HL Deb 22 July 1975 vol 363 cc161-274

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 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: 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 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 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 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.

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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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.

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 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 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 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 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 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 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 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 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 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 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.

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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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, 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… 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 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 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 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 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 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 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—

  1. (a) the Secretary of State has given a consent under subsection (2) above; and
  2. (b) the consideration for the transfer has been determined; and
  3. (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 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: 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 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 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 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 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 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 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 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 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 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 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 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 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 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.

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 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 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 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 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 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 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 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 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. 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 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 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 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 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 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 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, 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 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 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.

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 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 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 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 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 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 moved Amendment No. 69:

Page 7, line 19, leave out subsection (4) and insert— ("(4) In subsection (1) above "general external borrowing" means—

  1. (a) sums borrowed by the Board other than—
    1. (i) sums borrowed from a body corporate which is one of the Board's wholly owned subsidiaries at the time of the loan;
    2. (ii) any sums mentioned in subsection (1)(b) above; or
    3. 249
    4. (iii) sums borrowed by the Board for the purpose of giving assistance under section 3 above; and
  2. (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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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—

  1. (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
  2. (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 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 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 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 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 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 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 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 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 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 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 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 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.