Patijn proposals which have been adopted by the European Parliament, or on the lines of the Commission's own proposals recently published, which are federalistic in their nature, or something different, I cannot tell.
On these questions we must await the report of Mr. Tindemans, the Prime Minister of Belgium to the Council. Whatever the tenor of the Tindemans Report, I feel sure the European Community will remain a fairly loose union of States for some time, a loose union consisting—if I may put it this way—of dispersed power centres which safeguard individual, local and national liberties. In this way the national dimension referred to in my noble friend's Report may well remain for years as important as the European dimension. But in this age of rapid communications, it could be that the European dimension will expand faster than perhaps it has historically done, and that therefore federalism, or confederalism, may come about sooner than some of us might have expected.
After two and a half years in the European Parliament, I have now become, like my leader Mr. Kirk, a convinced European federalist. I feel that Europe must become more organically united than it is at present if we, the Western Europeans, are to have that influence in the world which the electorate, judging by our recent Referendum, appears to desire. It may be true that during the Referendum, federalistic aspects of European Union were to some extent played down, but in addressing many audiences up and down the country I found that the young certainly wanted us to go faster than the old and that there were many ardent federalists among them. I would not deny them this prize, for the future really belongs to them. That is why I think it is so important that in designating Members to the European Parliament we should send as many
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young persons as possible, for it is they and not the older Members who will see the achievement of that union which I believe a clear majority in the country have called for.
Lord WYNNE-JONES: My Lords, before the noble Earl sits down, I wonder whether he can explain to the House how he thinks the Commission is able to work without continuing criticism from bodies such as the Select Committee of this House? The noble Earl may agree that in some respects the Commission has shown itself remarkably inept at producing policies which are adequate for the situation. This can be very serious for the future. Can the noble Earl give us any indication of how he thinks the Commission can be brought to face its duties more effectively?
The Earl of BESSBOROUGH: My Lords, I have already broken the Egremont rules. I apologise to the House, but if I may comment quickly on what the noble Lord has said, I think the arrival of this country within the European Community has already been very beneficial. I think it will be seen that some of the Commission's proposals—and I agree with the noble Lord that they are sometimes inadequate and not very well put together, which is largely due to translation difficulties—will gradually improve, particularly as British officials consult with Commission officials at a fairly early stage, as well as during later stages. I agree that the quality of the documents and the way in which they are produced is often quite inadequate, as compared with the official documents produced by our own Government.
9.53 p.m.
Lord LLOYD of KILGERRAN: My Lords, I hope it will not appear to be too incongruous if, in the light of the history of Party political attitudes and involvement in Europe, I rise from the loneliness of these Benches, so committed are the Liberals to the European idea, to make a brief contribution to this debate at this late hour. In a personal capacity, I should like to say what a privilege it has been to serve on the Select Committee under the remarkable Chairmanship of the noble Baroness. Lady Tweedsmuir. If I may echo her words, it has been a privilege to me in

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a very small way to help this House, however inadequately I may have done so, to acquire the "feel" of the European dimension, to use words more apt than any I could myself think of.
In adding my congratulations on the work of the noble Baroness, may I direct your Lordships' attention to the word "sifting" which appears throughout this Report. Sifting is done by the noble Baroness, and she certainly undertakes a remarkable amount of work in looking at all these documents and preparing papers for the rest of us to consider. She also participates in the work of many of the Sub-Committees; and it is indeed a remarkable Chairman that we have guiding this Select Committee.
I wish to make only two points very briefly. I should like to take the words of the Report and urge the Government, first of all, regarding recommendation (b) on page 23:
"up-dated memoranda should be provided by the Government in the case of proposals substantially amended in the Council."
The noble and learned Lord, Lord Dip-lock, has dealt fully with that matter, and I shall listen with great interest to what the noble Lord, Lord Shepherd, has to say about it.
My last point is that I should like also to draw attention to the Committee's recommendation (d) on page 24:
"the staffing of the Committee should be considered by the Offices Committee"—
and may I add, "as soon as possible"? Those of us who have worked particularly on Committee F, under the brilliant chairmanship of the noble Earl, Lord Lauderdale, will know what a remarkable amount of work is done by the members of the staff of that Committee in assisting all its members. Without that devotion and work of the staff, the work of this Committee would be brought to an end. My contribution to this debate, my Lords, is merely to ask the Government to pay urgent attention to recommendations (b) and (d).
9.57 p.m.
The Earl of LAUDERDALE: My Lords, whatever else may be said about the Select Committee, it at least answers Emerson's adage that in politics and in
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trade bruisers and pirates are of better promise than talkers and clerks. If our Select Committee has won any acclaim, it is due entirely to our lady chairman In 1714 Mrs. Manley wrote that politics is not the business of a woman: but I have heard it said by a noble Lord in this House that behind every successful man there stands an astonished woman. As Chairman of one of Lady Tweedsmuir's Sub-Committees it would be churlish of me to say a word without first of all thanking my colleagues; thanking our clerical staff, and thanking our specialist advisers, all of whom have worked hard, have been steady under fire, and assiduous in their attention. It would also be churlish not to take this opportunity of thanking my noble friend Lord Bessborough for his attendance from time to time despite the difficulties of his dual mandate.
There are constitutional issues and I do not believe it serves any purpose to obscure them. The Tammany representative Timothy Campbell wrote to President Cleveland in 1885: "What's the constitution between friends?" But the first constitutional issue has already been dealt with by the noble and learned Lord, Lord Diplock. This is the question of information about what goes on in the secret closets of the Council of Ministers. I ask the question whether it is quite sufficient to say, as we have suggested in this Report, that we should rely on the Executive, on our own Government, to provide the information. Parliament's success in acquiring Parliamentary power down the centuries has derived from Parliament's insistence that the Executive should not just get away with things. We have had an experience recently, which will be fresh within the recollection of this House, when some questions were raised by others as well as myself, for example, about the Executive's treatment of Parliament in the choice of our European Parliamentarians. But without delving further into that, and without covering again the ground covered by Lord Diplock, may I ask this question? I hope that the noble Lord the Leader—I was just going to say "the noble Shepherd"—Lord Shepherd, may be able to tell us when we may expect that council resolutions are listed in a recognisable numbered reference system on the yellow list. This has been asked for earlier.

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The second constitutional aspect relates to the Maybray-King Report. May I draw your Lordships' attention to paragraph 139A of that Report which states that:
"Ministerial statements on Community matters have not always been entirely satisfactory".
The Report goes on to recommend in the following terms:
"The Committee recommend that it should be open to any Lord to propose that such statements should be referred to the Select Committee".
While it is perfectly possible for any noble Lord at any time to put down a Motion on the Order Paper drawing attention to a Ministerial statement and proposing that it should be referred to the Select Committee, what is needed and what, in fact, was intended, in my view, by the Maybray-King recommendation was a right for noble Lords without notice, at the time that a Ministerial Statement is made, to move that it be referred to a Select Committee. It would be for the Select Committee to take it seriously or not and to go into it or not, but the right of any noble Lord in this House, at the time a Statement is made, to move without notice that the Statement should be referred to a Select Committee is one which has been slurred over hitherto and which should, I believe, be looked at by the Procedure Committee as a first step.
There is another aspect which has not come through the careful and courteous wording of this Report that is, the quality of evidence sometimes offered by our friends in Whitehall Departments to Sub-Committees of the main Committee. One would not wish to dot i's and cross t's in any disagreeable fashion but when sitting in the chair one has sometimes been reminded of Samuel Butler's words that:
"Learned nonsense has a deeper sound Than easy sense. And goes for more profound".
I know of an instance when a Minister came to give evidence on a document which not only clearly he had not read, but on which quite clearly he had not been properly briefed. That is not yet a sufficiently serious performance in relation to what the standing of a Select Committee of this House ought to be. When the Minister was questioned, he
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showed some irritation that the questions went beyond the list of questions that had been sent to him in advance purely as a matter of courtesy. He had imagined that he could get away with written answers to those questions. One almost felt him saying under his breath with Byron:
"I loathe that low vice of curiosity".
It is a late hour. However, there is an astonishing situation which I must mention regarding evidence that was given to our Sub-Committee on wind-screen safety glass in motor cars. The Government memorandum told us that industry did not want the safety glass that the Community were recommending. In those early days we were just coming out of our innocence and thought we had better make a double check. Therefore, we got hold of the industry which said the very opposite. Is that really worthy content for a Government memorandum which was sent in all seriousness to a Select Committee of your Lordships' House?
Several noble Lords, notably the noble Earl, Lord Cowley, and the noble Earl, Lord Bessborough, have referred to another matter which I believe to be of constitutional importance, and that is the constriction of our work through printing delays. We are well aware that this is a delicate field for a whole host of reasons, but how can members of the Select Committee be asked to work against the clock, to work at weekends, to work without the help even of secretarial staff at weekends to get Reports out if they are then hung up by the printers for a couple of months? Eventually people tire of the endeavour. Parliament has encountered the printing problem in other respects. Already as Parliament we have our own workshops: is there any reason why we should not have our own print shop, and this as a service to Parliament as a whole? Minor points I will not stress, but as to the Government memoranda which come with these documents, some of them are so anodyne that they really compel one to read the document itself.
The Scrutiny Committee is still opening up new areas of Parliamentary and constitutional experience. I believe that in our attitude to the Executive and to its backup land in Whitehall we should

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indeed be "suaviter in modo, fortiter in re" in Lord Chesterfield's phrase—firm in our resolve, but meantime perhaps philosopically good humoured and not too carping in our approach. After all, a little nonsense now and then is relished by the wisest men.
10.8 p.m.
Lord HINTON of BANKSIDE: My Lords, as compared with the noble Lords who have preceded me in this debate, I occupy an extremely humble position in that I am no more than a co-opted member of Sub-Committee F and speak only from my narrow experience within that Committee, but there are two points to which I should like to draw your Lordships' attention. The first, I think, underlines a point which I believe the noble Baroness, Lady Tweedsmuir, made when she introduced the debate and which was again made by the noble Lord, Lord Walston. Although I no longer have any business connections with the electricity supply industry I am on one of their independent committees which advises them on research. In that capacity I receive certain publicity and broadsheet information which they circulate, including documents from their overseas relations branch. Among those circulars is one which aims to keep the electricity supply industry informed of the proceedings and decisions of the European Economic Community.
Surprisingly, from time to time I find that this document contains information which relates to the work of Sub-Committee F but which, so far as I know, has not been made available to that Sub-Committee. I am making inquiries about the sources of this information, but so far as I can see at present it comes from frequent visits to Brussels, from personal contacts and through the various international organisations which aim to keep the energy industries of different countries in touch with one another. But, if I am right in believing that the electricity supply industry is better informed than your Lordships' Sub-Committee, it seems to me that this is a matter which might be looked at.
The second point I should like to raise is whether sufficient expert consideration is given to the papers which are prepared by the Commission for submission to the
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Council, while those papers are still at the drafting stage. At one of the meetings of Sub-Committee F, a witness from one of the Government Departments, who. I would point out, was most helpful and clear in his evidence, was asked about the preparation of a document that we were considering. He had sat on the committee which had prepared that document. His answer was that the committee had been made up of so-called experts. He was asked what a so-called expert was, and with very great frankness he said, "Well, they are people like myself. I am an administrative civil servant. Like me, they have been told to specialise on a specific subject and, like myself, they have made themselves as familiar with it as possible."
My Lords, I do not for one moment want to denigrate the work of men like that who represent us in Brussels, but I get the impression that many of the proposals which came before Sub-Committee F would not have been made if they had been considered by those real experts who have had a lifetime's experience on the subject under review. I wonder whether it might not ultimately save time and trouble if real experts could be called in by the Commission to give practical advice when technical proposals are being prepared.
10.13 p.m.
The Earl of SELKIRK: My Lords, may I say a word or two in place of the noble Lord, Lord Chelwood. Many extremely powerful, colourful and appropriate remarks have been made about the noble Baroness who chaired the Committee. I am left in doubt as to which of the many remarks is most suitable and which of them I would myself like to adopt. The noble Lord, Lord Lloyd of Kilgerran, expressed it very well, if I may say so, but by only a very narrow margin. Many other very fine and appropriate remarks have been made.
My Lords, I shall speak for only a short time on one thing. We are going into an astonishing experiment, and none of us knows quite how this will work out. The noble and learned Lord, Lord Diplock, pointed out that the theory and practice have already shown quite a wide separation. I have myself been surprised at the measure of flexibility which the

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Treaty of Rome has shown already. I do not know how much wider it will go, but it is not going to work out precisely as it was originally intended that it should.
Of course, there are many very curious matters which have to be sorted out, and translation is one. I am afraid that a kind of language is growing up in Brussels which I think we must stop before it goes much further. Things are getting just a little dangerous, and we must try to kill it. But there are certain things, I believe, which are fundamental to this. Of course we must watch what has happened, but, more important, we must remember that we should give this country confidence in what is happening in Brussels. The only way to do that is to know what is happening. This is one of the tasks which falls directly to the Select Committee. A second point is that we must remember that the Member-States are the source of power—power in the most raw and blunt sense of the word. Brussels is close to it, and it is very dangerous to separate Government from power. We must remember this point when we are thinking about going into this organisation.
My Lords, the third point I would make is on the subject of personal responsibility. I believe that the success of the Constitution of this country is our personal responsibility. We can charge the noble Lord the Leader of the House with a notional responsibility for every blessed thing the Government do it may be notional, but still we can charge him with it. This is one of the strong points of the way in which our Constitution has evolved. Let us be quite frank: there is no one in Europe we can charge with responsibility for these things. These are all points we have got to watch if we are to make this a success, and I believe these are points which this Committee has perhaps begun, in these initial stages, to formulate in the correct way. I am very glad to have served on this Committee. I must admit that when we started, under the chairmanship of Lord Diamond, I wondered how we were to start, and I feel that under two chairmen quite considerable and important progress has been made.
10.16 p.m
Lord SHEPHERD: My Lords, I am very happy to reply to tonight's debate for two reasons First of all, I served
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with the noble Earl, Lord Lauderdale, and the noble Lord, Lord Brooke (who was in his place a few moments ago), on the Maybray-King Committee, the Committee which your Lordships' House set up to decide what framework we should have for scrutiny of EEC legislation. I am delighted to say that the recommendations that we made, which were accepted by your Lordships' House, have been successful. I believe that with our system we need not be too worried, too concerned in comparison with another place. I think we succeeded because we looked at the problem in very considerable depth.
My second pleasure is to be able to join with other noble Lords in praising the noble Baroness, Lady Tweedsmuir, for her chairmanship. I have a feeling that the praise that is given to her could equally be borne by myself. I well remember—and the noble Earl will recall—in the days when we were considering the Scrutiny Committee, we asked what we should look for in a chairman. There were some who thought we should look for someone who would be a smooth coordinator. I took the view—and I think the noble Earl shared my view—that we needed somebody with political flair, and that if the person who was chairman had not got political flair he would not survive very long in this matter of high politics. Therefore, I was delighted that my noble friend Lord Diamond was appointed initially, and I think great credit must be given to him for the way in which the machinery of scrutiny was started.
When, unfortunately, my noble friend left, I was able, as Leader of the House, to use a certain amount of influence with the Front Bench opposite. I said there was one person I wanted, and that was the noble Baroness, because she really has political flair. She has also got drive, and I must say that when the noble Lord, Lord Lloyd, talks about staffing, I do not think there is any problem where the noble Baroness is concerned; there is no—I nearly said depth—to which she would not go in order to see that the framework and the support for her Committee are achieved. I would say to the noble Lord. Lord Lloyd, that this is a matter that has already been through the Offices Committee today, and I think it was favourably received; although I think it would be fair to say to the noble Lord,

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and to the noble Baroness, that we are living in a period of constraint; we have really got to look at not just this committee but the whole framework of government. I do not believe we can go on taking on staff solely because there is a need; I think we have got to look, in some degree, at our priorities here.
I have read this Report, and, like the noble Earl, Lord Cowley, I only saw sight of it properly at the weekend. Some criticism has been made in terms of the printing of this and other Reports of the Committee. We have to face the fact that Her Majesty's Stationery Office and the printing department that supports it, particularly at this time of the year, are pressed to nearly insufferable proportions. Parliament increasingly places tremendous demands upon them. I have direct responsibility for this side of the printing, and I know that HMSO have done a great deal and that a great deal of ingenuity is being used here. But Parliament places increasing demands on them, and I fear that unless we increase capacity the sort of problem that has arisen will continue to arise.
Lord INGLEWOOD: My Lords, I am grateful to the noble Lord for giving way. Would he not agree, as someone who has been in Parliament for many years, that the appalling inconvenience to which we have recently been subjected through these interruptions and delays in our printing is something that is comparatively recent? Something must lie at the bottom of it, and it cannot just be an increase in work and workload. It is something to look into.
Lord SHEPHERD: My Lords, I can only say that if you were to look at the lists of Amendments to Bills, tabled, shall we say, on Friday night for consideration on Monday, you would see the tremendous pressures that are laid on our printing to meet the demands of your Lordships' House and of another place. These are matters which give me considerable anxiety, and if there are ways and means of overcoming them I shall be happy to adopt them.
The noble Baroness and noble Lords have drawn attention to a number of recommendations in the Report. On the terms of reference, I am glad that this does not need change. It caused difficulty
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when the noble Baroness was in office, and equally it caused me difficulty, too. But I think that the Select Committee have used a degree of wisdom and restraint in not exercising the very wide powers given by their terms of reference, and I hope that this will continue. In regard to the size of the Select Committee, no one can dispute the amount of work that is involved, and I should have thought that the recommended increase is one that ought to be accepted; but this is very much within the competence of the Committee of Selection, and I would hope that this is a matter that could be referred to them quickly.
In regard to the period of appointment, this raises some problems. I know that there is pressure from the Back-Benches that there should be a continuing flow of membership to the House Committees, and there is a degree of reluctance to appoint committees for too long a period. On the other hand, I believe that this is a Committee on which there ought to be continuity. Since this is very much a House judgment, we ought to refer it to the Procedure Committee, and I suggest that we so do immediately after the Recess.
Several noble Lords stressed the recommendation in paragraphs 27 to 29, listed as (b) in the Summary of Conclusions, that the Government should inform the House and the Select Committee of significant amendments proposed in the course of the discussion of proposals in Council working groups. There are genuine difficulties here, of which the noble Baroness will be fully aware. The procedures at the Council are unlike our own, where one can identify particular stages in the process of consideration, but this is something that we should look at and I believe that another place is giving anxious thought to this matter. And as this is something which is of importance to the two Houses, I will refrain from saying anything more here, except to comment that the Government fully appreciate the spirit in which this recommendation was put forward, and if it is possible we will seek to overcome the genuine and real difficulties that now exist.
In paragraph 43, the Select Committee raises the very interesting question of the balance between reports for debates and

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reports for the information of the House, and I was asked whether it would be right and proper on occasion to have Motions for approval of a Select Committee report. Personally, I feel that the "take note" Motion, particularly if it is a Motion being introduced by the chairman of a sub-committee, is the right formula, and I think it would be wrong if we were to have a form of confrontation between the Government and the chairman of a sub-committee. These debates are mainly to provide information to the House as a whole and to influence the Government, but also to hear from the Government their views on the matter; and I feel that if one were to get on to a Motion of approval, one could reach the stage when the close relationship between the Executive and the Select Committee could be placed in some jeopardy. If there were a Motion of approval, I feel that it should come from a member of the Back-Benches, not a member of the subcommittee; in other words, it should come from the private initiative of a Member. But I should have thought that the present processes have, certainly from the Government's point of view, done all that we would wish.
I think it would be wrong to believe that a report has been taken note of only when one has debated a Motion. I have made a number of inquiries in the last few months about the way in which Departments have taken note of reports and I can assure the House that they have been very helpful indeed and have been well received. I understand that the noble Earl, Lord Lauderdale, expresses his wrath from time to time about some civil servant producing a piece of paper which he thinks is a load of nonsense—
The Earl of LAUDERDALE: May I interrupt the noble Lord?
Lord SHEPHERD: My Lords, let me just add that the noble Earl is not the only one who, inside or outside Ministerial office, feels that what is offered is not always quite what is required, but I feel that taken as a whole—and that was the spirit of the Report—the Committee genuinely believes that the Government and our Civil Service have sought to render a full contribution to the Select Committee.
The Earl of LAUDERDALE: My Lords, I am only surprised that the noble Lord should think that I am ever wrathful. It is the last thing I am. But this might be an opportunity to let him know about one piece of delay which was due to some files of evidence on energy being sent to the Commons Committee on Violence in Marriage. Sometimes things do go astray.
Lord SHEPHERD: I suggest that the noble Earl should improve his handwriting! My noble friend Lord Walston asked that the Government should provide a full explanation in cases where there are fast-moving proposals for which no adequate time for scrutiny at this end has been provided. I have been advised that the Departments are already working on this and I hope we shall be able to see solid improvement in the service.
The noble Earl, Lord Lauderdale, asked whether we could have a consolidated list of Community proposals which are in progress and that this should be provided for the information of Parliament. I gather that this is a proposal which has been raised by the Procedure Committee in another place and I understand that contact has already been made between officials and the House authorities to explore the practicalities of this.
The noble Earl, Lord Bessborough, said that the Government should seek to initiate a common reference system for EEC proposals. We shall give this interesting suggestion very careful consideration. I should think that there is a lot to be said for it, but it is often difficult to persuade even Departments to change their reference numbers.
My noble friend Lord Walston and the noble Baroness, Lady Tweedsmuir, said that the Government should informally give information to the Committee about important proposals before publication. This is a matter which is very close to my heart, as the noble Baroness will remember when I was in Opposition. However, there are difficulties here, but difficulties may be overcome. I shall look into the matter and communicate with the noble Baroness.
The noble Baroness also asked that the details of important consultations undertaken by the Government on EEC proposals should be given in an explanatory memorandum. The Departments already

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include information about outside bodies which they have consulted. The memoranda are mainly produced at an early stage. Therefore, they may not be fully complete. However, I feel that there is difficulty—apart from giving the names of those whom we have consulted—in giving a report as to what advice the Government may have received from those bodies, because much of that advice is naturally given in confidence. The noble Baroness also suggested that steps should be taken to provide fuller information about Council decisions and that an improvement in Council procedures should be sought. We shall look at this. We are always in favour of improvements in Council procedures, provided that they do not rob the Council of the necessary flexibility in dealing with urgent matters.
I must say to the noble and learned Lord, Lord Diplock, that I was very impressed with his speech and with that part of the Report which the noble Baroness attributed to him. I do not intend to reply to him this evening. I should much prefer to look at this and many other matters in the Report in some detail and with some care. If the noble and learned Lord agrees, I should like to have the opportunity of discussing his paper with some of my officials, in order to get the full benefit of the advice he has given and, perhaps, some of the advice which he has decided not to disclose at this stage.
I join with the noble Baroness in paying sincere tribute to the noble and learned Lord, Lord Diplock. It is a very great feature of this House that a Lord of Appeal who, heaven knows! must have enough problems and work, should give so much of his time to Parliamentary matters. These words must equally apply to other noble Lords who serve on these Committees and also to those who, like the noble Lord, Lord Hinton of Bankside, are co-opted. I think one of the great strengths of our Select Committee procedure is that we keep the numbers of regular members fairly small but have this power to co-opt. This, more than anything else, gives us a degree of flexibility.
There is much else in this Report that I could deal with and there may be much
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in this debate to which I have not replied. But we can all take pride that in a relatively short period of time—some 18 months—we have set up a completely novel procedure in this House, a procedure of scrutiny of legislation within the European Economic Community. As the noble Earl, Lord Lauderdale, will remember in our discussions in more convivial places than this House during our examinations of this matter under the chairmanship of the noble Lord, Lord Maybray-King, I felt that if this procedure were a success it might be a procedure that we could well adopt in domestic affairs. I believe that in this way we can really get to the heart of problems with a real understanding and deal with some of the problems that confront us.
But that is of the future. A great deal has been achieved and we should all be very grateful to all those who have taken part in this particular venture. I should not like to think that this Report and this debate bring this particular era to an end. I know that if I thought so I should quickly be disillusioned by the noble Baroness. I should like to suggest that, perhaps in three months' or six months' time, when the Report has been properly digested, and when as a consequence lessons have been learned and greater co-operation established, the noble Baroness will go through her recommendations as though she were the pilot of an aircraft, doing "checks", and then come to me, if I should still he here as Leader, to see what progress has been made and to see what the difficulties are and whether we could overcome them.
My Lords, this is the beginning of a new exercise, a new function. I think it has been extraordinarily successful. Much still could be done, but I believe it will be done more by co-operation behind the scenes than in debate in this House, despite its great worth. So far as the Government are concerned, we are happy with the way in which this Committee has worked. If it has been a gain to the House, it has been a gain to the Government. I hope it will continue and we will certainly help to the best of our ability. We are grateful to the noble Baroness and all noble Lords who served on this Committee.
10.30 p.m.
Baroness TWEEDSMUIR of BELHELVIE: My Lords, it falls to me in replying briefly to this debate to thank all noble Lords who have taken part. There have been no less than five present or former Chairmen of Sub-Committees taking part. There has also been a distinguished member of the European Parliament and a very distinguished member of sub-Committee F. I should like to thank my noble friend Lord Cowley for his contribution on the question, above all of information. I think this has been the theme of many speeches that we have listened to tonight. I myself found it almost impossible to convey information to the public on what we do. Therefore, it is for the Government to devise ways by which this can be done.
I am grateful to the noble Lord the Leader of the House for the very helpful response that he has made to some very important points, notably membership of the Committee and its continuity, and for the promise he gave the House that he would look at this important question on how we are to get at the amended documents in the Council working groups, which was referred to by many noble Lords who have spoken. I should like to take up his invitation to come in three to six months' time—if we are all still alive in this economic situation!—and discuss with him how the various recommendations have been carried out, and how we can improve the working of our Committee. I feel that the Leader of the House, as a member of the Maybray-King Committee, has his heart in this exercise. He wants to succeed, and he has the same enthusiasm about it as is so evident in the members who give so much of their time to the Select Committee. Therefore, we have made a good start and with his help, and those of the members of the Committee, I hope we shall continue to do so. I should like to thank all those who have taken part in this debate.
On Question, Motion agreed to.

GREATER LONDON COUNCIL MONEY BILL
Reported with Amendments.
HOUSE OF LORDS OFFICES
Fourth Report from the Select Committee, made and to be printed.