AIRCRAFT AND SHIPBUILDING INDUSTRIES BILL

HL Deb 14 October 1976 vol 375 cc461-536

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 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 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, 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 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 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 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 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 £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 £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 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 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 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 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 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 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.

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 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 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 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 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 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. 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 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 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 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 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 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, 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 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.

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 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 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 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, 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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, 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 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 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 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 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. 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 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 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, 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 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 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 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.

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— 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 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 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 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 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 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.

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 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; 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 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.