SCOTTISH DEVELOPMENT AGENCY (NO. 2) BILL [H.L.]

HL Deb 12 June 1975 vol 361 cc497-535

3.37 p.m.

The MINISTER of STATE, SCOTTISH OFFICE (Lord Hughes)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, that the House do now again resolve itself into Committee.—(Lord Hughes.)

On Question, Motion agreed to.

House in Committee accordingly.

[The Earl of Listowel in the Chair.]

Clause 13 [Finances of the Agency]:

Debate on Amendment No. 50 resumed.

Lord CAMPBELL of CROY

When the Committee was adjourned at 10.30 on Tuesday evening last, I had moved the group of five Amendments to Clause 13 which stood in my name on the Marshalled List. I think it would be for the convenience of the Committee if I very briefly indicated the purpose of the Amendments. If the Government's intention in this clause is to set a limit to the borrowing power of the agency of £200 million—and that appears to be the intention—the clause as drafted does not achieve that; because there are loopholes that I have pointed out by which the Agency could exceed the amount. One example is through partly-owned subsidiaries. If the clause were to include only wholly-owned subsidiaries, then the borrowing limit could be exceeded through partly-owned subsidiaries.

Then, on Amendment No. 51, the intention here is to make certain that the Agency could not borrow abroad—for example, against a Treasury guarantee—without being subject to the limit. As at present drafted, it could be interpreted that the limit does not apply until the moment when the Treasury meets the guarantee. Then, in the second part of Amendment No. 55—with a new subsection (7) suggested—the question is raised of what would be the procedure if the Agency were to exceed the limit. These are probing Amendments in order to point out these matters to the Government.

One reason is that if Parliament is passing a clause which appears to set a limit, then we are concerned that the clause should be effective in so doing. Another reason is that the Agency and the subsidiaries would on many occasions be competing with private enterprise for loans and would have the advantage of a Treasury guarantee. In times of credit squeeze and other circumstances, they would clearly have an advantage; so that it is of interest to industry generally to know whether the Government are serious in imposing this limit. I need hardly say that it also seems to us that in the economic circumstances of today the Chancellor of the Exchequer would wish to be able to control the borrowing powers of the Agency.

Lord HUGHES

Am I right in thinking that the group to which the noble Lord, Lord Campbell, referred was comprised of Amendments Nos. 50, 51, 53, 54 and 55? The noble Lord nods his head. I will give way to the noble Lord, Lord Balerno.

Lord BALERNO

Could I have a little clarification on this; because it is all rather complicated to a simple mind like mine? If the Agency can either set up or acquire wholly-owned subsidiaries, it would seem to me that there would then be no limit to the amount of money it could raise by extremely devious means, because there is no limit to the number of their wholly-owned subsidiaries. They could borrow their money from their wholly-owned subsidiaries. It all seems rather curious and I should be glad if the noble Lord, Lord Hughes, could elucidate.

Lord HUGHES

I am grateful for the way in which the noble Lord, Lord Campbell of Croy, has put these Amendments and has made it clear to the Committee that the purpose is to secure information and to put it on the record not only for the benefit of your Lordships but for those outside who are intensely interested in these matters. There is no compelling reason why partly-owned subsidiaries of the Agency should be prevented by the Agency's financial limits from borrowing money to finance expansion and development. It would be wrong to maintain that the exclusion of borrowing by partly-owned subsidiaries means the Agencies will have uncontrolled access to the financial resources outside the limits provided by the Bill. When the Agency borrow from their non-wholly owned subsidiaries, this will count towards the financial limit. The limit proposed in the Amendments would cause a serious disincentive for private sector companies to join with the Agency in joint ventures, since the future funding of the venture could be jeopardised by other demands upon the Agency's funds, over which the private sector company had absolutely no control.

On more than one occasion during our debates on Tuesday, it emerged that there was considerable support for the idea of such joint ventures, but obviously it would be wrong if the dice was against that type. The Amendments would also insert a legislative ban which might be detrimental to the interests of minority shareholders in such a partly-owned subsidiary. This could result in a conflict of duties for Agency-appointed directors in such a company. As directors of the company, they would be under a duty to act in the interests of the company as a whole, and it might be clearly in the interests of the company as a whole that the company should borrow. However, such borrowing might be prevented or discouraged by the borrowing limits if either of these Amendments was accepted. The provision in the Bill follows the precedents of the Gas Act 1972, so whether everybody on my side of the Committee would consider this was a suitable precedent to follow, it certainly cannot be found objectionable by noble Lords on the other side of the Committee.

It is possible to exaggerate the extent to which non-wholly-owned subsidiaries will be able to obtain funds which do not already count towards the limit. If they obtain funds from the Agency, the Agency will have to draw on their limits in order to provide the money. Thus the only funds which could be obtained which did not fall within the limits would be funds provided by the private sector. If a partly-owned subsidiary is considered creditworthy in itself by prospective private sector lenders, there is no reason why it should be debarred from obtaining the necessary finance by limits designed to control the supply of public funds to the Agency. If the legislation required the borrowing to be backed by a formal guarantee from the Agency—and this is a point which the noble Lord, Lord Campbell of Croy, particularly wished to be reassured upon—then, as a parent body for the subsidiary, the amount guaranteed would count against the Agency's limit.

The formula proposed by Amendment No. 54 would be less onerous than requiring all borrowing by non-wholly owned subsidiaries to count towards the limit. But, nevertheless, it could be detrimental to the interests of other shareholders and could still lead to a conflict of duties for Agency appointed directors. I would accept that there may be force in the argument that the Agency may be expected to honour any obligations incurred by a company in which it had a very high percentage holding, whether or not a formal guarantee had been given, and that borrowing by such companies might be held to create a contingent liability upon the Agency. The Amendments proposed are not a satisfactory way of dealing with this and would create more difficulties than they would cure. If there should be any significant loophole, it could be effectively closed by administrative arrangements with the Agency, and exactly the same thing would happen in the case of a similar situation, in either the National Enterprise Board or the Welsh Agency. The power the Secretary of State has to give specific directions would be the power to enable him to enforce such arrangements, if necessary.

If I may now touch on Amendment No. 51, as was explained in another place in relation to the corresponding provision in the Industry Bill, the sums which this Amendment seeks to include in the Agency's financial limits are already covered in the list of things which count towards the aggregate amount outstanding. They are covered by the term "general external borrowing". The effect of the Amendment would therefore be to count them twice. The Amendment would also have the effect of excluding sums actually issued by the Treasury as a result of the Agency's being unable to repay a loan from someone other than the Secretary of State. When such sums are issued there is a corresponding reduction in the amount of general external borrowing.

On Amendment No. 55, I have already explained in relation to other Amendments why borrowing by partly owned subsidiaries should not count towards financial limits. When companies are wholly-owned subsidiaries of the Agency, which of course at the moment is a matter somewhat in limbo, their borrowing already counts towards the borrowing in this clause. There is no justification for counting such borrowing twice, which would be the unintentional effect of the Amendment. I hope therefore I have made it clear to those interested that there is nothing either unreasonable or sinister in the proposals. There is obviously no question of the Agency suddenly running out of the statutory allocation of funds without warning. The Government, in the normal way, will monitor their rate of expenditure and, in accordance with the normal practice, if it were felt that a point would arise when they might exceed the limit, and it was the will of Government of the day that they should not have to limit their activities, but it would be desirable for more money to be made available for them, then, in accordance with the usual precedent, further legislation would be introduced for an increased limit of money. If the Government of the day wanted it to be kept to the sums which were in the Bill, the Agency would have to act accordingly.

In these remarks I have covered the points brought out in the various Amendments to which the noble Lord, Lord Campbell of Croy, has spoken, and I hope that he will feel the Amendments have served the purpose in eliciting information, and he will find it possible to withdraw Amendment No. 50, and not move the other Amendments to which he has referred.

3.49 p.m.

Lord BALERNO

I would be the last to attribute to the noble Lord, Lord Hughes, any sinister action in this, and I do not do so. I should like to thank him for his extremely lucid explanation; but this is a most complicated matter. I find it extremely difficult, with my poor comprehension, to follow his words. This surely has to he studied with great care, and it has to be studied by those who are affected in Scotland. It will not be possible for the copies of the report of this Committee to be discussed in Scotland until the beginning of next week, and there will be considerable discussion then. Therefore I would ask the noble Lord whether he will take into considera- tion the fact that this Bill with all its complications is being rushed. There needs to be time to study the complicated questions that are raised in this clause.

Lord HUGHES

I must agree with the noble Lord that these are complicated questions, and that is why I am much happier dealing with them at a quarter to four on a Thursday afternoon rather than at half-past ten on a Tuesday evening after seven and a half hours of continuous discussion. I must remind the noble Lord that the proceedings on this Bill will by no means be finished in a week's time. There will be considerable discussion on these and other points in another place, when they discuss the Bill in detail in Committee. I suspect that when those outside who are most concerned in these matters are able to read what I have said on behalf of the Government, they will be totally reassured. If they are not, I have no reason to believe that they will not avail themselves of the full opportunities for ventilating further points in due course.

Lord CAMPBELL of CROY

We are grateful to the noble Lord, Lord Hughes, for his important statement of clarification. I think he is mostly reassuring on the points I have raised, and I am certainly glad that we adjourned when we did on Tuesday evening. It has given the noble Lord an opportunity of replying on a complicated series of Amendments of a technical clause. I paid a tribute to him then on his stamina in going through those seven and a half hours, and I do so again today. As regards the point he made, of course we would not wish to put obstacles in the way of borrowing for joint ventures which clearly met with the approval of all concerned. On the question of loopholes, he has given us an assurance that where partly-owned subsidiaries are concerned the Secretary of State will regard borrowing in the spirit of this clause. I think he went so far as to say that an element of borrowing which corresponded to the percentage of the ownership of the subsidiary would be regarded as within the limit. At least that was the impression he gave but I will not pursue that point now.

His statement was certainly helpful and it will reassure those outside this House, particularly in Scotland, who would otherwise feel that they were up against a competitor with enormous advantages in borrowing. His assurance on my Amendment No. 51 is exactly what we wanted. He confirmed that the Bill does what is intended, and if I pressed that Amendment it would mean that something would happen twice. He also gave us an indication of what would happen if the Agency were approaching the limit of their borrowing power. The Bill does not spell out what will happen if the Agency exceeds the limit, and if Parliament does not agree or takes some time in finding a place for the necessary Bill to get into the programme and be passed. I trust that the Agency would then be directed by the Secretary of State to dispose or otherwise relinquish some of its borrowing and revert to being within the limit, should the necessary agreement not be forthcoming to its being elevated. In view of what the noble Lord has said, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

3.52 p.m.

Lord CAMPBELL of CROY moved Amendment No. 52: Page 12, line 10, after ("Agency") insert ("other than payments in respect of dividends declared on public dividend capital").

The noble Lord said: My noble friend Lord Drumalbyn, who was in the Chamber a short time ago, has had to leave for a meeting and he has asked me very briefly to move this Amendment on his behalf, because we believe that it is one that will commend itself to the Government. We believe that these words or words of this kind could be inserted so that payments in respect of dividends declared on public dividend capital should be taken into account and, for clarity, mentioned in this subsection. I beg to move.

Lord HUGHES

The Government are grateful for this Amendment which has drawn attention to a drafting deficiency. Payments which are intended to be deducted are receipts which the Agency will get from other than its business functions which would count against grant in aid. The drafting of this subsection has been noticed. It is already complex and we should like to take it away and decide how best to meet the spirit of the Amendment. I accept the Amendment in spirit but I should like an opportunity to deal with the drafting. I undertake that a Government Amendment to give effect to its intention will be tabled, if not during the proceedings in your Lordships' House then certainly in another place.

Lord CAMPBELL of CROY

I am sure I can say on behalf of my noble friend that he will be very glad to hear the response of the Government. All the credit goes to him and not to me, although I have had the pleasure of moving this Amendment. In view of the alternative which the Government have promised, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 13 agreed to.

Clause 14 [Other limits on Agency's powers]:

Lord CAMPBELL of CROY moved Amendment No. 56: Page 12, line 38, leave out ("wholly owned").

The noble Lord said: We have discussed this point at other stages in the Bill. Therefore at this stage I need say only that I move Amendment No. 56, which I believe is acceptable to the Government.

Lord HUGHES

Once again, this is an Amendment which the Government are prepared to accept in principle, but we are not completely happy to accept it exactly as it stands. I accept the principle of the Amendment, and on behalf of the Government I undertake that the necessary Amendments to give effect to its purpose will be moved on Report here or in another place. As I have already given undertakings about Amendments, some of which are on fairly complicated points, we would prefer, if it should prove advisable, to leave the Amendments until the Bill gets to another place and then get it right. This will be done so if an Amendment does not appear on Report stage—though some undoubtedly will—it will mean not that the Government are backing down from undertakings but that time makes it necessary to leave it to another place. None the less the undertaking stands quite firmly.

Lord BALERNO

Surely we could have a little longer between the Committee stage and the Report stage than I understand we are going to have. That would give the Government plenty of time to get the Amendments put into proper order so that we send the Bill to another place in good order.

Lord HUGHES

Unfortunately, taking a longer time between Committee and Report stages in your Lordships' House does not add any days to the calendar, and from the Government's point of view it is important that this legislation reaches the Statute Book during the present Session.

Lord CAMPBELL of CROY

May I explain that I have not sought to move this Amendment at length, because we had such discussion during the seven and a half hours on Tuesday, and in order to save time, where the principle has been discussed on other Amendments, I would not wish to repeat the arguments. I am sorry that the noble Lord cannot accept these words straight away, but he has kindly said that something equivalent will be put down at a later stage. In addition to what my noble friend Lord Balerno has said, may I say we understand that the Report stage is to be in a week's time. But there will be the Third Reading on a day in the following week and in this House we can put down Amendments at that stage as also can the Government, and I hope both opportunities will be taken.

It would be unsatisfactory if we were to send to another place a Bill in not so complete a form as we could make it. I know that two or three of the changes which have already been made in this Bill are not ones with which the Government would agree, but I hope that we can send to the other place something which is comprehensive and which does not have obvious gaps or parts which are unsatisfactory, because the Government have not had time to draft Amendments and put them through in this place at any of the Bill's stages, as we shall then have done a complete job even though the Government may not agree with all the changes. I should like to make it quite clear that we are very grateful that so much of what we have proposed from this side of the Committee has been acceptable to the Government. We have differed on only two or three important matters and have had to divide. In view of what the noble Lord has said, I beg leave to withdraw this Amendment.

Lord HUGHES

Before that is done, may I say that as the Amendments which the Government are seeking to put down will obviously not be controversial, I am anxious that as many as possible are tabled in your Lordships' House. If time prevents some of them being tabled for next Thursday and time is available for them to come in on Third Reading, I do not think your Lordships will regard it as an improper use of time if we proceed in that way. I should be very happy if the Bill were able to go to the other place with the only Amendments needing to be made being deletions, or those which your Lordships in your wisdom have put in, notwithstanding the advice which I have to tender.

Amendment, by leave, withdrawn.

4.3 p.m.

Lord CAMPBELL of CROY moved Amendment No. 58: Page 13, line 7, leave out ("restricted circumstances") and insert ("the event that a fixed dividend is in arrear.").

The noble Lord said: I beg to move Amendment No. 58. This is tabled in order to discover what is visualised by the words "in restricted circumstances". We think this probably relates to nonvoting preference shares where voting is allowed only if the fixed dividend is in arrear. If this is the case, we believe it ought to be stated in this subsection. I beg to move.

Lord HUGHES

So far as the Government have been able to ascertain, this is the only category of shares which would fall within that restriction of "in restricted circumstances", and the words certainly cover those preference shares where the fixed dividend is in arrear. But the wording in the Bill has been chosen because that is the way in which it is dealt with in the City code. If, either here or in another place, it emerged that there were any other possible loopholes in the routine regulations governing the exercise of voting rights which could be used as grounds for evading the need to obtain the permission of the Secretary of State, we would look very closely at the drafting. But we think the merit of the wording which the City code implies is that it certainly covers what has been said and there is in fact no indication of anything else. So, as I say, if the noble Lord withdraws his Amendment we will have a look at it and perhaps have discussions in other ways to find out whether there is a form of wording which is likely to be more beneficial. We took the view that if this has satisfied the City code we could not be going very far wrong in following it.

Lord CAMPBELL of CROY

I am very grateful for that clarification given by the noble Lord. I hope he will look at this and, if necessary, put words into the Bill. I seek leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord CAMPBELL of CROY moved Amendment No. 59: Page 13, line 8, leave out subsection (3).

The noble Lord said: I beg to move this Amendment, which directly follows the change which was made in the Bill on Tuesday. This subsection is nonsense, considering the deletion that has been made, and I assume that the Government will agree to its now being removed.

Lord HUGHES

I will not object to its being removed, in the confident expectation that when Amendment No. 4 is properly dealt with in another place this bit will come back in again.

On Question, Amendment agreed to.

4.6 p.m.

Lord CAMPBELL of CROY moved Amendment No. 60:

Page 13, line 15, at end insert— (5) Neither the Agency nor any of their subsidiaries shall make any offer to acquire any of the share capital of a body corporate or accept any offer to sell any such share capital if the effect of the offer or acceptance would be that the Agency or their subsidiaries or any two or more of them if the offer is wholly accepted would hold more than ten per cent. of the share capital of a body corporate unless they have notified the body corporate in writing of the intention so to do and the period of six weeks has elapsed after the date upon which such notice is given. If within that period a resolution of a general meeting of the body corporate has been passed having the effect (however worded) that that meeting is opposed to the acquisition or further acquisition of any of its subsidiaries neither the Agency nor any of their subsidiaries shall acquire any of the share capital of that body corporate until a further resolution of a general meeting has been passed permitting such acquisition. (6) Where the Agency or any of their subsidiaries make an offer to the shareholders of a body corporate to acquire any of its shares or stock therein that offer shall be withdrawn in the event that within the period during which by the terms of the offer it is to remain open it is accepted in respect of less than half of the shares or stock to which the offer relates; and in that event no further offer shall be made by the Agency or any of their subsidiaries in respect of the shares or stock of that body corporate without the consent of its Board of Directors. (7) Where the Agency or any of their subsidiaries make an offer to acquire any of the share capital of a body corporate otherwise than by a purchase of shares on any recognised Stock Exchange the Board of Directors of that body corporate may within four weeks of the making of the offer apply to the court for a declaration that the consideration for the offer is inadequate. The court in deciding upon the adequacy of the offer shall assess the value of the shares and stock comprised in the offer as if there were no limitation imposed by or under any enactment upon the rate of dividend payable thereon. If the court finds that the offer is inadequate it shall be withdrawn unless the consideration is increased to an amount not less than that (if any) indicated by the court as adequate. If such an offer is so withdrawn neither the Agency nor any of their subsidiaries shall make any further offer to acquire any shares or stock of that body corporate without the consent of its Board of Directors.

The noble Lord said: This rather lengthy Amendment, consisting of three new subsections, is a probing Amendment and it illustrates how we think Clause 14 should operate. First, we believe that the acquisition of shares in companies should be made only with the consent of a general meeting of the company as well as with the consent of the individual shareholders whose shares are offered for.

As regards subsection (6) which we propose in this Amendment, this would write in the rules of the City Takeover Panel, which require unsuccessful bids to be withdrawn. I am aware that it is not normal to include in Bills and Statutes the rules of a non-statutory body and therefore what I am seeking is a statement by the Minister that the rules of the City Takeover Panel would apply, so that this is clearly on the record and those concerned know what is intended.

Turning to subsection (7), this specifics that if an offer is made by the Agency or any of its subsidiaries, the directors, on behalf of the company concerned, should be entitled to apply to the court for a declaration that the consideration offered is inadequate. Then if the court upholds this the offer would be withdrawn, so that without necessarily expecting the Government to write this into the Bill, we are concerned that they should confirm that this is the way in which they think the clause should be operated. I beg to move.

Lord HUGHES

The proposed requirement that the Agency and their subsidiaries would need the consent of a company in general meeting before acquiring more than 10 per cent. of its shares would put the Agency at a serious disadvantage in comparison with private sector holding companies. The Agency, of course, have no powers of compulsory acquisition in this field and there is no reason why they should not buy shares from willing sellers.

The constraints in the Bill on acquisitions by the Agency, like those in the Industry Bill on the National Enterprise Board, are already more onerous than those applied to private companies and to the former Industrial Reorganisation Corporation. It is more than likely that acquisitions will frequently be made with the full agreement of the company concerned but the proposed procedure could seriously inhibit the Agency's entrepreneurial activities by delaying and sometimes frustrating altogether its ability to respond quickly to opportunities. For example, cases could arise where the workforce and some of the owners of the company, together with the Agency, were anxious to retain control of the company within Scotland. This aim could be frustrated by the delays which such a decision would impose.

The Agency will already require the approval of the Secretary of State before taking a 30 per cent. or larger holding in a company, since this would normally amount to a controlling interest. Where there is opposition from the company, the Secretary of State would obviously wish to satisfy himself that the Agency's proposed acquisition was none the less justified.

The Government are considering whether the Secretary of State might also require to be notified of certain proposed holdings below the 30 per cent. threshold in cases where the proposed acquisition was opposed by the company. The Government will adopt the same approach to the SDA on this matter as to the National Enterprise Board, and will have more to say on this matter at Report stage of the Industry Bill in another place.

With regard to subsection (6), the takeover code covers the possibility of offers for part of the voting rights of a company and also the possibility of offers being accepted by an insufficient number of shareholders to give the Agency more than half of the voting rights. In this case the Development Agency will abide by the takeover code. The Amendment would impose further restrictions on the Agency in areas which are already covered by the code. The proposal that acquisitions are to become subject to veto by the board of directors of a company following an offer which is accepted by less than half of the voting capital to which it is directed, is particularly unacceptable. An obstructive board of directors could block a new offer which might be of benefit to shareholders and workers, and they might hold up a development sponsored by the SDA in the interests of the Scottish economy as a whole.

With reference to subsection (7), the Agency will be buying shares from willing sellers at mutually acceptable prices. There is no reason to involve the courts or anybody else in the assessment of an adequate price. These points I think show that in all of these matters the Agency will be acting in a completely commercial way and will be operating fully within the City Takeover Code. I think that these are the points upon which the noble Lord, Lord Campbell of Croy, in tabling this Amendment wished to have some assurance from Her Majesty's Government. I hope he will find that what I have been able to say on this matter fully meets the points which he has raised.

Lord CAMPBELL of CROY

Not fully, but to a very great extent. The noble Lord has said there will be a statement at the Report stage of the Industry Billy in another place on the main point of my proposed subsection (5)—that is, the degree of consent required. We shall have to await that statement, because I have acknowledged during the course of discussions on this Bill that the Industry Bill is the parent Bill in many of the provisions here which are repetitions of it. As regards my proposed subsection (6), of course we are grateful for the statement which I sought that the Agency will observe the rules of the Takeover Panel. I am sorry that under subsection (7)—this is where the noble Lord is not able to meet me—he does not see a need for access to a court, because we think that this would have given an additional safeguard. But, in view of what the noble Lord has said I will not pursue these matters at this time, and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 14, as amended, shall stand part of the Bill?

Lord CAMPBELL of CROY

This is the point in the Bill where we must ask the noble Lord, Lord Hughes, to elaborate on something he said in the Second Reading debate. Noble Lords were concerned about the relationship between the National Enterprise Board, to be set up under the Industry Bill, which is to operate over the whole of the United Kingdom, and this new Scottish Agency, which has many of the functions of the proposed National Enterprise Board written into this Bill word for word, but not all of them. It is clear that there could be collisions and a great deal of ambiguity about which Board and Agency respectively had certain functions in Scotland, unless something was clearly stated about this matter.

In his speech on Second Reading the noble Lord said that guidelines were to be issued on this subject. Many in Scotland are concerned to know about these guidelines. The National Enterprise Board has what are described as "main functions" in the Industry Bill. It is stated that functions of the National Enterprise Board shall be: … extending public ownership into profitable areas of manufacturing industry"— without circumstances concerning rescue operations or promotion of industrial development or other factors. Therefore, in Scotland many in business are concerned about the relationship between these two bodies. Can the noble Lord tell us more about the points which will be covered in the guidelines which he mentioned; how they will be issued, and from which Secretary of State; when they are likely to come out; whether they will be made public and, if so, how they will be promulgated? This is a very important matter, I think the noble Lord will agree. He certainly seemed to treat it as such in his Second Reading speech. I do not want to delay the Committee at this stage, but this is the appropriate moment to ask him whether he can tell us any more now on this very important subject.

Lord HUGHES

I do not think I could at this point give as comprehensive an answer to these matters as the noble Lord, Lord Campbell of Croy, would consider was proper. It would be desirable that, so far as possible, your Lordships should have an indication of the way in which the Government are thinking. What would perhaps be the most appropriate way is this. When on Tuesday week (I think it is) we come to the Third Reading, I would hope to be in a position, when moving, That the Bill do now pass, to make a statement along these lines which I hope will go considerably further than anything I might be able to say today. I accept that the noble Lord has put forward a point in which the House is interested, as it is entitled to be interested. I should therefore like to give as full an answer to that as circumstances permit. I hope that that proposal will be acceptable to the noble Lord, Lord Campbell of Croy.

Lord CAMPBELL of CROY

For my part I am grateful to the noble Lord, Lord Hughes, and I shall await with interest his statement on Tuesday week.

Clause 14, as amended, agreed to.

Clause 15 [Transfer of property, rights and liabilities of certain bodies to Agency]:

4.17 p.m.

Lord HUGHES moved Amendment No. 61:

Page 13, line 24, at end insert— ("( ) For the avoidance of doubt, it is hereby declared that planning permission shall be deemed to have been granted under section 26 of the Town and Country Planning (Scotland) Act 1972 in respect of any development initiated by the Scottish Industrial Estates Corporation before the date of the commencement of this section.").

The noble Lord said: I beg to move Amendment No. 61 to Clause 15. At present the Scottish Industrial Estates Corporation developments are treated as being made by a Government Department and as such do not require a formal planning approval. This Amendment avoids the possibility that, once the Scottish Development Agency (which, of course, will not be in a similarly privileged position) takes over Scottish Industrial Estates Corporation factories in the course of construction, the planning authority might question the legality of the development on the grounds that planning permission had not been given. This Amendment ensures that such developments, once initiated, are treated as if they had planning permission under Section 26 of the Town and Country Planning (Scotland) Act 1972 which concerns local planning authorities' determination of applications for planning permission. Of course, when the Agency is initiating the matter, then it follows the normal procedure. I think noble Lords will accept that it is eminently reasonable that something which has been started by the Scottish Industrial Estates Corporation should not have to come to a halt while an application for planning permission, which had been deemed at that point, had to be submitted. I beg to move.

Lord CAMPBELL of CROY

I would not object to this proposal in the circumstances which the noble Lord has described. But I would add a caveat that there is in Scotland, and I believe also elsewhere, some anxiety about planning permissions being given to Government agencies and Government Departments which do not have to go through the normal planning procedures. In this case it is most unlikely that a project that had been started by this particular body would give rise to planning objections which would lead to inquiry, and so on. But in principle I must make that caveat because there is this distrust of Government Departments being able to set up projects without the ordinary planning procedures. I have no objection to this Amendment.

Lord HUGHES

We are not aggravating the position in the Scottish Development Agency Bill.

On Question, Amendment agreed to.

On Question, Whether Clause 15, as amended, shall stand part of the Bill?

Lord CAMPBELL of CROY

There is a point on this clause concerning the Small Industries Council in subsection (4). So far as I know, it has not expressed any views about what is happening to it. One of the Schedules deals with the question of disposing of its staff and property. However, I wonder if the noble Lord can tell us whether the absorption of the Council into the Agency in this way is with the full agreement of the members of the Council.

Lord HUGHES

I am not certain. All I can say is that I have not heard of any objection.

Lord CAMPBELL of CROY

I will not pursue this point. However, it has done useful work in Scotland and I should like to pay tribute to it. It would be a pity if it disappeared without anybody knowing what had happened to it. However, I will not pursue the matter at this stage. Perhaps the noble Lord could tell us more on a later occasion.

Lord HUGHES

The noble Lord, Lord Campbell of Croy, will recollect that when I spoke about this at Second Reading I intimated that the headquarters of the new Agency would be in the West. I referred then to the fact that the existing Council do not have offices in the West, and that there would not necessarily be either a change of location or of staff. I have had a note passed to me which says that they have been fully consulted about absorption and are fully agreed.

Lord CAMPBELL of CROY

I thank the noble Lord for what he has said.

Lord BALERNO

I support my noble friend on this point. Perhaps it has been changed because of the fact that the Small Industries Council has been consulted and has agreed. The Small Industries Council has done a very important and useful job in Scotland right down to grass roots level. The small industries that it has started up, which have helped to keep the population on the ground in rural areas, have been of the greatest value. I was alarmed when I read this part of the clause. Unfortunately, I was unable to be present at the Second Reading of the Bill, and I trust that the small industries in Scotland, apart from their own Council, themselves agree to this transfer.

Lord HUGHES

Perhaps I ought to have taken the opportunity when I was speaking earlier to associate myself with what the noble Lord, Lord Campbell of Croy, said, to which have now been added the words of the noble Lord, Lord Balerno. Of course, I totally agree that they have done a first-class job. When the occasion is taken to set up a comprehensive agency, such as the Scottish Development Agency will be, obviously it is wrong not to gather in these other bodies. I have no doubt that it will be a source of satisfaction to those who have the responsibility of running the Scottish Development Agency that they will be taking under their wing a body with such a record of successful operation and that the people who have been running it will be part of the staff which they will be taking over.

Clause 15, as amended, agreed to.

Clause 16 [Transfer of publicly owned property to Agency]:

4.23 p.m.

Lord CAMPBELL of CROY moved Amendment No. 62: Page 14, line 10, at end insert ("but any such transfer shall be recorded by the Agency in their report for the financial year in which the transfer was made, except where the value of the property transferred was negligible.")

The noble Lord said: I apologise for speaking yet again. All I can say is that I hope I am dealing with these points expeditiously. My noble friend Lord Drumalbyn has not yet been able to return from his meeting and has asked me to move this Amendment on his behalf. His point is that he considers that such a transfer should be recorded in the Agency's report. Earlier in our proceedings in this Committee he spoke about the importance of the report by the Agency. He feels that transfers of this kind should be included and that this Amendment should be included in the Act. I beg to move.

Lord HUGHES

It has never been the policy to include in a Bill something which quite obviously will have to be done in pursuance of the normal procedures laid down in another part of it. The Amendment seeks to have a public record in the annual report of all but negligible transfers of publicly owned property to the Agency. I should like to emphasise that it goes without saying that such transactions would be recorded in the Agency's report for the year in question and that no statutory reference is necessary to ensure this. We do not envisage that any circumstances could arise where this would not take place, but if there were the slightest danger that in drafting its report the Agency did not permit this, I can certainly assure the Committee that the Secretary of State would direct the Agency to include the necessary particulars in its report. Therefore, I hope that the noble Lord will agree not to press the Amendment.

Lord CAMPBELL of CROY

In view of that statement, which I am sure is what my noble friend is seeking, I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

Lord CAMPBELL of CROY moved Amendment No. 63:

Page 14, line 10, at end insert— Provided that before control over any company or corporation or any property is transferred to the Agency by virtue of this section proposals so to do shall be laid before Parliament and shall contain full particulars of the manner in which the control by Parliament over the activities of the Minister concerned in respect of that company, corporation or property will thereafter be exercised, and those proposals shall not be implemented unless approved by a resolution of each House of Parliament.

The noble Lord said: This short clause is exactly the same as Clause 4 of the Industry Bill. It deals with the question of transfers of public property to the Agency. This could include parts of nationalised industries. Where those industries are concerned, Parliament has always followed the ministerial responsibilities. There is nothing here to indicate that in being transferred to the Agency a section of a nationalised industry should first of all be considered by Parliament.

In view of the many debates that have been taking place, particularly in another place, about Parliamentary and Ministerial responsibility for nationalised industries, it seems strange that there should be nothing in this clause to indicate that transfers involving one Minister handing over his responsibility to another should not be considered and discussed in Parliament.

The intention of Amendment No. 63, which I now move, is to ensure that in such circumstances Parliament would have the opportunity to discuss the transfer before it was made. I am not wedded to the wording of this Amendment but it explains what we think ought to happen. I beg to move.

Lord HUGHES

Transfers of publicly owned property to the Scottish Development Agency are not likely to be a frequent occurrence, since most of the Government's existing shareholdings are United Kingdom interests which are appropriate to be vested in the National Enterprise Board, and the same would generally apply to property which might be transferred from nationalised industries. Thus, acting as a holding company for publicly owned property will be an incidental function of the Scottish Development Agency, whereas it would be a major function of the National Enterprise Board. None the less, circumstances could certainly arise in which there would be holdings of primarily Scottish interest to be transferred and it would be appropriate to use the Scottish Development Agency rather than the National Enterprise Board for this purpose. This explains the inclusion in the Bill of this clause which is modelled on the corresponding provision in the Industry Bill.

I think the noble Lord, Lord Campbell of Croy, will be aware that the Government gave certain assurances about amending the Industry Bill clause to ensure adequate Ministerial control over any transfer, for example by a nationalised industry to the National Enterprise Board. The Government also undertook to inform Parliament of any such transfer before it was made. These assurances apply equally to the present provision. There will shortly be an opportunity in another place to consider the precise Amendments which the Government propose to the Industry Bill provision, and it would be appropriate in the circumstances for this to be followed in the present Bill.

On the question of Parliamentary control of property transferred to the Agency there seems no reason why there should be special provision for this which is any different from the normal control over nationalised industries or the other activities of the Scottish Development Agency. Thus, in the view of the Government the appropriate means of Parliamentary control over the public investment in the property transferred will be through the Public Accounts Committee or the Select Committee on the nationalised industries, as appropriate.

While the Government accept that Parliament has a right to be informed of proposed transfers of any significance, it does not seem appropriate for Parliament to be required to approve any such transfer. Such transfers will involve the relatively minor step of transferring the management of certain Government shareholdings to another body within the public sector. As regards transfers from nationalised industries, Parliamentary control is not required for, say, British Rail to sell a workshop to the public or to the National Coal Board, and there is no reason why that approval should be required for a sale to the Scottish Development Agency.

I do not know the exact timetable of the Amendments which the Government have undertaken to make in relation to the Industry Bill, but obviously if that timetable permitted them to be put to this Bill while it was still before your Lordships' House, I should be happy to do so. I suspect that the noble Lord, Lord Campbell of Croy, will find this a justifiable reason for withdrawing the Amendment at this stage.

Lord CAMPBELL of CROY

Again I am grateful to the noble Lord for his explanation and for relating it to the Industry Bill. Clearly what happens to that parent Bill where these clauses are concerned will affect this Bill. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 16 agreed to.

Clauses 17 and 18 agreed to.

Clause 19 [Assistance to persons providing air services serving the Highlands and Islands]:

4.35 p.m.

Lord CAMPBELL of CROY moved Amendment No. 66: Page 15, line 13, leave out from ("company,") to end of line 15.

The noble Lord said: May I explain that the previous two Amendments under my name with asterisks are not expletives deleted; it is simply that in the interests of saving time I did not seek to move these Amendments. I now beg leave to move Amendment No. 66.

As the noble Lord, Lord Hughes, confirmed in the Second Reading debate this clause has nothing at all to do with the Scottish Development Agency. As I understand it, the Bill is being used as a vehicle for enabling the Secretary of State for Scotland to be able in certain circumstances to assist aviation. This Amendment inquires whether it is necessary for the Secretary of State to impose conditions. It did not seem to me to be essential that there should be conditions imposed in this way, but it gives the noble Lord the opportunity of explaining them. I beg to move.

Lord HUGHES

I wonder whether the noble Lord, Lord Campbell of Croy, would object if in speaking to Amendment No. 66 I also said something about the succeeding two Amendments, Nos. 67 and 68, without of course in any way infringing his right to deal otherwise with these if he feels so inclined?

Lord CAMPBELL of CROY

In the absence of my noble friend I will agree to that.

Lord HUGHES

As the Committee will be aware, this clause will permit the payment of a subsidy to Loganair Limited, the extent and nature of which has yet to be determined. However, in drafting a provision like this, which is of an enabling nature, it is advisable to provide not simply for the immediate circumstance which gives rise to the need for the power, but also for contingencies which might reasonably arise in the future.

Dealing with Amendment No. 66, the power to impose conditions on the giving of assistance is in common form. It is needed to ensure that assistance is used for the purpose for which it is provided. For example, the company might be obliged to buy back shares if it ceased to operate air services serving the Highlands and Islands. The conditions would not be a backdoor way of controlling the affairs of a company.

Touching now on Amendment No. 67, there is nothing either in the Industry Act or in the Highlands and Islands Development Board legislation requiring Parliamentary approval before the Secretary of State gives shareholdings in excess of 30 per cent., and Clause 14 of this Bill enables the Secretary of State, without Parliamentary approval, to authorise the Scottish Development Agency to acquire shareholdings in excess of 30 per cent. and without upper limit. No similar Amendment has been tabled to that provision and we cannot see any valid reason why assistance to companies providing air services should be singled out by this Amendment.

When I come to Amendment No. 68, which is that shareholdings must be disposed of as soon as is reasonably practicable, I have explained that in relation to similar Amendments discussed earlier in connection with the powers of the Agency, the Government consider that when a public stake is taken in a company the public should be able to receive a proper share of the benefits accruing. The first suitable opportunity for disposal is not necessarily the best opportunity and could indeed prove quite inopportune. It is certainly intended that the Secretary of State should have the option of disposing of holdings taken under this clause, and one of the consequences of the Amendment that has been moved is that it has revealed the fact that the clause as drafted may be defective in the sense that while it makes provision for acquisition it does not make provision for disposal. So, as a result of this Amendment and our attention being directed to this point, a Government Amendment will be tabled at another stage to provide this power and also enable shares to be held after the expiry of the five-year period to which the powers of acquisition relate.

I hope therefore that the noble Lord may find it possible to withdraw Amendment No. 66 and that Amendments Nos. 67 and 68 in the names of the noble Lord, Lord Drumalbyn, and the noble Lord, Lord Campbell of Croy, need not, at this stage at any rate, be moved.

Lord CAMPBELL of CROY

I think perhaps I had better speak now as the noble Lord, Lord Hughes, decided to discuss two other Amendments, with the Amendment that I have moved, and perhaps I ought to say briefly the purpose of these two Amendments. First, dealing on behalf of my noble friend Lord Drumalbyn with Amendment No. 67, because the Government themselves in the Bill laid down procedure for the Agency, when the Agency are intending to involve themselves more than 30 per cent. in an undertaking, he was suggesting that in this clause, where it is the Secretary of State who is concerned, there should also be some procedure before he acquired more than 30 per cent. control. He is suggesting the obvious course, which is Parliamentary approval. With regard to my Amendment No. 68, it is the same point as we discussed on Amendment No. 13. I have taken the wording of the Industry Act 1972 which is now in operation, and well understood by industry. On Amendment No. 13 the noble Lord, Lord Hughes, undertook to consider the situation and perhaps put forward an alternative Amendment. I am glad to say he has just done the same thing again, and so I am quite ready to accept that. However, I know my noble friend also wishes to speak.

Lord BALERNO

The way the Government have slipped this clause into this Bill is most ingenious. I should like to congratulate them upon their having done so. At the same time, I issue a warning. In Scotland, we have had a very good record with our independent airlines. The independent airlines virtually pioneered the air services within Scotland. When these air services have been absorbed into larger corporations, inevitably they have started to lose money, and the services have become less efficient. We hear complaints from British Airways that at present they are steadily losing money on their services in Scotland. There is still at least one independent air service in Scotland.

I would hope the fact that this clause is being put in the Bill does not make the Agency feel compelled to take over independent airlines which, so far as I know, are working quite happily at the present time. I should like them to be able to preserve their integrity.

Lord HUGHES

I admitted on Second Reading that we took the opportunity of making this Bill a vehicle for being able to give assistance to Loganair in services they are providing to certain islands in Scotland which are not profitable services, but which are socially very necessary. If Loganair were not helped to provide these services, there is at least considerable doubt whether anyone else would be willing to step in and take their place. This is not in any way designed as a means of acquiring an interest in an air service. It is a means of ensuring that the service to the population of these islands is continued, and the Government will be enabled to give the necessary assistance to make that possible. It has no relation whatsoever to the document, which may have come to more than myself, from another airline, at least part of whose name has a Scottish connection. This part of the Bill has no relevance and no connection whatsoever with that.

The Earl of CROMARTIE

If I may intervene for one second, I support in this case what has been said by the noble Lord, Lord Hughes. I have a fairly close connection with the Western Isles. Since the Island Authority was inaugurated, for better or worse, the only way to get over to these islands is by Loganair. Without Government aid, that is absolutely impossible for them to do. They would not be viable. In this case it is absolutely necessary. Provided it does not apply to what my noble friend is thinking about, I support it.

Viscount MASSEREENE and FERRARD

I should also like to support what the noble Lord, Lord Hughes, has said. I have had experience of running a small airline, using Loganair aircraft, from Glasgow to the Isle of Mull. I lost a considerable amount of money on it. I was hoping that the Highlands and Islands Development Board would give me a grant, but in their non-wisdom, they did not do so. As the noble Earl, Lord Cromartie, said, if you are to have an air service in the Islands, it is very difficult to make it pay.

Lord HUGHES

There is one point that I overlooked. The noble Lord Lord Balerno, asked whether this would enable the Scottish Development Agency to become involved in Scottish airlines. I should have pointed out that it is not the Development Agency; it is the Secretary of State. What I have otherwise said is the case. I am sorry that the noble Viscount, Lord Massereene and Ferrard, should have found, as others have found before him, and since, that running an airline is as good a way as any of losing money. I am surprised he contemplated getting money from the Highlands and Islands Development Board. I am quite certain one of the reasons why they refused him that grant was because they would not wish the noble Viscount to have it on his conscience that he had had money from such a body.

Lord CAMPBELL of CROY

We are all in agreement with the purpose of the clause. What my noble friends have said supports, in certain circumstances, the need for financial assistance to airlines carrying out essential services to small communities at long distances, which are most unlikely to be able to pay their way. But that was different from the points in my Amendments, which simply concerned the degree to which, if the Secretary of State were to take shares in some other company—not the proposal at present being made for Loganair—there should be some control of the extent to which he could move into that company and impose conditions. In the light of what the noble Lord, Lord Hughes, has said—and I am grateful to him for clarifying the intentions of the Government on this—I seek leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord HUGHES moved Amendment No. 69: Page 15, line 30, after ("Argyll" insert ("and Bute").—(Lord Hughes.)

The noble Lord said: The Argyll District created by the Local Government (Scotland) Act 1973 was renamed Argyll and Bute District in August 1974, in accordance with the provisions of Section 23 of that Act. The consent of the Secretary of State was notified in SDD Circular 45/1974. This therefore corrects an error in the Bill as printed. I beg to move.

On Question, Amendment agreed to.

Clause 19, as amended, agreed to.

Clauses 20 to 25 agreed to.

Clause 26 [Short title, commencement and extent]:

Lord HUGHES moved Amendment No. 70: Page 18, line 11, leave out ("1957") and insert ("1975").

The noble Lord said: I beg to move Amendment No. 70, and to refer to the next Amendment, which has the same effect. This is not a misprint, although it may seem so. This Amendment substitutes a reference to the House of Commons Disqualification Act 1975 for the existing reference to the 1957 Act. I beg to move.

On Question, Amendment agreed to.

Clause 26, as amended, agreed to.

Schedule 1 [The Scottish Development Agency]:

Lord HUGHES

I beg to move Amendment No. 71.

Amendment moved— Page 21, line 11, leave out ("1957") and insert ("1975").—(Lord Hughes.)

On Question, Amendment agreed to.

4.50 p.m.

Lord CAMPBELL of CROY moved Amendment No. 72:

Page 21, line 31, at end insert— ("(c) if he is, or was at any time during the twelve months preceding his appointment, a member or officer of any trade union recognised for the purposes of negotiation in relation to persons employed in any undertaking, take part in any deliberation or decision of the agency with respect to any contract with, or the taking of an interest in, that undertaking.").

The noble Lord said: This Amendment raises the question whether persons who have been in positions in trade unions within recent months and who are members of the board should be restricted in the same way as other members of the board. I move Amendment No. 72 simply in order to give this matter consideration. I believe there is increasing partnership in industry, and this is something we welcome. It happens in different ways. I will not pursue that, although I know noble Lords on both sides have interesting views on it. It seems only reasonable that those who have been in positions in trade unions should also be regarded as having been concerned with the contracts or business that might be discussed by the Agency.

Certainly, I can tell the noble Lord from my own experience, and I am sure he has had similar experience, that one has been lobbied as hard by trade union lobbies on certain projects or orders, both when a Minister and out of Office, as by any other lobbies and I have been glad of that. When those who work in a certain area have, as trade uunionists, lobbied about the business which affects their firm, this has been a good sign because they have identified with what they are doing in their own work. That is something which we would encourage. But it means there are circumstances where someone who had been lobbying very hard for a firm or in connection with a contract could be in an exactly similar situation as that described and catered for in this paragraph of the Schedule. I therefore move this Amendment to see whether the Government have any views or suggestions about this situation. I beg to move.

Lord HUGHES

I have a feeling that if this Amendment had been tabled in another place it would probably have presented an opportunity for a very considerable political debate, in which the mover would undoubtedly be accused of making an attack on trade unionists and the trade union movement generally. I have no intention of doing so, because whatever might be taken from the wording of the Amendment the noble Lord made it perfectly clear he had no such intention, and in fact went on to associate himself with the need for discussions with trade unionists in these circumstances. I think it would not be going too far to say that he was in sympathy with the Government's view that in the circumstances in which we now live trade unionists should be encouraged to take a bigger role in decision-making in industry. Having regard to that, it would be wrong to restrict the part that a member of a trade union could play in the Agency's deliberations merely because he is, or was, a member or an officer of a trade union which has members in an undertaking in which the Agency is concerned.

But I submit that the Bill provides adequately for protecting the position where members' interests are concerned. Indeed, as a matter of drafting the Amendment does not add very much, since it applies only to a member who, under the terms of paragraph 13(1), is directly or indirectly interested in a contract or other matter which the Agency has under consideration. This covers members who stand to benefit, or to suffer personally in a material sense, from some decision of the Agency. If a trade union member or official had this sort of interest—for instance, if he was currently employed by or owned shares in the undertaking in question—he would be excluded from deliberations or decisions of the Agency on a matter concerning contracts, and could be so excluded at the Agency's discretion on any other matter, in the same way as any other member with an equivalent interest. This applies whether or not his union or former union represents the work force of the company concerned. These restrictions apply to all members of the Agency whether trade union members or not, and of course it is right that they should exist.

If the purpose of the Amendment was to secure that any member, even though not "interested" in a contract in the terms of paragraph 13(1), should be debarred from discussing or voting on a contract or proposed holding simply because his union or former union represented workers in the undertaking concerned, then I certainly could not subscribe to that at all. But I do not think that this is what the noble Lord, Lord Campbell of Croy, had in mind. I take it from his remarks that he visualised circumstances in which a trade union member or official could have some interest which would be covered in the same way as other material interests, and wanted to be quite certain that such a member would be covered. As I have indicated, he would be covered in exactly the same way as any other possible beneficial interest, or suffering, because it works both ways. I hope, therefore, that the noble Lord will withdraw the Amendment and justify my belief that he was seeking information and not a fight.

Lord BALERNO

I should like to support my noble friend, because I think he is really on to a good and important point. However, I greatly admire the noble Lord, Lord Hughes, both for his ingenuity and his ingenuousness.

Lord CAMPBELL of CROY

I am grateful to the noble Lord, Lord Hughes, for his considered statement in reply to this Amendment. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

On Question, Whether Schedule I shall stand part of the Bill?

Lord CAMPBELL of CROY

May I raise one point on this Schedule? Under it the Secretary of State has great freedom to appoint and sack members of the Agency. Secretaries of State for Scotland have had some experience of this with the Highlands Development Board; there have been difficulties, happily not during my term of Office. I referred on Tuesday to an occasion when two members suddenly had to resign. I think we must recognise that it is a quite difficult task for the Secretary of State to make these appointments and to decide on the length of time the offices should be held. I wonder whether the noble Lord can tell us any more at this stage about how the Secretary of State proposes to do this.

Lord HUGHES

I do not anticipate that there will be anything unusual in the method of appointment to this Agency, and in the type of service, whether part-time or full-time, that may be possible. The Civil Service Department, as the noble Lord knows, is fully involved in connection with the conditions and the salaries that may be paid; and also with the term for which people may be appointed. I think all of these will follow the customary pattern. Beyond that, I am afraid there is nothing I can usefully say on this point.

Schedule 1 agreed to.

Schedule 2 [Financial and Administrative Provisions relating to the Agency]:

4.59 p.m.

Lord HUGHES moved Amendment No. 73:

Page 23, line 42, at end insert— ("(2) The Agency may borrow money from any of their wholly-owned subsidiaries without obtaining the consent of the Secretary of State.")

The noble Lord said: I should like to read tomorrow exactly what the noble Lord, Lord Balerno, said in relation to the last Amendment. I thought he was being complimentary, but then I thought perhaps it was a rather back-handed compliment. I should like to study it. This Government Amendment exempts borrowing by the Agency from any of their wholly owned subsidiaries from the requirement to obtain the consent of the Secretary of State and the approval of the Treasury which is normally required when they borrow from a person other than the Secretary of State. The Scottish Development Agency (Schedule 2, paragraph 3); the National Enterprise Board and the Welsh Agency will generally be obliged to seek the consent of the Secretary of State and the approval of the Treasury where they are borrowing from a person other than the Secretary of State.

Paragraph 1(4) of Schedule 2 to the Industry Bill exempts borrowing by the National Enterprise Board, and the corresponding provision in the Welsh Development Agency Bill exempts the Welsh Agency in respect of their wholly-owned subsidiaries from the need to obtain this consent. Having noticed this, we think it appropriate that the Scottish Development Agency should be put on the same footing, and this Amendment accomplishes it. Taken along with Clause 13(5)(a)(i), which provides that borrowings from the Agency's wholly-owned subsidiaries do not count against the financial limit, this gives the Agency the necessary scope to manage their internal financial arrangements in the same way as a holding company in the private sector. Paragraph 5 of Schedule 2 imposes a duty on the Agency to ensure that wholly owned subsidiaries' external borrowing is effected with the consent of the Secretary of State and the Treasury. I beg to move.

On Question, Amendment agreed to.

Lord CAMPBELL of CROY moved Amendment No. 74: Page 24, line 25, leave out ("wholly owned").

The noble Lord said: I think that this amendment and Amendment No. 75 could be taken together. This is a subject which has been discussed earlier in this Committee stage, so I shall move only Amendment No. 74 at present in case the Government are able to accept it now rather than produce different wording later. I beg to move.

Lord HUGHES

I should not like to accept it at this stage.

Lord CAMPBELL of CROY

I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.3 p.m.

Lord CAMPBELL of CROY moved Amendment No. 76: Page 24, line 29, at end insert ("; and for the purposes of this paragraph borrowing includes the giving of any guarantee for the repayment of money by any other person (not being an individual employed by the borrower).").

The noble Lord said: I beg to move Amendment No. 76. We believe that restrictions on borrowings by subsidiaries should include the giving of guarantees, and we therefore propose that this wording should be inserted in the Bill.

Lord HUGHES

There are reasons for having controls over the external borrowing of the Agency's wholly owned subsidiaries which do not apply to the giving of guarantees by such subsidiaries for borrowing by private persons. Borrowing by the Agency or their wholly owned subsidiaries is direct public expenditure. Without the borrowing consent requirements provided in paragraphs 3 and 5 for the Agency and their wholly owned subsidiaries respectively, the Government could not control the rate at which the Agency deployed their funds. In contrast, the sums guaranteed by wholly owned subsidiaries, or by the Agency themselves, represent private expenditure and only create a demand on public expenditure in the contingency that the private borrower fails to repay.

It is not clear why the consent requirement is to be applied to guarantees given by wholly owned subsidiaries and not those given by the Agency themselves. Wholly owned subsidiaries might not necessarily have a power to give guarantees, depending on their Articles of Association. The Amendment has, however, drawn attention to a possible loophole in Clause 13, in that although the aggregate of loans guaranteed by the Agency themselves counts towards their overall financial limit (thereby providing a control over the scale of guarantees given) there is no provision for sums guaranteed by wholly owned subsidiaries to count towards that limit. These sums, like sums guaranteed by the Agency themselves, create a contingent liability on the Agency's resources, and may therefore be subject to the overall limit.

I should like to look into this matter and, if it should prove to be necessary for an Amendment, to table one. In fact, in the time since we have had a look at this we are not absolutely certain that it is necessary, but if it should prove to be necessary then a suitable Amendment will be tabled. If it should be necessary to do so and it is done, I think that it would meet everything that would be required in this situation. I hope therefore that the noble Lord will find it possible to withdraw this present Amendment.

Lord CAMPBELL of CROY

It seems that on occasion when the noble Lord is not able to accept my Amendment verbatim he none the less is able to say that something needs to be done. My noble friend Lord Massereene and Ferrard earlier today spoke in terms of archery. I think it can be said that even if I have not hit the bull's eye I seem to have got a number of magpies. I am grateful to the noble Lord for saying that he will look at this and, if there is a defect, will amend the Bill at a later stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.6 p.m.

Lord CAMPBELL of CROY moved Amendment No. 77: Page 25, line 2, leave out from ("direct,") to ("payments") in line 3 and insert ("repayments of the full amount of the sums so issued together with ").

The noble Lord said: It seems that while the Agency must repay loans from the Secretary of State in full under subsection (4), this Amendment is needed to require the Agency to repay to the Treasury in full and under an Agency guarantee, which is paragraph 6(2) in the Schedule. I therefore beg to move the Amendment.

Lord HUGHES

This Amendment is not necessary. There is no question, from the Bill as it stands, that this is a provision for letting off a part of the repayment. The purpose of the Bill, as it stands, is that it may be convenient for repayments to be made by instalments from time to time, and this is the way in which this can legally be given effect to. If this were taken out it would mean that repayment could only be made in one single sum, repaying the whole amount, whereas it is of course much more likely that there will be occasions from time to time when repayments in diminution of the sum would take place until the whole sum was repaid. The obligation to repay the whole amount is there.

Lord CAMPBELL of CROY

The noble Lord has given an assurance that this is not necessary, and I hope that that means that the Bill has the effect which we would propose. I therefore beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.9 p.m.

Lord CAMPBELL of CROY moved Amendment No. 78: Page 25, line 34, at end insert ("being the greater or less amount appearing to the Secretary of State to be its true value.")

The noble Lord said: We believe that the Secretary of State ought to notify the true value, and that this should be included in the Schedule. This is the reason for our suggesting that these words be added. I beg to move.

Lord HUGHES

It is implicit in the sub-paragraph as drafted—which already uses the phrase "true value"—that amounts to be notified would be determined by reference to an assessment of the true value of the property in question. There is no question of arbitrary determinations. The requirement for the Secretary of State to have approval of the Treasury for each determination is a further safeguard against arbitrary assessments. The Amendment also seeks to make clear that the true value may be either greater or less than the amount initially paid for the property. This could certainly be the case, but either contingency is adequately provided for in the sub-paragraph as drafted.

The Amendment does not achieve quite the effect that was probably intended. By reference to sub-paragraph (3) it is clear that the amount of capital debt to be notified to the Agency in respect of any property is to be the aggregate of (a) the initial cost of pur- chasing the property, or an estimate of its current true value if the former is inappropriate; and (b) the costs and expenses of and incidental to bringing the property into public ownership in the first place. The effect of the Amendment would be to prevent the Secretary of State from taking into account the incidental costs of initially acquiring property when he made a determination in the circumstances of sub-paragraph (4). It is appropriate for these costs to be taken into account, for example when the property itself may be deemed to have fallen in value since first acquired. Thus, the Bill as it stands does everything the noble Lord wants and the Amendment would, in fact, slightly diminish the circumstances and would exclude these incidental costs. I hope I have satisfied the noble Lord that what he wants will be done, and that what he proposes will result in less than what he wants being done.

Lord CAMPBELL of CROY

The noble Lord, Lord Hughes, has certainly given the assurance we wanted. I can say straight away that, as he has probably guessed, this is really a difference of opinion between expert draftsmen, because it is the draftsmanship here which is in question. However, the statement which the noble Lord has made will I hope, at any rate for the time being, satisfy those who were worried about how this Schedule would be interpreted. I therefore beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Schedule 2, as amended, agreed to.

Schedule 3 [Members and Stag of the Corporation and the Council]:

5.11 p.m.

Lord HUGHES moved Amendment No. 80: Page 27, line 18, leave out ("may") and insert ("shall")

The noble Lord said: It is inconceivable, given the provision as presently drafted, that the Secretary of State would have failed to use his power to provide for compensation payments in the event that the need arose. However, in order to give fullest possible reassurance to the staff of the two bodies concerned, the SIEC and the SICRAS, the Government are prepared to write a clear duty into the Bill.

On Question, Amendment agreed to.

Lord HUGHES

I beg to move Amendment No. 81. This Amendment updates the references to legislation concerning continuity of employment.

Amendment moved— Page 27, leave out lines 41 to 44, and insert— ("(a) the Redundancy Payments Act 1965 (b) the Contracts of Employment Act 1972, and (c) the Trade Union and Labour Relations Act 1974").—(Lord Hughes.)

On Question, Amendment agreed to

Lord HUGHES

I beg to move Amendment No. 82. This Amendment makes it clear that the transfer of employees of the Scottish Industrial Estates Corporation and the Small Industries Council for Rural Areas of Scotland to the Scottish Development Agency is effected by Clause 15 of the Bill and not by Schedule 3. This is a purely technical Amendment.

Amendment moved— Page 27, line 46, leave out ("paragraph 1 of this Schedule") and insert ("section 15 of this Act").—(Lord Hughes.)

On Question, Amendment agreed to.

Schedule 3, as amended, agreed to. Page 28, line 33, at end insert—

("1975 c. 8.

The Offshore Petroleum Development (Scotland) Act 1975.

In section 20(2), the definition of "Scottish industrial Estates Corporation".")

The noble Lord said: This Amendment repeals part of the Offshore Petroleum Development (Scotland) Act 1975, which refers to the Scottish Industrial Estates Corporation. As this is the last of a very long series of Amendments, I take this opportunity of expressing thanks to all noble Lords who have taken part for the very helpful way in which they have made possible a very useful discussion of this Bill, which is so important for the interests of Scotland. I particularly thank the noble Lord, Lord Campbell of Croy, for the part he has played, marred only from my point of view by one unfortunate Division.

Lord CAMPBELL of CROY

I wish on behalf of my noble friends again to express our gratitude and our admiration

Schedule 4 [Minor and Consequential Amendment of Enactments]:

5.15 p.m.

Lord HUGHES moved Amendment No. 83:

Page 28, line 6, at end insert—

("The Pensions Increase Act 1971

1A. In Part I of Schedule 2, after paragraph 38 there shall be inserted the following paragraph— 38A. A pension or compensation payable by virtue of Schedules 1 or 3 to the Scottish Development Agency (No. 2) Act 1975.".").

The noble Lord said: Increases, to take account of inflation, are normally payable on public service pensions and on annual compensation paid in such circumstances as the reorganisation of a department or service or by a transfer or other reorganisation of the functions of local authorities. To give effect to this, the Amendment makes the pensions and compensation payable under the Bill an "official pension" as defined in Section 5(1) of the 1971 Act by adding a paragraph to Part I of Schedule 2 to the Act.

On Question, Amendment agreed to.

Schedule 4, as amended, agreed to.

Schedule 5 [Repeals]:

Lord HUGHES moved Amendment No. 84:

to the noble Lord, Lord Hughes, for his single-handed feat in dealing with so much of a long Committee stage—seven hours on Tuesday and again today—and for considering so carefully all we have had to say. Perhaps I might say to noble Lords from Wales, who have been waiting for the end of this Bill, that I hope we have not appeared to be unduly occupying time. We have tried to deal as expeditiously as we could with these matters and they will have seen that many of the points we raised brought matters to the attention of the Government for consideration and change, and therefore we hope we have not held them up unduly.

Lord LLOYD of KILGERRAN

Almost in the capacity of an independent observer, one who has been able to follow this fascinating discussion for only six hours, I wish to add my congratulations to the noble Lord, Lord Hughes, on the way he has dealt so fully with these matters. I also very much admired the manner in which the noble Lord, Lord Campbell of Croy, presented the issues, although of course we were not able to agree with much of the content of what he had to put before the Committee.

On Question, Amendment agreed to.

Schedule 5, as amended, agreed to.

House resumed: Bill reported with the Amendments.