INDUSTRY BILL

HL Deb 24 July 1975 vol 363 cc468-519

4 50 p.m.

House again in Committee.

On Question, Whether Clause 10, as amended, shall stand part of the Bill?

Lord ELTON

I should like to say this by way of preamble to the rest of Part II of this Bill, as it has now become. I shall be brief, but I want to make the observation that the operation of the whole of this Part of the Bill is set in motion by conditions set out in Clause 10, which is now a very short clause. That clause contains no yardstick at all of the criteria which the Secretary of State shall employ when deciding what appears to him to be of special importance to the United Kingdom or to any substantial part of the United Kingdom. Therefore, in going through this clause we must look closely at the Parliamentary supervision of the exercise of that power, since it does not exist at the moment in which its exercise is initiated.

Clause 10 agreed to.

Lord LOVELL-DAVIS

I beg to move Amendment No. 99.

Amendment moved—

After Clause 10 insert the following new clause:

Meaning of "change of control"

".—(1) Subject to subsection (2) below, in this Part of this Act "change of control", in relation to an important manufacturing undertaking, means a change of control from any person or persons previously in control to any person or persons not resident in the United Kingdom.

(2) Where the person carrying on an important manufacturing undertaking or part of an important manufacturing undertaking is a body corporate, there is a change of control of the undertaking only upon the happening of any event as a result of which—

1. (a) a person not resident in the United Kingdom becomes able to exercise or control the exercise of the first, second or third qualifying percentage of votes in that body corporate or in any other body corporate which is in control of it; or
2. (b) a person resident in the Units-d Kingdom and able to exercise or control the exercise of the first, second or third qualifying percentage of votes in that body corporate or in any other body corporate which is in control of it ceases to be resident in the United Kingdom.

(3) For the purposes of subsection (2) above—

1. (a) one body corporate is in control of another if it is entitled to cast 30 per cent. or more of the votes that may be cast at any general meeting of the latter body; and
2. (b) control of a body corporate which has control of another body corporate gives control of the latter body.

(4) Any power to direct the holder of shares or stock in a body corporate as to the exercise of his votes at a general meeting of that body corporate is to be treated as entitlement to cast the votes in respect of the shares or stock in question.

(5) Two or more persons acting together in concert may be treated as a single person for the purposes of any provision of this Part of this Act relating to change of control.

(6) For the purposes of this Part of this Act—

1. (a) the first qualifying percentage of votes is 30 per cent.;
2. (b) the second qualifying percentage is 40 per cent.; and
3. (c) the third qualifying percentage is 50 per cent.;

and the references to votes in this subsection are references to votes that may be cast at a general meeting."—(Lord Lovell-Davis.)

Lord DRUMALBYN

In the course of studying this clause there appeared to me to be the omission of the word "or" here. I beg to move.

Amendment to the Amendment moved—

Subsection (1), line 3, at end insert ("or").—(Lord Drumalbyn.)

Lord LOVELL-DAVIS

I am grateful to the noble Lord, Lord Drumalbyn, for this drafting Amendment, which I am glad to accept.

On Question, Amendment to the Amendment agreed to.

4.52 p.m.

Lord DRUMALBYN moved Amendment No. 99H as an Amendment to Amendment No. 99:

Subsection (1), line 4, after first ("persons") insert ("resident in the United Kingdom and").

The noble Lord said: We have at least made a start to the Government's accepting Amendments from this side of the Committee; I hope it will not in any way weaken the good clause. This Amendment is designed to clarify a matter which I think the noble Lord has already inferred, and one he was prepared to discuss further with us. The clause as drafted states: Subject to subsection (2) below, in this Part of this Act 'change of control', in relation to an important manufacturing undertaking, means a change of control from any person or persons previously in control to any person or persons not resident in the United Kingdom.

So we have on the one side of the balance sheet, as it were, any person whether in the United Kingdom or not in the United Kingdom, and, on the other side, any person or persons not resident in the United Kingdom.

It is obviously for consideration whether it is right for the Government to say that an overseas investor who has put money into this country and then wants to divest himself of that investment should be interfered with in the disposal of that asset. He is already an overseas resident. The great danger, of course, of interfering in this way is that investment in this country will be discouraged. If I were an investor and thinking of putting money in some country I should think twice, or many more times, before I put money in a country in which I was going to be locked in or in which I was going to have to accept compensation on terms arranged in this country.

It might well be that the person who was being prevented from disposing of his assets in the way in which he wished to do would find that the compensation he got in this country was very much lower than what somebody else in another part of the world was prepared to pay. I appreciate that there are two sides to this argument, but I should have thought that the overriding principle, at a time when we really do need investment and capital, would be encouragement of investment in this country. It is for that reason that I move this Amendment. I beg to move.

Lord BESWICK

As the noble Lord, Lord Drumalbyn, said, this was a point which the noble Earl, Lord Balfour, mentioned earlier. This Government, as with other Governments, encourage inward investment. There is nothing between us about that. We recognise the advantages there have been to our economy by foreign investment. There are many such companies, of course, in the country operating happily, who have so operated over a long period of years. But I thought he agreed that there may be occasions when there would be an industry—possibly a particularly sensitive industry—in which, for a range of reasons I can think of, it would be inadvisable to allow the control of a company to pass into foreign hands. That, I thought, was something about which there was no dispute.

The noble Lord's Amendment, however, has seized upon the fact that there would be authority in this Bill for the Secretary of State to intervene in the event of the transfer of ownership from one foreign owner to another foreign owner. That is what the Amendment is really dealing with, not with the principle of inward investment. The reason for that power is that there may well be a situation where a company in Britain has been in the ownership, or substantially in the ownership, of some foreign citizen of a perfectly respectable and acceptable kind. But then for one reason or another there may be a desire to change. The intention may well be to change the ownership to a citizen who may not be so acceptable. There may be a number of reasons why it would be inadvisable for an important company in this country to pass to this other proposed new owner. It is for that reason that we think the power should be in the Bill.

Lord DRUMALBYN

The logical conclusion of that of course is that the country would refuse investments if those investments came from people overseas whom the Government for one reason or another did not trust or did not like. But is that so at the present time? Is there any limitation on someone from overseas coming into this country and investing? Certainly in the development areas, I should have thought that the money is encouraged to come here and at any rate try. So there is an illogicality in this particular control. The noble Lord said that this does not deal with encouragement to investment. It does not. It deals with discouragement to investment. As I explained, this kind of control is likely to discourage investment in the future. That is the point of the argument.

Lord BESWICK

I think that either the noble Lord or I have mistaken the purpose of his Amendment. As I see it, he is not attacking the principle of power being in the hands of Her Majesty's Government to prevent the transfer of ownership to a foreign citizen. There is nothing between us, I think, in that. Although I absolutely agree with the noble Lord that we would not regard with suspicion the majority of cases, there may well be cases—indeed, there have been cases—where we would think it undesirable that a particular industry should pass under the control of a particular citizen overseas. That is so. The only point which is touched by the Amendment of the noble Lord is when the present ownership is on the point of passing to another foreign ownership and when, for a variety of reasons, the second foreign owner may be less respectable than the first. In such a case it ought to be possible for the Secretary of State to intervene.

The Earl of LIMERICK

This is an argument which I can follow perfectly well. But does not the noble Lord agree that if the Bill were to be left in the form of this Amendment without the further Amendment of my noble friend Lord Drumalbyn, the intending inward investor, knowing that should he wish to dispose of his investment he could only do so subject to some further test of acceptability. I would be less likely than otherwise he would have been to make the initial inward investment?

The Earl of BALFOUR

If a foreigner controlling an industry in the United Kingdom wished to sell it to somebody who was unacceptable to us, surely we have exchange control procedures which could be used. As I read this clause, if an American starts a factory in the United Kingdom and decides to sell that factory to a Canadian, the Government can step in and take it over, I wonder whether the noble Lord. Lord Beswick, has taken up this point with the Scottish Council of Development and Industry. It was through the magnificent efforts of that Council that so many industries came to Scotland from many parts of the world and started the industrial estates. They did a magnificent job. As the wording stands at present, I do not believe that the Government could have done anything that would more discourage industry from coming to Britain. I hope that my own Amendments will be considered later. If an American, Canadian or Australian firm wished to start a business in Europe—and I include Britain in Europe—in order to get into the EEC, the provisions of this new clause would frighten them away altogether. I do not think they would ever come near us. The long and the short of it is that they would go to Europe.

Lord BESWICK

For some time there have been powers—but they are not overt powers—which could be used for preventing inward investment. The fact that those powers are there could have had the consequences which the noble Earl has mentioned. However, I beg to suggest to him that they have not had that effect, nor will the power in this clause have the effect which he fears. It is conceivable that a company may consider this possibility, but if they were going to consider it they would have considered it before. We are proposing to give quite open powers, and these will be in the hands of the Government. I should have thought that there was absolutely no difference between us as to the need to have power to prevent a sensitive, important British company from falling into the hands of an unsatisfactory foreign owner.

The noble Earl mentioned the possibility of an American wishing to sell his business to a Canadian. It almost reminds me of the widows and orphans when we were discussing taxation. One can always think up such a case, but such a case is unlikely to call for the use of these powers. Supposing that a citizen of the United States decided to dispose profitably of his assets to a citizen of an Eastern European country, would the noble Earl be as happy then? The noble Earl has advanced one case and I am advancing another. If it were thought desirable the powers that we are discussing now could be exercised. We want useful inward investment in Scotland to continue. There have been cases where certain international companies have the reputation of being asset strippers. Let us suppose that a change occurs in a company which we think is absolutely essential to the British economy, since it gives secure employment to British workers and has been in the hands of an American family concern over a period of time, and they wish to dispose of their assets to somebody who we think is not so respectable, somebody who has the reputation of being a speculator. In that case ought it not to be feasible to use the powers in exactly the same way as we could use our powers if it were a straightforward transfer from a British to a foreign owner? If the noble Earl cares to think about it he will see that there may well be cases where these powers should be used.

5.7 p.m.

Lord ELTON

May I advance two points. The first arises from what the noble Lord, Lord Beswick, said about the control of inward investment. Perhaps he will put me right if I am wrong, but I am under the impression that all direct and portfolio investment leading to any nonresident or group of non-residents obtaining 10 per cent. or more of the voting rights in a United Kingdom company requires exchange control approval. That approval is obtained by applying to the Bank of England. However, it is not only the Bank of England which has the final say in the matter, because all inward direct investments valued at £1 million or more—these, I take it, are the figures to which we are alluding and also some other cases of doubt and difficulty—are referred to an interdepartmental committee of officials under Treasury chairmanship which is called the Foreign Exchange Control Committee.

I understand that there are also special arrangements for particular departments to be consulted about prospective investments in companies or sectors of special interest which are included in what is known as the "sensitive list". For example, at present all inward investment from Japan and all proposed investment by non-residents in the electronic sector is referred to the Department of Industry. I believe that rules are being drawn up covering inward investment applications from OPEC members as well. In the case of inward direct investments from Japan, the special criteria against which applications are tested include principally the requirement that the investment shall be located in an assisted area, but that at least half of the value of the final product shall have been added in the United Kingdom and that at least half of the output produced shall be exported. These criteria show clearly that the authorities may already, if they wish, vet and control inward investment. I say that because the noble Lord rather swept aside as being nugatory the present control of inward investment. In fact, already it is fairly considerable, and one of the doubts at the back of our minds is that these existing powers are treated so lightly in the drafting of the new Bill.

If at the same time I may place at the feet of the noble Lord another conundrum which may give rise to debate at a further stage, may I put to him the position of a group of companies which, through the description of holding companies in subsection (3) of the proposed new clause, would come under the purview of the Minister. It may well be that for sound economic and administrative reasons it will be necessary to pass the assets or the voting stock of one member of the group to another. Quite large companies are concerned and quite large chunks of their assets may be concerned. If upon that occasion the Minister will be entitled under this Bill to intervene with the prohibition and vesting orders, even if he has no intention of doing it the prospect that he may do it for motives not at present clear, and perhaps not even existing, will act as a considerable disincentive to our foreign friends putting money into this country. When they put money into this country they make jobs. Here may I refer your Lordships to the passage of opinion across this Table earlier this afternoon. We want to make jobs.

The Earl of ONSLOW

There is one question which I should like to ask the noble Lord before he answers my noble friend Lord Elton. Let us assume that a British company is owned by another EEC-based company and it wants to transfer the ownership to a different EEC-based company but this is refused. How does this conflict with the Treaty of Rome? If it does conflict with it and the case is taken to the Supreme Court in Luxembourg on the basis of fair trading what will be the Government's view?

Lord DRUMALBYN

Before the noble Lord answers that question, I wonder whether he would also answer this one. What legislation parallel to this already exists in other EEC countries or in Western industrialised countries? May I add that perhaps the noble Lord had to scour around a little for an example to illustrate his case, and he took the example of someone in the USA wanting to transfer an industry to a citizen of an Eastern European country. The only citizen of an Eastern European country who would be able to acquire the interest would quite plainly be a refugee. Is he aware that refugees from Eastern European countries have done a great deal to set up industry in this country and elsewhere? They are not all professors of economics.

5.11 p.m.

Lord BESWICK

I overlook the last remark which I think would have been better received in a number of hours' time when we get to the more lighthearted stage. The noble Lord, Lord Elton, spelled out the powers which I had in mind which are at present available. I could have given him the powers in full, but I did not wish to detain the Committee. There is Section 482 of the Income and Corporation Taxes Act 1970 and Section 30(2) of the Exchange Control Act 1947, but the point about those powers is that they were really secured and granted by Parliament for other purposes; that is, exchange control purposes. They were not secured for the sort of purpose that we now have in mind—that is, national economic planning purposes—although they have probably been used by Governments of both complexions. But it is proper to have overt powers to which one could point in an Act of Parliament, and I hope that will be acceptable to the noble Lord, Lord Elton.

In any case, the reason why I did not earlier go into that point in detail is that we are on an Amendment which is not dealing with the principle of a British company falling into the hands of a foreign citizen. We are dealing with a narrower Amendment on the transfer from one foreign owner to another foreign owner. In that case there would be no transfer of British currency; it would be a transfer of overseas currencies. I have explained to the Committee that the reason for this additional power is that there may well be circumstances where control has been in the hands of a good, respectable overseas corporation or overseas family firm. For one reason or another they may wish to dispose of it and the disposal may be proposed to some company which is less acceptable for British national purposes. It is thought desirable to have the power to step in should that situation arise. The noble Lord should not readily assume that it is not possible for power to pass into the hands of a country, the Government of which he would disagree with. I am not thinking of refugees at all; he was wrong to think of them. This is a power which I think, on reflection, we would all consider might well be used, although I have not in mind any particular case at the present time.

The Earl of ONSLOW

Could the noble Lord answer the question I put, or does he not know the answer?

Lord BESWICK

The noble Earl was good enough to make so many points. I do not know the one he refers to.

The Earl of ONSLOW

I made only one point. If a British company is owned by an EEC-based company—

Lord BESWICK

I beg the noble Earl's pardon if he thought I was complaining about his interventions. I welcome them and enjoy them. I should have said that the answer to that question is that the Amendments after the next deal with that specific point and possibly we can deal with it then.

Lord ELTON

Would the noble Lord therefore proceed to answer my query about the transfer of the control of one of a group of companies to another member of the same group, where the holding company is resident (under the terms of the Bill) abroad? Technically, as I read the Bill, this could count as a transfer between two non-resident controlling interests or between one resident and one not. What I should like from the noble Lord is a view as to whether he could himself table an Amendment at Report stage which would obviate this, because it would really inhibit the normal and beneficial operation of foreign corporations working in this country and employing British labour at a time when there is unemployment.

Lord BESWICK

I think that is a point on which I require legal advice, and I will seek it and let the noble Lord know whether it is necessary to consider covering the point at Report stage. But may I say, since the noble Lord again seems to have a fear that these powers are likely to be used wrongly, that they are only permissive powers. With the kind of transfer that he has in mind it does not necessarily follow that there will be interference.

Lord ELTON

I appreciate that, but it is worth remembering that if you give somebody a gun it is no good just telling him not to shoot people wearing a particular uniform. You have to make sure that he does not do so.

Lord DRUMALBYN

I think we have explored this matter as far as we can at the present time. I hope that at the next stage of the Bill the noble Lord will be able to tell us a little more about what other countries have this type of machinery. Perhaps he will also consider probable developments that we shall have in the European Economic Community of transfers of shares between companies, going both ways in order to form cross-frontier corporations in the EEC. This is a wider subject and I agree with the noble Lord that it will all depend on how these powers are used. But, in the meantime, I beg leave to withdraw the Amendment.

Amendment to the Amendment, by leave, withdrawn.

Lord DRUMALBYN

Amendment No. 99A is purely exploratory, in order to find out whether the United Kingdom includes the Channel Islands and the Isle of Man for these purposes. I beg to move.

Amendment moved—

Subsection (1) at end insert ("the Channel Islands or the Isle of Man")—(Lord Drumalbyn.)

Lord LOVELL-DAVIS

The Channel Islands and the Isle of Man are not parts of the United Kingdom and our legislation, our industrial policies and our system of industrial support do not extend to them. It is therefore right that these reserve powers, which will be used only if necessary, should apply to transfers to these territories since, in a sense, if the control of a business is transferred there it passes from the sphere of influence of the British Government.

Lord DRUMALBYN

May I ask whether the Channel Islands and the Isle of Man were, as a matter of courtesy at least, consulted in this matter?

Lord LOVELL-DAVIS

I do not know whether they were consulted on the matter, but the fact remains that the situation is as I have stated and they are not part of the United Kingdom.

Lord DRUMALBYN

I am well aware of that fact and they are very proud of it. But at the same time they owe allegiance to the Crown and they ought not to be treated as aliens. I understand the point made by the noble Lord and if they have not raised an objection to this (which I understand they have not) there is no point in my pressing this Amendment. Therefore I beg leave to withdraw it.

Amendment to the Amendment, by leave, withdrawn.

5.20 p.m.

The Earl of BALFOUR moved Amendment No. 99B:

Subsection (1) at end insert ("or any other member state of the Communities").

The noble Earl said: In moving this Amendment, I wish to speak also to Amendments Nos. 99B, 99C, 99D, 99E and 99F. I am still extremely concerned here that as the wording of this new clause stands it could even discourage any Member-State of the Community from starting up an industry in the United Kingdom. On reading this clause, I certainly think that if there were no such provisions in France, Germany, or somewhere like that, an overseas company wishing to start up in Europe would certainly not start in the United Kingdom. Perhaps the idea is that, wherever there might be the slightest risk of having someone undesirable starting up a company in the United Kingdom, the Government would rather they did not try.

There is one other point I should like to take the opportunity of raising, particularly in connection with Clause 10(3)(a). I know of a company in Scotland which has a connection with the rather specialised sphere of resistance wire. They are associated with a firm in France which produces resistance strip, which, in turn, is associated with another firm in Germany which produces resistance tube. These are not big companies by any means, but their products are within a very specialised sphere—the sort of stuff that goes into electric light bulbs, wirelesses, heaters and so on. Each have roughly one-third of their interests in the other two, in such a way that if, say, company A in Scotland combined with company B in France, it could alter the overall picture of firm C in Germany; or firms A and C combined together could alter firm B. They do a marvellous job. Judging by the provisions of Clause 10, I feel that any action taken by the French and German firms might upset the whole trio. Under the provisions, the Government could then slap a prohibition order on them.

In exactly the same way, one could have something like spectacle glass, or types of lens, being produced partly in this country and partly somewhere else like Japan, and partly in somewhere like Switzerland, where they are specialists in this sort of thing, or Germany. The provisions of this Bill could be highly detrimental to our co-operation with the European Economic Community, and perhaps some overseas policy of that Community.

I sincerely hope that these Amendments will at least be considered very carefully by the Government. I would add that if, as I suspect, the Government have no intention of accepting the Amendment, then on this side of the House we should remind the Government of the overwhelming majority of the referendum. In all honesty, I am expressing the opinion that the present Government is inward-looking. It does not look outward towards Europe, where we can benefit from each other's experience and individual know-how. I beg to move.

Lord LOVELL-DAVIS

I can assure the noble Earl, Lord Balfour, that the Government have considered these matters very carefully indeed. The fact that we do not feel disposed to accept the Amendments in no way shows us as being inward-looking and not concerned with our place in the Common Market. The fact is that the clause as drafted, and this legislation, will not discourage—and is not intended to discourage—EEC investment in the United Kingdom. There is no question of the Government trying to inhibit this.

This Bill is a piece of United Kingdom legislation couched in terms of the United Kingdom. That is why we refer in Clause 10 to residents of the United Kingdom. This reference is without prejudice to our European obligations. The Government recognise and accept that in certain circumstances our European obligations would prevent the powers set out in Clauses 10 to 15 from being used to prevent the acquisition of a British company by a resident of the EEC. My noble friend the Parliamentary Secretary stated this on Report in another place, and his predecessor made this clear in Committee in another place. Therefore, there is no question of the Government not understanding and accepting our European obligations.

The question is the narrower one of whether it is necessary to put this in the Industry Bill. I am advised that it is unnecessary. Section 2 of the European Communities Act 1972 incorporates directly applicable Community law into that of the United Kingdom, and this includes obligations under Articles 52 and 53, which bear on Clauses 10 to 15. Therefore, there is no question of the Bill being interpreted in a way contrary to our Community obligations. Under the European Communities Act, these particular obligations are in effect made part of our law. I hope that in the light of these assurances, the noble Earl will accept that the Amendments he has put down do not need to be included in the Bill.

The Earl of BALFOUR

I must say that I am not satisfied. May I remind your Lordships of the reply given to my noble friend Lord Drumalbyn only a few minutes ago? The Channel Islands and the Isle of Man were excluded from the provisions of this clause. If a person moves to the Channel Islands and decides to set up his company there, the Government have the right to take it over. I think I am correct in saying that.

Lord LOVELL-DAVIS

The situation in the Channel Islands is a difficult one. I am advised that it is probable that our European obligations would prevent us from using these powers in relation to those Islands, but the position is not entirely clear. The point is that if our European obligations apply to the Channel Islands, there is no need for the Amendment last put down, since the European obligations I have just been talking about would have the effect sought. But if the obligations do not apply, the last Amendment would be undesirable because it would weaken the powers in a way which is neither beneficial nor necessary as part of our European obligations. My point here—and I hope the noble Earl, Lord Balfour, will take it—is that the Channel Islands are a special case. It is probable that our European obligations prevent us from using our powers in relation to the Channel Islands.

The Earl of LIMERICK

Leaving aside the question of the Channel Islands, which is special in this case, as in many others, is the noble Lord, Lord Lovell-Davis, in fact saying that the position is the same in this clause as drafted, without the Amendment, as it would be in law if the Amendment were adopted; that is, subject to any future change in European law? Is he saying that the effect of adopting the Amendment would be zero in terms of law? Is that the position?

Lord LOVELL-DAVIS

I hope I have not confused your Lordships. I have been talking to the noble Earl, Lord Balfour, about the Channel Islands. I was in fact going back to Amendment No. 99A, proposed by the noble Lord, Lord Drumalbyn, and pointing out that the Channel Islands and the Isle of Man are in a peculiar situation. I am certainly not saying anything of the sort about the Amendments put down by the noble Earl which, so far as my advice is concerned, are unnecessary.

Lord ELTON

I began to be reassured when the noble Lord, Lord Lovell-Davis, said that it was all clearly stated in the European Communities Act, and that we need not worry. However, my confidence was diminished sharply when the noble Lord then said that in certain respects he did not understand that Act—nor, I gather, can anyone else—as it relates to the position of the Channel Islands. I make this comment in no spirit of ascerbity, but that was the position in which he appeared to leave us.

Lord LOVELL-DAVIS

If the noble Lord has a clear interpretation of the position of the Channel Islands vis-à-vis Europe and this country, perhaps he would give us the benefit of his knowledge.

Lord ELTON

Absolutely not; and it is the lack of clarity which concerns me. I just hope it does not spread beyond the Channel Islands to the Minches and all the rest. What I wish to ask the noble Lord is whether it is his opinion that the existence of the sections he has cited in the European Communities Act renders it sufficiently clear to all who will be called upon to operate this Act for us to leave out the words suggested in this group of Amendments, which, if my noble friend Lord Limerick is right, merely endorse the statement of law contained in the European Communities Act? If it merely endorses what is already in the European Communities Act, I think we will be doing a service to humanity by repeating it here so that we do not have yet more unnecessary legislation by reference. I should like to leave that thought with the noble Lord. I do not want to hold the Committee up. He will no doubt want to reflect, and we shall wish to be advised. If it is a question of having one thing in a nutshell on a piece of paper on the lawyers' and stockbrokers' and accountants' desks which is understood by all, that is very much better than having to ring up somebody in a dusty office to interpret and pull down Acts of Parliament which have gathered dust on the shelves for years.

Lord LOVELL-DAVIS

I have sheets of paper here about EEC obligations which are affected. I certainly would not wish to go through them all, and I am sure your Lordships would not wish me to do so. I take the noble Lord's point. I am advised that these words are unnecessary. I will certainly check back to ensure that this advice means that it is not necessary for us to include these Amendments in the Bill.

Lord ELTON

May I just add that it is not really necessity I am talking about, but utility. We want laws which, whether or not we like them, work smoothly and not at great expenditure of legal time and expense. When the noble Lord sends back for his next brief, I hope he makes the point that we are trying to get something workmanlike and not lust some thing which satisfies the semantics of an elegant drafting requirement.

Lord LOVELL-DAVIS

I take, the point, and I will ensure that this is absolutely workable.

The Earl of ONSLOW

Would the noble Lord be kind enough to give us some idea of how he foresees the clash between this Bill and perhaps the European legislation, and answer my point about the Supreme Court in Luxembourg?

Lord LOVELL-DAVIS

I think the short answer is that there is no clash at all. We are now members of the EEC and the necessary Treaties apply to us, and there is no way, as I said to the noble Lord, Lord Elton, in which we can enforce this Act in any way contrary to our obligations as members of the EEC.

The Earl of ONSLOW

The noble Lord is saying that if somebody objects and goes to the Supreme Court in Luxembourg and the Court finds for him and not for Her Majesty's Government, that Supreme Court decision stands, irrespective of this Act, because of the Treaty of Accession Act?

Lord LOVELL-DAVIS

That is the case. When the matter is tested, it is tested in so far as we are members of the EEC.

Lord LEATHERLAND

I do not want to be argumentative, especially at this hour, but I wonder whether the noble Earl, Lord Balfour, could add to my store of general knowledge on a matter which arises out of his recent speech. He was telling us about the European Community and the interlocking companies in the Common Market, and he mentioned companies A, B and C respectively in Britain, France and Germany. Then he went on to say that these companies, or parts of these companies, were very anxious to be able to use lenses of very high quality, and he said that the manufacture of those lenses of very high quality was a specialisation of a German firm. Is it not a fact that the most famous manufacturer of lenses in the world is domiciled not in the Common Market West Germany, but in Communist East Germany, and therefore that part of his argument would have been irrelevant?

The Earl of BALFOUR

The answer is that I was simply trying to give an example of a specialised field where you get two or three companies joining together to carry out the same function.

At this stage I am happy to withdraw this group of Amendments, but I have not been altogether satisfied with the answer. I wonder whether I could ask the noble Lord, Lord Lovell-Davis, to let me know if the provisions of this new Government clause would be substantially altered in any way if the words I put down had been accepted. I beg leave to withdraw the Amendment.

Amendment to the Amendment, by leave, withdrawn.

On Question, Whether Amendment No. 99, as amended, shall be agreed to?

Lord ELTON

I should like briefly to ask for elucidation on one point which has been touched on by the noble Lord. That is the arrival of the figure of 30 per cent. in subsection (3): For the purposes of subsection (2) above—

1. (a) one body corporate is in control of another if it is entitled to cast 30 per cent. or more of the votes that may be cast at ally general meeting of the latter body…"

I merely wish to ask, as this is permissive—it may not be too important, but I think we should go over the ground carefully—what is the position when you have a company which is already securely under the control of a patriotic and efficient and entirely British holding company with a 51 per cent. stake, and you have some other body corporate moving from having 28 per cent. to having 31 per cent. of the stock of the company? It seems to me that the powers would then be set in motion, or could be set in motion, without much purpose. As I say, it is permissive, but I should like the Minister's comment.

Lord BESWICK

The answer is that of course if there was a 51 per cent. holding by a perfectly respectable and competent British company the whole question would not arise.

On Question, Amendment, as amended, agreed to.

5.38 p.m.

Lord BESWICK

I beg to move Amendment No. 100. This is a drafting Amendment. Perhaps I may also speak to Nos. 102, 105, 109, 110, 111, 112 and 114. I was simply going to explain that they are on a point of drafting designed to bring greater clarity to this Part of the Bill. None is a point of substance. I beg to move.

Amendment moved—

Page 11, line 10, leave out ("or of a relevant body corporate").—(Lord Beswick.)

On Question, Amendment agreed to.

Lord BESWICK moved Amendment No. 100A:

Page 11, line 14, after ("this") insert ("Part of this").

The noble Lord said: I beg to move Amendment No. 100A, and it may be convenient to refer to Amendments Nos. 104A, 130B, 281A, and 284A, and 285A. These Amendments delete the references to prohibition vesting and confirmation orders in the interpretation clause, Clause 28, and make it clear in the appropriate clauses, Clauses 11 and 14 in the main body of the Bill, that these terms have the meanings ascribed to them for the purpose of Part II of the Bill only. Since their use is confined to Part II, it is more in keeping with the convention of Parliamentary drafting that they should be defined in that Part than in the interpretation clause. I hope that this is acceptable. I beg to move.

On Question, Amendment agreed to.

Lord LOVELL-DAVIS moved Amendment No. 101:

Page 11, line 17, at end insert ("and may make such incidental or supplementary provision in the order as appears to him to be necessary or expedient").

The noble Lord said: I beg to move Amendment No. 101, and to take with it Amendments Nos. 108 and 124. These are purely drafting Amendments. In place of the provision in subsection (9), which appeared to some to be slightly odd on its own, we propose to make it clear, in subsection (1) in respect of a prohibition order and in subsection (2) in respect of a vesting order, that each may contain incidental and supplementary provisions. This is intended to give greater clarity to the drafting. I beg to move.

The DEPUTY CHAIRMAN of COMMITTEES (Baroness Wootton of Abinger)

There is an Amendment to this Amendment, to which we now proceed, in the name of the noble Lord, Lord Elton. Amendment No. 101A.

Lord ELTON moved, as an Amendment to Amendment No. 101, Amendment No. 101A: At end insert ("to prohibit or restrict that change of control")

The noble Lord said: Although the words which the noble Lord seeks to insert at this point of the Bill may be a fairly standard phrase, they none the less give very considerable powers to the Minister without very considerable supervision. It seemed to me that it would be prudent to make it clear that supplementary or incidental provisions should be made only in so far as they are necessary to achieve the purposes for which the main provision was itself tabled. I do not think there can be any exception taken to this, though the noble Lord might grudge the ink that the words will take. I can think of no other objection.

Lord LOVELL-DAVIS

I can assure the noble Lord that it is a common feature of Statutes that they give the right to make orders. The Statutes permit these orders to contain incidental or supplementary provisions. These provisions are, of course, subordinate to the main order and do not provide a means of going beyond the purpose of the order. Rather they make explicit that the order may contain those detailed points that in practice prove necessary, but which are impossible to predict in advance of having to make an order. We do not wish to restrict the scope of these incidental provisions in the way that this Amendment would do. It is a common form provision. For example, it appears in Section 22(3) of the Fair Trading Act 1973 or, as the noble Lord, Lord Drumalbyn, will recall, in Section 1 of the Unsolicited Goods and Services (Amendment) Act 1975 which he piloted through this House. I hope that that will satisfy the noble Lord.

Lord ELTON

Up to a point. The point was precisely when the noble Lord said, "We do not wish to restrict the making of these provisions in this manner." Everything he said at the outset was designed to make me think that they were already so restricted, and that what I had put down would not in any way restrict them further and that my fears were groundless. But those words led me to suppose that they were not groundless, because they would constitute a restriction which would not be acceptable to the noble Lord. So I should like him to explain what this restriction is.

Lord LOVELL-DAVIS

The words proposed in the Amendment are, "to prohibit or restrict that change of control". We do not wish to accept that restriction precisely in this way. That does not alter the fact that these provisions will not really go beyond the purpose of the order.

Lord ELTON

In fact, the words that I put down are taken from the earlier part of the same paragraph. The orders which I am suggesting should be circumscribed in this way are orders which are necessary or expedient to prohibit or restrict the change of control. I have said that nothing supplementary or incidental should be done that is necessary for some other purpose. I am willing to accept the noble Lord's assurance that the Statutes are such that they could not be used for any other purpose. It is only when he tells me that they would restrict the power of the Minister by implication to do things not included in the intention of the original order that my ears prick and my hackles bristle.

Lord LOVELL-DAVIS

The clause would read: may make such incidental or supplementary provision in the order as appears to him to be necessary or expedient". That is fairly general and it is included in legislation. The noble Lord wishes to tie what is necessary or expedient specifically to prohibit or restrict that change of control.

Lord ELTON

The noble Lord has stated better than I could the reason for making my Amendment. Now could be state his reasons for not accepting it?

Lord LOVELL-DAVIS

We have gone on a long time about this. Perhaps we could leave it at that and I shall look at it. I would rather not accept the Amendment.

Lord ELTON

I smell something: I am not sure that it is a rat. On the understanding that we could return to this later. I beg leave to withdraw the Amendment.

Amendment to the Amendment, by leave, withdrawn.

On Question. Amendment agreed to.

Lord BESWICK

I beg to move Amendment No. 102. I took this with Amendment No. 100. I beg to move.

Amendment moved—

Page 11, line 19, after ("in") insert ("paragraphs (a) and (b) of").—(Lord Berwick.)

On Question, Amendment agreed to.

5.48 p.m.

The Earl of BALFOUR moved Amendment No. 103:

Page 11, line 20, leave out ("or") and insert ("and").

The noble Earl said: We are here dealing with three conditions that would affect subsection (3). Before a vesting order is made and before the Secretary of State carries out his functions, I feel strongly that all three conditions should apply. That is why I think that the word "and" should come in in each case, and it should not be just a choice of one of the three. I beg to move.

Lord MELCHETT

I was rather hoping for a slight explanation of exactly why the noble Earl wanted all three subsections to apply rather than just one, because I was going to reply at some length to explain why the Government want all three options. Perhaps he would like me to do that and that might be helpful. As he said, these Amendments would make it possible for a vesting order to be made only when all three conditions set out in paragraphs (a), (b) and (c) of subsection (2) were met, rather than, as the Bill now provides, for a vesting order to be made if any of the conditions is satisfied. The Government believe that each of these circumstances can justify the making of a vesting order. The first in paragraph (a), as an alternative to a prohibition order, is necessary to deal with the company which, unless taken over, will fail and where, if the foreign bidder is prohibited from procedeing, there is no alternative source of new capital. Here we believe it right that the Government should be able to make a vesting order, rather than being forced to issue a prohibition order and see the company fail. Similarly, there may be circumstances when a prohibition order would be ineffective; for example, where a change of control occurred outside the United Kingdom's jurisdiction and where a prohibition order would have limited effect, or none at all.

Secondly, paragraph (b) covers the situation where a prohibition order has been made but it has then become clear that, if no Government action is taken, the company or business will simply fail. Here, again, a vesting order may be justified on the ground that this would be the sole means of protecting and securing the business. Thirdly, paragraph (c) is designed to prevent attempts to circumvent the powers through stealth. If a change of control has occurred, there may be no question of a further threat of change of control nor would it be right to make a prohibition order to prohibit what has already occurred, but it is clearly right that in these circumstances a vesting order might be made irrespective of whether or not a prohibition order has been made. As the noble Earl will be aware, these Amendments would severely reduce the times when a vesting order might be made. I hope that, for the reasons I have given, he will see that all three circumstances are desirable and that it is therefore not necessary for this Amendment to be made.

The Earl of BALFOUR

This is one of the few occasions when I have received an absolutely first-class explanation. The Minister's comments have been most valuable and prove how worth while it is to table Amendments. I think this is the first time on this Bill that I have had a simple, straight forward, brief and clear explanation and I hope that such explanations will be given more often as we proceed with the Bill.

Lord MELCHETT

I am obliged to the noble Earl, but perhaps he had such a clear explanation because I was able to read from my brief without having had any comments from the noble Earl to confuse the situation.

Lord CAMPBELL of CROY

That was churlish.

The Earl of BALFOUR

I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.52 p.m.

Lord BESWICK

I beg to move Amendment No. 104A, which was taken with Amendment No. 100.

Amendment moved—

Page 11, line 31, after ("this") insert ("Part of this").—(Lord Beswick.)

On Question, Amendment agreed to.

Lord BESWICK

I beg to move Amendment No. 105, which was discussed with Amendment No. 100.

Amendment moved—

Page 11, line 36, leave out ("either").—(Lord Beswick.)

On Question, Amendment agreed to.

The Earl of BALFOUR moved Amendment No. 107:

Page 11, line 37, at end insert ("or such other manufacturing undertaking or body corporate as the Secretary of State may by order direct").

The noble Earl said: I can be brief in moving this Amendment. Supposing a vesting order had to be made where a change of control had taken place. There are in the United Kingdom industries of a very specialised nature. For example, I believe there are only two firms making the high quality paper used for the glossy magazines. If one of those companies had a change of control it might be an advantage, rather than the Board taking it over if arrangements could be made with the Secretary of State or the Board to enable the firm to be managed by the other company producing high quality paper. Since tabling the Amendment, I have come to realise that there could be difficulties in making the necessary financial arrangements, but I felt that we should consider whether it might sometimes be better for private enterprise to take over such a firm rather than for it to go into Government control, with the making of a vesting order.

Lord MELCHETT

I hope I can continue to be helpful to the noble Earl. May I suggest that we consider his Amendment No. 129 with this one? They seem to cover very similar points. If the noble Earl is agreeable, I will reply to both Amendments at the same time.

Lord HAWKE

While my noble friend Lord Balfour is considering that matter, may I ask the noble Lord, Lord Melchett, to say whether the Government pay stamp duty to themselves?

Lord MELCHETT

Stamp duty on what?

Lord HAWKE

Stamp duty on the transfer of shares. Do the Government pay it out of one pocket into another when they take over shares?

Lord BESWICK

I do not have the answer, but we will get it.

The Earl of BALFOUR

I am not certain that I am able to move the two Amendments, Nos. 107 and 129, together.

Lord MELCHETT

. I will reply to the noble Earl in relation to Amendment No. 107 and perhaps he will consider whether No. 129 can be taken at the same time. It might be for the convenience of the Committee if I answered both Amendments now, and perhaps when we come to Amendment No. 129 the noble Earl may not wish to move it. The Government, recognise that in certain circumstances it may be desirable for assets or shares vested under Clause 11 to be owned by a body other than the Secretary of State or the National Enterprise Board. In Committee in another place we accepted that if shares in a Scottish or Welsh company were vested to protect Scottish or Welsh interests, it would be proper that the shares could be held by the Scottish or Welsh Development Agency respectively. This is already possible; there is nothing in the Bill to prevent the NEB, after receiving property under a vesting order, passing it on to the appropriate agency. Indeed, subsection 2(4)(f) specifically allows for this and for other disposals. It will be possible for the Secretary of State to transfer the property vested in the Secretary of State to the NEB, the Agencies or indeed to dispose of it, so that the first of these Amendments is in our view not necessary.

I come now to Amendment No. 129 which includes the same wording but strikes at Clause 12 of the Bill. We believe that this Amendment would be undesirable rather than unnecessary. It would allow the transfer of right, liabilities and encumbrances to the Welsh or Scottish Development Agencies or to anybody else. There is nothing in law to prevent this being done with the agreement of those affected—by which I mean the creditors—and no Amendment is needed for that, but to give the Secretary of State power unilaterally to transfer rights, liabilities and encumbrances would be unfair to creditors since the debts owed to them might be transferred to a paper company with no resources and therefore no means of paying off the debt. This would clearly be unfair, and the Government have no wish to take the power. I hope, therefore, that the noble Earl will not seek to foist an unfair and unwanted power on to the Secretary of State and will not seek to move Amendment No. 129 when we come to it.

The Earl of BALFOUR

I am grateful to the noble Lord for those comments, and I am glad to know that under this vesting order it would be possible to hive off to another industry. That is encouraging, and I probably will not wish to move Amendment No. 129 when we come to it. In the meantime, I beg leave to withdraw Amendment No. 107.

Amendment, by leave, withdrawn.

Lord BESWICK moved Amendment No. 108:

Page 11, line 37, at end insert ("and may make such incidental or supplementary provision in the order as appears to him to be necessary or expedient").

The noble Lord said: This Amendment was discussed with Amendment No. 101. I beg to move.

Lord ELTON

I hope that the noble Lord will accept that on this and similar Amendments, I wish to associate the strictures I made in relation to Amendment No. 101A.

Lord BESWICK

I understand.

On Question, Amendment agreed to.

5.59 p.m.

Lord BESWICK moved Amendment No. 109:

Page 11, line 37, at end insert—

("(2A) A vesting order may only be made if the Secretary of State is satisfied that the order is necessary in the national interest and that, having regard to all the circumstances, that interest cannot, or cannot appropriately, be protected in any other way.")

The noble Lord said: This Amendment and Amendments Nos. 110, 111 and 112 were all taken with Amendment No. 100. I beg to move.

Lord ELTON

I am not clear whether this is quite the same matter as the other issues that were discussed. In any event, I should like to take this opportunity of raising two points. One is that this would seem the appropriate place in the Bill—if the Government saw fit—to put some limit on the retrospection of vesting orders. In the Bill as it stands, a vesting order can be made in a situation which has, in the view of the Minister, transpired at any time since 1st February 1975. At present, that is not a very long time ago, but in two years it will be rather longer, and in 10 years it will be a great deal longer. I feel that it would be appropriate to have in the Bill a point at which people know that the Minister will not decide that such a transaction has taken place.

I should also like to ask the noble Lord at this juncture whether he does not think it fit—and, if so, why he does not think it fit—to include some such limitation of action on the Secretary of State in respect of prohibition orders, which can be just as dislocating as vesting orders, on an industry, and whether this or some other part of the Bill would not be suitable for that purpose also?

Lord BESWICK

I note what the noble Lord has said and possibly I can consider it, but the Amendment only rearranges the position of the subsection. In relation to Amendment No. 110, there was no earlier mention of "relevant body corporate", and I thought the definite article inappropriate in the circumstances. I felt that it should be left out. But, as the noble Lord has chosen the occasion to hang a question, I will see that it is answered. Maybe we could return to this at Report stage.

Lord ELTON

It would perhaps have been better to raise this point on the Question, That the Clause stand part, but if the noble Lord will keep it on record we can return to it at Report stage.

On Question, Amendment agreed to.

Lord BESWICK

I beg to move Amendment No. 110.

Amendment moved—

Page 12, line 1, leave out second ("the") and insert ("any").—(Lord Beswick.)

On Question, Amendment agreed to.

Lord BESWICK

I beg to move Amendment No. 111.

Amendment moved—

Page 12, line 3, at end insert ("together with so much (if any) of the loan capital of that body as may be specified in the order").—(Lord Beswick.)

Lord ELTON

The Amendment transfers the words on the Marshalled List from the end of the clause as it was before it was amended, It therefore has the effect of preventing the vesting of loan capital except in subsection (2)(c)—that is, in a retrospective case. Can the noble Lord explain the effect of this Amendment on a company with a small share capital but a large loan capital? Are those who have financed the company to be denied both control and recovery of their cash? I hope that I have not condensed my argument too much, but I feel that more than a matter of syntax is involved when we have this short passage removed to a different part of the clause. There must be a reason for it, and I should like to know what it is.

Lord BESWICK

It was simply to make it clearer. There is no difference in the meaning.

Lord ELTON

I do not think I absolutely agree with that because, as it was in the Bill, the words, "together with so much (if any)" came at the end of Clause 11 as it then stood and presumably applied to the whole of subsection (3). Now this phrase has been moved up the page, so it comes before subsection (3)(b), which I take it was originally subject to its provisions. The noble Lord shakes his head, so I take it that I am wrong. I am prepared to abide by his judgment, but perhaps he would just explain.

Lord BESWICK

My advice is that it makes no difference, but, that it is a more clear exposition of what was intended in the first place.

Lord ELTON

. I am sure that if the noble Lord finds any difference on reflection he will let me know in writing. However, I had another question, the answer to which will be subsumed in the preliminary answer, if there is no change in the effect. If there is a change, it seems to me that we might have a situation in which a company had a small share capital—a £100 company—and a very large loan capital. There is no provision for compensation, as I read it. Maybe the noble Lord would like to return to this at a later stage as well.

On Question, Amendment agreed to.

Lord BESWICK

I beg to move Amendment No. 112.

Amendment moved—

Page 12, leave out lines 7 and 8.—(Lord Beswick.)

Lord DRUMALBYN

Does this mean that the loan capital of the relevant body corporate cannot be transferred and cannot be specified in the Order?

Lord BESWICK

Again, I am advised that this is simply a drafting Amendment and makes absolutely no difference to the Bill. This, again, was intended to be a rearrangement of the text to give greater clarity. I am sorry that the effect has been to confuse noble Lords. If noble Lords feel that there is a matter of substance, I will certainly look at this again, but I am advised that it is simply a drafting Amendment.

Lord ELTON

Would it help if I explained more fully what it is that I take to be the case? The noble Lord could then speak to this at the next stage. We have the words which we are now considering deleting in an earlier Amendment inserted at the end of subsection (3)(a). Until they were transferred there, they appeared to refer to the whole of the subsection. Now we see that "in any other case"—that is a case not specified in subsection (3)(a)—it is only the share capital and not the share capital with so much (if any) as is requisite of the loan capital which appears to the Secretary of State to be involved in the change of control. The point of substance is that there seems to be a very different treatment of the two sorts of capital in the two subsections. We should like to know the reasons for this. When I was given this part of the Bill to look at I realised that it was very complicated and I do not wish to hold up the Committee at this stage, particularly if it puts the noble Lord in a difficulty. Let us get it right later on.

On Question, Amendment agreed to.

6.8 p.m.

Lord BESWICK moved Amendment No. 113:

Page 12, line 8, at end insert—

("(4) In this section relevant body corporate" means

1. (a) a body corporate incorporated under the law of the United Kingdom or of a part of the United Kingdom carrying on in the United Kingdom as the whole or the major part of its business there the whole or part of an important manufacturing undertaking, or
497
2. (b) a body corporate incorporated under the law of the United Kingdom or a part of the United Kingdom—
   1. (i) which is the holding company of a group of companies carrying on in the United Kingdom as the whole or the major part of their business there the whole or part of an important manufacturing undertaking, and
   2. (ii) as to which one of the conditions specified in subsection (4A) below is satisfied.

(4A) The conditions mentioned in subsection (4) above are—

1. (a) that it appears to the Secretary of State that there is a serious and immediate probability of the happening of an event in relation to the company which would constitute a change of control of the undertaking, or
2. (b) that the Secretary of State has learnt of circumstances relating to the company which appear to him to constitute a change of control of the undertaking on or after 1st February 1975.")

The noble Lord said: I am glad to Pet away from drafting Amendments and to deal with one which is a matter of rather more substance. This Amendment completes a series which the Government seek to make to this part of the Bill to deal with the problems of changes of control of important manufacturing undertakings when these bustirics are carried on by bodies corporate. The Amendment replaces the definition of a "relevant body corporate" in two senses: first it completes the physical rearrangement of the definition from Clause 10 to Clause 11; I hope that that is a simple operation this time, and one which creates no difficulties. Secondly it redefines the term in more significant ways.

The movement from Clause 10 to Clause 11 is in fact significant. In the Bill as it reached this House, the term "relevant body corporate" was used both in respect of the circumstances justifying the use of these powers—the signal for action—and in respect of the action that might be taken. The Government's Amendments are designed to confine the term to a narrower context; it occurs only in respect of subsection 3(a), limiting the shares that may be vested, and hence now limits the scope of the action that may be taken under a vesting order, and not the circumstances in which an order may he made.

The changes in the definition itself from that now contained in Clause 10(2) reflect this new purpose. First, we provide that a body corporate, to be a relevant body corporate must be a United Kingdom company. To provide otherwise would be uselessly wide, since the scope of our jurisdiction necessarily extends only to vesting of United Kingdom companies. If a key business is carried on by an American company, the vesting order will be able to vest only the assets in the United Kingdom of that company, not its shares. We recognise this, by providing that a relevant body corporate must be incorporated under the law of the United Kingdom.

The second change is this. We recognise that the power to vest the shares of a company, and still more those of a holding company, should be exercised only if the important manufacturing undertaking accounts for a major part—more than half—of the activities of the company or group. This is achieved by the phrase carrying on as the whole or the major part of its business the whole or part of an important manufacturing undertaking". There is thus no question of the shares of the ultimate holding company being vested simply because it controls, as a small part of its business, an important manufacturing undertaking. That is the intention, and I hope that noble Lords opposite will accept it. I beg to move.

Lord ELTON

I am much obliged to the noble Lord for that very helpful—

The DEPUTY CHAIRMAN of COMMITTEES

Amendment No. 113A is an Amendment to this Amendment and should be taken immediately.

Lord DRUMALBYN moved Amendment No. 113A:

Subsection (4A), paragraph (b), line 4, leave out ("1st February 1975") and insert ("the date of the passing of this Act.").

The noble Lord said: This Amendment has been put down to raise the whole question of the retrospective aspect, which might have been raised on the Question, Whether Clause 11 shall stand part, or in relation to subsection (2) line 26 on page 11. But we ought to consider this principle. It is up to the Government in every case to justify any retrospective powers they take. Here is a case where the Government are prepared to legislate that any change of control of an important manufacturing undertaking occurring on or after 1st February 1975 will come within the scope of the Bill. We are coming closer to the time when the Bill will become law. It is therefore relevant to ask the noble Lord whether he has in mind any changes of control, to which he is to apply the provisions of the Bill, which have taken place in the past six months; or whether he is aware of any others. This is a long period to go back. Let us suppose that the Bill became law in August, October, November or whenever—it would be quite a long period to go back. In the meantime, a great deal might have happened in regard to the disposal of assets.

Apart from the principle of the matter, it may be extremely difficult, from the practical point of view, to unravel the situation. We ought to consider this matter alongside the provision which enables notice to be given, on which I have put down an Amendment which says that this should run from the date of the prohibition order and not from the date of the notice being given. Has notice already been given before the Bill has come into force? If it has not been given, and if it can, as we should think, be given only after the Bill comes into force, then all the difficulties that I have indicated will be encountered, including the practical changes in relation to the disposal of the assets. The assets may have been disposed of several times over, or there may have been disposal of the shares many times since then. I believe that the noble Lord is in a position where he has to justify, first, the practicality of this proposal; and, secondly, the necessity for it, and I call on him to do just that. I beg to move.

Lord LLOYD of KILGERRAN

I also find the observation by the noble Lord, Lord Beswick, in regard to the first part of Amendment No. 113 helpful, because it limits jurisdiction to a United Kingdom company, which appeared essential. But like the noble Lord, Lord Drumalbyn, I am anxious about the retrospective aspect of going back to 1st February 1975. I wish to ask from these Benches whether there is any special reason why that date was fixed upon?

Lord HEWLETT

I wish to lend support to what the noble Lord, Lord Drumalbyn, said in this regard. The whole concept of retrospective legislation is an anathema to this House and indeed to the country. Unless there is some supervening reason why the Bill is to be back-dated in its effect when it becomes an Act, then I believe that the Amendment put forward by the noble Lord, Lord Drumalbyn, should have the support of the whole Committee, on a matter of principle, let alone in regard to the very good arguments of practicality which he brought forward. If I could have the Minister's attention, I should be grateful to know why the magic date of 1st February 1975 has been chosen. Peradventure it could have been a year or two years ago. I should like to have an answer on the principle of the matter, and on why the date of 1st February has been chosen. Personally, I find it quite unacceptable, and I hope that the Committee will take that view.

Lord BESWICK

May I try to answer the point which the noble Lord, Lord Drumalbyn, made? I should say in passing that I agree that the issue of retrospection is one which we must regard with great care. No one wants to have a retrospective power unnecessarily. The purpose of this power, to be able to make a vesting order after a change of control has occurred, is to prevent the powers to control foreign purchase of key British assets being evaded through what one might call a surreptitious or a clandestine operation. There may be a case where we thought it was unsuitable for a British company to pass into foreign hands. I suppose that the type of operator who may do something clandestinely is the kind of person of whom we would seek to be aware. What we say here is that if the transfer came to light after the three months' period, there would be no power to prevent the transfer. In those circumstances, and especially if it had been done in an underhand way, it is thought that there should be some power in the hands of the Secretary of State to take action.

I turn now to the relevance of the date of 1st February. It was given just after the Bill was published. The point is that the Bill was published on 1st February, so that any transaction that took place in the light of something which should have been known—

Lord HAWKE

I should like to raise one point with the noble Lord. Will not the Secretary of State, or the Government in general, have had other powers, because surely the transfer cannot have taken place without Treasury and Bank of England consent? Is he going to nullify or reverse the decision of the Treasury and the Bank of England, if he uses these retrospective powers?

Lord BESWICK

I think I dealt with the question of the powers under the various foreign exchange controls legislation, and I pointed out that that was legislation designed for a different purpose, and not for this purpose. It was in order to have open, above board power for this particular purpose that we brought in this clause—

Lord HAWKE

I agree, but a transfer cannot be so clandestine that it evades the control of the Treasury and the Bank of England. If they have already given their consent, surely it is completely anomalous to pass a Bill under which the Minister can go back and reverse decisions of his colleagues and the Governor of the Bank of England?

Lord BESWICK

If the transfer was from one foreign company to another foreign company and the second foreign company was thought to be undesirable there is no question of any foreign exchange coming into it.

Lord ELTON

Surely the noble Lord said in speaking to a recent Amendment that we were excluding orders against foreign companies if they were not registered in the United Kingdom we could have no power over them. Is that right?

Lord BESWICK

The assets would be subject to vesting.

Lord DRUMALBYN

I am not very satisfied with the answer the noble Lord has given. He has based it purely on the coming to light of information that some kind of exchange control has been effected outside the period laid down by law, and I do not quite see how this relates to this question of retrospection. There seem to be two quite separate questions. I do not think that the noble Lord has dealt with this aspect. Perhaps the best thing to do would be to leave this where it is at the moment and to come back to it at the Report stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

The DEPUTY CHAIRMAN of COMMITTEES

We now return to Amendment No. 113.

The Earl of SELKIRK

Before the noble Baroness puts the question, may I ask the noble Lord, Lord Beswick, one question? It is a matter of drafting. This Amendment reads: A body incorporated under the law of the United Kingdom… Strictly speaking, I think I am right in saying that there is no law of the United Kingdom. You can speak of the united laws of the United Kingdom or you can say, "incorporated in the United Kingdom". Alternatively, you could say, the law of Scotland" "the law of England". I think that as the matter stands it is not correct.

Lord BESWICK

This is a point of such subtlety that I would have to go to very high legal authority before I could possibly answer the noble Earl.

Lord ELTON

Now may I thank the noble Lord for his lucid explanation at the beginning of the Bill of the rather puzzling omission of the words, "whether or not incorporated", and also of the proportion of the activities of a holding company and a subsidiary which constitute his IMU—an important manufacturing undertaking. I will not go on about that because the noble Lord has covered the ground very aptly. I should like to know why in the new 4A we have to refer to, the happening of an event… which would constitute a change of control", rather than simply to "a change of control"? This is a small point but it is an awful waste of words and it means the same thing.

Lord BESWICK

If it does, we can make an appropriate Amendment later on.

On Question, Amendment agreed to.

Lord BESWICK moved Amendment No. 114:

Page 12, line 9, leave out subsection (4).

The noble Lord said: This Amendment was taken with Amendment No. 100. May I say that the subsection relates to a Bill passed by this Parliament. According to the legal advice I have this is the law of the United Kingdom.

On Question, Amendment agreed to.

6.25 p.m.

Lord MELCHETT moved Amendment No. 115:

Page 12, line 16, leave out ("or, as the case may be, the Board").

The noble Lord said: While moving Amendment No. 115 I should like to speak to Amendments Nos. 118, 120 and 121. All these Amendments seek to bring about a small procedural change. They in no way alter the principle that where a vesting order vests 30 per cent. or more, but not all, of the shares of a company, the remaining shareholders must be offered the opportunity to have their shares acquired under the vesting order. This remains their right. The Amendments merely alter the procedure, instead of this offer being made by the Secretary of State or the Board it will be made by the Secretary of State. This matches the earlier vesting order, which can be made only by the Secretary of State. We believe there is advantage in making it quite clear that the vesting order is the responsibility of the Secretary of State, and that the Board are merely recipients of securities vested, if they are involved at all. I beg to move.

Lord DRUMALBYN

I regard this as a definite improvement.

On Question, Amendment agreed to.

Lord CULLEN of ASHBOURNE moved Amendment No. 115A:

Page 12, line 17, leave out ("the holders of") and insert ("each of the holders of any part of").

The noble Lord said: The reason for this Amendment is that there is no provision in this subsection for holders of convertible loan stock to require the Secretary of State or the NEB to acquire their holdings in the circumstances to which subsection (5) relates. Rule 29 of the City Code states as follows— Where an offer is made for equity share capital and there are convertible securities outstanding, arrangements must he made within a reasonable period of time to offer the holders of such securities such amendments of the conversion terms or other appropriate arrangements as to ensure that their interests are not prejudiced. Where options or subscription rights are outstanding this also applies mutatis mutandis. Despite the fact that an assurance has been given that the NEB will comply with the provisions of the City Code, it certainly seems preferable that provision for convertible holdings is made in the Bill itself. I beg to move.

Lord DRUMALBYN

I should like to support what my noble friend has said. The requirement is to serve on each of the holders and not by a general notice to all holders. I rather think that this is intended, but I think it should be made explicit. There was difficulty in drafting this Amendment. From what my noble friend has said, I am not sure that conversion rights come within the scope of share capital. It may be that the noble Lord, Lord Beswick, was not aware of the purport of this Amendment 1, before my noble friend spoke. If not, I hope he will look at it very closely because it is an important point. It would be a pity if conversion rights were interfered with without any compensation. Obviously, if shares are being transferred to a public corporation in this way, it is difficult to have conversion rights included, but instead some compensation would obviously have to be arranged.

Lord BESWICK

I wonder whether I may give the answer that I was going to give to the noble Lord, Lord Cullen of Ashbourne, on Amendment No. 115A. There is nothing between us as to what we want to do. The Government, like the noble Lord, believe that shareholders who have not been involved in the change of control should have an opportunity of disposing of their shares to the Government who, by virtue of the vesting order, now control the company. This is analogous, as the noble Lord knows so well, to the requirement under the City Code that when a bid is made and accepted for 30 per cent. of a company's shares an offer must be made on the same terms for the remaining shares. This offer will certainly be made in respect of all shares they hold in the company. That is our intention, and the Government have put down an Amendment to make this intention quite clear by providing that the offer will be made to the holders of all the share capital. This removes all doubt.

The present Amendments, if one takes Amendment No. 117 as well, seek to make this clearer, but I am advised that they would however have the effect of requiring every holder to be notified. This goes beyond company practice under which, when there are joint holders of shares, only the first named need be notified. This seems unnecessary, and indeed undesirable, since it would lead to complications when joint holders came to contrary decisions. We wish therefore to abide by the best company practice. This is the practice set out in the Code. I was asked by the noble Lord, Lord Drumalbyn, about the position of the convertible shareholders. I am advised that they are not covered by Amendments Nos. 115A or 117, as drafted, but we will look at that matter and, if there is a point, come back to it on Report stage.

Lord CULLEN of ASHBOURNE

I am grateful to the noble Lord. In view of the fact that he is going to look at the matter again, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

The DEPUTY CHAIRMAN of COMMITTEES (Lord Amherst of Hackney)

Amendment No. 116, Lord Drumalbyn?

Lord DRUMALBYN

I am perfectly willing to move this Amendment, but it is not mine and I do not know what it is all about. I gather from what the noble Lord, Lord Beswick, said that it may belong to him. In fact in an earlier Marshalled List it appeared under his name.

The Earl of BALFOUR

It appeared under Lord Beswick's name on Tuesday, but when the list was marshalled up Lord Drumalbyn's name appeared. I wonder whether it is correct even in the drafting as it is.

Lord MELCHETT

I hope it will be in order for me to move this Amendment on behalf of my noble friend Lord Beswick. At Report stage in another place, the Government were asked for clarification as to whether the offer under subsection (5) would extend to all share capital. Our legal advice is firm that, as drafted, these subsections already have the desired effect, as my noble friend has said, but so as to put the matter beyond all dispute we offer this Amendment, which makes it explicit: the offer made by the Secretary of State will extend to all outstanding capital. I beg to move Amendment No. 116.

Amendment moved—

Page 12, line 17, after ("of") insert ("all").—(Lord Melchett.)

Lord BESWICK

The Amendment should have been in my name and I do not know why it is not in my name.

On Question, Amendment agreed to.

Lord MELCHETT

I beg to move Amendment No. 118. I spoke to this Amendment on Amendment No. 115.

Amendment moved—

Page 12, line 20, leave out ("Secretary of State or the Board to acquire") and insert ("order to extend to").—(Lord Melchett.)

On Question, Amendment agreed to.

Lord MELCHETT

I beg to move Amendments Nos. 120 and 121 en bloc. I spoke to these Amendments with Amendment No. 115.

Amendments moved—

Page 12, line 24, leave out ("or, as the case may be, the Board")

line 25, leave out ("him or them to acquire") and insert ("the order to extend to").—(Lord Melchett.)

On Question, Amendments agreed to.

6.35 p.m.

Lord ELTON moved Amendment No. 122:

Page 12, line 26, at end insert—

("( ) Without prejudice to subsection (5) above, a prohibition order shall cease to have effect at the end of a period of three months after it is laid before Parliament unless, within that period, a vesting order has been made in relation to the share or loan capital of the body corporate carrying on the important manufacturing undertaking to which the prohibition order relates or any assets which are employed in that undertaking, but without prejudice to anything previously done by virtue of the order.")

The noble Lord said: I will endeavour to be brief since this work is taking some time. The purpose of this Amendment is simple and self-evident. In the Bill as it stands the Minister would be empowered to put a prohibition order upon anybody, prohibiting them doing anything which he thought was conducive to an undesirable change of control on an important manufacturing undertaking. Thereafter, the time could elapse, and continue to elapse, without his needing to justify the continuation of the prohibition order, because, as I mentioned earlier, it is not subject to the vesting order procedure. With circumstances changing so as to inhibit the proper conduct or the necessary reorganisation of the undertaking to which the prohibition order applied, we feel that if this order can only be laid in a case which affects the national interest, the Government should be prepared either to terminate the order, or step in with the courage of their convictions and make a vesting order if that appeared to be the correct action to take.

What the Minister should not be empowered to do is effectively to block off certain courses of action, probably to change control or preliminary steps to the change of control, but possibly rationalisation steps which would permit but need not necessarily be designed to precipitate a change of control. Therefore we feel the Minister should be under an obligation either to justify the order by the laying of a vesting order, or that the order should lapse and a new one be made which would fit the new circumstances which would by then have evolved. I do not claim the Amendment is perfect as it now stands, but it will serve to express the point we wish to make.

Lord LOVELL-DAVIS

The Government are concerned, through the powers set out in Clauses Nos. 10 to 15, to prevent the loss to acceptable foreign control of key 'British manufacturing enterprises. If this can be achieved appropriately through the prohibition of certain actions, they will be content. A vesting order, to acquire shares or assets, is a reserve power only to be used w hen the national interest at risk cannot appropriately otherwise be safeguarded. There is no need, therefore, to make a vesting order as an automatic sequel to a prohibition order, so as to prevent a foreign takeover. The effect of this Amendment would require a vesting order to be made within three months of the laying of a prohibition order. If this were not done, the prohibition order would become ineffective. So far as the prohibition order and its continuance is concerned, it is subject to an Affirmative Resolution and this would have effect until it was revoked.

Lord ELTON

As my next remarks may relate to a later Amendment, perhaps I ought not to speak generally now, but, as I recall, the clause setting out the Parliamentary procedure for the order is such that the Minister may lay an order which will lapse after 28 days if it is not given endorsement by either House of Parliament. But as drafted, the Bill says that the order shall be laid "after"—though it does not say how long after—and indeed under the present procedure it is open to the Minister to lay the order on the 27th day, for Parliament not to have sufficient time, and for the Minister then, since there is a proviso that this shall not be prejudicial to the power of the Minister to lay another order, to lay another order on the 29th day and so on, ad infinitum. It is an unsatisfactory procedure, and I was going to tackle it later in the Bill; but in default of that Amendment being carried, the situation I allude to could arise. I thought perhaps we should discuss it at this point.

Lord LOVELL-DAVIS

This matter comes up later in the Bill, but basically the situation is as the noble Lord has described. The fact that the prohibition order lapses means that another prohibition order has to be made. If there were no good reason for making one, then surely it would not be made.

Lord ELTON

I think we are on very technical ground, and I hope that the noble Lord will allow me to withdraw my strictures at this stage on the understanding that, having read very carefully what he has said and also having read the Bill as it is subsequently amended, which may well affect this clause, we might revert to this on Report stage.

Lord DRUMALBYN

Before doing that, I wonder whether we might get this just a little clearer. We were talking about the prohibition order lapsing. It will lapse unless it is carried into effect by an Affirmative Resolution of Parliament. After that, it will go on. As I understand what the noble Lord said, it will then go on indefinitely being a prohibition order against the transfer of particular assets to a particular person overseas. The noble Lord indicates that that is so. In that case I personally can quite see the purpose of it. Personally, the vesting order would come into effect only if an attempt was made to transfer those assets to that person, despite the prohibition order.

Lord LOVELL-DAVIS

Yes. I should like to refer the noble Lord, Lord Drumalbyn, to subsection (10) of Clause 11; but no doubt he has taken that into account.

Amendment, by leave withdrawn.

Lord BESWICK

I beg to move this Amendment, this was spoken to at the same time as Amendment No. 101.

Amendment moved—

Page 12, line 34, leave out subsection (9).—(Lord Beswick.)

On Question, Amendment agreed to.

6.44 p.m.

Lord DRUMALBYN moved Amendment No. 125:

Page 13, line 20, at end insert—

( ) It is hereby declared that where it appears to the Secretary of State that circumstances have so changed that it is not just or expedient to proceed with the vesting order, he may withdraw it at any time before it has been approved by both Houses of Parliament.

The noble Lord said: I beg to move this Amendment, which is absolutely clear in itself. I am not sure, in view of what has been said in relation to the last Amendment we have just discussed, whether this is strictly necessary. Perhaps the noble Lord will be able to tell us whether, if the Secretary of State finds that in view of changed circum stances it is not reasonable to proceed with a vesting order, he can withdraw it. If that is so, perhaps he would also tell us how he would do this. I beg to move.

Lord LOVELL-DAVIS

I accept that it is possible, in the period between laying a draft order and its being approved, that certain circumstances could change so as to remove the need for, or the appropriateness of, the order. But there is no need for this Amendment to make clear the Government's right to withdraw the draft order before it has been approved. It is clear beyond peradventure that the Government already have this right, and the words in this Amendment merely add needlessly to the length of the Bill. In effect the order is laid before the House in draft, and can be withdrawn at any time before being approved. Once approved, it has legal effect.

Lord DRUMALBYN

I am much obliged, and with that assurance from the noble Lord I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 11, as amended, shall stand part of the Bill?

Lord ELTON

I shall try to be brief. I have already alluded to the procedure for the lapsing or renewal of orders, and I hope that the noble Lord will look at this carefully so that we can consider it later. I notice that the limitations placed upon the Secretary of State by the new subsection (4)(a), when determining what is a body corporate, relate only to circumstances comprised in the new subsection (4)(b)—that is, the restrictions apply only in the case of a holding company. It is only when a holding company is involved that the Secretary of State must either see a serious and immediate probability of a change of ownership or learn of a change of ownership already accomplished, before he can issue a vesting order. With any other body corporate, he is entitled to act—upon precisely what, I should like to know.

On vesting order, we should also need assurances which might be best done in the form of Amendments. First, under Clause 11(2)(ii) the Secretary of State can acquire by vesting order, "any assets which are employed in the important manufacturing undertaking." The word "any" is very broad, and we wonder whether it would not be preferable to replace it with the phrase "preferably all those associated with that part of the IMU to which the rest of the vesting order relates". Will not the Secretary of State be tempted, if this is not so, to wander through the orchard of assets belonging to the IMU, picking those apples which are ripe and fair, leaving those which are scabby on the branch and the rotten ones on the ground? Might the parent company not then be left with assets without meaning, because they would be divorced from those things which gave them meaning?

We have touched already on the retrospective element of vesting orders, and look to the Government to limit this element. On prohitition orders, we feel that the definition in Clause 11(1), as widened by amendment, is rather vague. The order should specify not only the things which may not be done, but who is not to do them, and in relation to what. The noble Lord may be able to give assurances on these points, but he specifies things which may not be done. It would be possible to draft prohibition orders which would prevent a particular corporation parting with particular assets to anybody. I 'do not think this is the purpose of the Bill either, and I have raised it at this stage of the Bill because there may be a simple answer, which the noble Lord can give me later.

I have probably spoken long enough on this complicated matter, but I hope the noble Lord will accept that this is something which, particularly to a layman, is an involved subject, not merely from the business point of view but also from the legislative point of view. It seems to me that we shall have to look at this very carefully at Report stage.

Lord WINDLESHAM

Before the noble Lord replies to what my noble friend has said on this clause, and before we see Clause 11 standing part of the Bill, I wonder whether I may ask the noble Lord to look at subsection (4) on page 12? I should like to broaden the discussion a little from the technicalities at this stage. I think I have heard all the discussion on this clause. If anything has been said about the content of Clause 4 I may have missed it, but I do not believe I have. That clause was the subject of one of the Government Amendments, No. 109, which had the effect of moving it further up the Bill—

Lord BESWICK

The noble Lord mentioned "Clause 4". I believe he is referring to subsection (4).

Lord WINDLESHAM

Yes, I meant subsection (4) of Clause 11. Subsection (4) has effectively been moved up a little earlier in the Bill so that it comes after subsection (2), but the wording, as I understand it, is still the same. I should like to ask the noble Lord whether he can explain something about the wording of this subsection. On the face of it, it looks an unusual provision. It says: A vesting order may only be made if the Secretary of State is satisfied that the order is necessary in the national interest". It continues: and that, having regard to all the circumstances, that interest cannot, or cannot appropriately, be protected in any other way. I take those words to be circumscribing a power of the Secretary of State. For those of us in the Committee who are opposed to this Bill circumscribing powers are perhaps to be welcomed. But is this not entirely subjective? It is saying that the Secretary of State must act in the national interest. Parliament imposes that obligation on Secretaries of State. But it is this second provision, that interest cannot, or cannot appropriately, be protected in any other way that I should like the noble Lord to explain.

We know that when Acts of Parliament come before the courts for interpretation the courts very often seek to establish what was the intention of Parliament. Can the noble Lord who is handling this part of the Bill tell us what the intention of Parliament is if it puts this subsection on the Statute Book? Can he give any examples of the way in which this power might be used?

6.52 p.m.

Lord BESWICK

I take the noble Lord's point first. I think he has made only two interventions and they were about a form of words which were originally taken from an Act in which he had a part, so I hope he does not query the parentage of the words. He will find them in the 1972 Act.

Lord WINDLESHAM

Is the noble Lord saying these words were in an earlier Act.

Lord BESWICK

Yes, the 1972 Act.

Lord WINDLESHAM

Perhaps we should not both be on our feet at once. If the noble Lord will allow me to continue, he has given me one answer. This occurred on an earlier form of words, as he said, which I questioned earlier. I think that is an interesting fact, but I am not seeking to make Party capital out of this or anything else. I am genuinely interested. Coming into the Chamber for an hour or so and looking at this form of words, it strikes me, whoever was responsible—the Government draftsman serves both Administrations impartially—as a somewhat curious feature. We are in Committee and I hope the noble Lord may be able to elaborate a little further than just saying, "You put it on the Statute Book in an Act of your own."

Lord BESWICK

If the noble Lord had allowed me, I should have gone on to elaborate a little further. I do not know why the noble Lord in two interventions he has made—he strolls into the Chamber and makes an intervention—should think that I take exception to those interventions. I welcome them and he should not assume, because I try to answer them, that I am not dealing with them properly. Of course I am. But it interested me that there was this coincidence. The words which he challenged me on before were words which had been taken out of the 1972 Act. Similar words to these have also been taken out of the 1972 Act. I will try to tell him what I think they mean.

The noble Lord himself has had great experience. He knows that if something is happening which he, as a Minister, thinks ought not to happen, he could first invite the chairman of the company to come and see him and they could have discussions. In very many cases in the affairs of this country, when it is pointed out that certain actions may have undesirable consequences, most companies are quite responsible and will accept what is said to them, and there could be changes. The powers that are available could be a whole series of powers. There could be a question of investment grants; even a question of planning grants. There could be any number of powers in the hands of one Minister or another. If neither they nor the simple, good British tradition of talking thinks over, yields, a satisfactory agreement, then we are suggesting there should be powers in this Bill. That is why the wording is as it is. These are reserve powers and we would not use them unless they were necessary. I hope that that satisfies the noble Lord.

Lord WINDLESHAM

Not entirely.

Lord BESWICK

The noble Lord accuses me of not answering him satisfactorily. I was going on to answer his noble friend.

Lord WINDLESHAM

No; I would prefer to press the point now. My noble friend has raised some very interesting points which have arisen out of his own Amendments and those of my noble friends. Perhaps we can clarify this point because I am not satisfied with what the noble Lord has said. It would be more helpful to the Committee then to hear the Minister's reply to my noble friend's points.

The noble Lord has said that this means that everyone will behave in a sensible and reasonable way; a Minister would ask a representative of the company or industry concerned to come to see him and they would talk it through. I have no doubt that that would happen, and I have no doubt that provisions which refer to the national interest can be found throughout the Statute Book. But it does not explain to me why there is this additional rider. The Minister must satisfy himself that the national interest cannot "be protected in any other way". To help me can the noble Lord say, for example, whether the power which he tells us has been on the Statute Book since 1972 has ever been used? Have there been any instances that he can recall?

Lord BESWICK

I am sorry that the noble Lord and I appear not to be able to communicate with each other. I did not say to the noble Lord that the powers appeared in the 1972 Act. Of course they did not. The 1972 Act was a different Act. The noble Lord was saying what strange words they were, and I was saying that the words in this subsection were similar to words in the 1972 Act. I am afraid that I cannot without taking a particular case give him the kind of circumstances that may arise. There may well be (if the noble Lord would be good enough, having asked all these questions, to listen to me) a question when it is found that something has happened without the Secretary of State's knowledge. In that case these reserve powers could then be used. That is another occasion when they would be needed. But I will study what the noble Lord has said, and if there is anything I have not answered I will see that answers are given to him either in writing or on Report stage.

The noble Lord, Lord Elton, was kind enough to tell me the kind of doubts he had in his mind; and again I will consider what he has said to see whether there is any substance in the points he made. He asked about the possibility of picking out parts of a company, leaving the unprofitable or less profitable parts if that was done. I do not see that that would be done. But if it was done, then of course the transaction would be reflected in the compensation payable. But I do not think that that eventuality is likely to arise.

He also put to me that Clause 11(4)(a) applies only to Clause 11(4)(b) which deals only with holding companies. He was suggesting that that statement, which I think had been made, was not correct. I think he will find that the conditions set out in subsection (4)(a) of Clause 11 apply to subsection (4) as a whole—both paragraphs (a) and (b). I think that that is the answer to him, but I will have a look again when I see his words in Hansard.

6.59 p.m.

Lord DRUMALBYN

May I say a word arising out of what has been said? The words that were taken from the 1972 Act were of course used in a very different context. The 1972 Act states that financial assistance will not be given under the section in the way described unless the Secretary of State is satisfied that it cannot, or cannot appropriately, be given in any other way. But that is a very different matter indeed. This is a question of financial assistance being given, and one knows in advance that things can be done in any other way. Those concerned can go to the banks; they can go to the merchant banks and so on. They can raise money on the market. But this is a very different question. I think I was asked, when I introduced the 1972 Bill into this House, to justify those words; and the answer is of course that it is up to the Government to justify this when the Affirmative Order is introduced. They have to demonstrate that the order is necessary in the national interest and that they cannot see any other way. If anybody else in the House says, Here is another way", then the order may be lost. That must be the answer.

Lord BESWICK

I am obliged to the noble Lord. I thought I had made it abundantly clear that I did not say—although the noble Lord, Lord Windlesham, said that I did—that I was talking about the similarity of powers. I agree that the words are apparently rather wide, but they are the words which have been used. The noble Lord reminds me, and I recall, that questions were asked about them. They may excite a certain amount of interest but they are of reputable origin.

The Earl of BALFOUR

I am intrigued by the reply of the noble Lord, Lord Beswick, to my noble friend Lord Windlesham because these are the very words in the 1972 Act which are being repealed by Clause 17.

Lord BESWICK

That is right.

The Earl of BALFOUR

In view of the comments made by my noble friend, this is rather interesting.

Lord HAWKE

Can the noble Lord now answer my taxation question? It looks as if the Board and the Secretary of State will receive shares and that they will also pass on shares. Three taxes may be relevant—capital transfer tax, stamp duty, and capital gains tax. I saw messages winging their way to Delphi and I wonder whether the answer has come back.

Lord BESWICK

There was a message, but the message was to the effect that we will find out.

The Duke of ATHOLL

May I ask the noble Lord about the words in brackets in subsection (10) which read: but without prejudice to anything previously done by virtue of the order…". I imagine they mean that nothing can be done in anticipation of the order being made. I realise that on occasions this could give rise to difficulties because the Secretary of State may have to act in a great hurry, but I hope that it means that nothing will be done until the order has been made. Secondly, the words in brackets continue: …or to the making of a new order)". I thought that a new order could be made in all cases. Therefore, strictly speaking I am not sure that those words are necessary, but perhaps it is better to have them there.

Lord BESWICK

I think that the words are necessary. I am not absolutely certain that I have correctly understood the noble Duke's question. If anything is done within 28 days and the order is not approved, then anything that has been done will not be affected by the order.

The Duke of ATHOLL

I realise that; but what worries me is that something may be done before the order is made. There will be cases of extreme urgency and I am trying to find out how quickly the Secretary of State can make an order. If he does something before the order is made, is he covered by this phrase that is set within the brackets? I hope he is not, although I can visualise that there may be cases when it is desirable that he should be covered.

Lord BESWICK

The Secretary of State is covered at the time the order is made. The power will lapse if the order is not approved.

Baroness WARD of NORTH TYNESIDE

We are discussing whether Clause 11 shall stand part. So far as this Bill is concerned, the Secretary of State is a very important individual. He will have very wide powers and it is most important that we should scrutinise everything that relates to his powers. I noticed in the Press yesterday that the Secretary of State made some very unfortunate remarks about the debate that is taking place in your Lordships' House. In fact, he said that the Upper House was making a nonsense of his Bill and that when it went back to the other place he would have it altered. I have listened with great interest to the debate which has taken place this afternoon and to a large number of Amendments—many of them put forward, I am sure, with very good intentions—which have been moved by the noble Lord opposite. Therefore, it seems to me peculiar that a large number of Amendments having been moved by a member of his own Government and they having been very well discussed—the noble Lord on the Government Benches has been very helpful and I am sure that this side of the Committee has been very helpful—the Secretary of State shows so little admiration for what is taking place in the Upper House and has already said that appalling decisions are being made here. If he feels that way. I wonder why he has asked the Minister to move so many Amendments on behalf of his own Bill. I do not like this. Therefore I wish to put it on the record that we have discussed a large number of Amendments moved by the noble Lord opposite, that we have tried to be helpful and that he has tried to be helpful.

When this clause is included in the Bill, both noble Lords opposite and noble Lords on this side of the House will perhaps have contributed to the improvement of a Bill which I do not like and which many noble Lords on this side of the House do not like. It is important to have this on the record. May I suggest to the noble Lord that when he discusses with the Secretary of State, as he is bound to do, the result of the Amendments that the Secretary of State wishes to be moved in this House he should tell the Secretary of State that if he wants good co-operation in the interests of the Bill it would be better if he kept to himself his ideas about what he thinks is going on in this House until the Bill is returned to the other place for discussion. I did not like the Secretary of State's remarks. All I can say is that it makes me all the more anxious that we should make this Bill as good as we possibly can, and that the Secretary of State ought to keep to himself his own ideas until he sees what has happened to the Amendments which have been moved by the Minister and debated. I disliked his remarks very much indeed and he would do very much better to hold his tongue until the Amendments that he wants to be moved are discussed. At Report stage many of them will be discussed again. If in due course he does not like his Bill, by that stage I hope that the present Government will be out of Office and the Bill will not be on the Statute Book.

Lord ELTON

I do not wish to protract the debate on the Question whether Clause 11 shall stand part; we want to deal with it before the next business. Therefore, I merely say that at Report stage I should like the noble Lord to explain to me the intentions behind the inclusion of subsection (14) which have the effect of prohibiting petitions against orders. While I do not wish to protract the debate, I thought it would be courteous to give advance warning of a point which I intend to raise later.

Clause 11, as amended, agreed to.

7.10 p.m.

Lord BESWICK moved Amendment No. 126:

Divide Clause 11 into three clauses—

1. (a) the first consisting of subsections (1) to (4A),
2. (b) the second consisting of subsections (5) to (8),
3. (c) the third consisting of subsections (10) to (15).

The noble Lord said: I hope that this is an Amendment on which we can all agree. We have just passed a very important but lengthy clause. I am suggesting that, rather like Gaul, we should divide Clause 11 into three parts. It will be easier to understand if we divide it in this way. I beg to move.

Lord ELTON

I think this is an operation which would be entirely beneficial.

On Question, Amendment agreed to.

House resumed.