AIRCRAFT AND SHIPBUILDING INDUSTRIES BILL

HL Deb 05 November 1976 vol 376 cc1628-727

11.24 a.m.

The MINISTER of STATE, NORTHERN IRELAND OFFICE (Lord Melchett)

My Lords, I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.—(Lord Melchett.)

Lord HARMAR-NICHOLLS

My Lords, the point I wanted to put to the noble Lord the Leader of the House was this—and I do not expect an Answer today. If I put down a Question next week, is he prepared to give an Answer as to whether he accepts the 1962 ruling, that if there is a doubt, however small, a Bill must be deemed hybrid? If in answering that Question he accepts the 1962 ruling, has he given consideration to the submission I made to him that there are very clear doubts about the Bill we are now going to discuss? If I put that Question to him next week, would he be in a position to give me an Answer?

The LORD PRIVY SEAL (Lord Peart)

My Lords, this is a matter for the House to decide. I will look at it.

The Earl of LAUDERDALE

My Lords, as the noble Lord the Leader of the House has risen to his feet, may we take this opportunity of expressing our sincere condolences to him on the very grave personal blow which he must have suffered in seeing his own constituency reverse its representation, and can he tell us what views he has about the future?

Lord PEART

My Lords, of course I am always sorry whenever anything goes Tory.

On Question, Motion agreed to.

Lord CARR of HADLEY moved Amendment No. 149: After Clause 36, insert the following new clause:

Compensation for severance

.—(1) This section applies to a person who—

1. (a) is entitled to receive compensation under section 36 above in relation to the securities of a company (the "relevant company")and
2. (b) suffers special loss or damage or reasonably incurs expenses (not being taxes) as a direct result of the vesting of those securities in a Corporation.

(2) A person to whom this section applies shall be entitled to receive a payment (to be determined in like manner to the compensation payable to him) equal to the loss or damage or expenses referred to in subsection (1) above.

(3) Where the relevant company forms part of a larger undertaking, the payment referred to in subsection (2) above shall include a sum equivalent to the reasonable cost of rearranging the affairs of that undertaking and a sum calculated by reference to any increase in the proportion of the overhead expenses of the undertaking to the volume of the business over which those expenses are spread, so far as that increase is due to the vesting of those securities and is not reasonably capable of being avoided or diminished.

The noble Lord said: My Lords, I beg to move the new clause to be inserted after Clause 36, as printed on the Marshalled List of Amendments. This new clause repeats precisely an Amendment which we moved in Committee. When I withdrew the Amendment in Committee I said that the Government's reply had been very disappointing to us, and that while I was withdrawing the Amendment I really felt I must have further consultations, particularly, of course, with the industry, about this; and almost certainly I would wish to return to the subject on Report. Indeed, as your Lordships will see, that is what I am now doing. My further consultations and the further consideration I have given to the matter myself indicate to me that there really is a need for this matter to be considered further by the Government.

If I may just remind your Lordships what this new clause is about, it is to provide for compensation to companies taken over in respect of expenses which they cannot avoid incurring in the process of handing over their company to the Corporation; in other words, in the words of subsection (1)(b) of the new clause, it is to compensate a company which suffers special loss or damage or reasonably incurs expenses … as a direct result of the vesting of those securities in a Corporation. It is impossible to be precise about what such expenses may be. In many cases they may be minimal, in which case there will be no measurable hardship to the companies concerned if this clause is not there. But in other cases they may be substantial, and I think we have established in our previous discussions that no allowance is made for them in the terms of compensation. Therefore, we are dealing with expenses which are unavoidably incurred by companies purely because of vesting their subsidiaries in the new Corporation. It really does seem to me to be contrary to any reasonable concept of equity to deny them some compensation when they unavoidably incur such expenses simply by virtue of the vesting of their securities in one of the Corporations.

When we debated this matter in Committee the Government gave about four reasons for their refusal to accept the Amendment. First of all, they said that the effects of severance were difficult to quantify. Well, I do not dispute that, but I must point out again that a previous Labour Government was prepared to make this attempt, difficult though it might be, in the case of port businesses. They did that, I must remind your Lordships, undeterred by their experience of having to quantify the severance losses suffered by coal owners on the nationalisation of their collieries in 1946. So there are those two precedents where, in spite of the difficulties, Labour Governments have been prepared to make provision for the sort of compensation for which this clause is asking. So I think that really disposes of the Government's first argument against accepting this Amendment.

The second argument was that the subsidiary status of a company would be a relevant factor to be taken into account when its securities came to be valued. As I have said, I think we elicited in the last debate that this was not taken account of in working out the compensation terms. I really do not believe that that argument is valid at all, because if a holding com- pany were selling its subsidiary as a whole as between a willing seller and a willing buyer it would, of course, take these considerations I am talking about into account in setting its price. That is precisely what the Government's method of valuation does not permit them to do. Therefore, I think it is undeniable that the actual compensation evaluation does not take into account the possibility of the sort of expenditures we are talking about in this new clause.

The third argument used by the Government in rejecting the Amendment on Committee stage was that parent companies will be able to use the compensation they would receive to expand or diversify, and thus find new employment for the head office facilities. That argument was put forward by the Government, and one of the things that we pointed out at Committee stage was that if a group suddenly lost one of its subsidiaries it would still be left with the head office overheads and perhaps the research and development overheads and other overheads which were previously spread over all of the companies in its group if suddenly it lost one or more of those companies. It is impossible to reduce the overheads very quickly or suddenly. In some cases it is not possible to reduce them completely.

I do not believe that the Government have answered that point, because it is true that the companies can reinvest the compensation they get and, to some extent at least, replace the activity which they have lost, but that is not something which cannot be done overnight. First of all, they are not going to get the money overnight. There will be considerable delays before they actually get that money. Having actually got the money, it is not possible suddenly to start up some new activity, either from scratch or by buying some other company overnight. There is at least bound to be a substantial period in which the fixed overheads of the groups have to be spread over a smaller range of activities and therefore will add to the costs and reduce the profitability of those other activities. There again, I think that the Government have not begun to answer the argument we are making.

The last argument that the Government made against accepting our Amendment on Committee stage was that the precedents I quoted then, and again this morning, of the coal and port businesses, were not analogous to the aircraft and shipbuilding industry. It may be true that the severance losses to be expected in these cases may be less severe than they were in the case of coal and the port businesses. I do not believe that that alters the principle. We do not know how great they will be. I accept that it is likely that they may be smaller than in those previous cases, but the principle we are arguing is a principle of equity. One cannot dispose of an argument on equity by saying that the loss will he smaller than in some other cases which have been dealt with in this way in the past, unless a substantial argument can be produced that they are going to be so small that it would be genuinely possible to discard them on de minimis grounds.

The Government simply have not brought forward any arguments to show that it is reasonable for us to accept that the sort of losses which we are seeking to cover will be so small as for it to be fair to discard them on de minimis grounds. Therefore, I believe that there is an argument in principle here which Governments ought, in fairness, to accept. I really do not understand why they should be reluctant to accept it. May I end my speech by pointing out that the Government are themselves being inconsistent because in what is now clause 50(12) of the Bill they provide compensation for disruption of existing compensation schemes. Of course we are glad that they are doing that, but by doing so they are giving away their case in principle. They are admitting that there is a case for providing compensation for extra costs involved as a result of a group having to vest its subsidiary or subsidiaries in one of the corporations. If they are prepared to do it for pensions—and of course we welcome that—then I believe that they throw away their argument in principle against allowing it to be done in other cases as well.

I hope I have said enough to indicate to your Lordships that there is a case in equity for dealing with this matter along the lines that we suggest. If it turns out in practice that the fears of some companies about the costs in which they are going to be involved of the kind I have mentioned are indeed very small, then no one will be any worse off. The taxpayer will be no worse off. But since we cannot be sure what these costs are going to be, in fairness I believe we ought to provide for them to be compensated for if they arise. I beg to move.

Lord TREFGARNE

My Lords, I hope the noble Lord, Lord Melchett, will take the point of my noble friend Lord Carr seriously and give us a fair and considered answer. I should like to put to the noble Lord by way of emphasis a simple but hypothetical case to which I hope he will listen, and I hope lie will consider it carefully and explain to me why it is, as I believe, that the Government are not compensating these companies in a proper way. Let us imagine a small group called Smith Holdings (that was, I believe, a mythical group referred to by my noble friend Lord Carr at an earlier stage) purchasing a computer or renting a computer to operate its accountancy system. It would have its bought and sold ledgers, its pay roll and so on, all programmed into the computer. It would have, for example, three subsidiaries and the parent company, making four companies in all, using the services provided. If the annual rent of that computer were £120,000, then each of the members of the group would contribute £30,000 a year to the rental of the computer. If one of those subsidiaries were nationalised, there would be only two subsidiaries plus the parent company; that is, three companies remaining to operate the computer. Therefore, the annual contribution that each company would have to make to the rental would be £40,000. In other words, each of the three subsidiaries would be experiencing additional costs of £10,000 per annum simply arising out of nationalisation. I agree and accept that that is a hypothetical case, but it is, I hope, reasonably simple and straightforward. I want to ask the noble Lord why it is that the Government are imposing these additional costs, such as those upon companies not to be nationalised when they take their subsidiaries without proper compensation.

Lord ORR-EWING

My Lords, may I add my voice to the desire we have for some form of compensation here. Rather than take a hypothetical case, I will take the particular instance of the company of which I am a non-executive director, and thereby I declare an interest. By taking an instance which is live, where I know the facts, I feel it underlines the position rather better. We have a group of 18 companies and if the Bill goes through in its original form two of those companies will be nationalised. It may not seem to be many but in terms of turnover it is substantial. That will take between a third and one-half of the total group turnover away under nationalisation.

It happens that our headquarters office is on land owned by one of the big companies to be nationalised, George Clark & NEM Limited, the marine engine building company. Although we own the offices, the land is leased to us by the marine engine building company. We do not know at present how long we want to stay there. Obviously we would want to stay in those offices during the period of negotiations for compensation because it is easier to be on site when the files and facts are available. Incidentally one of the injustices is that at present, after vesting day, we have no right to information at all; all that is going to be denied to us after vesting day in helping us to negotiate a fair compensation price. Putting that apart, it could well be that the nationalised company would want those offices. It would be common to most nationalised concerns; they generally breed people in offices fairly fast and they will want them. We would not want to be right on their land, we would want to move further away, perhaps nearer to the geographical centre of the new group. What would happen?

First, as we have lost half to a third of our turnover it is right that presumably we should want less people to be at group headquarters. At present 30 are employed there; key people, accountants, specialists, metalurgists, engineers, advisers to the group. Obviously, it would not justify the same number, so we have to run down the numbers. We have therefore got redundancy pay to he met in the cases of however many it might be. It might perhaps be 10 out of the 30 will have to go, many of them long serving, many of them seniors. We have to get rid of those. In the case of redundancy pay half is paid by the taxpayer but half falls upon the company itself. So we have to look for new offices; some new centre nearby. We may have to pay out because people may have to move a long way away, and nowadays there is generally some compensation to be paid for movement costs; finding a new house, agency fees, and the like. This is common for key personnel in any industrial concern.

So we have a double cost. First we have to find new group headquarters, we have got to negotiate either its purchase or its lease. We have got to run down our personnel. We have got surely every conceivable entitlement to some sort of compensation for severance. That is an actual case. The facts are in broad terms as I have given them. I should have thought that there was a castiron case for accepting this Amendment in the interests of fairness, but in the interests incidentally of continued prosperity for the rump of the firm and the well being of all those other people employed who are not being taken over. This must be just as important for the well being of our country as for any other industrial manufacturing concern. I hope that the Government will take this illustration seriously because the facts are as I have given them.

11.42 a.m.

Lord MELCHETT

My Lords, as the noble Lord, Lord Carr, said, we had a useful discussion of the subject of severance payments in connection with a similar Amendment tabled at the Committee stage. Since that time we have given further thought to the subject in the light of the points raised, but I regret to say that I have to tell noble Lords opposite that the Government have no reason to change their position on this Amendment.

The question of severance payments cannot be considered in isolation. The subject has to be viewed in the light of all the vesting and compensation provisions in the Bill. The Bill provides for the securities of the scheduled companies to be vested in the new Corporations under Clause 20. Therefore, complete companies are taken over as going concerns. However, we have recognised throughout that within a group company structure, which is the prevalent situation in the case of companies covered by the Bill, subsidiary companies are less distinct from their parents or fellow subsidiaries than might otherwise be the case. For historical reasons the edges of ownership of particular assets may well be blurred, and the owner and the user are on occasions different people. I think that is the case in the example which the noble Lord, Lord Orr-Ewing, gave to us. In fact, the example he gave of the head office of a vesting company could be owned by its parent company, even though it is occupied solely by the vesting company; or at least that is a different variation on the theme that the noble Lord gave to us. I am sure that there are other examples as well.

In view of this, Clause 21 has been included in the Bill to tidy up the loose ends. It provides for property, rights or liabilities of a non-vesting company in the same group as a vesting company to be taken into public ownership where they are directly relevant to the vesting company. The mechanism of the clause allows for these "appurtenant" assets to be vested in the scheduled company at the date of transfer. Under Clause 39(7) compensation for the securities of the vesting company is adjusted on the assumption that the assets so vested were part of the vesting company during the reference period. I hope that noble Lords will agree that this goes a long way towards removing the possible disruptive effects on group companies brought about by the vesting of subsidiary companies. But that is not the whole story. Under the Bill we are valuing unquoted securities as if they were quoted.

Lord CARR of HADLEY

My Lords, is it too much to ask the noble Lord to see whether he could apply that principle he has just enunciated in the Bill to the particular case mentioned by my noble friend Lord Orr-Ewing? I do not mean in amounts, but so that we understand how much of the problem mentioned by my noble friend would be dealt with under the clauses that the noble Lord has mentioned. I do not quite understand.

Lord MELCHETT

My Lords, I have only got half-way through the explanation but I think it would be difficult—and I hope that the noble Lord, Lord Orr-Ewing, will accept this, and other noble Lords opposite—for me to give an answer on a particular case. After all, that will be the subject of negotiation and then arbitration if necessary, and indeed if the noble Lord's Amendment to the Bill stays in the arbitration may go very wide on this sort of point. I know that the noble Lord, Lord Trefgarne, has raised a hypothetical case and, if I may, I will come to that in a moment. But it would be very difficult for me to give an answer to a question raised on a particular case. I can enunciate the broad principles, but it is difficult to say what would be the particular answer. To put it more simply than I did just before the noble Lord intervened, the broad principle is that if assets are wholly relevant and necessary to the business they will be acquired under Clause 21 and compensation will be paid.

Lord TREFGARNE

My Lords, is the noble Lord saying that Clause 21 provides that the new Corporation could, in the case of my hypothetical example, take over the leasing agreement, for example, on the whole of the computer when the subsidiary that was to be vested only used it for say a quarter or less of the time?

Lord MELCHETT

My Lords, no, I said that if the assets are wholly relevant and necessary to the business then they can be taken over by the new Corporation. Again, it is difficult to give an answer in a hypothetical case because it would depend on a variety of factors which the noble Lord has not mentioned. For example, how necessary it was for the bit that was vesting to continue to use the computer in the future or not, and I can think of a whole string of other possibilities. If I could be allowed to continue with my speech, I hope that I might be given a chance of enunciating the broad principles of the Government's case. So far I have gone through half of the story.

Under the Bill, we are valuing unquoted securities as if they were quoted. If the securities of a company were quoted, then it could not have been a subsidiary company. The basis of valuation therefore produces two indirect benefits to the shareholders. First, unquoted securities are almost always worth less than equivalent quoted securities. But by valuing unquoted securities as if they were quoted, this discounting is ignored. Secondly, the valuation process, in assessing the worth of the securities will need to take into account the factors which would have been relevant to the company had its securities been quoted, and hence if it had not been a subsidiary. To a certain extent, therefore, the effects of severance will be reduced by virtue of the assumption that the company stood as an independent entity when the share valuation takes place.

The noble Lord, Lord Carr, again referred to the precedents in the coal Act and the Ports Bill for making allowances for severances. I went into some detail at the Committee stage on why I felt that neither of those two precedents was relevant to this Bill. I honestly do not have anything more to say about that, but, to be frank, the noble Lord, Lord Carr, has very often during the stages of this Bill criticised me for completely ignoring what noble Lords opposite have said and not answering the points at all. I think the same criticism could, ever so gently, be directed at him in regard to what I have said on the two precedents at the Committee stage, because the Ports Bill does not provide any sort of precedent at all, and I tried to make that clear.

The noble Lord, Lord Carr, also suggested in his speech, as he did in Committee, that there was inconsistency in the Bill in respect of severance because we were compensating the group under Clause 49, which is now Clause 50, for severance of pension schemes, but were refusing to include in the main compensation provisions compensation for severance of other central services and other matters. This is a misunderstanding. The pension schemes have of course separate legal identity distinct from the companies and their shareholders.

The pension funds are trusts for the benefit of the members of the schemes. Clause 50 as it now is provides that where regulations are made under the clause—for example, to split pension schemes—as a general principle nobody should be worse off and, accordingly, there might have to be some adjustment of funds between those members coming into the publicly owned sector and those not coming in. The comparable principle in the case of companies and shareholders, which is a quite different situation, is the payment of compensation for the vesting part as if it were free standing. In other words, Clause 36 provides for compensation for the loss of shares and Clause 50 provides for compensation for loss resulting from changes in pension schemes.

For these reasons we believe that with the existing provisions of the Bill, the problems of severance raised by noble Lords opposite will be significantly reduced if not entirely eliminated. The vesting of the scheduled companies will be achieved with the minimum of disruption to former parents and fellow subsidiaries and compensation will be determined fairly in relation to the situation of each company. I hope that with this further, rather lengthy, explanation, the noble Lord will not press the Amendment.

11.52 a.m.

Lord LLOYD of KILGERRAN

My Lords, may I ask the noble Lord, Lord Melchett, a question about the phrase he uses from time to time about compensation in relation to assets which are necessary for the operation of the company? I think those were his words—that compensation is payable in relation to assets which are necessary for the operation of that company. I realise that he may not be able to give me an immediate answer, but is he aware that many companies, subsidiaries or corporations also may have very considerable know-how—property known as industrial and intellectual property—which they are able to exploit? As often happens, however, such assets are not immediately necessary to the operation of the company at a particular time. The know-how of this sort of property is valuable in the exploitation of further developments of the company or it may have been of advantage to the company some months previously, although it may not be necessary for the operation of the company at a particular time. If I misunderstood the phrase the noble Lord used I apologise for interrupting him.

Lord MELCHETT

My Lords, I had in fact completed my remarks but perhaps it would help if I repeated the phrase I used, though I should not like to answer off the cuff the points which the noble Lord made. I said that Clause 21 provides for property rights or liabilities of a non-vesting company in the same group as a vesting company to be taken into public ownership where they are directly relevant to the vesting company. I do not know if repeating those words makes the matter clearer, and I will write to the noble Lord on the particular points he made.

Lord LLOYD of KILGERRAN

I am obliged to the Minister, my Lords. Is he aware that many companies have this know-how of intellectual property which is of tremendous value, property which is totally different from any other property such as plant and factories? I am grateful to the noble Lord for undertaking to write to me because the words he used did not seem to carry the matter much further forward.

Lord CARR of HADLEY

My Lords, I fear that we are going to give the noble Lord, Lord Melchett, a busy week-end of letter writing because I, too, want him to write to me as a matter of urgency. We want to be reasonable about this and I accept that Lord Melchett wants to be reasonable, too. It is a matter of difficulty of understanding and I appreciate the noble Lord's difficulty in answering the sort of intervention I made, even if I had made myself as clear as possible, which I probably did not. As I see the case that he is making to us again today, the noble Lord, Lord Melchett, is not attempting to deny that some genuine severance expenses will be, or at least may be, incurred but is seeking to claim that in so far as they are incurred they are fairly taken into account in the compensation clauses. If I remember correctly our debate in Committee, I felt that he was not making that claim in Committee, but that may have been my mistake and not his. If I did not re-read what he said carefully enough, I apologise, but I think I am right in saying that what he is saying now is that there will be or may be some expenses but that in so far as they are involved they will be taken into account in the method and amount of compensation.

So that we may consider the matter before Third Reading, I should like the noble Lord to write to me—no doubt also to my noble friend Lord Orr-Ewing!explaining, not in any quantitative sense but in principle, how this applies to the specific concrete case which my noble friend quoted. It is clear from what my noble friend said that the group of which lie is a non-executive director will undoubtedly incur expenses wholly due to this measure. The remaining group will undoubtedly, after a short interim period, need to remove their head office off the land of one of the companies in the group which is being nationalised. Obviously it would not be a suitable arrangement permanently for them to have their head office on land owned by the company which has been nationalised, even if the Corporation were prepared for that to be a permanent arrangement, which I doubt, and equally I doubt whether the remainder of the group would want such an arrangement. There will, therefore, be the expense of moving their head office and one cannot deny that that could be a considerable expense.

Further, as the concern will be losing about one-third of the group's present turnover, they will have to reduce their headquarters staff, at least until they have their compensation money and can re-expand again. It is not only painful but expensive to reduce staff, and rightly so because people who are declared redundant must be properly compensated and looked after in many ways, and although there are redundancy funds which roughly speaking cover this on a sort of insurance basis, an employer suffers direct costs when, through no fault of his own, he must reduce his staff. The concrete case which my noble friend put clearly brings home that real cost will be incurred by that group solely because of the Bill and the nationalising of this company within the group. I want to be assured—not in quantitative terms; not to agrue whether the amount is or is not enough—that the compensation terms allow for some compensation in principle to the group which my noble friend quoted for expenses which will undoubtedly be caused wholly and solely because of this nationalisation.

There can be a further argument later as to whether or not the amount of compensation is enough. I stress that I am not arguing about adequacy. I want to be assured before Third Reading, in view of what the noble Lord said today, that I am right in thinking that in principle the compensation terms can take account of the sort of costs which my noble friend put before the House. If they do not, then I do not believe the Bill is fair in its present form. If they do, then perhaps we might be prepared to admit that it is fair. If the noble Lord will write to me about that before Third Reading I will be prepared to withdraw the Amendment now, on the understanding of course that depending on the letter 1 receive from him we may or may not wish to return to the subject on Third Reading next Tuesday.

Amendment, by leave, withdrawn.

Clause 37 [Payment of compensation]:

Lord MELCHETT moved Amendment No. 150: Page 50, line 10, leave out ("22(7)(a)") and insert ("22(6)").

On Question, Amendment agreed to.

12 noon

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 151:

Page 50, line 31, leave out subsections (6) and (7) and insert— ("(6) where, after the date of transfer, a Stockholder's Representative submits a claim in writing to the Secretary of State for payment on account of compensation in respect of the vesting of securities under this Act, the Secretary of State shall within six months of that date make a provisional estimate of any compensation so payable and compensation stock equal in value to 75% of that amount shall forthwith be issued to, or at the direction of, that person or his successor in title".)

The noble Lord said: My Lords, the Amendment addresses itself to making it obligatory on the Secretary of State not to delay paying compensation. We had a little debate about this at the Committee stage and, under strong pressure, the noble Lord, Lord Winterbottom, reluctantly agreed to go back to his right honourable friend to see whether there was any possibility of his considering some of the points that we had made. At the time, we received strong support from the noble Lords, Lord George-Brown and Lord Robbins, among others. I believe that the noble Lord, Lord Winterbottom, agreed in principle. In fact, he said most specifically that there was nothing between us about the Government's intentions. He said that payments on account should be substantial and should he made at the earliest possible opportunity. I was not quite sure what he meant when he prefaced his remarks by saying, If the provision is to be of any real value but I am sure that that was only a lead-in to the main point that we all agree that payments should be substantial and should be made quickly.

The difficulty is that nobody wants to part with their money prematurely and that, with the greatest respect, neither the Government nor the Civil Service are noted for the speed with which they operate, particularly if they are parting with their money. Indeed, anybody who has had practical experience knows that a bureaucracy may sometimes, if pressed too hard, be tempted to say: "Look, if you make my life too awkward and if you push me too hard, I promise you that this particular thing will take a very long time to process." This should not happen. We agree that it is regrettable but, frankly, we all know that it does happen from time to time. The noble Lord, although he gives all sorts of undertakings, has resisted most strongly accepting any obligation to be placed on the Secretary of State.

I must deal with one argument put forward by the noble Lord, which I did not think a very good one. He suggested that there was a possibility that an overpayment might be made and that this would not be in the best interests of the shareholders. I accept that an overpayment could be made, because I think that the noble Lord was taking the point that there could conceivably be liabilities which had not come to the surface in trying to determine what the ultimate compensation would be, but I do not think that there is any point at this stage in resurrecting all the arguments about the treatment of these liabilities about which, as the noble Lord will be aware, we were not terribly happy in some cases. This was particularly so in the case of certain kinds of loan which are not given their full value.

I do not believe there is any need to go into the splendid semantic argument between the noble Lords, Lord Winter-bottom and Lord George-Brown, about the definitions of industrial democracy being like elephants that one can recognise when one sees them, because that had nothing to do with this point. However, the other thing that I think one should say is that we are here in an inflationary situation.I can never remember the figures and do not know what the devaluation of the pound has been in the last few months, but what one knows beyond doubt is that inflation is running at the rate of something like 1½ per cent. per month—and it is doubly important that, in circumstances of this kind, there should be no delays in payments. My noble friend Lord Carr also made the point, which I feel is again relevant here, that the probability is that these moneys will be needed and will be used for reinvestment in further productive activities associated with the industry which it is likely that the companies will wish to deploy.

Therefore, we are saying here once again that it is of course nice that the Government accept the principle involved. Of course it is very good of the noble Lord to give us undertakings but we ask him to accept that, with the best will in the world, undertakings are not suable and are not very powerful weapons in the hands of the suppliant and that we believe that, in equity, it would be proper to put in some such provision as this. I am not particularly wedded to the figures and I know that the noble Lord said that flexibility would be reduced, but I would ask him, if he cannot accept exactly what is written here, if he would not do his best to come forward with some alternative form of words that would strengthen the arm of a person who is merely asking to be paid what he is owed without undue delay. I beg to move.

Lord WINTERBOTTOM

My Lords, the noble Lord has reminded the House that we had a full discussion on this Amendment and Amendment No. 152 at an earlier stage and that at one moment I even strayed into the jungle with the noble Lord, Lord George-Brown. I attempted to explain the intention of the Government with respect to payments on account. I am afraid that I cannot do very much more than reiterate the position. The noble Lord, Lord Strathcona, thought that the door had been opened a chink by the reply given in Committee and hoped that it would be pushed open a little wider later. I am afraid that I may disappoint him, but I may be able to state with greater clarity what is the Government's attitude.

Of the 43 companies named in the Bill, 42 are unquoted. In all these cases, compensation will be determined under the provisions of Clause 39, by negotiations with recourse to arbitration. While it is our intention and wish to complete these negotiations as quickly as possible, it is inevitable that, even with the best will in the world, it will be some time before all the settlements are reached. We recognise that shareholders could feel aggrieved if they have a long wait before they receive their compensation, even though interest on the stock will accrue from vesting date. It is for this reason that we feel it right to make provision in the Bill for the Secretary of State to make payments on account of compensation stock. May I say, speaking personally, in relation to that, that I feel that the noble Lord's argument in regard to inflation is valid, in that the longer the delay, the less valid the coin in which the settlement is paid. I think that that is a valid argument which I am certain my right honourable friend will note.

I believe that we all agree that the negotiations will he complex. Not only will it be necessary to settle the base value for compensation, it will also be necessary to establish, on the basis of a detailed investigation of the companies' records, whether there are any inter-company debts to be treated as securities under Clause 22 and whether there are any appropriate deductions to be made under Clause 40. I repeat the Government's intentions: while it is our intention to make payments on account within six months of vesting day, the complications of the negotiations may be such that, in some cases, it might not be possible to reach a sufficiently definitive view in that time scale. The Amendments, if passed, would reduce the flexibility in the present provision which could act against the interests of shareholders where the negotiations were particularly complicated. I think it is fair to argue that it is much better to avoid making payments on account that might, in the light of further negotiations, have to be reclaimed. This is a hypothetical situation, but one which might arise.

I have to repeat the phrase that I used before, that if the provision is to be of any real value payments on account should be substantial and should be made at the earliest possible opportunity. I think that the noble Lord will agree that too small a payment made too late is of no real value, and that is the reason for my introductory phrase to the effect that if the provision is to be of any real value payments must, I repeat, be substantial and must be made at the earliest possible opportunity. It is therefore intended that payments on account should be as large as possible and should be made as early as possible, consistent with the uncertainties still surrounding the negotiations.

The noble Lord mentioned that it is the nature of Governments and their servants to be dilatory, but we can also say that it is the nature of Parliament to be alert and awake, and I should imagine that six months after vesting clay noble Lords will be recalling what I have said and may question me if substantial and early compensation has not been paid. I should think that that is a corollary of what I have been saying.

The Earl of ONSLOW

My Lords, I should like to interrupt the noble Lord if only for my own clarification. Is there to be any interest payable on the money from vesting day to the time that it will eventually be paid out? I ask this because if there is not it will mean that to a certain extent the Government are borrowing for nothing when they would have to pay 15 per cent. in the open market, and consequently even after six months this would be a depreciation on a loan of 7½ per cent. Perhaps the noble Lord can assure me on this.

Lord WINTERBOTTOM

My Lords, I thought I said clearly that interest is paid from vesting day to the date of payment. Noble Lords who have put down the Amendment suggested a payment of 75 per cent. of the Secretary of State's estimate, but the setting of such a figure is bound to reduce the flexibility of the provision, and in cases of great uncertainty it could be too high, while in other cases where there are a few problems it could be too low. Either way one party or another could suffer, and it is far better for everyone to retain the degree of flexibility in the existing provisions. In Committee, the noble Lord, Lord Robbins, suggested that a solution to the problem could be to allow the Arbitration Tribunal to settle the timing and the amount of payments on account. This suggestion may have some superficial appeal, but it might act to the detriment of the shareholders. Noble Lords should remember that the arbitration process is reached only at the stage when negotiations have failed to reach a solution.

In these cases where there is no arbitration the shareholders could be deprived of the opportunity of payment on account, and if arbitration took place at a late stage payment might become unacceptably delayed. The noble Lord, Lord Robbins, did not really suggest a true safeguard, but I assure the House that the existing provisions for payments on account are intended to give a real benefit to shareholders. It is not intended to be a cosmetic provision, but one which will be used to the fullest possible extent consistent with the progress of negotiations. It will be operated in the best interests of shareholders, and payments will be made as soon as possible and in the largest amounts possible. I hope that I have now made somewhat clearer what I said at a previous stage of the Bill and that the assurances I have given are somewhat firmer. For this reason I ask your Lordships not to press the Amendment.

Baroness SEEAR

My Lords, before the noble Lord sits down I should like to put a point to him, although I do not really expect him to answer this. Why could the Government not consider indexing the payments? This would be a very useful prod in order to get on with it, on the one hand, for those who have to pay, and if there were delay there would be satisfactory compensation for those kept waiting.

12.14 p.m.

Lord SHINWELL

My Lords, have we no experience to guide us in these matters, the kind of experience of what has happened in the past when industries have been transferred from private ownership to public ownership? Tribunals have been appointed and some have been expeditious in their operation while some have been a little sluggish. It seems to me that everything depends on the capacity, the ability and the readiness to come to terms by those who are responsible for the negotiations about the time of compensation, how much should be paid on account and so on. In part of his reply my noble friend gave what is perhaps a more satisfactory answer than much of the jargon that has been used about this matter, when he said that he would not be at all surprised if after a period of six months—or some period—he might be asked questions about why the transactions had not been implemented or carried through. If there is any sluggishness on the part of those who are responsible for dealing with this matter of compensation, there is always the remedy that questions can be asked in Parliament, and that could be very helpful.

Quite frankly, I dislike the whole of this part of the Bill, because I can recall that when the mines were nationalised the demand was made by quite a number of people for confiscation. They said, "Why pay the coal mine owners anything at all?" I resisted that very strongly and I had considerable support in my hesitation to accept that concept. But we appointed a tribunal. We said that it is not for the Minister to decide; it is not for the civil servants to decide. We appointed a tribunal which on the whole dealt with the matter expeditiously. I know that there were some cases where it took about eight years to come to a decision, but that was because of complications which existed and into which I need not enter now. I would rather have had a tribunal appointed—not civil servants necessarily; they are inclined to be a little sluggish. They do not like to pay out, or perhaps they are too busy, or they may have gone on holiday. I do not want to indulge in unnecessary criticism, but this matter could have been dealt with much more satisfactorily had it been decided in the Bill to appoint a body, a tribunal—judicial or otherwise—which would have dealt with the whole question of compensation, with instructions to proceed as expeditiously as possible.

Lord CAMPBELL of CROY

My Lords, I should like to refer briefly to the suggestion made by the noble Baroness, Lady Seear. She asked why had the Government not accepted some form of indexation? I have twice moved Amendments, at the Committee stage and earlier, which the Government did not accept, but which I still hope they will reconsider, which would have introduced an indexation system for payments of compensation where the payments were delayed through no fault of the people who were due to receive them, and I hope that the Government will keep an open mind on this.

Lord TREFGARNE

My Lords, I found the answer of the noble Lord, Lord Winter bottom, unconvincing. He seemed to be saying that if anybody was concerned or aggrieved about not being paid quickly enough he could arrange for a Question to be asked in your Lordships' House or in another place and that that would prod the Government into action. But questions to Ministers, either in your Lordships' House or in another place, have no binding effect upon the Government. They do not necessarily oblige them to take any course of action. Perhaps the noble Lord imagines that by exposing some undue delay the Government would be prodded into action by the odium of the companies concerned or by the odium of the people, but if the Government were in any way responsive to the odium of the people they would not be introducing this Bill in the first place.

Lord STRATHCONA and MOUNT ROYAL

My Lords, the industry will have listened carefully to, and will have appreciated, what the noble Lord has said, and we will follow this up in Parliament as the noble Lord has suggested and as the noble Lord, Lord Shinwell, has mentioned. I was not suggesting that there was dilatoriness necessarily, but we were suggesting that the wheels of some Government Departments grind exceeding slow at times.

Thirdly, I accept the point which the noble Lord was making that the suggestion made by the noble Lord, Lord Robbins, might have the effect of leading to further delay. I am bound to tell the noble Lord that I do not really think he has made the point that our suggestion could act against the shareholders' interests, but I do not think there is any need for us to pursue this. I know his heart is in the right place. He has offered to bare the Government's breast, and if we have any weapons to thrust into it later on I can assure him that we shall lose no opportunity to use them. My Lords, I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

Clause 38 [Base value of securities of a listed class]:

12.21 p.m.

Lord TREFGARNE moved Amendment No. 153: Page 51, line 4, after ("days") insert ("multiplied by 4/3").

The noble Lord said: My Lords, I rise to move Amendment No. 153, which is to Clause 38, and I should like to speak at the same time to Amendment No. 154, which is to Clause 39. I am of course aware that two Amendments similar to these, which were designed to have the same effect, although I think these do it better, were moved by myself during the Committee stage, and I am sorry to say that I was totally unconvinced by the reply that I received. The fundamental point that I want to make—and it is quite simple—is that the Government have set the basis for compensation as the Stock Exchange price of these shares calculated over a certain period, and have said that that is a fair and reasonable method of calculating the value of the whole enterprise. I want to say quite clearly that I think that is a totally mistaken impression on the Government's part, is quite wrong and is totally unjust.

My Lords, there is a certain amount of case history available to us on Stock Exchange bids and deals, of course, and I want to tell the noble Lord, Lord Winter-bottom, if he does not already know, that during a period similar to the one provided in the Bill a number of takeover bids were effected through the medium of the Stock Exchange in relation to quoted companies, and that the average percentage increment over the share price finally paid by the acquiring companies was, on average, no less than 48 per cent. above the hid price prevailing at the start of the bid. Perhaps I can take some examples quite at random from the list that I have been given. When, for example, Brook Motors acquired Opperman Holdings on, I see, the 25th July 1973, the increment was 28 per cent. above the prevailing share price. To take another example, when GKN acquired Kirkstal Forge on the 15th December 1973, the final acquisition price was no less than 48 per cent. above the share price immediately before the bid was announced. As I have said before, the average over that period was 48 per cent., and there were examples of 122 per cent, and 100 per cent. spread throughout the list.

Lord PARGITER

My Lords, would the noble Lord give way for a moment? Would the noble Lord not agree that very often these prices bear a particular relationship as between two companies, in that the acquisition of one company by another company may not have a proper regard to its existing share value but to what it might be worth to that particular company; that is, not what it is worth on the general market?

Lord TREFGARNE

No, my Lords, I would not agree with that at all, I am afraid. If that were to be the case there would be some examples where the bid price was below the prevailing share price, and I am sorry to tell the noble Lord that there are no examples on my list, and I believe none available, of such a case. My Lords, the fact of the matter is that, in my view, the Government are seeking to acquire these companies together with the control by acquiring all the shares, but are paying nothing for the control. In other words, they are confiscating the control; and the Amendments which I have tabled seek to rectify that, what I believe to be, glaring injustice.

It is not true to say that the shares as quoted on the Stock Exchange represent the price of the control, because companies never acquire control by means of repeated small purchases on the Stock Exchange. Indeed, I believe that is contrary to the rules of the Stock Exchange, to acquire control simply by purchasing shares on the open market. My understanding is that when a company seeking to acquire another acquires more than a certain percentage of that company's shares, it is required to declare that fact and to make a formal bid; and it is at that point that, to acquire all the shares, it becomes required to pay a premium over and above the share price immediately prevailing before the bid. My Lords, I hope I have made my point clearly. I beg to move.

Lord WINTERBOTTOM

My Lords, the noble Lord is in fact putting into numbers the argument that we had at earlier stages of this Bill; namely, that the sum of these elements of a company is less than the value of the company as a whole and as a going concern. That is really the argument that we have been hammering out. I accept that it is a very important point that he and other noble Lords have raised. Before I go on to try to answer his argument, I would say that taking a takeover figure as the one which we should use to illustrate the argument is, I think, not correct. My noble friend Lord Pargiter has in fact, I think, given that answer: that the bringing together of two companies by a takeover bid brings into the calculations many factors which are completely outside the situation we are discussing now. I do not think I will go into that in detail, but it is a different sort of operation from the one which the noble Lord is expressing in the terms of his 4/3 or from those which noble Lords have argued as matters of principle earlier in our discussions.

However, I am afraid I cannot accept the arguments, used by honourable Members in another place and some companies, that since we shall be acquiring a large number of subsidiary companies which will be wholly owned by their parents we ought to be paying something more than the Stock Exchange listed price for the controlling interest. We have tried to find the best formula we can, and we believe that the Stock Exchange quotation represents the willing-seller/willing-buyer price for a security, which, we believe is the fairest way to reach a calculation which we can achieve. Where companies are negotiating for the price of controlling interests in other companies, it may be necessary to pay a premium to persuade existing shareholders to sell. This is a situation of a willing buyer and an unwilling seller. This additional payment of a premium is the subjective adjustment reflecting the degree of unwillingness. But in a nationalisation measure approved by Parliament the compensation paid to shareholders should reflect the objective worth of the companies.

Indeed, it could be argued, perhaps, that in the case of unquoted securities the compensation terms already give a benefit. Unquoted securities are generally worth less than equivalent quoted securities simply because they are less easily traded. But if we are valuing unquoted securities as if they were quoted, this might be of value to the parent company in reaching the final calculation. Thus, for this reason we believe that the discount which might be associated with the lack of quotation may be ignored. For these reasons, my Lords, I ask the House to reject the noble Lord's Amendment.

The Earl of ONSLOW

My Lords, the noble Lord, Lord Winterbottom, made quite a lot of play about the fact that in a voluntary takeover situation there is a premium on the shares solely to make it agreeable. But this is not a voluntary situation; this is a forced sale. It seems to me to be more logical, if it is a forced sale and the people do not want to sell, that you should pay a higher premium than when it is voluntary.

Lord ROBERTHALL

My Lords, although I do not agree with the Bill as a whole, I feel that the Government would be unwise to accept this Amendment. The difference between an ordinary takeover of the kind referred to and these is that the take-over company expects to make much more use of the assets than have the existing company. It seems to me, speaking as a taxpayer, that it is not very likely in this case that the assets will be used much more advantageously than they are now. I think there is a marked difference here.

The Earl of LAUDERDALE

My Lords, the noble Lord, Lord Roberthall, has put his finger on the nub of the matter. The assets—and we have been saying this throughout the debates—are not going to be used more advantageously. This is the tragedy about the whole project. It was Tacitus who said long ago that they have laid the country waste and called it peace. The project is virtually to destroy these industries and to reduce the use of their assets. The noble Lord, Lord Roberthall, put his finger on the heart of our disputes over the Bill. As my noble friends Lord Trefgarne and Lord Onslow have said, this is a forced sale.

The noble Lord, Lord Winterbottom, whom we all respect and whose position as a social democrat we all honour, is somebody we trust. He is one of the people in his Party—there are a few left—in whom we really have great confidence. I do not want to embarrass him by saying this, for it may be that the laurels I cast about him are to his disadvantage elsewhere. He has used the argument that what Parliament decides is not a forced sale. But it does not make it less of a forced sale because Parliament has decided it; let alone when Parliament decides it through a minority Government resting on a very small element of public support—and a good deal less today than yesterday, may I remind him. He will have heard about Workington and about Walsall where, as a matter of fact, I was born. I was born abroad; I happened to be born in Walsall.

He will realise that what is being thrust upon Parliament is being thrust upon it by a minority Government unsupported by the public and at the behest of a part of the Government's supporters. Because that is thrust on Parliament and because Parliament is so constituted that we probably cannot prevent it, then he says that it is not a forced sale, that the victim must accept it with a smile. But it is a forced sale, and no amount of pretence about the Government representing the will of the people makes it not a forced sale. Even if all the people wanted it—and they do not—it is still a forced sale. That is why we are really in the situation of a willing buyer dealing with an unwilling seller.

My Lords, I have asked this question twice before and have not had an answer. How is it if the Government do not approve of takeover prices in the case of nationalisation, that they approved of the British Transport Docks Board's offer of £1.50 a share for shares standing at 90p when the offer was made? The Government accepted the takeover price. They rallied their troops to come here to support that point of view. They put up my friend the noble Lord, Lord Wynne-Jones, to move the Bill about Felixstowe because they believed in a takeover price. Now they say that they do not and that what Parliament says must obtain, regardless of the pain of the victim. This is not fairness by any stretch of the imagination. I think that in his heart the noble Lord, Lord Winterbottom, knows it is not fair—and he is a very fair-minded man.

Lord CARR of HADLEY

My Lords, I am not going to advise my noble friends to support this Amendment in the Division Lobby because, however regretfully, we have come to the decision that it is now hopeless at this stage of the Bill to try to get the Government to accept a totally different basis of compensation. Therefore, we have continued to concentrate our efforts on Amendments which would at least provide the arbitration tribunal with sufficiently wide terms of reference to be able to take into account all the relevant factors in order to arrive at the end of the day at something nearer the fair valuation than can be provided by the Government's chosen formula.

Although that is our position, I feel that I must repeat what we deeply believe to be the utter fallacy of the sort of arguments advanced again by the noble Lord, Lord Winterbottom, and by other Ministers in this House and in another place. We must remind the Government and not only Tory MPs in another place or Tory Peers in this place but Peers of all Parties and of none in this House, and anybody who claims to have expert knowledge of these matters outside this House, that the Government's chosen method, the formula which they have put into the Bill, cannot produce the results which they admit they want to produce. There really is no difference of objective between us. It is a total disagreement about method.

All I want to do now is to repeat the basic reason for this difference of method. The Government keep talking about the earning power of the assets being nationalised, and they say that the Government's aim is to enable shareholders to replace that earning power. Where they go wrong is to say that they can do that by having compensation based on the Stock Exchange price. Earning power is of two kinds. The earning power of the Stock Exchange shareholder is measured by the dividends he receives from his shares. That is quite clear. If one is wanting to compensate the Stock Exchange shareholder on the earning power of his shares it is perfectly fair to do it on the basis of Stock Exchange prices. I think that we agree about that.

Where the Government seem unable to move intellectually is to the understanding that that is quite different from the valuation of the earning power, which one possesses if one owns all the shares in a company. Then one is not merely entitled to dividends on the shares one owns; if one owns all the shares, one is entitled to the whole income of the company and not just dividends. That is the basic reason why share prices can never be a fair basis of valuation when buying the whole of the shares in a company.

We are not going to press this Amendment. We have given up pressing Amendments to change the basis of compensation. We are trying to get fairness through the arbitration tribunal. But I cannot resist the opportunity once more of saying to the Government that they really are on a wholly false intellectual basis in the case they are making. That is universally recognised by anybody of all Parties and of none who know anything at all about this subject.

12.40 p.m.

Lord TREFGARNE

My Lords, I am obliged to my noble friend Lord Carr for his speech. There is one problem. One unfortunate company is quoted and will not therefore be able to have recourse to the arbitrators. All the shares of that company will be acquired quite simply on a calculation based upon the prices that prevailed on the Stock Exchange at the particular time. I feel very strongly on this matter. I do not think that the interests in particular of that quoted company are in any way properly represented by the provisions in this Bill.

On Question, Amendment negatived.

12.42 p.m.

Lord CAMPBELL of CROY moved Amendment No. 155:

Page 53, line 34, leave out from the beginning to ("the") in line 36 and insert— ("the arbitration tribunal, in determining the base value of the company's securities in accordance with subsection (1) above, may have regard to".)

The noble Lord said: My Lords, Amendment No. 155 naturally follows the debate which has just taken place on Amendments Nos.153 and 154. The point was discussed in Committee when I moved a similar Amendment. The noble Lord, Lord Winter bottom, said that the Government would consider the arguments that I put forward. The wording of the Bill gives the impression that a Stock Exchange quotation of a parent company is relevant in all cases and also that that quotation is of primary importance. Moreover, the Bill as drafted obliges that to be taken into account; it is obligatory. Our Amendment would make it one of the factors that can be taken into account. It is not obligatory; it does not have to be taken into account. We believe this would put this into the right perspective.

I will not repeat the arguments and illustrations that have been given in previous debates that a parent company's quotation may have no relevance at all to the value of a subsidiary. We now await the Government's views after their reconsideration in accordance with Lord Winterbottom's undertaking.

Lord WINTER BOTTOM

My Lords, as the noble Lord has said, there was considerable discussion on this Amendment at an earlier stage. Clause 39(6) provides that, where a vesting company represents a substantial proportion of a quoted parent, the share quotation of that parent shall be one of the relevant factors. I must emphasise that this is only one of the relevant factors. The basic requirement on the Tribunal is to take account of all relevant factors in determining the notional share quotation of an unlisted company. The inclusion of Clause 39(6) merely ensures that the quote of a parent is not excluded from the considerations when it is strictly relevant.

The application of Clause 39(6) is strictly limited. First it applies only where an acquired company represents a sustantial part of a quoted group. In other words, Clause 39(6) will apply only where the activities of the acquired company are clearly a major factor in determining the quotation of the parent. It is not our intention to apply Clause 39(6) where the activities of the acquired company are less than major in determining the share price of the parent.

Secondly, noble Lords in all fairness will agree that it is clearly stated in Clause 39(6) that the provisions of that subsection define only one of the relevant factors. It is not provided that Clause 39(6) should be the overriding factor; any other factor which is of relevance to the valuation of an acquired company will also be taken into account. The significance of Clause 39(6) in any particular case will depend on just how substantial a part of the quoted group an acquired company is. In Committee, it was made clear that the assurance given by my noble friend Lord Beswick to the British Insurance Association that the parent company quotation would not be overriding held good.

Amendment No. 155 would limit the application of Clause 39(6) unnecessarily. It would make the arbitration tribunal responsible for deciding whether or not to take into consideration a parent's share quotation. This could lead to an anomalous situation where, for example, if the arbitration tribunal decided not to consider a parent's quotation where it was in fact strictly relevant.

Clause 39(6) is so drafted that it can be applied, in negotiations, in the way most appropriate to the particular valuation in question. Any reduction in the flexibility of application of the provision—which could result from the inclusion of the Amendment—could be detrimental to either party in the negotiations.

May I point out that although I have failed to satisfy noble Lords that the basis of valuation was wholly fair, nevertheless that is not the end of the day. Negotiations between the stockholder's representative and the Secretary of State, and, subsequently, the work of the tribunal must have the ultimate influence on what the original stockholder receives. For this reason, I hope that the noble Lord will withdraw his Amendment.

Lord CAMPBELL of CROY

My Lords, the noble Lord has given a better reply than we received at Committee stage. The Government have been able to consider carefully what was said then. The noble Lord, who is not a Minister at the Department of Industry, has made a much more forthcoming reply today. We are grateful for that. He said that this particular factor—I think I have his words correctly—would be taken into account only when it was strictly relevant. As we had originally read the Bill, that was not clear. It looked as though this factor was to be relevant in all cases, and that it was obligatory that it should be taken into account. Therefore I cannot see why the Government cannot accept the wording of our Amendment. The noble Lord has come a long way, if not all the way, to meeting the change in the words that we suggested. I suggest that the tribunal should have either the noble Lord's reply as guidance before them, or it should be included and elaborated on if necessary in some wider remit so that it is made perfectly clear that what the noble Lord has said is a better description of what is to be done than what might be interpreted from the Bill.

This has indicated that it was well worth while putting down this Amendment so that the subject could be considered again at Report stage. We have had a more satisfactory reply from the Government, though we would prefer to see this made clear in the text of the Bill. I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

The DEPUTY SPEAKER (Lord Derwent)

My Lords, there is a misprint in Amendment No. 156. In line 3 the word "divided" is incorrect. It should read "dividend".

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 156:

Page 53, line 37, at end insert— ("( ) In determining the base value of any securities of a company in accordance with subsection (I) above, it shall be assumed that dividend had been paid by that company of such an amount as would have been appropriate if no restrictions as to the payment of dividends had been imposed on the company under the terms and conditions of a temporary loan made to the company by the Secretary of State for Defence.")

The noble Lord said: My Lords, this is an Amendment on two specific narrow points. We were rather disappointed with the replies that we received at the Committee stage. When certain loans are made, one of the provisions included is that there should be a limit on the dividend. If the dividend is liable to be one of the considerations which is borne in mind in producing this regrettable notional Stock Exchange price, it seems unjust that the dividend which is so limited should be used as a basis of valuation.

The answer that the noble Lord, Lord Winter bottom, gave us during Committee stage was that it would be up to the stockholder's representative to make a case when it came to arbitration. We are not very convinced by that argument. After all, it is possible that the stockholder's representatives may be able to persuade the tribunal to accept the company's view of what the hypothetical situation would have been in 1973/74 had they then been quoted on the Stock Exchange, and also the various consequences that would have flowed from that.

But the clause already contains a number of pointers intended to guide the arbitration tribunal through the minefield of all the guess work that we like to call the hypothetical assumptions that would be required of them. They have to assume under subsection (4) that the securities actually issued in the middle of the relevant days had been issued before the first relevant day. Under subsection (5) they must assume that the assets of the company were not subject to any charge, whether or not that was the case. Under subsection (7) they have to suppose that the assets not actually vested in the company until the day of transfer were vested in it before the relevant days. Similarly, under subsection (9) they arc asked to assume that a sum paid to a company had never been paid to it, and then to make three further separate assumptions under subsection (12). Therefore we propose that one further assumption should be made by the tribunal. It is one which they ought to make and which, if it is not written into the Bill, they might fail to take into account among all the other hypotheses which are required of them.

It is worth pointing out that in these two specific cases we are taking only about two loans. The one made to Yarrows in 1971 is specifically mentioned in the Bill and is to be taken over under Clause I5(3)(f). The other loan, which was made to Brooke Marine Limited, has already been repaid in full. Therefore, as I say, this is a point of very narrow application but there is the possibility of injustice if this small point is not added to the Bill. My Lords, I beg to move.

Lord WINTERBOTTOM

My Lords, doubtless noble Lords will have noticed that I stick tightly to my brief. As the noble Lord, Lord Campbell of Croy, so generously remarked when he withdrew the last Amendment, he recognises that we listen to what is said by noble Lords opposite: if we can meet them, we do, and if we cannot meet them we try to explain with great clarity the reasons why that is so. As I understand it, the Amendment we are now discussing seeks to specify one of the relevant factors to which the arbitration tribunal should have regard as a relevant factor when determining the base value of unquoted securities. When an identical Amendment was moved in Committee it was withdrawn following an assurance I gave. As I said earlier, my noble friends and I have given this careful consideration, but I must repeat that I cannot reverse the rejection that I put to your Lordships on the last occasion. I hope to be able to clarify the reasons for that. The question has to be argued within the context of the provisions included in Clause 39, for varying unquoted securities for compensation purposes.

Clause 39 provides that the base value of these securities is to be determined by agreement between the Secretary of State and the stockholders' representative or, in default, by arbitration on the basis of an imputed Stock Exchange quotation taking account of all relevant factors. The arbitration tribunal is required to have regard to all factors which are relevant to the determination of the base value of these securities. It is therefore inevitable that in the negotiations both parties must have equal regard to the same factors. The provisions are deliberately widely drawn in the interests of practicability and fairness. Since 42 of the 43 scheduled companies are unlisted, it was necessary to devise basic terms of common application which could nevertheless be applied with equal fairness to the differing underlying conditions of the many companies covered by the Bill.

I hope it will be helpful to noble Lords if I repeat again the assurance given by my noble friend. Specific factors which might be considered to be relevant are not listed, because their relevance could vary from company to company. It is for the stockholders' representative to make a case for including a factor among the relevant factors. Since the companies concerned are free to put their cases to the Secretary of State as to why the conditions attached to the Ministry of Defence loan should be disregarded, this Amendment is unnecessary unless, of course, companies do not feel that their case is sufficiently strong to persuade the Secretary of State. We believe that the Amendment is unnecessary and also that it would destroy the generality of the phrase "all relevant factors". To specify certain relevant factors would give particular weight to the specified factors and, conversely, could downgrade the significance of those factors not specified. That would unbalance the terms and could well undermine their inherent fairness as related to particular companies.

Lord HAWKE

My Lords, I am sorry to interrupt the noble Lord but is that last statement consistent with the little bit of the Bill which runs from line 34 to line 38, where it specifics that "relevant factors" must be taken into consideration?

Lord WINTERBOTTOM

My Lords, as regards the relevant factors, if I might just read what we said about the previous Amendment, we refer to various elements—paragraphs (a), (b) and (c) of subsection (6). Those are relevant factors which the arbitration tribunal shall take into account in determining the base value of the company's securities. There may be a certain strength in the logic of the argument put forward by the noble Lord, but in this particular case we believe that the suggestion put by the noble Lord on moving this Amendment might cause the downgrading of other unmentioned relevant factors while we wish all relevant factors to be taken into consideration in negotiations between the stockholders' representative and the Secretary of State.

Lord HAWKE

Yes, my Lords, that really rather confirms what I thought. When I was listening to this debate I thought: "Why on earth leave in lines 34–38? Surely the tribunal know what the relevant factors are?" Now the noble Lord is saying that the relevant factors should not be adumbrated because they remove the weight put on the unknown relevant factors. I agree with him.

Lord WINTERBOTTOM

All or none, in fact, my Lords?

Lord HAWKE

Yes.

Lord WINTERBOTTOM

We want to keep in all the relevant factors. I reject this Amendment because of the freedom which is provided in the clause for companies with valid cases to have factors considered as relevant for the purpose of the valuation. It is unnecessary also because it destroys the flexibility of approach in the valuation process and could be potentially damaging to the interests of shareholders. It is for this reason, and I hope because of the clarity of my explanation, that I hope that this Amendment will be withdrawn.

The Earl of LAUDERDALE

My Lords, somebody claimed once that this Bill was a great act of imagination. After what we have just heard, I think it is an act of hallucination. I wonder sometimes whether we are not reading Alice Through the Looking Glass as we pick our way through the thickets of hypothesis. We all know perfectly well and accept that Government loans are given to companies very often on the basis that their servicing takes priority over everything else and there is no danger of conflict with the payment of dividends. That is well understood and nobody complains about that. Equally we understand that this matter has been cleared up in the case of Yarrows, whose loan has been taken over by the Secretary of State anyway, and in the case of Brooke Marine, where it has already been repaid. But we want to make quite sure that the phrase "all relevant" does include "all relevant".

What we have just heard from the noble Lord is to the effect that if you specify any relevant factors you then downgrade the rest and, therefore, if you add one more you downgrade the rest that much more. But the Government have already put in a lot of relevant factors which have to be considered, and all of them hypothesi It has to be assumed that securities were issued before the relevant day; it has to be assumed that the assets have not been subject to a charge; it has to be assumed that the assets were vested in the relevant company before the relevant day. There are three more assumptions in sub-section (12). If it is the case that to add one further relevant factor which should go before the tribunal, ultimately, would downgrade the rest, then take the whole lot out. The noble Lord has just said that if you specify certain relevant factors—and the Bill lists half a dozen or so—that downgrades the rest. Well, take them all out. But when you list some you make them more relevant than others. Therefore, we want to make sure that this particular point is covered and is really taken care of in the arbitration tribunal. Are we to take it from what the noble Lord says that, if the stockholders' representative makes the point in his negotiations with the Secretary of State, that immediately becomes a relevant factor and ipso facto should it go to arbitration? If that were so, I for one would be less unhappy. But I am bound to say that the argument we have had is most unsatisfactory, as indeed are the purposes of the Bill. I hope I shall never be deterred from detecting a cheat or what I think to be a cheat by the menaces of a ruffian. I am not saying that the noble Lord opposite is a ruffian, but I know that he enjoys Dr. Johnson as much as I do.

Lord STRATHCONA and MOUNT ROYAL

My Lords, I think the noble Lord will have got the drift of the fact that he has totally failed to satisfy at least two of my noble friends and I believe that the noble Earl, Lord Lauderdale, reinforced a point made by the noble Lord, Lord Hawke, that the Minister in sticking to his brief—which is a regrettably narrow brief—seems to be trying to have it both ways. He did not apparently pay any regard to the fact that I mentioned a whole series of assumptions which it says are to be taken into consideration. He then objected to adding another one on the grounds—which struck me as a proper old Parliamentary draftsman-type argument—that this would destroy the generality of the clause. I do not mind terribly if it does destroy the generality of the clause, not that I think it does, because as I have said to him several times we are only dealing with two specific cases. The best thing we can do is to say that we assume he is trying to do his best. We know it is only two particular cases that are being discussed and perhaps some of the things that are being said in the two Houses of Parliament will be useful ammunition in case these assumptions are not properly taken into consideration when the cases are being considered. I do not think we can do anything further at this juncture so I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

1.5 p.m.

Lord CAMPBELL of CROY moved Amendment No. 156A:

Page 53, line 47, at end insert— ("(7A) If any property rights or liabilities belonging to the company in connection with the business of repairing, refitting, or maintaining ships carried on by it other than at a shipyard or other works in which the company had an interest in possession on the initial date shall have been transferred or granted to any person and the consideration for the transfer or grant shall have been received by the holders of securities of the company or any of them, then, for the purpose of determining the base value of any securities of the company in accordance with subsection (1) above, it shall be assumed that immediately before each of the relevant days such property rights or liabilities were not vested in the company.").

The noble Lord said: My Lords, this Amendment was discussed with Amendment No. 138A on the ship repairing industry and that Amendment No. 138A, was accepted by your Lordships' House. I, therefore, beg to move this Amendment formally.

On Question, Amendment agreed to.

Clause 40 [The appropriate deduction]:

Lord CARR of HADLEY moved Amendment No. 157:

Page 56, line 42, at end insert— ("and that the word "prior" in each of subsections (1) and (2) of section 24 above were omitted").

The noble Lord said: My Lords, in Committee we moved an Amendment which would have removed from Clause 24 the word "prior". On that occcasion, the Government rejected the Amendment on the grounds that the need for prior approval by the Secretary of State for an excessive dividend would prevent directors paying out dividends in the hope of getting retrospective approval and then finding themselves penalised if they did not get it. Taking account of the reasons given by the Government in Committee, we are now moving this Amendment to Clause 40 of the Bill—compared with the Clause 24 in Committee. This new Amendment, we believe, applies only to the situation where deductions from compensation are to be made under Clause 39 due to excessive payments of dividend made between February 1974 and March 1975. We believe, therefore, that this Amendment does not affect the liability of directors at all as we were advised our previous one did.

My Lords, the Bill provides that the restrictions on dividends contained in Clauses 24 and 25 are to apply by virtue of Clause 59 to the period February 1974 to March 1975. The restrictions on dividends are, we have argued, unfair and could produce ridiculously low levels of dividend. The Government have acknowledged this but have said that that was why the Secretary of State could give his "prior" approval to the payments of dividends which would exceed the level formally permitted. However, just the same disadvantageous interpretation of a dividend formula could affect a company in this period between February 1974 and March 1975. But because the provisions of the Bill were not announced until May 1975 when the Bill was published, there would have been no possibility to seek prior approval to pay greater amounts of dividend during this period we are talking about—February 1974 to March 1975—nor could the Secretary of State authorise such payments even if he wanted to.

So all this Amendment does is to enable the Secretary of State to use his discretion—and I emphasise that it is only to use his discretion—to grant retrospective approval for excessive dividend payments made before the Bill was published and before the prior approval which the Bill requires could have been obtained. In the period we are talking about, it was impossible to ask for prior approval because the Bill had not been published and the statement had not been made. We believe that this period—this blank period, if can call it that; this vacuum period—needs covering and we believe that this new Amendment, unlike our previous one in Committee, has the limited purpose that we desire. I beg to move.

The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey)

My Lords, this Amendment is identical in terms to one negatived in Committee, but as the noble Lord, Lord Carr of Hadley, has pointed out, the context is slightly different. This Amendment highlights the fact that Clause 24, as applied by Clause 40, effectively prohibits any approvals of dividend or interest payments above the permitted level. In other words, the Secretary of State does not have the discretion which the noble Lord spoke of and this Amendment seeks to give it to him. But to understand why the Bill contains such a prohibition we have to have regard to the overall purpose of the provisions of Clause 40 and the possible practical implications of Clause 24.

Clause 24, which has already been looked at very carefully, is unique among the safeguarding provisions in that it is the only one which does not allow for retrospective approval. There are good reasons for that which I think have been given in relation to quoted securities and there are likely to be a great many security holders. If an excessive dividend payment were made, and subsequently approval was sought and withheld, it would be very difficult for the dividends to be reclaimed. As a result, the directors would automatically become liable. The requirement for prior approval therefore ensures that the directors are duly warned of the danger of doing something that could well be a serious error of judgment on their part.

Turning from that explanation to Clause 40, as I hope noble Lords will appreciate, Clause 40 is not a penalising clause. No person could be made personally liable in respect of any transaction to which Clause 40 relates. The clause provides no more than that the compensation shall be adjusted in line with any abnormal financial transactions in the period between the reference period and the start of safeguarding, which in most cases is 17th March 1975. In effect, therefore, if shareholders receive unusually high dividends between the reference period and the start of safeguarding—and this is not purely hypothetical but is a real case—this is treated in the Bill, and particularly in this clause, as an advance of compensation. Nobody suffers. In fact, in these cases where Clause 40 will apply it could be argued that the shareholders have benefited because they have received at least part of their compensation earlier than they would otherwise have done. Against that background, the question of any approval procedure under Clause 40, particularly in relation to dividends, is of little relevance. With that explanation, although I acknowledge that there is logic in what the noble Lord, Lord Carr, has said, I would ask the noble Lord not to press his Amendment.

Lord CARR of HADLEY

My Lords, I am sure that the noble and learned Lord will understand that particularly for a non-lawyer it is not easy to take in the full import of what he has said. He himself admits that there was a logic in the case that I made. I appreciate the noble and learned Lord's explanation and I should like to study it. If I am satisfied by it, as I may well be when I have had a chance to consider it, that will settle the matter. I am sure he will understand that if I am not satisfied then I must at least reserve the right to return to it at Third Reading, although I shall certainly not do that unless I feel that I cannot be satisfied by his explanation. On that basis, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord STRATHCONA and MOUNT ROYAL had given Notice of his intention to move Amendment No. 158: Page 57, line 12, leave out from beginning to ("there") in line 15 and insert ("on the date of transfer").

The noble Lord said: My Lords, I believe that on reading carefully what was said in Committee stage in another place the answer was considered to be satisfactory and therefore I do not intend to move this Amendment.

Lord McCLUSKEY moved Amendment No. 159: Page 57, line 16, leave out from first ("of") to end of line 19, and insert ("any sum the right to repayment of which could be treated as a security under section 22(6) above").

The noble Lord said: In connection with this Amendment, the noble Earl, Lord Ferrers, raised a point in connection with Amendment No. 138. That was an Amendment which we saw as consequential, and at that time I acknowledged the possibility that we might have to look again at the particular wording. The same point arises in relation to this Amendment No. 159. We are giving the matter consideration and noble Lords will appreciate that if we come to the view that the point is a sound one—and we may yet do that—then we shall take a further opportunity at a later stage to alter the words contained in Amendments Nos. 138 and 159 in order to put the matter beyond doubt. I beg to move.

Lord STRATHCONA and MOUNT ROYAL

My Lords, that is entirely satisfactory. I am grateful to the noble and learned Lord. I was going to raise the point, but we will await his explanation and will see what has to be done at Third Reading, if necessary.

On Question, Amendment agreed to.

1.18 p.m.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 160:

Page 57, line 19, at end insert— ("and the Secretary of State has not later than the prescribed date notified to the stock-holders' representative his intention that this subsection should apply in relation to such repayment or part repayment. For the purposes of this subsection "the prescribed date" shall mean—

1. (a) in the case of the application of this subsection to a part repayment of the principal of a particular debt, the date of service of a notice under section 21(1) above in respect of the amount of the principal of that debt remaining outstanding immediately before the date of transfer; and
2. (b) in the case of its application to the repayment of the whole of the principal of a particular debt, a date 9 months after the date of transfer.")

The noble Lord said: My Lords, I hope we can deal with this Amendment fairly briefly. During the Committee stage the Government asserted that our argument was ill-founded because no debt would be treated as a security unless a notice had been served in respect of it, but our advice is that this is wrong, because Clause 39(5) applies to the situation where, if a notice had been served, the debt would have been treated as a security. No notice can be served if the loan has been repaid, and the Amendment provides a time limit within which the intention of the Secretary of State must be made known to the stockholders' representative.

Lord McCLUSKEY

My Lords, I should like to ask the noble Lord a question on this. He referred to Clause 39(5). Does he mean Clause 40(5)?

Lord STRATHCONA and MOUNT ROYAL

My Lords, I am sure that if the noble and learned Lord has looked it up while I have been speaking he is more likely to be right than I am, but Clause 39 is what it says in my brief.

Lord McCLUSKEY

My Lords, I merely asked because I think this was originally Clause 39 and it may be desirable that it should be accurate before we discuss it further.

Lord STRATHCONA and MOUNT ROYAL

My Lords, I think the noble and learned Lord is probably right and that what has happened is that there has been a slippage of the clause numbering which we have not spotted, in which case I regret it. I am sure that the noble and learned Lord is correct and in fact I should have referred to Clause 40(5). I beg to move.

Lord McCLUSKEY

My Lords, this is not a matter which takes me entirely by surprise and I will seek to answer it in this way. The Amendment seeks to prescribe that no deduction shall be made unless the Secretary of State has notified the stockholders' representative that a deduction will be made, in the case of a part repayment by the time the notice is served under Clause 22 and in the case of a total repayment, by nine months after the date of transfer. In the Government's view this is unnecessary and at this stage it is intended that no debt shall be treated as a security unless a notice is served in respect of it. There may be—and I acknowledge the possibility at least, although I cannot go further at the moment—some substance in the doubt expressed by the noble Lord, but I think that doubt would be caught up by the Amendment about which I was speaking a little earlier, which we are considering in relation to what were Amendments Nos.138 and 139. I think the point will then be met. Let me make it quite clear that it is not intended that any debt will be treated as a security unless notice is served in respect of it.

Lord STRATHCONA and MOUNT ROYAL

My Lords, I am sure that explanation will be satisfactory to those who understand these things better than I. I am very happy to withdraw the Amendment for the time being in the hope that we are all seeking to achieve the same objective.

Amendment, by leave, withdrawn.

Lord McCLUSKEY moved Amendment No. 161: Page 58, line 19, leave out ("22(7)(a)") and insert ("22(6)").

On Question, Amendment agreed to.

Clause 42 [Stockholders' representatives]:

1.21 p.m.

Lord REDESDALE moved Amendment No. 162: Page 59, line 19, leave out from ("every") to ("are") and insert ("class of securities which").

The noble Lord said: My Lords, when the noble Lord, Lord Winterbottom, on Committee began to say that he had sympathy my heart leapt. But I am afraid it was sympathy in the wrong sense, in that the noble Lord was sympathising that he was not actually going to say anything about it, so I was disappointed. As I said at the time, I felt the answer was not satisfactory. I said as much and reserved the right to come back at this stage, which I am now doing, with the same Amendment.

My Lords, having read very carefully what was said by the noble Lord, and I know he said it in all good faith, I do not really agree with what he says today. When the noble Lord said there would be meetings for different classes of securities but it would still be before the same stockholders' representative, I did not think this got us any further. I did not think it was really very fair on the basis that the different stockholders had different interests, and these interests ought to be represented by different people.

The noble Lord went on to say that there shall be one stockholders' representative for each company. All right, but he cannot have it both ways. If one stock-holder for one company gets one answer, another could quite easily get a different answer for a different company. Frankly, you can turn this little argument inside out. The noble Lord, Lord Melchett, at times has talked about circular arguments. This one disappears in a blue flash at the end, because you can take it further on.

My Lords, there is another point I wanted to raise; and here, the noble Lord, Lord Winterbottom, dug a little pit into which he jumped, and now I am throwing him a rope, kindly I hope, to pull himself out of this little elephant trap. The noble Lord said that different stock-holders' representatives for different classes would cause delay; if there were delay it would be caused because there was a certain unfairness. The noble Lord is a fair person, so I hope he will reconsider this point because otherwise, the delay only emphasises the point that there is unfairness. This unfairness should have been seen to. I hope that the noble Lord will come back at this stage and, being a reasonable man, reconsider what he has said. I beg to move.

Lord WINTERBOTTOM

My Lords, I thank the noble Lord, Lord Redesdale, for trying to help me out of an elephant trap. I have got into enough trouble from elephants in this debate to last me for the whole Parliamentary Session. But when we discussed several Amendments on Committee stage, I explained, I hope with clarity, why we could not accept that. May I give your Lordships once again our reasons why we still cannot accept them.

My Lords, Amendment No. 162 would have the effect of appointing a stockholder's representative for each class of security for each company, and the other Amendment is consequential to it. One might have three stockholders' representatives for a single company; the ordinary shareholders, the first preference and the second preference shareholders, something like that. We believe this would be a harmful situation. Schedule 6 provides that all the holders of the securities in a company shall appoint their own stockholders' representative who will represent the various interests of that company in negotiations with the Secretary of State, and if it becomes necessary, before the Arbitration Tribunal.

The stockholders' representative may call a general meeting of all the holders, or alternatively, he may call a meeting of particular classes of stockholders where matters affecting these classes exclusively are to be discussed. At both types of meeting, the procedure governing fairness for all would rule and, in particular, ensure safeguards for the minority shareholders. Every stockholder is entitled to one vote for each I by normal values of the securities held by them. To have more than one stockholders' representative per company could open the way to certain groups of shareholders being treated differently, either more or less advantageously than other groups. Further, it could delay the process of negotiation which would be detrimental to the shareholders.

My Lords, certain of the earlier arguments we have had were finely balanced, but, in this case, I am quite clear that to have more than one stockholders' representative for a single company might well bring about unfair treatment of some other class of stockholder. In preparing a negotiating machine, it is clear that one unit—namely, a company—must be represented by one stockholders' representative. We could not have two or three stockholders' representatives arguing with differing voices in the interests of one single judicial person, to wit, a company. I believe it would only cause confusion and delay. That is the last thing we want, and for this reason, I hope your Lordships will not accept the Amendment.

Viscount SIMON

My Lords, I have not taken part in the earlier discussions on this point, but I am rather surprised by what has been said by the noble Lord, Lord Winterbottom. We are legislating to cover every possible case, and it may be that the sort of case I have in mind does not exist. We know that what have been acquired have been described as wholly-owned subsidiaries of other companies or groups; but there may be, perhaps, in the subsidiary companies security holders of debentures, or whatever it may be. Surely, their interests might well be at variance with the interests of the equity holders.

It seems to me hard for a single representative to represent fairly the interests of classes of shareholders whose interests as between one class and another may be different. Perhaps I misunderstood the point, but it seems to me eminently sensible that the holders of any class of securities should be represented separately from the holders of other classes of securities, whose interests may not be the same as theirs.

Lord WINTERBOTTOM

My Lords, with permission, may I answer that point, because the noble Viscount, Lord Simon, has given me a chance to clarify the position. May I explain the procedure as I see it happening? We have a company with, say, three classes of shareholder. I would imagine that the stockholders' representative would call a general meeting of all classes of shareholder, each with voting powers equivalent to £1 unit shares; and within this general meeting, agreement would be reached between the various interests within that one company. In fact there would be preparatory work for the negotiations that the stockholders' representative would conduct on behalf of all classes of stockholders with the Secretary of State.

Obviously, there would be preparatory meetings and discussions when the interests of the various individual differing groups of stockholders would be appointed and then the company would represent these interests with a single voice to the Secretary of State. That is how it is seen as working. I believe that any attempt to complicate the method of negotiation by having more than one type of stock-holders' representative could only be counter-productive.

Lord REDESDALE

My Lords, the noble Lord, Lord Winterbottom, did a very fine action replay of what happened before. I am afraid it makes me even more dissatisfied with the answer than before; I am sorry. I think all he has said has highlighted the unfairness of this situation. I feel that each class of stockholder is now going to be treated unfairly, because they cannot be represented by one person when the interests of each class of stockholder can be different. I feel that this highlights the unfairness of compensation all the way through. However, unhappily, I will beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

Clause 49 [Duty of British Shipbuilders to consult etc., with Northern Ireland state-controlled.]:

1.31 p.m.

Lord MELCHETT moved Amendment No. 164:

Page 65, line 26, leave out from ("their") to end of line 32 and insert ("respective functions, British Aerospace and British Shipbuilders shall each have full regard to the need to consult, and wherever possible coordinate their activities with those of, any company incorporated in Northern Ireland which is engaged in one or more of the relevant activities and at any general meeting of which the Crown is entitled to exercise or to control the exercise of at least one-third of I the voting power. (2) In subsection (1) above "relevant activities" means—

1. (a) in relation to British Aerospace, the activities specified in subsection (1) of section 2 above, and
2. (b) in relation to British Shipbuilders, the activities specified in subsection (3) of that section.").

The noble Lord said: I beg to move Amendment No. 164. I made it clear in the Committee stage that the Government were as anxious as noble Lords opposite to see proper coordination between the new Corporations and publicly-owned companies in Northern Ireland which are carrying out the same activities. We believe that Clause 49 should secure this objective so far as British Shipbuilders and Harland and Wolff are concerned. I explained in Committee how the arrangements are working for British Shipbuilders and Harland and Wolff when we discussed Amendment No. 193. I accept that the principle is just as important for the aircraft industry in Great Britain and Northern Ireland, and I am, therefore, bringing forward this Amendment, which extends the scope of the clause to cover British Aerospace and Short Brothers and Harland.

Both Corporations in carrying out their functions will now be required to consult and wherever possible co-ordinate their activities with any publicly-controlled company incorporated in Northern Ireland carrying on those activities. This means the requirements on both British Shipbuilders so far as Harland and Wolff are concerned and on British Aerospace in relation to Short Brothers and Harland. I should make it clear that this clause, as now extended, in no way departs from the independence of the Northern Ireland companies. In particular, it could not result in either Corporation being required to provide work for these companies, so cutting back on their own employment requirements. But it should ensure that the Corporations and the Northern Ireland companies are in a better position to face foreign competition.

My Lords, this Amendment meets the assurance I gave during our debates in the Committee stage. It aims to meet an objective which I believe noble Lords opposite and I want to achieve, and we believe that these provisions are the best way of achieving our common objective. I hope your Lordships will accept the Amendment. I beg to move.

Viscount ROCHDALE

My Lords, the Amendment which we are now discussing, No. 164, certainly meets the point that my noble friend Lord Brookeborough and I were trying to make when we wanted to insert into this clause British Aerospace and the Northern Ireland company, Short Brothers and Harland. The noble Lord's Amendment entirely meets our point. We are extremely grateful to him for having put down this Amendment. As he will have noticed, we have withdrawn the Amendments which we had put down, which were intended to meet the same objective. Therefore, I accept this Amendment very readily. The noble Lord, Lord Melchett, went on to talk about what really comes under the next Amendment, which is quite a separate point. Perhaps I could speak on that when we come to the next Amendment.

On Question, Amendment agreed to.

Viscount ROCHDALE moved Amendment No. 169:

Page 65, line 32, at end insert— (2) In carrying out their obligations the Corporations shall make available to the bodies corporate referred to in subsection (I) above any information or facilities which the said bodies corporate—

1. (a) could reasonably expect to have had access to as members of their respective United Kingdom industries before vesting date; and
2. (b) will be made available by each Corporation to their wholly owned subsidiaries after vesting date.

(3) The information or facilities made available pursuant to subsection (2) above may be the subject of such reasonable charges as are agreed between the parties.

The noble Viscount said: My Lords, this Amendment, as I said a moment ago, deals with a separate point. But, before I come to the main point, may I deal very briefly with a minor point: it is an important point, but a minor point, that my noble friend Lord Brookeborough made at the end of the debate we had in Committee. I may say that my noble friend is very sorry that, I think for reasons of transportation, he has been unable to be here this afternoon. He made the point, when we were discussing the clause in Committee, regarding the financing of Harland and Wolff and the way in which the present method of financing made considerable inroads into the social budget of Northern Ireland. This was, of course, a major and complicated matter, and the noble Lord, Lord Melchett, rightly I am sure, in order to save time—he drew attention to the fact that he had pages of notes on this—said that he would kindly write to my noble friend on this point. All I want to say is that the noble friend has written a very well thought out letter on this point. He sent a copy, I believe, to my noble friend Lord Strathcona and he sent a copy to me. Obviously, we will consider it. It is not a matter for us to discuss further now.

I would merely make two points. One is that I am sure my noble friend Lord Brookeborough will not necessarily allow it to lie there but will be pressing the noble Lord from time to time, as appropriate. The second point is to ask the noble Lord, Lord Melchett, whether he would feel it possible to publish it in some way, so that it can be on the record, whether, if my noble friend put down a Question for Written Answer, that might be a way of dealing with it?

Having said that, can I now come to the main point at issue in my Amendment. This deals with the relationship between the Corporations and the Northern Ireland companies, as the noble Lord, Lord Melchett, has said. Obviously he agrees that something had to be put into the Bill, as it was in another place; otherwise, we should not have had Clause 49 in its present form at all. The question that my noble friend and I ask is this: does it go far enough? Does it leave too much to the good will and discretion of the present leaders of the Corporations, or the leaders at any particular time? In saying that, I do hope no one will accuse me of casting any aspersions or criticisms on the present incumbents. I am quite sure they are anxious to do all they can in this matter. But the fact remains that the heads of nationalised industries have a way of coming and going rather unexpectedly from time to time, and they cannot commit their successors. Therefore, we feel that something more is needed in the clause.

As it now stands, all that the Corporations have to do is to have full regard to the need to consult and wherever possible coordinate their activities with the companies in Northern Ireland. We do not think this goes nearly far enough. We think it can mean anything or nothing, depending on the individuals who are carrying out these considerations. The point I am most anxious to make is that we are not asking that these companies should have any more now than they have had in the past, as members of the United Kingdom shipbuilding industry—if I can speak primarily about shipbuilding, but the argument is just the same in the case of aerospace—and as members of their trade associations, who act as the industry's focal point. Nor do we want that these companies should have any more than other members of the industry who are now to be within the umbrellas of the Corporations.

Again, lest there be any misunderstanding—I say this because I have heard some mutterings about this—we are certainly not asking that these companies in Northern Ireland should have any access to what might be regarded as trade secrets from Swan Hunter or any of the other companies that come under the Corporations, any more than they would expect to have access to the trade secrets of Harland and Wolff. That does not mean to say that there will not continue to be a healthy interchange of know-how, as is the case, I believe, in any progressive industry today

In order to make it absolutely certain that the question of trade secrets and improper information getting across does not occur, I would draw your Lordships' attention to the fact that in our Amendment the two criteria which we include in Clause 49(2)(a) and (2)(b) are connected together by "and" and not by "or", so that the circumstances that we are considering in both those criteria have to be complied with. What we want to make sure is that when the Bill becomes an Act and the Corporations come into being with their subsidiaries, then the Northern Ireland companies will be in no worse or weaker position than they are today. Without some such Amendment as we have put down, we believe they will be, through no fault of their own.

I know that the noble Lord, Lord Melchett, has said, both today and in Committee, that he believed there was nothing much between us and that our intentions were the same. I am delighted to hear that, but I am still doubtful. I do not want to repeat what I have already said in Committee, but I should like to remind your Lordships of the various areas where Harland and Wolff have today access as of right to information, discussion and facilities through the trade associations or other central bodies to which they now belong. I referred in Committee to technical research—on matters of policy particularly—market research and overseas promotions.

There are of course other areas. For instance, one which is very important is the way in which Harland and Wolff can be associated with the shipbuilding companies of Western Europe. There is an association that deals with that. There is also a committee which is a link between the shipbuilding industries of the nine companies in the European Community. There are questions of standards, recruitment, financial matters, various discussions with Her Majesty's Government and—although this is slightly different it is very important—the question of national agreements. The wage systems in the industry are based on national agreements. Clause 7 of the Bill lays down that the Corporations have to go into this question of agreements with the trades unions. Yet those national agreements which the Corporations would make would affect the working of Harland and Wolff. Unless it is in on those discussions and has full access to the facts and figures and so on, it might be very seriously affected by agreements in which it had had no say in the past.

Those areas of work which I have itemised are the areas where the Corporations will step in and take over from the trade associations, the SRNA, the SBAC and so on. Where will the honourable Short Brothers and Harland stand? I have already quoted one particular example dealing with Clause 7 in the Bill. My noble friend and I say that there should be no doubt whatsoever that these companies should, as of right, have access to the information, facilities, facts and figures that they have had in the past through the various trading organisations that exist today. We have conferred and we make it quite clear that we are not expecting that they should get those facilities for nothing, but they should make payment for them where appropriate, just as they do now, whether by means of subscriptions to trade associations or actual payment for services which they have received.

The chief executives of these companies are very busy people and they do not want to be worried constantly as to whether or not they can get in on these discussions. They want to be there as of right and play their full part. That is why we have tried to amend this Amendment which we have put down so as to meet the doubts of the noble Lord, Lord Melchett, about the earlier Amendment we put down in Committee, when we used the word "assist". I recognise, as the noble Lord said, that that might have unfortunate connotations. We hope that this Amendment will meet the case, although from what the noble Lord said on the last Amendment, he still seems to think that the present clause is adequate. I am afraid we do not agree with him that the evidence so far suggests that it will be adequate, and I hope my noble friends will support me in this Amendment. I beg to move.

1.48 p.m.

Lord MELCHETT

My Lords, may I first respond to the point the noble Viscount made about the letter I wrote to his noble friend, the noble Lord, Lord Strathcona, with a copy to him. Certainly I would be happy to see it included in Hansard. I suggest that a Question for Written Answer might be the best way of elucidating the information. No doubt the noble Lord will pass that on to his noble friend, if I do not have a chance to do so in the near future.

My Lords, I regret to have to tell the noble Viscount from the start that the Amendment is not acceptable to the Government, as I think he deduced from the remarks I made about the Government's Amendment that we put down to this clause. The Government are as anxious as noble Lords opposite to see a proper degree of co-ordination between British Aerospace and Short Brothers and British Shipbuilders and Harland and Wolff, but they believe that the clause as it is now will achieve that. The noble Lord's Amendment adopts a means of achieving this objective which we do not consider to be the right one. It also goes considerably beyond what we want to see.

If I may deal in a little detail with the text of the Amendment, in the first place I should like to point out to noble Lords that their Amendment is technically defective. By not amending the reference to Clause 2(3), it leaves out the clause applying solely to shipbuilding activities; it would not encompass Short Brothers and Harland and Wolff. However, we consider that the requirements to make available the same information and facilities as were available before is in any event unnecessary. All companies which remain outside the scope of our public ownership proposals will want this to be the position. We are, by our own Amendment, already putting Short Brothers and Harland and Wolff in a privileged position by virtue of Clause 49, and I do not think there is any need to go any further.

However, the intended requirement that the same information and facilities should be made available to Shorts and to Harland and Wolff as to the Corporations' wholly owned subsidiaries goes much beyond what we consider desirable. It could mean that Shorts and Harland and Wolff would in effect be treated as wholly-owned subsidiaries. Facilities could, for example, be interpreted as including finance, so that these two companies would be able to call on the financial resources of British Aerospace and British Shipbuilders. In our view, these companies should not be excessively integrated in the activities of the new Corporations.

As I explained during Second Reading debate, we feel strongly that these firms should continue to he considered primarily in the context of Northern Ireland. Given Short's importance to the economy of Northern Ireland, employing over 6,000 people, the Government believe that it should be controlled locally and should be ready to he the responsibility of any future devolved Administration. As to Harland and Wolff, ownership is vested with the Northern Ireland Department of Commerce. Both these companies however should be seen in the perspective of Northern Ireland as a whole, and this is the point I made during Second Reading and again at Committee stage.

As the noble Viscount knows far better than I, there is a background of 50 years of devolved Government in Northern Ireland, which traditionally and historically has dealt with industry in the Province. All parties in the Convention were agreed that they wanted an early return to a devolved Administration, and it remains the declared aim of Her Majesty's Government to achieve just that. At the same time, I do of course, as I have done all along, I hope, recognise the concern expressed by the noble Viscount and his noble friends.

In response I would say this. Of course Northern Ireland is part of the United Kingdom and of course there is a need for co-ordination. Hence our acceptance of Clause 49 and the Amendment that I have just moved to extend it to aerospace. In this way the two companies can retain the separate identities which we believe that they should have without becoming isolated from industry in Great Britain. For those reasons, and also given the technical defects in the noble Viscount's Amendment, I hope that he will not press it and that he will consider, on reflection, that the distance the Government have gone to meet the very proper concern which he and his noble friend have expressed about this clause, has been met to a large part by the Amendment I moved earlier this afternoon.

1.53 p.m.

Lord CAMPBELL of CROY

My Lords, I should like to speak immediately after the Government on this Amendment which has been moved and explained so well by my noble friend Lord Rochdale. We must ensure that there is proper co-operation between the new Corporations proposed in the Bill and the aircraft and shipbuilding companies in Northern Ireland. Previously, the Government have made no provision at all for this. It makes sense that there should be common services, and we believe that this should be written into the Bill. This addition cannot in any way affect the purposes of the Bill. It spells out the co-operation which ought to continue to take place with the companies in Northern Ireland. Naturally we welcomed earlier the Amendment which the noble Lord, Lord Melchett, moved and which has now been agreed to in the Bill, but that did not go nearly far enough. As my noble friend Lord Rochdale has explained, where there is a pooling of common services and facilities he has in this Amendment made provision for payment to be made. He recognises it is not a question of just getting free services.

The noble Lord, Lord Melchett, indicated that there was some defect in the drafting of this Amendment, and that it had not taken into account changes in the Bill at Committee stage. This is something that we can tidy up without any difficulty at Third Reading on Tuesday. May I say in extenuation that, because the Bill has been proceeding through your Lordships' House at the sort of speed which no Bill of this kind would ever go through in normal circumstances, with a minimum of time between the Committee and Report stages, and we have had great difficulty in getting the reprinted Bill in time, I think it is difficult for my noble friends to propose an Amendment which is perfect in its drafting.

Lord MELCHETT

My Lords, I did not make any reference to the Bill as amended in Committee. I stand subject to correction about this, but I think that the technical defect is the same as the one I pointed out when the Amendment was moved at Committee stage, and it is unaffected by any changes in the Bill since then. I may have got that wrong, but I did not make any reference to changes made at the Committee stage.

Lord CAMPBELL of CROY

My Lords, I was not able to get the exact point that the noble Lord made, and he has now made it. But my answer remains the same, that with the short time available, in many cases we simply had to put down straight away the Amendments which we wanted to raise again at the Report stage, and we had, with great difficulty, managed to get them down by last Friday night in readiness for the Report stage beginning on Monday. From this Bench I certainly would accept that there could be defects in the drafting of not only our own Amendments from the Front Bench but also some of my noble friends' Amendments, but I see no difficulty, if the principle is accepted, of a tidying up Amendment to put this right at Third Reading. After all, that is what Third Reading allows us to do in your Lordships' House. I hope for the reasons I have given that my noble friend will press his Amendment.

Lord O'NEILL of the MAINE

My Lords, I should like briefly to support the mover of this Amendment and to appeal to the noble Lord, Lord Melchett, if he can, to think again between now and Third Reading. I am one of those, coming from Northern Ireland, who wants to see a Northern Ireland Assembly reestablished as soon as possible, and I was not in favour of the feeling which existed there that a firm like Harland and Wolff should cease to be vested in the Department of Commerce and be much more integrated into London affairs, so I am in full agreement with the remarks the noble Lord made with regard to that.

At the same time it seemed to me, although I am not an expert in either the aircraft business or the shipyard business, that the Amendment moved by the noble Viscount was a most reasonable and sensible one. It seems to me that when Scotland has its own Assembly firms in that position in Scotland will be given the facilities for which the noble Viscount is asking. I therefore suggest that another think should perhaps take place between now and Third Reading, because it seems to me that the Amendment is reasonable and not in any way out of the way.

Viscount ROCHDALE

My Lords, naturally I am extremely sorry that the noble Lord, Lord Melchett, feels unable to accept this Amendment. I do not want to take up your Lordships' time too much, but there are three points I should like to make on the points he made. First, he suggested that Harland and Wolff would, as a result of this Amendment, find themselves in "privileged positions". They were the words he used. I am certain in my mind that, unless this Amendment is included, or at any rate the intention behind this Amendment is constantly worked on, those two companies will be under-privileged. They will be under-privileged in the sense that they are now, and have been in the past.

Then the noble Lord mentioned the question of finance. Somehow he read into this Amendment that it would be possible, as a result of this, for these companies to ask for, or expect to acquire through the Corporation, financial assistance. I cannot see how that could be, because a careful reading of the Amendment shows that information and facilities for which they are asking could only have been those which they could reasonably expect to have had before vesting date. How could that possibly apply to finance, and those same bits of information and facilities as the subsidiaries in the Corporations will now have? I cannot agree with him on that. Finally, he refers to inadequate drafting. Well, this is always possible, and if your Lordships now agree to putting this into the Bill then, if the

Resolved in the affirmative, and Amendment agreed to accordingly.

Clause 52 [Furnishing of information to the Secretary of State]:

2.8 p.m.

Lord CARR of HADLEY moved Amendment No. 171:

noble Lord feels that there are errors in the drafting, I feel sure that he will be able to come forward on Third Reading with appropriate alterations, and it will then be up to your Lordships to decide on the strength of his arguments which they prefer.

2 p.m.

On Question, Whether the said Amendment (No. 169) shall be agreed to?

Their Lordships divided: Contents, 73; Not-Contents, 43.

CONTENTS
Amory, V.	Grimston of Westbury, L.	Orr-Ewing, L.
Ampthill, L.	Hailsham of Saint Marylebone, L.	Platt, L.
Balfour of Inchrye, L.	Hanworth, V.	Rankeillour, L.
Barrington, V.	Harmar-Nicholls, L.	Redesdale, L.
Beaumont of Whitley, L.	Hawke, L.	Rochdale, V.
Belstead, L.	Henley, L.	St. Davids, V.
Berkeley, B.	Hereford, V.	Sandys, L.
Broadbridge, L.	Hornsby-Smith, B.	Seear, B.
Byers, L.	Jessel, L.	Sempill, Ly.
Caccia, L.	Killearn, L.	Simon, V.
Campbell of Croy, L.	Lauderdale, E.	Skelmersdale, L.
Carr of Hadley, L.	Lindsey and Abingdon, E.	Stamp, L.
Chelwood, L.	Long, V.	Strathcona and Mount Royal, L
Clancarty, E.	Lucas of Chilworth, L.	Sudeley, L.
Colville of Culross, V.	Lyell, L.	Thorneycroft, L.
Cullen of Ashbourne, L.	Mancroft, L.	Trefgarne, L.
Daventry, V.	Molson, L.	Trevelyan, L.
Denham, L. [Teller.]	Monck, V.	Vickers, B.
Drumalbyn, L.	Mottistone, L.	Vivian, L.
Effingham, E.	Mowbray and Stourton, L. [Teller.]	Ward of North Tyneside, B.
Forbes, L.		Westbury, L.
Gainford, L.	Munster, E.	Wigoder, L.
Gore-Booth, L.	O'Hagan, L.	Winstanley, L.
Greenway, L.	O'Neill of the Maine, L.	Wolverton, L.
Gridley, L.	Onslow, E.

NOT-CONTENTS
Bowden, L.	Houghton of Sowerby, L.	Peart, L. (L. Privy Seal.)
Brimelow, L.	Jacques, L. [Teller.]	Peddie, L.
Brockway, L.	Janner, L.	Sainsbury, L.
Bruce of Donington, L.	Kagan, L.	Shinwell, L.
Buckinghamshire, E.	Leatherland, L.	Stedman, B.
Burntwood, L.	Llewelyn-Davies of Hastoe, B.	Stewart of Alvechurch, B.
Champion, L.	McCarthy, L.	Stone, L.
Chorley, L.	McCluskey, L.	Strabolgi, L. [Teller.]
Collison, L.	MacLeod of Fuinary, L.	Wallace of Coslany, L.
Davies of Leek, L.	Melchett, L.	Weidenfeld, L.
Donaldson of Kingsbridge, L.	Milford, L.	Wells-Pestell, L.
Elwyn-Jones, L. (L. Chancellor.)	Oram, L.	Winterbottom, L.
Gordon-Walker, L.	Pannell, L.	Wynne-Jones, L.
Hale, L.	Pargiter, L.
Henderson, L.	Parry, L.

Page 70, line 35, at end insert— ("(4A) Where it appears to the Secretary of State that a requirement is imposed on a person under this section and that person has refused or failed to comply with the requirement, the Court on the application of the Secretary of State may make such order or orders requiring compliance by that person with the requirement as the Court thinks just and reasonable for the purposes of this Act. For the purposes of this subsection "the Court" means the High Court in England or Northern Ireland or the Court of Session in Scotland, as the case may be.").

The noble Lord said: My Lords, it may be for the convenience of the House if I speak at the same time to Amendment No. 172, that being consequential upon No. 171. Here we are concerned with the disclosure of information and we accept that it is right that if a person fails to disclose information reasonably required under the Bill he can be taken to court. As we understand it, he cannot go to the court to test his case; he must be summoned to appear before the court by the Secretary of State. As the Bill stands he must be summoned before the magistrates' court under the threat of a fine. Our objection to this is that the magistrates' court is not a suitable court to deal with this sort of matter. Accordingly, we seek in the Amendment that it should be the High Court and not the magistrates' court. I need not say more about the purpose of the Amendment; it is simply the level of court to which cases like this should go.

Lord McCLUSKEY

My Lords, speaking on a personal level, as a lawyer who has many friends who appear in the High Court, I have a certain trade union-type of sympathy with lawyers because undoubtedly this would make work for lawyers at the Bar, but the Government are unable to support the Amendment for a number of reasons. As the noble Lord has explained, what the Amendment does—at any rate in the case of England and Wales—is to retain the magistrates' court jurisdiction (in Scotland it would be the sheriff court) in all cases where there is a question of furnishing false information or of intention to deceive. However, it insists on High Court jurisdiction if someone refuses to comply with a requirement. However, as the Bill is drafted, someone who refuses to comply with a requirement and is prosecuted in the lower court and found guilty has the right to take a point of law such as the reasonableness of his refusal to the High Court or its equivalent in Scotland.

Therefore, the Bill provides that if there is an interpretation of whether a requirement is reasonable—for example, that the reasonable excuse put forward by the defence under subsection (5)(a) is that the requirement was unreasonable—the High Court could adjudicate on that question. The only difference is that under the Bill the adjudication could occur only on appeal and not directly as the Amendment provides. So I think that noble Lords opposite will surely accept that the ultimate arbiter of the matter of reasonableness is, or can be at the instance of an aggrieved person, the High Court. Of course, exactly the same applies in the case of Scotland although the lower court there is the sheriff court and the higher court is the High Court of Judiciary. In Northern Ireland, appeals from the magistrates' courts go direct to the Court of Appeal.

In the circumstances, I would urge upon your Lordships the present provisions. I submit that they are satisfactory and are consistent with previous legislation. What is laid down in the Bill as it now stands is common form procedure in most if not all comparable Statutes. Wherever there has been a requirement to provide information, the Statute has laid down that the proceedings following that requirement should be brought in the magistrates' court or its equivalent in Scotland and Northern Nand, and we should like to be consistent. So I hope that, in the light of that explanation, noble Lords will reconsider the Amendment and withdraw it.

Lord CARR of HADLEY

My Lords, I shall certainly give consideration to what the noble and learned Lord has said. This illustrates the great difficulty one has when the normal period between Committee stage and Report is contracted to about half what is normally regarded in your Lordships' House as the proper amount of time. It does not give the Opposition and people wishing to make representations an adequate opportunity to think matters through. In order to make quite sure that one does not miss a point, the only thing to do is to slap an Amendment on to the Order Paper. This is a typical example of "more haste less speed". I hope that the Government will take this on board because, if any of these Amendments are unnecessary, they are the people to blame for not having given the normally accepted amount of time not only for each stage but—what is very important in this respect—between each stage. However, so far as the Amendment is concerned, all I can say is that I have listened carefully to what the noble and learned Lord has said. To me, as a layman, I thought it sounded fairly reasonable, but I must stress that I am speaking as a layman. I must therefore seek advice. If we are satisfied, that will be the end of it. If not, I shall have to return to it on Third Reading on Tuesday. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

2.15 p.m.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 173: After Clause 53, insert the following new clause:

Acquired company's documents to be made available to former parent company

.—(1)This section applies to—

1. (a) a company which comes into public ownership (the "former subsidiary") and which immediately before its date of transfer was a subsidiary of a company not being a company which comes into public ownership (the "former parent company"); and
2. (b) the books, accounts and documents of the former subsidiary so far as they relate to its affairs subsisting at, or at any time before, that date of transfer.

(2) Subject to subsection (4) below, the former subsidiary shall, at any time, and from time to time after the date of transfer of its equity share capital, make available to the former parent company such facilities for the examination of and the making of extracts from or copies of the relevant documents as the former parent company may reasonably request for the purposes of its business or, in the event of any question arising between the former parent company and the former subsidiary whether any request is reasonable, as may be directed by the Secretary of State.

(3) For the purposes of this section a company which comes into public ownership and whose equity share capital was held immediately before the date of transfer by two companies in equal proportions shall be deemed to be a former subsidiary, and the two companies, and any company of which either of them was at that time a subsidiary, shall each be deemed to be a former parent company.

(4) Subsection (2) above shall cease to have effect on the expiry of the period of 10 years beginning on the relevant vesting date.

The noble Lord said: My Lords, the Amendment is on similar lines to one moved at the Committee stage, but it has been slightly altered. In urging the rejection of the then Amendment No. 201, the noble Lord, Lord Kirkhill, gave us four grounds for objecting to it. He said first that it was open-ended and would give the parent company the right of access to the books of the subsidiary no matter how long after the date of transfer. That is the principal point that we have tried to deal with in this Amendment, where the time period has been limited to 10 years. Then, the noble Lord said that a prudent company would ensure before the date of transfer that it had all the necessary documents. The difficulty about that is that one can never be quite sure what points the Inland Revenue, for example, may raise after a considerable passage of time.

So far as compensation is concerned, the noble Lord said that the stockholders' representative would have access to all the necessary information under what was then Clause 41 but what is now Clause 42. I hope that I shall not fall into the same trap as I did a few minutes ago. Then they pointed out that when the ownership of a company changes the former owner loses all rights or interest in respect of the company; but we made the point at the time that, in the ordinary way, a company which is selling another takes the precaution of reserving to itself a right of access to further information if it wants it.

Finally, may I say that, in order to prevent any possibility of vexatiousness or abuse of these provisions, our Amendment makes the Secretary of State the final arbiter as to whether the information that is required is reasonable. We had earlier on today an example given by my noble friend Lord Orr-Ewing of the sort of situation where this kind of information might well be available. I am not sure whether it was an exact illustration but the Government will recall that my noble friend cited an example of a company that could well find itself needing information which, if we have no clause on these lines in the Bill, would be denied to it. I beg to move.

Lord ORR-EWING

My Lords, I should like to add my support to this Amendment. It seems to me that some period must be allowed. It is not right that, as from vesting day, a company should not have any access to its files, data, patent conditions, licences and all sorts of things. On the other hand, if the company is required to micro-miniature photograph every single piece of paper which, over the years, has been collected in files of one sort or another, it will be involved in tremendous costs—not only the cost of reproducing all these documents, but the cost of filing them away, of housing them and of arranging for them to be reproduced and so on. Those of us who have experience of this also know that the Inland Revenue are not terribly quick on the draw. What happens if, after a year or two one is suddenly asked to pay some tax and one wants to go and look at the files or to examine the accounts carefully? I am sure that the Government, wishing to be fair, will think that this is a reasonable and progressive Amendment. It merely makes sure that a company losing one of its main subsidiaries but carrying on a business which is not competitive but which may be in associated engineering fields, will have access to important data in order to answer queries coming from other sources, perhaps including overseas licensees and people of that ilk.

The noble Lord will note that we have been at pains to specify 10 years. If noble Lords opposite feel that that is too long, perhaps they could come forward and make a constructive suggestion for some shorter period, though it must not be too short. We have also given the Secretary of State powers to supervise. Therefore, it seems to me there is nothing against the Amendment and that, on the whole, it will help the changeover and will not make the holding company which has lost its subsidiary vulnerable to all sorts of difficulties that might arise if none of this information is available to it after vesting day.

Lord McCLUSKEY

My Lords, I do not want to labour the point but I still have to resist the Amendment, I am afraid. A similar Amendment was moved during the Committee stage and, since that time, the Amendment has been altered in order to prevent the right of access being open-ended, although the period taken—10 years—is an excessively long one on any view. From the reading of the Official Report of the Committee stage it appears that we could agree with noble Lords on one thing anyway; that is, that the Bill in this context should reflect what is normal practice in the case of change of owner-ship. But we would differ from noble Lords opposite about what is normal in the private sector.

We still hold that it is normal that, when the ownership of a company changes, the former owner loses all his rights and interests with respect to the company; the one exception to this, the one which the noble Lord, Lord Strathcona and Mount Royal, used in Committee as the basis of his support for the Amendment then being moved, is the exception in the case where the former parent company undertakes continuing guarantees or warranties beyond the date of transfer. If that were the situation, one would acknowledge that it was a valid point. If such guarantees are to continue, we would accept that it would be logical and reasonable for the parent company to ask for and to receive continued access to documents. But under Clause 54 of the Bill the Corporations would take over all warranties, guarantees and liabilities given by the former parent companies in respect of the obligations of their former subsidiaries. Therefore, the one exception which has been cited to the complete break doctrine which my noble friend Lord Kirkhill mentioned in Committee cannot therefore arise. I hope that noble Lords opposite will accept that the position is not comparable to the private sector case of a change of ownership within a period of warranty. Where there is not a period of warranty connected with a change of ownership it is not normal practice for the former parent company to have access to its former subsidiaries' books and so on, especially for such an enormous period, and we do not think it is appropriate to have such a provision here.

The Government do not see any reason why the former owners should be given rights after nationalisation which they would not have got from a comparable private takeover. I ask the noble Lords to withdraw the Amendment. In the light of what has been said today on the point in relation to tax, I should say that surely the Amendment is making something of a mountain out of a molehill. If there was a tax problem it is difficult to believe that a reasonable request without the need of a statutory backing for documents would be granted. In the circumstances, I ask that the Amendment be withdrawn.

Lord HAWKE

My Lords, have not the Government got the wrong end of the stick here? Surely this is not the same as a private enterprise transfer of business, because there is an essential difference; namely, if the Bill becomes enacted in any form this will be compulsory, whereas the transfer of business from private enterprise is a voluntary one within the rules that apply and is not enforced by the full weight of legislation of the Crown. So the Government are in a different position to another private enterprise business taking over one that it purchases in the ordinary way.

I suggest to noble Lords opposite that this is a vitally important matter and that it is no loss to them. One wonders why the Government think that it matters that this facility should be available to the companies in the terms of the Amendment. What are the Government to lose by being just moderately generous and, if one likes to put it this way, moderately sensible of other people's attitudes, instead of taking a rather doctrinaire view and trying to relate it to a circumstance which is totally different from the one with which we are confronted. Therefore, I ask the Government to think again before they invite my noble friends on the Front Bench to make a decision about this.

Lord MOTTISTONE

My Lords, I should like some information from the noble and learned Lord. He speaks about the liabilities and so on having been taken over, but suppose these companies had been conducting work for, say, a foreign Government or something like that on an escalation clause basis, and that after a number of years the foreign Government came to the conclusion that the escalation clause basis had not been calculated properly, either through a mistake or on purpose, and were proposing to sue the people for a return of money already paid. Against whom have they a remedy? Is it against the new nationalised Corporation, in that it has taken over the liabilities? Or is it against the old owners of the business whom they may claim have wilfully swindled them, to put it mildly? If the noble and learned Lord could answer that question, it might clear up the matter about the books.

Lord McCLUSKEY

My Lords, with the leave of the House, may I direct the noble Lord's attention to Clause 54? I should hate to suggest that I can make anything in the nature of an authoritative pronouncement on it—it would be dangerous for me to do so—but the wording seems to be clear enough. If an action is to be taken against the company, and I assume that it would be taken, then the wording appears to apply: If any sum required by any judgment or order to be paid by a company which at the time of the judgment or order is a wholly owned subsidiary of a Corporation or has at any time since the cause of action arose been such a subsidiary is not paid by the company within the period of 14 days … —then the Corporation becomes liable. If the answer is not in Clause 54, then I cannot answer the noble Lord's question.

Lord HAWKE

My Lords, this is a case where the matter has not gone to the court at all but is merely a claim.

Lord MOTTISTONE

My Lords, before the noble and learned Lord sits down, would he care to answer my question: what have the Government to lose by accepting the Amendment?

Lord McCLUSKEY

My Lords, in reply to the noble Lord, Lord Mottistone, I can only say that the Government see no reason to depart from the normal practice in this type of case.

Lord MOTTISTONE

But there is not a normal practice in this type of case.

2.27 p.m.

Lord STRATHCONA and MOUNT ROYAL

My Lords, I am bound to say to the noble and learned Lord that this is a profoundly disappointing reply. It seems to me that part of the time we are arguing on a question of fact. I know that I am sticking my neck out in trying to cross swords with somebody of the training of the noble and learned Lord, but he is asserting that the Government are the best judge of what is the normal good commercial practice. But we have spent many weary hours trying to say to him, with the greatest of respect, that the Government have not got a clue about what is good commercial practice if we judge what they believe the Stock Exchange does. I am not attempting to open up the whole issue of compensation, but time and again noble Lords opposite have said: "We are following good Stock Exchange practice", and rows of noble Lords behind me, and on the Cross-Benches and on the Liberal Benches have said that, with the greatest respect, that is simply not so.

The noble and learned Lord is now telling us that the Government, most of whom have never been in commerce, have a better idea of what is normal commercial practice than those who are actually doing it on a day-to-day basis. We are asked on the basis of that to accept that no reasonable request would be refused. The implication here is that the Minister shall be the judge of what is reasonable. I suggest to him that it leaves us in a most unreasonable situation. One of my noble friends gave an example of the kind of thing we have in mind. We gave a number of other examples of the kind of situation which could arise. Let us please not say that they are hypothetical; one of them is a reality, and the others are perfectly likely to occur.

The noble Lord, Lord Mottistone, pointed out that we are dealing here not with an ordinary willing seller and willing buyer. Again, how often do we have to say this: we are dealing with an enforced takeover. I do not know, because I do not know my way about this Bill well enough, whether it will be possible for the companies, in order to prepare themselves against this possibility, to enter into all sorts of undertakings now. I suspect that there is something in the Bill which says that any onerous transactions which they enter into now can be avoided by the Minister later if it suits him. That is the sort of thing I would expect to find in here, but I have not been able to turn it up during the time that we have been having this rather unsatisfactory exchange. It really is not the kind of thing that we would in the least want to divide upon, but the Minister really has put us in a very great difficulty here. We want to get on with our business on a Friday afternoon. On the other hand, we may later on be castigated for having a whole lot of Amendments at the Third Reading stage. When we get such a profoundly disturbing and unsatisfactory answer as that, I think we may have to return to the point later, but for the time being I am willing to leave it at that. My Lords, I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

Clause 57 [Interpretation]:

2.31 p.m.

Lord CAMPBELL of CROY moved Amendment No. 174: Page 74, line 40, at end insert ("being a date falling not less than twenty-eight days after the making of the order").

The noble Lord said: My Lords, I beg to move Amendment No. 174, and I think it would be convenient if Amendment No. 177, which is connected, were discussed at the same time. We went into this at Committee stage, so I will very briefly remind the Government of the point. The Secretary of State will be able to make an order specifying vesting dates, but that order may be made without warning and could specify an immediate date for the vesting in each Corporation of the companies to be nationalised. We believe that the companies should be given some warning, and the object of the two Amendments is to secure a minimum notice of 28 days between the day when a vesting order is made and the date when it comes into operation. I am moving this again to provide the Government with an opportunity to give any further indication they wish of their thinking on this.

My Lords, there is some irony in the contrast between the Government's attitude on this point and that to be found in Clause 28 of the Bill, subsection (7), where, if a notice to exclude a company from nationalisation is withdrawn or revoked, the date of the transfer is fixed at two months after the date of withdrawal or revocation. We hope that even at this stage the Government will recognise that a reasonable amount of notice of vesting date ought to be given to the company. I beg to move.

Lord MELCHETT

My Lords, as the noble Lord has said, he and I, and your Lordships, discussed these Amendments during the Committee stage, and I do not want to repeat all the same objections that I then put forward. However, I should like to deal with some of the points which the noble Lord, Lord Campbell of Croy, made during the Committee stage. As I understand it, he was concerned that the companies involved should have some warning of vesting. As I said then, it may well be that there will have to be a period of some weeks, or even months, between Royal Assent and vesting. We will obviously aim to make the vesting order well in advance of vesting day, though I confess I am surprised that the companies should feel that they need any more notice of our intention to vest them in the Corporations. However, we see no advantage in having a statutory requirement for such a gap, which, as I explained during Committee, would only limit flexibility to do what is best in the interests of the industries.

My Lords, during the Committee stage the noble Lord, Lord Campbell of Croy, mentioned that the Iron and Steel Act 1967 specified that the vesting date would occur 36 weeks after the passing of the Act, or such earlier date as the Minister may appoint. The noble Lord said that at least this made it clear that a considerable interval was expected. But even that provision left the actual date flexible, which the noble Lord's Amendment does not. Here we think that precedent is correct and that a statutory and unalterable gap would be unsuitable. However. I repeat the assurance which I have now given to the noble Lord, that we will give the companies as much warning as we possibly can and that we will aim to make the vesting order well in advance of vesting day. I hope that meets the main concern of the noble Lord.

Lord CAMPBELL of CROY

My Lords, I am grateful to the noble Lord because he has now given a definite assurance that it is the intention of the Government to give reasonable notice to the companies. I think the companies do need that notice. I will not argue the point with him now, but he started by saying that he did not think they did need notice. However, he has made it clear that the Government intend to give notice, and I am sure that the companies need about 28 days as a minimum. But in the light of what the noble Lord has said, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord McCLUSKEY moved Amendment No. 175:

Page 75, line 21, at end insert— (""holding company" shall be construed in accordance with section 154 of the Companies Act 1948;").

The noble and learned Lord said: My Lords, this Amendment simply fulfils an undertaking which was given by my noble friend Lord Melchett in Committee. I need not elaborate it. I beg to move.

Lord STRATHCONA and MOUNT ROYAL

My Lords, we are grateful to the Goverment. As the noble and learned Lord has said, this was something which we put forward. I think they have put it in a different place, hut otherwise we are in total agreement.

On Question, Amendment agreed to.

Lord CAMPBELL of CROY moved Amendment No. 176:

Page 75, line 45, at end insert— "net loss" means the amount by which the value of the securities of the company would have been reduced upon the hypothesis that the relevant transaction had occurred immediately before the first of the relevant days.

The noble Lord said: My Lords, this is another matter which was raised at Committee stage. Deductions from compensation will he related to values at the date of transfer. Losses valued at 1976 prices will he deducted from 1973–74 base values. The purpose of the Amendment is to ensure that both the positive and the negative elements of compensation are valued on the same basis regarding the time of valuation. When I moved this Amendment, giving rather more detail, at the Committee stage, the noble Lord, Lord Kirkhill, seemed to dismiss it somewhat lightly. I hope, none the less, that the Government were able to consider what was said during that debate; and I put the Amendment down again so that the Government, after consideration, could tell us whether they had had any second thoughts on this subject. I beg to move.

Lord McCLUSKEY

My Lords, as has been pointed out this Amendment seeks to limit the amount of any "net loss" wherever this concept is used in the Bill, and it would apply in relation to Clauses 31, 32 and 40. It is exactly the same Amendment as was discussed and then withdrawn in Committee, and the Government see no reason, after consideration, to change their view on the matter. I do not propose to restate the reasons which were cogently given by my noble friend Lord Kirkhill—they appear in the Official Report in column 255—but I should perhaps add in relation to Clause 40, which I do not think the noble Lord dealt with, that it provides for compensation to be restricted to the extent of any "net loss" resulting from material or onerous transactions which take place between 28th February 1974 and the safeguarding date.

I would say to noble Lords that it must surely be accepted that it is most unlikely that any of the transactions covered by Clauses 31, 32 or 40 would have any immediate bearing upon the value of the securities calculated under the Bill. One could imagine that the share quotation of a company might be decreased to some extent if an onerous transaction of this kind came to light; but, equally, a high dividend could conceivably, in certain circumstances, increase the value of securities, particularly in the eyes of investors who were looking for high incomes and expected a repetition of the payment of the high dividend. This effect on securities is in the Government's view nothing to do with what is meant by "net loss" under the Bill. "Net loss" means exactly what it says; namely, the amount of money of which the new Corporation is deprived by virtue of the transaction in question. As my noble friend Lord Kirkhill said, the concept of net loss here implies simply an arithmetical sum for which the directors would become liable or by which compensation would be reduced under the relevant clauses in the Bill. It is inappropriate in these circumstances to look at the securities in the way proposed. I would invite the noble Lord to withdraw the Amendment.

The Earl of ONSLOW

My Lords, it seems odd that we should in this instance take no account of the difference in the value of the pound. For the benefit of this House it would be nice if the noble and learned Lord, Lord McCluskey, could state what that difference is. That is the first point. The second point is that we have had discussions about inflation proofing. The noble Baroness, Lady Seear, brought the subject up earlier today. We have pensions, which is a slightly different issue; but there is a terrible danger in the highly inflationary situation which we have had—20 per cent. last year and 14 per cent. this year and I cannot remember what it was the year before. These amounts should be calculated on the 1973/74 prices.

Lord CAMPBELL of CROY

My Lords, I am sorry that the noble and learned Lord has not been able to change the kind of reply, because it was a very similar reply to that given me in Committee stage—although he has added one point. With all respect, I am afraid that I did not think that the reasons given by the noble Lord, Lord Kirkhill, were very cogent. I do not propose to pursue this now and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord CAMPBELL of CROY had given Notice of his intention to move Amendment 177: Page 77, line 34, at end insert ("being a date falling not less than twenty-eight days after the making of the order").

The noble Lord said: This Amendment was discussed with Amendment No. 174, and I do not propose to move it.

Lord CAMPBELL of CROY moved Amendment No. 177A:

Page 79, line 23, at end insert— ("or any factory, dry-dock, graving dock, or other premises or land situated in the United Kingdom to which an acquired company was entitled to an interest in possession or a licence to occupy and which on or at any time after the initial date was being used for repairing, refitting or maintaining ships unless such factory, dry-dock, graving dock, or other premises or land are either wholly appurtenant to the shipbuilding undertaking carried on at a shipyard or other works in which the acquired company had an interest in possession on 31st July 1974 or are mainly appurtenant to property or rights which are wholly appurtenant to that undertaking or cannot reasonably be severed therefrom;").

The noble Lord said: This Amendment was discussed with Amendment No. 138A. It is one of the Amendments involved with the ship repairing industry. I beg to move it formally.

On Question, Amendment agreed to.

Clause 58 [Short title and extent]:

2.42 p.m.

Lord CARR of HADLEY moved Amendment No. 178:

Page 79, line 42, at end insert— ("(1A) This Act shall not come into operation with respect to British Aerospace or to any of the companies referred to in subsection (1) of section 20 above, until such day as the Secretary of State may appoint by order made on or after the date of the first meeting of the next Parliament, but shall otherwise come into operation immediately").

The noble Lord said: My Lords, this is the substantive Amendment which puts into operation the intention we have expressed on a number of occasions that the vesting date of the British Aerospace Corporation should be postponed until after the next General Election. The last time we considered the Bill I moved the Amendment leading to this and it led The Times newspaper to report the following day that we had changed our intentions on the subject. I thought I made it clear two days ago that we had not, and I am glad to confirm it now.

My Lords, this is the substantive Motion to achieve that. I have given the reasons for our view before, and I do not think I need to repeat them except to say that the nationalisation of the aircraft industry will bring such a loss of efficiency, investment and employment in this industry in the future that we feel it our duty to try to stop it. I beg to move.

Lord MELCHETT

My Lords, I am sorry to interrupt the smooth and rapid progress that we are making this afternoon by addressing some harsh words to noble Lords opposite, but I feel that this Amendment calls for it. This Amendment is an irresponsible attempt by noble Lords opposite to frustrate the will of the elected majority in another place and to circumvent—

Several noble Lords: Oh!

Lord MELCHETT

—and to circumvent the constitutional processes by holding back the Government's programme for longer than would be possible under the Parliament Act. It is a straightforward Party political attack. I gave in Committee the compelling industrial case for proceeding with this legislation. It is a case accepted by those in the industry who put its future prospects first, even though some of them may be opposed to the principle of nationalisation. They realise at this critical time that the industry is more damaged by delay than by anything else. I have to say that I think it is a great pity that noble Lords opposite are not as responsible.

My Lords, I must again make it clear, as I did in Committee that this Amendment is completely unacceptable and that the Government will resist it with every means at their disposal.

The Earl of ONSLOW

My Lords, would the noble Lord consider advising Mr. Callaghan to go to the country and ask the citizens for their opinion? I suspect that, after yesterday's results, he would not.

Baroness WARD of NORTH TYNESIDE

My Lords, may I ask one question? It worries me that we get so little support from the Government on many of the very useful Amendments we have moved. I am not going to argue that, but when an undertaking is given (which the Government are entitled to give) that certain Amendments will be considered during a very short period, what then do the Government do? Do they discuss with the Treasury the Amendments on financial matters which have been moved? Because I think this is of tremendous importance.

I do not really have any confidence in any of the Ministers sitting on the Government side, because I think they have had practically no experience at all. I still have quite a feeling of respect for Treasury officials but the Treasury is always pretty busy. We seem to have been forced into taking very quick decisions. If I had had my way, I should have supported many of our Amendments in the Lobby. I do not like holding up masses of Amendments, even to be polite to the Government because I do not feel polite towards them. What I want to know is this. After an undertaking has been given that some of our financial Amendments will be looked at and considered, do the Government merely consider them among themselves or do they go to the Treasury and really consider them from the point of view of what I might call the financial aspects?—for the Treasury cannot always believe in Ministers who really have had so very little experience. I believe in experience much more, sometimes, than political principles.

Lord BYERS

My Lords—

Baroness WARD of NORTH TYNESIDE

Can I have an answer?

Lord BYERS

My Lords, I really do not think that we were entitled to that outburst from the Government Dispatch Box. I have a feeling that the words were written yesterday and probably if amended in the light of the by-elections they might have been a little different. This is a very difficult decision to make. I do not think it is right to charge anybody with irresponsibility. I get the sense that this Bill is totally out of keeping with our whole economic problems at the present time. Just to honour a Manifesto pledge given in 1974 is, to my mind, quite irresponsible against the background of our economic balance of payments, our borrowing requirements and all the rest.

I accept the fact that if this Amendment is passed it will cause uncertainty. That is where the difficulty of the decision lies; but, on balance, I believe that this House (which is entitled to exercise a delaying power to give the other place an opportunity to think again) is fully entitled, in a situation like this, to send it back to another place and to say, "In the light of the economic situation, please look at it again". I can say that I and my noble friends will reluctantly support this. It is a difficult balance of judgment, but at this moment we think it right to send it back to the other place. I hope that the other place under their Time Table Motion will give sufficient discussion to this so that we get a reasoned reply if they disagree with us.

Lord CARR of HADLEY

My Lords, I want briefly to support what the noble Lord, Lord Byers, has said. It is nonsense to describe this as an irresponsible attempt to thwart the democratic authority of an elected Government. The Government we have at the moment have never really had any democratic authority for these measures. Certainly they have not had them since yesterday. Of that there can be no doubt. All evidence we have shows that the great majority of people in this country do not wish to have any further nationalisation in general or nationalisation of this industry in particular. All the evidence that we can achieve from election results, tests of opinion, and so on, shows this to be true over and over again. Please do not let us hear this utter nonsense about thwarting democratic authority.

Nor is this just a Party point. Despite what the noble Lord said just now, he has never given a compelling industrial case as to why this industry should he nationalised. As I pointed out the other day, in particular he is recommending the House, and the Government are recommending the country, to take the exactly opposite view and course recommended by the Plowden Committee for this industry. The Plowden Committee were set up by a Labour Government to examine this matter of industrial strategy. They specifically came down against nationalisation and gave arguments as to why. Those have never been dealt with by the Government. No compelling industrial case has ever been given. The only compelling case has been the one given by the Plowden Committee, and that needs to be argued against if the Government wish to go in exactly the opposite direction. As the noble Lord, Lord Byers, said, at best this measure is irrelevant to our urgent economic needs at the moment. Because of the cost of money and harm it will do to this great industry, it is damaging. Certainly, nobody could say that it is unconstitutional and improper for the House to exercise delaying powers. The Labour Government gave us delaying powers in the Parliament Act. We are doing no more and no less than what a Labour Government told us to do.

2.53 p.m.

Lord SHINWELL

My Lords, when a Government associated with a political Party decide on a course of action it is naturally expected that the members of that Party should follow the line embarked upon. On the Second Reading of this debate, I made a comment about the proposal to transfer the aerospace industry from private to public ownership. My comment was a simple one. Although I accept implicitly the principle of nationalisation, I qualify it in a pragmatic fashion: is it desirable, is it worth while and is the timing appropriate? My comment was the simple one that we are embarking on a gamble. Although in the course of these debates it has been sought to demonstrate that some of the companies concerned make considerable profits, I am doubtful whether in the future— perhaps not in the foreseeable future, perhaps the more remote future—they will continue to do so. The aerospace industry is a highly speculative industry; of that there can be no doubt.

In these circumstances, one has to come to a personal decision. What can one do? These proposals have to be considered in another place. Is it possible that anything said here on either side of the House can influence the majority in another place? I would not care to swear to it. Speaking with no egotism whatever of my personal experiences, I have been associated for a very long time with the Labour Party. Indeed, I can almost claim that there is no other member of the Labour Party active in public life who has a longer experience. From the very outset I have been devoted to the principle, never mind about the practice—it is a matter of timing and circumstances—of national ownership. Not that I regard it—now I repeat myself—as being an essential principle of Socialist philosophy. I do not. But it is part of the mechanics of Socialism.

We have undertaken in the course of time to embark on a number of propositions which have transferred private industry to public hands. The concept was that by doing so, we would make those industries more efficient and more profitable. I use the term "profitable" in a general sense. Also, it would provide security of employment for a large number of people associated with the particular industries involved. I must confess to a considerable degree of disappointment. It simply has not happened. At the same time, I would not retrace my steps and not ask the Government to retrace their steps; in other words, to de-nationalise. That would be a mistake. There must be continuity. Once we embark on a particular line of policy, we have to stand by it, make it efficient, worthwhile, and justify the action that we have taken.

I should like to say something which will influence some of my honourable friends in another place. To repeat what I have said (and forgive the repetition, my Lords, for there has been a lot of repetition in the course of our debates), when my noble friends in another place are considering not so much the political activities, the alleged—I emphasise the term—alleged filibustering, the Opposition have a perfect right to scrutinise every item, every line and comma of legislation that emerges from another place. Never mind about the constitutional aspect, it is a sensible course to take, otherwise you might as well abolish this place and be done with it. My advice for what it is worth, is: be careful before you embark on the policy of transferring an industry from private to public hands unless it has been carefully, studiously and practically thought out.

Regarding the circumstances surrounding the industry, is it going to be worth while? If it is embarked upon for purely ideological reasons, I reject it. There is a place for ideology but it must be associated with practical considerations. My advice to my friends in another place is this: be very careful indeed. Later there is another Amendment and I should like to say a word on that as I do not want to have to speak again. This is in connection with ship repairing. This is not strictly in order, but I merely mention it. I object to that.

For reasons which I ventured to advance on a previous occasion, we believe—I am speaking now about the Labour Party, and this cannot be challenged—in what is called a mixed economy. Make the public sector efficient and there to stay; let there be private ownership and private enterprise, and let it be "enterprise". That is our policy. In those circumstances, and accepting that policy, there is no reason at all why we should associate the inevitable change—and I would emphasise the importance of this—of transferring shipbuilding from private hands to public hands. I have advocated that for a long time, because I understand the shipbuilding industry. I have taken part in many of the disputes associated with the political aspects and I know what has happened. The shipbuilding industry has been in trouble almost ever since I can remember, and I may say that I came into the business representing a shipbuilding ward on the Clyde. That was before the First World War, so I know something about it.

I accept the nationalisation of shipbuilding per se, but I see no reason at all why shipbuilding should be associated with ship repair. Ship repair is an accessory, subordinate to and associated with shipbuilding, but not shipbuilding itself. There is no logical or valid reason why it should be associated with the shipbuilding industry in the take-over. Leave it where it is. That is all I want to say about that. As regards the political quibbles and disputations, and the out-bursts which are alleged against may noble friend Lord Melchett, one must say that after one has sat in this Chamber day after day and sometimes night after night listening to the repetition and the speeches, which are sometime very boring—and I have made my contribution, too—an outbreak of temper is not surprising. I forgive my noble friend for outbursts of temper because of his remarkable industry.

My Lords, I leave it at that; but if there is a Division on this Amendment I shall not have the courage to vote. I shall sit on the fence and simply abstain. I dislike it intensely, but to go into the Lobby will not make all that difference, so all they can say is that I have not the courage of my convictions. Certainly I lack the courage but I have the conviction, and therefore I would oppose the take-over of the British aerospace industry.

Lord GORE-BOOTH

My Lords, I rise with some diffidence, for two reasons. Coming directly after that very impressive and courageous speech by the noble Lord, Lord Shinwell, I feel that someone from these Benches should rise, even if the contribution that is made is only modest and not perhaps very knowledgeable, because the suggestion has been made that this Motion is purely a political manouevre. Even if I merely stand up, I think perhaps that will add some force to the argument that it is not just that: it is something far more important and far more fundamental. I have not ventured to speak earlier, and so I hope that your Lordships will forgive these few words—and I shall make them very few—which are perhaps rather more suitable for Second Reading than for Report. I should simply like to say this. This is a badly-conceived and badly-constructed Bill, which seeks to do the same thing to a number of disparate aspects of our industry. At least the Motion seeks to detach one from the rest.

I do not have ideological views on whether or not things should be nationalised. That depends a great deal on things like capital requirements, on the balance between industries to form a genuinely mixed economy and many items of that kind. I was much impressed by remarks of the noble Lord, Lord George-Brown, at a previous stage when, although he made a number of remarks about nationalisation with which I would not wholly agree, he made the point that what the Bill is liable to do is simply to keep on the same management but under a different ticket and to do that in order, quite rightly, to pay compensation for which it is necessary to increase the flow of money at a time when in all other aspects of our affairs this country is united in thinking that we should do precisely the opposite.

From my own particular part of this Bench, I can do no other than come to the conclusion that the very least thing one can say is that the inclusion in the Bill of this particular aspect of our industry, of which the noble Lord, Lord Shinwell, has spoken, is entirely inopportune and against what we ought to be doing. For that reason, I personally—and again I emphasise that I am not speaking for any of my noble friends but simply to give a non-political view—shall vote for this Amendment if it is put to a Division.

Viscount HANWORTH

My Lords, the noble Lord, Lord Gore-Booth, has done precisely what I was going to do. From these Benches, one can speak only for oneself, but I think it is perhaps not inappropriate to say that many people to whom I have spoken share precisely the views that have been put forward by the noble Lord, Lord Carr. It was mentioned earlier that even if one says that the Government may have to put substantial funds into an industry, that does not mean that it has to be nationalised. If it is necessary—and I think it is unlikely to be—it can take a majority holding. That is nothing like as traumatic an upheaval as nationalisation.

Finally, I would say this. Nationalisation in these circumstances without a justifiable industrial reason, and at a time like this, can only be called doctrinaire. I should like those on the Government side perhaps to think back a little and wonder whether in fact this sort of thing really forms any useful part of the Socialist ideal. The Socialist ideal in the old days appealed to many of us. Today it has degenerated very often into nothing but prejudice.

Resolved in the affirmative, and Amendment agreed to accordingly.

Schedule 1 [Aircraft Industry]:

3.16 p.m.

Lord TREFGARNE moved Amendment No. 178A: Page 80, line 10, leave out ("Scottish Aviation Limited").

The noble Lord said: My Lords, I rise to move Amendment No. 178A and at the same time I should like to speak to Amendment No. 178C, which was tabled to

3.8 p.m.

On Question, Whether the said Amendment (No. 178) shall be agreed to?

Their Lordships divided: Contents, 74; Not-Contents, 46.

CONTENTS
Airedale, L.	Greenway, L.	O'Hagan, L.
Amory, V.	Halsbury, E.	O'Neill of the Maine, L.
Ampthill, L.	Hanworth, V.	Onslow, E.
Arran, E.	Harmar-Nicholls, L.	Rankeillour, L.
Atholl, D.	Hawke, L.	Redesdale, L.
Balfour of Inchrye, L.	Henley, L.	Robbins, L.
Barrington, V.	Hereford, V.	Rochdale, V.
Beaumont of Whitley, L.	Hewlett, L.	St. Davids, V.
Bessborough, E.	Hornsby-Smith, B.	Sandys, L.
Byers, L.	Howe, E.	Sempill, Ly.
Campbell of Croy, L.	Inchyra, L.	Simon, V.
Carr of Hadley, L.	Jessel, L.	Skelmersdale, L.
Carrington, L.	Lauderdale, E.	Stamp, L.
Chelwood, L.	Lindsey and Abingdon, E.	Strathcarron, L.
Clancarty, E.	Long, V.	Strathcona and Mount Royal,
Colville of Culross, V.	Lucas of Chilworth, L.	Sudeley, L.
Cullen of Ashbourne, L.	Lyell, L.	Trcfgarne, L.
Daventry, V.	Molson, L.	Trevelyan, L.
de Clifford, L.	Monck, V.	Tweedsmuir, L.
Denham, L. [Teller.]	Monson, L.	Vickers, B.
Drumalbyn, L.	Morris. L.	Vivian, L.
Effingham, E.	Mottistone, L.	Ward of North Tyneside, B.
Elles, B.	Mowbray and Stourton, L. [Teller.]	Westbury, L.
Forbes, L.		Wigoder, L.
Gore-Booth, L.	Munster, E.	Winstanley, L.

NOT-CONTENTS
Birk, B.	Houghton of Sowerby, L.	Peart, L. (L. Privy Seal.)
Bowden, L.	Jacques, L. [Teller.]	Peddie, L.
Brimelow, L.	Janner, L.	Pitt of Hampstead, L.
Brockway, L.	Kagan, L.	Ponsonby of Shulbrede, L.
Buckinghamshire, E.	Kaldor, L.	Shepherd, L.
Champion, L.	Leatherland, L.	Stedman, B.
Collison, L.	Llewelyn-Davies of Hastoe, B.	Stewart of Alvechurch, B.
Davies of Leek, L.	Lovell-Davis, L.	Stone, L.
Donaldson of Kingsbridge, L.	McCluskey, L.	Strabolgi, L. [Teller.]
Elwyn-Jones, L. (L. Chancellor.)	MacLeod of Fuinary, L.	Wallace of Coslany, L.
Fisher of Camden, L.	Mais, L.	Weidenfeld, L.
Gordon-Walker, L.	Maybray-King, L.	Wells-Pestell, L.
Gregson, L.	Melchett, L.	Winterbottom, L.
Hale, L.	Oram, L.	Wynne-Jones, L.
Harris of Greenwich, L.	Pannell, L.
Henderson, L.	Parry, L.

replace 178B, which I shall not move. Scottish Aviation is a wholly-owned subsidiary of the Laird Group in which the Government already have a 50 per cent. stake. Its status therefore is not dissimilar in many ways from that of Short Brothers and Harland in Northern Ireland, aircraft manufacturers which the Government say they do not wish to be nationalised. The Plowden Committee Report on the aircraft industry, to which my noble friend Lord Carr has referred and on which I had the honour to make my maiden speech to your Lordships, did not recommend nationalisation, as we have heard, but it did suggest part ownership by the Government and I submit that Scottish Aviation already complies with that recommendation.

Geographically and in scale Scottish Aviation is far removed from the other companies to be vested in British Aerospace. It has two factories, at Prestwick and Cummock, and I think these are smaller than the individual plants of the British Aircraft Corporation or Hawker Siddeley Aviation or Hawker Siddeley Dynamics. I believe it is not inconceivable that in the fullness of time Scottish Aviation will become what has been called the Shotton of British Aerospace—not profitable but impossible to close for political reasons. Just because the company is not doing as well as it might is no reason for nationalisation. We are of course against nationalisation in principle, as we have said many times, but if financial assistance to Scottish Aviation is required that can easily be done by any one of the existing agencies and in particular the facilities provided by the 1972 Industry Act. The Government have given a number of assurances that the maximum autonomy will be accorded to the management of Scottish Aviation Limited within British Aerospace, but it is hard to see how this can be achieved without affording to Scottish Aviation a degree of authority within the Group which will be totally out of keeping with the size, scale and importance of the company, and indeed much out of keeping with the autonomy granted to the other companies within the British Aerospace Group.

The workload at Scottish Aviation is a very specialised one and quite different from that of BAC and Hawker. Scottish Aviation concentrates on the manufacture of light training aeroplanes. They have so far produced about 250 Bulldogs which have been supplied to the RAF and certain foreign Air Forces and they have recently announced an aeroplane called the Bullfinch, which is a derivative of the Bulldog. That aeroplane is to be developed for civil use. The company have also recently completed production of a short run Jetstream aircraft. A number were originally supplied to the Royal Air Force and have now been transferred to the Royal Navy for observer training, and eight are to be used for pilot conversions in the Royal Air Force. A further five are in reserve, but production of these is now over.

My Lords, in addition, Scottish Aviation undertake a certain amount of special contract work for Lockheed, such as on the C130 Hercules aircraft and the 1011 Tristar. They overhaul some military aircraft for the Canadian armed forces stationed in Europe. I understand that they also do a certain amount of overhaul work on aircraft engines. Unhappily, the workload of the company is rather declining. Indeed, only a week or so ago a number of men were declared redundant. There is a risk. I believe that the profitability of British Aerospace as a whole is likely to be impaired if subcontract work in future is put out to Scottish Aviation from Hawker Siddeley and BAC, other than on a commercial basis as to other firms. Light aircraft manufacture, which is really the principal business of Scottish Aviation, is a highly customer orientated business and has to be very responsive to market pressures. The outstanding and successful companies in this field are the American firms making the Piper, the Cessna and the Beech. I accept that with really vigorous management, Scottish Aviation could be pulled round, but I do not think it is likely to compete effectively in the field of light aircraft as part of British Aerospace.

An Amendment to delete Scottish Aviation was moved in Committee in the House of Commons, but defeated on a Division. It is interesting to note that the Scottish Nationalist Member of the Committee who might have been thought to have been most directly interested, was not able to attend the Committee on that day and did not vote. Whatever steps are taken to give Scottish Aviation maximum autonomy within the British Aerospace group, its interests are bound to be of less concern to the British Aerospace Board in London than those of BAC and Hawker Siddeley. It has been said that Scottish Aviation could become the nucleus of a light aircraft manufacturing facility within British Aerospace, but I am not convinced that this is feasible or desirable. First of all, there is the problem of the geographical difficulties of the company being based in Scotland. Secondly, it is true to say that, at present anyway, they do not have any basic aircraft design capability. The two aircraft I have mentioned, the Jetstream and the Bulldog, are both derivatives of a design initiated by other companies and taken over by Scottish Aviation at a late date. Therefore, I do not believe that that is an appropriate use for the facilities of Scottish Aviation which the Government want to be vested in British Aerospace. I beg to move.

Lord McCLUSKEY

My Lords, as my honourable friend the Parliamentary Under-Secretary of State explained during Committee stage in another place, the Government decided to take Scottish Aviation into public ownership following, and, indeed, as a result of, representations made to the Government following publication of the Consultative Document in January 1975. These representations came, and came strongly, from the unions at both company and district level, urging inclusion in British Aerospace. I may add that we were also told by the management that they considered the future for their company outside a large public organisation would not be an easy one. Perhaps while dealing with that point, I should make a short comment on what was said by the noble Lord, Lord Trefgarne.

The Government do not have a 50 per cent. stake in the Laird Group. The Government have a 50 per cent. stake in Cammell Laird Shipbuilders, the other 50 per cent., belonging to the Laird Group. That is the information which I have received to enable me to comment upon the noble Lord's point. So in seeking to remove Scottish Aviation from the scope of the proposals within this Bill the noble Lord is seeking to override the wishes expressed by those who work in the company. As my right honourable friend the Secretary of State made clear in the Second Reading debate in another place, the future for workers ultimately depends on the ability to sell their products. We believe, and those in Scottish Aviation agree, that they will do better in public ownership than outside it. The situation is a difficult one, and the Government would not pretend otherwise; but under public ownership the resources represented by Scottish Aviation, and most important the skill and experience of management and workforce, can, in our judgment, be used to the best advantage of the nation as a whole. Just how this should be done will be a matter for the Organising Committee, and, in due course, for the new Corporation, to consider.

May I take up one or two of the points the noble Lord made in moving the Amendment. The Organising Committee has already made it plain that they will not be establishing a centralised bureaucracy. The relevant Corporation is obliged under the Bill to take into account the desirability of promoting the largest degree of decentralisation of management consistent with the proper discharge of its functions. As my right honourable friend the Secretary of State announced in another place on 29th June, it is the Organising Committee's intention to maintain the separate identity of Scottish Aviation with a high degree of local autonomy, to maintain it as a separate profit source within British Aerospace. This is in line with the strong views expressed by the workforce there. But it must remain, of course, for British Aerospace to decide exactly what role Scottish Aviation should have within the organisational structure which they will be establishing.

I should also perhaps say a word about the employment rundown. The company's present rundown, which was mentioned by my noble Lord, is due partly to the completion of the Jetstream project and to a general rundown in its subcontract work. That, I am afraid, is symptomatic of the depressed state of the aircraft market in the current world economic situation. I do not think I can really add to what has already been said here or in another place. It becomes at the end of the day a matter of judgment in the light of the representations that have been made, and I would urge noble Lords to reject this Amendment.

Lord CARR of HADLEY

My Lords, may I say one or two words very briefly about this. There are two issues here. One is, should this company be in public ownership or not? And, strange though it may seem to noble Lords opposite, at this late stage on Friday afternoon on this Bill I do not want to argue that point. But, even if one accepts that it should be in public ownership, it does not necessarily follow that public ownership has to be equated with nationalisation in the sense we are talking about. This is a point made a number of times during our debates. What we are really saying is, "For the moment let us accept the argument that public ownership is appropriate. It is none the less not appropriate to put this particular kind of company within a great organisation like British Aerospace", which is comprised of two giant companies, BAC and Aerospace Division of the Hawker Siddeley Group.

A company of the size of Scottish Aviation, with its type of work, is disparate; it does not fit into that sort of matrix. I do not want at this juncture to argue about public ownership, but I do not believe it is the right form of public ownership to put it within this great nationalised corporation. I do not think we can press the matter today. My noble friend must take whatever decision he likes but I hope he will not altogether close the door on further discussion of this before we have finisned our debates.

Lord TREFGARNE

My Lords, I am not going to pursue the argument to a Division this afternoon. I will read carefully what the noble Lord has said. I will take particular note of the closing words of his speech: "It is a matter of judgment, in the light of representations made." He had referred earlier, of course, to the representations from the workforce. In the light of that observation, I hope now that he will apply his judgment to the representations made in the case of other companies which have been included in this Bill against their will. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 179: In page 80, line 34, after ("aircraft") insert ("other than guided weapons").

The noble Lord said: My Lords, at night, the noble Lord, Lord Melchett, and I had an exchange on this subject. This Amendment is a drafting Amendment on our side of which the noble Lord admitted he had totally misunderstood the purpose. He said he would have a look and see whether he thought it was necessary or desirable. Therefore, I have nothing further to say, the point being that we thought it might be useful to make it quite clear that unmanned aircraft for this purpose did not include guided weapons. I beg to move.

Lord WINTERBOTTOM

The noble Lord, Lord Strathcona and Mount Royal, has put the point very shortly. I shall try to explain that we believe that although obviously this is an intention to ensure clarity, it is not really necessary. The Amendment as we see it seeks to make sure that the guided weapons are within the scope of the Bill by including them within the definition of "aircraft". We have taken a rather different approach which makes it unnecessary.

If the noble Lord would look at line 18, he will see that we have explicitly covered guided weapons in that line. What is included or excluded from the definition of aircraft makes no difference to the guided weapon criteria. This means that of the two guided weapons companies, the British Aircraft Corporation meets the criteria because it makes both aircraft and guided weapons, while Hawker Siddeley Dynamics meets the criteria of making guided weapons. Given our approach, which we believe has the best chance of making the position clear, no drafting changes are necessary, we believe, and I hope that I have convinced noble Lords opposite of this fact. Perhaps I have not properly understood the noble Lord. Would he let me know if I have convinced him or not?

Lord STRATHCONA and MOUNT ROYAL

My Lords, I am not quite sure that I am the right person to be convinced or otherwise, but the noble Lord sounded entirely plausible to me. We shall study what he has said and see whether it is satisfactory. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Schedule 2 [Shipbuilding Industry]:

3.34 p.m.

Lord CAMPBELL of CROY moved Amendment No. 180: In page 81, leave out lines 15 to 17.

The noble Lord said: This Amendment has associated with it Amendments Nos.183, 186 and 187, which I suggest might be discussed with it. These Amendments draw attention to the special position of the warship builders as distinct from the merchant shipbuilders. The warship builders consist of three companies, Vickers, Yarrow (Shipbuilders) Limited and Vosper Thorneycroft Limited. We have debated their situation at an earlier stage of the Bill. Now I shall remind your Lordships only briefly of the reasons which we have given.

First, these companies are specialists in a highly technical field. Secondly, they are profitable, successful companies, providing valuable exports for Great Britain. Thirdly, far from unemployment having been caused by their operations or redundancies, in these companies as a whole employment has increased in recent years. Fourthly, they are not a burden on the taxpayers. Where some loans have been made from public sources they are being repaid.

The naval shipbuilders are fulfilling orders for the Royal Navy. In addition, they have been winning orders from foreign countries. The individual companies have close, direct contacts with their foreign customers. These naval shipbuilders are operating in a completely separate market from the merchant shipbuilding side, and the three British firms have shown that they can compete against the best of world competition. But the sharpness of their competitive edge and efficiency in a specialised and technical market is likely to suffer under the impersonal centralised structure of a nationalised industry. This debate now gives the Government an opportunity to consider again the inadvisability of causing an unnecessary and irrelevant disturbance to a successful industry which is making valuable contribution to exports, to our economy, and to the defence of our country.

3.36 p.m.

Lord MELCHETT

My Lords, may I apologise first of all for not being in the Chamber when the noble Lord rose to move his Amendment. I confess that the rapid progress that we have begun to make through the Amendments rather took me by surprise. My Lords, I know that noble Lords opposite believe that successful companies such as these should not be nationalised, but the Government do not merely see public ownership as a last resort rescue operation for loss-making companies. The Government believe that these companies, who are successful largely because they are major Government contractors, and who form an important part of the industry, should not be left outside the public sector. I agree that warship building is a highly specialised industry, but I believe that this has perhaps been over-emphasised as an argument against nationalisation.

The building of warships is of course not entirely confined to the specialist builders Vosper Thornycroft, Yarrow, and Vickers. The distinction between these three warship builders and other shipbuilders is not perhaps as clearly drawn as has been sometimes suggested by noble Lords opposite. Several other firms as well as these three have warship building capabilities. Although it remains Government defence policy to increasingly concentrate warship orders on the three specialist yards, it has always been acknowledged that if the Royal Navy is to obtain the ships it requires in the right timescale it will be necessary to place orders with other yards from time to time. That is why at this moment Swan Hunter have on order for the Royal Navy four type 42 destroyers and two other naval vessels, including an antisubmarine cruiser. Cammell Laird are also building two warships, and other companies have fleet auxiliaries or smaller patrol craft, on order for the Royal Navy.

If the specialist warshipbuilders were left outside the scope of the Bill, British Shipbuilders would still therefore have a considerable warship building capability. Surely it would not be in the best interests of the industry as a whole, or those who depend on it for employment, to split warship building into a public and a private sector in this way. The Government believe that it is highly desirable that British Shipbuilders should include a sector whose completions for export over recent years have fluctuated between £15 million and £40 million per annum, and who give direct employment to some 20,000 people.

As I said at Committee stage, these arguments on performance are not arguments for exclusion, but point to the very significant omission that will be created if the warship building companies were to be left out of the Bill. I put forward other arguments for including warship builders in the Bill during the other discussions we have had on this point, and I have carefully considered the opposing arguments put forward by noble Lords opposite. I can say firmly that the Government remain convinced that it would be totally illogical and damaging to both British Shipbuilders and to the shipbuilding industry as a whole to remove the warship builders from the scope of the Bill.

Lord WIGODER

My Lords, we on these Benches strongly support the Amendment. We accept the observation of the noble Lord, Lord Melchett, that the mere fact that an industry is successful is not in itself a decisive argument against it ever being nationalised. However, we are dealing here with three companies which are not merely successful; they are enterprising, inventive, thriving and highly competitive. We believe that in those circumstances no proper case has been made out by the Government for their nationalisation proposal. We understand that the other place will have various matters arising out of this and other Bills to reconsider during the next week or two and we think it entirely proper that the other place should be given an opportunity to reconsider whether this most important and successful industry should be included within the scope of the Bill. Therefore we very much hope that the noble Lord, Lord Campbell of Croy, will press the Amendment to a Division.

Baroness WARD of NORTH TYNESIDE

My Lords, the noble Lord, Lord Melchett, is perhaps not old enough to remember that it was an argument about naval shipbuilding just before 1931 that produced in that year an Election and the overwhelming defeat of the Socialist Party, followed by a very long and successful run by the Conservatives and, on occasions, the Liberals. I thought I would mention that to Lord Melchett because, having lived a very long time, I remember well how that naval shipbuilding matter produced a split at a time when we had a very brave Prime Minister, Ramsay Macdonald, who left his own side and formed a National Government—not that I am in favour of a National Government. I like having the facts presented, and I thought that I would let a rather young Minister know what happened on the last occasion when we had a controversy over naval shipbuilding.

Lord ROBBINS

My Lords, in contradistinction to the noble Baroness, I would always hesitate to argue with the noble Lord, Lord Melchett, on the ground of his age group; I think there is no a priori reason why he should be more right or more wrong than I am in my age group. However, on this occasion he has totally failed to convey conviction to my dim understanding. Does he argue that nationalisation would make these firms more efficient or that the omission of their brand of present efficiency would make the remainder of the industry less efficient, neither of which arguments would seem to convey the slightest conviction?

Lord HAWKE

My Lords, the argument for taking these enterprises out of the Bill is that in future, if I were a foreign Government, I would not place an order in this country—knowing the political record of the Labour Party and its love-hate relationship with foreign Governments—with a Government-owned shipyard.

Viscount SIMON

My Lords, I strongly support what my noble and learned friend Lord Wigoder said in support of the Amendment and I will mention only one other point of great importance. Here we have a specialist group of ship-builders with a very high technological achievement. If they are lumped in with merchant shipbuilders who have not had such great success it seems almost inevitable—I understand that this has been indicated by the Organising Committee—that the profits which they make will go into a common pool and that British Shipbuilders will then decide how it should be spent. I can think of nothing that would be more damaging to the morale of specialists than to feel that their success is being used not to develop their industry but simply to prop up perhaps failings in other parts of a similar industry.

I believe that this is a quite separate industry. It is as though the Government said that they were going to nationalise the motor car building industry and that that would include tanks. Admittedly, these people are building ships, but they are of a very different type and the whole operation is different. The high technology involved in all that goes into these ships is different. Therefore, I believe that it would be much better to take these three companies out. They are the three companies that are specialising in this field and I do not believe that it would in the least prevent orders for warships being placed with the other shipbuilders, as the noble Lord, Lord Melchett, said.

The Earl of HALSBURY

My Lords, may I remind the noble Lord, Lord Melchett, for the second time of the Fabian pamphlet by his right honourable friend Mr. Anthony Crosland, which states that the private sector is freedom's guarantee against bureaucracy? In the spirit of what the noble Viscount, Lord Simon, has said, why is the nationalised sector so afraid of the competition that it might get from a freely operating private sector? Is it felt that the quality of the management they would employ would put the public sector at a disadvantage?

Lord CAMPBELL of CROY

My Lords, the noble Lord, Lord Wigoder, has, in his contribution to this debate, confirmed what we understood from the earlier debate—that is, that the noble Lords on the Liberal Benches agree with

us on this point. Indeed, they joined their names with ours in these Amendments because, on consideration, they thought them preferable to those that they had themselves tabled.

The noble Lord, Lord Melchett, gave as a reason against these Amendments that some naval work was carried out elsewhere other than in the yards of these three companies. Of course one would expect that, from time to time, particular work would he arranged elsewhere. There will always be flexibility and one would expect it, particularly if a special reason suddenly required a particular job to be done in a hurry. But this is no argument at all as regards these three specialist companies. They can easily be separated from the merchant shipbuilders from whom they are very different in the activities that they carry out. I believe that your Lordships' House should give the other place the opportunity to look at this matter again.

3.48 p.m.

On Question, Whether the said Amendment (No. 180) shall he agreed to?

Their Lordships divided: Contents, 74; Not-Contents, 45.

CONTENTS
Airedale, L.	Greenway, L.	Onslow, E.
Amory, V.	Halsbury, E.	Rankeillour, L.
Ampthill, L.	Hamilton and Brandon, D.	Redesdale, L. [Teller.]
Arran, E.	Hanworth, V.	Robbins, L.
Atholl, D.	Harmar-Nicholls, L.	Rochdale, V.
Auckland, L.	Hawke, L.	St. Davids, V.
Balfour of Inchrye, L.	Henley, L.	Sandford, L.
Barrington, V.	Hereford, V.	Sandys, L.
Beaumont of Whitley, L.	Hornsby-Smith, B.	Sempill, Ly.
Byers, L.	Inchyra, L.	Simon, V.
Campbell of Croy, L.	Lauderdale, E.	Skelmersdale, L.
Carr of Hadley, L.	Lindsey and Abingdon, E.	Stamp, L.
Carrington, L.	Long, V.	Strathcarron, L.
Chelwood, L.	Lucas of Chilworth, L.	Strathcona and Mount Royal, L.
Colville of Culross, V.	Lyell, L.	Sudeley, L.
Cullen of Ashbourne, L.	Maybray-King, L.	Trefgarne, L.
Daventry, V.	Merrivale, L.	Trevelyan, L.
de Clifford, L.	Molson, L.	Tweedsmuir, L.
Denham, L. [Teller.]	Monck, V.	Vickers, B.
Drumalbyn, L.	Monson, L.	Vivian, L.
Dudley, E.	Morris, L.	Ward of North Tyneside, B.
Effingham, E.	Mottistone, L.	Westbury, L.
Elles, B.	Newall, L.	Wigoder, L.
Forbes, L.	O'Hagan, L.	Winstanley, L.
Gore-Booth, L.	O'Neill of the Maine, L.
NOT-CONTENTS
Ardwick, L.	Henderson, L.	Parry, L.
Birk, B.	Houghton of Sowerby, L.	Peart, L. (L. Privy Seal.)
Bowden, L.	Jacques, L.	Peddie, L.
Brimelow, L.	Janner, L.	Pitt of Hampstead, L.
Brockway, L.	Kagan, L.	Ponsonby of Shulbrede, L
Champion, L.	Kaldor, L.	Shepherd, L.
Collison, L.	Kennet, L.	Stedman, B.
Davies of Leek, L.	Leatherland, L.	Stewart of Alvechurch, B.
Donaldson of Kingsbridge, L.	Llewelyn-Davies of Hastoe, B.	Stone, L.
Elwyn-Jones, L. (L. Chancellor.)	Lovell-Davis, L.	Strabolgi, L. [Teller.)
Fisher of Camden, L.	McCluskey, L.	Wallace of Coslany, L.
Gordon-Walker, L.	Melchett, L.	Wells-Pestell, L. [Teller.]
Gregson, L.	Murray of Gravesend, L.	White, B.
Hale, L.	Oram, L.	Winterbottom, L.
Harris of Greenwich, L.	Pannell, L.	Wynne-Jones, L.

On Question, Amendment agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.

3.56 p.m.

Lord CAMPBELL of CROY moved Amendment No, 181: Page 81, leave out lines 19 to 30.

The noble Lord said: My Lords, I beg to move Amendment No. 181, and connected with it are Amendments Nos 182 and 184 which I suggest might be conveniently discussed with it. Amendment No. 181 is another in the series which would complete the changes necessary to remove the independent ship repairers from the Bill. We have already discussed that subject two or three times during the course of the Bill. This Amendment removes the list of 12, an arbitrary selection of companies, and the other two Amendments delete other references to ship repairers in the Bill.

Viscount COLVILLE of CULROSS

My Lords, I wonder whether I might say one word before the noble Lord, Lord Melchett, answers. The great merit of these Amendments is that they preclude any necessity for me to make a speech on hybridity. Having studied very carefully the Written Answers from the noble Lord, Lord Peart, I am now delighted to say that I would be happy to make a speech on hybridity, but I think not this afternoon. I hope the occasion will never arise; but, at any rate, if these Amendments are passed that makes sure of it for today.

Lord BALFOUR of INCHRYE

My Lords, could the Minister explain one point when he comes to reply? When we were discussing the nationalisation of Scottish Aviation, in support of the Government's action the Minister cited the wishes of the operatives. If, in the one case, the Government take into account the wishes of the operatives, surely in a case like this they ought equally to take into account the wishes of the operatives, which are not for nationalisation.

Lord MELCHETT

My Lords, I think we would probably disagree about the wishes that have been expressed by the people working in this industry, but, as the noble Lord made clear, we have already had a substantial debate on the main Amendment, and divided on it, and I would not wish to delay the House by dividing on the consequential Amendments.

Lord CAMPBELL of CROY moved Amendment No. 182: Page 82, line 12, leave out ("a shiprepairing company").

The noble Lord said: My Lords, this Amendment is consequential on Amendment No. 181. I beg to move.

Lord CAMPBELL of CROY moved Amendment No. 183: Page 82, leave out lines 30 to 33 and insert ("15,000 gross tons").

The noble Lord said: My Lords, this Amendment is consequential upon Amendment No. 180, concerning the naval shipbuilders. I beg to move.

Lord CAMPBELL of CROY moved Amendment No. 184: Page 82, line 42, leave out paragraph 3.

The noble Lord said: My Lords, this Amendment is consequential upon Amendment No. 181, concerning ship repairers. I beg to move.

Lord CAMPBELL of CROY moved Amendment No. 186: Page 83 line 43, leave out ("except in the case of a warship").

The noble Lord said: My Lords, this Amendment and Amendment No. 187 are related to the Amendments on warship building, and particularly Amendment No. 180. I beg to move Amendment No. 186.

Lord CAMPBELL of CROY moved Amendment No. 187: Page 84, line 5, leave out from ("registered") to end of line 9.

Schedule 4 [Acquisition of certain assets]:

Lord MELCHETT moved Amendment No. 188: Page 86, line 12, after first ("the") insert ("property or").

The noble Lord said: My Lords, this Amendment and the next one, Amendment No. 189, are purely drafting Amendments. I beg to move.

Lord MELCHETT moved Amendment No. 189: Page 86, line 13, leave out ("those") and insert ("the property or").

Lord MELCHETT moved Amendment No. 190: Page 87, line 44, after ("transferor") insert ("or incumbrancer to whom it is payable).

The noble Lord said: My Lords, Amendment No. 190 ensures that where compensation is due to an encumbrancer rather than the transferor, there is provision for compensation stock to be issued to him. I do not think it makes any alteration in substance. I beg to move.

Schedule 7 [Procedure etc. of arbitration tribunal]:

3.59 p.m.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 191:

Page 97, line 8, at end insert— ("(e) the provisions as to Awards.")

The noble Lord said: My Lords, the last time we dealt with this we were in even greater haste than perhaps some noble Lords may feel we are at the moment. I thought perhaps we had been a little cursory in dealing with what could be quite an important point, which returns to this question of the timescale for paying compensation. All that these two Amendments are seeking to do is to improve the tribunal's procedures to ensure that there is not undue delay in settling these matters.

The noble Lord said that he was about to give us a list, which would take 15 minutes to read, of some sections of the Arbitration Act which he did not feel it would be appropriate to include here. He also mentioned—and I am sure we agree with him, except that I do not agree with his English—picking upon speed as the only "criteria" worthy of mention in the Bill. I cannot remember what time of the day it was, but it was certainly a slip which was entirely legitimate at the time. While I would agree with that, what we are seeking to do is to ensure that there is not undue delay. We have gone over this point once before, and I wonder whether he thinks that perhaps he was overhasty. I am hoping that we might conceivably end on a happy note of agreement. Therefore, I beg to move Amendment No. 191.

Lord MELCHETT

My Lords, I regret to say that we are not going to end on that happy note. I cannot accept either of the two Amendments to which the noble Lord has spoken. The problem with Amendment No. 191 is that it would apply to a long list of sections of the 1950 Arbitration Act and to respond to it effectively I should have to go through each section and say why it is inappropriate for it to apply. I did not do this in Committee. Perhaps the noble Lord will allow me to write a letter to him setting out each section and the reason why it need not apply. There is nothing underhand about this. They are perfectly straightforward and reasonable reasons for not wanting each of the particular sections of that Act to apply. If the noble Lord will agree, I will write him on that point.

On Amendment 192, which the noble Lord also spoke to, perhaps I can try to improve on the English which I used at the Committee stage. The Government sympathise with the desire to see speedy decisions reached by the Tribunal, but in addition to speed there are other important objectives; for example, the need to give the parties a fair hearing and adequate opportunity for presenting their case. Subjects likely to figure in the Arbitration Tribunal rules would include the institution of proceedings, the joinder of parties, pleadings, interlocutory directions, service of documents, representation at hearings and evidence.

I can assure noble Lords that the Government have taken fully on board the need to reach speedy decisions and the regulations will be framed with this in mind consistent with the need to see justice done. However, I do not think it necessary to make statutory provision for this as speed is not the only criterion worthy of mention in the Bill. With the assurance that we have taken this point on board, I hope that the noble Lord will not press Amendment No. 192, either.

Lord STRATHCONA and MOUNT ROYAL

My Lords, I am grateful. I am sure the letter the noble Lord writes will reassure the industry; and, indeed, the further assurance he has given will also reassure the industry. I am not sure that I have put over to him the point of difference between "criterion" and "criteria". That is a rather narrow point on which to disagree at the end of an arduous Report stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.