Lords Sitting of 14 October 1976

Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Oxford.

MR. THORSEN: FILM ABOUT JESUS CHRIST
The Earl of LONGFORD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will take the necessary steps to prevent a film being made in this country about Jesus Christ by Mr. Thorsen.
The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich): My Lords, the Government have no powers to control the production of films in this country. There is power to refuse entry to an EEC national on grounds of public policy, public security or public health. My right honourable friend the Home Secretary will make his decision on the entry of Mr. Thorsen if and when the need to do so arises.
The Earl of LONGFORD: My Lords, while thanking the noble Lord for his reply, may I ask him whether, on reflection, he feels that it makes any sense at all—bearing in mind all the facts about this lamentable figure, whom the Prime Minister has described as a most undesirable and unwelcome visitor, and the information about the revolting film, a copy of which I believe has been shown to the Home Secretary? All this information is available at the present time; no more information could be available when he arrives, so does the noble Lord agree that his Answer does not add up?
Lord HARRIS of GREENWICH: No, my Lords, with respect to my noble friend, I do not agree with his conclusion. As my noble friend has said, the Prime Minister and my right honourable friend the Home Secretary have indicated their
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attitude towards Mr. Thorsen and, particularly, his film. What I have said this afternoon is that if Mr. Thorsen presents himself at a port, the Home Secretary will then decide whether he should be admitted. The position is governed by the immigration rules and what I have outlined this afternoon indicates that my right honourable friend will look at this matter extremely carefully if Mr. Thorsen does present himself at a port of entry.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, without in any way inpugning the total propriety of that answer, with which I agree, may I ask the noble Lord this. We are just passing through Parliament a Bill to allow Sikhs to wear their crash helmets on religious grounds. We have apparently changed the title of the life of the prophet Mohammed because of our desire to respect Moslems. Are Christians the only religious body in this country whose religious opinions are not to be considered? Further, may I ask the noble Lord this. He will remember that a previous Labour Home Secretary excluded—and I think they still are excluded—members of the body known as Scientologists on grounds of public policy. If they can be excluded on public policy grounds, what about Mr. Thorsen?
Lord HARRIS of GREENWICH: My Lords, I take note of what the noble and learned Lord said, and I also take note of the fact that he indicated the answer which I gave was—and I would not wish to misquote him—a proper one, taking account of the contents of the immigration rules. What I have said, I should have thought, would reassure the House, with great respect to the noble and learned Lord. I have said two things. First of all, so far as the film is concerned, the Government have no power, though of course the police will take any appropriate action if necessary. Secondly, if Mr. Thorsen presents himself at a port of entry the Home Secretary will then consider whether he should be admitted. The Home Secretary will reserve that position to himself.
Baroness PHILLIPS: My Lords, is the noble Lord aware that many ordinary people, who make up the great bulk of the population of the Christian community, are very concerned about this and

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that anything the Government can do to prevent the film from being made on this soil will be welcomed?
Lord HARRIS of GREENWICH: My Lords, I certainly take note of that. As my right honourable friend the Prime Minister indicated last month, that is also his view.
Lord MURRAY of GRAVESEND: My Lords, would my noble friend agree that Mr. Thorsen, this Danish nonenity, seems to have no money, no backers, no studios, no performers—in the widest sense of the word for this film—and he has had a lot of free publicity by people who really ought to dismiss him as a crank?
The Earl of HALSBURY: My Lords, does the noble Lord's reply indicate that a directive has been given to immigration officials to forbid the entry of this person until the Home Secretary has made up his mind?
Lord HARRIS of GREENWICH: My Lords, an indication has been given to the immigration service that if Mr. Thorsen arrives at a port of entry the matter must be referred to the Home Secretary.
Lord MAYBRAY-KING: My Lords, can the noble Lord give us any reason why a man who is aiming at producing a scurrilous film about something which is very precious to so many people, and who has been forbidden in his own country to produce it, should be allowed to do so here?
Lord HARRIS of GREENWICH: My Lords, with great respect to the noble Lord, I have answered that question. I indicated that the Home Secretary will consider the point if Mr. Thorsen appears at a British port.
Earl FERRERS: My Lords, is one to understand from that that the noble Lord's right honourable friend has not decided whether to allow Mr. Thorsen in—that he is going to wait to make a decision until the gentleman arrives—or has he made the decision already?
Lord HARRIS of GREENWICH: My Lords, both the Prime Minister and my right honourable friend the Home Secretary have indicated their attitude towards
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Mr. Thorsen and his film. What I said this afternoon indicates that if Mr. Thorsen arrives, the Home Secretary has said that he wishes the matter to be referred to him. He will then make a decision.
Viscount BARRINGTON: My Lords, would the Minister clarify one point on which I am not clear? Supposing Mr. Thorsen arrives at a port and says he has no intention of producing any film but has come to see Buckingham Palace. If he then starts producing a film, am I to understand from the Government that there is no way of preventing him from doing that? What would then happen?
Lord HARRIS of GREENWICH: My Lords, with great respect to the noble Viscount, the Answer to his first question is that if Mr. Thorsen does arrive at a port of entry, given the background to this case the matter will be considered by the Immigration Service, who will then refer it to the Home Secretary. My right honourable friend will then make a decision on the basis of the evidence at that time.
Lord BESWICK: My Lords, can the noble Lord say what additional evidence will be at the disposal of the Home Secretary when Mr. Thorsen arrives?
Lord HARRIS of GREENWICH: My Lords, what I am saying to the House is that if—and I repeat "if"—Mr. Thorsen does arrive at a port of entry in this country (because we have been told on a number of occasions that he is about to arrive but he has not yet arrived), the matter will be referred by the Immigration Service to the Home Secretary. With great respect to my noble friend, my right honourable friend the Home Secretary, together with my right honourable friend the Prime Minister, has made his position quite clear.
Lord HANKEY: My Lords, would not the noble Lord agree that perhaps many people would consider that the Government are dodging the real issue slightly? May I ask what would happen, for instance, if a British subject resident in this country wanted to make a film about the sex life of Mohammed? Would the Government not have to say that such a project would cause widespread alarm and despondency among the many Asian

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citizens we have here? Would it not cause widespread trouble? If we were to do that in the case of Mohammed, should we not do it even more so in a case which arouses so much alarm and despondency among a great many Christians in this country?
Lord HARRIS of GREENWICH: My Lords, I am well aware, as is my right honourable friend, of the strength of feeling over this matter. There is no disagreement on it at all. If Mr. Thorsen arrives the matter will be considered by my right honourable friend himself. Regarding the first part of the question put by the noble Lord, I do not believe in attempting to answer hypothetical questions but, frankly, in the case of an obscene film the police would take appropriate action.
Lord DERWENT: My Lords, may I ask the noble Lord whether he realises that the leaders of some non-Christian religions have also raised objections to this man arriving here?
Lord HARRIS of GREENWICH: My Lords, I am well aware of that.
Lord MACKIE of BENSHIE: My Lords, if both the Prime Minister and the Home Secretary have, as the noble Lord tells us, made their positions quite clear, why cannot the Home Secretary say quite simply that this fellow will not be admitted if he presents himself at a port? That would at least save the cost of his fare.
Lord HARRIS of GREENWICH: My Lords, I take note of the fact that the noble Lord is anxious to save Mr. Thorsen the cost of his fare. The Home Secretary is in fact acting on the basis of the contents of the immigration rules and the immigration appeal arrangements; and that is why I have given the Answer in the terms in which I have this afternoon.
Lord BROCKWAY: My Lords, would the Minister not agree that all this agitation has been of very great financial advantage to Mr. Thorsen in the advertisement that he has been given? Would he not agree that, as a result of this, a man who is largely resourceless will have financial backing for the film to be made in one country or another—a disagreeable film which we all deplore?
The LORD PRIVY SEAL (Lord Peart): My Lords, I think we have had a good run on this Question.

FREEMAN ROAD HOSPITAL
3.16 p.m.
Baroness WARD of NORTH TYNESIDE: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether any representations have been received from the Northern Area Health Authority on the inability of the Secretary of State for Health and Social Security to find sufficient money adequately to finish the new Freeman Hospital at Newcastle on Tyne.
Lord WELLS-PESTELL: My Lords, no representations have been received from the Northern Regional Health Authority for extra funds to finish the new Freeman Hospital in Newcastle-upon-Tyne. Sufficient funds have been made available to complete the current building scheme at this hospital. There are no firm proposals for any further major hospital building development on the site.
Baroness WARD of NORTH TYNESIDE: My Lords, while thanking the noble Lord for that Answer, may I ask whether he is aware that in the North quite a number of people have made representations, at any rate through me, for some extra money to make the hospital absolutely perfect? Is the noble Lord aware that we have already spent millions of pounds on a hospital which has been long awaited and that there are just a few details outstanding, involving very little money? Would the noble Lord be kind enough to make some inquiries about this? May I also ask him to bear in mind that very recently it has been stated that people in the North are not quite as healthy as people in the South and that it would be a great idea to give us a little more money to finish this really first-class hospital?
Lord WELLS-PESTELL: My Lords, in the first place the noble Baroness will

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know that this is a matter for the Regional Health Authority: they have an allocation. Quite recently, under the resources reallocation decisions, more money was made available to those regions which my right honourable friend the Secretary of State thought were in need. The region to which the noble Baroness has referred received a substantial amount of money to meet certain eventualities. This is really a matter for the Northern Regional Hospital Authority, and I can only refer the noble Baroness to that Authority.
Lord WYNNE-JONES: My Lords, would my noble friend confirm that the hospital to which reference is being made is the Freeman Road Hospital?
Baroness WARD of NORTH TYNESIDE: My Lords, may I first ask the noble Lord whether he knows how very nice and competent our area chairman is? Is the noble Lord aware that sometimes people do not make as much bother as I do?
Lord WELLS-PESTELL: My Lords, I would be the last person to suggest that the Regional Health Authority in which the noble Baroness is interested is not a very nice body. In reply to my noble friend, if I said "Freeman Hospital", I should have said "Freeman Road Hospital".

BREADWINNERS: SOCIAL SECURITY BENEFITS
3.20 p.m.
Baroness VICKERS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action will be taken to see that, when a woman is the main breadwinner, she will be able to claim family income supplement, non-contributory invalidity pensions and invalid care allowance benefits and any extra allowances that would be granted to the male breadwinner in similar circumstances.
Lord WELL-PESTELL: My Lords, I am not sure what the noble Baroness has in mind, and I assume that her Question
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relates to families where both busband and wife are out at work. If I am right in that assumption, may I say that noncontributory invalidity pension will be extended in November 1977 to married women who are incapable of paid work and of performing normal household duties. The Government have no other plans to take the kind of action which the noble Baroness envisages in her Question.
Baroness VICKERS: My Lords, I thank the noble Lord for that Answer. I used the words "main breadwinner" in my Question, and perhaps I should have said "only breadwinner", because the noble Lord may know that more and more women are now going out and earning money to keep their entire family. Therefore, it is only natural justice that they should have the same facilities as men for obtaining the other payments named in my Question.
Lord WELLS-PESTELL: My Lords, this presents a problem, and I have some sympathy with what is in the mind of the noble Baroness. But if we take the Supplementary Benefits Commission alone, I believe that last year they had something like 5 million new applications. Over and above that, 3 million had to be constantly reassessed for various situations, and we need a firm and rigid system. Otherwise, there is difficulty, as on some occasions the wife could apply because she happened to be the main breadwinner, and on other occasions, in a comparatively short space of time, the husband could become the main breadwinner and himself apply. As I understand the situation, the law relating, for example, to benefits—particularly supplementary benefits and family income supplements—clearly lays down that the man must make the application. I say "man", because we regard a man and a woman living together as husband and wife, whether married or not married, as a unit.
Baroness WOOTTON of ABINGER: My Lords, is not that the very point that the noble Baroness is raising? Why should an application for family income supplement have to come from the man, if the woman is the main earner? Will my noble friend consider having this ridiculous regulation changed?
Lord WELLS-PESTELL: My Lords, as I said a moment or two ago, there are certain difficulties in the sense that the situation could change, and from an administrative point of view it is easier if there is just the one person. But we recognise that there are anomolies and difficulties, and your Lordships may remember that on 15th September last my right honourable friend the Secretary of State for Social Services said that there would be a review. One of the issues to be covered in this review is whether it will be possible to operate a scheme whereby either husband or wife could claim benefit and either could have the conditions attaching to benefit applied on a similar basis.
Baroness WOOTTON of ABINGER: My Lords, does my noble friend not realise that, if a situation can change one way round, it can change the other way round, from the man to the woman and from the woman to the man?
Baroness FAITHFULLM: My Lords, following the noble Baroness's point, may I ask the Minister what is the position of a widow when there is an elder son in the house who is working, but who is herself the main breadwinner?
Lord WELLS-PESTELL: My Lords, if there is a shortage of money in the family, the widow is entitled to what everybody else is entitled to if he or she is in need; that is, she is able to make an application to the Supplementary Benefits Commission to see whether she is entitled to supplementary benefit, in which case, as the noble Baroness knows very well indeed, the income of the family will be taken into account.

CZAR NICHOLAS II: HISTORICAL RECORDS
3.24 p.m.
Baroness WARD of NORTH TYNESIDE: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in view of a recent publication
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The File on the Czar which contradicts the original record by the Foreign Office of the murder of the Czar and his family in 1917, an up-to-date statement of the facts will be made in order that the history may be available in this country.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, all the available documents in the possession of Her Majesty's Government relating to the assassination of Czar Nicholas II and his family are open to the public at the Public Record Office. It is for historians to assess this and other evidence. It is not a matter on which the Government have pronounced or could pronounce.
Baroness WARD of NORTH TYNESIDE: My Lords, is the noble Lord aware that that is a rather unsatisfactory Answer—
Several noble Lords: No!
Baroness WARD of NORTH TYNESIDE:— to that Question, in view of the fact that posterity may not be alerted to the facts that are in this new book? Would it not be possible to have just a general statement as to the new facts that have arisen, so that the whole of this country, and indeed historians, shall know that there are other facts which are different from those originally filed in the Foreign Office?
Lord GORONWY-ROBERTS: My Lords, I think that the noble Baroness perhaps makes a case for adding this new book to the records available in the Public Record Office, so that those records plus this book, for what it is worth—and I am sure that it is a substantial production—can be assessed by those most competent to do so; namely, historians.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, would not the book already be available in the British Musuem and the Bodleian Library?
Lord GORONWY-ROBERTS: Indeed it would, my Lords, by Statute, and I think in one or two other libraries, including our own Library in Wales and, I believe still, in Dublin.
Baroness WARD of NORTH TYNESIDE: May I ask the noble Lord whether he is absolutely satisfied that three other daughters of the Czar are not still alive?
Lord GORONWY-ROBERTS: No, my Lords. Nor do I think anybody else is absolutely satisfied about that.
Lord PAGET of NORTHAMPTON: My Lords, would not the noble Lord agree that the rewriting of history is not an activity which should be encouraged in Foreign Offices?
Lord GORONWY-ROBERTS: My Lords, I agree that probably a Foreign Office anywhere should be encouraged to make history, rather than write it.
Lord PANNELL: My Lords, is it not a fact that the Government have had great difficulty in coming to a final conclusion on the Katyn massacre which took place in 1940? Why should they be charged with going back as far into history as 1917 with any hope of a better result?

AIRCRAFT AND SHIPBUILDING INDUSTRIES BILL
3.27 p.m.
The MINISTER of STATE, NORTHERN IRELAND OFFICE (Lord Melchett): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, that the House do again resolve itself into Committee. (Lord Melchett.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF LISTOWEL in the Chair.]
Clause 2 (General duties of the Corporations]:
Viscount SIMON Viscount SIMON moved Amendment No. 33:
Page 4, line 11, after ("production") insert ("and").
The noble Viscount said: I rise to move Amendment No. 33, and would ask the Committee's agreement to my discussing with it Amendments Nos. 35 and 36 to which it leads. Before I come to those two substantive Amendments, I wonder
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whether the Committee would permit me to spend a few minutes trying to rectify a misapprehension which I must have created in the mind of the noble Lord, Lord Melchett, about the attitude of the Liberal Party to Party Manifestos generally. What I said on Second Reading—and I may have repeated it on the first day of our Committee—was that we do not regard the fact that a proposition is contained in a Party's Manifesto as an argument. I say that because, first, we may ask ourselves: how is a Manifesto created?
I do not think it would be stretching the imagination too far to say—and I am not speaking merely of Labour Party Manifestos—that when certain people sit down and work out what their Manifestos should contain they are sometimes (I do not say always) more concerned with albatrosses, or the avoidance of albatrosses, than with the merits of the case. Then those matters appear in the Party Manifesto, and I will not raise the question of whether a majority of the electorate supports them because I do not want to arouse the noble Lord, Lord Murray of Gravesend, on this. It does not matter to me.
Supposing the majority of the electorate do support it. I think that in a free society and in free Parties, as we have, not in one-Party authoritarian Government, it is permissible even within the Party to disagree with certain measures included in the Manifesto. Moreover, when the Government come to introduce these measures in the House, either in the other place or here, as of course they are perfectly entitled to do, surely they have got to satisfy the Members of both Houses who are unwise enough not to be Members of the ruling Party, on the merits of the case they are advancing, and the suggestion that because something is in the Manifesto we should not discuss it, or that we should accept it as an argument, or as an overriding argument—I think in one case it was really put to us almost as an overriding argument—is, I think, completely wrong. But the noble Lord, Lord Melchett—
Lord MELCHETT: I apologise for interrupting, but the noble Lord said that in one case it was put as an overriding argument. I do not know whether he was referring to something I said—
Viscount SIMON: With respect, I do not think it was. I do not want to make too much of it. Perhaps it was not put as an overriding argument. Certainly it was put as a strong argument. I think the noble Lord, Lord Melchett, described it, and I am afraid I have not got his actual words, as though this was a new policy of the Liberals. I venture to suggest that it is not a new policy at all. If noble Lords will cast their minds back a few years they will remember that in their Manifesto Mr. Heath's Conservative Government proposed to reorganise industrial relations in this country, and they introduced the Industrial Relations Bill. I do not remember that the Labour Party were inhibited in attacking the Bill because it had been in the Conservative Manifesto. They attacked it vigorously, and I entirely agreed with them. So I really do not think there is any new policy in what I endeavoured to say, and if it looks like a new policy to the noble Lord I probably expressed myself badly.
There is one further point, and that is the point which I made at the end of my speech on the Second Reading of the Bill; namely, that even if an item is in the Manifesto it is right for the Government—and this applies equally to any Government; I hope it will apply to a Liberal Government when we have one—to consider what has been put in the Manifesto in the light of the circumstances that have arisen since it was put in the Manifesto. It was there that I suggested that in the present circumstances it was arguable—I was not trying, obviously, to lay down the law—that the Government should give further consideration to the principle of the Bill in the light of present-day circumstances. I hope that what I have said has made it clear that my argument is not indeed intended to denigrate in any way the right of any Government to bring forward legislation in accordance with their Manifesto.
If I may now turn to these two Amendments, the first one, Amendment No. 35, which is read along with Amendment No. 215, is for the purpose of excluding from the scope of the Bill the naval shipbuilders. The naval shipbuilders stand in a class by themselves. Although of course they are making ships, their operations are quite different; they are making a completely different kind of ship. They have different technologies,
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very, very advanced technologies. I should like to make it clear that I am not arguing, as I know some people have argued, some noble Lords have argued I believe, that they should be left out because they are profitable. I do not think that is a correct argument at all, but I will make this point: I applaud the proposals of the Government that within this measure the various units should, so far as is practicable, be retained as separate units. This, I think, is a great improvement on previous nationalisation Bills. But, as far as I can read it, the fundamental difficulty will still remain, that if certain units are profitable their profits will be taken to subsidise the losses of other units; and if that is done not only will they not have the money to plough back in better investment, in new machinery and so on, but they will undoubtedly face a very severe strain on the morale of their management.
If it could be said that within this Scheme any of the units could retain its own profits and plough them back into the company that, I agree, would go some way to meeting the argument that I am putting forward; but so far as I can see, having regard to all the wide powers that it is proposed to give to the Secretary of State to do this and that with the Corporation as a whole, I feel it is going to be very difficult indeed for these successful companies in a different field to be able to continue in the very good work they are now doing.
There is the further point, which I know has been mentioned before, that it may be that their foreign business, building warships for foreign administrations, will be damaged because the foreign adminitrations, will feel unwilling to place orders with a Government concern. The noble Lord, Lord Carr, and his colleagues have put down Amendments having the same effect as this one. In one way I think their Amendment is perhaps a little neater than the one we have put down. In the circumstances I shall feel inclined, after hearing what they have to say, not to move Amendment No. 35, but we shall listen to what they have to say, and indeed what noble Lords opposite have to say.
Amendment No. 36 is designed to exclude what I may call briefly the engine builders, the builders of slow-speed diesel

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engines. Throughout the debates very little has been said about this group of companies, which it is proposed to bring into British Shipbuilders, and I have been in some difficulty in finding out what really lies behind this. The engines are, of course, an important part of a ship—that is obvious—but, then, so are steam engines if the ship is powered by steam engines. The boilers and the steam turbines are equally important, and all ships have other important components put into them. In fact, one that is almost universal these days is the propeller. There are the people who make propellers.
I do not want to put ideas into the heads of noble Lords opposite, but I really do not see the logic of picking out the manufacturers of slow-speed diesel engines. There is one particular difficulty here, and I should like to know whether it has been considered by the Government. I am sure it must have been considered. What conclusion have they reached on it? All of these manufacturers of slow-speed diesel engines, I think, (I am subject to correction) manufacture under licence designs of engines, the patents for which arc held elsewhere, mostly on the Continent, because the only very well established British diesel engine is already in national ownership through the Doxford Company. What is going to be the attitude of the holders of patents in these engines if they suddenly discover that their licensees in this country, who not only build engines for them but promote the sale of those engines in competition with their competitors, all have licences in the same concern? Are they not perhaps going to be a little doubtful whether it is wise to give licences to companies in this country when those companies are all in common ownership? I would very much like to hear from the Government what views they have on that aspect of the matter.
I do not think I want to say more at this stage. We shall hear what noble Lords opposite have to say, we shall hear what noble Lords on the Conservative Benches have to say, and presumably I shall have to decide what we do with these Amendments. Meanwhile, I beg to move Amendment No. 33.
3.40 p.m.
Lord CAMPBELL of CROY: The noble Viscount has moved Amendment
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No. 33. He has also spoken to Amendment No. 35 and I think that at the end the noble Viscount was also speaking to Amendment No. 36 relating to diesel marine engines. That is a subject in itself but perhaps I may touch upon it, too, at this stage. As regards the naval shipbuilders, I should like to support what the noble Viscount has said. My noble friends and I have put down other Amendments which would have a similar effect—that is, to delete the naval shipbuilders from the Bill.
As your Lordships will know, there are three companies which construct warships. They are Yarrow, Vosper Thornycroft and Vickers. Their business is entirely different from that of the merchant shipbuilders of this country. Moreover, they have an entirely separate market; they are building warships for Her Majesty's Government and for the Governments of other countries. A high degree of specialisation is involved in this work. Expertise in management is required and also, where exports are concerned, expertise in their sales teams of a very special kind; they are dealing with highly sophisticated equipment. To lump in this industry with merchant shipbuilding is likely to cause it to lose this high degree of specialisation.
It seems most improbable to us, and, I suggest, to anybody who thinks about it, that the proposed new nationalised body, British Shipbuilders, would be able to devote enough of its time to the very special subject and problems with which this industry has to deal. It is a profitable and expanding business. The figures for the individual firms show large increases in both turnover and profits between 1971 and 1975. The industry produces valuable exports for Britain and has no difficulty in competing with other countries for the supply of ships to foreign navies.
Where employment is concerned, there has been an increase in the numbers employed in naval shipbuilding over the past five years, and I would add that the industry has been successful without the need for selective subsidies from the Government and the taxpayer. At least two of the firms concerned have been in receipt of loans for particular reasons from the shipbuilding board and the Government and those loans are being repaid to the Government. There has

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been no difficulty about that. The specific grants which have been received are insignificant compared with the enormous sums of money which have been contributed selectively by the Government to merchant shipbuilding. As my noble friend Lord Orr-Ewing pointed out recently, the major part of the Government's financial help has gone to companies which are already in public ownership.
The flimsy grounds which have been given for nationalising the naval shipbuilders simply do not stand up to examination because the grounds which were given for nationalising shipbuilding as a whole—they were given by the Minister right at the beginning when the Bill was introduced in another place—were, first, that the shipbuilding industry as a whole was failing and unprofitable. Naval shipbuilding is not failing and unprofitable. The second ground that was given was that the industry was not competitive abroad and was not winning exports. But naval shipbuilding is winning exports. The third ground was that redundancies were being caused and that unemployment was rising. Again, that is not so with naval shipbuilding where jobs have been increasing. The last ground was that the industry was dependent upon the taxpayer for subsidies. Once again this argument does not apply to naval shipbuilding.
If I may turn to the diesel marine engines to which the noble Viscount, Lord Simon, referred, again this is a separate industry, though not a large one, consisting of six firms which manufacture what are called slow speed diesel marine engines. However, these engines are used by a very large proportion of shipping. The customers are to be found both in this country and abroad. Most of the ships which are built are not very large and they use this kind of diesel engine. The industry manufactures these engines under licence according to certain designs. There is a limited number of designs but these are the ones which are used throughout the world. I understand that the numbers employed by the six companies in this country total just over 6,000. One of the companies, Doxford, is already in public ownership, but that was due only to the accident of
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Court Line and the fact that its travel business was in trouble. This part of its business then came under Government control.
The manufacture of these diesel engines is quite separate from the shipbuilding industry. I believe that the framers of the Labour Party Manifesto are not experts in this field and may not have understood that these diesel engines are constructed quite separately, that they are ordered by the ship owners and that the business is separate from shipbuilding. There seems to be no reason, therefore, why these firms should be brought into the Bill. It can lead only to inefficiency. Nobody who is familiar with these businesses foresees that their inclusion in the Bill will result in any improvement. Their exports have been increasing. In the last two years they have received important orders, and nearly 20 per cent. of their future order book is for countries abroad.
We shall reach other Amendments, as I mentioned, which stand in the names of my noble friends and myself relating to the naval shipbuilders. No doubt we shall be discussing later the question of whether the manufacturers of these slow speed diesel marine engines should be included in the Bill, too, and we can reach our conclusion in due course. However, at this stage I, like the noble Viscount, Lord Simon, should be interested to hear what possible explanation the Government can give for including these firms in the Bill.
Lord GISBOROUGH: I should like to say a few words regarding naval shipbuilding. At the Second Reading in another place, the Secretary of State gave the reasons for the nationalisation of shipbuilding. One of the reasons was the indifferent record and the falling output and productivity of shipbuilding. I think one should have a look in particular at the records of two companies to see how they match up to that criticism. Perhaps I may quote the turnover of Vosper Thornycroft in the years 1971, 1974 and 1975 to show whether theirs was a falling output and an indifferent record. In 1971 their turnover was £32 million, in 1974 it was £57 million, and in 1975 it was £82 million. The turnover of Yarrow, of which I have the details here, was £12 million in 1971, going up to

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£26 million in 1974, and then to £35 million in 1975. That is hardly a case of falling output and productivity. If one takes Vosper Thorneycroft's profits for 1971, they were £0·6 million for 1971, £ 3million for 1974 and £4 million for 1975. In the case of Yarrow, their profits were £0·3 million, £0·7 million and £0·5 million. Again this can hardly be described as a falling output.
Another criticism was that since 1966 no less than £299 million had been given or promised to the United Kingdom shipbuilding industry, mainly for reorganisation and reinvestment. Again taking these two naval firms, Vosper received only £89,000 and Yarrow £354,000. There were in addition many loans, of course—I think that Yarrow had £5·7 million—but these were interest-bearing loans. In addition, there were loans such as £4·5 million from, I think, the SIB, which was really given to help them over the problems which they had come across from their previous effort with UCS. They had such a terrible problem after the Government experiment that they had to have a loan to get them out of trouble and they are paying this back with interest, and this is certainly a drain on their resources. Had they not been mucked about by the Government in that case they would not have needed that loan. Yarrow also have been investing £8 million of their own resources in further specialised shipbuilding facilities. So there is certainly no great drain on Government grants.
Another argument for nationalisation was the fact that there was a slump in employment. One can look at the figures to see to what extent this can be justified in these two naval shipbuilding companies. In 1968 Vosper employed 4,534 people. In 1971 it went up to 4,900, 5,000. In 1974 it went to 6,500 and in 1975 it was the same figure plus 40. En Yarrow it was 1,700 in 1968, 3,400 in 1971, 4,500 in 1974 and 5,000 in 1975. So that criticism is obviously totally inapplicable to both those yards.
Another reason given why nationalisation would have to take place was that the shipbuilding companies were unable to compete in international markets. One can perhaps see how the naval shipyards performed in exports. Over the last five years the value of exports for Vosper was
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£270 million, which represented no less than 65 per cent. of their turnover, which seems a pretty fair amount. In Yarrow it was £66 million, being 58 per cent. of their turnover. So one really cannot feel that that criticism applies to them in that respect. In fact, none of the criticism seems to apply to naval shipbuilding, so if nationalisation is taking place for the reasons given there is no justification for nationalising the naval shipyards.
It appears that the Government are really not aware of the difference between the naval shipbuilders and the rest of the industry. The naval shipbuilders have got very specialised teams for their very specialised design and the sophisticated equipment they have to produce. They are profitable and they have proved their competitiveness. Furthermore, although they are making good profits they do in fact make their ships for this country virtually without profit, so that the country is getting extremely good value for money when it uses them to build ships.
Nationalisation, then, offers simply further control that is not needed, extra management that is superfluous and cumbersome and centralised control that is not necessary. It is more than likely—one cannot see anything else happening—that the funds which they generate will be diverted to the other parts of the shipbuilding industry which are short, and it is highly likely then that the naval shipbuilders will have to subsidise, in effect, the civil shipbuilders. Furthermore, it is equally likely that orders will be diverted and naval ships will be built in the non-naval yards which would otherwise have been built in the naval yards, purely to take account of low employment and lack of work in the civil yards. Therefore I support this Amendment—and there is another one coming along later upon which this matter will also be under discussion.
3.55 p.m.
Lord MELCHETT: As we are dealing with two fairly major Amendments in speaking to Amendment No. 33—Amendments Nos. 35 and 36—if the noble Viscount would agree I should like to say a word about the warship builders and my noble friend Lord Kirkhill will say a word about slow-speed

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marine engines, since that is the way it was planned; we were not expecting to have a debate where everything was wrapped into one, as it were. I should like to respond very briefly to something which the noble Viscount said about Manifestoes when opening the debate. I apologise immediately if I gave him the impression that I was saying that this was a new policy of the Liberal Party. My intention was quite the reverse.
I acknowledge that it has been a long-standing policy of the Liberal Party not to accept that the inclusion of something in a Manifesto is a reason for doing it. Indeed, I apologise if I gave anyone the impression that I was putting forward the inclusion of something in a Manifesto as a justification for doing it. I mentioned a Manifesto when we were dealing with the Committee stage in the context of ship repairing really for two reasons. One was the constitutional one which the noble Lord, Lord Carr, raised earlier when talking about the aircraft industry and the attitude of noble Lords opposite on Second Reading of this Bill, that there has been a tradition, so far as your Lordships' House is concerned, about voting against the Second Reading of Bills where the proposals were contained in the Election Manifesto of the Party that forms the Government, and that was for only that reason and none other. Except that on ship repairing the allegation has been made that this is simply in the Bill by accident and that the Government had not intended to nationalise it at all and only realised at a late stage that it was in, and so on.
The noble Lord, Lord Campbell of Croy, while not saying quite that, did say that he thought that the Government still did not understand that ship repairing was something separate from shipbuilding and I merely made the point in responding to the debate that there had been a separate strand of proposals in my Party for many years concerning ship repairing as a separate entity, and that was why ship repairing was contained in the Manifesto. But I had not meant on either occasion to use that as an industrial or any other sort of reason for nationalising it and I do not think I need to. The industrial case is quite strong enough in all these instances which we have been looking at both the other day and today.
Lord CARR of HADLEY: Since the noble Lord referred to something I said the other day I think I ought to make myself clear. I think that reference to Hansard would show that I said at the time that the question as to what section of the Bill if it was thrown out was equivalent to a vote against Second Reading was of course a matter of judgment, but I felt that to reject the whole of the aircraft industry amounted to that. But I specifically said that this was a matter of judgment and I took a different view, for example, about ship repairing. In saying that, I did not in any way relate it to the suggestion that the Government did not know what they were doing—I do not think they do, but that is another question.
Lord MELCHETT: I do not think that the noble Lord's judgment and mine on these matters are going to be the same however long we talk about it. To turn to the Amendments that would remove the warship builders from the scope of the Bill, I should like to try to convince noble Lords opposite that, in the Government's view, there are very good reasons why warship builders should not be excluded from public ownership. First, it seems illogical to the Government that those yards which are perhaps the most dependent on Government should be those which are left out of the nationalisation proposals. Secondly, the need for overall planning of resources would not be met if we were to leave the warship-building yards as separate entities outside British shipbuilders.
Third, it is desirable in our view that British shipbuilders should include a sector whose completions for export over recent years have fluctuated between £15 million and £40 million a year and who give direct employment to some 20,000 people. The warship builders themselves have said that over the past five years export orders for Vospers and Yarrows have in one way or another gained £273 million for the balance of payments. As I said on Second Reading, these arguments on performance are not arguments for exclusion but point to the significant omission that would be created if the warship building companies were to be left out of the Bill. I know there are some who subscribe to the theory that only loss-making companies should be taken

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into public ownership. That is not a view that I share and I fail to see—nor do I think anybody has adequately explained—why only losses should be nationalised while private interests are left to enjoy the profits.
Lord ORR-EWING: I think the noble Lord might inadvertently have misled the Committee when he said that it would be wrong to leave out of the Bill a portion of the industry which got the maximum help from the Government. Our argument has been that the warships have not got help from the Government. They have been standing on their own feet, having had marginal help and where they have received help they are repaying it. The noble Lord is presumably referring to them as a customer, which is quite a different state of affairs. If the Government are going to say that every industry, whether it is clothes for industrial workers or anything else, has to be nationalised, that is another argument. I hope he will not rest his case on that argument because it falls to the ground almost before it starts.
Lord MELCHETT: It was indeed in the sense of customers of the Ministry of Defence that I was referring, as the noble Lord would know, and I suggest to him that although the Government buy clothes for the Army, and so on, it could hardly be said that the textile industry owes its reputation and its standing and a great deal of its business to those orders for military clothing. I would suggest that there is a large difference in degree between a sector such as that and the warship building sector.
Lord MACKIE of BENSHIE: Did the noble Lord not accept the figures that were given, which showed conclusively that both yards referred to had a higher figure of exports than home sales?
Lord MELCHETT: If I may, I will respond to that, otherwise I shall lose track of all the interruptions. I did accept it, and indeed I gave the export figures myself in my speech just a minute ago.
Lord STRATHCONA and MOUNT ROYAL: The point I wanted to put to the noble Lord is this. He is suggesting that we should bring the customer
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together with the producer. Does he not recall that the Rothschild Report went to a great deal of trouble to suggest that there was a very good case in the matter of research for separating those two elements as a general principle?
Lord MELCHETT: I do not think I am saying that they should be brought together in the sense that the Ministry of Defence will be building the warships. The British shipbuilders will be building the warships and they will have a large degree of operational and commercial freedom and they will not be under anything except very general direction from the Government and the Secretary of State. It is the Government in the form of the Ministry of Defence who are placing the orders in this case.
I think it is forgotten that the orders which are placed with them by the Ministry of Defence contractors lend a great deal of standing to the warship builders and indeed that a lot of the export orders come to these firms because of their standing as Ministry of Defence contractors. The fact that their products are acceptable to the Royal Navy means that they are acceptable to other navies. In addition, the warship builders obtain a great deal of assistance from the Ministry of Defence in obtaining orders. That is the purpose of the Ministry of Defence sales. The Government fully recognise the differences between warship building and merchant shipbuilding. These differences will of course have to be taken into account in the future organisation of the industry and the organising committee has visited the yards in question already and consulted those directly involved.
It seems that there is not a great difference between us on the facts: it is merely the conclusion that one draws from the facts on which we are divided, and I would suggest that that conclusion depends very much on one's political beliefs. Unfortunately, eloquent as I may be in your Lordships' House I do not believe that I am going to change the political beliefs of noble Lords opposite on this point.
4.5 p.m.
Lord KIRKHILL: In this wide-ranging short debate we have touched

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upon Amendment No. 36, as the noble Lord, Lord Campbell of Croy, and the noble Viscount, Lord Simon, mentioned earlier and I might just say—although the noble Lord, Lord Campbell of Croy, will not agree with me—that the Government conviction is that the specialist manufacturers of slow-speed diesel marine engines should be nationalised because it would be quite wrong for them to be divorced from the shipbuilding companies named in the Bill on whom they are almost entirely dependent for orders and survival. In each case the supply of these engines to shipbuilders constitutes the major part of the business of the companies, which the Amendment of course would seek to delete from the Bill.
About 80 per cent. of all engines fitted into ships are slow-speed diesels. Turnover in other activities is very small and in the last ten years no slow-speed diesels have been supplied by any of these companies to any British shipbuilding company not within the scope of the Bill. Moreover, of those listed in the Bill a majority are in the same group as shipbuilding or ship repairing companies, namely Scotts' Engineering, Barclay, Curle and Company Limited and George Clark and NEM Limited. John G. Kincaid is an independent company but in practice it is closely linked with the Scott Lithgow Group.
The noble Viscount, Lord Simon, specifically asked a question about foreign patents and licences and I am advised that no difficulties are expected because these engines are built under licence. There are in fact only two licensors: one company builds under licence from Burmeister and Wain, which is a Danish firm, and the other builds under licence from Sulzer, which is a Swiss company.
Lord LLOYD of KILGERRAN: I should like to take up a point to which the noble Lord, Lord Melchett, did not reply and which was put by the noble Lord, Lord Campbell of Croy, who emphasised the high degree of specialisation in the fields of technology associated with these warship builders. At Second Reading I declared an interest in this matter in that I am a very small shareholder in the Vosper, Thorneycroft group, I should like to ask the noble Lord whether the Government have considered that in an
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Industry—if that is the correct word—warship building, where there is this highly specialised technology, where there is a vast amount of know-how associated with teams of workers in the warship building companies, whether or not the taking over into this Corporation will affect those teams. My information, for what it is worth, is that it is very likely that those teams of experts will be seriously damaged in the near future by this kind of takeover.
If I may again refer to my own experience, after the war and round about the early 1950s, I had the great privilege of being a member of the Royal Commission on Awards to Inventors, of which the chairman was a member of this House, the late Lord Cohen of Walmer. All the aspects and the conditions of warship building were put to that Commission at that time and as a result a very large ex gratia award was paid to that firm for the use of its know-how. I have no reason to believe that the expertise in warship building has been reduced since those days in the early 'fifties. I would have said that with Government assistance and with the Government being a customer there has been an increase in the value of that know-how for exploiting abroad. Therefore, I should like to ask the Minister whether the Government have considered that the effect of taking over these companies into these large corporations will appreciably disturb the teams of experts and the value of the know-how, and the exploitability of that know-how, at the present time.
Lord TREFGARNE: I should like to take up the point the noble Lord was making about warship builders. The noble Lord conceded eventually that the foreign earnings of the warship builders was substantial.
Lord MELCHETT: I think that is a little unnecessary. I conceded it immediately. It is one of the first things I said when I got up to speak.
Lord TREFGARNE: I apologise to the noble Lord. He at once, apparently, conceded that. In that case, we are at one on that point at least, that the warship builders are substantial owners of foreign currency. Can the noble Lord say quite clearly what he thinks will be the effect of

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nationalisation on those foreign earnings? His case seems to have been, thus far, that the warship builders ought to be included, because they rely so heavily on Ministry of Defence orders. One arm of our case might be, and, indeed, is, that far from relying exclusively on British Ministry of Defence orders, their reliance on overseas defence orders is very great. We would say those orders are in jeopardy if these firms are taken into public ownership. Will the noble Lord say quite clearly, therefore, how he thinks the foreign defence sales of these warship builders will he affected when they come into public ownership, if they do?
Lord MOTTISTONE: May I ask a question on the same sort of line. I think I understood the noble Lord to say that he thought there were positive merits in feeding into a conglomeration successful firms as well as unsuccessful firms, if only to find a balance. I do not know whether the noble Lord has studied the situation in Italy, where I believe it has been Government policy for some time deliberately to pluck successful firms and mix them is with firms which are not doing well. As I understand it, this has not been successful because, on the whole, the successful firms have been dragged down. I would suggest to the Government that perhaps the Italian situation would be worthy of study before being quite certain that the argument put forward was a sound one.
4.13 p.m.
Lord MELCHETT: I hesitated before getting up, not because I do not know the answers to these the various questions, but I did not want to get up three times for three different points. The noble Lord, Lord Lloyd of Kilgerran, asked about the technological know-how and the great expertise of the teams in the warship building sector. Indeed, the Government have considered this, and consider it an important reason for including the warship building sector in British Shipbuilders. My understanding has always been that one of the justifications for expenditure on military research and military equipment is that there is always a very substantial spin-off into civilian uses. This was also one of the justifications for the space programme in the United States of America and elsewhere.
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I should have thought that the fact that the warship building sector and the merchant shipbuilding sector are going to be under a single unified Corporation, British Shipbuilders, will in fact hasten and help the process of spin-off. After all, it is very important in the warship building sector that there should be technological innovation. It is also important from the general standpoint that that technical innovation should be made use of in the merchant shipbuilding sector and other sectors, as relevant. Therefore, I see that important process as being aided by the existence of British shipbuilders, who will bear strongly in mind—and I am sure this is a point made to them in their consultation with the warship builders—the importance of maintaining the expertise, the specialist knowledge, the teams, as the noble Lord called them, in existing companies.
The noble Lord, Lord Trefgarne, asked about export sales. I would say to him simply that I do not see any reason why export sales should be affected one way or another by the warship builders going into British Shipbuilders. There may be arguments for saying, that, given this unified structure and the advantages it will bring, orders may be improved. But I would not say there is a great deal of evidence about what, after all, must be a hypothetical question one way or the other.
Lord TREFGARNE: It is not quite so hypothetical. I have read reports in the newspapers, and I suspect that the noble Lord, Lord Melchett, has read them also, which say that some Middle Eastern Governments, particularly in the Arabian Gulf, have said quite clearly that they will not buy warships from British warship builders if they are nationalised.
Lord MELCHETT: I am in the middle of my speech, and there is another question still to answer. I read all sorts of things in the newspapers, some of which I believe, and to some of which I give less credence. I think it is necessary to look at the motivation of some of the things said. I would not agree that there is any evidence that because an industry is nationalised, foreign Governments are less willing to deal with it than if the industry were not nationalised. It must, on the whole, be a hypothetical

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question. We will have to wait and see. But I myself would not see any reason why export orders should be affected.
Lord MACKIE of BENSHIE: Taking the example of industries already nationalised, there has been an increase, not just a maintenance of exports.
Lord MELCHETT: We are talking about two industries which have not previously been nationalised and which have a large export concession in this particular object. It would not be helpful to draw analogies with the gas and electricity industries.
Lord TREFGARNE: What about the analogy of Rolls-Royce, where the Government intervened with a supply of engines for the Chilean Government?
Lord SHINWELL: As there appears to be a scarcity of enthusiasts on this side of the Committee, may I be permitted to make a contribution?
Lord MELCHETT: I am still in the middle of my speech. I am anxious that my noble friend Lord Shinwell can intervene, but I am still in the middle of making a speech. I only sat down to be interrupted, and if I could just answer the one other question that I was asked, I will then anxiously await the support of my noble friend behind me.
The noble Lord, Lord Mottistone, asked a question about providing a balance between the successful and unsuccessful firms. I think the noble Lord misunderstood what I said about that. I was not saying we plucked out warship builders in order to provide a balance between the successful and the unsuccessful companies. There are some successful merchant shipbuilding firms—not many, I agree. I merely said I did not see, and have not heard of, any justification for the argument that because something is successful, therefore it should not be nationalised; in other words, that only the loss-making companies should be nationalised.
Lord MOTTISTONE: Would the noble Lord let me know, possibly not now, whether a study has been made of this particular policy of the Italian Government? I think this is something worthy
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of study against the background of nationalisation generally. This is something, perhaps, that should be studied more slowly. If the noble Lord can give me that assurance, I would be most grateful.
4.19 p.m.
Lord SHINWELL: I hope that my opening gambit, my reference to the paucity of enthusiasts on behalf of the Government in relation to the matter under review, has not been entirely overlooked. From the very beginning of these debates, I have made it clear beyond peradventure that the nationalisation of shipbuilding per se, by which I mean merchant shipbuilding, is inevitable. Vast sums of money have been injected into the industry over the years. Reference has been made to this on more than one occasion, and I hope it has sunk in. It is impossible to devote vast sums of money to an industry which discloses defects from time to time, perhaps gratuitously, not being entirely faultless in the matter, and being disregarded and permitted to go on, and remain unconcerned.
Therefore, it has seemed to me, departing from the customary doctrinaire presentations and considering it in a pragmatic fashion, that the national ownership of the merchant shipbuilding industry is inevitable. But, at the same time, I have said occasionally in the course of these debates—perhaps what I have said has been disregarded, and, therefore, perhaps I had better repeat it—that much depends on—I will not use the term "administration" of nationalisation because that seems to be associated with the Civil Service, and in connection with nationalisation the less we have to do with the Civil Service the better I like it—the know-how, the expertise, the method of production, the means of procuring orders and the like, all the industrial, technological, and commercial aspects associated with the industry. That is what I am concerned with; not the principle of nationalisation in itself, but the method of implementation. This is what we have to consider.
I am bound to say to my noble friend Lord Melchett—perhaps it is not a fault on his part—that there has been some repetition; frequently in reply to allegations from the other side of the political

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fence he says: "I am quite sure this is going to happen. I know it is going to happen. It ought to happen, but, of course, it may not happen". I want reassurances of a practical character. When he spoke recently in connection with the debate on aerospace nationalisation he referred to decentralisation; that was his answer to all the allegations. "Decentralisation" is a most ambiguous, nebulous kind of term. What does it mean?
I am concerned with how the industry is to be run. Therefore, I put this question, which no doubt my noble friend will endeavour to answer. Let us assume that warship building is included in nationalisation and foreign countries wish to purchase warships from this country. It has happened before, over and over again, because we have built some of the most famous warships the globe has ever had to deal with. Do those foreign purchasers apply to Her Majesty's Government, or do they apply to the respective building firms? I ask that question because the answer to it makes all the difference. If the application is made to the Government shipbuilding corporation, the answer may be associated with a political situation—how an order for a war vessel from a foreign country may have certain ramifications affecting civil shipbuilding. I want nothing of that sort to happen.
Therefore, under nationalisation, I want shipbuilding firms—and I apply this not only to warship building firms but to all shipbuilding firms, whether it is John Brown or the Govan Shipyard or any of the other companies included in the Schedule to the Bill—to be able to deal directly with foreign consumers, and to operate as they have operated before, except for general financial accountability, and, of course, from time to time—this cannot be ignored—certain political considerations; for example, whether we should build more ships or fewer ships, the unemployment situation, the general situation. All that must he taken into consideration. I want nationalisation to be accepted as a principle, but to operate efficiently through the medium of all the firms associated with the national shipbuilding corporation. Therefore, I would not interfere at all with Yarrows so far as production is concerned, the procurement of orders, the way they run their business, except in so far as some of their
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transactions might possibly have a detrimental effect on the shipbuilding industry elsewhere.
This may be regarded as a quite new conception associated with nationalisation. I may be wrong about this, but I recall the other day, when we were having a short debate on the aerospace industry, that a question was raised about the coal industry and what might have happened when the coal industry was nationalised. Might it not have been better—I do not know; it is a guess—when the coal industry was nationalised, that instead of all the pits coming under one control, not only for the purposes of administration but for production and distribution and for the production of by-products and the like, the management of various pits should have been left to conduct the operations? I think we might have avoided a great many of the difficulties and defects that have occurred since. I do not want to pursue the matter.
Lord TREFGARNE: I wonder whether I could intervene?
Lord SHINWELL: The noble Lord always interrupts me because I cannot reply to interruptions; first of all, because I cannot hear very well, and, secondly, because, with great respect, the interruptions are not worth replying to. In any case, I am just about to sit down. If we could obtain from my noble friend on the Front Bench some definite assurance of a practical character, so that it can be clearly understood—nothing nebulous about it, no ambiguity, so that those who are going to be associated with nationalisation in the future, so far as this particular industry is concerned, know exactly what is going to happen—that we are not going to have an amorphous Corporation, with complete control, running the show, with all kinds of directors who know all about it; they are bound to know all about it. Usually the people appointed to Boards of that kind do not know anything about it at all. There is a reason for that. Sometimes it is better to put people on the Board who are neutral, independent, with no expertise because there is a better chance of running the industry effectively. That is a concept that some Governments have had in the past, and we have had experience of it. But I do not want to pursue it any further, except to throw my hat into the ring and

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suggest that this idea might be exploited, or, if not exploited, at any rate amplified, by some of my noble friends on the Front Bench. Perhaps that would satisfy many noble Lords opposite.
4.30 p.m.
Lord STRATHCLYDE: If I understood the noble Lord aright, he has told us that one of the reasons for nationalising these private yards which go in for naval shipbuilding was because they got so much money from the Government. The noble Lord did not say that? I understood him to say that, but I am getting perhaps a little deaf. Perhaps the noble Lord could explain to me how it comes about that so many ships are built in these private yards for the Royal Navy. After all, it is not as though the Royal Navy have no shipbuilding yards of their own. They used to build ships at Devonport; Portsmouth built ships; Chatham built ships. Yet it seems that these private yards are creaming off some of the money which otherwise would have been gained by the Government yards. I just do not understand it, and I should like to be informed about it.
My own idea is that the Admiralty were very glad indeed to get outsiders to build ships for them. They got new ideas; new techniques were introduced. Who was the man who introduced the whole of the naval torpedo craft? It was Sir Alfred Yarrow, years ahead of the naval shipbuilders of the time who, so far as I know, were the Royal Corps of Naval Constructors. Why did we not stick to them? Why did we give the orders to these private yards? That is what I should like to know. One thing that comes to my mind which maybe illustrates the reason, is that when a few years ago I went to sea, the secondary lighting in His Majesty's ships consisted of great, heavy brass lamps with a candle in them. You could hardly lift them. They were exactly the same as in Nelson's ships in the Battle of Trafalgar, and that was a hundred years ago.
Surely you get new ideas by employing different people who are not tied down to what has gone before them; who introduce new ideas. But all that is going to be broken up. It seems to me about the most silly idea I have ever listened to.
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Why did Yarrow go ahead at all? Why did it ever get orders for ships? It was because it built new ships, with new ideas in them, that were highly valued by the officers of the Navy in my time. The Government should think again on this issue. At the moment there is competition, but there will be none if all the ships are built under a nationalised industry. I simply do not understand the arguments that are being put up for doing away with these yards and making them Government yards. It will not increase efficiency; it will do the reverse.
Baroness WARD of NORTH TYNESIDE: I should like to throw my hat into the ring, too. I want to ask only one question. Of course I am against the nationalisation of naval shipbuilders. I have an idea why the present Government want to nationalise naval shipbuilders, and that is because they could then reduce the number of ships built by naval shipbuilders for our defence. I am very interested in this. I should like a reassurance on this, because of course if there is a row in the Labour Cabinet between the Left-Wing and the Right-Wing of that Government, they might be persuaded not to build the number of naval vessels that are necessary for our defence. I should like a special statement made by the noble Lord, Lord Melchett—and perhaps he could speak a little slower, because he goes so quickly. Perhaps he does that in order to get over some of the points which he does not want to get involved in answering. I want to know quite definitely that there will be no attempt made by the Government to reduce the number of naval vessels which are necessary for the safe defence of our country. I want that question answered directly.
Lord MELCHETT: I shall do my best. I certainly do not intend to go too fast, and if I do I apologise to the noble Baroness. I am afraid that it is the impetuosity of youth, and not that I am trying to skate over any difficult questions. I cannot give the noble Baroness the assurance she wants because it is not in my hands to do so.
Baroness WARD of NORTH TYNESIDE: But the noble Lord could ask for it.
Lord MELCHETT: Decisions about future defence expenditure are made at the time by the Cabinets involved. The noble Baroness knows what decisions have been made at this point in time, but I could not possibly, nor could any Government, or any Minister, or Secretary of State in the Government, bind future Governments or future Cabinets. But I should have thought that, if anything, the noble Baroness's fears should be directed in the other direction. I should have thought that if anyone had any fears on this score it would be that once the Government had nationalised these shipyards they would be tempted to keep them going by giving them more orders than were needed for our defence rather than the reverse. I hasten to add that I do not expect that that will happen, but I hope that it might set the noble Baroness's mind at rest slightly.
May I turn to the matter raised by my noble friend and the noble Lord opposite about the breaking-up of these yards and the question of centralised control. I should like to direct my noble friend's attention to Clause 5 of the Bill, and to an Amendment which was included in that clause in another place, where it says particularly that British Shipbuilders shall review its affairs—and of course this must be a matter for British Shipbuilders, for the Corporation itself. But the Bill lays on it an obligation to review its affairs and the affairs of its subsidiaries, in particular to make sure that there is decentralisation of management and decision-taking to separate profit centres in the shipbuilding and ship repairing areas of Great Britain, and in particular of Scotland and Wales, and without prejudice to the generality of that in relation to sales, pricing, production, the formulation and implementation of investment programmes, manpower planning, and management, industrial relations, and responsibility for financial performance.
British Shipbuilders then have to make a report on this to the Secretary of State within a particular period of time, and the Secretary of State has to inform Parliament of the contents of the report. Therefore, my noble friend will have an opportunity very soon after the Bill receives Royal Assent for looking into these matters and making sure that British Shipbuilders are doing what the Bill tells them to do. But that shows quite clearly
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what the Government's intentions are in the matter. It is that this should he decentralised; that the yards should deal with their own orders, but ultimately the decisions must be left to British Shipbuilders. They are under an obligation to carry out the sort of review I have indicated, and the Bill lays this obligation on them, and they will have to report through the Secretary of State to Parliament.
Lord CARR of HADLEY: Before the noble Lord sits down, could he qualify and further explain one point on which I am not clear? I think I took in all that he was saying about the need to decentralise to separate profit centres, and to report about the performance of each profit centre. What is the position if the Corporation was to decide that one highly profitable profit centre area should subsidise an unprofitable one? Does it have to report that? Will the report to the Secretary of State and to Parliament show whether it has done it? This is certainly one of the fears I have for the naval shipbuilders. At the moment they are successful, profitable undertakings ploughing their profits back further to fructify their own successful business. If their profits were to be creamed off, not in order further to fructify their own successful business but to prop up the unsuccessful business in other parts of the Corporation's activities, then our naval shipbuilding might indeed fall into decline.
Lord MACKIE of BENSHIE: Would the Minister not agree that while it is most desirable in a nationalised industry that these should be separate profit centres and separate management and give them a high degree of decentralisation, that it is not the same, and it does not provide anything like the same motivation as a private firm standing on its own feet? "Big Brother" giving you a certain degree of latitude is not the same as independence and proper motivation.
Lord MELCHETT: I could not agree with that, my Lords. In response to the noble Lord, Lord Carr of Hadley, it is quite clear that the review which British Shipbuilders will he obliged to undertake will have to cover the question of responsibility for financial performance and, therefore, if a decision was made by British Shipbuilders to say to a particular profit centre, "All your profits will not be ploughed back but will be passed over to

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X or Y company to subsidise their loss-making activities", I imagine that that would be perfectly clear from the report and, as the report would be laid before Parliament, it would be subject to the scrutiny of Parliament.
Lord GEORGE-BROWN: The Minister would help us if he would answer absolutely clearly the question asked by my noble friend Lord Shinwell, who is not as deaf as he sometimes pretends to be. If we are here making a holding company which will then handle beneath it a number of operating companies—I apologise if I am shouting but I want my noble friend to understand what I am saying because I think I am on his side—and if the Minister would say, "That is what we are doing", which, with great respect to the noble Lord, Lord Carr of Hadley, and other noble Lords opposite, is how private enterprise works, then if the Minister felt able to say, "That is what the Bill is proposing to do", I think he would meet the problem which Lord Shinwell has in mind and he would help many other noble Lords at the same time. There is nothing wrong in the way in which businesses currently operate where there is a holding company, a number of operating companies and ultimately somebody brings the whole together in a profit and loss account and balance sheet which shows the whole picture. Would the Minister assure us on this point, in which case he might for a change carry Lord Shinwell and me with him? Will he say that that is what the Bill is proposing to do? If he would just say that, then a couple of us at any rate could go home a little happier.
Lord MELCHETT: I am in three difficulties. First, I thought I had satisfied my noble friend Lord Shinwell with what I read out to him from the Bill. My second difficulty is that of course there are holding companies and holding companies, and I bow to the much greater experience that almost every noble Lord has of industry and commercial life than I have. My understanding is that there are some holding companies which may exercise a very considerable degree of control over their operating companies, while others may be a mere shell sitting above a series of operating companies and having no influence over what they
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do at all; so I do not think, with respect to my noble friend Lord George-Brown, that the term is quite as precise as he implied.
My third difficulty is that it must ultimately be a matter for British Ship builders, subject to the general control exercised by Parliament through the Secretary of State, because there is no point—I think that, on both sides, we all agree about this—in setting up a new body, British Shipbuilders, obtaining many who are highly qualified, if I may say so to Lord Shinwell, and extremely expert to serve on that body if Parliament and Ministers, particularly during the passage of the Bill, tell them exactly what they are meant to do. There must be a certain degree of flexibility allowed to British Shipbuilders in deciding what is the best form of organisation. It will be subject first to scrutiny by Parliament through the Secretary of State and, secondly, to the very clear guidelines which are laid down in the Bill. If what I have read out seems to amount to Lord George-Brown as a holding company, then I think that would be a perfectly adequate description of what British Shipbuilders would do, but I would not want to be tied to the precise phrase "holding company", because it seems to me that it could mean different things to different people.
Earl FERRERS: I am sure that the noble Lord, Lord Melchett, had so many questions to answer that he inadvertently failed to answer my noble friend Lord Strathclyde who asked why the Government found it necessary to purchase private warship manufacturers simply because large sums of Government money went to those firms. I would be grateful if the Minister would explain some of the philosophy of this because it is very germain to the whole Bill and to both sides of it. As I see it, there are three reasons for nationalising them. One is because Government funds are put into a business because that business is failing. That is a perfectly logical argument although that does not mean that it is accepted by all people on all sides of the political spectrum; that if the Government put a lot of money into a firm because that firm is going bust, it could be said that it is reasonable that they should have a stake. The second reason for nationalizing

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them may be because the Government of the day in their view consider that public ownership per se is right. One may describe that as dogma, but the view is taken that there are industries which the Government of the day think should be in public ownership.
But then there is a third argument. It is that because the Government are a large purchaser, and because of that fact the industry concerned is receiving a large amount of public money, that is a reason for nationalising it. I fail to see why that should be a reason. It was one of the reasons put forward by Lord Melchett today and, indeed, it has been put forward as one of the reasons for nationalising the aircraft side of the industry; that it should be done because a lot of public funds go to it by way of the Government being a purchaser. I would be grateful if Lord Melchett would explain why that of itself requires public ownership because it seems to me that one does not have to be an owner just because one is a purchaser. If that is one of the reasons why the warship builders are being taken into public ownership—and the same can be said about the aircraft part of the Bill—it would be helpful if Lord Melchett would explain why that is necessary.
Lord MELCHETT: I thought I had done my best to explain why the Government felt that the firms which we are discussing in one of the Amendments should be brought into public ownership, and frankly I suggest that there is a limit to how many times I can get to my feet and say the same things without trying the patience of the Committee. I know how anxious noble Lords are to make progress with this stage of the Bill and I would not want unnecessarily to delay matters by repeating myself. The noble Earl, Lord Ferrers, said there were three reasons why it could be said or alleged that certain firms should be taken into public ownership. I support the three reasons he gave, but I suggest that there is another one. Certainly if very large public orders are going to a particular sector of industry, that is a justification or part of the justification for the public having the ownership of those industries. But I stress that that is only part of it. There seems to be no single reason unless one relies simply, as the noble Earl put it, on dogma or on political belief that public
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ownership is a more desirable form of ownership for some industries than private ownership.
There are many reasons why warship building should be taken into public ownership and the noble Earl missed out the one that I have tried to go into this afternoon, and that is the great advantage which their inclusion in British Shipbuilders will give to British Shipbuilders itself. We do not see it as a sensible approach simply to nationalise something which is bound to make losses and be a failure and that seems to be what noble Lords opposite are saying: namely, that we should leave out the profitable bit because it is all right.
Earl FERRERS: I am afraid that the noble Lord has completely misunderstood me. I do not wish to delay him unduly on this point, but I hoped that he would be able to say why the fact of being a customer should also make one the owner. That is a point which the noble Lord has not explained—or at least not convincingly. If that is the premise, one would merely put it to him that there are industries which are to be nationalised whose exports exceed 50 per cent. of their production. On the noble Lord's theory, it might be reasonable for a group of foreigners to be the owners of such an industry because they are the largest purchasers. It was only that point that I wanted explained. I accept that, if Government funds are used to prop up an industry or if there is political argument in favour of nationalisation, those are reasons which can be put forward for nationalisation, but I simply do not see the argument that because the Government are purchasers they should therefore be the owner.
Lord STRATHCLYDE: Did I understand the noble Lord, Lord Melchett, to say in his last intervention that the naval shipbuilding yards were losing money? I thought he made a general statement to that effect.
Lord BYERS: Just the opposite.
Lord MELCHETT: No, I said the opposite, as the noble Lord, Lord Byers, has said.
Lord CAMPBELL of CROY: I will say that the noble Lord, Lord Melchett, does very well in trying to defend an extremely weak case, because he is speaking to us from an untenable position. I am afraid that I must tell him that the arguments which he has given us this afternoon are unconvincing. The main reason which the noble Lord has given where the naval shipbuilders are concerned is that they are suppliers to the Ministry of Defence.
Lord MELCHETT: I do not want the noble Lord to perpetuate a myth. I have not said that that was the main reason at all. I have said that there are several reasons. That may well be one, but it is certainly not necessarily the main reason.
Lord CAMPBELL of CROY: I am glad that the noble Lord has corrected the impression that he gave earlier, though that does not alter the argument. I will just say that he said that it was one of the main reasons, though he certainly gave the impression that it was the principal reason. One of the chief reasons that he gave was that the Ministry of Defence were customers of the naval shipbuilders. That cannot be the reason in itself. What the Ministry of Defence want, surely, is the most efficient producers of warships.
The noble Lord went on to say that other countries would buy warships from the British naval shipbuilders because the Ministry of Defence ordered them and used them. But will this continue if the standards are, regrettably, to decline? That is the danger. The danger is that in this highly sophisticated, technical industry, it will not be possible to maintain standards under the kind of organisation which is laid down in the Bill. There is a danger, as the noble Lord, Lord Shinwell, pointed out, that, when nationalisation happens, centralisation will take place. I know that the noble Lord, Lord Melchett, has been saying that this will not happen in the case of British Shipbuilders but this applies to both the warship builders and the manufacturers of marine diesel engines which are the subjects of these Amendments.
Whatever Ministers may say, as the noble Lord, Lord Shinwell, pointed out when he was describing the coal industry, once industries are under a nationalised corporation, such as British Shipbuilding,
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there is an irresistible trend to refer subjects and decisions to head office. The dialogue between customer and firm is interrupted. The Minister may say now that it is the intention not to centralise but to continue direct business between customers and individual yards, but we know—and the noble Lord, Lord Shinwell, was speaking from great experience in this—that when nationalisation happens this does not continue. The tendency is to centralise and to refer decisions to head office. This is the certain way to lose business and to lose customers.
I mention the four reasons which the then Secretary of State for Industry gave when this Bill was introduced in another place. The reasons he gave were, first, that the record of output and productivity of the shipbuilding industry had not been good; secondly, taxpayers had had to produce a large amount of money for grants to the industry; thirdly, that unemployment was threatened due to the manpower losses which were continuing; and, fourth, that the industry was unable to compete in its present state in foreign markets. I pointed out that not a single one of those four reasons applies to the naval shipbuilders.
I should like to take up something that the noble Lord said just at the end because it underlined one of the criticisms which my noble friend Lord Carr made in an intervention. He said that it was necessary to nationalise the naval shipbuilders because they were profitable and were needed in some way to offset unprofitable parts of the merchant shipbuilding industry.
Lord MELCHETT: With great respect, I did not say that and I have had to correct noble Lords before who have alleged that I did. With great respect to the noble Lord, it is all very well trying once to put words into my mouth but twice is going too far.
Lord CAMPBELL of CROY: I am trying my best to pinpoint what the noble Lord said and if he wishes to correct me, of course he must do so. Was it this that he said—that the Government were intending that profitable as well as unprofitable shipbuilding should be nationalised? I am sure that just now—and I did take a note of this—he said that this was necessary because the Government did not wish that the new Corporation

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should simply have unprofitable industries in it. I think I have the sense of what the noble Lord was saying.
This immediately raises the question put by my noble friend Lord Carr which is that there will be a temptation to British Shipbuilders—the new nationalised body—to use the profits being made in one part of the industry in order to stem losses that may be being incurred elsewhere. The effect of this—whatever the Minister may say about individual profit centers—is to drag them all down. We have seen this in microcosm in UCS. I saw it at very close quarters at that time before coming into Government. There, one of these shipbuilding firms—Yarrow—was incorporated in UCS and was very nearly dragged down with UCS and lost a lot of working capital before it was separated. It has survived, thrived and is profitable today because it was separated and was not dragged down with the other companies in UCS. I would say straight away that there are of course merchant shipbuilders who are successful and thriving now, despite the exceedingly difficult world situation with orders. So I think it would be wrong if anybody in this debate gave the impression that all the merchant shipbuilders were unprofitable. Some are successful; others are having a very depressing time.
We shall be discussing other Amendments on the subject of both naval shipbuilders and the marine diesel engines. I hope that Government will, having studied what has been said during this debate, go away and consider further whether they are not threatening two valuable industries with this nationalisation Bill, and that they will not have closed their mind to a reconsideration where these two industries are concerned.
5 p.m.
Visount SIMON: We have had a longer debate than I expected. I apologise if I caused embarrassment to the Government Front Bench or to any noble Lord by putting these two important Amendments into one discussion. I was led to believe that the only way I could discuss Amendment No. 36 was to put them together because, once the Question was put on Amendment No. 33, we would have lost the possibility of discussing Amendment No. 36.
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So far as naval shipbuilding is concerned, as the noble Lord said just now, we are to have another opportunity to discuss this. I think I said in introducing the Amendment that there were already Amendments put down by the noble Lord, Lord Carr of Hadley, and his noble friends dealing with the same subject, and I think that this preliminary discussion has been useful. It has brought out many interesting points and we shall be better prepared when we come to discuss this issue again. After we have dealt with Amendment No. 33 my intention will be not to move Amendment No. 35.
There is only one other observation I meant to make on this issue. I listened with great interest to what the noble Lord, Lord Melchett, said, largely in reply to his two noble friends, about the independence of the units within this organisation, and, when speaking previously, I said that I welcome the intention of the Government to maintain these independent units. What I am still doubtful about is whether in fact, with that intention which I know is a genuine intention, they will succeed in doing it. That is one reason why we here have been rather vigorously attacking the wide powers given to the Secretary of State, because that might very well upset the arrangement; and in that I think I carried the noble Lord, Lord Shinwell, with me.
Apart from that, the crucial point about maintaining these independent units is the question of finance. If there is a common financial pool then it follows that the cash flow from the successful units goes into a common pool and it is the board of British Shipbuilders which decides where that cash is applied. It is all too easy to feel that it should be applied perhaps in renovating the plant in some of the less successful companies rather than in building on success in the companies from which the resources come. We shall want to look very carefully at the clauses which govern this independence of the units because that is the matter that worries me.
I will not say more on that. With regard to Amendment No. 36, relating to the slow-speed diesel engine manufacturers, I thought, with respect to the noble Lord, Lord Kirkhill, that his reply was rather cursory, and if this is the only discussion we are to have on the subject

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then we on these Benches will certainly put down this Amendment again. But at this stage I should like the Government to look further into the question of the licencees. I do not think that it is enough for the noble Lord, Lord Kirkhill, to say, "We don't think that any harm will come." I think that the companies themselves, and indeed the holders of the patents, ought to be consulted about this matter in one way or another. Incidentally, I was told—and I do not vouch for this, the noble Lord can tell me whether I am wrong—that one of the reasons, on the aircraft side of the Bill, that Westlands were not included was in fact that they were manufacturing various types of helicopter under licence and had been warned that they would lose the licences if the firm was brought into British Aerospace. I say only that I was told that; it may be untrue. But I think that it shows that there is a risk that these kind of things may happen. I beg leave to withdraw Amendment No. 33.
Amendment, by leave, withdrawn.
5.4 p.m.
Viscount SIMON Viscount SIMON had given Notice of his intention to move Amendment No. 36:
Page 4, leave out line 12.
The noble Viscount said: I ought formally to say, as we said during discussion of our earlier Amendment on the aerospace industry, that we do not intend to leave the matter here and at a later stage of the Bill we shall ask your Lordships' House to come to a decision on the substance of this Amendment
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN had given Notice of his intention to move Amendment No. 37:
Page 4, line 13, leave out ("matters relating thereto") and insert ("and innovation concerning the above-mentioned matters.").
The noble Lord said: I moved a similar Amendment in connection with the Aerospace Corporation, to the effect that the duties of that Corporation should be extended by adding innovation to the duty to promote research. This had the great support of the noble Lord, Lord Kings Norton, who, as many of your Lordships will be aware, has a great international reputation in aeronautic affairs. The noble Lord, Lord Kirkhill,
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in reply gave me some most helpful assurances and he has followed this up by writing me a letter. I should like to thank him for the speed and efficiency with which he has operated.
5.6 p.m.
Lord CARR of HADLEY Lord CARR of HADLEY moved Amendment No. 40:
Page 4, line 24, leave out subsections (5) to (7).
The noble Lord said: I beg to move this Amendment, and perhaps it would be helpful to the Committee if I were briefly to outline what it seeks to do. The Amendment seeks to remove from the Bill subsections (5), (6) and (7) of Clause 2. Perhaps we ought to look at what each of those subsections seeks to do in itself. Subsection (5) gives the Secretary of State power, after consultation with either of the Corporations, to make a Statutory Instrument prescribing the activities which either Corporation and its wholly-owned subsidiaries are to carry on,
"either in addition to the activities specified"
in earlier subsections of the clause, or in substitution of those activities. This subsection gives other powers to the Secretary of State as well, but it is the powers which I have mentioned on which I particularly want to concentrate.
I wish to repeat to the Committee that we are concerned here with the power which the Secretary of State would be given by this subsection to make a Corporation, by Statutory Instrument, either accept additional duties to those specified earlier in the clause or to give up some of the duties it has and substitute them with others.
Subsection (6)—the second subsection which we here seek to remove—lays down the way in which the Secretary of State shall do this, and it says in common parlance that the Secretary of State shall use the Affirmative Resolution procedure; that is to say, the Statutory Instrument which he lays in order to change the duties of the Corporations shall be subject to the positive approval of Parliament and shall become effective only when that positive approval has been given. That sounds all right on the surface, but I shall come back to that in a moment.
The third subsection which we seek to remove lays a duty on each Corporation to make sure that all its subsidiaries

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conform with the duty which the Secretary of State has laid upon each Corporation. That is obvious, I suppose. It also says something else, which is one of the reasons why we are particularly disturbed by it. It says that if there should be any conflict between any of the extra or substituted duties which the Secretary of State lays on the Corporations with any of the duties already being passed in the Bill, if it is enacted, then the duties contained in later Statutory Instruments shall prevail over the duties laid down in the Bill.
Your Lordships might feel that one has only to mention the powers in these subsections to make an unanswerable case for their removal. But since presumably the Government do not feel that—or they would never have put them in in the first place—I had better spend a little time saying a little more about it and, in particular, draw your Lordships' attention to a number of points. First, I ask your Lordships to remember very clearly that in Clause 2 we are dealing with the "duties" of the Corporation and not with the "powers" of the Corporation and, therefore, if the Secretary of State makes an order under subsection (5) he is not just giving the Corporation enabling powers to do something if in their wisdom they think it is right to do it, he is laying upon them an absolute duty to do it.
It is Clause 3 of this Bill which deals with the powers of the Corporation but we are at the moment concerned with Clause 2 of the Bill which lays down the duties of the Corporation. It is very important to keep this distinction in mind, particularly since I understand that in another place—and indeed in public argument outside—the Government have sought to defend these powers by saying, "Well, after all the shareholders of a company can assemble in general meeting and change the objects of that company". Indeed, so they can, but if one changes the memorandum or articles of a company one may give that company the "power" to do something, but one does not give it the "duty" to do it. So the argument about the Companies' Act and the power of shareholders to alter the objects of their company is wholly irrelevant to this question. It would be relevant if we were talking under Clause 3 of the Bill, because it is Clause 3 which deals with
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powers, but, I repeat, we are now dealing with Clause 2 which deals with duties.
For the same reason it is also irrelevant for the Government to try to defend the powers in the subsection—as I understand they did in Committee in another place—by reference to Section 2(1) of the Iron and Steel Act 1967, which is now reenacted as Section 3(1) of the Iron and Steel Act 1975. It is irrelevant for exactly the same reason, because, as I read it, that section of the Iron and Steel Act again refers to powers and not to duties. I am stressing this point, because it is a very important one for your Lordships to get hold of in judging the need for the Amendment which I am proposing.
What this subsection does—and the others, (6) and (7), make effective—is to give the Secretary of State at the time the power to place a duty upon either or both of the Corporations to do anything that he likes. What I said in my Second Reading speech—to take what may seem and is in a sense an absurd example—was that if he wished to order them to make paper bags he could do so, and having made the order, the Corporations would be under a duty to make paper bags. They would be under a duty to see that all their subsidiaries—or some of them at least wherever the appropriate facilities could be provided—should make paper bags. This rather absurd example underlines, I hope, for your Lordships the limitless breadth of power which this part of the Bill seeks to give to the Secretary of State, a power which is wholly unprecedented in any previous nationalisation Statute, and I believe wholly unacceptable.
One may think that it is unlikely that the Secretary of State—even the previous Secretary of State for Industry—would order the Corporations to make paper bags, although Mr. Benn's imagination runs riot on occasions. But it is by no means unlikely that a future Secretary of State might well, shall I say, order these Corporations—and let us take the Aerospace Corporation—to go into the component manufacturing business, to go further into the great field covered at present by our highly successful avionics industry.
I am sure many of your Lordships have visited our Farnborough air shows over the years. I always remember the first time I went, and it was long enough

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ago for me to be somewhat struck with wonder as well as awe at some of our modern aircraft, supersonic speeds and all that. One was rather absorbed by the actual flying that one saw, but even in those days when the wonders of modern flying hit one harder and more deeply than they do now, I remember that the overriding impact which my visit to Farnborough made on me on that first occasion was made by the exhibition which supported the flying exhibition, where one went through the halls at Farnborough and saw the enormous range of British engineers of one kind and another—mechanical, electrical, hydraulic engineers and many other associated component manufacturers—all making the highly sophisticated components required by the aerospace industry. That made one realise what an enormous hole would be left in British technology and in British higher technological industry if we were even to allow our advanced aircraft industry to die. That is one of the reasons why, ever since, I have been a passionate supporter of sustaining that aircraft industry.
The point I am making to your Lordships now is that, if what I am saying is true about this enormous back-up engineering effort to the aircraft industry, many of us can well see that in a year or two a Secretary of State, particularly if he were a Secretary of State of the present Party, would be severely tempted to lay a duty upon that Corporation to embark in that area of activity. Similarly, one might think of the shipbuilding side where one can see at the moment many companies involved in making components required in shipbuilding which are not at the moment covered by this Bill. But I can see a future Secretary of State thinking, "What a good idea it would be to include them", or to place upon the Corporations a duty to embark on this wider sphere of manufacture.
He would do this without us in this House or in the other place having any opportunity with any effectiveness to check what he was doing. He could do things which would be of extraordinary damage to the existing companies in these various fields of manufacture. Those companies would have no effective right of appeal and Parliament would have no effective right of control, because instead
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of as at the moment, as has always been hitherto, the Government only being able to extend the scope of nationalisation and nationalised activity by a full legislative process, he would with subsections (5) and (6) which I am talking about be able to do it merely by laying an order—which it is true would have to be put to Parliament for approval but which would give Parliament no opportunity for amendment of any kind.
That is simply not good enough. No Secretary of State of any Party ought to be entrusted with this degree of power and this minimal degree of Parliamentary control. He could go on laying order after order and merely have to get a majority on a single vote in Parliament to make it effective, and the activities of these two Corporations could be expanded ad infinitum.
Lord HANKEY: Would the noble Lord allow me to interrupt? If Parliament were to express very strong views about such an order, would the Secretary of State not feel obliged to alter it a little? The point which worries me is that we may be too rigid on this. I do not like this Bill any more than the noble Lord does; but if we are going to have a Corporation, I should not like it to be anchored solely on doing certain things which are specified in the Bill now. If somebody creates a new invention in a short time, does there not have to be some flexibility about the powers of the Corporations?
Lord CARR of HADLEY: With respect to the noble Lord, he has said: should there not be some flexibility in relation to the powers of the Corporation? There is a big difference between powers and duties. If these duties are going to be changed, Parliament should have some right to effective control because they are decisions which would have an immense effect not only on the Corporations—and I accept that it might be good for the Corporations—but you also have to consider what the effect might be on other parts of British industry, not just on the owners and the shareholders, but on the employees in other companies in other parts of British industry.
Therefore I do not believe that the Secretary of State should be able to do this simply by placing an order on which he

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has to get one vote of approval and on which Parliament's only option is either to "chuck" it out completely or approve it without any change. It may be tedious; democracy is rather tedious as well as a very imperfect instrument. I think that powers of this kind must be subject to the full legislative process. I do not believe the duties of the Corporation should be changeable without the full legislative process.
I must remind your Lordships—and the noble Lord, Lord Hankey, has brought this freshly to my mind—of something to which I have already referred. If your Lordships look at subsection (7) you will see the point I have already mentioned,
"… and in the event of any conflict between the duty imposed by this subsection"—
by the type of Statutory Instrument that I have been talking about—
"and any duty imposed by the preceding provisions of this section, the duty imposed by this subsection shall prevail."
In other words, it is not only a question, as the noble Lord suggested, that we might not wish the Corporation to be too circumscribed. We have, after all, gone to a lot of trouble and time to lay down the existing duties. The proposal as it stands here is that by mere Statutory Instrument, despite all the time and trouble that Parliament has taken, the present or future Secretary of State can, by a mere single vote, pass an order and do something which prevails in law over everything else which has been said in this Bill about the duties of these Corporations. I believe that, too, is a wholly unacceptable provision. I hope your Lordships will maintain resistance to this with great vigour and determination.
I do not think that at this moment I need say any more. I hope that I have at least been convincing enough to make your Lordships feel that the Government must make a much more specific and detailed justification for the needs of these powers than they have yet done in another place or, to be fair, had an opportunity to do here. I now give them that opportunity. I hope that they will not repeat the irrelevant defence to which I have already drawn attention which was given by Ministers in the Standing Committee in another place. I beg to move.
5.25 p.m.
Lord ORR-EWING: I hope that the Government will think seriously about my noble friend's reasonable and well argued approach to this matter. When we are thinking about the Secretary of State's powers—and we have been thinking about this question in successive measures which this Government have brought before your Lordships' House: I remember long discussions on the Industry Act and when we set up the BNOC—it is worthy of discussion to make sure that if there is to be competition between the nationalised industry and the private sector, the competition should be fair. The powers that we are now proposing to give to the Secretary of State allow him, after consultation but not necessarily agreement with the Corporations, to ask them to undertake activities in industrial areas which were never intended by the Government when they first drafted the Bill.
Like my noble friend, I have never missed a Farnborough Air Show. I must declare an interest: I am chairman of a small electronic company. Like all electronic companies of worthwhile stature, we have a small interest in avionics. Anyone who goes to Farnborough perhaps does not appreciate that in such a modern aircraft as the MRCA, half the cost and most of the complexity is in the electronics and avionics which allow the aircraft to undertake sophisticated duties. By nationalising Hawker Siddeley and the British Aircraft Corporation we are automatically giving them an electronic capability because in their guided weapons division they have an electronic capability. In the case of BAC it is at Stevenage, and Hawker Siddeley have the same.
They already have a capability, and there must be the fear in the electronic industry in the big companies, which are responsible for so much of our electronic exports, the Racals, Marconis and Elliots, and many others, that this will be made an excuse for invading an area with all the financial advantage that a nationalised Corporation has—cheap money rates, Treasury standing behind them, guarantees of various forms; that they will invade an area and thus adversely affect Britain's competitive position and the avionic companies which supply so much to these aircraft corporations. It is particularly sad that we should be discussing this. We ought to be

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discussing the cost of all this because I read on the tape today that the pound has hit its all-time low of 1·63 at the Smithsonian Institute, and our trade figures are not good. So we ought not to be discussing further public expenditure, further interference, we ought to be thinking of how we can free British industry to compete and help our balance of payments.
There is also a constitutional principle, as my noble friend has said. It is disturbing to find him able to impose a duty on the Corporations. This measure, as it stands, could easily be adjusted and I hope that we can persuade the Government to make these minor adjustments. It is not that we are allowing them to enlarge their activities. We may be compelling them to do so even against their own interest and judgment. As my noble friend said in his addendum, at line 7 on page 5, there are some pretty sinister words. It says:
"… and in the event of any conflict between the duty imposed by this subsection and any duty imposed by the preceding provisions of this section, the duty imposed by this subsection shall prevail."
What we are saying is that the duty imposed by a Statutory Instrument "drummed" through Parliament with perhaps a minority, but capable of carrying the Statutory Instrument through, will override all the powers drawn up in this nationalisation Bill. This cannot make sense. I am sure the intention was not that, and I believe it could be changed with minor drafting.
I have been looking at the Consultative Document published at the beginning of 1975. I take the following from that:
"It will give the new Corporation the greatest possible commercial freedom".
Let us honour that part of the mandate; give them commercial freedom and not have them imposed upon. Ministers have said, and the noble Lord, Lord Beswick, has said at the Financial Times Convention, which he addressed in a very good speech at the beginning of September, that the Corporations themselves wanted to push away, to decentralise, and that the Minister wanted to decentralise action. Therefore, if he wants to do that, let us change this measure and not allow him to impose a duty which is not given and which has not been passed through this Chamber, as my noble friend has said, in a
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proper way. To take one further point, the under-Secretary of State, as my noble friend said, quoted the Iron and Steel Act and I would ask the Government to look at that and, please, not to quote it again, because it specifically says "powers" and not "duties".
Finally, if those sorts of power were essential to a successful nationalised industry—not that there are many of them—why have they not been given in any other single measure which has been put before Parliament? We started this in a big way in 1946 and so for 30 years we have been increasing the size of the public field and narrowing the field of action of the private sector. Yet never before have we asked for these powers, and this at a time when everyone is saying: "If you have to have nationalisation"—and I do not know how much more of it we can afford in this country—"don't give powers to the Minister to interfere with it. Let it use its own commercial judgment, because if you go on interfering you will never get any decent person to head or to manage that nationalised industry, because they will be receiving too much interference and will too much 'mucked about' by any Government who have those powers". Let us amend these powers and then we shall have at least some slight improvement in the Bill.
5.31 p.m.
Lord MELCHETT: My Lords, this Amendment seeks, as the noble Lord, Lord Carr, said, to remove the powers of the Secretary of State under Clause 2(5) to adjust the duties of the Corporations in line with changing needs, subject to an Affirmative Resolution in each House of Parliament. We wish to introduce a procedure whose purpose is to allow the duties of these Corporations to be adjusted more expeditiously. As noble Lords know, in the past when the duties of the nationalised industries have had to be changed it has been necessary to introduce a Bill in order to do that; but the delay involved in this procedure can be very damaging. Therefore we aim to make the procedure swifter, but still subject to the approval of Parliament.
There has been a great deal of misunderstanding about the purpose and effect of these new procedures, and therefore I would like to explain in a little detail the

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effect of the subsections which these Amendments would remove from the Bill. Clause 2(5) allows the duties of either Corporation to be changed in three ways. First, new or alternative activities may be prescribed which the Corporation will be required to carry on. We envisage this would normally happen where an activity already carried on by the Corporation under Clause 3(1)(a) or (b) becomes sufficiently central to its business for this to be recognised by being written into its duties. Conversely, an activity prescribed under Clause 2(1) or 2(2) which seems central now may, in the course of time, cease to be so substantial that the Corporation should really not he required to carry it out. Under Clause 2(5) the Secretary of State will be able to substitute a new activity.
Secondly, the Secretary of State may prescribe objectives to be pursued. This is not a power to interfere in the detailed affairs of the Corporations: the objectives must be of a general character. Thirdly, the Secretary of State may lay down conditions subject to which activities are to be carried on or objectives pursued.
I hope that that explanation has made it clear that these provisions are not a means of providing for the extension of public ownership by Statutory Instrument, as has been suggested. They could not be, for they provide no means of compulsory acquisition. They are nothing more than an attempt to allow a greater degree of flexibility to respond to changing circumstances. Indeed, we believe they are a means of increasing Parliamentary control, because they provide an opportunity to formalise smaller changes and to keep the practical and the statutory positions more closely in line. As the noble Lord, Lord Carr, said, there is the need to think about the wellbeing of these vital new Corporations which are to be set up by the Bill, and there is also the need to look to the interests of private industry and the people involved in private companies. I believe that the measures embodied in the Bill will, quite rightly, allow Parliament to hold that very delicate balance by making any changes subject to an Affirmative Resolution in both Houses. I therefore think that the provisions laid down in the Bill adequately meet the fears expressed by the noble Lords opposite.
Lord CARR of HADLEY: May I ask one question to follow up a point that I made? Let us stick to my example—it may be an absurd example if you like, but I take it only in order to clarify what the powers are. Would it or would it not be legally possible for the Secretary of State to place a duty on either of these Corporations to make paper bags, provided that he can get a majority for that in one Division?
Lord MELCHETT: If the Affirmative Resolution was passed by both Houses to that effect, I daresay it would be, just as Parliament, if it wished, could nationalise the paper bag-making industry.
Lord CARR of HADLEY: But does not the noble Lord understand that there is a very big difference between Parliament nationalising something by means of the full legislative process, and a one-Division decision on the say-so of the Secretary of State?
Earl FERRERS: The noble Lord, Lord Melchett, has been kind enough to explain exactly what this means, and I am bound to say that it is now so clear that it alarms us even more than we were alarmed in the first place. The noble Lord said that it is perfectly all right: this merely gives the Secretary of State the power to alter something which at the moment seems central to the Corporations but later on may not seem central and, equally, that something which may not seem central now may become so later. That is exactly what we are worried about, because this is not just a degree of nuance where one shifts the basis of emphasis a little.
As my noble friend has pointed out, what the Secretary of State can do is to substitute entirely the first two subsections of Clauses 1 and 2. We had a discussion the other day, and the noble Lord, Lord Melchett, slightly twitted me for putting down such an absurd Amendment. I asked what he meant by, "an efficient and economical design of aircraft". The noble Lord said that of course we all know what this means and of course it is the duty of British Aerospace, and indeed of any nationalised industry, to run something economically. But if he has these powers, the Secretary of State can put an obligation on the Corporations

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which will result in their doing quite the reverse and possibly carrying out operations which are inefficient. The end of subsection (7) says:
"… in the event of any conflict between the duty imposed by this subsection and any duty imposed by the preceding provisions of this section, the duty imposed by this subsection shall prevail."
The Bill says that the authority of the Statutory Instrument takes precedence over the authority of the Bill. I believe that is a wrong position in which to put Parliament and that it is a wrong position in which to put the Corporations. All the way through, people have said that the Corporations are to be given freedom of manoeuvre. I think it was Mr. Carmichael who said in another place:
"Those who will be responsible for managing and running the two new Corporations should do so within the broad parameters set by the Bill and shape the organisation in a way that will best enable the Corporations to carry out those functions."
That must give a degree of independence to the Corporations, and yet these three subsections, particularly subsection (7), in fact give the Secretary of State power to override and to interfere with the overall management of the Corporations.
As my noble friend Lord Carr said, it is not right that by one vote all the paraphernalia contained in these subsections, which are an absolutely fundamental part of the Bill and tell the Corporations what they are to do, should go through without any discussion at all. It will be a case of either accepting the proposals or rejecting them. I agree with my noble friend that this Parliamentary power which is being given—whatever Government is in office—is too great to give to a Minister.
5.41 p.m.
Viscount SIMON: Having listened to the noble Lord, Lord Melchett, I am bound to say that we on these Benches will give our warmest support to this Amendment. This clause gives the Secretary of State powers which are not right, if we want this industry to run as independently as possible of interference, as I believe it should do. After what has been said by noble Lords on my left, I do not believe there is any need for me to make a long speech, because I agree with what they have said and I do not want to waste the time of the Committee. But I
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must say this—and this is extremely important—about the words
"… in the event of any conflict between the duty imposed by this subsection and any duty imposed by the preceding provisions… the duty imposed by this subsection shall prevail."
Let me suppose that the Secretary of State, who I assume would be a very reasonable and sensible person, wanted the Aerospace Corporation to undertake some new development. It may sound like a very interesting development, so he consults the Corporation who say, "If we stretch our resources of money and manpower to do that, we are afraid that we shall fall behind in the programme for producing the aeroplane which you want for the Air Force, and we must have regard to the requirements of national defence." The Secretary of State could then say, "Never mind about that, because my instructions override your requirement to have regard to national defence." It would be an impossible position.
I am not sure whether the Secretary of State has to publicise the results of his discussions with a Corporation, but I can well imagine that in circumstances such as I have described the chairman of the Aerospace Corporation would find it very difficult to remain silent, and we should have one of those very unedifying occasions, such as we have had in the past, when the chairman of a nationalised industry is at logger-heads with his Minister. We want to avoid that kind of situation, and we could avoid it far better by removing these three subsections of Clause 2, leaving the Aerospace and Shipbuilders Corporations to carry on with their business as laid down in the Bill.
The noble Lord said that modifications take time, but if there was a really good case it would not take very long to get an amending Bill through both Houses of Parliament. He also said, if I heard him aright, that the Government might want to impose upon the Corporations a duty to do something for which they already had power and which they were already doing. But if they are already doing it, it is surely not a matter of great urgency—even if it is at all sensible to lay such a duty upon them. So I do not at all follow that part of the noble Lord's argument. I hope that the Government will take very serious notice of what has so far been

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said about these three subsections, and consider whether they should be removed from the Bill.
Lord HANKEY: I am very grateful for the explanation which the noble Lord, Lord Carr, gave to me and I am very sorry that I interrupted his speech. In my experience, the British have one failing, which is that they tend to go all rigid. Once anything has been done for a certain time it becomes traditional, and when it becomes traditional the British are finished because nothing can then be altered. When something new comes along the British just cannot be stopped, because we are frightfully good at anything new until the point when it becomes traditional.
If we are to set up these Corporations, which I earnestly hope we shall not—I am entirely against this Bill—then, for God's sake! do not let them go rigid. There must be some means by which, if something is in the national interest (and I recall what the noble Lord, Lord George-Brown, said yesterday) it can be done. One of the shipbuilding yards which forms part of the Corporation may have some new product—a drilling rig springs to mind, but there will very soon be many other things; they will not necessarily be ships driven by slow-speed diesel engines—and if that happens it is essential that the Corporation should be able, and should possibly be so instructed, to get on with it and make it. It might be something totally unconnected with ships. It might be some kind of new procedure for computing the sizes of plates to be used in making ships, or something like that. We live in a time when everything is being changed by computers, when there are new techniques coming from every hand, and we must not go rigid and prevent our industry from adopting something.
I do not like the wording of this Bill any more than noble Lords on the Conservative and Liberal Benches. I think it is too specific. There is a lot to be said for our being able to think in Parliament about the powers and duties being imposed upon these Corporations. I am not convinced that, if an order has to be laid before both Houses of Parliament, we are precluded from exercising influence over it. After all, we could make out such a case in this House that the Government would take it back and think again. But if we are to do this at all, the Secretary
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of State probably ought to have powers to make some of these shipbuilding yards—I am thinking more of them than the aerospace industry, which is so very progressive—do the things which are necessary.
Lord CARR of HADLEY: I apologise in reverse to the noble Lord, because I take the point he is making about flexibility. But is he not, in fact, making a case for either of these Corporations to be able to come to the Government and to Parliament and say, "You have given us these duties, but our powers are rather too restricted, and in order to carry out the duties which you have given us in the national interest would you please extend our powers somewhat. We can no longer be effective in this field"—let us say that it is the aircraft field—"unless we can also do something which at the moment we do not possess the power to do"? If the noble Lord were making that case, it would be something to which we should all have to listen carefully and sympathetically, but that is not what is being proposed in this Bill. We are giving any Secretary of State power, for all time from now on—whether or not the Corporations wish it, and whether or not they feel that they are too restricted—to lay upon them a duty subject only to one vote in Parliament, which I believe is rather different from the kind of flexibility which the noble Lord is talking about.
If the Government had responded to this Amendment in the way the noble Lord is arguing, we should all have to think about it rather carefully. But, as I understand the position, the Government are insisting on their full pound of flesh in terms of Ministerial powers—and over my dead body will they ever have that!
5.50 p.m.
Lord HANKEY: I am very grateful to the noble Lord. I was about to make a point just like that. I think this does give too much power to the Secretary of State and also that the business about the Houses of Parliament ought to be spelled out a little differently. I do not know here and now just what I think it should be, but I do not like these words very much, for the reasons stated by the noble Lord. I did want to say that I do not like the idea that a Secretary of State is able to interfere in the running of State

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Corporations quite as much as this text says he is to be able to do. This is my point. I do not believe in politicians' interfering in the running of Corporations.
If we look at the way the Renault company is run in France, I do not believe that the French Minister, in practice, interferes in quite this sort of way. Some of the State corporations abroad really are run rather efficiently, but I do not believe the Secretary of State, or his corresponding opposite number, does in fact do this sort of thing. We live, in this country, from one expedient to another and I think it is entirely wrong. We change the Government, and a new Secretary of State interferes in a different way. There ought to be some sort of consensus about the running of these things. If you talk to the Steel Corporation, they do not know if they are coming or going, and the people who are making plant for them do not know whether they are coming or going, either. They are all in trouble. They are always going to be in trouble because we have this sort of interference, but it is going to be worse under this text than it is even in the Steel Corporation
What I would like to suggest is that the Government should realise we are not anxious to have rigidity. We want to have precisely the sort of flexibility which the noble Lord, Lord Melchett, mentioned if we must have these Corporations—and I hope we do not—but, on the other hand, I think that the Government might take this clause back and think about it very seriously in the light of this debate.
The Earl of HALSBURY: I support this Amendment and if the noble Lord, Lord Carr, divides the Committee I shall follow him into the Division Lobby in order to improve what I must confess is an ill-thought-out, hasty piece of legislation of the type of which we get much too much.
I do not want to talk about paper bags, because I will come a little closer to the bone. We are going to nationalise the manufacturers of marine diesels. Now no marine diesel will go round and power a ship without a diesel injector and a diesel pump. These are not made by diesel marine engineers. They are made by private industry and made at a profit,
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and I can well see the suspicion arising in the minds of the second-line suppliers that with the profit-conscious avidity of nationalisers somebody else's profit would be very valuable in turning what would otherwise be a loss, perhaps, into the neutral point, so "Let us pinch our suppliers' profit."
Twenty-eight years ago the Party to which the noble Lord, Lord Melchett, belongs passed through the House of Commons and through this Chamber a non-controversial Bill called the Development of Inventions Act 1948, which established a corporation of which for 10 years I was managing director, and the condition between the Parties that it be not a controversial Bill was that it was written into the Bill that where the Corporation was sponsoring development it would entrust that development to the hands of a firm engaged in the industry concerned unless special circumstances warranted otherwise. I believe, as a compromise to be thought of at Report stage, I should like to put it into the mind of the noble Lord that something like that might be written into this Bill, and you could then have the best of both worlds. You could have an element of the type of elasticity which the noble Lord, Lord Hankey, would like to see and, at the same time, you could remove the fears which have been expressed by the noble Lord, Lord Carr. I found that section in the Development of Inventions Act to be my passport to good relations in industry, because they knew I was going to bring them something; I was not going to take something away. Something of this kind in the way of safeguard is necessary to be written into the Bill. We have until Report stage to think about how to draft it, and until then I shall support the noble Lord, Lord Carr.
Lord ORR-EWING: Perhaps I could come back to the Minister. I would associate myself first with the need for flexibility, as my noble friend and the noble Lord, Lord Hankey, have said. We do not want an arthritic industrial society, and flexibility is essential, but there are, there have been growing up and there still exist, ways of starting new ideas. You do not have to start a new idea in a vast nationalised industry. It may in fact be the worst possible place to start a new idea. There is the NRDC; there is the

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Small Firms Division of the Ministry of Industry to give aid and advice; there is the FFI to help with finance, and there are other organisations. Every Government over the last 30 years—perhaps this has been done even more successfully in the United States—have seen the need for innovation and to help small firms get going with new ideas. I do not think that because there are some anxieties we need to accept the formula which is in this Bill. I believe that you can get the flexibility which is desired by other methods.
I did put the point about fair competition. In previous disscussions on nationalisation we have, although we might not have been able to change the Bill, had assurances from the Minister that competition, if it was going to come about, would be fair; but there has been no assurance about this. In fact, I think the noble Lord, perhaps by accident, or perhaps even by design, completely left this out. If he is not in a position to give an answer now perhaps we could find another occasion, because there must be some anxiety that competition is going to be fair. One has to remember that these two Corporations, apart from the initial cost of something like £500 million or more for setting them up, are going to be allowed to borrow up to £300 million each so that they can expand their activities or go into competition with existing and established firms, and I am sure in the long-term interest this is not desirable because so many of those firms are the big export earners and are very competitive in world terms.
The supposition that my noble friend put about paper bags is not all that ridiculous, because when I was chairman of the Electronic Engineering Association some six or seven years ago I had to lead a deputation to a Minister called Mr. Wedgwood Benn, and we were discussing whether we could get some support for the microminiature developments which have come about and are widespread, and he and his chief scientist actually used the argument, "I wonder if we ought to be giving any aid at all to the electronics industry? Ought we not really to be launching automatic laundries?" We had a long discussion about this, and it seemed rather wide of our mark. So the paper bag illustration is not all that far off the mark, because you could in fact have
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automatic laundries. Mr. Wedgwood Benn actually suggested that in a ministerial interview.
I also remember that when he had responsibility for the Atomic Energy Authority they were allowed and encouraged to go into the civil market and develop that side of their business, rather alien to what they were then doing and to their Statute, but in those days it had to be approved by the House—and that is all we are saying. It had to be sensibly discussed. We do not want to have something put before us which we have either to throw out or to approve of in toto. It is much better to discuss it sensibly. That is why we are first raising my own point about fair competition but, above all, asking for some minor alterations to the drafting of this Bill which will inhibit irresponsible Ministers of the future. At the moment we have got Mr. Varley; that is all right. But there is a general change from time to time; they all change partners and dance again. So I rather hope that we shall not have any more rather extreme Ministers, but one cannot guarantee that, and that is why the legislation which any Government put before the House should be foolproof and knaveproof; so let us make it that way.
Lord AUCKLAND: I intervene as a member of the Joint Committee on Statutory Instruments. As your Lordships' Committee will know, the purpose of that Committee is not to discuss or pronounce upon the political content of any measure going through Parliament, but if we are going to get subsections such as this it is going to put an already overworked Committee—and I am not a particularly vocal member of that Committee myself—into enormous difficulties. We are already very much overworked with legislation. What I am really putting to the Minister is this question. Will the discussions with the Corporation be sufficient? Will they give sufficient opportunity for evidence to be taken and problems to be sorted out before all this goes before the Committee on Statutory Instruments? If not, it puts this Committee—which is, as I have just said, completely non-political—in an extremely difficult situation, because I have never seen legislation so controversial as this in Statutory Instruments and I hope that there

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will not be any legislation of this kind in the future.
6.1 p.m.
Lord CARR of HADLEY: I wonder whether I might make one more appeal to the Government by asking the Government Front Bench to reflect a little upon what we have been saying. We have now been on the Committee stage of this Bill for about 11 hours and I do not think that as yet there has been the slightest sign of flexibility on the part of the Government regarding any issue which we have raised. There has been a solid stone wall about everything, which is rather disappointing because it puts all of us into a difficult position.
So long as the matters for debate between us concern the specific question of the nationalisation of a particular industry or part of an industry I concede that there is a doctrinal cleavage which in the end comes down to a statement of faith. If we want to be rude about somebody else's statement of faith we call it dogma; when it is our own statement of faith we do not like to call it that. And so long as the divisions between us, whether big or small, are related to those fundamental political beliefs one can understand the Government of the day being rigid. However, I submit to the noble Lord opposite that here we are dealing with something beyond that.
The Amendment that I have moved on behalf of my noble friends, which is supported by at least one Member of the Cross-Benches and one Member of the Liberal Benches, has nothing to do with the nationalisation of the aircraft, shipbuilding, ship repairing or diesel marine engine industries. It has to do with the powers of the Secretary of State to add to or subtract from the nationalisation of those industries. That is not a matter of Party doctrine.
The noble Lord and his freiends must know how unsatisfactory even the Affirmative Resolution procedure is. Indeed, when I was in the other place and sat on the Government side I tried to defend the Affirmative Resolution procedure in relation to very much smaller matters than this; they were well circumscribed by the duties of a particular Bill. However, when the noble Lord's Party
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were in Opposition they passionately protested that the Affirmative Resolution procedure, giving no opportunity for amendment, simply was not sufficient. I am not saying that I have not been party to using the Government's majority to sustain the Government's view, but here we are being asked to sustain this power—not simply to add to or subtract from the duties contained in the substantive legislation but to use the Statutory Instrument procedure to override those duties. I believe that I am not just making a debating point when I say that this is digging very deep into constitutional matters and into the power of Parliament to defend the citizen as well as the overall national interest.
If I may refer again to the points made by the noble Lord, Lord Hankey, I think I have said enough to indicate to the Government that had they been coming to us and saying that in order to make sure that these nationalised Corporations succeed they must have flexibility and therefore must be provided with the power to come and say to us, "Look, Parliament, we have a duty to fulfil and we are too restricted in our powers to be able to fulfil it effectively in the national interest", all of us would have had to look at such a claim very seriously. But it is different when you say not that the industries must have the chance to have flexibility and some means of coming to ask for it but that from now on any Secretary of State shall have a blanket power, whether or not the Corporations wish it, by Statutory Instrument to add to or subtract from their duties and to override the duties given to them in this substantive legislation.
I hope that the noble Lord, Lord Melchett, will be able to say that he will go away and talk to his most senior colleagues about this matter because I believe that constitutional and libertarian issues are at stake in giving this blanket power to a Secretary of State. I am not accusing the Government of wanting this power to misuse it, but we are putting on to the Statute Book a power which any future Secretary of State could abuse and which Parliament could not prevent any future Secretary of State from abusing.
This is not a Party political division about the nationalisation of these industries; it is a deep constitutional point.

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In fact, we take this point so seriously that I shall have to advise my noble friends to support the Amendment in the Division Lobbies and therefore delete these subsections from the Bill. Before we reach the Report stage I hope that the noble Lord will have a very good look at the matter so that the Government do not try to reinsert these subsections as they stand but take note sympathetically of the very genuine concern which I believe

CONTENTS

Airedale, L.

Greenway, L.

O'Brien of Lothbury, L.

Amherst, E.

Grey, E.

O'Hagan, L.

Amory, V.

Gridley, L.

Onslow, E.

Ampthill, L.

Grimston of Westbury, L.

Orr-Ewing, L.

Armstrong, L.

Hacking, L.

Platt, L.

Auckland, L.

Halsbury, E.

Rathcreedan, L.

Balerno, L.

Harcourt, V.

Redesdale, L.

Banks, L.

Harmar-Nicholls, L.

Rochdale, V.

Barrington, V.

Hives, L.

Runciman of Doxford, V.

Belstead, L.

Hornsby-Smith, B.

Ruthven of Freeland, Ly.

Berkeley, B.

Hylton-Foster, B.

St. Aldwyn, E.

Boyd of Merton, V.

Ilchester, E.

St. Davids, V.

Brookeborough, V.

Inchcape, E.

Salisbury, M.

Byers, L.

Inverforth, L.

Sandford, L.

Campbell of Croy, L.

Killearn, L.

Sandys, L.

Carr of Hadley, L.

Kimberley, E.

Selkirk, E.

Clitheroe, L.

Kinnaird, L.

Selsdon, L.

Cole, L.

Lloyd, L.

Sempill, Ly.

Cork and Orrery, E.

Lloyd of Kilgerran, L.

Simon, V.

Cornwallis, L.

Long, V.

Skelmersdale, L.

Craigmyle, L.

Lyell, L.

Somers, L.

Cromartie, E.

Mackie of Benshie, L.

Spens, L.

Daventry, V.

Macleod of Borve, B.

Stamp, L.

Denham, L. [Teller.]

Mancroft, L.

Strathclyde, L.

Derwent, L.

Marley, L.

Strathcona and Mount Royal, L.

Drumalbyn, L.

Masham of Ilton, B.

Strathspey, L.

Dudley, E.

Melville, V.

Swansea, L.

Dundee, E.

Merrivale, L.

Teviot, L.

Dundonald, E.

Meston, L.

Trefgarne, L.

Ellenborough, L.

Monck, V.

Trevelyan, L.

Elles, B.

Monson, L.

Vickers, B.

Elton, L.

Morris, L.

Vivian, L.

Emmet of Amberley, B.

Mottistone, L.

Ward of North Tyneside, B.

Faithfull, B.

Mowbray and Stourton, L. [Teller.]

Ward of Witley, V.

Falmouth, V.

Wardington, L.

Ferrers, E.

Moyne, L.

Wigoder, L.

Gainford, L.

Newall, L.

Wise, L.

Gisborough, L.

Norfolk, D.

Yarborough, E.

Gladwyn, L.

Norwich, V.

Young, B.

Glasgow, E.

NOT-CONTENTS

Allen of Abbeydale, L.

Hale, L.

Pannell, L.

Aylestone, L.

Henderson, L.

Peart, L. (L. Privy Seal.)

Birk, B.

Hunt, L.

Peddie, L.

Brimelow, L.

Jacques, L.

Shinwell, L.

Brockway, L.

Kirkhill, L.

Stedman, B.

Champion, L.

Leatherland, L.

Stewart of Alvechurch, B.

Collison, L.

Llewelyn-Davies of Hastoe, B.

Stone, L.

Cooper of Stockton Heath, L.

Lovell-Davis, L.

Strabolgi, L. [Teller.]

Cudlipp, L.

McCarthy, L.

Wells-Pestell, L. [Teller.]

Davies of Leek, L.

McCluskey, L.

Wigg, L.

Donaldson of Kingsbridge, L.

Mais, L.

Willis, L.

Elwyn-Jones, L. (L. Chancellor.)

Melchett, L.

Winterbottom, L.

Evans of Hungershall, L.

Milner of Leeds, L.

Wootton of Abinger, B.

Goronwy-Roberts, L.

Oram, L.

Wynne-Jones, L.

Resolved in the affirmative, and Amendment agreed to accordingly.
Members of both Houses ought to feel, quite regardless of their normal Party allegiances.
6.8 p.m.
On Question, Whether the said Amendment (No. 40) shall be agreed to?
Their Lordships divided: Contents, 117; Non-Contents, 42.
6.16 p.m.
The DEPUTY CHAIRMAN of COMMITTEES (Baroness Wootton of Abinger): I have to call the Committee's attention to the fact that if Amendment No. 44 is agreed to I shall not be able to call Amendment No. 45 or Amendment No. 46.
Lord MOTTISTONE Lord MOTTISTONE moved Amendment No. 44:
Page 5, line 10, leave out from ("to") to end of line and insert ("manage").
The noble Lord said: I am not proposing under Amendment No. 44 to speak so much to the question of the misuse of the expression "industrial democracy". That part of it I have covered in a further Amendment, No. 203, which I am not proposing to take with this Amendment but to leave to take its turn when we come to it. I propose to devote most of my remarks to the question of management, but before doing so it perhaps would be of interest to your Lordsihps to know—and this is genuine—that I found myself in the late 1960s talking publicly about industrial democracy. When I talked about it I meant more democratic rights for industrialists, and there was not a preconceived idea which led me to think that that was a wrong use of the expression. The use of "industrial democracy" to cover the general area of participation, worker control, whatever you like, crept in rather later than that, and it was perfectly reasonable to use that expression in the late 1960s. The only point of this is to show that industrial democracy, unless it is described, means what one wants it to mean, which rather reminds me of Alice in Wonderland, or was it Through the Looking-glass? I forget.
The point here that I would suggest to your Lordships is a fault in the Bill—and I am afraid that the very expression that we see before us is perhaps spreading the baleful influence of the erstwhile noble Viscount, Lord Stansgate, about whom my noble friend Lord Orr-Ewing recently spoke—is that what is being said here is telling the management of these Corporations how to manage; it is spelling it out in detail. It is, I would suggest to your Lordships, certainly arrogant and insulting to the management of these Corporations to tell them how they are to do their job.
We talked about this earlier on Second Reading and we have talked about it in other Amendments. Your Lordships will remember that the noble Viscount, Lord Rochdale, touched upon this when he said how very delicate was the expertise of a board of directors. I would suggest to your Lordships that it is really wrong, within an Act of Parliament, to tell people how they are to manage. It is unfortunate that in this day and age management has become the property of everybody. I think we have the public media to thank for some of that, but it is a fact that, generally speaking, people feel that anybody can manage—rather as people think that anybody can teach or anybody can train—and the expertise within that field has somehow become denigrated so it is therefore felt to be all right for the management function to be shared by people who have neither the training nor the experience to do so, and for good management a lot of both is required. There are of course other functions of boards of directors, apart from straight-forward practical management. But management is a very important function and if one gets a whole lot of amateurs and throws them in to help with the management of any enterprise one cannot make a successful enterprise.
I would strongly suggest to the Committee that you must think again before you start throwing in phrases like (I forget the actual wording) "promoting industrial democracy in a strong and organic form," whatever that means, when you are really talking about a management function. I would press noble Lords opposite not to be carried away (which I suspect in that phrase they may have been) by the thought that management is not a very expert and a very taxing and difficult task. I have had a certain amount of experience on a small scale of trying to manage people and I know how difficult it is. I am sure most of your Lordships will have had this experience, but I think that many people who write about management have not had any experience at all. I do not think it is at all unreasonable, for example, for trade union leaders to think that they can do it just as well if they have the chance, because they are led to believe that by a great many of the published writings. This is something that a responsible Government should

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put out of their thoughts and I should like to think that in fact it is not for me to take the initiative and to suggest a rewording of this subsection, but for the Government to do so in order to show how responsible and how understanding of the problem they are. Therefore, I believe it is something that the Government could well consider doing.
I would not say that my rewording, which was intended to be a quick and not too troublesome one, is the ideal for this paragraph but I should have thought that at the Report stage the Government might consider tabling a suitable Amendment for this subsection which would be satisfactory and would meet the obvious demands of diminishing the interference in the management of these Corporations and of giving them useful guidance which does not tell them what to do. I beg to move.
Lord KIRKHILL: If we are to appreciate the significance of this Amendment we cannot entirely overlook the Amendment which the noble Lord, Lord Mottistone, tabled to Clause 56, although he himself explained very carefully that he was only speaking to Amendment 44 at the moment. The promotion of industrial democracy is one of the most important features of this Bill. As my noble friend Lord Melchett will be explaining on later Amendments, we have said on many occasions on the Government side, and at great length, that we do not consider it right to prescribe a particular form of industrial democracy because that is something for those in the industries to work out. But our firm hope and expectation is that it will enable all employees to play their part in the future of these industries. The Government do not concede that there is necessarily a conflict between, on the one hand, industrial democracy and, on the other hand, management. Indeed in the view of the Government good management, certainly in the latter quarter of the 20th century, should generally encourage some form of industrial democracy.
I think I should also point out to the noble Lord, Lord Mottistone, that the precise effect of his Amendment is, to say the least, uncertain. There is a replacement duty on both Corporations to promote industrial democracy in Clause 2,
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with the duty to manage their activities, while at the same time there is left elsewhere in the Bill a substantial emphasis on industrial democracy. Thus, under Clause 2 the Corporations would be required to start consultations on industrial democracy with the trade unions within three months of vesting date. Their organisational review under Clause 5 must still take account of the steps necessary to promote industrial democracy in each of their undertakings. But our basic objection to the Amendment is that it replaces our concept of industrial democracy with an emphasis towards management and the removal of that phrase at this stage of the Bill, and I could not urge noble Lords to accept this Amendment.
Lord MOTTISTONE: I understand, though regret, the statement made by the noble Lord, Lord Kirkhill. I agree with him on one point; namely, that in modern management one must use a measure of what I would call industrial democracy, though I suspect that noble Lords opposite might have a slightly different view as to what this meant. This is one of the problems of the broad phrase. I agree that management, with the co-operation of the people being managed, is absolutely essential and perhaps more so today than ever. What I am objecting to is Parliament in an Act of Parliament, telling what is supposed to be a responsible management of a large State-owned Corporation that they have to do this. If they are the sort of people who will not use the right methods to manage well in the modern era they should not be there, but it is not for us to spell out this sort of detail. Therefore, I believe that noble Lords opposite could benefit greatly from giving more thought to this, to their own credit, quite apart from the credit of Parliament. However, as I do not seem to have a tremendous amount of support, and as there are other, similar Amendments to come, I beg leave to withdraw this Amendment.
Amendment, by leave, withdrawn.
6.28 p.m.
Viscount SIMON Viscount SIMON moved Amendment No. 45:
Page 5, line 10, leave out from ("promote") to second ("in") in line 11 and insert ("the effective participation of employees in the processes leading to management decisions").
The noble Viscount said: I have approached this matter from a quite different angle from that adopted by the noble Lord, Lord Mottistone. As I said during our Second Reading debate, we on these Benches are as keen about what is called "industrial democracy" as anyone and my real objection to this is the use of that phrase, because I believe that phrase can be so easily misunderstood and if it is misunderstood then those people who are most anxious to see it succeed may feel cheated and that they have not got what they wanted.
In my view, it is quite essential to put something of this kind into the Bill. The noble Lord, Lord Mottistone, said that this is good management. I agree, but I believe that the nationalised industries ought to give a lead in this. In fact, I think it is a great pity that they have not made more progress in the existing nationalised industries over the last 20 years. I do not object at all to this duty being placed upon the Corporations to promote what is called "industrial democracy". I come back to my strong objection to the use of this phrase. I know it has been in use for some years now. I think I first came across it about six or seven years ago in a pamphlet produced by, I think, the Union of Democratic Control, or some such body. When I saw it, I thought how misleading this could be to workpeople who felt that they wanted to develop the idea. We do not have to be philologists to know that "democracy" means government by the people. Therefore, it can be naturally thought that "industrial democracy" means government of industry by the people who engage in it. We do not believe that that is a practical proposition.
I go this far with the noble Lord, Lord Mottistone, that management is an art which has to be learned and practised. It is not everyone who can just step out of his chair at his place of work and immediately become a manager. We believe there must be the closest possible co-operation between management and everybody working in the organisation, but that it is quite wrong to call that industrial democracy.
I once sat for a fortnight at the feet of the noble Lord, Lord Brown, who has made a great study of this subject. I am
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bound to say that the conception which the noble Lord had was a little more like industrial democracy than the conception I had, because, if I remember rightly, his theory was that you have groups of all the different workers in a particular plant, from the management down to the floor cleaners; you get them altogether in what I think he called a parliament and then, when a proposition was brought forward, if any one group objected to it the proposition was not carried; every single group had a veto.
As many of your Lordships will know, the noble Lord, Lord Brown, is a very remarkable person. I was most interested not only to hear his theory, but to be able to ask whether it really worked because, to me, it sounded almost ideal. The noble Lord, Lord Brown, said that indeed it did work and immediately gave responsibility to all these groups so that they would not stand out against what was obviously the feeling of the other groups. The noble Lord was a very persuasive person. I am sure that as a manager he was also very persuasive.
I think this is going a little too far to apply everywhere, but he would be the first to admit that this idea is not applicable everywhere. But that is the sort of thing which the phrase "industrial democracy" might make people expect. Indeed, it might make them go even further, and expect something that is practically indistinguishable from syndicalism. After all, the number of people on the shop floor is always greater than the number of managers. The idea is that you have a polling booth and people can say, "I am in favour of this proposition", or, "I am not in favour of this proposition". But the shop floor would rule the organisation. I do not think that noble Lords believe that or want it to happen, but I am so afraid it might if this phrase becomes established in Acts of Parliament—and there are people who do want it, and they will say, "This is what industrial democracy really means; this is what we ought to be fighting for".
I have ventured to suggest an alternative wording. I am not wedded to these words. It may be that other noble Lords will have other alternatives to suggest, but this seemed to me and my noble friends to be the best short expression of what we want—"the effective", I

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think that is a very important word, "participation by employees", and we emphasise that it is all employees, "in the processes leading to management decisions". There may be some noble Lords opposite who fear that we are trying to exclude in some way the trade unions from a function which they can perform. Indeed, in the scheme of the noble Lord, Lord Brown, if I remember rightly, the trade union officials had virtually no place at all in his parliament. But we are not wanting to keep out trade union officials. They are there to help people who may not have had as much experience or opportunity to learn as the officials have had of how these things work. We want the participation of all employees, either direct or through their representatives, in the processes leading to management decision. If noble Lords opposite or on the Conservative Benches, or anywhere else in the Committee, would like to suggest an alternative, I should be happy to accept it if it were a better alternative. I apologise for not saying so before, but I think it would be for the convenience of the Committee if we could discuss Amendment No. 46 at the same time. I beg to move.
6.35 p.m.
Lord CARR of HADLEY: Perhaps I may support the noble Viscount, Lord Simon, in that. I was myself going to suggest that we should also discuss Amendment No. 46 as I thought that he was not going to do so, because Amendment No. 46 in my name and that of some of my noble friends is purely a probing Amendment. The Amendment seeks to leave out the phrase "industrial democracy in a strong and organic form" not because I do not want something on the matter in this Bill, but because I want to discover, if I can, what the Government mean by this. So it would be to the convenience of the Committee if we could discuss Amendment No. 46, the probing Amendment, along with the more substantive Amendment just moved by the noble Viscount. Perhaps I can deal with my probing Amendment before saying what I have to say about the Amendment of the noble Viscount. Perhaps I might be allowed to begin by putting on record for noble Lords the fact that, in seeking to remove these words for the purpose of clarification, I want to put something constructive in their place.
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I made my maiden speech in another place some 26½ years ago, if the noble Lord, Lord Melchett, can conceive of such a thing. Precocious as he is, I doubt whether he was making speeches 26½ years ago, certainly not public ones. In that maiden speech, I chose as my subject, and was lucky to have the opportunity of choosing as my subject, my support (I almost was going to say passionate support) for more joint consultation in industry. This has always been one of my main motivating forces in political and industrial life. When it came to the (shall I say?) controversial Industrial Relations Bill, I was at pains to see that whatever else was not in that Bill, it did contain clauses which put on employers a legal obligation to give information to trade unions, and also to give information to all other employees. I also made sure that in the Code of Practice which went with that Act there was strong emphasis on the need for the closest participation and consultation about an ever-widening range of subjects.
I am sorry to personalise what I have to say in this way, but I want to get on the Record that any critical questioning I may make on this subject is not made because I am in any way scornful about the real need to promote the sort of spirit which I believe is intended in these words. I do think words matter. Now that we have started to write into Acts of Parliament the phrase "industrial democracy", it is very important that we should stop to consider what we mean by it. I know that this is not the first Bill in which it has been introduced. On the other hand, this is a Bill which not only covers a wide and important sector of British industry but which in other clauses and subsections actually gives a legal framework to what I presume is meant by "industrial democracy". I do not think it gives a very satisfactory sort of framework, because it is a very partial framework.
Like the noble Viscount, Lord Simon, I remember a good many years ago now, being very interested in the experiment pioneered by the noble Lord, Lord Brown. While the noble Lord, Lord Brown, was very keen on encouraging trade unionism and on strengthening trade unions, I think I am right in saying that the concept of industrial democracy which he pioneered specifically included all the employees in his organisation. Of course, this Bill—

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we shall come to these parts of it later—specifically includes only some of the employees in these industries. It may be a majority, but by implication at least it specifically excludes a substantial proportion, which may be as much as 30 or 40 per cent. of all the employees in these two industries.
We shall come to this when we begin to discuss what is meant by the phrase "relevant trade union" and what perhaps ought to be meant by "relevant trade union". That is why I think that at an early stage in our discussions of this subject within this Bill we really ought to seek from the Government some explanation of what they mean by "industrial democracy in a strong and organic form" I do not know what interpretation they put on the word "democracy". I suppose that if they had included it in the interpretation clause they could, as it were, have given it whatever meaning they liked, but they have not included "industrial democracy" in the interpretation clause of this Bill.
I therefore presume that we have to look to dictionary sources if we wish to discover what these words mean. I have only looked at the Shorter Oxford Dictionary; I thought it might take too long to go deeper than that. First, I should like to draw your Lordships' attention to how "democracy" is defined. The primary definition is, "government by the people". In expanding that, it goes on to say,
"in modern use often denoting a social state in which all have equal rights".
I must underline the word "all", because the Bill specifically gives rights to some and excludes others from having those rights. Therefore, I wonder whether that really is truly democracy, unless the Government are going to give it some specialised meaning, which they appear not to have done at the moment.
Again, a further definition in the Shorter Oxford Dictionary, which really confirms the one I have just given, is that democracy is,
"a state or community in which the government is vested in the people as a whole".
Again, clearly the provisions of the Bill specifically exclude the people as a whole from joining in the government of their
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community. So I really ask the Government, unless they are going to alter the meaning in their provisions, whether it is wise to use the phrase "industrial democracy". It may be that you cannot get there in one great stride, and the Government could perhaps argue that they are taking the biggest stride possible towards it in one go. But I think it is liable to cause great disillusion and cynicism if we loosely use words which; hold out great broad concepts of expectation, and when people come to the nuts and bolts of the Bill they find that the nuts and bolts specifically exclude them from these great opportunities which are held out to them. So I ask the Government to look at what they really mean by this phrase "industrial democracy".
Then what is the meaning of the word "organic"? "Strong" understand, and I think I could agree with it if we got our definition of "democracy" right. Of course, when I look at the Shorter Oxford Dictionary on "organic", I find that it has a much wider number of different meanings. I promise your Lordships that I will not read out all the alternatives, but I must draw your Lordships' attention to two which I think are relevant to the sort of area in which we are engaged. One of them is that "organic" means,
"of or pertaining to or characterised by systematic connection or co-ordination of parts in one whole".
One could not possible describe what is proposed in later stages of the Bill as a "co-ordination of all the different parts in one whole". Indeed, it specifically sets out to do the reverse, to separate some parts from the whole.
An alternative definition is an,
"organic whole every part of which exists only in and through its relation to the rest".
There again, this partial granting of the rights of consultation in later parts of the Bill specifically excludes the rest; it specifically does not connect one part of it to the whole. So I believe that we need to look at our use of words to some extent. I do not want to be too pedantic about it, nor, I am sure, do other noble Lords. Before we write grand phrases of this kind into this Statute, not as a general objective but as an objective which we then subsequently try to define in concrete terms, and those concrete terms prove to be contrary

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to any accepted meaning of the word. "democracy" and "organic", I think we should think again.
That brings me to the substantive Amendment, No. 45, moved by the noble Viscount. I find the words that he has put down not unattractive:
"the effective participation of employees in the processes leading to management decisions"
seems to me to have a precision which the grand phrase, "industrial democracy in a strong and organic form" lacks. It is precision by which, one can hope, Government and Corporation and managers down the line can actually understand what we are telling them to do, and can put it into effect. It is, therefore, less likely to cause disillusion and cynicism after first raising expectations. So I see that these words have considerable merit.
What I want to say to the noble Viscount and his colleagues on the Liberal Benches is that for my part—and I think I shall have to so advise my colleagues on the Conservative and Unionist Benches—I would rather not vote for any particular form of words at this stage in our debates. I should like to obtain from the Government some considered view about what is really in their mind when they talk about, "industrial democracy in a strong and organic form", and to have the chance to consider that. They, perhaps beyond the bounds of this evening, can consider what we in this House say to them, and then when we get to Report stage I should like to make up my mind and advise my noble friends to make up theirs, and if necessary express their minds in the Division Lobby, about the precise words which we should put into this Bill.
Although, therefore, I say to the noble Viscount that at this moment I do not object to his words—and I can imagine finding myself at the next stage of the Bill prepared to go with him—I am not yet ready to write either his words or any other words into the Bill finally at this stage. Therefore, without any lack of good will, and with a great deal of good will towards what the noble Viscount has proposed, I would rather not commit myself to precise words at this stage.
6.50 p.m.
Lord COOPER of STOCKTON HEATH: The noble Lord, Lord Carr, has said that words matter, but in his
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Amendment he moves that we should leave out the words "in a strong and organic form", but it leaves in the phrase "industrial democracy".
Lord CARR of HADLEY: May I correct the noble Lord? My original Amendment did. I noticed the error of it, and the Amendment on today's Marshalled List includes "industrial democracy". Although I am moving to leave those words out, I very much want some words to be there in due course. I am just not yet sure what the words should be.
Lord COOPER of STOCKTON HEATH: I thank the noble Lord for the explanation. It had me mystified. The subject of participation or consultation is a difficult subject. The TUC in their document on industrial democracy say that the British trade union movement throughout its history has generated a large measure of industrial democracy. This is how they see it; not as a fixed, defined state, but as a developing state. The paragraph following upon where the Amendments are suggested deals with consulting with the unions as to the form of industrial democracy. I am not afraid of the phrase at all. I do not think that it would lead to the difficulties that the noble Viscount, Lord Simon, has mentioned. It recognises, as do the TUC, that in each industrial establishment you have a different set of circumstances, and one form of industrial democracy or workers' participation, is all right for one establishment but may not necessarily follow for another.
I do not see the difficulty that has been set out in this debate. I think that the phrase is all right. You have the words about effectiveness, and some words that are a little stronger—but incidentally, I do not think going to the Oxford dictionary is going to help us, and certainly would not be understood by shop floor workers. I suggest leaving well alone.
Lord MACKIE of BENSHIE: I should like to back my noble friend Lord Simon on this Amendment. I think that the noble Lord, Lord Carr, is absolutely right when he says that words are very important, and particularly in this matter. We in the Liberal Party have a great deal of experience of this—at least we have

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talked about it for much longer than any other Party. There is no question that what I mean by industrial democracy and progress is very different from the view held by certain sections of the Young Liberals.
The subject is so important that we have to be precise. The Government are doing great harm by producing the words "industrial democracy", which mean a lot of different things to a lot of different people, and backing it up by saying that it should be in a "strong and organic form". The noble Lord, Lord Carr, will be pleased to hear that we in farming have a different meaning for organic. We have chemical manure and we have organic manure, and they mean slightly different things, and both are very useful. But I think that this subject is very serious. British Industry is way behind. We have had various political pamphlets and schemes: In Place of Strife, Nye Bevan's book, In Place of Fear, and we have put nothing in place of the fear of the sack in this country, and the state of our industrial relations shows it. It is high time that we were making progress. To this day in many firms and in the nationalised industries there is not even information and consultation. We do a tremendous disservice by not defining the steps forward that we wish to take.
My noble friend put it in a very reasonable form when he said that he was willing to accept any better form of words. I would appeal to the Minister to accept the spirit of what we are saying and to take it back and look at it, because the phrase as it at present exists will do more harm than good. There is an enormously important section of industry, both public and private, who are not nearly enough considered at the present day. I refer to the executives, both middle and senior. If you put into effect the sort of industrial democracy that the wilder men in both the Labour and Liberal Parties are talking about, then you would get a flight of executives from this country which would make anything we have seen up to now look like a trickle. Therefore, I would ask the Government to look at this phrase again and to be more precise.
The Earl of ONSLOW: Industrial democracy is something like social justice and the opposite to sin. We have in
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theory—and possibly in theory only—all been against sin, and we are all for social justice. I suspect that social justice means something very different to myself than it does to Mr. Heffer, or to the noble Lord, Lord Melchett. We are now all coming to believe in, and be for, industrial democracy. I would say again that this probably means different things to a corporate union man, to a man on the shop floor, to myself, and to the noble Lord, Lord Melchett. Perhaps Her Majesty's Government could please refrain from writing into Statutes purple prose slightly more suitable for the slushier forms of historical novelists; but if this strong and organic industrial democracy is to be introduced, it must be defined. The Government in another place claimed they could not define it. The Minister of State, when replying to an Amendment produced by Mr. Thomas, the Member for Bristol North-West, claimed that he could not produce a definition sufficiently accurate for the courts to define. Unless the Government can define it, perhaps we had better leave it out.
If "industrial democracy" is consulting, informing, asking advice by the management of a workforce, then this must be right. It is to be welcomed and encouraged, not only as humanitarian and enlightened practice but also in management's own selfish interests. If it is to mean a trade union bureaucracy merging with the increased Civil Service bureaucracy, and an increased management bureaucracy, which are the things we have seen with nationalised industries, then this, in my humble opinion, would gum up the works and would lead to lack of initiative, and consequently more loss to be funded by the taxpayers at the present Shylockian rates of interest.
If it means election to the board by the workers themselves, on the Dutch system, then this possibly is going to put out of joint the noses of the established trade union officials. Above all, I am sure it could not be democratic in the way that the East Germans and the Chinese use the word "democratic". If that is going to be the case, the workers will have less say in their own affairs and less advice asked of them, than they did with the worst of the Victorian sweat-shop owners. Surely we must wait for the Bullock Committee.

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One final question. If we have finally defined "industrial democracy" and it is written into the Bill, and the industrially democratic British shipyard workers and British aircraft workers say that they want to denationalise the whole caboose, will Her Majesty's Government please give the pledge that this will be allowed, because if not that would not be very democratic.
7 p.m.
Viscount ROCHDALE: I am not particularly interested in the words that are used because most of us know what we mean, whatever words are employed. I would, like my noble friend Lord Carr of Hadley, start by saying that I hope that nothing I may say will let it be thought that I am critical of the concept of industrial democracy because that would be exactly the reverse of the case; I am entirely and sympathetically disposed to it. When I was chairman of Harland and Wolff I might almost say that I led the way on the board to promote it. It may be helpful if I were to give the Committee a little experience of how that practical effort to get it into being has worked and is working.
It was in April 1975, about 18 months ago, that the then Minister of State to the Northern Ireland Office produced a booklet, the name of which I cannot recall exactly, but which I think was entitled "Industrial Democracy". It was directed solely to the company and was distributed throughout the company to all employees. It dealt with the whole concept of participation and industrial democracy, not merely at director level but at all levels from the shop floor upwards. A large meeting was held at which the Minister of State came to discuss it and he said that he wanted us to take it away, consider it at all levels and then come back to him, he hoped—I am afraid that it proved rather optimistically—at the end of July 1975 with a document agreed on both sides, on the trade union side and the management side, which could then be implemented.
It is only fair to say that at the lower levels a great deal of participation was already in being and was being developed, much more probably than may have been realised at the time. Naturally the spotlight or glamour or interest was thrown not on what was going on—the very
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important and encouraging work that was going on—but on worker directors and that was the subject which was thought and talked about most. It did not prove at all easy to produce an agreed document, one agreed by both sides. The two sides went away and had their meetings. We had several, as did the trade unions, and there were a certain number of joint meetings to find out what the other side was thinking. It looked for a long time as though it would be impossible to arrive at a jointly agreed paper that we could put to the Minister of State and say, "This is how we want our worker directors to be appointed" and so on. However, in the early autumn—it was several weeks, perhaps a month or so, later than the Minister had hoped—a document was produced. It was produced not only with internal knowledge, but certainly on the trade union side they brought in advisers from I think Strathclyde University and elsewhere. In any event, the document was produced and it looked as though it would be fairly plain sailing for the appointment of worker directors.
Towards the end of last year I retired from the chairmanship and the position then was that nothing in fact had happened. I regret to say—of course, I kept in touch with what was going on—that today, 12 months later, there are no worker directors yet appointed to the board. The articles of association of the company were altered so that the spaces are there, but none has yet been appointed. There are of course many difficulties at this stage. I do not want to say anything that might embarrass any of my friends in Belfast. I must therefore be careful in what I say. The sort of problems are these. How will the names of the individuals be chosen for the Minister to appoint? Will they be willing to be appointed? That sort of thing can by no means be taken for granted, especially when one considers what in my view is absolutely essential; first, that a director, once appointed, must be a director in full and, secondly, that there must be no second-class citizens. In other words, the appointment of worker directors must be an absolute reality. There must be no charade or facade; it must be absolutely complete. They must have the same responsibilities as any other directors and they must have access to all the papers and information that other directors have;

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and that of course raises enormous problems.
I hope I shall not be misunderstood, and that it will not be thrown at me that I am not trusting trade union workers to observe confidentiality. That is not the point. I have many friends there, shop stewards and others, whom I would trust absolutely. But outside in the yard the ordinary employee will not yet understand what these particular individuals will have learned and they will be under enormous pressure to divulge things that they do not want to divulge, and this therefore raises a problem. Noble Lords who have sat on boards of directors will remember the first board they attended as a junior director. One felt very immature, not knowing exactly what to say or what to contribute. One needed to learn a great deal, and in exactly the same way those coming from the shop floor recognise only too well that they will need to learn a tremendous amount. I know that in the company referred to facilities are being made available for them to get that knowledge. And if there are to be no second-class citizens, the remuneration must be the same.
If noble Lords bear in mind all these various requirements on directors, the difficulty is not with the management, with the present directors, but the difficulty lies with themselves. They will find it extremely difficult in some of these ways and the situation does not need probing very far to suggest that if they live up to this they will segregate themselves from their own colleagues whom they are there to help. Thus, the whole purpose of the exercise would be to some extent, if not frustrated, at any rate undermined.
Without going into what is a very complex, interesting and in my view exciting prospect, it seems to me that what we must do first in any one company is to move step by step from the ground floor up. There must be participation at shop steward level and at each level right the way up, building up to when it is natural and really effective to have worker directors. There must therefore be an individual approach in each company and that approach will depend on a number of factors: on the history of the company, on the organisation of the company and very much on the individual personalities both
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of the existing boards of directors and of the trade unionists whom one would hope may in time become directors. If we, with that in mind, consider the clause as drafted, we note that it says:
"…to promote industrial democracy in a strong and organic form…".
It seems to me that there is an inherent danger in those words because I read them as meaning that the Corporation itself might devise or give some sort of blueprint for the industrial democracy in its various subsidiaries which they would all have to try to work on. I believe that this would be wrong.
I was encouraged when the noble Lord, Lord Kirkhill, in speaking to the previous Amendment, said that it was not intended that the Corporation should lay down any particular form which the industrial democracy should take. I believe that that is absolutely right. Each company must be allowed to work out for itself its own method of doing it. For that reason, I very much agreed with my noble friend Lord Carr when he suggested that we should think very carefully about this so that we get the right form of words and so that, if we do not use the word "promote", we shall at any rate encourage industrial democracy in the various subsidiaries while leaving it to them to work it out for themselves so as to get the best advantage, for I am absolutely certain that it will come and that it should come. We need it just as much all pulling together in a large industrial company as one does in a cricket eleven or something like that.
Lord STRABOLGI: I suggest that this may be a good moment to have a break for dinner and to take other Business.
I suggest that, subject to the other Business being completed, the Committee should reassemble at eight o'clock. I beg to move that the House do now resume.
House resumed.

HEALTH SERVICES BILL
Brought from the Commons; read 1a, and to be printed.

LOCAL GOVERNMENT (MISCELLANEOUS PROVISIONS) BILL
7.12 p.m.
The PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk): My Lords, I beg to move that the Commons Reason for disagreeing to one of the Lords Amendments be now considered.
Moved, that the Commons Reason for disagreeing to one of the Lords Amendments be now considered.—(Baroness Birk.)

LORDS AMENDMENT
[No. 1]
After Clause 6 insert the following new clause:
Trading near Highways
.—(1) No person (other than a person selling, offering or exposing for sale or depositing for sale any foods, goods, provisions, articles or things at any market or fair for which a toll, stallage or rent is payable) shall use any shed, hut, shelter, booth, shop, stall or other erection whether on wheels or not or any vehicle or any container used with or without a stall on the verge or lay-by of any road to which this section applies or on any land adjacent to and within 15 yards of such verge, lay-by or road for the purpose of selling, offering, depositing or exposing for sale any food, goods, provisions, articles or things whatsoever other than newspapers.
(2) If any person contravenes the provisions of this section he shall be liable to a fine not exceeding fifty pounds and to a daily fine not exceeding five pounds.
(3)

(a) This section applies to roads of any of the following descriptions—

(i) all trunk roads and roads which are classified as principal roads by the Secretary of State under the Local Government Act 1966;

(ii) any other county road, or part of a county road to which the highway authority may by order apply this section.

(b) Before making an order under this sub section the highway authority shall cause to be published once in each of two successive weeks in a local newspaper circulating in the locality in which the road is situated, a notice stating the general effect of the intended order and stating that within a period specified in the notice (not being less than twenty-eight days after the first publication of the notice) any person may object to the application by sending notice of his objection and of the grounds thereof to the highway authority.

(c) If, before the expiration of the period specified in the notice, any objection to the application is received by the highway authority,
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the highway authority shall consider any such objection and shall afford to any objector an opportunity of being heard by the highway authority before making the order.

(4) Nothing in this section shall apply to—

(a) any shed, hut, shelter, booth, shop, stall or other erection or any vehicle placed on private property by or with the consent of the owner of such property and with the permission of the highway authority;

(b) any building erected or work constructed with the consent of the Secretary of State in pursuance of section 194 of the Law of Property Act 1925 or of any other statutory provision or any scheme made pursuant to a statute;

(c) the sale of food, goods, provisions, articles or things from a vehicle when in use solely for the purpose of itinerant trading with the occupants of the premises adjoining any verge or land referred to in subsection (1) of this section;

(d) the sale of food, goods, provisions, articles or things from any premises used as a shop or as a petrol filling station pursuant to a permission granted or deemed to have been granted under the provisions of the Town and Country Planning Act 1971 or any order or regulation made thereunder or in respect of which an enforcement notice cannot be served under section 87 of the Town and Country Planning Act 1971 by virtue of subsection (3) of that section; or

(e) the sale by the occupier of land used for agriculture or horticulture, and from such land, of the produce thereof, unless in relation to any particular location on such land a magistrates' court on the complaint of the highway authority under section 43 of the Magistrates' Courts Act 1952 determines because of the use thereof for the purpose of such sale would adversely affect the safety of persons using the adjoining road that the exemption conferred by this paragraph shall not apply to that location or that the said exemption shall not apply until any condition imposed by the court in relation to access to or facilities for the parking of the vehicles of persons likely to frequent the said location in connection with such sale has been complied with.

(5)

(a) In giving their permission under paragraph (a) of subsection (4) of this section the highway authority may attach thereto such terms and conditions as they think fit.

(b) Where an application is made to a highway authority for a permission under paragraph (a) of subsection (4) of this section then unless within twenty-eight days from the date of the receipt of the application the highway authority give notice to the applicant of their decision on the application the provisions of paragraph (c) of this subsection shall apply in relation to the application as if the highway authority had refused to grant the permission applied for.

(c) Any person aggrieved by the refusal of the highway authority to grant permission under paragraph (a) of subsection (4) of this section or by the terms and conditions attached thereto

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may appeal to a magistrates' court and on any such appeal, the court may—

(i) if the appeal was against a refusal by order direct the highway authority to withdraw such refusal and to issue the permission for which application was made;

(ii) if the appeal was against the imposition of terms or conditions direct that the permission shall as specified in the direction, have effect either unconditionally or subject to such modified terms and conditions as may be so specified.

(d) Any breach of any terms and conditions imposed by the highway authority under paragraph (a) of this subsection shall be deemed as regards liability to a fine equivalent to a contravention of the provisions of this section.

(6) In this section—

(a) the expression "container" includes any basket, pail, tray, package or receptacle of any kind whether open or closed;

(b) the expression "private property" does not include common land or unenclosed moorland;

(c) the expression "vehicle" means a vehicle of any description drawn or propelled along roads whether by animal or mechanical power.

[No. 2]
The Commons disagreed to this Amendment for the following Reason:—
Because so far as the aims of the amendment are desirable, they are adequately secured by existing general legislation.

COMMONS AMENDMENTS
[No. 3]
After Clause 6, insert the following new clause:
Control of road-side sales.
.—(1) If a highway authority considers that, for the purpose of avoiding danger on or facilitating the passage of traffic over a highway for which it is the highway authority, it is appropriate to make an order under this subsection in respect of the highway, the authority may make an order (hereafter in this section referred to as a "control order") specifying the highway and providing that, subject to subsection (5) of this section—

(a) no person shall sell anything on the highway or offer or expose anything for sale on the highway; and

(b) no person shall, for the purpose of selling anything or offering or exposing anything for sale on the highway or of attracting from users of the highway offers to buy anything, put, keep or use on the highway, or on land within fifteen metres from any part of the highway, any stall or similar structure or any container or vehicle.

(2) The Highway authority for a highway in respect of which a control order is in force may vary or revoke the order by a subsequent order.
(3) Section 84C(1) to (5) and (6) of the Road Traffic Regulation Act 1967 (which relate to the procedure for making orders under the provisions of that Act mentioned in subsections (1) and (5) of that section) shall have effect as if sub sections (1) and (2) of this section were included among those provisions.
(4) If a person contravenes a control order which is in force for a highway, the highway authority for the highway may by a notice served on him require him not to contravene the order after a date specified in the notice (which must not be before the expiration of the period of 7 days beginning with the date of service of the notice); and—

(a) if a person on whom a notice relating to a contravention of a control order is served in pursuance of this subsection contravenes the order after the expiration of that period, or causes, permits or procures another person to contravene it after the expiration of that period, he shall be guilty of an offence and liable on summary conviction to a fine not exceeding £50;

(b) if a contravention in respect of which a person is convicted of an offence in pursuance of the preceding paragraph is continued by him after the expiration of the period of 7 days beginning with the date of the conviction he shall, as respects each day on which the contravention is so continued, be guilty of a further offence and liable on summary convicton to a fine not exceeding £10.

(5) A control order does not apply—

(a) to anything done at premises used as a shop or petrol filling station either—

(i) in pursuance of planning permission granted or deemed to be granted under the Town and Country Planning Act 1971, or

(ii) in a case where the premises are, without such permission, lawfully used as a shop or petrol filling station, or

(iii) without prejudice to the generality of sub-paragraph (ii) above, in a case where by virtue of section 87 of that Act (which relates to enforcement notices) an enforcement notice in respect of that use of the premises cannot be served;

(b) to anything done at a market in respect of which tolls, stallages or rents are payable;

(c) to the sale, offer or exposure for sale of things from or on a vehicle which is used only for the purpose of itinerant trading with the occupiers of premises or which is used only for that purpose and for purposes other than trading;

(d) to such a vehicle as is mentioned in the preceding paragraph or to containers on the vehicle;

(e) to, or to containers used in connection with, the sale, offer or exposure for sale, by or on behalf of the occupier of land used for agriculture and on that land, of agricultural produce produced on that land;

(f) to the provision, in a lay-by situated on a highway, of facilities for the purchase of refreshments by persons travelling on the highway or on another highway near to the highway;

(g) to anything as respects which the control order provides that the order is not to apply to it.

In paragraph (e) of this subsection "agriculture" and "agricultural" have the same meanings as in the Agriculture Act 1947.
(6) References in the preceding provisions of this section to a control order are, in the case of a control order which has been varied in pursuance of subsection (2) of this section, references to the order as so varied.)
[No. 4]
Page 40, line 22, leave out ("6") and insert ("7").
Baroness BIRK: My Lords, I beg to move that the House doth not insist on their Amendment No. 1 to which the Commons have disagreed for the Reason numbered 2 but propose Amendments Nos. 3 and 4 in lieu thereof.
Your Lordships will no doubt remember that when this Bill was before us at Report stage a new clause was added which had as its objective the control of roadside trading in England and Wales. I do not think there is any need for me to detain the House with a detailed explanation of the clause as it was fully debated at that stage, and earlier during Committee, but it may be of some help to the House if I summarise briefly its main aspects.
The clause which was added on Report would, broadly speaking, prohibit the sale of food and articles on the verges and lay-bys of all trunk and principal roads in England and Wales, and enable highway authorities, by order, to prohibit such sales on other roads. Although certain produce and premises would be exempt from control the ban would apply automatically and extend for a distance of 15 yards on either side of the road.
I need not remind the House that the Government found the clause unacceptable. There were two main reasons for this. The clause contained no element of discretion—it would have imposed a blanket ban on roadside trading on all major roads in the country whether or not a problem existed to be dealt with, irrespective of the wishes of the local authority. Secondly, it would have had a detrimental effect on the provision of refreshments for travellers, and particularly for lorry drivers.
The noble Viscount, Lord Amory, and the noble Baroness, Lady Young, described in some detail the sort of trading and their ensuing problems with which the clause was intended to deal and the use made by local authorities of their local Act powers. I agree that certain types of roadside trading need some measure of control. There is the prospect of litter;
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there is also—and this was stressed during the debate—a danger to road users if trading is completely unfettered on roads which are not suitable for such activities. The roads to the coast in the summer are obvious examples.
Where we differ is in the means by which control is to be achieved. We have, as was promised in the other place, had another look at the matter to see how far the objections I have mentioned can be overcome. When this was pressed in the other place, my honourable friend said that he would look at it during the Recess and that, both as a result of the proceedings in this House and of what was said in the other place at the time, he would consider it very carefully to see whether it would be possible to find some means of meeting what was said by noble Lords opposite and the view that the Government took at the time.
The new Amendments before the House are the result of our consideration of all the facets of this problem. The most notable feature of the proposed new clause is, I think, that it has a much more reasonable application than that moved by noble Lords opposite. Discretion to apply the clause lies with the highway authority. If the authority decide that a trading activity on a particular stretch of road is causing problems, they may make an order prohibiting the sale of goods on a length of road specified in the order. But first they must advertise their proposals and consider representations in the same manner as if the control order had been made under the Road Traffic Regulation Act 1967. A control order may not apply to certain people who we believe have a right to be exempted—the farmer selling produce from his land adjoining the road, the itinerant trader, and people running mobile canteens and similar structures catering for lorry drivers and other road users, provided—and this is very important—that they trade in a layby.
The clause is not perfect: no attempt to regulate so diverse an activity as roadside trading could be. We have to consider the interests of road users, who may legitimately require both refreshment from time to time and safe roads, and those of local people who resent litter deposited by travellers through their area. The clause is an honest attempt to deal with

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these various requirements, and to prevent the need for each local authority which needs powers to restrict roadside trading from seeking them in local Bills. As such, it is squarely in line with the principles lying behind the whole Bill. I hope the House will agree that the procedure set out in the clause provides the best possible solution to a most difficult problem, and I commend it to the House. In moving the Amendment, I should add that the second Amendment is entirely consequential. I beg to move.
Moved, That the House doth not insist on their Amendment No. 1 to which the Commons have disagreed for the Reason numbered 2.—(Baroness Birk.)
Viscount AMORY: My Lords, we are sorry that the Commons could not agree with the new clause which was inserted at the Report stage. We recognise that the new clause which the noble Baroness has just introduced to us has been put forward as a compromise attempt to meet some of the objections that were found to the clause that was added to the Bill by this House. We appreciate the efforts of the noble Baroness to find a solution which would be acceptable to the Government and to the local authority associations. The Association of County Councils has carefully considered and discussed with officials in the Department of the noble Baroness the proposed new clause, but after doing so the association concludes that its members would feel that the compromise which is now suggested would not work very well.
Three of the reasons for this conclusion are as follows: First, that the clause does not apply automatically to trunk and principal roads, and a doubt is felt whether the Department of Transport, as the highway authority, would be active in applying the provisions to specified trunk roads. Secondly, doubts are felt about the period proposed before notices take effect, which it is felt would be apt to stultify the object because of the relatively itinerant nature of many traders. Thirdly, the exemption for the provision of refreshment in lay-bys is felt to be fairly loosely drawn.
There are other more technical doubts and objections with which I need not trouble your Lordships. We realise that it is too late now to suggest Amendments
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to the new clause which the noble Baroness has introduced. If therefore the choice is between the proposed compromise clause and no clause, then the Association of County Councils believes that its members would reluctantly prefer no clause, which would leave those authorities which are in a position to do so, to rely on the better drafted—as we think—local Acts until 1984 and it would hope thereafter that such of these local provisions as have been found useful may then be re-enacted.
I am sorry to be so unwelcoming to the new clause put forward by the noble Baroness, as I know that she hoped that it might provide a bridge. I rather hope that when the noble Baroness realises that the clause she is putting forward in the hopes of getting agreement will not succeed in that object, she might, as it no longer achieves the aim, perhaps be inclined to withdraw it. But if she feels that she cannot do that, then my noble friends and I must make it clear that with deep regret we cannot welcome the clause which she has put forward.
7.23 p.m.
Baroness YOUNG: My Lords, I should like to support my noble friend Lord Amory in this matter. I do not wish in any way to repeat the arguments he has put so lucidly, nor do I wish in any way to seem ungrateful about the Bill. My first reason for speaking at all is to say that we on this side of the House wish to acknowledge that in our experience of this whole Parliament this is the first Bill which has come back to us having only one Amendment which has not been accepted by another place. We are very grateful for this and we acknowledge it. We acknowledge also that in the case of the one Amendment which they have felt unable to accept the Government have produced a compromise Amendment. I should like to acknowledge our gratitude for that, and we hope that we on this side of the House have been able to make this a better Bill. I want to make that quite clear at the beginning.
With regard to the Amendment which we are now discussing, I should like to ask the noble Baroness, Lady Birk—who I know has taken a great personal interest and considerable trouble in this matter—whether she would consider withdrawing

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the compromise Amendment and reverting to the status quo before the Bill was amended at all? I believe that this is the wish of the Association of County Councils which first raised this matter and which recognises the difficulty in which the Government have found themselves over this Amendment, but which feels that the problem that it is designed to meet would be better dealt with by the legislation as it is, without the compromise Amendment. I do not know whether this is possible, but I should like to press this suggestion upon the noble Baroness. In doing so I hope that she will realise that this is not done in any critical or carping spirit, because I am most grateful for the acceptance of our Amendments by another place.
Lord LEATHERLAND: My Lords, I should not like my noble friend to feel that she has no support at all in the House for the alternative Amendment which she is commending to your Lordships. Undoubtedly there is a grave danger arising from traders who park alongside and on our main roads. The county council of which I was a member took powers many years ago to deal with this problem. One respect in which I prefer the Amendment now presented to the original Amendment incorporated in the Bill is that it gives more power to the local authorities. We are always talking in your Lordships' House about giving local authorities more power. This proposal gives them an option. They are allowed to decide whether or not they want to introduce these controls.
With regard to the suggested serving of refreshments in lay-bys, I am sorry to see that this was objected to by the noble Viscount, Lord Amory, because there are many people who use the roads by both day and night, long-distance lorry drivers among them, who would welcome the opportunity of having a "hot dog" stall or perhaps something a little more elaborate for a meal in some of the lay-bys, where they are perfectly safe and where the drivers can pull up in the course of a long journey. I notice—and it is well in keeping with the times—that whereas the original Conservative Amendment used the old-fashioned expression "15 yards", we with our more modern outlook have substituted "15 metres" in the alternative Amendment. I hope that the Amendment put forward by my noble friend will be adopted.
Baroness BIRK: My Lords, I am grateful to the noble Viscount and to the noble Baroness for objecting more in sorrow than in anger over this matter, and I am grateful, too, for their appreciative remarks, in particular to the noble Baroness, Lady Young, for her comment on the Bill, with which I entirely agree; it left this House a very much better Bill. I was remarking to myself today that it is perfectly true that all the Amendments which we passed between us were accepted by the other place, except this one about which your Lordships will remember I had various misgivings myself. The noble Viscount mentioned—
Viscount AMORY: My Lords, I should like to intervene only to assure the noble Baroness that I had thought that as I was speaking only on this new clause I perhaps would not be able to say how much I would have agreed with what my noble friend has since said. The labours in this House have greatly improved the Bill which as a whole will be greatly welcomed by the local authorities.
Baroness BIRK: My Lords, I thank the noble Viscount very much for his remark. In fact I had taken it for granted that that was what he intended to say. He raised three points. I was sorry that he found that he had to say that it was a compromise which would not work very well. I do not wish to go through all the points raised in the previous debate, but I felt that in the circumstances it is an extremely good compromise. It has been rather like an occasion where, having managed finally to get both parties to the altar, they now seem to be splitting up even before the marriage has taken place, which is a great pity.
The noble Viscount mentioned, first, the problems of the roads—that this would not apply automatically. It will be for the Secretary of State for Transport to make orders in respect of trunk roads, and this is unavoidable since the orders are for the purpose of "avoiding danger or facilitating the passage of traffic" on highways, which is their whole purpose. Therefore they must be made by the highway authorities, and the highway authority for trunk roads is, as we all know, the Secretary of State. Nevertheless it will be for county councils which face the problem of roadside trading to persuade

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the regional controllers of the Department of Transport that an order should be made. I do not think that there is any great difficulty about this.
The regional controllers are extremely concerned about road safety, about the unobstructed passage of traffic and about the avoidance of nuisance on trunk roads. If a county can demonstrate their problem—and I think they are all agreed that there is a need to bring in this sort of banning and orders—and intend to make control orders covering their principal roads, it is difficult to imagine them holding out against making an order for trunk roads. I believe that is so, and the power in these matters, the pressure from a county council, can be extremely strong. I appreciate the point made by the noble Viscount that in this context there is a great deal to do.
On his second point, concerning the seven days' notice that there must be, I think we are all agreed that some notice has to be given to somebody who contravenes the control order, because unless one has an enormous number of notices all over the place there will be no way of knowing that a control is in operation, and festooning the roads with signs would bring us up against further problems and we should probably need another Act in order to do away with that. This really is in the nature of being a red herring. The powers are needed to give authorities the ability to tell traders to move on, and if they do not do so they will be prosecuted. It is not, therefore, a question of whether they trade on one day or seven days. One must be just in this and give people the opportunity. The ability to do this is provided by either form of legislation. The really determined offenders, those who are prepared to receive a notice, will, seven days later, become liable to a £50 fine and, seven days after that, to a daily fine of £10; and if they still want to continue to trade, I do not think these provisions will deter them.
Incidentally, in the clause moved by the noble Viscount, if I remember, the daily fine did not exceed £5. We have in fact increased it so it is not so lucrative to do this. His third point I think was the definition of the word "refreshments". It is true that it is difficult to define it more closely, but I think that it simply means
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things to eat and drink. I do not think that selling clothes in a layby would pass under the definition of "refreshments". I think it must be pointed out that this exemption applies to facilities for the purchase of refreshments in laybys only, and if this cannot be used for that then one could ask well what are the uses for laybys apart from cars stopping there, where they often stop, and enjoy their own refreshments. It is an opportunity for a rest, for stretching one's legs and occasional car repairs, but also for the purchase of drinks or snacks.
It would be quite wrong to ignore the needs of lorry drivers or to think that their case is overstated, and noble Lords will remember that when we discussed this in the earlier passage of the Bill, that was one of the points I kept stressing, because there has been a reduction in the number of roadside cafes and a tendency for former cafes to move more "up market" to cater primarily for the more profitable trade provided by motorists. By making this exemption it would ensure that mobile stalls in laybys could continue to provide this service which lorry drivers and other travellers need and which it seems unreasonable to deny.
Even so, taking the noble Viscount's argument to the ultimate, it would in the last analysis be for the courts to decide if there were to be a particularly doubtful interpretation. When the noble Viscount says that it would be better to leave this to local Acts, I believe we are all agreed that the purpose of drawing these together in this Miscellaneous Provisions Bill was in order to prevent the necessity of doing that, which is not only time-consuming for Parliament, but is also an extremely expensive and very lengthy and elaborate process for local authorities, and I do not think that this is the way to tackle this particular problem.
I do not think that it would answer the question. I entirely agree with my noble friend Lord Leatherland who pointed out that people stress the need and the right of local authorities to demand autonomy. The right way to do it and to give them the power that he described is by giving them the discretion which is covered in this clause. That is preferable on those grounds alone to the clause which was originally moved by the noble Viscount. While I appreciate that the noble Viscount

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and the noble Baroness who are moving their original clause have not got exactly what they want and the Association of County Councils is not entirely happy with it, I should have thought, frankly, that a piece of cake of this size was better than no cake at all. If I may say so, I think they would be very misguided to want to return to the previous position when we have taken such trouble and were indeed so convinced by so many of their arguments, by the wide desire in various parts of the country for some form of control, that we have now brought forward this Amendment in order to provide what I believe is exactly what was being asked for both at Committee and Report stage in this House. Therefore, I tell the Committee that I must continue to commend the Amendment to the House and I hope that the House will accept it.

COUNTER-INFLATION (PRICE CODE) ORDER 1976
7.37 p.m.
Lord ORAM Lord ORAM rose to move, That the Counter-Inflation (Price Code) Order 1976, laid before the House on 29th July, be approved. The noble Lord said: My Lords, this is an order to approve the radical revision of the Price Code, which came into operation on 1st August, for the period to July of next year.
The Government's policies for this second year of the attack on inflation were set out in two White Papers published at the end of June. These outline the strategy by which we shall build on the success achieved in the twelve months since July 1975. We were then facing an annual inflation rate which approached 27 per cent. thanks to the response from the trade union movement, and from millions of ordinary wage and salary earners, that appalling figure has been virtually halved. But the present rate of inflation is still too high and must come down if this country is to maintain its competitive position in the world.
My Lords, the Price Code is not the main or the only instrument by which this attack on inflation is to be pressed forward through the next ten months. My right honourable friend the Chancellor
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of the Exchequer has spoken more fully on several occasions about the economic and monetary policies which were summarised in the White Papers. Public expenditure is being strictly controlled. Most important of all, within the Social Contract, a second year of pay restraint has been recommended by the TUC to their members. Wage earners have shown themselves prepared to moderate their demands so as to hold down industry's costs and leave resources free for new productive investment.
It is by the cumulative effect of all these measures that the rate of increase in prices must be halted, rather than by a squeeze on industry's profit margins alone. The Government have made it abundantly clear that we are supporters of the mixed economy. We have no vendetta against profits which are fairly earned and responsibly applied to improving this nation's economic infrastructure and expanding its productive capacity. In the last resort, it is out of profits that the new investment and new jobs we want so badly will come.
The Price Code has therefore been modified, quite deliberately, to halt—and indeed reverse—the erosion of profit margins which would result if blanket price controls were applied too rigorously and insensitively. The purpose of the changes was summarised in the White Paper Modifications to the Price Code which was presented to Parliament by my right honourable friend the Secretary of State for Prices and Consumer Protection. The changes are to
"permit British industry to raise the funds that are needed to finance a higher level of activity, to increase employment and to instil the confidence needed to invest for the future".
The Price Code is a lengthy document and I do not think your Lordships would thank me for taking you through 153 paragraphs, point by point. I propose to concentrate on the three main ways in which the new Code differs from the Code which preceded it. First, investment. There is general agreement that the priority for the immediate future must be to modernise, re-equip and expand the manufacturing base of British industry so as to be ready to respond to growing demand in export markets. The former Price Code contained a special relief for investing firms. They were free to widen

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Profit margins, to take account of a proportion of their investment expenditure on plant and machinery. In the new Code, the value of the investment relief has been more than doubled—from 20 per cent. to 50 per cent. of qualifying expenditure. In addition, distributors will qualify for equivalent relief in respect of expenditure on the construction of shops.
The new Price Code has also been amended so that its principles approximate more nearly than those of the old Code to the principles of current cost accounting. As Sir Francis Sandilands' Committee has ably demonstrated, the conventions of historic cost accounting are inadequate in a period of rapid inflation. A firm may seem to be pursuing a normal prudent depreciation policy but will nevertheless find when a machine is scrapped that the accumulated depreciation is inadequate to meet its replacement cost. Similarly, when raw material prices are rising, the returns generated from current sales must be sufficient to allow for the replacement of stocks at current prices.
The new Price Code moves some way towards recognising the calculation of costs on a replacement cost basis. This is a technical matter, but it is vitally important because all the various Price Code régimes—both the allowable cost rules and the net profit controls—boil down to a calculation of the profit margin that remains when costs have been met. So it is very important that costs should not be understated.
Under paragraph 41 of the new Code, firms which have revalued their capital assets for the purpose of their own accounts may calculate depreciation against that value. Alternatively, if they have not undertaken a revaluation the cost of depreciation on a historic cost basis may be marked up by 40 per cent. Firms will also be able to use the latest purchase price for materials when they calculate their current costs. This is in paragraph 55. And they will be free under paragraph 82 to disregard most of the paper profits which arise from stock appreciation, when they see how they stand under the profit ceilings in the Price Code.
The former Code had a rule that if costs fell, prices should be reduced proportionately. In many cases, this still applies. But the Government wished
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to take account also of the criticism that the rule might discourage firms from cutting costs, whether by making a more productive use of their resources or by expanding output and thus spreading overheads more thinly. In paragraphs 29, 30 and 53 the new Code therefore introduces a totally new set of reliefs. In future, this sort of saving in overhead costs may be split fifty-fifty. Half must go to hold prices, but half can be kept to improve profits. Savings in fuel costs over and above the cost per unit of output before 1st August may be kept in full. For labour costs and the cost of raw materials, the approach of the old Code will continue. Any reduction in costs per unit of output must be passed into prices. But we have dropped the old "productivity deduction" under which firms had to absorb an additional slice of any increase in labour costs.
The profit margins which firms can aim at under the new Code—by applying these new provisions and others which I have not mentioned—should be significantly more favourable than they would have been if we had allowed the old Code to run on unchanged. That is obvious. What is much less easy—indeed impossible—is to say precisely what difference the order before your Lordships will make to profits and prices. We are dealing with the period up to July 1977, and over that timescale the view taken by the Government's advisers is that the market itself will be the main constraint on the rate at which firms will be able to increase prices on the home market. This is true, in particular, of the distribution sector.
The Government have been criticised for the forecast that the effect of the Price Code changes could be to increase the Retail Price Index by about 1 per cent. over 12 months. A lot of people have done a lot of calculations to show that if every firm raised every price to the maximum permitted under the Code then the aggregate effect would be very much more. But that is a completely unreal exercise. There will be all sorts of factors operating on prices over the next year, including both internal and external cost increases. It is the Government's job to give Parliament and the public our best assessment of what will actually happen to the economy over that period, subject to all the uncertainties and constraints of real life. Within these conditions, I must

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say again that the difference made by Price Code changes is relatively small. One per cent. is not a precise prediction; it is a broad statement to the effect that the Price Code changes in themselves will have little bearing on the aggregate movement of prices in the year ahead. On the other hand, the changes will provide significant headroom for the rebuilding of company profits. We are confident that they will have—indeed have already had—an immediate and positive effect on industrial confidence and on firms' willingness to invest.
Since this Government first introduced the investment relief, it has been closely monitored by the Price Commission against actual investment. In the same way, the Commission will keep careful watch on the new reliefs introduced into the new Code. It is essential for public confidence that higher prices claimed under the Price Code should be justified and that reliefs should be applied to their proper objectives.
My Lords, I have said that this order covers the period to next July. This debate is not, perhaps, the appropriate place to look beyond that date. It is possible that the present Price Code Order will be the last. In the absence of new legislation, the powers to enforce a Price Code will expire at the end of July 1977, and the Government now have to consider very carefully the form of prices policy which should succeed them. Meanwhile, for the remaining period of the current and second year of pay restraint the Price Code remains an essential buttress to our counter-inflation policies. In its revised form it should offer no obstacle to the rebuilding of industry's profit margins where funds are needed for industrial growth and modernisation. Many criticisms of minor matters in the old Code, and in the procedural requirements, have also been met in this new order, and therefore I hope it now obtain your Lordships' approval. I beg to move.
Moved, That the Counter-Inflation (Price Code) Order 1976, laid before the House on 29th July, be approved.—(Lord Oram.)
7.50 p.m.
Lord ELTON: My Lords, this seems to be a pretty thick order to introduce into a pretty thin House. I say "thick" because I am told that the volume of
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explanatory material which accompanies it from official and non-official sources has to be weighed rather than counted in numbers of pages. That is one of the reservations many of us have about the scheme.
Of course one recognises the good intentions of the Government, and that they are trying to achieve the objectives which we hope they will achieve. I rather doubt whether the sweeping benefits which the noble Lord pinned in expectation to this infant Atlas will materialise in regard to the industrial sector. That was the point he made at the beginning of his speech; and towards the end he noted that the effect on the RPI was likely to be marginal. I note the expectation of an increase in profits and the hope that it will contribute to a return of investment confidence, but I cannot help having a nagging doubt in my mind that this conclusion has been arrived at without due consideration of the explosion in minimum lending rate which is now with us, or, indeed, of a number of other costs which have been sprung quite lately upon the sector of the economy to which the noble Lord refers, notably the increase in the National Insurance contribution next July.
In that connection I would say that it is not yet clear to us whether this increase is to be devoted to increasing National Insurance benefits or not. It is widely assumed that it will not be, and indeed that it cannot be since it is really a Treasury device to raise revenue; and I must say in parenthesis that the evasion of the point when it was raised by my right honourable friend in another place by the Under-Secretary of State at column 200 of Monday's Hansard does rather endorse that view. If it is not to be so devoted, could Her Majesty's Government assure us that these will be allowable costs for manufacturers?
I think one ought to give cautious approval where one can, and I can claim no expertise in connection with these very sophisticated accounting methods; but it seems to me that there is an element of commonsense that should be welcomed in the change to replacement cost basis when calculating the value of stocks and their replacement for investment allowances. Whatever answer the noble Lord may have to this query about National Insurance benefits, I wonder whether the

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Minister accepts that such increases can only be set against net profit margins by distributors, and that the gross profit margin to which they have to work is pegged in a way that may have been acceptable in 1973 but bears little relation to conditions that have evolved since February 1974.
It seems to me that the retailer is rather in the position of somebody exploring a seaside cave when the tide is coming in. That is not a perfect illustration; but the ceiling is pegged and the gross margin is allowed to rise to 110 per cent. of the level of the reference year. However, the emergency rescue clause is triggered only when the retailer's net profit margin has sunk to 80 per cent. of the reference year. As I say, I am somewhat of an ingénu in these matters, but it seems to me very unlikely that you can recover 20 per cent. of net by an increase of 10 per cent. of gross in a time of galloping inflation.
I had intended to remind your Lordships of the remarks made by the Prime Minister recently, but the noble Lord, Lord Oram, has been kind enough to repeat them to us. He said that businesses should be allowed to be profitable. That may be tantamount to a Bishop saying that a layman should be allowed to sin. But we must, I am sure, believe that he intended it. I hope the noble Lord will take that in good part, because it is a matter of great importance. It seems to me that in such a situation as I have outlined, where there is this trap between the gross and the net margin, there is a great danger that the small businessman and indeed the larger retailer is not going to be profitable. For instance, we are told, in anticipation of an eager welcome, that investment allowances will be increased when it comes to building shops.
I wonder whether the noble Lord is aware of how many shopkeepers are clinging desperately to existing premises rather than planning to throw up new ones. There are exceptions, of course, but I hope the noble Lord will consider the position of the retail trade, upon which I have concentrated my remarks during the period of the operation of this order. The noble Lord has told us that it will run perhaps, finally, to next year. That may be the end of the road for this method
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of trying to control the very dangerous situation in which we are, but I do not think it is likely to be sufficient to wait until the end of that period in order to consider necessary adjustments, not only in the light of existing sliding scales but also in the light of moving those scales themselves in relation to situations which have changed since the Act was passed in 1973.
I should like to raise one other small query with the noble Lord. I noticed in following the proceedings in another place that reference was made to a helpful inquiry made by the chairman of the Carroll group. I noticed that the Under-Secretary of State did not reply to that point. I have failed to achieve any means of discovering whether this has been put right by correspondence without my knowledge and, as the matter will not come before either House again, I would ask the noble Lord whether he would be kind enough to jog the memory of his right honourable friend in another place.
I have made some rather acid comments to a rather empty House, but I hope that your Lordships will see that while we are in sympathy with the aims and some of the methods the Government propose, we do not entertain the sanguine hopes of the noble Lord as to the results.
7.57 p.m.
Lord HARMAR-NICHOLLS: My Lords, I think one would admit at once that the Price Code change as regards the depreciation of stocks is a good thing and will be helpful. I do not want to say anything more about the Price Code than to emphasise what my noble friend has said. But I could not sit in silence and still have in mind the points that the noble Lord, Lord Oram, put in presenting the Price Code before he came to the Price Code itself, because if ever we have had an example of giving a little back with one hand and taking much more back with the other hand, we have it here. It may be that I am still looking at this through the eyes of another place, but I do not think we ought to allow the record to stand without some comments to balance what the noble Lord said when he was introducing this order.
What did he say? He said that the Government are bringing in this Price

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Code change because they believe in a mixed economy. They understand that profits are necessary and they want to support the making of profits so that we can get investment. If that is what the Government believe, why do they not do something about it? Everything they have done since taking Office has been tending to end the mixed economy. It is already 60/40 as regards central control, and if we get what is in the pipeline now the mixed economy will be almost at an end.
As regards profits, the Government should do something about them, because the tax levels at the moment, for any of us who are trying to run businesses with any profits, are such that it is a task which one simply cannot win. Furthermore, it is wrong to suggest that the Price Code changes will be a great advance, when they were thought up and put on paper before we had the increase in interest rates. You cannot borrow money now. You are doing very well if you can negotiate with the bank for 2 per cent. above the base rate, which means 17 per cent. on borrowed money in order to run your business in Germany, the rate is 3½ per cent., in Switzerland it is 2 per cent., in America it is 6½ per cent., and in Japan it is 5½ per cent., and the Government are asking our businessmen, particularly the small ones, to be successful when they are having to pay 17 per cent. in order to get the liquidity to run their businesses.
That is allowed to happen, yet the noble Lord, Lord Oram, speaking as the Government spokesman, says that he believes in people making profits and wants to encourage them. The noble Lord, Lord Oram, is introducing this very small improvement—and I accept that it is an improvement, and I have no doubt that it will have the applause of the whole House in order to get it into operation—but it could not stand alone, taking everything into account.
We have to pay the employment tax of £1,000 million for everybody whom we employ, but we have no return at all. Yet it was suggested that this very tiny, but acceptable, improvement is reflecting the point of view of a Government which believes in profits. I do not think that the Record should be allowed to stand with that unanswered, and that is what I have tried to deal with in these two minutes.
8.2 p.m.
Lord ORAM: My Lords, I do not think the House would welcome it if I attempted to follow the noble Lord, Lord Harmar-Nicholls, into a wide-ranging debate on the Government's economic policy, since we quite recently had an opportunity for that, but I would make one point. He doubted whether we believed in a mixed economy. I assure him that we do, and the approach of these changes in the Price Code is an illustration of that. Perhaps only a small part of the economy is affected, but it is an indication that we have the investment prospects of the private sector very much in mind, and that is why these changes have been introduced.
I thank the noble Lord, Lord Elton, for at least recognising that we have good intentions in these matters, just as I recognise that he has doubts. I also thank him for the general tone of his comments. Not surprisingly, he raised two important matters which have arisen since the Price Code changes came into effect; namely, the increase in the minimum lending rate, to which he made a brief reference, and the increase in the National Insurance contributions, to which he made a fuller reference. Perhaps I may comment briefly on his point about the minimum lending rate.
We believe that its effects will be relatively marginal, and it is all the more important that companies should be able to generate a substantial proportion of their investment funds from retained profits, which is one of the objectives of the changes in the Price Code. As an illustration of what I have in mind, when I say that I believe that the effects of the increase in interest rates will be relatively marginal, I would point out that in 1975 retained profits accounted for 68 per cent. of the sources of all capital funds, while bank borrowings accounted for only 9 per cent. Moreover, in any, case the new Code gives manufacturing and service companies the option to continue to treat interest charges as allowable costs for Price Code purposes.
Lord ELTON: My Lords, may I just intervene? Perhaps I waited too long. The noble Lord said that he thought the minimum lending rates would have a marginal effect. I am wondering what they would have a marginal effect on. Does he

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mean investment—that it is so low that it will not be reduced, or only marginally affected, or is he talking to the actual area of prices to which the Code is directed?—because I have to tell him that at the latest count retained profits are yielding something like 3 per cent. and there is every prospect of their becoming less, even in spite of this new Code. Therefore I felt, when the noble Lord said that, that with a 15 per cent. minimum lending rate the effects must be more than marginal.
Lord ORAM: I think that the figures which I gave of retained profits accounting for a major part of capital funds, and of the relatively small proportion that derived from bank borrowings, support my first point, that we expect, and are right to expect, that the effects will be relatively marginal.
May I now turn to the point which the noble Lord made rather more fully about National Insurance contributions? He asked for a certain assurance and I can give it to him. When the Chancellor announced the surcharge, he pointed out that National Insurance contributions are allowable for Price Code purposes, and the specific assurance I can give the noble Lord is that steps will be taken to ensure that the surcharge is allowable in the same way as the basic charges. I believe that that is the assurance he wants. I would also make this point, because it may not be properly appreciated, that the National Insurance surcharge does not come into operation until next April, while the Price Code phase with which we are now dealing ends in July. So that we are talking about a relatively small period. I am not saying that it is unimportant in that period, but there could he an assumption that we are talking about a period of a whole year, which is not the case.
Then the noble Lord, Lord Elton, went on to deal with the difficulties of distributors, and he was quite right in saying that in some respects they are not treated in quite the same way as manufacturing and service industries. But I would point out that many of the measures in this Price Code are designed to help the distributors, not just by an improvement in the safeguard, but also, for example, by the new stock relief, by the fact that investment
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relief is extended to shops, and by the fact that there is a higher depreciation possible; for example, on commercial vehicles. So it is not a completely blank picture, by any means, although I know from my own experience within the field of distribution that there are anxieties. I acknowledge that entirely. I think I have at least answered the main points which the noble Lord raised, and therefore I hope that the House—
Lord ELTON: My Lords, before the noble Lord sits down, he said that he recognises the anxieties, and I am delighted he has done that. But I asked him whether if he did recognise the anxieties, he would seek means of alleviating them in practical terms before the expiry of this order. If that is within his grasp, I think he ought to give that undertaking.
Lord ORAM: My Lords, how powerful I am in these matters is something that is in some doubt. But I indicated that in the forthcoming year the Government will need to apply their collective thinking to what follows the expiration of this Price Code.
Lord ELTON: My Lords, I am sorry to intervene again, but I am talking about what precedes it. Many people may go "bust", to put it crudely, before the Code expires, if it is not adjusted, and if we are right in our expectation of what it will do. If we prove to be right, I hope that the noble Lord will not allow his friends' political pride, or his own, to refuse to look that fact in the face and amend the Code as it goes on.
Lord ORAM: My Lords, several times since I have been in this House I have declared my own close association with the Co-operative movement, and I can assure the noble Lord, Lord Elton, therefore, that I have an ear to the ground so far as the problems of distributors are concerned; and, naturally, any influence that I can exercise will be on behalf of distributors, because of my own personal interest in that field. I merely say to the noble Lord, I hope he would not expect me to have a dramatic effect on that; but I will do what I can.

AIRCRAFT AND SHIPBUILDING INDUSTRIES BILL
8.11 p.m.
House again in Committee on Amendment No. 45.
Earl FERRERS: Before the dinner break we were in the middle of what I think most people would recognise as a very valuable discussion on industrial democracy, and in some ways it was a pity that the trend of the debate had to be interrupted. The noble Lord, Lord Mackie, said that in his view either the words "industrial democracy" as written in the Bill really ought to be defined, or some other kind of expression ought to be used, and I am bound to say that I, too, am of that opinion. So far as I am concerned, the remarks that I wish to make about this have absolutely no partisan feeling about them at all. If "industrial democracy" means anything, as my noble friend Lord Carr said, it must refer to all the people and, quite clearly, as it is put in the Bill at least, to that extent "industrial democracy" is not being used in that capacity.
When one puts in a phrase such as this it must mean something, and it must be interpreted in a certain way; and it is disturbing when the Minister of State says:
"Through consultation with our legal advisers, we have established that the phrase 'industrial democracy' does not as yet have a sufficiently clear meaning to be interpreted in a court of law. Therefore, to place a statutory duty for industrial democracy would be to impose an improper burden on the courts in requiring them to interpret it."—[Official Report, Commons, Standing Committee D, 13/1/76; col. 184.]
I think that is an absolutely understandable view and a very important one, because to put these words in the Bill as they are is bound to indicate that they are deserving of some interpretation and the Minister of State, in his own words, after taking advice says that this is not possible.
Viscount SIMON: May I interrupt the noble Lord for a moment, because I did not quite hear him. He said, "the Minister of State". When did he say it, and which Minister of State?
Earl FERRERS: It was Mr. Kaufmann, at col. 184 of Standing Committee Don 13th January.
Viscount SIMON: I am most grateful.
Earl FERRERS: The fact that he has said that this phrase is not interpretable in the strictest sense to me is an argument for saying we must find some other words, because they must be interpretable; and what I should like to suggest is that we should try to see what we mean by "industrial democracy". As I see it, there are two concepts here. On the one hand, if it means that a firm or a corporation or a body of people should consult those who are members of it, take into account the interests of those people involved in it and make them be participating in their organisation, then that, of course, is highly commendable, and I think nobody in any part of the House would say that a firm or a business will not work considerably better if those who are involved in all its work know what they are doing, feel that they are cared for and that they are properly participating in the success of the business.
On the other hand, of course, it may be the second alternative, that industrial democracy requires those who are involved in the business in fact to participate in the running of the business, to participate in the management of the business and to be elected to those positions of management. This would, of course, have a very different working, for this reason: if you are going to have on a board, as my noble friend said before the dinner break, what are normally described as worker directors, this may in some terms be highly democratic, but I think it poses one great problem. If it is to be wholly democratic they have to be elected by some means or other. Once they are elected, immediately there arises a conflict of loyalties. To whom are such people responsible? To the Board corporately, or to those who have elected them? And if it is that they are not responsible to those who have elected them, it may be asked, why, then, are they elected? Is the answer, to be responsible to the Board, as my noble friend said, and that those worker directors who are so elected to a Board must accept corporate responsibility? If so, and if you are not careful, inevitably they are going to be divorced from those who have elected them there.
There is no Party stuff whatsoever in this. This is merely how I see the concept

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of the difficulty: Once people are elected, to whom are they responsible? This in turn makes one think, "Is it right that a business of any description, whatever it is, should be managed solely by those who are elected or for those who are elected?" That leads one to say, "Well, what is the purpose of business?" The purpose of any business must surely be to run the business as successfully as possible for all those who are involved in it. Fundamentally, this means that you have to run it for the benefit of, essentially, those who consume, because if you have not got the consumers then you cannot sell your products.
In any business, and particularly in these two vast industries of shipbuilding and aerospace, there arc whole hosts of people involved. You have the people on the shop floor, you have the management people, you have the foremen, the technicians, the engineers, the naval architects, the solicitors, the accountants, those who sell abroad, those who sell in this country; each person is hugely dependent upon the others. Equally, you have those who manage the business, whose business is to run the finances, to try and organise and direct all the efforts of these people to a profitable conclusion.
I am bound to say that I find it difficult to think that if you are going to get industrial democracy operating in that second area which I have tried to describe, you will end up by being a producer-orientated organisation. Once you are a producer-orientated instead of a consumer-orientated organisation then, as I think I mentioned in my Second Reading speech when I quoted Sir Keith Joseph, you are well on the way to being crippled.
Lord MACKIE of BENSHIE: Would the noble Earl say that the Milk Marketing Board is an incompetent organisation? It is a wholly producer-elected body and it works. I think that the noble Earl is carrying the argument too far. Would he not agree that, after experience, we could well have worker elected directors but that it is too early to have them now?
Earl FERRERS: I quite agree with the noble Lord and in what I have said I have tried not to dispense entirely with the idea of worker elected directors. I
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was merely trying to point out the difficulty which may well come about if you write into a Statute something which is not absolutely crystal clear. There may well be examples of producer organisations which work effectively. The noble Lord, Lord Mackie of Benshie, has mentioned one example and I would say to him that, as he will readily realise, it is a quite unique example.
If one is to have this kind of democracy, which in itself may be desirable, it is essential to know exactly what it is that one is after. May I suggest with the greatest of respect that fundamentally a business must be run by those who are capable of running it for the people who are going to purchase. Once you have lost that fundamental aim you have lost the purpose of the business.
This does not mean that there are not many circumstances in which the participation of employees cannot fruitfully take place. I think that it can take place. There are many opportunities of this nature for people. I merely utter one word of warning. If you are to write into a Bill that you want industrial democracy you must be absolutely clear about what you mean by industrial democracy. I do not believe that the Bill makes this clear, and I hope that some method will be found of trying to discern whether it is participation by those who are involved that is required or whether it is the eventual and gradual running of the organisation for the benefit of those who are involved that is required. My fear is that it might end up by being the latter, which I do not believe would be for the benefit of either the organisation or those who are involved.
Viscount ST. DAVIDS: I am totally with the noble Earl in his remarks about producer and consumer orientated organisations. However, I think that the noble Earl missed a point which is very much in his favour. A producer orientated organisation can run in certain circumstances—that is, if the consumer is more or less captive. In the case of the Milk Marketing Board, all the people who buy milk are in this country; they cannot cross the Channel in order to buy their milk. However, there is nothing whatever to stop the consumers of ships or aircraft from buying them elsewhere.

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They are not in the same position. Surely, therefore, the example which was quoted to the noble Earl of the Milk Marketing Board is not quite fair in this context. The fact of the matter is that you can get away with a producer orientated organisation in the case of milk but not in the case of ships or aircraft.
Lord TREFGARNE: Like so many noble Lords who have spoken thus far, I am quite in the dark as to what industrial democracy means. If the Bill had just contained a few vague references to the term it might have passed unremarked, but my fears are raised by the references to the "relevant trade unions" in a subsequent part of the Bill. The Government's concept of industrial democracy seems to me to be just to consult a few of the work people. This has raised our fears; at least it has raised mine.
We shall be discussing the question of "relevant trade unions" in a later Amendment, but may I put it to the noble Lord that our fear is that industrial democracy, as he would have us imagine it, is not that at all; it is simply handing over power from one set of people, those who are presently charged with running these industries, to another set of people whose record is as yet untried. I hope that the noble Lord will be able to allay my fears in that respect at least.
The Earl of ONSLOW: I am sorry to intervene again during the Committee's debate on this subject, but what has struck me throughout the debate, and also when I re-read the Bill, is that the Bill says that it shall be the duty of each Corporation to promote this strong and organic industrial democracy. Then we read in subsection (10):
"Nothing in this section shall be construed as imposing upon either Corporation, directly or indirectly, any form of duty or liability enforceable by proceedings before any court".
If we have something written into an Act of Parliament, what on earth is the point of saying that it is unenforceable in any court? It seems to me to be meaningless.
8.27 p.m.
Lord MELCHETT: We have had a long and interesting, although sadly interrupted, debate and I am glad to have the chance at last to say a brief word on behalf of the Government. A couple of points
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have been raised. The noble Earl, Lord Onslow, has just raised one about the position of the courts in interpreting this phrase in the Bill. The noble Lord, Lord Trefgarne, raised another point about trade unions, which we shall come to in later Amendments. Therefore I will deal primarily with the two Amendments which we arc debating at this stage.
Before I explain the Government's view of industrial democracy, I should like to deal very briefly with what seems to me to be a specious argument, although it is one that several noble Lords have advanced during the course of the debate on these two Amendments: that is, as argued by noble Lords, that anything which cannot be precisely defined should not be included as part of the duties of the Corporations.
Leaving aside for one moment the question of legal interpretation, which, as I say, we shall come to, that does not seem to me to be an argument that is necessarily valid. There are a large number of concepts, many of which we would all agree are extremely valuable and desirable but which we would all have a great deal of difficulty in defining—and, indeed, many of which courts of law might have a great deal of difficulty in defining. Just because these things are difficult (and I do not think that they are difficult) to define, I do not believe that that is necessarily a reason for excluding them from a Bill. Nor I do think, just because they arc difficult to define, that they are necessarily either meaningless or useless.
It has been said on many occasions by Government spokesmen on this Bill that we see positive disadvantages in defining "industrial democracy". As my noble friend Lord Kirkhill said on an earlier Amendment, it is something which we see developing from the wishes and aspirations of those in the industry itself. We expect it to involve participation by employees in decision making at all levels, but in whatever form they decide is most appropriate. We sec it developing in a variety of ways, and progressively, over time. We do not want to suggest a definition prescribing a final form for industrial democracy which might inhibit its development to take account of the changing views of those actually working in the industry. While we do not want to put definitions

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into the Bill, I believe that "industrial democracy" is a phrase which is well understood in industry. It does not cover a single, narrow system of voting but a wide though recognisable range of industrial organisation and behaviour.
The noble Lord, Lord Carr—whom I see is not able to be with us for the end of the debate—spent some time going over the dictionary definitions of various words that his Amendment touched on. I would have to agree with my noble friend who spoke earlier in the debate and said that dictionary definitions were not really going to be much use to people on the shop floor, and therefore would suggest that they should not take up too much of your Lordships' time. Of course, democracy in a constitutional sense covers a wide range of forms and practices from constant referenda to representative chambers. Democracy applied within an industry similarly covers a range of concepts and possibilities, some of which may, of course, overlap, from co-operative ownership to thoroughgoing consultation with varying degrees of involvement or participation in management decisions at various levels in between. Industrial organisations in all the developed economies are bound to move in this direction, as they have done already in many countries and indeed within some enterprises in this country. I believe that all noble Lords agree that benevolent patriarchy is simply not enough in the late twentieth century.
Earl FERRERS: Benevolent what?
Lord MELCHETT: Patriarchy.
The Earl of ONSLOW: A patriarch, with the greatest respect to the noble Lord, is a gentleman with a long beard who lives in Istanbul and keeps the Greek Church in order.
Lord MELCHETT: I accept the noble Lord's correction of my pronuncuation.
If I lack political sophistication, as was alleged by noble Lords opposite when we were discussing the meaning of the word "efficiency" in Clause 2, I can at least see that people have reached a degree of social and educational sophistication at which they rightly feel that they have something to contribute to the way their
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enterprise is run. That is not, I believe, a Party matter, and I would entirely agree with the spirit in which the noble Earl, Lord Ferrers, introduced his remarks on the Amendment. And although we may disagree in your Lordships' Chamber about particular forms or even about names, I believe that all people of good will are now trying to encourage effective industrial democracy.
It seems to me that where the main difference, if there is a difference, lies between what my noble friend and I have been saying and what some other noble Lords have said in the course of the debate, is that we see as of fundamental importance the fact that what form industrial democracy takes should be left to the people involved. In fact, when noble Lords ask us to define precisely what we mean by industrial democracy what they are either consciously or unconsciously saying is: "You must lay down what form industrial democracy is to take in these particular industries at this particular time"—presumably in the Bill, where it will be enshrined in Statute law for all time. I simply do not see industrial democracy working like that. If that is a difference—and the noble Lord, Lord Mackie, is making noises which suggest that he and I at least would disagree on this—it is a fundamental difference in what we see as the industrial democracy involvement.
Lord MACKIE of BENSHIE: Would not the noble Lord perhaps agree that when the Government take an industry and support it with the money of all the people, perhaps the Government, representing all the people, ought to have some say in how the thing develops? It might even be irresponsible not to have some say.
Lord MELCHETT: Well, as I say, it reflects a fundamental difference in what we mean by industrial democracy. We quite firmly see that as something that must develop from the people working in the industries. The noble Lord mentioned that he was not entirely at one with the young Liberals on this matter. I am not sure to what extent the rest of his Party follow the younger members, but I suggest to him that on the whole this is something that the Liberal Party have tended to agree with—that industrial democracy must develop from the people actually

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involved and should not follow rigid formulations laid down by the Government or indeed the management of the industries concerned either.
I want to say a word about the expression "strong and organic" to which several noble Lords have drawn attention. I do not pretend for a moment that the words have any precise meaning, but the Government believe that they are important and useful because they underline that we are not talking about something imposed from outside, as I have said to the noble Lord, Lord Mackie, and we are not talking about something weak. We mean, and the phrase to us implies, something vigorous, something growing from within the organisation as part of its constitution and as part of its structure.
To turn to the actual Amendment which we have been discussing all this time and which was moved by the noble Viscount, Lord Simon, I would just make one brief comment to him. It seems to me that the effect of the Amendment is to narrow the duty placed on the Corporations because the Amendment specifies the form worker participation should take in these particular industries. I would, of course, expect industrial democracy to involve participation in the processes leading to management decisions, but it can also, as I have said in general terms, involve other forms of participation—for example participation in decision-taking itself. As my honourable and right honourable friends have explained frequently in another place and as I have repeated in the general debate tonight, we believe it is for those involved in shipbuilding and aerospace to decide which form of industrial democracy is most appropriate for their industries. The present wording in the Bill, therefore, has been carefully chosen to place a firm obligation on the new Corporations to promote industrial democracy, while leaving the greatest possible scope for those within the industries to determine what form this should take.
The Amendment moved by the noble Viscount, Lord Simon, would, I believe, reduce this flexibility, and I therefore do not believe that it would be wise to narrow the definition in the way he suggests.
8.36 p.m.
Lord HARMAR-NICHOLLS: The noble Lord has been arguing as though
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somebody had suggested that the words "industrial democracy" should be removed from the English language. That is not the situation. The Amendment is to remove them from the Bill. It would be perfectly all right to put them in the Explanatory Memorandum. It would be perfectly all right to explain when the Bill is being presented for somebody to operate that this is the general intention behind it. But if we are going to be responsible legislators, bearing in mind that other people have to suffer sometimes if they do not adhere to the words we put in our legislation, we ought not to put into an Act something that cannot be defined. The noble Lord tried very hard to produce a definition, and I would imagine that if anybody could do so it would be he; he is alert and he is with it. It is not a question of removing it from the language, but I believe it ought not to be put into the Bill.
Lord MELCHETT: I know it is not for me to lecture an experienced Parliamentarian like the noble Lord, Lord Harmar-Nicholls, but this illustrates one of the dangers of joining a debate having not heard the mover of the Amendment who made it quite clear that he was not moving the Amendment to delete these words but merely to seek an explanation from the Government as to what they thought they meant.
Lord HARMAR-NICHOLLS: That was very courteous, and I accept it, and the noble Lord was absolutely right. But if this is Parliament in Committee, it is not for Members of any House to adhere slavishly to what movers and seconders of Amendments have done. If in the process of discussing these things weaknesses are shown which could not have been foreseen by the movers and seconders, any Member has a duty to draw attention to this. All I am saying at this minute is that the noble Lord went to the Dispatch Box to answer arguments that I had heard, whatever somebody before that had said; and I am saying that his argument made it perfectly clear that neither he nor his colleagues know what these words mean.
The noble Lord said that what he thinks they mean is a desirable thing for people to keep in mind, and I do not disagree with that, but if that is the explanation—and he is the Minister giving it—the place

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for that is in the Explanatory Memorandum, not in the Bill itself. I say as a general proposition, quite apart from this one, that legislators ought never to put into Acts things which cannot be defined, because if that is done people are left to put their own interpretation on what is in the Act and this may be starting trouble. Some of us who have to run businesses know perfectly well that on occasions we have employees who are just as desirous as one is oneself to make a success of the business.
If they see in this that it is the duty of the Corporation to take into account and to promote industrial democracy, they can charge you with not promoting industrial democracy as they see it and that can be grounds for their being a little more awkward in terms of general production. What I am saying is that he has proved that it cannot be defined, in this Act or in any other, and words ought not to be put in which cannot be defined. They can be in an Explanatory Memorandum as a general proposition but not in an Act.
8.41 p.m.
Earl FERRERS: One thing still worries me, and I think it would worry a lot of people. These two industries are so sophisticated that it does not matter whether you are a person on the shop floor, a manager, a salesman or a member of the Board—each person is vitally important as an expert at his own particular job. I remember saying during the Second Reading debate that I thought there was every virtue in consultation but there was none in "Buggins' turn". All I meant by that was that, just in the same way as a pilot of an aeroplane has to be a highly trained and skilled person to fly that aeroplane, he can only do so if the people who have been involved in the electronics and the avionics and if the machine tool operators have been equally efficient in their way. Equally, the person who has been responsible for running the business has to be efficient, and in my humble opinion those people responsible for running the businesses must be chosen because of the qualities they possess for doing the job that they arc put in to do, which is to run the business.
The fear is that in the long term this concept of industrial democracy might well end by people being in particular
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positions in business, not because they are qualified to do the job but simply because they have been elected to do it. It is in that way that you become inward-looking and producer-orientated. I think that is the danger.
The Earl of ONSLOW: I should like to press the noble Lord, Lord Melchett, on this point. When replying to the mover and to other speeches on the subject of industrial democracy, he has gone to great lengths to say that it is what the workers want. I should like him to answer this question: If the workers want British aerospace and British shipyards to be denationalised, and this is democratic, will he give the Government's pledge that their wishes will he adhered to?
Lord REDESDALE: I shall be very brief, as the noble Lord knows I always am, but there are a few points I should like to raise. First, my noble friend Lord Carr of Hadley unfortunately has had to leave but he will, obviously, be reading the noble Lord's reply very carefully. My noble friend stated quite clearly that lie was not going to move this Amendment, which of course we shall not do. I should like to congratulate the noble Lord, Lord Melchett, on a masterly speech. I felt that not only was it a masterpiece as a speech, but it was a masterpiece of flexibility inasmuch as at the end of the day I do not think any of us were all that much wiser on some of these points. It was a fascinating speech and it was beautifully delivered.
There is another aspect which concerns me and I am sure the noble Lord may just answer this point in concluding the debate. I know that the noble Lord has been very careful tonight to get his words quoted hack to him correctly, and I should hate to get this wrong, although I am sure he will tell me if I have. He said that the people who work in the industry must decide —or words to that effect. This point was raised earlier and the noble Lord did not actually answer it then. In the aircraft industry, where there are large numbers of white collar workers, the proportion of people who are in the unions is not that large and the question really comes back to one of consultation, to which we shall be coming later. Surely it is not merely the unions concerned; it is all the people. I am sure that we

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shall all be grateful if the noble Lord will cover that point in somewhat greater detail.
Another point which has been raised is, that if industrial democracy is not defined then, as the Minister of State said, it could not be enforced. I listened carefully to what the noble Lord said and it seemed to me that on the one side we had the Red Queen saving, "Strong organic industrial democracy", and on the other side we had the Cheshire cat in the terms of the clause which says it is unenforceable, saying, "Which way?" I thought there was a slight inconsistency there.
Lord MELCHETT: In response to the noble Lords who have raised these points I would just say that they will very shortly he arising on Amendments and I did not feel it was my job to delay the Committee by making long speeches which I shall have to make again in a few minutes' time.
Viscount SIMON: We have had a long and interesting debate, interrupted by dinner. There is only one respect in which I really disagree with the noble Lord, Lord Melchett. I think he told the Committee that the mover of the Amendment had said that he did not want to remove these words but merely to probe. I think the noble Lord, Lord Carr, said he wanted to probe, but I want to remove these words for the reasons I have expressed. I think they are imprecise and, what is worse, they can lead to misunderstanding.
We have had a lot of discussion about what "industrial democracy" means. I think all of us in this Chamber have heard a lot of it in recent years, and we know broadly what it means. But in my view it is desirable to try to define it in some way, for the reasons I have explained. I found a splendid definition which was given by the Secretary of State in another place on 28th July of this year. It was mentioned by my noble friend Lord Lloyd of Kilgerran during the Second Reading debate in this House. What Mr. Varley said was:
"The honourable gentleman pretended not to know what it meant. The honourable gentleman says that we should tell him. It really means that we have to identify those who work in industry with the decision taking in their industries."
Strangely enough, I had not read those words, and I had not even heard them
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from the lips of my noble friend Lord Lloyd of Kilgerran when I wrote this Amendment; but it seems to me that I came pretty close to what the Minister said.
In my view that is all we need to say. The noble Lord, Lord Melchett, suggested that these words in some way limited the form in which this participation could take place. They certainly were not meant to, and if the noble Lord feels that the words are limiting, perhaps he can suggest some wider words. There was one phrase which I did not like very much. He said that it should be discussed in each industry or in each business, and that it should be finally settled "in the form they decide"—"they" being the workers. I think on consideration the noble Lord will agree that it is not the form they decide; it is the form that is agreed between the workers and the management. I entirely agree with him that there must be complete flexibility, and if I thought that the words I had suggested inhibited complete flexibility I would withdraw them at once and look for some others; but having found the support of Mr. Varley I think the words are pretty good.
In all other respects I want to say, for the benefit of noble Lords on my left, that I am far closer to the noble Lord, Lord Melchett, than they are. I think the Liberal Party and noble Lords opposite are aiming at exactly the same thing here. It is just a question of how we get it. I do not think it would be useful to press this Amendment today, but I hope that between now and the later stages of the Bill the Government will consider the wording. Wording does not mean much if we know what it means, but I think there is uncertainty about this.
Perhaps briefly I may mention something else to your Lordships. I was at a meeting in Paris last week, listening to some of the civil servants of the OECD, and I suddenly pricked up my ears when I heard them talking about "industrial democracy". I then discovered that this was a generic term for the democratic countries of Western Europe which were also industrialised. They were described as "industrial democracies", which shows that the words can convey completely different meanings. I feel really strongly that these words should be out. I agree that they are already in some Statutes, but I do not think it is too late to give them

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an honourable burial and to put something in their place. If we go on with them much longer we shall be landed with them for ever. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
8.50 p.m.
Viscount SIMON Viscount SIMON moved Amendment No. 47:
Page 5, line 12, at end insert ("incorporated in the United Kingdom".)
The noble Viscount said: This is a tiny point which has been brought to my notice. The clause requires the Corporations to ensure that the promotion of industrial democracy, or whatever words we put in, is undertaken by themselves and by their wholly owned subsidiaries. It has been called to my attention that one or two of those companies have wholly owned subsidiaries abroad. It has been suggested to me that in fact it is impracticable to ask them to promote this situation abroad in circumstances where the legal position may be quite different from the legal position in this country, and that therefore we should add after the words "wholly owned subsidiary" the words "incorporated in the United Kingdom". It is a fairly narrow point, but we feel we may be imposing on the Corporations a task which in fact it is impossible for them effectively to carry out. I beg to move.
Lord REDESDALE: I should like briefly to support what has just been said by the noble Viscount, Lord Simon. It seems to be quite impossible in certain countries to enforce something which is in any event somewhat difficult to define. It could cause a number of problems if these directives were put down where the legislation in that country was in contradiction to the ruling by the Corporation. Consequently, I support the noble Viscount.
The Earl of ONSLOW: I have one or two words to say on this Amendment. I think the Amendment is very clear in its intention, but it might be worth while taking some examples of this. If we developed this, as yet still undefined, concept of industrial democracy, and laid down in this country how it should work,
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and then tried to impose that pattern in, say, Germany, France or Holland, we should run up against the pattern of supervisory boards and worker electors which I think exists in those various countries. If some of these companies have a subsidiary in South Africa—and I think they do—we should be building up terrible trouble. By this, please do not let anybody take the impression that I am in any way sympathetic to or that I like apartheid. I do not, but that could present problems.
If there were a joint company in a Communist State, we would again run up against enormously complicated arrangements and difficulties. All I am doing is trying to identify some of the difficulties which could arise. I should like to hear the views of the noble Lord, Lord Winterbottom, on this particular subject.
Several noble Lords: Hear, hear!
Lord WINTERBOTTOM: I think those cheers are excessive in view of the size of the Amendment. May I say that we are talking about wholly owned subsidiaries which are in fact, I presume, separate local entities belonging to but being separate from the parent company. One thing has come out clearly from the discussions which have been going on for some little time on the subject of industrial democracy; that is, that industrial democracy can mean many things to all men. If I may paraphrase a statement by a judge of the American Supreme Court, and I am paraphrasing in order not to shock your Lordships, it is simply: I recognise an elephant when I see it but find it difficult to define. I think this is very true. We all know what we mean by industrial democracy, but it is difficult to define. Industrial democracy in an independent but wholly owned subsidiary in Germany will differ from a similar organisation in Saudi Arabia—and these are two real possibilities.
We believe that the concept of industrial democracy is sufficiently flexible to embrace various legal systems and various civilisations. If, as we hope, the British Aerospace companies and British Shipbuilders take a lead in this field in this country, their foreign subsidiaries should have the same opportunity. For these reasons, I hope that your Lordships will not accept the Amendment of the noble Viscount, Lord Simon.
Baroness WARD of NORTH TYNESIDE: I know that this discussion has been going on for a long time, but am I not right in thinking that this Government have appointed a committee on industrial democracy? I remember it, because I was so annoyed that they did not even put a woman on it. I am not a Women's Lib person, but I thought it really was ridiculous. I think the committee was appointed a few months ago, as we do not seem to understand what "industrial democracy" means in terms. So is it not possible now, for all of us interested in the subject, in these Amendments and so on, to go to that committee and ask it if it is ready to interpret the words "industrial democracy"? What on earth is the good of having such a committee, a very important committee with many important members on it, appointed by the Labour Government, if the Government keep on giving answers in the Chamber which do not seem to be very satisfactory? What is the good of appointing a committee if the Government try and interpret these words? Presumably the Government have to wait until they get a report from the Committee which will tell them about industrial democracy.
Lord TREFGARNE: I must say that the Government Front Bench seem to find the Amendment rather funny. I do not find it so. It is a serious and important Amendment. I hope the Government will consider the matter with rather more care than is apparent just now. As my noble friend Lord Onslow and the noble Viscount, Lord Simon, have said, this is an important matter. I should particularly like to emphasise the point that my noble friend Lord Onslow made about countries which have a different social order from ours. We may not approve of their social orders, but that is the situation in those countries, for now at least. For us to prejudge the issue and, in short, to be very patronising about the situation, is inappropriate. I hope that the noble Lord, Lord Winterbottom, will consider this matter a little more carefully than appears to have been the case thus far, and perhaps offer a more sympathetic acceptance of the Amendment.
Lord MACKIE of BENSHIE: Would
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the noble Lord care to change his illustration? Everybody recognises an elephant, although they do not need to define it. Would the noble Lord agree to take an abstract thing like Heaven? Everyone's idea of Heaven is entirely different. No one has ever succeeded, so far as I know, in defining it. Perhaps an elephant is the wrong illustration.
Viscount SIMON: I see that the noble Lord, Lord Winterbottom, shakes his head, which seems to indicate he is not prepared to move towards us. I am rather sorry about this, because I agree with the noble Lord, Lord Trefgarne. This is a serious Amendment, although the area in which it operates is fairly narrow. We must recognise that there are countries—I am not saying there are cases in point, because I do not know that there are, but there are countries, for instance, where trade unionism is very little developed and where possibly it would be extremely difficult at this stage to develop any effective participation with employees. In that case, one might be imposing on these corporations a duty—we must remember it is a duty, not just a power but a duty—which it would be very difficult to fulfil.
I do not believe many cases are involved, so that by putting in these words we should not be shutting the door. After all, in all areas where it is possible companies will still be able to encourage industrial democracy, or whatever we call it, in these various companies. But to impose a duty on them to do it irrespective of the industrial conditions and political system in the country might be to impose upon them a duty which is not capable of being fulfilled. And although in the later clause it does say—and my noble friend Lord Lloyd is going to have a go at it—that they could not be sued if they failed to do it, the object must be to lay upon the Corporations duties which it is reasonably possible for them to perform. I am obviously not going to press this Amendment, but I should like noble Lords on the Front Bench opposite to give some thought to this before the next stage to see whether there is anything we can do.
Lord WINTERBOTTOM: We will certainly consider the points raised by the noble Viscount, particularly looking into

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the legal aspects of companies trading overseas.
The Earl of ONSLOW: Before the noble Lord concludes with that very short answer, which is basically, "I will go away and think about it, but nothing will be done at all", if I am not being too cynical—
Lord MELCHETT: I think, with respect, the noble Earl is being too cynical. The noble Viscount asked my noble friend to take this away and look at it and my noble friend has said that he will do just that.
The Earl of ONSLOW: If I am being too cynical I would certainly apologise to the noble Lord, Lord Winterbottom, who is quite comfortably my favourite man on the Government Front Bench. The point I should very much like him to answer is in regard to, first, Saudi Arabia, or secondly, say, South Korea. One hopes that these Corporations are going to work and are going to be aggressively commercial and set up companies to make money for the public who are going to own them, in various other countries. If in a country like South Korea, you impose this duty on a board there and then the South Korean police move in with the orders of President Park, this is going to be incredibly difficult. We must please have some greater explanations to Lordships from the Government on this.
Viscount SIMON: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
9.2 p.m.
Viscount SIMON Viscount SIMON moved Amendment No. 49:
Page 5, line 13, leave out ("3") and insert ("6")
The noble Viscount said: I am sorry to be troubling your Lordships so continuously. In my speech on Second Reading, I outlined the purpose of this Amendment. We lay upon the Corporations a duty to promote (I am going to use my own words) the effective participation of employees in processes leading to management decisions, but we say that within three months of vesting date they
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are to consult with the trade unions as to the methods by which this can be implemented. I agree that all it says is that they are to get in touch with the trade unions in three months, and it may be said that they will not be all that busy that they cannot have a meeting with the trade unions in three months.
The Corporations, when they are set up, will have a very big task in moulding all these different undertakings together. If they have a meeting with the trade unions, of course immediately after that there will be a great deal of pressure to say when the next meeting will be. They could well spend a great deal of time on this very difficult subject. I have suggested that the time should be extended from three months to six months. There is no great magic in these figures. I thought that six months would give time for the Bullock Report to be published, and it would be much easier for these discussions to take place when the parties concerned have before them the Bullock Report. That Committee has been looking into this matter, and would perhaps give them some guidelines along which they might work. The Corporations could say, within three months of being set up, "Let us ask the trade unions to come and talk to us and then we have started our consultation". But I do not think that that is quite what the Government want to happen. I should have thought it might be better to extend that period, from three months to six months. As I say, there is no magic in the figures. Three months is a rather short time. These new Boards will be dealing with a great multitude of problems. I beg to move.
Lord MOTTISTONE: Surely what the noble Viscount, Lord Rochdale, said earlier on another Amendment, about how industrial democracy was introduced into Harland and Wolff, is very relevant to this Amendment. What people want to happen quite often does not happen as quickly as they would like.
Viscount BROOKEBOROUGH: May I support the Amendment from my own knowledge about what has happened in Northern Ireland. Although people have said that seven days is a long time in politics, when it comes to the question of promoting industrial democracy, whatever that means, dealing with very many various

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Types of unions and many types of men, six months is a jolly short time in which to get a lot of very strong characters to agree.
Lord WINTERBOTTOM: I think noble Lords have not quite grasped the point. We have not said that agreement should be reached within three months or six months, but that discussions should begin within three months or six months. That is a very profound difference. I cannot share the fears of the noble Viscount, Lord Simon, that this is something that will be given a low priority in the general reorganisation and negotiations which the two new Boards will have to tackle the moment they are made responsible for these two great industries. I should have thought that this might appear right at the head of their list of priorities.
I will take a bet with the noble Viscount that discussions will start within the first month, because in fact, as noble Lords probably know, the Organising Committees and the trade unions are already working on this important subject. The ground rules are now already being laid down. For this reason I do not think it really matters very much whether we take three months or six months, since the work has already started. But I feel that it is better, to give a sense of urgency, that we should not accept the six months proposal of the noble Viscount but should stay with the three months in the Bill.
Viscount BROOKEBOROUGH: What is the point of putting any number in if they have already started?
Lord WINTERBOTTOM: That is just to encourage them to get on.
Viscount SIMON: I think the noble Lord, Lord Winterbottom, has made a fair point here. It is, as he said, only the question of starting discussions. I did not want discussions to start just for the sake of getting them going in order to comply with the law and then going to sleep on them. He rightly says that these matters have no doubt been examined already by the Organising Committees, and in view of that I think the sensible thing for me to do is to withdraw this Amendment.
Amendment, by leave, withdrawn.
9.9.p.m.
Earl FERRERS Earl FERRERS moved Amendment No. 50:
Page 5, line 14, after ("with") insert ("(a)").
The noble Earl said: Here we come on to the part of the Bill which determines how this industrial democracy shall be brought about. The noble Lord, Lord Winterbottom, said in reply to the Amendment before last that we all know what industrial democracy means. We have had a discussion on this, and one thing that is perfectly evident is that we do not know what it means, which in itself is a worry. But I think we do determine a bit from this subsection what the Government mean by "industrial democracy". Incidentally, Amendment No. 50 goes with Amendment No. 51.
If industrial democracy means anything at all, as we discussed previously, it must mean of all the people. Clause 2(8) says that industrial democracy should be carried out. Subsection (9) imposes a duty on the Corporation to have consultations about how that industrial democracy is to be carried out. The first thing it does is to confine those discussions to the relevant trade unions, and they are defined at page 76 as being the unions which not only must be independent but also must have been recognised for the purposes of collective bargaining to be unions as to which the Advisory Conciliation and Arbitration Service has made a recommendation for recognition.
The Corporation has a duty laid upon it to discuss only with those people the form that industrial democracy is to take. By this Amendment what we seek to do is to allow all the workforce to be a party to these discussions. I suppose there are about one-third of the total employees of both the shipbuilding and the aircraft industries who are members of no unions at all. These are such people as naval architects, engineers, accountants, and people in the managerial grades who are members of no union. It seems to me quite inconceivable, if we are going to have industrial democracy, if the employees and those who participate in the firms are to determine the way in which their firms or businesses are to go, that one-third of them should be removed from such a discussion. It makes a mockery of the word "democracy" whatever it does to the "industrial" part of the

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phrase. I hope that your Lordships will agree that this is a reasonable Amendment to make. Not only do I hope that noble Lords will agree but I hope particularly that Her Majesty's Government will agree.
One of the drawbacks of this industrial democracy concept has been the polarisation of people who are fundamentally un-unionised people into unions as quickly as possible in order to try to safeguard their position. There are many people involved in these industries who are, by their very nature, not union orientated people, and they suddenly discover that the Government have brought in this Bill which is going to divest them of all say in how their company is going to be run. Therefore, they have tried to gather themselves into unions in order that their say should be heard.
Then of course we have the problem that the Government complain, as they have, that there is a proliferation of unions, and they cannot cope with talking to all these unions because there are too many of them. There are various staff associations, for instance, which this Bill, as it is constructed at the moment, completely removes from participation, not in industrial democracy but in consultations about how industrial democracy should work. I can tell your Lordships of one organisation which has recently grown up—The British Aerospace Staffs Association—a new union or corporation of people who have joined together simply in order that their voice should be heard in the future of the industry with which they are highly involved. But they are not allowed to be consulted and I know that the noble Lord, Lord Beswick, has had some trouble because they were anxious to see him, yet he said, "No, I cannot see you because you are not a recognised trade union and therefore it would be wrong for me to see you".
I can understand that point of view, but that is what has happened and that is what the Government have done by introducing the Bill; they have encouraged people to join into unions which they would never have done before. I have even heard it said—I do not know whether the noble Lord, Lord Melchett, would care to comment on this—that the TUC has brought pressure on Lord Beswick not to become involved with the British
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Aerospace Staffs Association because there are already sufficient unions in the aircraft industry.
If that is so, and I do not know whether Lord Melchett knows if it is, then it is terrible because it is really the TUC bringing pressure to bear on a chairman-elect of a Corporation as to whom he should consult. That cannot possibly be right and our fear is that as the Bill is drafted the only people who are to be consulted about how industrial democracy should be brought to bear are those who have the right to participate in discussions on wages, terms and conditions and so on of their employment. We believe that this is far too narrow. We believe that if industrial democracy is to be written into the Bill then all those people who are involved in their industry must as of right be consulted. I hope that Lord Melchett will see the virtue of the Amendment and will accept it.
Lord MACKIE of BENSHIE: I support this important Amendment and I view the Government's conception of industrial democracy with grave suspicion. When the noble Lord, Lord Winterbottom, used the expression "you know what an elephant is", perhaps he was thinking of the trade unions as his concept of democracy. If one cannot envisage the fact that if industrial democracy is to mean anything it will mean plant, company and corporation loyalty and that the further down it goes the more effective it is, then one does not understand what industrial democracy means at all. It is self-evident that the trade unions of this country are not only too fragmented to be effective but are in many cases completely out of touch with workers on the shop floor and have lost much of their influence to the shop stewards on the shop floor.
It is to us in the Liberal Party self-evident that it must be wrong to consult only whom one regards as the relevant trade unions. If this is to be a success it must involve all the people in the plant. I am afraid that if industrial democracy is to work in this country it will lead to a withering away of the enormous trade unions with their card votes and everything else because the loyalties of the workers in a plant must inevitably be to their own firm and to their own fellows in that plant and not to remote and strange trade unions. If one is to promote

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industrial democracy, it must be within a sizeable group to which the workers and all the people working can relate, and for that reason I have much pleasure in supporting the Amendment.
Lord ORR-EWING: Perhaps it is appropriate to remind people on the 200th anniversary of the United States that it is
"government of the people, by the people, and for the people",
and that it was not said that it was government by a few people. Fundamentally, it is all the people, and that is why this is an Amendment of good substance. In the aircraft industry, in which between one-third and one-half of the total work force is not in organised "relevant" unions, it does not make sense to set out in the Bill a limitation which prevents an important section in any organisation from being consulted in the introduction of industrial democracy and from participating fully in working it out.
It is to be remembered that subsections (8) and (9) were considerably tightened up as a result of pressure from the Tribune Group in the Committee stage. I do not think that the Tribune Group is very strongly represented in this House—I do not see it very strongly represented on the Front Bench at the moment. Perhaps the noble Lord would like to claim honorary membership. I should be very happy if he wishes to do so, although it seems that at the moment he will not.
Perhaps this is an opportunity to restore the balance a little, because as my noble friend in front here has said, plant loyalty is to be encouraged. It is all too fragile at the moment. When I first started working in industry we met one another a good deal more in canteens, and at football and cricket grounds or similar places. Now in more than half the cases sports fields have been sold by firms for building. Immediately the hooter or its equivalent sounds—and generally a quarter of an hour before this—everyone is starting to rush out to their cars, motor cycles or bicycles to go home to watch the telly, redecorate the house or do something else. Therefore we need to do all we can to encourage the workforce to feel a whole and a loyal support to the plant. This would he one more divisive factor. It is being said here that theoretically industrial democracy is for everyone but
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that in fact one-third or sometimes a half of the workers cannot take part. As noble Lords know only too well, it is only a few of those people who take part, and this is what leads to so much disruption in our industrial life. I very much hope that when the noble Lord looks at this matter he will put it back and will make it possible for everyone to participate and to work towards an industrial democracy which makes sense and which is above all both fair and represents people in all grades, every one of which grade is important to the working of any industrial plant.
Lord SEGAL: I have no wish to delay the proceedings of the Committee unduly, for very obvious reasons, but I rise to say that I have a very slight sympathy with the Amendment. Since we are discussing industrial democracy I wish to suggest that I should be able to muster far more sympathy with Amendment 51 if in the second line the noble Earl were to insert:
"organisations appearing to the Corporation to be democratically elected representatives of its employers …"
Equally in line 3 of the Amendment it might be desirable, again since we are discussing industrial democracy—whatever it may mean to noble Lords on either side—to insert before the word "employees" the words:
"democratically elected representatives of employees of its wholly owned subsidiaries…"
I merely throw out this suggestion to the Opposition because this matter may arise again at the Report stage. It might he worthwhile for the Opposition to redraft the Amendment so that it might have a wider appeal to other Members of the House.
Lord MOTTISTONE: It might be thought that from these Benches one is not in sympathy with the trade unions and I hasten to add that this is not the case so far as I am concerned. In a sense, if one sits on these Benches or those Benches opposite one is a joiner in your Lordships' House, but if one is not one sits on the Cross-Benches. I have found from practical experience that trade unions are absolutely essential to any form of business. I was very surprised recently in trying to organise a job evaluation exercise to find how absolutely dedicated certain individuals were. My noble friends have talked about groups of people who will be

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excluded if the Bill is not amended. But there are within all of us individuals who are dead against committing their future, their life, into the hands of organised bodies, and they tend to be disenfranchised in any arrangement. Even when one starts talking about democratically elected representatives, this is very difficult to do.
I think it important to take account of the fact that there are a lot of people—maybe one might describe them as "loners"—whose interests must be looked after and who feel deeply resentful at the organised bodies with which they feel powerless to compete. I suggest that somehow we must take account—and this does not relate only to the trade unions—of a rather large number of people with this feeling, which one only discovers almost by mistake, who are resentful of the growing influence of organised bodies such as the trade unions, Parliament, consumer groups or whatever. We are, in a sense, being undemocratically organised where account is not taken of that feeling. The only area in which we do take account of it is in Parliamentary and local government elections, which your Lordships will remember include everybody. I suggest to the noble Lords opposite that these Amendments of ours may need rather more careful consideration than might be thought necessary at first view. They are not Party political Amendments, but Amendments which take account of the feelings of people today. I believe that they should be seen in that light.
9.26 p.m.
Lord WIGODER: When the noble Lord, Lord Segal, rose, my heart leapt up at the thought that at long last this Bill or a small part of it was about to be supported by a Member on the Government Benches. Alack! To my eternal disappointment, it was not to be. The noble Lord, Lord Melchett, will agree that we have been over this or similar ground on innumerable other clauses in innumerable other Bills. I hope, therefore, that he will forgive my asking him whether, when he comes to the passage in his brief in which it says that there is nothing in Clause 9 to prevent the Corporation from consulting with other persons or organisations as suggested in the Amendment moved by the noble Earl, Lord Ferrers, he would be good enough to pause for a moment and explain to us not
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merely that, but also why it is that in those circumstances the "relevant trade unions" have been given a privileged position by being specified in the clause rather than all the employees as indicated in the noble Earl's Amendment.
Lord TREFGARNE: I have a nasty feeling that the Government have been rumbled in this Bill. They are seeking to pass power to a privileged group of people. In the Dock Work Regulation Bill which we are considering on other days this week, they seem to be seeking to do precisely the same thing. Your Lordships will recall that in the Dock Work Regulation Bill the Government are seeking to transfer the wor0k presently done by people belonging to all sorts of unions and organisations to one set of people—namely, the dockers. I feel that that proposal is just as objectionable as this one. In my submission, it is to transfer control or, if that is too strong a word in this context, industrial democratic power from where it may lie at present to a narrow set of people called the "relevant trade unions".
Our worst fears have been realised by the facts that have been recounted by my noble friend Lord Ferrers, who told us about the members of a particular trade union who were apparently not seen by the chairman of the Organising Committee because he, according to the rumours that we have heard, was asked by the TUC not to see them. This seems to me to be a quite disgraceful state of affairs and unless the noble Lord, Lord Melchett, is able to give us some very reassuring facts about the situation, I believe that our worst fears will have been well founded. The situation is quite clear. We must not allow this to arise even if we are misinformed on the facts as we now believe them to be, although that I doubt. In any event, I shall most strongly support the Amendment.
Lord MELCHETT: May I first of all apologise for the fact that I appear to have a page missing from my brief if I am to believe what the noble Lord, Lord Wigoder, told me it should say. It might be useful if I did not read out that part that he said I was meant to read out, as it is not here.
Earl FERRERS: Would the noble Lord like a page of mine instead?
Lord MELCHETT: I think it would be fair to say to the noble Earl that we have heard quite enough pages from his brief and it is time that mine at least had a chance of a say in your Lordships' Chamber. Instead of reading out the part which the noble Lord, Lord Wigoder, expected, it might be more helpful to him to say what my understanding is of the actual practice of the chairman designate of the two Corporations. As I understand it, they arc both perfectly willing to talk to anybody who wishes to talk to them, and I know that my noble friend Lord Beswick has met groups of people, among which have been both members of trade unions and also people who are not members of trade unions. I do not know whether that helps the noble Lord, Lord Wigoder, at all, but it is perhaps more useful than the non-existent page of my brief.
Lord TREFGARNE: Can the noble Lord say specifically whether the noble Lord, Lord Beswick, has seen the group of persons referred to by my noble friend Lord Ferrers?
Lord MELCHETT: No, I am afraid I do not have that particular information, and I regret to say I cannot remember which group it was which the noble Earl referred to.
Lord TREFGARNE: I am sorry to press the noble Lord, but I regard this as a matter of particular importance. It has been alleged that the noble Lord, Lord Beswick, declined to see—and I am speaking from memory of what the noble Earl said, and he will correct me if I am wrong—the British Aerospace Staffs' Association who are, I believe, according to the noble Earl, a comparatively recently formed Association. Unless the noble Lord can give us some clear indications on that fact, our worst fears will remain in our minds.
Lord MELCHETT: As the noble Lord said before he sat down, whatever I said his worst fears would remain in his mind, so I am not sure why he is troubling to press me, particularly as I have told him that my noble friend Lord Beswick has said that he is willing to see anybody at any time.
The Earl of ONSLOW: May I be permitted to press this point. The noble Lord, Lord Beswick, cannot answer this question on account of the Addison Rules but I would have thought, as the noble Lord, Lord Melchett, said earlier that he did not know, that it would have been possible for him to put pen to paper and pass a note approximately 12 feet down your Lordships' Chamber and ask the noble Lord, Lord Beswick, whether he has seen these people and then give a reply to my noble friends Lord Trefgarne and Lord Ferrers.
Lord MELCHETT: As the noble Earl knows, I am here to speak for the Government and not for my noble friend Lord Beswick or any other individual who may be affected by this. I am giving your Lordships to the best of my ability the Government's view on the Amendments which have been moved in your Lordships' Committee.
Lord TREFGARNE: But—
Lord MELCHETT: I have given way twice to the noble Lord and once to the noble Earl. If I could now be permitted to finish my speech, the noble Lord may then make another speech if he wishes to afterwards and no one, I am sure, will prevent him.
These Amendments seek to confer on any organisation representative of employees or employers in the wholly-owned subsidiaries, the rights the Government believe should be confined to unions which meet the criteria for independence and recognition which have been established by the Trade Union and Labour Relations Amendment Act 1974 and the Employment Protection Act 1975. We have had representations from the employees in these industries who are not members of unions at present recognised by employers in the industry, and who very understandably want to participate in the consultations on industrial democracy under Clause 2, on organisation under Clause 5 and on machinery for settling terms and conditions of employment under Clause 6.
I fully understand this and the Government certainly hope that these people will make their full contribution to the future of these industries. None the less, I do not believe that it would be in the interests of the employees of either of these two

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industries to accept these Amendments. They would cut across the Government's policy on collective bargaining and employee representation which we continue to believe to be in the best interests of all employees. As the wording suggested by noble Lords opposite fails to take account of current legislation, I believe it could lead to each Corporation facing a difficult industrial relations problem without providing any means of solving it.
The provisions in the Bill which, as I have said and as the noble Lord, Lord Wigoder, pointed out, are in line with other recent Acts of Parliament which have been through your Lordships' House and over which we have had exactly the same arguments as we are having tonight, provide a means of resolving disputes between rival groups claiming to represent employees. Under those provisions any such disagreement which would not be resolved by the Corporation and those involved would be considered by ACAS. The Government are of the firm view that the arrangements in the Bill are in the best interests of all employees in both industries. I therefore urge noble Lords to resist the Amendment.
9.36 p.m.
Viscount SIMON: I was rather surprised to hear what the noble Lord, Lord Melchett, was saying then, because in an earlier Amendment he was saying—and I was warmly agreeing with him—that in the various subsidiary companies of the Corporations there should be freedom to negotiate what was the best arrangement. If the Government are laying down that the arrangement must take a particular form, they are doing exactly what earlier on the noble Lord was saying he thought that he could not do.
Lord HARMAR-NICHOLLS: I think the noble Lord has found the page in his brief which he said he did not have. He said precisely what the noble Lord, Lord Wigoder, anticipated would be in the brief. He did not use the identical words. The noble Lord said that the chairman and others had made it perfectly clear that they were perfectly prepared to see anybody. There was no question about that. He went on to say that it was important that one group should be identified and the other should not. The question put
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to him by the noble Lord, Lord Wigoder, ought to be answered clearly. If, in arriving at a proper arrangement one can name one group—in this case, the relevant trade union—and if it is the desire of other groups, for the very good reasons my noble friend put forward, also to have a chance to put their point of view, why cannot that equally be written in to the Bill?
Lord REDESDALE: One thing that came out of what the noble Lord said made me very happy indeed. As I understood it, he guaranteed that at least the noble Lord, Lord Beswick, will see the Association which was mentioned. We should all be very grateful that this will definitely happen.
Lord MELCHETT: I do not know whether the noble Lord is deliberately trying to make trouble for these important industries; but it is quite unfair for him to say that I said that. He knows very well that I did not, and I hope that he will withdraw the suggestion.
Lord REDESDALE: I do not follow the noble Lord at all. Asking me to withdraw is rather discourteous on his part. I was merely saying that it is nice to know that he said that the noble Lord, Lord Beswick, will sec anybody on this. That is what I understood him to say. It will be very interesting to see in Hansard what was actually said. If he did not say that, then I misheard him. I certainly understood those were his words.
There is one brief point that I wish to raise which seemed to be totally skated over in the normal way by the noble Lord, Lord Melchett, who makes a nice argument but does not touch on the real meat of the matter—or get down to the bones of it, perhaps I should say. In an industry which is so technologically orientated, you have certain groups of people who are not, as we know, orientated to trade unions. These people are of a vast importance to the on-going health of that industry. They must be consulted. To say that it is inconvenient—and there are so many things in this life that are inconvenient—and hiding behind that, is not good enough. The Council of Engineering Institutions, and their various members, must be consulted. If it is just going to be the trade unions who will be consulted,

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industry will suffer. I hope that the noble Lord will have some more to say on this.
Earl FERRERS: I pause because I thought the noble Lord, Lord Melchett, was going to reply. It appears he is not. The noble Lord has evidently "shot his bolt". I think that I can come to the noble Lord's help because I realise that he was addressing himself—quite correctly—to the Amendment as printed in the Marshalled List. Unfortunately, there is a misprint. The Amendment says:
"and other persons or organisations appearing to the Corporation to be representative of those of its employers or the employees of its wholly-owned subsidiaries …"
Of course, the word "employers" is a misprint and should be "employees". If the noble Lord finds that any of the remarks he has made he would wish to change because he might have addressed himself to that erroneously printed Amendment, I will willingly give way—No, the noble Lord shakes his head.
Baroness WARD of NORTH TYNESIDE: Then is it "employees" twice?
Earl FERRERS: Yes, that is so. It should read:
"other persons or organisations appearing to the Corporation to be representative of those of its employees or the employees of its wholly owned subsidiaries …"
I think that makes grammatical sense: the other version, as it was printed, makes nonsense. I am bound to say I was glad that the noble Lord, Lord Segal, felt he was minded to support us in the theory, if not in the wording, of the Amendment.
Lord SEGAL: Might I dispel any misapprehension about this. When I said I was slightly in sympathy with this Amendment, I should like to confirm that the degree of sympathy is so miniscule that I wanted some slight alteration in the wording of the Amendment before I could slightly increase the amount of sympathy I might have felt for it.
Earl FERRERS: The noble Lord is peculiarly ungenerous, considering it is after dinner. But I am glad that he showed at least a tiny bit of sympathy, even though it was not quite as large as we might have hoped. I believe that what he said was that he would like to see democratically elected representatives. I believe
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that draws the net even tighter, because if the Amendment goes in as it is it would read:
"other persons or organisations appearing to the Corporation to be representative of those of its employees.…"
That could well include those who are democratically elected representatives. If one were to use that form of words, one would again exclude that vast proportion of people who are not union orientated and who do not want to belong to groups of people. I think, as my noble friend Lord Mottistone said, there is a very great fear that people in general are having a reaction against the big battalions. People do not always want to belong to the big battalions, and of course this does not mean that they arc any less in favour of their industry or less well disposed towards it. It merely means that as an individual you prefer to remain on your own and not to be grouped together.
The whole purpose of this Amendment was to try to ensure that when British Aerospace or British Shipbuilders, or any other body, is consulting on how to organise industrial democracy all these people, whether they are inside or outside unions, should be involved. I am bound to say that I was as surprised as my noble friend by the remarks of the noble Lord, Lord Melchett, when he said he could not accept this as it cut across collective bargaining and employee representation. With the greatest respect, this has nothing to do with collective bargaining; it is solely concerned with how to bring about this extraordinary phrase "industrial democracy" which is clear to the noble Lords, Lord Melchett and Lord Winter-bottom, but which everyone else finds it difficult to interpret. It is how to put that into operation that we are concerned about here.
That is the great problem with the Bill as it is drawn—that the only people who are to be consulted are to be consulted for collective bargaining purposes. I think that is a far too narrow proportion of people. And the inference is that that is all right: "We have got enough unions, and if you want to be involved in consultation, then you must join one of the existing unions." I do not believe, even if that is accepted as an argument for collective bargaining, that it is an argument for considering how industrial democracy should be brought about.

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I would therefore ask your Lordships to agree with me, in the interests of this peculiar form of words which the Government have themselves put into the Bill, that our Amendment should go into it as well, so as to encompass all those who at the moment are specifically—and, I
Resolved in the affirmative, and Amendment agreed to accordingly
venture to say, deliberately—excluded from consultation.
9.45 p.m.
On Question, Whether the said Amendment (No. 50) shall be agreed to?
Their Lordships divided: Contents, 61; Non-Contents, 22.
9.54 p.m.
Earl FERRERS Earl FERRERS moved Amendment No. 51:
Page 5, line 15, after ("unions") insert ("and
(b) other persons or organisations appearing to the Corporation to he representative of those of its employers or the employees of its wholly owned subsidiaries who are not members of a relevant trade union").
On Question, Amendment agreed to.
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN moved Amendment No. 52:
Page 5, line 18, leave out subsection (10).
The noble Lord said: In so far as I can understand Clause 2(10) it raises matters of very considerable public importance, because it endeavours to exclude aggrieved parties from having recourse to the courts and in those circumstances, of course, it affects the rights of individuals, and is worthy of careful consideration. I am inviting the help of the Minister in so far as his Government's understanding of the clause is concerned. In order to help him may I say that I have considered the scope of this subsection in the context of Part III of the Bill, and in particular Clause 42 of that Part, which sets up an arbitration tribunal for disputes under the Bill. I have also carefully considered Clause 53, which deals with liabilities arising on the Corporation. But in my submission, in so far as I can understand these clauses, none of them is of relevance to the point I am making in regard to subsection (10). As at present drafted, it seems to me that the exemption contained in this subsection is far too wide and could lead to serious hardship for employees of the Corporations and could also involve the industrial property rights of firms associated with aerospace and shipbuilding technology.
May I ask your Lordships to consider the scope of Clause 2(10). It says:
"Nothing in this section shall be construed as imposing upon either Corporation,"
now follow two important words—
"directly or indirectly,"
and it is the scope of the words "or indirectly" which cause me considerable anxiety. The subsection continues:
"any form of duty or liability enforceable by proceedings before any court".
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Therefore the effect of the subsection is that any form of duty or liability arising directly or indirectly under its terms cannot be enforceable in the courts of law.
Perhaps I may give one or two examples of why I think that this subsection, as drafted, could cause considerable hardship. Let us suppose that in the course of their duties under Clause 2(1) the Corporations decided to promote efficient and economic design, or development or production, to take three aspects of this clause which it is the duty of the Corporations to promote; and let us also suppose that the Corporations decide to use the results arising from their duties to promote research. I assume that useful, practical and commercial results will arise from the promotion of research, particularly having regard to the sympathetic approach of the Minister when I suggested that a more balanced expression would have been "research and innovation" and I withdrew my Amendment to insert the word "innovation". Let us further suppose that in the course of this operation the Corporations were to use a design, invention or process which is thought by some firm or individual to be the subject of patent or design rights owned by that outside firm or individual. If it were a normal commercial matter, the person or firm owning the patent or design rights would be entitled to bring proceedings either in the courts or in the Patents Appeal Tribunal against the person or firm which was thought to be infringing those rights.
It seems to me, therefore, that the wording of subsection (10), particularly having regard to the word "indirectly", means that if the Corporations should infringe a patent or design when exercising their duty to promote then there shall be no recourse to the courts. It seems to me that that cannot be a just position for the Corporations to adopt.
May I give a second instance. Suppose that there is disclosure of know-how by a person or firm not employed in the Corporation, a confidential disclosure to the Corporation through one of the employees of the Corporation. It might be that the disclosure was made to a person in the management; it might be a

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disclosure to a technical person on the staff of the Corporation—it is a very common experience for confidential information to be disclosed to an organisation or a firm—and trouble arises.
Suppose that the Corporation uses this confidential know-how which has been disclosed to it—and this could be done quite inadvertently, without any intent to be fraudulent or to raise difficulties. In the normal commercial practice at the Patent Bar we are frequently involved in such disputes, where the person who owns this confidential know-how can at once go to the court and say that his property in certain inventions as designs has been used, that the know-how has been used and that it was disclosed in confidence. Therefore he would have some rights and be able to have recourse to the courts. It seems to me that as the Bill is at present drafted, particularly having regard to the word "indirectly", there is a danger of the owner of know-how who discloses it in confidence to the Corporation having his rights affected.
May I take another instance of an employee in the Corporation who is an inventor and who happens to produce an invention while an employee. This again in ordinary commercial practice can raise difficulties. The employee may say that he owns rights in the invention. The Corporation may say that he has no rights in the invention. At once a dispute arises which in normal practice could be sent to the High Court, or, as I have said, to the Patent Office Court, where provision is made for dealing with such disputes.
No doubt the Minister and his Department are aware of the discussions at the present time, ill which the Trades Union Congress is interested, as to the rights of employees. Many inventors as employees of firms have had problems arising from the question of what is the scope of their rights, and it is sometimes very difficult and expensive for an employee to assert his rights against his employer. It seems to me, therefore, that if it is the duty of the Corporation, as is stated in Clause 2, to promote research and the other factors, it may happen that a dispute will arise with an employee who produces an invention. As I understand it, the effect
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of subsection (10) is to preclude that employee from having recourse to the courts to exercise his rights.
I ought perhaps to apologise to the Minister for not having given him notice of these rather technical but very practical points that I have raised, but I think that they are of sufficient practical importance to be discussed at the present time. There may be other examples of cases in which difficulties might arise in view of the word "indirectly", in that an employee might be precluded from exercising his rights under safety regulations, for instance. If it is his duty to promote efficient designs in shipbuilding, maybe in the course of that employment dealing with this aspect of shipbuilding a person may suffer some kind of injury. The word "indirectly", it seems to me, is inclined to imply that even in regard to safety regulations the employee might not have the normal rights of individuals in industry to have recourse to the courts.
I have spoken at some length, but I hope that the Minister will agree that any clause which endeavours to exclude the rights of an individual to the courts is worthy of careful consideration. I beg to move.
Lord REDESDALE: I thought the noble Lord, Lord Lloyd of Kilgerran, made a fascinating and able case, which I tried to follow in its technicality as best I could. I feel that the noble Lord, Lord Kirkhill, will have quite a lot to answer, which he may have to answer at a later date.
Lord KIRKHILL: The Lord Kirkhill has had similar difficulty!
Lord REDESDALE: Although I felt that the noble Lord, Lord Lloyd of Kilgerran, argued his case so well that there is much to be answered, I felt that at this stage, although I have much sympathy, I could not go the whole way with the noble Lord, for the simple reason that there is so much uncertainty—or perhaps the word one should use, because it is so favoured by the other side, is "flexibility"—in the Bill that it will be hard to test

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anything in a court of law. Therefore, as was stated by the Minister of State, perhaps this is the easy way out; but the other aspect of it really must be settled.
The Earl of ONSLOW: We have now amended subsection (9)—the relevant trade unions—to include the words that my noble friend Lord Ferrers moved in his Amendment. If peradventure another place agrees with this Amendment, how on earth are people who have a justifiable grievance at not being consulted going to ensure that they are consulted? I am assuming for the sake of argument that something ghastly happens to the noble Lord, Lord Beswick, and he is replaced by somebody who would not perhaps be so sympathetic. If these people are supposed to be consulted about introducing this mythical concept which Her Majesty's Government as at present constituted cannot define, of "industrial democracy", and if they say they ought to be consulted, how is this going to be sorted out? That is my first point.
My second point is this. Surely it is a principle of law that if we pass an Act of Parliament it should ultimately be enforceable at law, because if it is not enforceable everybody is wasting the time and the heating of this building while we arc discussing it; the energy of being in this Chamber at the moment when we could all be at home in bed or playing chess, or whatever it may be, and it seems to me that to pass an Act of Parliament—or a section of an Act of Parliament—which is in no way enforceable is, with the greatest respect to Her Britannic Majesty's advisers, really rather dotty.
10.9 p.m.
Lord KIRKHILL: I think at the outset I could use the very same phrase as was used by the noble Lord, Lord Lloyd of Kilgerran, that as far as I understand—and I would go on to say "upon advice". But first I will try to deal with one or two of the points raised by the noble Lord. I am advised that nothing in this subsection would affect any rights at law which individuals would otherwise have in respect of patents or their intellectual property rights of which the Corporations secure benefit as a result of Clause 2(4), which requires the Corporations to seek to secure the benefit of the knowledge and experience of employees. I am further
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advised, on Clause 2(10), that it is fair to point out that it merely says that no duty imposed by the clause can be enforced in a court of law. Duties in respect of patents, intellectual property, et cetera, are imposed by general law, not by the clause, and are therefore not affected. But I would certainly undertake to reflect at a more appropriate moment upon some of the nuances of the word "indirectly", and I will communicate with the noble Lord.
The view of the Government is that if the courts were required to adjudicate on industrial democracy this could give rise to substantial legal problems—noble Lords laugh, so my sense of timing was perfect. Therefore, when we decided that it was important to underline our commitment to industrial democracy by imposing on the Corporation a positive duty to promote it in a strong and organic form, we had to ensure that this duty was not enforceable by proceedings before a court of law. We therefore inserted the subsection which this Amendment seeks to remove. The subsection applies to all the duties imposed by Clause 2, and not just to the duty to promote industrial democracy, because we wished to follow the precedent of the Iron and Steel Act 1949, and revived by the Iron and Steel Act 1967.
It is further the view of the Government that the courts are not an appropriate forum for enforcing the duties of the Corporations because of the relationship between the Secretary of State and the Corporation. He has the powers to see that the Corporations carry out their duties should it seem that they are not meeting their responsibilities. The Secretary of State could do this in various ways; for example, through his powers of appointment, or over finance. The experience of 30 years with nationalised industries suggests that the courts are unlikely to provide a practical means of dealing with problems of this kind. We do not consider that this Amendment will in any way make it more difficult to see that the Corporations carry out their obligations, otherwise we would not have put it forward.
It is the view of the Government—and I need hardly point out that the Government have given proper weight to the legal advice they have received, and I have to emphasise

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that point—that if this clause were omitted as the Amendment seeks to do, we should be enacting bad laws. In the light of my comments, I think that your Lordships will not wish to press the Amendment.
Viscount SIMON: If the noble Lord, Lord Kirkhill, is going to consider the legal aspects, he talked a great deal about enforcement duties, but he will remind himself that the clause refers also to relieving them of liabilities (and I think that is very important) quite apart from enforcement duties.
Lord LLOYD of KILGERRAN: I am grateful to the noble Lord, Lord Kirkhill, for his reply. As one who is not unfamilier with the Patent Bar in view of 25 years' experience there, I fully appreciate the difficulties of getting an answer from legal advisers who are not so familiar with these matters as are some other specialists. I understood the noble Lord to say that in so far as the word "indirectly" was concerned, he was prepared to reconsider the position and therefore consider some aspect of the wording of this clause.
Lord KIRKHILL: I said I would reflect upon it.
Lord LLOYD of KILGERRAN: At this late hour I hope we are not indulging in semantics, but if the noble Lord, Lord Kirkhill, will reflect upon this matter I shall be grateful. As I understood him, he also said that the main purpose of the subsection was to preclude recourse to the courts in deciding what is meant by industrial democracy. Speaking for myself, I certainly would go along with him and say that recourse to the courts in relation to matters involving industrial relations and so on is often a great mistake. I would agree with trade unionists who say that lawyers are of little use in deciding these matters of industrial relations. If it is the view of the Government that this subsection is largely intended to remove from the courts any discussion of industrial democracy, may I ask the noble Lord to reflect upon that matter as well? If he will be good enough to reflect upon both those matters, and any other matters incidental to my speech, when he happens to read it
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tomorrow, in those circumstances I do not propose to press this Amendment at this stage. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 3, as amended, agreed to.
Clause 3 [Powers of the Corporations]:
10.16 p.m.
Lord LLOYD of KILGERRAN Lord LLOYD of KILGERRAN moved Amendment No. 59:
Page 6, line 3, at end insert—
("( ) No consent or general authority shall be given in pursuance of the preceding subsection unless a draft of the document containing it has been laid before Parliament and approved by a resolution of each House of Parliament.")
The noble Lord said: The Amendment which I propose is an attempt to render accountability to Parliament in relation to actions taken in view of the wording of Clause 3. Under Clause 3, and particularly under subsection (3), the Secretary of State can give general authority to extend the powers of the Corporation and to extend them very widely indeed. Particularly in Clause 3(1)(b) in the third line, the Secretary of State can extend the powers of the Corporation to "any other activities" quite apart from the activities with which this Corporation is primarily concerned. In subsection (2), each Corporation shall have power to do (a), (b), (c) and (d), which are a considerable extension of their powers. Therefore, I felt that if the Secretary of State is to be entitled to extend the powers of the Corporation very widely, as Clause 3 seems to suggest, then before these powers are extended a draft should be put to Parliament of the scope of the extension suggested. Therefore, my Amendment comes to this, that:
"No consent or general authority shall be given in pursuance of the preceding subsection unless a draft of the document containing it has been laid before Parliament and approved by a resolution of each House of Parliament."
I draw attention to the fact that it should be a draft of the document, which is, therefore, capable of being discussed in another place and in your Lordships' House before it is finally approved. In conclusion, I would draw the attention of the Minister to the fact that that the form of my Amendment is on the lines of Clause 2(6). I beg to move.
Lord MELCHETT: May I first of all make the point that the provisions in the Bill follow the general principles of previous legislation. Subsections (2) and (3) are broadly in line with Section 2(2) of the Iron and Steel Act 1967. There is only one important modification. Under subsection (3)(b), disposals of interest in wholly owned subsidiaries require the consent of the Secretary of State. The absence of this provision would make it possible in principle for the Corporations to reduce the scope of their activities without the Secretary of State's and, through him, Parliament's consent. I think the noble Lord would agree with me that that would be undesirable.
The powers of the Corporations we are discussing here are no more than those which their subsidiaries, as separate legal entities, derive from the Companies Acts and their own Memoranda and Articles. The Corporations, being entirely a creation of Statute, are not covered by the Companies Acts or Memoranda and Articles and therefore have to have the equivalent powers laid down in the Statute. The powers in Clause 2(2) are no more than those given to a private sector company and which are essential for that company's normal commercial operations.
Noble Lords could imagine the effect on the operations of a private sector company if they had to come to Parliament and submit their proposals to Affirmative Resolution procedure in the way proposed by this Amendment. The two Corporations would be required, by these Amendments, to do just that. It seems clear that any commercial opportunity which they were hoping to exploit would have either disappeared or been snapped up by some other organisation in the time taken. We of course recognise that as publicly owned industries these Corporations must be subject to the proper degree of Parliamentary control. In that respect I do not think that there is any difference in principle between the noble Lord, Lord Lloyd of Kilgerran, and myself. But I would suggest to him that this Amendment would impose on the Corporations procedures which would greatly limit their chances of commercial success. The Secretary of State is answerable to Parliament, and we believe strongly that the provision requiring the Secretary of State's consent or general authority for
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the exercise of these powers is the most appropriate way of ensuring Parliamentary accountability while at the same time ensuring that the Corporation can operate competitively in the commercial markets.
Lord LLOYD of KILGERRAN: I am grateful to the noble Lord for his lucid explanation of the position. I would have thought prima facie that he would not have resisted this Amendment, having regard to the inclusion in Clause 2 of subsection (6) which is in almost the same form as the Amendment I proposed, and leading, as I would suggest, to greater public accountability. I sympathise with the point he has made that it might lead to some administrative difficulties and some delays, and in the circumstances I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
10.23 p.m.
Lord CAMPBELL of CROY Lord CAMPBELL of CROY moved Amendment No. 66:
After Clause 3 insert the following new clause:
Ship repairing
. None of the functions conferred by this Act upon the Secretary of State or British Shipbuilders shall be construed as authorising or requiring British Shipbuilders to repair or maintain ships except by or through the companies referred to in Schedule 2 to this Act.
The noble Lord said: I beg to move Amendment No. 66 standing in the names of my noble friends and myself, and the noble Lord, Lord Byers. This is another of the Amendments in our series of Amendments which would have the effect of deleting from the Bill the ship repairing industry. This would make it clear that the nationalised Corporation, British Shipbuilders, would not be repairing or maintaining ships except through the companies referred to in Schedule 2.
I must start by saying that on the last of these Amendments, which was discussed on Monday, my noble friend Lord Colville of Culross raised again questions of possible hybridity in the Bill arising from a Written Answer which had been given to me and to the noble Lord, Lord Wigoder, about points which we had raised on Second Reading on the same subject. I must tell your Lordships that the Leader of the House has this evening passed a Written Answer to my noble friend Lord Colville, and I have been

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able in the last few minutes to see it. I think there is only one copy in existence at the moment, though I have passed it out for some copies to be made. That reply, which may appear in Hansard tomorrow as it was available before 10 p.m.—I hope it will because on the last occasion it was about two days before it appeared in Hansard—follows the same form as the previous reply by the Leader of the House in giving a long written explanation of the Government's interpretation of the criteria in Schedule 2 and therefore a justification of why the 12 ship repairing firms have been named as falling within the criteria and other firms of the 100 or so ship repairing firms that exist in the country are not included.
My noble friend Lord Colville and I are grateful that the Government have obviously taken a great deal of trouble since Monday to make this Written Answer available and to put forward their explanation. It is a complex question, and I know that my noble friend will be examining the reply carefully without delay, as will others of us who are not so well versed in the legal and drafting matters involved. If the noble Lord, Lord Melchett, has anything to add on this point tonight I hope he will do so.
I come to the general question of the ship repairing industry and whether it should be included in the Bill. On Monday evening, I outlined the vigour and success with which the ship repairing industry as a whole has been carrying on its business in Britain. I also described its nature as a service industry and pointed out that it was very different from the shipbuilding industry and should not be treated as part of the shipbuilding industry. I gave the analogy of the motor car industry where motor cars are manufactured at large plants and are quite different kinds of installations and industries from the garages which carry out repairs and maintenance on motor cars all over the country. That is the sort of relationship that exists when the shipbuilding industry and the quite separate ship repairing industry are compared.
The ship repairing industry is to be found in scattered units round our shores because that is what is required; they have to carry out repair work often at very short notice doing often small jobs. We
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believe that it is wholly unsuitable for nationalisation and the kind of structure which, in other industries which have been nationalised, then grows from the form of nationalisation. When Lord Melchett was answering the Amendment on Monday, he seemed to place much emphasis on the report of the firm PA Management Consultants which had reported on the ship repairing industry about two years ago. That report in itself did not propose that nationalisation was the way in which any improvements in that industry might be carried out.
What that report did was what one would expect of any report from a firm of consultants examining an industry: it was critical in some respects and it made some suggestions. But the performance of British ship repairers must be considered in the context of North-West Europe. The PA Management Consultants' report showed that ship repair output in North-West Europe as a whole declined in the period 1968 to 1972 by about 6 per cent. a year. But during that same period, British ship repairing output fell by 3½ per cent. a year. So, while output was falling in both North-West Europe and Britain, it was falling less in Britain than in North-West Europe. The comparison is a favourable one so far as British ship repairers are concerned.
This consultant firm—and any other consultant firm—would be likely to produce a report of this kind, but, as I repeat, it did not propose that the ship repairing industry should be nationalised. I believe that the noble Lord would find that, if a firm of consultants was appointed to examine a Government Department—his own, for instance—it would be likely to produce a report that was critical in some respects and make suggestions for changes.
Lord MELCHETT: Would the noble Lord not agree that a firm of consultants is unlikely to suggest that an industry should be nationalised in any event, particularly if the firm had been appointed by a Conservative Government?
Lord CAMPBELL of CROY: No. I believe that if a consultant firm is asked to carry out a job it will carry out that job and make a report. What I was drawing attention to was the great emphasis which the noble Lord, Lord Melchett, placed upon that report in his reply on Monday.

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If noble Lords who were not here on Monday and did not hear the noble Lord will look up Hansard they will see that in his reply he relied very largely upon that report. He indicated that in some part of its recommendations it was critical of the industry.
I am submitting that that is what one would expect when a consultant firm is asked to examine an industry. I was going on to say that that happens even in Government. I certainly remember times in the past—though this is a little out of date now—when the organisation and methods team within the Civil Service used to tackle Departments which thought themselves exceedingly efficient: the O & M team would find things to criticise and would put forward suggestions and perhaps new ideas, some of which were adopted. This is quite a normal process.
I believe that the noble Lord was placing too much emphasis on the advice given by a firm of consultants which was helpful but which in no way condemned the industry or proposed that this was the kind of solution which should be adopted. So, I first draw attention to the fact that the noble Lord the Leader of the House had provided my noble friend Lord Colville with a Written Answer, which is being immediately studied on the question of hybridity. If the Government have anything more on that at this point, we should be grateful. Secondly, as regards the general question of the nationalisation of the ship repairing industry, I reiterate that no case has been made for this and that the consultants' report is not in itself a sound reason for this action. I beg to move.
10.34 p.m.
Lord LLOYD of KILGERRAN: Quite apart from the question of hybridity, I have spoken at some length both on Second Reading and in this Committee on the undesirability of having the ship repairing firms taken up in the scope of this Bill. I rise merely to make it clear that I support the noble Lord, Lord Campbell of Croy, in so far as this general question of the exclusion of ship repairers from the scope of the Bill is concerned. We are still strongly of the view that, on this general point, the ship repairing firms should not come within the scope of the Bill.
10.35 p.m.
Lord ORR-EWING: I have now had an opportunity of reading this report, which as my noble friend said was the excuse—and one cannot help feeling a rather slender excuse—which the noble Lord gave for nationalising the whole of this rather special service industry. I have previously declared an interest but perhaps it is wise to do so again. I am a director—a non-executive director—of a group and in that group there is one wholly owned ship repairing subsidiary. I have now read the report fairly carefully and I have tried to line it up with the rather selective quotations from it which the noble Lord gave. I do not blame him entirely for that. If I were doing his job I probably would also be selective in making points which favoured my case.
But I think he would be wrong in saying that the consultants were not in a position to examine the future formation of the industry, or the nationalisation of it; I think he suggested that because the consultants were appointed by a Tory Government this might have inhibited them from making that recommendation. But their terms of reference, which were not so very carefully carried out as some of the other terms of reference, specifically asked them, at paragraph b:
"to examine and report upon what action, if any, the Government could take or cause to be taken to improve the performance and prospects of the industry."
So I think the noble Lord was wrong in saying that they could not have recommended it. Clearly they could have recommended anything which they genuinely thought would have helped ship repairing. They could have recommended public ownership, a public share on the BP principle. They could have recommended an injection of aid under the 1972 Act, had they thought that that would be helpful, but they did not. They could have recommended nationalisation, had they thought that that would be helpful.
After quoting those things, the noble Lord said, at column 188 of Hansard of 11th October:
"The major aim, therefore, of taking into public ownership the larger ship repairing companies is to substantially improve investment and productivity in the industry."
I made the point last time that ship repairing is a labour intensive industry;

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it is not a capital intensive industry like shipbuilding. But I wonder if the noble Lord should really have put in the point about increasing productivity by nationalising?
Did the Government not remember what had happened to the coal industry? Did they not remember what had happened to British Rail? Did they not remember—more recently—what has happened to British Steel, where it needs three times as many people in a nationalised industry to produce a ton of steel as it does in Germany or in the United States of America? Could they not remember the strike at Llanwern over manning, where a £50 million plant remained idle for years because people would not cut down the over-manning on it? I hardly think that the productivity of a nationalised industry is the strongest argument that the noble Lord can make. It is the weakest, and I suggest that in future it be left out.
Much has happened since this report was made. It was based on the results from 1968 to 1972, results which are now basically four years out of date. In that period there has come about North Sea oil and the servicing of North Sea oil rigs and the servicing of the ships to supply and service North Sea oil, and ship repairing firms play a big part there. There is the opportunity, also in connection with North Sea oil, for new facilities which ship repairers can undertake: tank washing and the like. There is the argument—which I think the noble Lord also used—that rationalisation can more easily take place under nationalisation. In this connection it was mentioned that sometimes there were several firms in a single estuary. But this is a service industry, and if a ship calls in an estuary and finds that there is no berth available in one of the ship repairing firms it is a positive advantage to have alternative resources; otherwise a ship may have to steam another hundred miles along the coast before it can get assistance.
The noble Lord has suggested that the declining output of the ship repairing industry was another factor reflecting poorly on its performance. But as my noble friend has pointed out, in that period from 1968 to 1972 the fall off in British ship repairing yards was only 3½ per cent. per year while in Western Europe it was 6 per cent. We were nearly twice as
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good as Western Europe in that respect.
Then, the report shows that UK costs—and this was not mentioned—are generally lower than they are in the case of our North European competitors. That was before the pound fell by another 50 per cent. in value so they are even better value now than they were then. Here, again, I do not think that that argument stands up.
Then it says that ship repairing industrial relations are not good. But any of us who travel abroad know that the reputation this country has for industrial relations anywhere in engineering is not good. That is why we are not getting the orders we ought to be getting because we cannot promise either reasonable escalation of costs, or sometimes we cannot promise functional delivery on time because of poor industrial relations.
Surely it must be remembered that generally in North-West Europe—and this comes out in one section of this report—they have one trade union with whom they deal and here we have five or six trade unions. It is very much more difficult to get happy industrial relations with five or six competitive unions. I do not think, therefore, that it is right to compare the structure of industry in this country to its disadvantage. If we take the whole report it certainly does not put forward a bad image of what ship repairing has been able to do in the period in which it was reviewed and I hope the noble Lord will now consider whether in the interests of saving public money—and I come back to it—of not disrupting a reasonably happy and productive industry, and of saving the reorganisation, the disenchantment and the waiting which now goes on, he will not agree to delete ship repairing from this Bill.
10.43 p.m.
Lord WYNNE-JONES: The noble Lord, Lord Orr-Ewing, has raised points about the whole of ship repairing. I do not claim to know much about this, but I should have thought that there is a very big difference between the scale of operation of different firms in this field. There may be certain branches of ship repairing such, for example, as are associated with Swan Hunter on the Tyne, which are done on a very large scale and which amount almost to shipbuilding, but there

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are others which are very minor. It is rather like the difference between completely reconstructing a particular vehicle or, if one is referring to garments of wear, for example, to sending one's shoes back to the manufacturer almost to be re-made, and having the minor job done. I should have thought there may well be a case for distinguishing between scale but not a case for distinguishing between ship repairing as a whole and shipbuilding.
The noble Lord has roamed rather widely. He has roamed over the steel industry and the coal industry. I would challenge some of the things he has said, but they seem to me to be largely irrelevant to what we are discussing now. We are discussing this question of ship repairing and it seems we ought to stick quite clearly to this point. The point is surely a very simple one; that is, is ship repairing as a whole so distinct from shipbuilding that it ought to be separated? I should have thought that ship repairing as a whole is not so distinct. It may well be that certain branches of ship repairing, depending on the scale, may well be regarded as unsuitable for exclusion from this Bill. I am not prepared to discuss where the line should be drawn, but the Government have taken this into account in the Bill and therefore I should have thought we are dealing here with something that is essentially perfectly reasonable and sensible, and that to exclude ship repairing as a whole would be utterly unreasonable.
10.45 p.m.
Lord MOTTISTONE: If I may address your Lordships briefly in answer to what the noble Lord has just said—and I am quoting from experience in the Navy—surprisingly, there is a great difference betweeen ship repairing as a whole and shipbuilding. It is quite remarkable how good shipbuilders are bad ship repairers, and good ship repairers (like the Naval Dockyards) are not so good at shipbuilding. I studied this for many years with puzzlement. It seems to demand a different approach, a different way of dealing with things; maybe there is a greater flexibility of approach in ship repairing. Frankly, you cannot compare it rather casually with repairing shoes. It is a totally different activity. I am not entering into the other arguments at this
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point. But I just want to make it quite clear that the noble Lord is on the wrong track.
Baroness WARD of NORTH TYNESIDE: I do not intend to make a very long speech about ship repairing, but having represented from 1931 to 1945 a very industrial constituency, Wallsend-on-Tyne, where we had a very important ship repairing yard as well as a shipbuilding yard, I know that in my part of the world—and they do not always, naturally, agree with me—they like to be referred to. Therefore I thought that I would support our Amendment that ship repairing is different from shipbuilding, and I wish to make certain comments on that fact.
I listened with very great interest to my noble friend Lord Orr-Ewing, who knows very much more technically about this matter than I do. At the same time, the noble Lord opposite very wisely began by saying that he did not know very much about it. Probably he thinks I do not know very much about it. At any rate, for quite a long time Wallsend did me the honour of returning me to another place, and therefore I learned a lot about ship repairing.
I want to mention the two firms concerned, Swan Hunter Ship Repairers (Tyne) Limited and the Wallsend Slipway and Engineering Company Limited. In the North of England one of our problems, as I am sure noble Lords know very well indeed, is that of employment. In the Swan Hunter ship repairing yard not only did we give a lot of work to those who lived in Wallsend, but also to a great many people who used to cross over the Tyne from Jarrow. Most noble Lords will know of the problems of unemployment that Jarrow had to face for very many years. While I certainly think that the noble Lord opposite is a very distinguished person in his own part of the country, he would have been a little wiser had he not started by saying that he did not know anything about ship repairing.
May I say that sometimes I am very annoying to my own Party, and my own Government. I well remember that for very many years in another place I was arguing for certain action for the Wallsend ship repairers. I remember that one of

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my colleagues and I in another place always had down an Amendment for a little additional assistance when new berths were being built in our ship repairing yard. I noticed that I was always called to speak at 6.30 a.m., and I was never able to convince even my own Party that what I and my colleague were suggesting was worth while. Nevertheless, the Wallsend ship repairing yard has gone on and is a very highly regarded yard. It is quite different from a shipbuilding yard. The men were very proud to work in the Swan Hunter ship repairing yard, and I think it would be absolutely wrong to nationalise it. I can tell your Lordships that on the Tyne they do not like nationalisation. I find it extraordinary that when in another place the Chancellor of the Exchequer says, quite rightly, that we must save money, the Government want to go on with their nationalisation plans. I do not understand it, because they could stop them quite easily. They could cut expenditure in this way much more easily than in other ways. If the ship repairing yards were left to get on with their work they would do it very well indeed.
I shall not go into technical matters because I have never regarded myself as "technical"; but I was extremely proud when, not so very long ago, the Boilermakers' Union—a very tough Labour-supporting union—were celebrating, I believe, 100 years of existence, they very kindly asked me to their dinner. I thought that was extremely nice of them, because I have always been on friendly terms, even with those people who used to vote solidly against me. I believe in that kind of relationship, even if it means that I have had to argue with my own Party sometimes; but tonight I am supporting them wholeheartedly.
I should like to mention another firm, because I know how good they are; that is, Bristol Channel Ship Repairers Limited. They have an excellent record, too. They are smaller, of course, and have been able to bring their employees into consultation on the actual working. I should like to support them too, because I have great admiration for their work. I shall not say any more, but I feel almost as though I were back in the old days, although not quite back to 6.30! Certainly, unless we get a reasonable answer, which I doubt—and I do not say that nastily, because I do
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not expect the noble Lord, Lord Melchett, will agree with what we are saying—I shall have great pleasure in voting against him. Therefore, I shall have great pleasure in supporting the Amendment which has been so ably moved from this side of the Chamber. I hope that we shall have a very large majority, because I believe that would please those in the North of England, and I always like to speak up for those who have been such friends and done so much for the nation all the years that I have been their Member.
Lord GISBOROUGH: The 100 ship repairing companies under the SRNA are spread out all round the coast where they are needed. The peculiar thing about them is that the jobs they have to do are very varied: some last only for hours while others last for days or months. The cost varies from £100 to £1 million, and so on. We know already that the repairers undertake surveys, repairs, refits, conversions and a great variety of jobs. Some have to work in dry dock, some in harbours, some in buoys and some at sea, while the ship is sailing all over the world. The speed at which they can do the work is all-important. Shipowners like to keep contact with individual firms because they know their opposite numbers and can very often bargain about prices, and so on, before work starts.
The efficiency of this industry is vital to the customers, because one must remember that the cost of running or delaying a ship can amount to thousands of pounds per day. There is criticism on the grounds of fragmentation, but that is necessary because every port needs to have a ship repairing outfit not too far away. As has already been said, this industry is similar to the manufacture of motor-cars, because although the manufacturer can be some distance away the garage around the corner is always needed. Rationalisation has been going on and is continuing. Criticism has been levelled at the industry for its labour relations, but the number of man-days lost is no worse than in any other industry, and in some cases is much better. It is said that casual labour is employed on a day-to-day basis, but this is a totally outdated idea and casual labour was finished in the 'sixties. Labour relations in some firms have been particularly good, and one has been mentioned by the noble Baroness.

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It is said that there has been a decline in the share of the world market for repairing, with a reduction in employees. But it must be remembered that, while shipbuilding is worldwide and a ship can be built anywhere, repairing can be of use only to ships within the area of North-West Europe. It is interesting that the Australian-Japanese trade has blossomed out at various times, but that is totally irrelevant to the repairing industry. It is only fair to compare the British ship repairing industry with like industry in Europe, and one notices that between 1968 and 1972 the drop in the output of the repairing industry in Europe was 6 per cent., whereas that in the United Kingdom was only 3 per cent. It is also true to say that there was a slump in shipping yet, in spite of that, during the period from 1968 to 1972 the number of foreign ships dealt with by repairers went up from 14 per cent. to 27 per cent.
There has also been a reduction in many directions over which the repairers have no control. The number of coastal vessels, and the number of passenger ships using United Kingdom terminal ports, have both reduced. There are very much bigger, and therefore far fewer, ships and, in some cases, the facilities of the repairing yards have been too small to cope with the big tonnages. There have also been longer periods between dry-docking, due to the increased efficiency and management of ships, together with modern techniques; and, in addition, continuous survey has crept in, which has reduced the need for regular surveys. A relaxation in the requirements of classification societies has meant that minor damage is allowed to continue unmended for a longer period. There has been a change in trade patterns—for example, containers—and British fleets have generally become younger and require fewer repairs.
There has been a suggestion that nationalisation would allow a further exchange of labour between shipbuilding firms and ship repairing firms. This is something of a red herring. At the moment, 9 out of the 12 firms are totally divorced from shipbuilding yards. At Swan Hunter and Wallsend, where they work closely together, there is extremely little interchange. There is, however, quite a lot of interchange in the case of the smaller and medium sized yards
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which are not to be nationalised, and there is a real fear that if they are not nationalised they may be forced to change. That is to say, work which would otherwise go to some ship repairers might forcibly be transferred to shipbuilding yards, to the cost of the ship repairers but to the benefit of the shipbuilding yards which may be short of work. However, it may work to the considerable disadvantage of the ship owners and cause delays and extra costs.
The idea of linking shipbuilding with ship repairing is out of date. If anything, the trend in the modern industry is for their courses to diverge. I should like to support the noble Lord who said that there is a very distinct difference between the shipbuilders and the ship repairers and that the one does not do particularly well the job of the other. One of the reasons for nationalisation in other industries has been the amount of public money which has been poured into them. The ship repairers have had no support whatsoever from public funds. They have reinvested from their own profits. One particular case that I should mention is a special dry dock which has been built to cater for North Sea opportunities. Another example is a large floating dry dock which is being brought from the Middle East and is on its way here now, entirely financed by the ship repairers.
Some of the ship repairers are not to be found in the assisted areas and do not benefit from the higher levels of assistance which are available to the rest of the industry. There is no argument for the nationalisation of the ship repairers. Indeed, there are arguments against it. It is an industry which is unsuitable to management on a national scale and national planning. The sizes of the yards are different and their management varies greatly. The shipping industry has indicated that it would much rather deal with individual firms and it opposes the nationalisation of the ship repairers.
Finally, I have yet to hear any reason given as to why nationalisation will speed up modernisation. I have yet to hear any reason given for the nationalisation of any part of the industry which is convincing in any way, other than political dogma. Every reason that is given is completely refuted by the facts. This is a successful and good industry and it is

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able to carry on by itself. Any change which involves nationalisation can do no good; it can only muck it about. The industry serves this country well and has contributed to tax. The nation is virtually broke, yet instead of having the tax which the profits from the ship repairers bring to it, this nation wishes to buy the companies' capital. Even if the terms are confiscatory, nationalisation will still cost a great deal.
About a week ago we heard that the issue of bonds was not inflationary—that it was a transfer of resources. One should remember that the resources which are to be transferred, or the bonds which are to be issued, will mean that interest amounting to 15 per cent. annually will have to be paid to those who are issued with the bonds. I expect that those people will sell their bonds immediately, but some people will be left with them. Unless, therefore, the companies which are bought pay considerably more than 15, 20 or 30 per cent., through nationalisation, both the country and the industry will be worse off. The ship owners will be worse off also because of the lower service that they will be able to offer. In fact, we shall all be worse off—except the political theoreticians who will have had their way. Their dogma and their political pride will have been satisfied.
Lord MELCHETT: May I first respond to the point which the noble Lord, Lord Campbell of Croy, made on the subject of hybridity. As he said, my noble friend the Leader of the House has answered a Question for Written Answer which was placed on the Order Paper, I believe, yesterday by the noble Viscount, Lord Colville of Culross, on the matters which the noble Viscount raised on the last day on which we discussed ship repairing at sonic length, the previous day on the Committee stage of this Bill. My understanding is that that Written Answer will appear in Hansard tomorrow, although unfortunately it was not prepared until rather late this evening. But noble Lords will appreciate that it was not until yesterday morning when the noble Viscount's speech appeared in Hansard that those who advise the Government, indeed the Ministers involved, even had a chance to read what the noble Viscount had said. As the noble Lord has said,
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although the Government remain quite convinced of their case, and have done all along, it was important—and I think noble Lords opposite would expect it—that we took some time and considerable care to study what was said and respond. And some of the points were points of detail which inevitably necessitate further checking just to make sure that the facts that were checked many months ago when the Bill was prepared were still as they were when they were previously checked. So inevitably a considerable amount of time has to go by; if I may be permitted to pay a tribute to those who have done a great deal of work in providing the answer so quickly it might be appropriate for me to take this opportunity to do so.
Lord CAMPBELL of CROY: I hope the noble Lord noticed that I thanked the Front Bench opposite for having taken so much trouble to produce this answer by this evening, because I certainly wish to say so myself, recognising how much work must have been done by officials.
Lord MELCHETT: I am very grateful to the noble Lord. Indeed, I was passing the buck from the Front Bench, who did not have to do most of the work, to those who actually did. I am in a difficulty in replying to what I think is the third major debate we have had on ship repairing in your Lordships' House in the space of a few weeks. There is one of me and I have one speech which I have now made at least twice, and there are several noble Lords opposite who have made the same speech or at least the same points more than once. However, some noble Lords have not necessarily made new points but put the same points in a different way, and my answer, if I read the whole thing out again, would inevitably be rather repetitive.
I certainly accept what the noble Lord, Lord Orr-Ewing, said about the PA Management Consultants' report. I apologise if I gave the impression that the report was entirely critical of the industry. I do not think it would be fair to say that any Government Minister has ever got up and said that the industry is in a complete mess and can only be saved by nationalisation. We have said that there are things wrong with the

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industry which could be put right and we have drawn on the information given in that report to support the case, but not necessarily entirely to make it for us.
As the noble Lord knows, it is tempting, obviously, when there are consultants appointed by the Party opposite, to draw on their conclusions for one's evidence, and I was grateful to the noble Lord, Lord Orr-Ewing, for acknowledging the temptations, to which I have, I regret to say, succumbed. The only point I would make on the recommendations is that of course the consultants could look very widely at the industry, but I think the noble Lord would accept that it would be a bold firm of management consultants which, having conducted the survey, would recommend to a Conservative Government that the only way solution for the industry was nationalisation. That was the only point I was seeking to make about their conclusions.
There was one point which I think was made by the noble Lord, Lord Orr-Ewing—it may not have been him, and I apologise if it was somebody else—about the question of there being more than one ship repairer on a particular estuary. I know that this is a point made by PA Management Consultants in their report on the industry. But it seemed to me that there might be a danger of confusing the criticism in their report that there was more than one ship repairer on an estuary and often they were competing with each other for orders instead of competing against the Continent, which I think is the point made in the consultants' report, and the Government's proposals for that sector of the ship repairing industry which we wish to see vest in British Shipbuilders. Our case there is that the definitions in Schedule II have been drawn up to provide British Shipbuilders with a coverage of most of the major estuaries in this country so that they have ship repairing firms which cover the main estuaries in this country. The Schedule has not particularly been drawn up in an effort to rationalise the industry, but to give a reasonable coverage of the main estuaries to British Shipbuilders and the main ship repairers in this country.
I am tempted to return to a debate on a previous Amendment when the noble Lord, Lord Orr-Ewing, referred to the
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multiplicity of unions faced by the ship repairing industry. That was one of the criticisms that was put into the Government's mouth by noble Lords opposite, although I do not think I actually made the point myself. One of the dangers of consulting with a multiplicity of bodies is exactly that which the noble Lord, Lord Orr-Ewing, has raised, and one which I think we all accept that this country suffers from to some extent.
I am sorry in a way to see ship repairing leave the Bill at this stage, when we have had so many interesting debates on it. It will be like losing an old friend; but I hope I shall not be losing the friendship of the noble Baroness, Lady Ward of North Tyneside, who says that she wishes to vote on this Amendment. I sympathise with her; I know how strongly noble Lords opposite feel about this. She will forgive me if, like Danny McGarvey in his time, I vote strongly against her. The Government continue to believe that the proposals in the Bill are the right ones for British Shipbuilders, the shipbuilding industry and the ship repairing industry. I do not think this is something on which the noble Baroness and I can agree; I think we shall just have to agree to vote against each other on the issue.
11.12 p.m.
Lord CAMPBELL of CROY: There has been a useful debate on this Amendment, and first I should like to say something about the remarks of the noble Lord, Lord Wynne-Jones, because he inquired about the characteristics of the ship repairing industry and he did so with that inquiring scientific mind of his which we know so well. I think he was genuinely seeking information and then making an assumption which led him to a certain conclusion. But I think one can answer him straight away when he asked whether ship repairing was so different from shipbuilding. It certainly is a different and separate activity, and also the characteristics of the ship repairing industry are such that most of the firms are ready to take on small repair tasks as well as larger tasks, whereas the noble Lord, Lord Wynne-Jones, was inquiring whether the industry was not divided into larger firms which were restricted to taking on major tasks. That is not so. In different areas these firms are ready, at short notice, to carry out a wide variety

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of tasks, whatever the size of the firm itself. I think the noble Lord was answered most concisely by my noble friend Lord Mottistone from his experience of years in the Royal Navy, when he pointed out that ship repairing was, as he had found from his own experience, entirely different from shipbuilding.
My noble friend Lord Orr-Ewing went in some detail into the P.A. Management Consultants' report. I simply mentioned the main recommendations and the background to that report. I think he has helped us, in the light of what the Minister said on Monday, to read a proper interpretation into that report. In particular the noble Lord, Lord Melchett, having said that they were not asked to put forward any solution, when my noble friend read out the remit it was perfectly clear that if they had wanted to they could have put forward their own solutions. The noble Lord has asked whether they would put forward nationalisation to a Conservative Government, but the point is that they could have put forward any particular solution or pattern had they so wished. In fact what they did, as one would expect, was to make certain criticisms but generally to give a report on the industry. It was not a bad report. It was helpful as it came from consultants to a Government which were looking at the industry to see what improvements might be made.
My noble friend Lady Ward of North Tyneside very much reinforced us in our views on the subject, speaking, as she does, from her personal experience of having represented a ship repairing area. She gave her support quite clearly to the purpose of this set of Amendments. Then the noble Lord, Lord Melchett, himself, in his reply, said, with his usual charm, that he had only had one speech on this subject, and he had used a little of it on Second Reading, he had used it on Monday and again he had had to make use of most of it today. We were hoping for a different speech today. We were hoping that at least there would be some new element in it after he had considered what had been said on the earlier occasion last Monday.
I must tell the noble Lord that there is no question of his losing the subject so easily tonight, because I made it clear on Monday that we would move the Amendment on Monday and this Amendment again
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with a view to continuing our examination of this subject, one of the most important subjects in the Bill, and asking for Government explanations, and especially explanations on why these 12 firms have been selected for inclusion in Schedule 2. Although we shall he studying in that connection the Written Answer Liven on the hybridity question, we must again record that the criteria themselves which the Government are interpreting seeni to be quite arbitrary in the selection of 12 out of the 100 or so firms which exist in Britain.
We intend to press these Amendments on Report, as I said earlier on, unless the Government satisfy us on this important matter. But we do not intend, as I did not on Monday, to press this series of Amendments at this stage. Therefore, I now seek leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
11.17 p.m.
The Earl of INCHCAPE The Earl of INCHCAPE moved Amendment No. 67:
After Clause 3, insert the following new clause:
Restriction on certain powers
. Notwithstanding anything in the two last preceding sections of this Act or in any subsequent provision of this Act or in any order, consent or authority made or given under this Act neither British Shipbuilders nor any of its subsidiaries shall—

(a) manage or operate any ship;

(b) enter into any arrangement with regard to the management or operation of any ship unless the arrangement is such that the amount of any payment thereunder of money or moneys worth to or by British Shipbuilders or any of its subsidiaries is calculated independently of the earnings of that ship;

(c) acquire and hold an interest in or form or take part in forming a body corporate or enter into any partnership with a person if the business of that body corporate or person is or is to be wholly or mainly the management or operation of any ship;

(d) receive any moneys or moneys worth in consequence of holding an interest in a body corporate or of being in partnership with any person if the amount of those moneys or that moneys worth is dependent in whole or in part upon the earnings of any ship.

The noble Earl said: I will not read out the Amendment because it is too long, but I should like to explain why three of

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your Lordships, all of whom are involved in the shipping industry, feel it necessary to put forward this Amendment. Briefly—and I will be brief at this late hour—we are concerned that British Shipbuilders could deliberately or inadvertently stumble into the position of setting up an embryo national shipping line—in short, engaging in a shipping industry, which is completely and absolutely different from shipbuilding. As your Lordships can see, it is not stated expressly in the Bill that British Shipbuilders can operate or manage ships, but under Clause 3 the Secretary of State could clearly give British Shipbuilders authority to engage in such activities, either directly or indirectly. That is not in the interests of British Shipbuilders for reasons which I will give later. It is also not in the interests of British shipping, and it is for that reason that my noble friends and I are so concerned about it.
Our fear is that, because of the vast over-capacity in world shipbuilding today, British Shipbuilders will not find it at all easy to sell ships, which means that from time to time they may find themselves completing a ship for which there is no previously arranged buyer. In those circumstances they will have a choice between selling the ship at a loss or trying to muddle through by operating it themselves, until hopefully the market turns up. I believe that in these circumstances any attempt by British Shipbuilders to retain the ship would be merely concealing and postponing a loss, and doing so in a way which would vastly increase it. If no experienced shipowner in the world can make a profit from operating such a ship, it is quite certain that British Shipbuilders will not be able to do so. It follows that if British Shipbuilders were so foolish as to engage in ship operating, they would be losing money and before long someone would be suggesting that this Government-owned company should receive special assistance.
It might, for example, be suggested that it should receive special preference in obtaining cargoes from other nationalised industries. That is cargo discrimination, a practice against which successive Governments of all Parties have set their face for over 100 years and opposed all round the world, to the great benefit not only of the British shipping industry but of world trade. That is not all. I believe
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that cargo discrimination would be the thin end of the wedge, the first sorry step towards the nationalisation of shipping. It is for that reason that the shipping industry believes that the restrictions proposed in this Amendment are necessary. They are also in the interests of British Shipbuilders itself. We hope that the new Corporation will be capable and experienced shipbuilders, but even so they will have the greatest difficulty in making money in their own line of business; they have no hope whatever of making money in someone else's business, with ships the rest of the world does not want and without having any shipping management expertise. Accordingly common sense alone should rule out any question of British Shipbuilders engaging directly or indirectly in the operation or management of ships.
As your Lordships may have noticed, this Amendment does not prevent British Shipbuilders from owning ships. It is now quite common for ownership of ships to be divorced from management and operation. The owner of a ship may be a bank or a leasing company having a purely financial interest, and they are both charging out the ship in return for a fixed revenue. My noble friends and I can see no objection to British Shipbuilders assuming this role, and we have drawn our Amendment with great care so as not to inhibit British Shipbuilders in this respect. It was tempting to have an Amendment which would simply prohibit British Shipbuilders from being involved in any way in the ownership, management or operation of ships. I hope the Government will appreciate the efforts we have made to keep these restrictions to the absolute minimum.
I shall not be surprised if the noble Lord, Lord Melchett, attempts to justify the retention of this power on the grounds that other international shipbuilders have it and use it. If so, it will be interesting to hear if his examples are from nationalised industries or from private industries. For it is one thing to have a private shipbuilder lose his own money in trying to operate ships; it is quite another thing for a Government organisation to do so, and it is only in a nationalised industry that there is this risk of cargo discrimination about which I have spoken. If the

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Minister is asking for freedom or flexibility, he is asking for that freedom to operate ships at a loss. My noble friends and I believe that it is not in the interests of British shipping or British Shipbuilders that the new Corporation should have that particular freedom. I beg to move.
Lord INVERFORTH: I made my maiden speech a few days ago during the Second Reading of this Bill, and several of your Lordships were extremely kind in the way you received it. Unfortunately, I had to leave before the end of that debate, and I should particularly like to thank the noble Lord, Lord Melchett, and other noble Lords who spoke in the later stages for the kind references they made to my first effort. I read their remarks with much appreciation, and I do apologise for not being in the House to actually hear them.
My noble friend Lord Inchcape has carefully explained the purpose of the Amendment which stands in our joint names. The wording is inevitably complicated and we are sorry for this. I would certainly be willing to go into the details as to why four separate paragraphs are necessary, but I really think it would suffice to say that our Amendment is designed to prevent British Shipbuilders from engaging in the operation or management of ships either directly or, by means of a contract or a joint venture, indirectly.
As the Bill stands, British Shipbuilders could easily become involved in a contract or joint venture under which its fortunes would depend on the trading results of a foreign shipping company, competing with British shipping companies. Your Lordships will, I hope, agree that it would be a sad day if the Government had a financial interest—albeit an indirect interest—in a foreign shipping company, prospering at the expense of British shipping companies. Our Amendment is obviously a relatively minor issue to the shipbuilding industry. To us in the shipping industry it is a major one. The shipping industry is an efficient one—I use this much debated adjective proudly. It is engaged in earning the foreign currency this country so desperately needs. We hope your Lordships will prevent any risk of this successful shipping industry being damaged almost accidentally by a Bill which deals with quite another industry.
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May I mention one aspect which seems to me highly important, which is that the excellent relationship that currently exists between the owners and the builders should not be damaged. The goodwill of the customer could quickly cool if the supplier became a potential competitor. When my company orders a ship we work most closely with the builder, his naval architect and his design staff. The trade for which the ship has been designed must be very fully discussed. Indeed, the British yards who have built over the years many ships for my company know the pattern of our trades and their requirements nearly as well as we do. Several British shipbuilders have at times come to my company for advice, as we have ships operating in the worldwide tramp market as well as those servicing our Lines. The builders ask us how we see the future pattern of worldwide trade, as they say it would help them to know the type and size of ships we are thinking of building. This, they tell us, greatly helps their design teams in preparing plans for future tonnage.
There are many other owners who also work closely with our shipbuilders, and so we have this helpful and cordial atmosphere between the two industries, with information being exchanged for mutual good. The owners are in fact co-operating wherever possible in an especial endeavour to lighten the many problems which face the builders at this time. I should not like to see this spirit of co-operation undermined or soured by the advent of the proposed new Shipbuilding Corporation managing its own fleet. When the apprehension of the ship owners over this matter was mentioned in another place the Government attempted to reassure our shipping industry with kind words, which were appreciated. However, that is not enough. The one reassurance which would set our minds at rest would be the acceptance of this Amendment, which I hope your Lordships will support.
11.28 p.m.
Lord CAMPBELL of CROY: On behalf of my noble friends on this Bench I should like to support this Amendment which has been moved and explained so clearly by my noble friend Lord Inchcape, and supported by the noble Lord, Lord lnverforth. Although the Bill has been amended today,

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as originally drafted Clauses 2 and 3 made it possible for British Shipbuilders to move without any further legislation into other activities and to engage in the ownership and operation of ship-owning as one of those activities.
It is clear from what my noble friend Lord Inchcape pointed out, that this would not be in the interests of either the shipbuilding industry or the ship-owning industry, or in the interests of Britain. But may I add some reasons to those that have already been given. I would point out that the new Corporation, British Shipbuilders, might well be tempted at times to sell ships to itself at moments when, such as in the last two or three years, there has been a recession in the market for ships and there is great competition for orders and far more capacity in shipbuilding than demand requires. It could then well be a temptation for British Shipbuilders to go on building ships and then to sell them to themselves. That would be a short-sighted policy and would only conceal losses, and in the end British shipbuilding and British ship owners would suffer from that sort of competition.
The British shipping companies already buy most of their ships from British shipyards and if British Shipbuilders were to move into this new activity it would only antagonise the British shipping industry. As my noble friend pointed out, there will not be a lot of money available to British Shipbuilders. Indeed, the money needed for the Bill as a whole is money that can scarcely be afforded in our present situation, and to use some of it for ship operating as well as shipbuilding would surely be a wrong use of those funds.
The other reason I would put forward in support of the Amendment is that British Shipbuilders, however good its management may be for shipbuilding, will not also have the management required for operating ships at sea. I should like clarification from my noble friend as to whether I am right in thinking that there is no prohibition in the Amendment on British Shipbuilders owning ships; that they might for a period own ships provided they were not operating them. That was my interpretation of it, but for clarification it would he helpful if that could be made clear. Certainly if
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the new Corporation were to operate ships and try to branch into that activity it would have the unfortunate results which my noble friend outlined.
This is a reasonable Amendment which in our view is needed, and if the Government have difficulties with its terms, I hope they will come forward with alternative wording. It is important, whatever assurances the Government may give on this subject today, that this should be clearly written into the Bill to allay any apprehensions among ship owners that this new nationalised body would start operating in ship owning and running ships as well as the duties they are supposed to have under the Bill.
Viscount SIMON: I appreciate that noble Lords are anxious to hear what the noble Lord, Lord Melchett, has to say in reply, so I will detain the Committee only briefly. My noble friends and I warmly support the Amendment. The noble Earl, Lord Inchcape, made a very good point when he said that if the ship owners—and British ship owners are very efficient in their operations—are not prepared in certain circumstances to buy a ship and to operate it, it is very unlikely, if it were left to the new Corporation, that they would be able to make profitable use of it in a business in which clearly they will have no management expertise. We, like the Conservative Party, believe that nationalisation has gone far enough and that to go into a new venture like shipping with a nationalised Corporation would be a serious mistake.
Viscount RUNCIMAN of DOXFORD: I have only one point to make. Other noble Lords, including the noble Lord, Lord Campbell of Croy, have gone into the detail of the Amendment. It seems to me from experience of active ship owning, which I must confess now extends to slightly over 50 years, that one lesson one can learn is that it is almost always fatal to be at the same time the supplier and the customer. I can remember one case a long time ago where a very large concern in the ship owning and shipbuilding fields came very badly to grief very largely for that reason. The temptation is always there, if you build a ship you must run her; if you run a ship and if you think that you can build cheaper than you can if you go to a

631
specialist, you come adrift in the other direction. My noble friend Lord Inverforth emphasised that the relationship between the ship owners as customers and the shipbuilders as suppliers must be absolutely clear cut. If you do not ensure that, you will have trouble, confusion and, I think, loss to both parties.
11.36 p.m.
Lord MELCHETT: I should like first to reiterate the point which I made on Second Reading in response to the remarks which the noble Earl, Lord Inchcape, and the noble Lord, Lord Inverforth, made during that debate. Of course, I entirely agreed when the noble Lord, Lord Inverforth, said tonight that it was extremely important to continue the existing relationship between the shipbuilding industry and the ship owners. I am sure that that is something of which the Organising Committee of British Shipbuilders is very much aware.
As the noble Earl and the noble Lord have explained, the new clause is an attempt to limit the scope of the activities which British Shipbuilders may undertake. This new clause represents another attempt to limit the scope of the activities British Shipbuilders may undertake. One of the main objectives of the Bill is to allow the Corporation maximum flexibility to operate commercially while ensuring that it is fully accountable. This new clause would place further restrictions on the scope of the Corporation's activities by preventing it from even considering particular options. Indeed, I am advised that in the case of the Falmouth Towage Company which, I understand, operates tugs, the Amendment, if carried, would actually prevent the carrying out of an activity already undertaken by an existing company which is to vest in British Shipbuilders under the Bill. The Government are naturally opposed to limiting any option open to the Corporation which might help it to achieve its objectives, however unlikely it may now seem that it would wish to take advantage of it.
At the same time I should point out that British Shipbuilders may not undertake any new activity without the consent of the Secretary of State. Such consent would not be forthcoming if the Secretary
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of State had doubts as to whether the activities would be in the national interest. In considering the possibility, the Secretary of State would look most carefully at the effect on the activities of existing shipping lines of any extension of British Shipbuilders into the shipping field.
The position I have just outlined is of course a theoretical one. Present circumstances make unlikely an extension of the Corporation's activities into shipping on the lines envisaged in the Amendment. British Shipbuilders envisage that it will normally be its practice where it owns ships to put them out on bareboat charter for a fixed period through ship brokers on commercial terms. I understand that noble Lords who moved the Amendment see no objection to this, and I understand it to be the present intention of British Shipbuilders to do this.
There will be occasions, however—and I expect them to be comparatively rare—where British Shipbuilders may see an opportunity to enter into a joint venture and thereby persuade an owner to order, say, three ships instead of the two he would order if he were to operate alone. By participation in the venture, British Shipbuilders might thereby secure an additional order for a British yard. Noble Lords may say that the Corporation could under the terms of the Amendment participate on a fixed return basis. But this is unlikely to be attractive to the partner, who is only likely to be persuaded to go ahead with ordering more ships if the Corporation shows itself ready to take a share in the risk-taking involved. As I have said—and I would emphasise this—the Corporation is obliged to act commercially and it will therefore not enter into such ventures lightly.
There may also be occasions, again probably only rarely, when for some reason British Shipbuilders may find itself with a ship on its hands; for example, when it built for charter for a specific buyer who was then unable to take delivery for some reason. If the Corporation had this ship on hand, it would be acting in its commercial interests to occupy it with individual cargoes until such time as a bareboat charter could be secured. I hope I have made it clear that I expect occasions on which the Corporation would either wish to canvass for individual cargoes or to enter into

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joint ventures to be rare. Moreover, on such occasions British Shipbuilders would operate in a genuinely commercial manner. Equally, however, to accept this new clause could result in an unacceptable restriction on the flexibility which the Corporation needs both to achieve a commercial return and to best assist the British shipbuilding industry in its present very difficult position. The Government believe it would be quite wrong, as was made clear when this subject was debated at least twice in another place, to impose restrictions on the public sector which are not imposed on the private sector. I should like to repeat my assurance that I do not envisage, and indeed I can assure noble Lords that Ministers would not condone, such activities resulting in harm to the British shipping industry. I hope that with that full explanation of our objections to the new clause and with the assurances I have given, the noble Earl and the noble Lord might be able to withdraw the Amendment.
The Earl of INCHCAPE: I thank the noble Lord, Lord Melchett, very much for his reply. Certainly some of the assurances he has given would on the face of it seem to be satisfactory. But from some of the other things he has said it would seem clear that there would be exactly the same dangerous effect on the British shipping industry as my noble friends and I feared in our speeches, and therefore I wish to press the Amendment.
11.43 p.m.
On Question, Whether the said Amendment (No. 67) shall be agreed to?
Their Lordships divided: Contents, 43; Not-Contents, 17.

CONTENTS

Amherst, E.

Hives, L.

Orr-Ewing, L.

Beaumont of Whitley, L.

Hornsby-Smith, B.

Redesdale, L.

Brookeborough, V.

Inchcape, E. [Teller.]

Runciman of Doxford, V.

Campbell of Croy, L.

Inverforth, L.

Salisbury, M.

Carr of Hadley, L.

Killearn, L.

Sandys, L.

Carrington, L.

Lloyd of Kilgerran, L.

Selkirk, E.

Colville of Culross, V.

Lyell, L.

Selsdon, L.

Denham, L. [Teller.]

Mackie of Benshie, L.

Simon, V.

Drumalbyn, L.

Morris, L.

Strathclyde, L.

Dundonald, E.

Mottistone, L.

Strathcona and Mount Royal, L.

Elles, B.

Mowbray and Stourton, L.

Vickers, B.

Elton, L.

Newall, L.

Ward of North Tyneside, B.

Ferrers, E.

O'Hagan, L.

Wardington, L.

Gisborough, L.

Onslow, E.

Wigoder, L.

Harcourt, V.

NOT-CONTENTS

Champion, L.

Llewelyn-Davies of Hastoe, B.

Peart, L. (L. Privy Seal.)

Davies of Leek, L.

McCluskey, L.

Stedman, B.

Elwyn-Jones, L. (L. Chancellor.)

Melchett, L. [Teller.]

Wells-Pestell, L. [Teller.]

Harris of Greenwich, L.

Murray of Gravesend, L.

Willis, L.

Janner, L.

Oram, L.

Winterbottom, L.

Kirkhill, L.

Resolved in the affirmative, and Amendment agreed to accordingly.
Baroness LLEWELYN-DAVIES of HASTOE: I think it would be with the general agreement of the Committee if I moved that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.