Lords Sitting of 20 October 1976

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Wakefield.

MEMORANDUM OF UNDERSTANDING
Lord ORR-EWING: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what progress has been made in promulgating the Memorandum of Understanding signed on 25th September 1975 by the USA and the United Kingdom, covering the mutual interchange of armament sales.
Lord WINTERBOTTOM: My Lords, British industry has been made fully aware of the provisions of the Memorandum of Understanding, and arrangements exist for advising United Kingdom companies of how they may take advantage of it in seeking to secure orders in the United States of America. For its part, the United States Government has taken steps both to ensure that the provisions of the Memorandum of Understanding are known throughout the Department of Defense and to bring them to the notice of major United States defence contractors.
Lord ORR-EWING: My Lords, is the noble Lord aware that in the five-year period up to 1970 we purchased £1,000 million worth of arms from the United States, and in the last five years, £500 million, and the reverse purchases have been marginal, although the sale of the Harrier has improved them more recently? Is it not true to say that whereas at the top level there is a sincere desire to buy armaments from this country, this may not have worked down to the working level where the decisions are actually made? Is the Minister aware that after a year we very much hope that the working level there will know fully and will honour the terms of this agreement?
Lord WINTERBOTTOM: My Lords, I am aware, as is my right honourable friend, of the imbalance. The United States Department of Defense and a number of major United States defence contractors have been encouragingly helpful in assisting us in our attempts to ensure that United Kingdom companies are able to compete. A particularly welcome initiative from the United States is a visit by a team of high level United States procurement officials at the end of this month, during which they will have detailed discussions as to how the Memorandum of Understanding can be most effectively implemented from now on.
Lord DUNCAN-SANDYS: My Lords, in view of the existence of this Memorandum of Understanding, will the Minister consider publishing at intervals particulars of the sales which have taken place in both directions?
Lord WINTERBOTTOM: My Lords, this is difficult because many such sales are confidential. The Memorandum of Understanding can be seen in the House of Commons Library, and I am certain a copy could be obtained for your Lordships' House. I should imagine that the annual debate on the Defence Estimates might be of advantage for asking questions on the subject. Collaboration is very close to the heart of Her Majesty's Government.
Lord DUNCAN-SANDYS: My Lords, I realise that the exact particulars cannot necessarily be published, but could a broad indication be given of the value of the orders in both directions?
Lord WINTERBOTTOM: My Lords, I will pass that comment on to my right honourable friend, and, as I would say that this is a very important part of British defence policy, I will see whether it can be reported upon annually in broad terms.
Lord SHINWELL: My Lords, in view of the report in The Times newspaper this morning, and the news that has been current elsewhere, that our Centurion tanks have now been outmoded by the production of a new device by the American Pentagon, shall we be compelled now to buy even more from the United States?
Lord WINTERBOTTOM: My Lords, I am not aware of the point made by my noble friend. I will let him know, if he will put down a Question later.
Lord SHINWELL: My Lords, does not my noble friend read The Times newspaper?
Lord WINTERBOTTOM: My Lords, when I have time in the early morning, yes.
Lord BOWDEN: My Lords, may I ask my noble friend whether, when considering the question of the sale of armaments, he could link with it the sales of ordinary commercial goods which have hitherto been barred from the United States on the pretext that they may in some way be concerned with the Armed Services? An enormous number of perfectly ordinary conventional goods have been refused admission to the States for this totally specious reason, which has been used to great effect to protect American industry by a process which we have so far been unable to overcome. Even such things as ordinary diesel engines, for example, have been refused admission. Can this also be taken into account when we consider this question of the sale of armaments, to which it is inextricably linked?
Lord WINTERBOTTOM: My Lords, I am grateful to my noble friend for his helpful comment. I will bring it to the notice of my right honourable friend.
Lord PAGET of NORTHAMPTON: My Lords, is not the essential difficulty in implementing this agreement the fact that the Americans produce much better arms at a much more competitive price?
Lord WINTERBOTTOM: No, my Lords.
Lord ORR-EWING: My Lords, when the visiting team arrives—and perhaps even before they arrive—would the noble Lord stress that it is important that the instructions from the top in the Pentagon should filter down, and should be issued down, to the working level? Up till now, even though over a year has elapsed, this has not come about. We very much hope that these instructions will be issued before the team arrive here, so that we can get on and progress this effort.

THE MALTON BY-PASS
2.43 p.m.
Lord TRANMIRE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government when it is proposed to construct the Malton by-pass on the A64.
Baroness STEDMAN: My Lords, as soon as resource constraints on road expenditure permit.
Lord TRANMIRE: My Lords, has the noble Baroness taken into account the fact that the three projected by-passes on the A64 are really one scheme? To go ahead with the York and Tadcaster by-passes and postpone the Malton one is going to make traffic congestion in Malton quite unmanageable and frustrate the Government's own policy of encouraging industrial development in the Scarborough, Whitby, Malton area.
Baroness STEDMAN: My Lords, I accept what the noble Lord says, that the Malton by-pass is in effect part of one continuous scheme and that there will be problems and congestion; but because of the limited funds available other schemes in the national network have an even greater priority.
Lord POPPLEWELL: My Lords, would my noble friend be able to give an assurance that when finance is again available this Malton by-pass will go ahead before expenditure on further motorways is embarked upon? Is my noble friend aware that this is a scheme that has been pressed for very many years? The traffic from the West Riding and the industrial traffic going to Whitby and Scarborough via this old market town, with its narrow streets, its crossroads in the centre where there are traffic lights, and then over the railway and river bridge, creates very difficult congestion, and there is a case for a first priority to be given as soon as finance is available.
Baroness STEDMAN: My Lords, I thought I had made it clear in my original Answer that as soon as the resource constraints on road expenditure permit, this will be one of the schemes that will be carried out.
Lord MOWBRAY and STOURTON: My Lords, has the Minister considered that one of the things that the country is being asked to do is to economise in fuel? If the Minister could see the build-up of traffic coming from the Leeds, Bradford, York area into Malton, especially during the summer months, she would see that the expenditure on the road might well be offset by the economy in fuel.
Baroness STEDMAN: My Lords, my Department has looked at all the schemes. This scheme will cost about £6½ million. It was formerly due to start this month, and tenders had been invited when the July cuts came. Since the announcement of the deferment we have had made very plain to us by the local action groups, and all other people, the difficulties that will prevail if this part of the scheme is not able to be carried out. In the announcement of the deferment of the schemes my right honourable friend in another place said that this one was included, which meant that it was set back by one to two years, with an approximate starting date of 1978. But that, we hope, is a pessimistic date, and as the resources become available we hope to be able to speed up the start.
Lord DERWENT: My Lords, may I say that if I ask any of your Lordships next year to come up and stay for a weekend, if you come by road you will not arrive until Monday morning?
Lady KINLOSS: My Lords, could the Minister say whether the Government considered applying to the Regional Fund of the EEC for help on this by-pass?
Baroness STEDMAN: My Lords, I have no information on that score. If the noble Lady would like to put down a Question I will get the information and let her know.
Lord GISBOROUGH: My Lords, could the noble Baroness say in what year this Malton by-pass was first conceived?
Baroness STEDMAN: My Lords, a long time ago.
Lord MOWBRAY and STOURTON: 1929.
Baroness STEDMAN: My Lords, it went into the trunk road preparation pool in February 1967. Presumably a lot of protest has been made from all sides since then, but it did go in the trunk road preparation pool in February 1967. We appreciate that there is a bottleneck, we appreciate all the problems to the commercial and holiday people, and we will do our best; but we must have the money first.
Lord BLYTON: My Lords, is the Minister aware that the Conservative Party are always shouting for cuts in expenditure by the Government, yet they are now pleading for extra money to be spent. This is while they are shouting outside that the Labour Party are not making sufficient cuts in capital expenditure.
Baroness STEDMAN: My Lords, I am grateful to my noble friend for his support. We have had to look at our priorities. Malton, regrettably, is not one of the highest priorities. We will do the job as soon as possible.
Viscount ST. DAVIDS: My Lords, is the noble Baroness aware that my head is positively stuffed with good ideas, all of which would greatly improve the country but many of which would cost a great deal of money? Is she also aware that I shall inflict none of them on her or any of her friends while the country is in its present state?
Baroness STEDMAN: My Lords, a very laudable statement.
Lord TRANMIRE: My Lords, will the noble Baroness realise that this scheme started 47 years ago, when it was costed at £100,000? Forty years ago it was accepted by the local highway authority at a cost of £200,000. It is really false economy to put off what must be done in a very short period of time.
Baroness STEDMAN: My Lords, I cannot be held responsible for something which Governments before the one of which I am a member had an opportunity of doing.
Lord MOWBRAY and STOURTON: My Lords, will the Minister take note of

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the fact and assure me that the Government are aware that a world shattering event has happened today? When the noble Lord, Lord Popplewell, has to ask the Government to do something like this about roads around Malton, matters must be very bad indeed.

SOVIET FREIGHT CHARGES
2.50 p.m.
Baroness WARD of NORTH TYNESIDE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they can report on the representations made unanimously by interested European countries, including Great Britain, to the Soviet Union on their unrealistic freight charges for shipping.
Lord ORAM: My Lords, the United Kingdom has taken this matter up with the Soviet Union in the Anglo-Soviet Joint Maritime Commission and I understand that a number of other European countries have done likewise in bilateral discussion. My Ministerial colleagues have discussed the issue with a number of Ministers abroad, and official multilateral consideration of the question is continuing in Western international shipping fora. At the same time there have been contacts at commercial level.
Baroness WARD of NORTH TYNESIDE: My Lords, while thanking the noble Lord for at any rate quite a lot of information, may I ask him when he thinks it likely that we will really hear that something has happened?
Lord ORAM: My Lords, this is a long-term question of negotiation. The noble Baroness will recall, because she asked a Question about it, that in July there was a conference in Leningrad, at the commercial level. At that conference the Soviet shipowners expressed their desire in principle to work within shipping conferences. We believe this to be a helpful approach and we have noticed some recent evidence of apparent Soviet
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willingness to reach a commercial settlement in some areas; an example is the negotiation last month by the Russian Baltatlantic Line of membership of the shipping conferences on the North Atlantic.
Baroness WARD of NORTH TYNESIDE: My Lords, again I thank the Minister for that information. May I ask him to say when he thinks it would be suitable for me to table another Question, bearing in mind that unless one keeps on putting down Questions things fail to proceed?
Lord ORAM: My Lords, I assure the noble Baroness that her Questions are welcome. I suggest that, as two important meetings in this connection are to be held in November—I think on the 2nd—some point after that date might be an appropriate time for her to ask another Question.

OIL EXPLORATION: LICENCE APPLICATIONS
2.52 p.m.
The Earl of LAUDERDALE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how many of the 53 applications for offshore exploration licences under the fifth round were received by 15th September, and how many of those received by 5th October are from groups depending mainly on foreign finance; and when the allocations will be made public.
Lord STRABOLGI: My Lords, no applications were received by 15th September. It is customary in the industry for companies to withhold their applications until just before the deadline. The response has been encouraging and shows that the United Kingdom Continental Shelf continues to be an attractive oil province. The applications are now the subject of commercially confidential discussions, and I am therefore not able to comment on the applicants or their financial resources. A further statement about the round will be made when the applications have been examined and decisions taken on the award of licences.
The Earl of LAUDERDALE: My Lords, in thanking the noble Lord for that Answer, may I also, through him, thank the Secretary of State for a letter which he was good enough to write to me on the matter when my Question went down? Would not the noble Lord agree that the round threatened to be a complete flop until BNOC made it known that, in exercising its 51 per cent. share, it would also undertake a 51 per cent. share of exploration costs from the beginning? Was not that the hump which had to be got over and which resulted in a goodly flow of applications afterwards?
Lord STRABOLGI: My Lords, I cannot of course answer for the companies, but I think it more than likely, in view of the preparatory work required prior to applications, that decisions to apply were taken more than three weeks before the deadline. The Government have throughout been confident of a satisfactory response to the round.
Lord ORR-EWING: My Lords, are the Government still pushing all applicants retrospectively to accept BNOC's 51 per cent. share in previous licences as a condition for favourable treatment on this occasion? Is Esso holding out against this condition and, if so, will this not cause delay in making the final allocations?
Lord STRABOLGI: My Lords, I am afraid that I cannot answer for Esso at the moment, or indeed comment on any individual company's application during this confidential period. Her Majesty's Government will assess applications by taking into account all the published criteria.
The Earl of LAUDERDALE: My Lords, would the Minister admit that the confidential discussions that have already taken place have included pressure amounting virtually to threats on applicant companies to accept retrospective participation, including in at least one case a suggestion that senior executives of the companies might have their residents permits withdrawn?
Lord STRABOLGI: My Lords, that is quite a different question.
Lord ORR-EWING: My Lords, would the noble Lord agree that, if pressure is
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being put on these applicants in this manner, it is totally out of accord with every assurance that was given at the time of the debate on the nationalisation of North Sea oil? Will the noble Lord look into this as a matter of urgency and with great seriousness?—because, if it is true, it needs to be known, and if it is not true, it needs to be announced that it is untrue.
Lord STRABOLGI: My Lords, we treat this matter with particular seriousness. If the noble Lord would like to put down a Question, I will of course answer it.
Lord SLATER: My Lords, since my noble friend said that on this issue it would be wrong for the Government to give details of confidential decisions, is it not right that the Government are unable to break that confidentiality at this stage?
Lord STRABOLGI: My noble friend is absolutely right, my Lords, as he often is. These matters are now the subject of commercially confidential discussions with individual applicants, as I said. There are competing applications for many blocks and it would not be appropriate to comment at this stage.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, would the noble Lord agree that, while respecting commercial confidentiality, to use confidentiality as an excuse for the kind of pressure to which my noble friend referred would he totally improper?
The Earl of LAUDERDALE: My Lords, may I ask the noble Lord to confirm or deny that on about 12th October—namely, a week after the deadline closed—a letter was sent to certain applicants asking what was their attitude to retrospective acceptance of BNOC's share in existing licences?
Lord STRABOLGI: My Lords, following the invitation to apply, the Government reviewed the optional arrangements for BNOC making its contributions and concluded that, as expenditure on development under fifth round licences was unlikely to arise until the early 'eighties, BNOC should by then be favourably placed to finance its share as expenses were incurred.
Lord BLYTON: My Lords, may I ask my noble friend for an assurance that we will not shift from the 51 per cent. control of all licences for North Sea oil? Is he aware that I want to see the British people controlling North Sea oil and not private enterprise making a haul out of the whole job?
Lord STRABOLGI: Yes, my Lords I am sure that there is a great deal in what my noble friend says. The Government, through BNOC, will get all the profits from its 51 per cent. share. If the companies pay on average 70 per cent. of their profits on their share, as we estimate they will under existing licences, then, with participation, the Government's total take would be perhaps about 85 per cent. from profits over the life of the field.
The Earl of LAUDERDALE: My Lords, may I ask the noble Lord to be so kind as to answer the question which I just put to him about the letter which, according to my information, was sent on about 12th October to a number of applicants asking what was their attitude to accepting BNOC's 51 per cent. share in licences already existing under previous rounds? If he does not know the answer now, will be find out and give it to the House?
Lord STRABOLGI: Yes, my Lords, I will certainly do that.
Lord AVEBURY: On the question of the commercial confidentiality of these negotiations, is it not apparent from the questions that have been put to the Minister that some information is being given by the commercial companies to noble Lords? As the companies have no objection to the information being released, may I ask the noble Lord at least to undertake to consult them and make a statement later to the House about any conditions that may have been put to the companies as part of the negotiations?
Lord STRABOLGI: My Lords, I will certainly bring what the noble Lord has said to the attention of my right honourable friend.

SELECT COMMITTEE ON COMMODITY PRICES
3 p.m.
The LORD PRIVY SEAL (Lord Peart)The LORD PRIVY SEAL (Lord Peart) rose to move That the Select Committee on Commodity Prices have power to adjourn from place to place. The noble Lord said: My Lords, the House will remember that the Select Committee on Commodity Prices was set up in January this year. At that time it was thought unlikely that it would find it necessary to meet elsewhere than in London. It was, however, always understood that it should have the power to adjourn from place to place should the need arise. The Committee is now well advanced in its inquiries and hopes to conclude them in the next two or three months. It now finds it necessary to ask for this power for one specific purpose: this is to enable a quorum of the Committee to travel to Europe for a meeting with the Secretary General of UNCTAD, Mr. Gamani Corea. The bearing of UNCTAD's work on the Committee's remit is self-evident and I am satisfied that the Committee should be allowed the power of travel for this purpose. I hope that the House will agree. I beg to move.
Moved, That the Select Committee on Commodity Prices have power to adjourn from place to place.—(Lord Peart.)
Lord BARNBY: My Lords, when the announcement regarding the appointment of the Committee was first made, it was strongly urged that there would be difficulty in the Committee achieving anything very much unless some firm and constant unit of measurement could be determined and used. The fluctuations in the commodity prices which the Committee was appointed to investigate would have much less, if not little, meaning unless there could be some stable unit against which the fluctuations could be measured. Has any progress been made on that? Also, may I ask the noble Lord whether it is intended that some interim report should be published and, if so, how soon is that report on progress likely to be made?
Lord PEART: My Lords, I understand that the Committee is anxious to proceed as quickly as possible and also to have proper discussions, and I believe that

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what I have suggested is reasonable. The noble Lord, Lord Roberthall, is in his place today and no doubt he can answer detailed questions.
Lord SHINWELL: My Lords, can we have information as to the number of members on this Committee? When the matter was originally raised, I believe I asked a question about this journeying from place to place, for commodity prices have more than national ramifications—indeed, they have worldwide ramifications. How far have the members of the Committee to travel and how much will it cost, and is it worth while?
Lord PEART: My Lords, I agree that one must be careful about this. There are nine members of the Committee, which is chaired by the noble Lord, Lord Roberthall, who is here today. I think that, in the circumstances, it is important that they should go to UNCTAD Headquarters in Geneva. It is not usual for the Secretary General of an international organisation to be summoned to places outside the area where his organisation is sitting. Therefore, I feel that this is reasonable.
Lord ROBERTHALL: My Lords, I think it very unlikely that the Committee will want to use this power except for the purpose already stated by the noble Lord the Leader of the House. We have had great difficulty in getting hold of proper representatives of underdeveloped countries and therefore we attach great importance to being able to see Mr. Corea, who is in a unique position to speak on their behalf. As regards the questions raised by the noble Lord, Lord Barnby, which are not strictly relevant to the Motion proposed by the noble Lord the Leader of the House, we are hoping to make a report in the early months of next year. It is an extremely complicated subject and I do not feel that an interim report would be worth reading.
On Question, Motion agreed to.

RENT (AGRICULTURE) BILL
3.8 p.m.
Lord PEART: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill. In
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doing so, may I take this opportunity to say that, following representations which I have received, I shall not be moving Amendments Nos. 86 and 97 to 99. They will be withdrawn from the next issue of the Marshalled List. I beg to move.
Moved, that the House do now resolve itself into Committee.—(Lord Peart.)
Earl FERRERS: My Lords, we are very grateful to the noble Lord, Lord Peart, for having indicated that he does not intend to move these Amendments. We made representations that we thought it wholly inappropriate that these Amendments should form part of the Bill, and we are very grateful to the noble Lord for having listened to those representations and deciding not to move the Amendments. However, I feel that the Amendments should not have appeared on the Marshalled List in the first place. Amendment No. 97, for instance, takes up eight pages and refers to matters such as the Housing Act 1957, the Rent Act 1965, the Housing Acts 1969 and 1974, the Counter-Inflation Act 1973 and so on and, in order to achieve the Amendments, the Government had to put down one to alter the Long Title of the Bill.
We accept and are grateful to the noble Lord for having decided not to move the Amendments, but I believe—and I say this with the greatest possible respect to the noble Lord—that these Amendments which appear on the Marshalled List in his name, should not have been put down when the Government are in trouble with their business and we, as the Opposition, are doing our best to accommodate the Government. To have something like this suddenly appear on the Marshalled List, even if it is removed at the last minute, puts a very considerable strain on everyone trying to decide what is on the Marshalled List and whether it should or should not be so. It really jams up business in a quite disagreeable manner. However, having said that, we are grateful to the noble Lord for removing the Amendments.
Lord PEART: My Lords, I naturally discussed this matter through the usual channels and I believe that it was right to take the action I did. I may add, though, that my noble friend Lady Birk wrote about this matter to one of the colleagues

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of the noble Earl, the noble Baroness, Lady Young. The letter was dated 7th October. No discourtesy was intended, I can assure the noble Earl. There are great arguments here about consolidation. I am not a legal expert and do not pretend to be, but I think it right in the circumstances to take the action I have. I shall of course have this examined.
On Question, Motion agreed to.
House in Committee accordingly.
[The BARONESS TWEEDSMUIR OF BELHELVIE in the Chair.]
Clause 1 [Interpretation and commencement]:
3.9 p.m.
Earl FERRERS Earl FERRERS moved Amendment No. 1:
Page 1, line 9, leave out sub-paragraph (i).
The noble Earl said: This Amendment appears in the name of the noble Lord, Lord Swaythling, and myself and with it goes Amendment No. 2. I think it may be helpful if I explain at the outset the attitude which my noble friends and I have tried to adopt in our consideration of the Bill and the Amendments so that your Lordships can be perfectly clear where we stand.
We had a full Second Reading debate when it was made clear that our concern was not over what might be called the "humanity" aspect of the Bill but over the sheer practicality of making it work, and its effect on the efficiency of agriculture as an industry. I explained on Second Reading and I reiterate that I have very much sympathy with the underlying feelings that motivated this Bill, and that goes also for my noble friends. Eviction is unpleasant whatever the reasons and wherever it is found. That does not mean to say that there are no conditions where it ought to exist or where provision for it ought to be made.
In the same way I should not wish to minimise for one minute the emotional or traumatic stresses which the processes of court orders for possession can cause. They are real and they are frightening, and this is to be recognised by everyone. Furthermore the dignity of people becomes involved. I should not like it to be
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thought that in discussing any of these Amendments, or indeed even in putting them down, we on this side might be considered to be unseized of these feelings or unsympathetic towards them; we are not. They are fully recognised and fully accepted. I think it right that we should also make it clear at the beginning that on that part of the Bill which deals with what—for want of a better expression—I might call the humanity side there is no disagreement whatsoever. Where there is disagreement, it is over how the Bill is to work and how it will affect interests other than those of the immediate tenants for whose benefit it is introduced, and what is the correct balance to obtain for all those inevitably conflicting interests which get impinged upon by the Bill.
In some ways we are also handicapped because many of my noble friends and myself are farmers and landowners, and so as regards the Bill we might be considered to be landlords, and by those less charitable than some we might be accused of having a biased approach to the Bill. All I would say to that is that in the Amendments in my name and in the names of my noble friends, we have sought to be unbiased and to put down the Amendments solely in the interests of agriculture as a whole, and to enable the Bill, if and when it becomes law, to work as smoothly and effectively as possible. I thought it might be helpful to make that absolutely clear from the beginning so that we know where we stand and we know what are the reasons for our putting down some of the Amendments.
The first Amendment, in the names of the noble Lord, Lord Swaythling, myself, and the noble Lord, Lord Sandys, seeks to exclude dairy farming and livestock keeping and breeding from the provisions of the Bill. I realise that at first impression that may seem to be a fairly sweeping Amendment, and I will try to explain why we have put it down. The Bill gives security of tenure to farm workers. At Second Reading the noble Baroness, Lady Birk, explained quite clearly that the object of the Bill was to put the onus of housing farm workers on to the local authorities. We will consider at a later stage whether in fact the Bill as it is will achieve that. But the fact is that after one has gone through all the gamut of the Bill and all its provisions, it gives

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security of tenure; that is what the Bill is about.
If there is security of tenure in houses which are erected for and kept for stockmen, then there will be situations, in my view, where stock may well not be looked after. Of course in the old days dairy herds consisted of 10 or 15 cows. Sometimes there were a few pigs on the farm and periodically some poultry as well. But as economics have changed, so the very nature of farming has changed, and now there are dairy herds not of 10 or 15 animals but sometimes consisting of 30 animals, sometimes 120 and sometimes even 250, all in one place. Intensive pig units can now consist of not just hundreds of pigs but even thousands. Now an intensive poultry unit with 50,000 birds on a site is considered to be a small site, and such units can go up to 250,000 birds, all on one site.
It stands to reason that two results emerge from this situation. The first is that the capital involved in these enterprises is vast, and the second is that these stock, being animals, have to be looked after, sometimes 24 hours a day, and certainly seven days a week. This is not always done by the same person, but the management has to be there to achieve it. Anyone who knows anything about agriculture—and I reckon that a considerable number of people do—will recognise that the secret of success of any form of stock farming is stockmanship. If there is a good stockman the thing works; if there is a bad stockman it does not.
Inevitably with these units and with the vast sums of money tied up with them, it is essential frequently that houses should go with the units. Sometimes houses are erected specially, sometimes houses are earmarked specifically for a stockman. This enables the farmer to put into a house a person who will be able to look after the animals to the best of his ability. Frequently this means that a stockman returning home at night will take the opportunity of going around and seeing his animals before he retires to bed. That may be against normal industrial practices, but it is one of the facts of stockmanship, and a good stockman will do that.
If a stockman leaves, or has to be changed because his management is not
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good, then under the Bill he is permitted, indeed entitled, to stay on. I ask your Lordships to consider for a moment what the effects of this would be. Let us take, for example, a dairy unit of possibly 120 to 200 cows, all of which have to be tended and looked after. Under the Bill a stockman may leave his job yet remain in the house. What would the farmer then be able to do? Of course he can go through all the processes of notifying the local authority. He can inform the agricultural dwelling housing advisory committees—which have been called ADHACs for short—of the problem. But once all this has been done, it may be six months before the problem is resolved, and even then it can be resolved only by the local authority finding another house. Meanwhile the animals have to be looked after.
A farmer may well do this himself, or perhaps he will try to get somebody else to do it. But picture the situation. If he knows that his stockman has gone or is going, he will advertise for a new stockman. If he advertises and—as I said on Second Reading—states in the advertisement that there is no house available, the fact is that he will not get any replies. If, on the other hand, the farmer does not place such an advertisement in the paper but then invites a prospective new stockman over, he will then have to say, "This is the house which will go with the job, but you cannot go into it yet because my previous stockman is remaining on. He may be there for three months, six months, 12 months, or even for two years. So you cannot have that house until it is empty. But I will provide you with a caravan." The practicalities of the situation are that a stockman will not come to such a post. Imagine the situation if a stockman is asked to bring his wife and children to live in a caravan. This point will be discussed under later Amendments, but the fact is that stockmen are highly paid, highly skilled people, and it is unlikely that they will be prepared to move from one job where they already are into a new job where they have to live in a caravan in the hopes that one day a house may be available. That is a real practical difficulty.
I now move to the next point. Any farmer engaged in a business is able to take immediate action. Anyone can deal with a problem of short duration; of

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course he can. What is impossible is for him to deal with a problem which is of long duration. It may well be that some of these houses, some of these units, are right away from towns—they usually are—and quite reasonably isolated. I venture to suggest that those farmers who are beset with the problem of finding a new person and not being able to have possession of the house which has been specially designed and erected for a stockman may well in the end say, "It's just not worth it. It's not worth the palaver of a seven-day week. It's not worth the responsibility. It's not worth the capital investment. It's not worth trying to make a go", when not only have you got all the worries connected with livestock farming but, on top of that, you have got the problem of finding a stockman and putting him into a house, which you cannot get hold of. If that were to happen on any large scale at all, the effect would be that farmers would give up their livestock holdings.
One of the great fears about this Bill as it stands at the moment is, as I said on Second Reading, that with all the paraphernalia contained in this Bill one thing that the average farm worker—and indeed the average farmer, but particularly the farm worker—will gather from it, is the four words, "Now I can stay". Therefore, if you get a problem such as I have described in one place, the danger is that the effect of this Bill could be such as to increase the feeling among people, "All right, if I have to leave my job I can still stay on. It's my right to stay on".
The noble Lord, Lord Peart, who was after all a very distinguished Minister of Agriculture and who knows more about agricultural facts, I suppose, certainly from a ministerial point of view, than anyone else in this Chamber, knows perfectly well that there has been considerable difficulty over ensuring that there are sufficient dairy cattle. The statistics have been going down in the past. If the result of this Bill is that this trend of giving up cattle and a reduction in dairying were to take place, the effects on British agriculture would be very substantial, because this means that in the end it would not be doing the job it is supposed to be doing, which is providing
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food for the nation. That applies whether it is dairying or beef, intensive poultry units or intensive pig units.
If that were to result from this Bill—and I put this not as a short-term problem but as a long-term problem—I think it would be a sad thing. I do not believe the noble Lord, Lord Peart, would want for one minute to think that this Bill might in fact result in a depletion in the number of stock kept by farmers and a lowering of the ability of British agriculture to do the job that it ought to do. I put forward this Amendment with great feeling for this reason: I believe that the stockman's situation is totally different from that of the other people involved with agriculture. It is perfectly possible to say that a tractor driver could live in a village or live away from the farm. It is perfectly possible to argue that a tractor driver could live in a local council building, but it simply is not practicable to say that stockmen can live in council houses away from their jobs.
This is the real nub of it. If stock are to be properly looked after and adequately catered for, then the stockman looking after them as to live on his job, and the effect of this Bill as it stands now is precisely not to enable that to happen. It is for those reasons that I hope that the noble Lord, Lord Peart, who has the interests of agriculture very much at heart and who must know in his own heart of hearts that this could have a restricting effect on agriculture, will give this Amendment very serious consideration and realise that, whatever the merits of the Bill in many other respects, it really is impracticable to let it refer to stockmen. I beg to move.
3.25 p.m.
Lord BYERS: I must first say that the remarks I have to make on this Amendment are my own remarks and that I do not speak in any way on behalf of my noble friends on these Benches. I could not agree more with what the noble Earl, Lord Ferrers, has just said. If I may say so, he has said it very much better than I could put it to your Lordships. I should like to say that this Bill is full of discriminations. Its main discrimination is, as we said on Second Reading, that it is dealing with tied cottages, as they are colloquially called, better known as service

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houses. It deals with these in 10 per cent. of the cases. As we said on Second Reading, there are many others: miners', railwaymen's, police, the Armed Forces', nurses' and other hospital workers' service houses, and so on. It is therefore discriminatory in that way. On this Amendment, can we not arrange to discriminate again; to discriminate in favour of those stockmen to whom the noble Earl referred, those who are so essential for their duties? The herdsman has to be there when his cattle calve, the shepherd when his ewes lamb, the pigman when his sows farrow, but those are not the only times. As the noble Earl said, it is really a seven-days-a-week job and any good stockman is so devoted to his job and so anxious for the health of his animals that he recognises this completely. I feel that, as the noble Earl said, it would be impossible for farmers to carry on if this Bill contained the words of the paragraph that it is proposed should be left out. So I give my most sincere support to the noble Earl in what he has said and I trust that the noble Lord the Leader of the House will accept this Amendment.
Lord CLITHEROE: May I say a short word, which I very seldom do these days, in support of this Amendment. I have been for nearly 50 years a farmer and a landowner. My wife was the first woman ever to qualify as a land agent and she shares my views. As the noble Lords have pointed out, this is a very peculiar set of circumstances, when you come to dairy-farming and sheep. Cows calve at night, as the noble Lord has told us, and there have to be people there at the time. We have something like 170 cows at home and they are in more than one building. This means that it is necessary to have people there every night, for that reason and others. Another reason is that the herdsman looks round the cows late in the evening to see whether any of them need bulling. That is something which also has to be done. If you have a lot of sheep, the sheep have lambs, and the lambs come at any time of night or day and have to be looked after. It is essential to have men who live on the farm, if it is a dairy farm or a sheep farm. I know that the noble Lord, Lord Peart, is well aware of all that I have said and I hope that he will take every step he can to meet these difficulties, which are, indeed, genuine ones.
Lord COLLISON: I want to say, first, that, concerned as I am with this Bill, I do not intend to jump to my feet on every Amendment. One appreciates that there is a considerable shortage of time and that this House and its Committees must get through a great deal of work. Therefore I intend to contain myself. But I must say one or two things on certain of the Amendments. I appreciated what the noble Earl said about humanitarian matters when he started his speech. I believe that he feels that these considerations must be taken into account, but I would point out to him that the Amendment itself absolutely contradicts that sentiment. After all, the Amendment would eliminate dairy and stock farming, which represents a large proportion of the farming industry and is one in which very many men and women are employed. These men and women are just as entitled to protection as the farm workers who are doing other kinds of work in the industry.
The Bill itself concerns agricultural workers; therefore Clause 1 of the Bill is very necessary because if you are discussing agricultural workers you must define "agriculture". This clause defines "agriculture" so that we and every one will know what people we are talking about in the remainder of the Bill. I should like to see the Bill go through and I hope that it will go through unamended. I would point out to your Lordships that this draft was arrived at only after full consultation with all sides of the industry and others. It is therefore the result of considerable discussion and consultation, and the Government decision on it was not taken off-hand but only after all the people concerned had been consulted and their views taken into account. I ask the Committee to bear in mind that agriculture is a wide and extensive industry. It is important to this country; and, as I said on Second Reading, this is the one element in relations between farmers and farm workers which creates bitterness. I do not want to go into that again. I am convinced after many years of experience—and I hope that your Lordships will believe me—that if we can clear up this matter, then the one remaining point of friction and bad feeling in the industry will be cleared up.
The noble Earl, Lord Ferrers, painted a grim picture of the consequences of this Bill and, in particular, the consequences

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to dairy farming and stock farming. The Committee will forgive me if I say that I do not believe one word of it. I think it is a wild exaggeration. Already we have countless farm workers—and women workers, too—who are stockmen who are required to look after the needs if stock and who are living in tied cottages. Occasions arise when these same workers leave their employment or are dismissed from their employment or become ill or incapacitated. The problem arises only occasionally; it is not a common occurrence; it happens in a minority of cases. The local authorites have already acted to help resolve the situation. I have not seen, nor do I expect to see, any breakdown in the industry in stock-keeping and dairy farming, or in any other aspect where workpeople are required to look after stock. That I do not accept, and I suggest that this is an exaggeration.
I know the industry and I can claim, perhaps, to know the problems which arise on both sides of the industry. This, in fact, will not constitute one of them. The cases will be few and far between and most of them will be resolved satisfactorily. I would therefore ask your Lordships to discount these scare stories about what might happen. I assure you that it will not. I say this sincerely and from knowledge. I would not seek to mislead your Lordships on this point.
The Earl of KIMBERLEY: I do not wish to cross ploughshares with the noble Lord, Lord Collison, but I feel in relation to the beginning of this Bill (one of the objects of which is to provide security of tenure, particularly to stock-men) that if you do not have a tied cottage or a service house for a stockman you are making the security of tenure less. If you have a first-class stockman anywhere in England, Ireland, Scotland or Wales, he would know that if for family reasons he wants to change his environment he will be able to find another job with a good house to go to. The farmer who employs him will know he can get a stockman of the same quality and efficiency. In a sense, security of tenure is greater this way.
The Earl of ONSLOW: The noble Lord, Lord Collison, rightly said that this was a very minor problem compared with
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the number of people actually involved. He went on to say that we on this side of the Committee were indulging in scare stories. I do not think we are indulging in scare stories, but there is a slightly worrying thing that if you do, this particular aspect could produce the wrong impression: it would produce the impression that all stockmen stay for ever and consequently the legal machinery will have to be gone through more frequently than at the moment. Secondly, I do not think that we have to lecture the noble Lord, Lord Peart, on agriculture; I think that a lot of us could be lectured by him to good advantage; but I have a feeling that we do have to lecture the noble Baroness, Lady Birk, on this subject. In her Second Reading speech she prattled on about "rotten roots". As the noble Lord, Lord Peart, said, she spoke eloquently. The use of the words "rotten roots" was not perhaps showing her normal standard of high judgment—I will put it like that.
Next, I want to underline the stockmanship and calving aspect. One has been told that one must not speak from personal experience. It is very difficult to know whether personal experience underlines a situation as one sees it or whether one can be accused, possibly with justification, of being the most monumental bore about what happens on one's own farm. I will risk that accusation and will just say this on this particular point. I have been out to dinner late at night and have come back and have found that the stockman has also been out on Saturday evening, and I have been in my dinner jacket, with sleeves rolled up, trying to pull out a calf, helping him. If he is not very near to where this particular operation is going to happen, it is going to make stock-keeping more difficult.
This leads me on to my next point, which is that 80 per cent. of English-consumed beef is produced in this country, 100 per cent. of our drinkable milk, 90 per cent., I think, of our pork and 100 per cent. of our eatable chickens. This is a very capital intensive business and if we make it more difficult for the farmer we shall have a situation where two further people are going to suffer. First, the consumer: if we do not produce as much as we do already prices will go up and pressure on the Green Pound will

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become even more severe. Secondly, the farm worker will suffer and, above all, the balance of payments will suffer. There are complaints from consumers already about the perpetually rising prices; the balance of payments is under the most appalling stress and one does not want to make points about the general state of the economy.
We all know that we are in a position in which the Beggars' Opera might have to become our national anthem. We must be very careful that we do not make it more difficult to feed more of our people as cheaply as possible. I know that the noble Lord, Lord Peart, understands this. I know that the Labour Party, for all its good aspects, is basically an urbanly based Party, and since the Corn Laws the industrial working class has exploited the agricultural working class in the benefits of cheap food.
Lord JANNER: I sometimes hesitate to intervene in matters with which many in this House are more intimately connected than I. I have listened for years to the kind of arguments put up in regard to the Rent Acts, and I am bound to say that the desperate fears presented to Parliament by enthisiasts who know their subject and who have tried to prevent the protection which I believe on humane grounds ought to be afforded to every individual, have proved to be wrong.
Lord SANDYS: I do not think the noble Lord is quite right, because the 1974 Rent Act, which was one of the pieces of legislation which the Labour Party introduced comparatively recently, has amply born out all the criticisms made from this side of the House.
Lord JANNER: I have had a lot to do with the Rent Acts, and I have not yet found that the basic principles on which they were introduced have been proved to be wrong. This is a fact. Let me now give my side of the experience. Having listened to what happens when applications are made in various courts, and having represented people making these applications, I have come to the conclusion that from a humanitarian point of view the Rent Acts have proved of value.
Lord SANDYS: I hesitate to interrupt the noble Lord once again. Why is it
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that at the present moment over 750,000 houses are empty in excess to requirements? Many of these houses could and would be let, and the same applies to rooms and other accommodation.
Lord JANNER: I am sorry to say that the people who keep them empty should be dealt with in a different way from the way in which they are being dealt with at present. Empty houses should be carefully considered and there should be ways and means of dealing with those who own them. It may be that the noble Lord does not think the same as I do—I am not surprised and I do not blame him; I merely say what I think. I speak from many years experience in that direction.
I have listened carefully to both sides. I am impressed by the fact that my noble friend who spoke this afternoon, who represents those who work in the industry, has categorically stated that he supports the Bill as it is. To my mind that is a very important point. In my opinion—and I believe this opinion to be generally held—the agricultural worker is a man who is devoted to his work and is not going to leave for fear that his leaving the employer will prevent the employer from getting another person. In fact, from what we have been told here, I am of the opinion that the average agricultural worker sticks to his employer for a very long time and it is only the exceptions who might be affected by an act of this description. In the judgment of a person who has a direct approach to the workers there appears to be an undoubted consensus of opinion among the workers in the industry. That means that the worker himself is not fearing anything in this Bill and the specific workers to whom this Amendment applies come within that category. Further, if you start breaking down the Bill and making exceptions there is going to be considerable misunderstanding and agitation by those who feel that they are being discriminated against.
The Earl of ONSLOW: Would the noble Lord give way? He is talking first of all about the Bill as designed solely for the workers. For obvious reasons I have enormous interest in my own workers and in agricultural workers. Surely we should be talking in the interests of

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agriculture as a whole, for the benefit of the whole community. Secondly, the noble Lord stated that this Bill should not discriminate. But it does discriminate. It discriminates against coalminers, against the Prime Minister, against all the other 95 per cent. of people who live in tied accommodation who will not be protected by the Bill.
Lord JANNER: With the greatest respect—and we do not frequently agree with each other—on this occasion I agree with the noble Earl. The fact that there is a difficulty and that the principle of the Bill is not being applied to other people, does not necessarily mean that it ought not to be applied to them and will not be applied to them. I am sure that the question of tied cottages in other directions will come under consideration in due course. But at present we are dealing with one aspect, and the argument that because you do not deal with other sides of it at the same time and so give an opportunity to those who oppose the Government to filibuster and to try to prevent them from getting legislation through, is not a very effective argument. If we were to take the whole gamut at the present moment, I am sure there would not be just one all-night sitting, there would be very many all-night sittings between now and the time the House rises.
Earl FERRERS: Is the noble Lord suggesting that our consideration of this Bill is filibustering?
Lord JANNER: It will be filibustering if noble Lords continue to use the argument that because we are dealing with this matter, all other tied cottages should be considered before this one is put through. That is what I am saying and I believe the noble Lord is a fair man who will appreciate the point that I am making. The argument about the other industries that are concerned is something which has to be considered later on, and I am quite sure we shall have opportunities of discussing it.
With regard to this question, I say again that the spirit which we have been told prevails between the employer and the employed in this particular industry is of such a nature that I do not think for one moment the agricultural employers have
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anything to fear, except in a possible case where the employer has not treated the employee properly, or where at least the employee feels aggrieved, and there will be very few cases in that respect. I hope that the employers in the industry and those who have spoken already will weigh the facts and come to the conclusion that their Amendment ought not to be accepted, in view of what we have heard today.
Lord MOYNE: May I make a brief intervention to draw attention to a case where the employee has not treated the cows properly? I came upon our second cowman kicking a cow. It was not possible to retain him; he was very rough with the cows. We did not know that when we took him on. We gave him time to find another house and finally he left of his own free will. He said, "I realise I am not appreciated here; I am criticised all the time". It is essential that cows should be treated gently, not only for the sake of the cow but for the sake of the farmer and for the sake of agriculture. In such a case surely it must be possible to recover the house in the proximity of the cowshed.
Lord JANNER: I do not know whether or not that point was addressed to me?
Several noble Lords: No.
Lord JANNER: Would the noble Lord like the Minister to answer?
Lord MACKIE of BENSHIE: I have been trying to talk about the Amendment, but may I start by digressing a little and say that many times in the long reaches of the night, wakeful and thinking about life in general, I have reflected that it is a great thing to be born a Scot and to farm in Scotland; that the lesser breeds who live further South are nice people but I have been assured of my own superiority and good luck. That has been entirely reinforced by this Bill which does not apply to Scotland. The reason it does not apply to Scotland is that the Scottish farm workers' union does not want it and the Scottish farm workers, in my experience, are independent, upright and highly sensible people. I have an enormous respect for Lord Collison's experience, but in this case I believe that the Labour Party are infected by a sort of folk memory. They feel they must get rid of this evil,

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but they have not heard the good news that the Battle of Waterloo was won some time ago.
In talking about this Amendment, I should like to put the point of view of the farming ladder of the stockman who is on his way up. It is a very important one and it is important to the English because they appear to need a large number of Scotsmen to come down to be the best herdsmen in England. Your Lordships may laugh, but no one will contradict me. It has been a tremendous source of increased production in England. You will not get those men to come down any more because there will not be a house for them. It is a recognised pattern nowadays that a young stockman will start as an assistant in a big herd and, as the noble Earl says, the herds go up to 500 or 600 cows, competently managed. Once he has learned his trade he goes off to a job looking after 100 cows. That is not a big herd. A great many young men tackle them on their own, helped by their wives, and they make a great deal of money. They deserve it, and they learn a great deal more about the business from doing that. They then go on to become the managers of the big units which are becoming more and more important in the production of food in this country. It does not apply only to cows but also to pigs and to every other form of livestock. These people will now be totally held back. They will be kept to one farm or to farms near where they live. I assure noble Lords that in my part of Scotland stockmen move about more than other people simply as they ascend this ladder and because they want, in the main, to make more money than the other workers on the farm.
The problem of the tied house in the County of Angus, at any rate, has been largely solved because the county council has built a large number of houses for retired farm workers. That is the real problem of the tied house. It is not a matter of the wicked employer; it is the problem of a man retiring. I think the whole Bill is so silly that this Amendment—which is a fairly big one, I must say—stands out for that reason as a monument to good sense.
Lord GISBOROUGH: I should like to support this Amendment. My own experience began when I was a student.
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I well remember getting up at 5.30 in the morning, walking through the ice and snow on many occasions to do the mucking out, wash the udders, report on mastitis and all the other things that one had to do and was trained to do. Often in the morning one would find that cows had calved during the night. One was out of touch with that because one was living about a mile away in a small house and coming up two or three times a day when required for milking. Of course, all the calving, the bulling, and so on, was done by the herdsman who lived in the house next to the cowbyres, and he was up at any hour of the night, or when necessary, as calvings and so on took place.
This Amendment accepts the reality of the situation where you must have the herdsman on the spot all the time. It was mentioned by a noble Lord behind me that, with an urban-orientated view, there is still an idea that a farm is something like a factory; but in truth it is far from it. It is particularly necessary to cover the farms where no land is attached because there is less likely to be any other houses on that same holding. The noble Earl has mentioned the large numbers of stock which are on many of the units now, and these are ever increasing. There is an enormous capital outlay on the cattle, pigs or sheep which constitute these large herds. With chickens particularly one has phenomenal numbers, and things can go wrong extremely quickly. There can be a temperature fault; a heating thermostat can go wrong and, in a short time, there is trouble. The feed can go wrong; you may have an outbreak of disease. This has to be dealt with immediately. You may have escaped stock, break-ins, fire, and so on, and it is necessary in many of these outfits to have somebody living very close.
Many stockmen are naturalists in their own way and take great interest in the surroundings as well as in the farm. I remember a shepherd who took a great hand in killing foxes et cetera, and without his help the lambs would have not survived. There is perhaps a suspicion that many farm workers are always coming and going and causing trouble. This is totally wrong. There is very little problem in my experience. Ninety per cent. of the workers are extremely hard working and efficient, and the last thing

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one wants to do is to get them to leave. On the other hand, you undoubtedly get the bloody-minded chap. This is where the problem lies. That type of person comes in and is no good at work, or he comes to the farm merely for the house and causes trouble. He does not deserve a great amount of sympathy.
It has been mentioned that with no house it is extremely difficult to get new workers, particularly good workers. I am glad that we heard the point from the Scotsman about the efficient Scotsmen who leave houses and come down to take the jobs. I know of many people in my part of the world who have given up stock, given up dairy cows because of lack of labour and houses. We have had this problem in the past. The noble Lord, Lord Janner, mentioned that restrictions should be drawn ever tighter round those farms or the people who have houses which are kept empty because of the tightness of the laws. He felt that there should be still tighter legislation. The tighter you draw legislation, the more effort people put into avoiding it.
I should like to finish with the story of the sun and wind. The wind challenged the sun to take the overcoat off a person in a field. The wind tried first: he blew and blew. The harder he blew, the more the man clutched his overcoat. When the wind failed the sun said that he would try. The wind said he wanted to try one more puff. He still could not do it. So the sun came out and the man took off his overcoat.
4.5 p.m.
Lord PEART: It may be useful if I intervene, not to shut out anybody, but I am certain that because of the importance of this clause it is right that we should have a wide-ranging debate. I think it will follow the pattern of a similar debate in another place. No doubt noble Lords have read carefully what another place did and said on the matter we are debating today. I should like to thank the noble Lord for the way he moved his Amendment. I agree with many things he said. I believe that noble Lords opposite wish to see this Bill work if it is passed. I hope it will be passed. Inevitably, there will be a major job to do. I accept this. There will be responsibilities not only on farmers but on the
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new committees and in the housing authorities.
I accept the spirit in which the noble Lord made criticisms and also moved his Amendment. I believe that he is anxious to do his best for all sections of the farming community. He said that there is no disagreement on the "humanity side", to use his phrase. I accept that. Many of the happenings we used to see in the countryside in another period are not frequent now although there are still isolated cases which can be avoided. Generally speaking, there are good relations between farmer and farm worker. That is my experience. I have travelled around addressing farmers' meetings in different parts of the country. I have visited various sections, and I have always had good relations with the Country Landowners' Association. There is a general desire to have a proper system which works effectively for all. This is what we are trying to do. I do not believe that this is a Bill which will weaken that relationship, despite some of the fears.
I know that they have been mentioned by the noble Earl, Earl Ferrers. He believes in the importance of having a good farmer and a good farm landlord relationship. That is why he feels that we should think in terms of the interests of a vital part of the agricultural industry. Here I do not dissent. I noted what he said about how important it is that we should have stockmen on the farm or near the farm. I do not think this Bill will hinder that when it becomes an Act. He talked about the importance of the industry and about small herds, the farm with a herd of 10 or 15 cattle, the 30 herd, 120 herd and 250 herd farm. He went on to describe the trends in the pig industry. I agree that we now have large pig units and it is the same in the poultry industry which is highly efficient. It was never in the Price Review and I never had to negotiate prices in that section. I did not get into trouble—as occasionally happened with others—when they thought they were not treated rightly.
We have seen a growth of a great agribusiness in this field. It has been stressed by the noble Lord, Lord Gisborough, and the noble Earl, Lord Onslow, who know their industry and who are farmers and landlords, that we are dealing with large enterprises where a

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considerable amount of capital is involved. No one wants these to be damaged in any way by the alteration of any manpower arrangements. It is true that you have to have people to be on the farm and be available 24 hours a day. I accept that you need good stockmen. I will deal with the stockmen from Scotland a little later.
I do not believe that this Bill will destroy confidence in any way. We have one of the best dairy industries in Europe. It was my privilege to negotiate in Europe in the last Price Review and I dealt specifically with an award for the dairy industry. I know the difficulties that they have had with the weather and other things. There was a period of retrenchment. I know the difficulties of the high costs and the effects on seed prices. Nevertheless, we have a most efficient industry which also produces a large supply of our beef, and some people forget that. Therefore we as a Government do not want to harm that.
There is a danger that noble Lords can think in terms of the past and have the old arguments raised. We have to look differently. The arrangements in the Bill are modest. To the noble Lord, Lord Swaythling, I must say that in another place—I must not quote—a distinguished farmer, a member of the Liberal Party, declared his desire to support this Bill. He thought that we were not abolishing the tied system as it exists in this country but rather we were going to improve the landlord farmer and farm worker relationships. I believe that this will be done. I believe that it will be a boost to the morale of workers and farmers. I could quote—but I would be making a Second Reading speech, and must not be tempted to do that—from other responsible sources. I could quote from the Farmer and Stockbreeder which talked about this Bill providing something which can work, if we will it. So I hope that noble Lords will not be too pessimistic.
Of course, they must speak from their own experience of the farming industry and they are right to do so. I make no complaint of the fact that on the Benches opposite we usually find more farmers or landlords than on my side. But that does not mean to say that they have an argu-
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ment, because it is rather strange that my Party generally has some very good records in agriculture. I think of my noble friend Lord Addison with his Marketing Acts, and of a great Minister to whom I was Parliamentary Private Secretary who brought in the 1947 Act. I see many noble Lords in this House who served with distinction on many of the committees, and who sought to improve the 1947 Act.
Most of the legislation which affected our agriculture is still there, and it is a tribute to the all-Party approach in that section. So I do not believe that the fabric of this industry which we have created, and which will have to challenge because of our entry into Europe, will be harmed by the arrangements which we have put forward in this Bill. As I have said, many people in all Parties believe that this is reasonable, and I think my noble friend Lord Collison was right to say that we should not exaggerate. Let us remove friction and bad feeling, but let us not exaggerate. He knows the industry, too, and he said that there will be no breakdown.
The noble Earl, Lord Kimberley, argued that we need first-class stockmen, which was again raised by the noble Earl, Lord Onslow. I do not regard him as a bore, if he wants to say that he feels self-conscious about what people think he is. From talking to him when he came to see me when I was a Minister, I know that he was anxious to consider policies in the interests not just of his own holdings but of agriculture generally, and I think he was right to stress his worries. He talked about the Labour Party being an urban Party, and so we may be. But many farm workers are in my Party, although some may be Liberals or Tories. However, that is not the issue. The issue is whether this Bill will work or frustrate. Can we work out something practical? Will these new committees—I do not like the names, because we generally use initials—work? Will they serve the interests of the rural community? Will the farmer and the farm worker feel at different times that they are getting a square deal? Will their interests be protected? I think that they will and given good will, based on what we have seen in other sections of the industry—for example, the agricultural workers' committees—I believe that common sense

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will be applied here and no section should suffer.
I shall not get involved in arguments about the Green Pound. Such matters will have to be settled, but not today when we arc dealing with this important Bill. I would say only this to the noble Lord, Lord Moyne. Of course, we do not want cows to be treated badly—no one does—but this Bill will not stop good husbandry. Farm workers who are employed in these great enterprises will not harm them, and I believe that, when a worker is required on the spot, the committees which we set up will recommend in the interests of agriculture that a farm must have these personnel. So I do not think that we should be too pessimistic.
The noble Lord, Lord Mackie, who quite rightly, spoke so lovingly about his Scotland, knows that many good Scottish farm workers were driven away, not only to England, because of certain acts which I shall not go into. But they drove them to Australia, New Zealand and all over the world and that was very good for world farming. If one goes to the Argentine, as I have done, and sees the great shows, one meets Scottish stockmen and I pay tribute to them. But this Bill will not apply in Scotland. The noble Lord may argue that that is because of the good sense of the Scottish farmworkers' union. It may be, but I do not know. I was responsible as Minister of Agriculture, but I am still in the Government and I should like to think that I try to protect the interests of the farming community and do all I can. So I say to him, as a friend of Scotland and a Border Englishman, that I do not think he should worry too much. He is all right, as he said, but let me argue the English argument and the Welsh argument. After all, the spokesman for the Liberal Party was a Welshman, and a famous Welsh farmer. The Welsh were driven out, and there are some good Welsh farmers in England as well. So I would rather take his view than that of the noble Lord who sits in this House.
Lord MACKIE of BENSHIE: If the noble Lord will permit me, I would take him up slightly on the argument which he appeared to use that Scotsmen were driven to England, the Argentine and all over the world by the tied house system and repressive measures—
Lord PEART: I did not refer to the tied house system.
Lord MACKIE of BENSHIE: Perhaps the noble Lord left that impression. He knows that it was the terrible depression in agriculture, and the miserable wages which were all that could be paid, not only in Scotland but in England as well, which drove people off the land in such large numbers.
Lord PEART: The noble Lord knows his history, I hope, and I did not mean that at all. Anyhow, I must not go into too much detail. What we are doing here is considering this clause and the Amendments and very quickly I come to them. There is a definition of "agriculture" in the Bill, which is intended to cover the whole agriculture industry as it is generally recognised, and I do not think it would be right to mutilate this clause. I am well aware that some argue that to provide security of tenure to workers in sectors of agriculture involving livestock and, in particular, to dairy stockmen would have a damaging effect on the industry, but I cannot accept that. However, I recognise that there are occasions when it is necessary to house workers on or close to a farm. That is why there are provisions in the Bill for farmers to make application for the rehousing of outgoing workers, in a way which enables housing authorities to take full account of the agricultural need and the urgency of the case.
As my honourable friend the Parliamentary Secretary said in another place, when a similar Amendment was being debated:
"We are presently discussing with both sides of the industry how best we can guide housing authorities and the advisory committees on the weight to be attached to the various elements of agricultural need."
There have been a lot of consultations on this matter, both before the Bill was published and now, between the major organisations representing the industry. Then, as my noble friend the Parliamentary Under-Secretary of State said on Second Reading:
"I would expect that those sectors where the welfare of animals is directly involved would merit high priority ratings on grounds of agricultural need and of urgency in the advice which local authorities will be receiving from agricultural dwelling-house advisory committees."
Lord HARMAR-NICHOLLS: The noble Lord is admitting that what I hope will happen is a pious hope. We have evidence that certain sections of the trade union movement in Scotland think that this clause is a bad one. Has the noble Lord any evidence from the employer/farmer side, irrespective of Party, to show that they think differently?
4.19 p.m.
Lord PEART: I mentioned the evidence of a distinguished farmer who represents a quite important body of feeling. I could also quote the Farmer and Stockbreeder, and papers of that kind, which have stated that they now feel that this is probably the first step to try to resolve something which is there, and which should have been resolved a long time ago. I know that some farmers take a different view and I am not denying that there may be some farm workers who take a different view, and there are also landlords who take a different view; but if good common sense prevails there should, if we carefully examine the Bill, be no worries. If the Scottish Farmers' Union do not want it, that is their business. All I know is that the National Union of Agricultural Workers have campaigned for years for it. I am not saying that that is a reason for bringing it in; on the other hand it is an attempt to try to do something which is sensible.
Another Amendment which has been moved, which seeks to exclude the use of land for grazing, meadow, or pasture land, would exclude both land which is used for the grazing and free running of livestock and land producing grass for subsequent drying or riling. The Amendment is not acceptable for the same reasons and considerations as apply to the proposed exclusion of dairy-farming and livestock keeping and breeding.
Noble Lords must know that these two Amendments would drive a coach and horses through the Bill. A very high proportion of stockmen are housed by their employers and their cottages account for about one-quarter of the total cottage stock occupied by whole-time workers. Obviously the rehousing needs of such an important group of people were very much in our minds when the Bill was being prepared.
1306
In his Second Reading speech the noble Lord, Lord Swaythling, said something that was very important. He referred to disease risks from cattle breeding and I thought that he was going to raise the matter again today. I mention it because I think the noble Lord had a point about risks at Al units in circumstances where a worker leaves his job at the centre and takes up employment in, say, a slaughter-house. I accept that were such a situation to occur, the particular risk might well be higher than in the case of a normal livestock enterprise.
In addition to what I have already said about cases of this kind indicating a high priority in terms of agricultural need and urgency, may I point out that under Schedule 4, paragraph 9, to the Bill it should be possible for the statutory tenancy which could be drawn up on the termination of employment to contain clauses restricting access routes in such a way as to minimise any disease risks. I should like to remind the Committee that under the present system it can take up to six months to regain possession of a cottage. Therefore the problem already exists; it is not created by this Bill. As I have said, I hope that the Bill might lead to a generally more satisfactory solution where livestock are concerned.
In no way do the Government wish to turn back the clock regarding agricultural policy. Our main document Food from Our Own Resources describes the strategy, and we believe that our strategy is right. We do not wish in any way to harm the industry through bad arrangements between tenant and landlord farmer. If noble Lords look carefully at the matter they will appreciate that this is something which can work and that therefore it would be very wrong to mutilate Clause 1 by accepting the two Amendments which have been moved.
Viscount GAGE: May I ask one non-emotive question which arises out of what the noble Lord has just said. I understood the noble Lord to say that the local authorities will provide what is necessary: they will provide the houses for the workers connected with stock breeding and so forth. Can the noble Lord say whether the Government will give any more money to local authorities to provide these houses? I mention this

1307
because my branch of the district councils association have said:
"It is feared that housing authorities will be left in the intolerable position of having accepted the validity of an application for re-housing in respect of the tenant of tied agricultural accommodation but will be unable to provide alternative accommodation because of the central Government's restrictions on expenditure".
Lord PEART: In these two Amendments I am not dealing with that question; it will arise later in the Bill and I shall be delighted to reply to the point then. I think that I have said enough about the two Amendments.
Lord ROBBINS: May I declare a complete non-interest. I am not a farmer. It is true that I am the son of a farmer, but my father loathed animals and concentrated his attention on vegetables and fruit. Therefore I speak with not even a hereditary bias. However, I must confess to the noble Lord and to those of his Back-Bench colleagues who have supported him that I find it extremely difficult to share his optimism that no conceivable harm may result from the clause as it stands. I am not an expert in these matters, but I think that the burden of proof that the granting of security of tenure to people engaged in jobs which necessitate dwelling in the neighbourhood of those jobs lies with those who argue that no embarrassment may be caused. I am not a farmer but for most of my life I have been connected with education and certainly I can think of many educational employments where it is highly desirable that the person employed should be in close proximity by day, and sometimes by night, with the human stock for which he is responsible.
Would the noble Lord really argue that a blanket security of tenure in such cases would cause no embarrassment in education, or would he argue that machinery, which might be analogous to the machinery foreshadowed in the Bill, would remove all possible apprehensions? It is that insouciance with regard to the possibilities which surprises me. I remember that about two years ago we had a debate when the noble Baroness, Lady Young, and I, among others, warned the House that security of tenure being given in other housing connections, which I need not specify at this moment, would
1308
increase the shortage of accommodation among university students. With all due regard, I cannot help contrasting the attitude of the noble Lord the Leader of the House regarding this clause with the attitude of the noble Lord, Lord Shepherd, who in those days performed his functions, when he said that he thought that the restrictions we were considering then would slightly aggravate the shortage but that the moral arguments on the other side outweighed the inconvenience. The shortage has increased. I leave it to noble Lords to decide whether in that case or this the gain outweighs the disadvantages.
4.30 p.m.
Lord SANDYS: Having listened to the noble Lord, Lord Robbins, I feel he has greatly strengthened the case for the Amendment moved on this side of the Committee. I must say that what divides our two sides of your Lordships' Committee is one basic issue which is quite fundamental, namely, over-legislation in a field which is very sensitive. I dilated at some length at Second Reading on the question of the necessity to legislate; I questioned this most strongly, and I laid part of my argument at that time on the evidence which the Government brought forward in favour of the Bill. I will not rehearse it once again, but I must say to the noble Lord, Lord Collison, and the noble Lord, Lord Janner, that of the agricultural workers in England and Wales who were questioned by the Arthur Rank Centre, who did a very full study, only 5·7 per cent. were in favour of the Bill. This is a very, very small percentage. I think there is an overwhelming need to recognise the desire among this group of workers for no change in this particular field. Therefore, I am resisting most strongly the blandishments of the noble Leader and of noble Lords opposite who have suggested to us that there is nothing to fear. I think there is an enormous amount to fear in this field, for agriculture as a whole and for the production of the industry.
I was particularly glad when the noble Lord, Lord Swaythling, referred to animal disease. I noticed in the noble Leader's reply that he was sympathetic to this point, and I should like to say a little more about it. There is a very real issue that we should look at in the field of the dairy industry, which we have not examined

1309
sufficiently. Once again I do not wish to repeat all I said on Second Reading, but I referred to the dangers in regard to this Bill when related to foot and mouth disease. I suggested to Her Majesty's Government that it might be suitable to blow the dust from the cover of the Northumberland Report and think again rather carefully.
I have in the interval since Second Reading thought about the subject again, especially where it relates to the situation where a farm is infected. Only nine years ago we all too frequently, when passing a farm gate, saw an enormous notice in red letters saying "Infected place", and listing a great many columns of points concerning what should and should not he done. In this respect one of the especially sensitive problems was access to and from the farm. When a farm is infected, or, to put it the other way round, in order to protect an uninfected farm—and it does not matter whether I am referring to foot and mouth disease; I could equally well, in the poultry field, be referring to Newcastle disease—it is most strongly in the interest of the farmer concerned to have his stock-keepers housed, if possible, within the radius of the farm or within a very short distance, so that those infected do not come in touch with other people.
My second point is this. Over and over again, after an infection has taken place—and, once again, I do not specifically restrict my argument to foot and mouth disease—there is a report published by the chief veterinary officer of the Ministry of Agriculture. After the infection in 1967/68 the chief veterinary officer, having identified where this particular outbreak took place, made a number of recommendations. I think it is up to the Government to think very seriously indeed on this particular field, because our stock in this country is so subject to the possibility of infection from outside. We must support the work of the agricultural research centres throughout the United Kingdom who are working day and night to ensure that livestock is protected from disease.
One of the problems which divides and involves every one of us in the United Kingdom is consumption. It divides us in this respect, that only 3 per cent. of the population are concerned with production
1310
and 100 per cent. are concerned with consumption. It is perfectly true to say that outside the United Kingdom the issue of tied cottages is not a very great one, for that reason. I suggest to your Lordships that that might be true. A far higher percentage of the population in many countries is involved in agriculture, understands agriculture, recognises the important part it plays in the life of the country. In a highly industrialised society it is easy—and I make no complaint about this whatsoever—for those who live in urban areas to think that the agricultural produce will come anyway.
I was very glad that my noble friend Lord Ferrers referred to the disincentive effect so far as this Bill is concerned. He stressed that there is a risk that farmers, who are in any case working under very considerable pressure to overcome the bureaucratic problems imposed upon them by this Government, would find themselves in a position of thinking, "Well, shall we pack it in? Shall we sell the herd? Are the returns such that in all conscience we should concentrate on something else?" Should this opinion, and it is an opinion which could very easily be held by a large number of farmers, become generally acceptable, there will be taking place the exact opposite to what the Government intend.
The Minister referred to Cmd Paper No. 6020, Food from Our Own Resources, and I was particularly glad he did so. My noble friend Lord Onslow gave us figures, which I think he must have drawn from Annexes 3 and 5 of that Paper, in regard to production. I think it would be true to say that in regard to self-sufficiency in milk products—drawing again on these two Annexes, between 57 and 60 per cent.—the White Paper stressed the opportunities there were for expansion of grassland and of cattle and sheep and stock herds. If the Government expect their wishes to be fulfilled, they must consider the situation again in regard to the stockmen.
Wild exaggerations have been suggested by noble Lords opposite. Lord Collison said that he felt that there was no breakdown likely. I would never suggest that the noble Lord was attempting to mislead your Lordships, but I beg to disagree with him on this. He said from his knowledge, and, no doubt, in full sincerity,

1311
that he felt that it would not damage the industry, and here we are in head-on collision on this issue. Only two noble Lords opposite have supported the Government's case, and I would say that there are grounds for reconsideration. I have said quite enough in regard to the situation generally. I do commend the Amendments to your Lordships.
Lord COLLISON: Before the noble Lord sits down, may I just seek to correct one point that was made. Where this 5·7 per cent. figure comes from, I do not know—I have not seen the Report myself—but I can assure noble Lords that the vast majority of farm workers in the National Union of Agricultural and Allied Workers wish to see the tied cottage dealt with—not abolished in the sense that you knock them all down, and I am referring back to the fears which have been expressed. It is accepted that 50 per cent. of agricultural workers are members of the Agricultural Workers' Union, and at every conference or branch meeting you find a unanimous dislike of the tied cottage system. Despite what has been said about my views regarding the damage to the industry, I must in all honesty reaffirm what I said before: I do not believe, and I am sure that events will prove me right, that the grim pictures of what may happen are going to become fact. Already we have this problem of the tied cottage, of work people going to court or being taken to court, of six months elapsing; and there has been no breakdown. I would remind noble Lords that this procedure can very well speed up the settlement of difficulties of that kind.
I really got to my feet to correct this idea about the number of farm workers who dislike the tied cottage. I assure noble Lords that the union is right. Through its contact with workers at branch level, county level and national level, it has found that the tied cottage is entirely disliked by people who know what it is, who understand it or who have seen what happens when an eviction takes place. I know I am not doubted in terms of what I believe, but I must reiterate again, in all honesty, in all conscience, that I am quite satisfied that this Bill will improve the situation and will not damage the industry in any way.
1312
On the contrary, it will do much to improve relations between the farmers and the farm workers.
4.41 p.m.
The Earl of ONSLOW: Before the noble Earl either withdraws or presses his Amendment, there is a question I should like to ask the noble Lord, Lord Peart, arising out of his remarks. He said that now in certain circumstances it could take six months—and I am absolutely certain that he is right in this matter—to get vacant possession of a house. He also said, and I am absolutely sure that he is right but perhaps he was just being optimistic, that he hoped that the ADHACs and the county councils would react sympathetically. I am speaking perhaps for myself, but I am pretty certain that if we could get written into this Bill an absolute liability on county councils to rehouse people after three months, so that there would be no question of going to court or anything, this could be a great improvement. I noticed my noble friend Lady Young looking horrified at that aspect. I am sure that she sees the point, as we all do, that it is going to cost a lot of money and so it is difficult. But I am speaking solely in the interest of agriculture.
Viscount MONCKTON of BRENCHLEY: I apologise for intervening, as I have just come from a funeral and am just going to a yeomanry regiment, but may I follow up that last point? Many of us, however small our acreage, would be prepared to give up, I believe, half, one-and-a-half or two acres to house our retired farm workers. The essential thing is that our stockmen must live near their herds or flocks, or pigs. But the land we would give. I would give it to Mr. Bottini of the National Union of Agricultural Workers if I could be guaranteed that my stockman's cottage would remain a stockman's cottage. Would that help?
Lord SANDYS: May I just confirm to the noble Lord, Lord Collison, who asked me where the figure 5·7 per cent. came from, that that is the figure of those agricultural workers said to be in favour of the Bill. I told your Lordships on Second Reading, and repeated it today, that it was a figure produced by the Arthur Rank Centre who qualified a professional

1313
report on the subject, and this figure was the one which has been published. When speaking on Second Reading I asked the noble Baroness whether she would like to offer your Lordships another figure, but as no figure was produced I assume that this is an accepted one.
Earl FERRERS: We have certainly had an interesting debate on this subject and I am grateful to those who have taken part, and in that I would include the noble Lord, Lord Collison, whose views are always respected because he has been so involved with the National Union of Agricultural Workers and has been a distinguished General Secretary of it. We are grateful to him for saying what he has said. I am bound to say that we find this a considerable difficulty. The noble Lord, Lord Collison, said that he was quite convinced that this provision will improve the industry and eliminate bitterness. While accepting that those are his views, I beg leave to doubt it. My fear is that it might do just the reverse. It could well be that it will increase the bitterness where farm workers find themselves becoming statutory tenants in houses built for purposes for which they no longer intend to use them.
While the noble Lord, Lord Collison, quite reasonably says that the agricultural workers' union is, and has been, very keen on this Bill, and at every conference they have had this call for the abolition of the tied cottage, a fact which I absolutely accept, I am not sure that he will also accept that, as I think everyone knows, not necessarily every member of the National Union of Agricultural Workers agrees with that. Indeed, a great many people who are not members of that union but who are also farm workers do not share that view. While I accept that that is the official view of the union, I know that he will not expect me therefore to say that ipso facto that represents the view of 50 per cent. of those involved in agricultural work.
The noble Lord, Lord Janner, said that he thought that the fears that we have expressed are unfounded. The reason which he gave for expressing that view was that the Rent Acts had a number of expressions of fear mentioned about them, and those fears have been unfounded. I would how to Lord Janner's experience in this regard because I know he has
1314
been greatly involved with the legal aspects of those Acts. I would only ask him whether he really believes that, as a result of those Acts, rooms and houses to let are more numerous and are more easy to get, or does he think that rooms and houses to let have, as a result of those Acts, become more difficult to acquire?
Lord JANNER: What I believe is that tenants have been protected, and this involves not only hundreds of thousands but probably over one million people in the country. I think that the Acts themselves have proved to be an effective protection for tenants who otherwise would have been turned out. I should like to say one thing about the question raised by the noble Lord, Lord Sandys, for whose opinion I have a high respect, not in this particular direction but generally. The fact of the matter is that people who are keeping their houses empty are causing a considerable amount of damage to the housing situation for personal advancement, not only so far as dwelling-houses are concerned but, as he knows very well, so far as business premises and other premises are concerned. It is a serious matter that these people do not consider that. After all, today there is a Rent Act which provides a reasonable rent for a house. Those who are not prepared to charge a reasonable rent are doing a great disservice to the community.
4.49 p.m.
Earl FERRERS: The noble Lord has been fair. He has said that in his view the Rent Acts have given considerable protection to millions of people. He is absolutely right. That of course is one of the reasons why buildings, houses and flats to rent are less easy to come by. It is why, for instance, it is so difficult to get rooms to rent in any university town, because once having got a room to rent if a student stays on a second term he is automatically given security of tenure. Therefore, landladies quite reasonably prefer to let them to Greeks and Japanese because at least they go home and there will be rooms available. While I accept that that has given security of tenure it has also frustrated the renting of accommodation, and that is what we fear will happen under the Bill. Certainly there will be security of tenure for tenants, but equally in the same way it will frustrate the ability to have houses or cottages to let for the purpose of agriculture.

1315
Lord Peart agrees that we need good relations between farmers and farm-workers, and that is absolutely right. He agrees that the success of agriculture as a business is important; he agrees that we do not want to damage it and that we should not destroy confidence, but my fear is that we shall be doing just that. The noble Lord is an experienced Parliamentarian and he speaks with great charm and knowledge, but he did not answer any of the points I put to him. He did not say how a farmer would get over the problem of running his farming enterprise on finding that a house which he had made available to a stockman was being occupied by a stockman who, for one reason or another, had left his employment. He said that such a farmer would draw up a statutory tenancy. That is the whole point: he will do that and, by that statutory tenancy, that person will have a right to stay on in the house.
The noble Lord did not say how a farmer in that position was supposed to cope. I suppose we must assume that he will cope either by doing the work himself, which he will no doubt do for a limited period, or provide such other form of existence such as a caravan. What an extraordinary way to improve the condition of housing in rural areas! Are we to see a proliferation of caravans on farms as a result of this measure? The other possibility is that the farmer will eventually throw his hand in and say it is not worth a candle. The noble Lord did not address himself to that thought, but I hope he will do so. Nor did he address himself to the thought that not only will this cause difficulties for farmers running their businesses but that farmers and those involved in agriculture might well give up running livestock enterprises while others will be deterred from coming into them.
The noble Lord, Lord Peart, did not address his remarks—I do not blame him because I did not specifically push it today, although I mentioned it on Second Reading—to the fact that a great many farmers and landowners have provided and are providing accommodation for people who work for them. This is particularly the case in livestock businesses, where if one is to have a valuable unit producing a lot of milk, eggs or pigs one must provide housing
1316
accommodation. That is being done now, but I fear that it will stop because no individual will spend £12,000 on building a house only to find somebody else living in it and he can not or may not have recourse to it. Not only is this a deterrent from the point of view of encouraging people to provide houses for agriculture, it is also a restriction on the national housing problem in rural areas. Nevertheless, as a result of this measure we are bound to find a slowing down in the number of people prepared to make this sort of investment.
Lord HANKEY: Is the noble Lord aware that in the area where I live nobody is allowed to build any more houses because it is a white area and is scheduled for agriculture? One is not allowed to build, and how we will provide the houses that are required is not apparent.
Earl FERRERS: The noble Lord has problems in his area which are considerably greater than the problems which may apply in other areas, and I am glad that he has drawn attention to that point. The noble Lord, Lord Peart, referred, and rightly, to the fact that the Government stood by their White Paper Food From Our Own Resources in which they specifically state that they wish to encourage an increase and improvement in industrial production. I return to the point I made earlier, which is that the Government must give agriculture some encouragement. They have subjected the industry to one restriction after another; we have had the problems of the capital transfer tax, capital gains tax, development land tax and the Community Land Act, all of which in their own ways have imposed restrictions. We now have the Agriculture (Miscellaneous Provisions) Bill which also imposes restrictions, and here we have a Bill which will restrict agriculture yet further.
If the noble Lord wants agricultural production to increase, as I know he does—I know that his heart is in the right place—he must give it some encouragement. To do that is in the interest of the whole nation at the time when, goodness knows! food prices are rising to tremendous levels and when the pound is becoming more devalued and imports more expensive. Everybody recognises that increased agricultural output is required. Why, then, this further restriction? I accept that

1317
those who live in stockmen's cottages should be just as much the subject of protection as anybody else. That is a perfectly reasonable argument. However, in my modest judgment I feel that the balance is wrong because if we give that protection to those people we will cause such a restriction on the movement of agricultural workers and on the output of agriculture that, from the point of view of the national interest and the industry, it will work to the detriment of both.
I had hoped that the Government might have accepted the Amendment. In my view they should do so, but I realise they are up against difficulties which might make it awkward for them to accept it. I do not for a moment believe that Lord Peart wishes to see it said of his Government's Administration that they curtailed
the output of agriculture, restricted the amount of livestock production and the amount of dairying. I do not say that that will result, but it is possible that it will and, if that were to happen, it would be bad for the Government—because their record would show that they produced such measures against agriculture that output was restricted—and it would be bad for the national interest. I hope that the Government will think again about this but, if they will not, then I am bound to ask the Committee to divide on the issue.
5 p.m.
On Question, Whether the said Amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 144; Not-Contents, 64.

CONTENTS

Aberdeen and Temair, M.

Ferrier, L.

Norfolk, D.

Alport, L.

Fraser of Kilmorack, L.

Northchurch, B.

Amherst, E.

Gage, V.

Northesk, E.

Amherst of Hackney, L.

Gisborough, L.

O'Hagan, L.

Amory, V.

Gladwyn, L.

Onslow, E.

Amulree, L.

Glasgow, E.

Orr-Ewing, L.

Armstrong, L.

Glenkinglas, L.

Porritt, L.

Ashbourne, L.

Goschen, V.

Radnor, E.

Atholl, D.

Gray, L.

Rathcreedan, L.

Auckland, L.

Grey of Naunton, L.

Redesdale, L.

Balerno, L.

Grimston of Westbury, L.

Reigate, L.

Banks, L.

Hailsham of Saint Marylebone, L.

Robbins, L.

Belstead, L.

Robson of Kiddington, B.

Berkeley, B.

Hankey, L.

Rochdale, V.

Birdwood, L.

Harcourt, V.

Romney, E.

Blakenham, V.

Harmar-Nicholls, L.

Ruthven of Freeland, Ly.

Bourne, L.

Hatherton, L.

Sackville, L.

Bridgeman, V.

Hives, L.

St. Aldwyn, E.

Broughshane, L.

Hornsby-Smith, B.

St. Davids, V.

Burton, L.

Howe, E.

Salisbury, M.

Caccia, L.

Hylton-Foster, B.

Sandys, L.

Campbell of Croy, L.

Ilchester, E.

Savile, L.

Carr of Hadley, L.

Jessel, L.

Selkirk, E.

Carrington, L.

Killearn, L.

Sempill, Ly.

Chelwood, L.

Kimberley, E.

Sharples, B.

Clancarty, E.

Kinloss, Ly.

Shuttleworth, L.

Clifford of Chudleigh, L.

Kinnaird, L.

Somers, L.

Clitheroe, L.

Lauderdale, E.

Spens, L.

Clwyd, L.

Lindsey and Abingdon, E.

Stamp, L.

Congleton, L.

Long, V.

Strang, L.

Cornwallis, L.

Lonsdale, E.

Strathclyde, L.

Cottesloe, L.

Mackie of Benshie, L.

Strathcona and Mount Royal, L.

Craigton, L.

Macleod of Borve, B.

Strathspey, L.

Cullen of Ashbourne, L.

McNair, L.

Swansea, L.

Daventry, V.

Macpherson of Drumochter, L.

Swaythling, L.

Denham, L. [Teller.]

Mancroft, L.

Terrington, L.

Deramore, L.

Marlborough, D.

Teviot, L.

Derwent, L.

Marley, L.

Thorneycroft, L.

Drumalbyn, L.

Mersey, V.

Tranmire, L.

Dundonald, E.

Middleton, L.

Trefgarne, L.

Ebbisham, L.

Monck, V.

Tweedsmuir, L.

Eccles, V.

Monckton of Brenchley, V.

Vernon, L.

Effingham, E.

Morris, L.

Vickers, B.

Elles, B.

Mottistone, L.

Wakefield of Kendal, L.

Elliot of Harwood, B.

Mowbray and Stourton, L. [Teller.]

Ward of North Tyneside, B.

Emmet of Amberley, B.

Ward of Witley, V.

Erskine of Rerrick, L.

Moyne, L.

Westbury, L.

Faithfull, B.

Netherthorpe, L.

Young, B.

Ferrers, E.

Newall, L.

NOT-CONTENTS

Aylestone, L.

Hughes, L.

Ritchie-Calder, L.

Birk, B.

Janner, L.

Segal, L.

Blyton, L.

Kirkhill, L.

Shinwell, L.

Brimelow, L.

Leatherland, L.

Slater, L.

Brockway, L.

Lee of Newton, L.

Snow, L.

Burton of Coventry, B.

Longford, E.

Soper, L.

Castle, L.

Lovell-Davis, L.

Southwark, Bp.

Champion, L.

Lyons of Brighton, L.

Stedman, B.

Chorley, L.

McCluskey, L.

Stewart of Alvechurch, B.

Collison, L.

Maelor, L.

Stone, L.

Cooper of Stockton Heath, L.

Melchett, L.

Strabolgi, L.

Cudlipp, L.

Morris of Borth-y-Gest, L.

Taylor of Mansfield, L.

Darling of Hillsborough, L.

Murray of Gravesend, L.

Wall, L.

Davies of Leek, L.

Oram, L. [Teller.]

Wallace of Coslany, L.

Davies of Penrhys, L.

Paget of Northampton, L.

Wells-Pestell, L. [Teller.]

Delacourt-Smith of Alteryn, B.

Pannell, L.

White, B.

Douglass of Clevelend, L.

Pargiter, L.

Wigg, L.

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

Peart, L. (L. Privy Seal.)

Wilson of High Wray, L.

Garner, L.

Peddie, L.

Winterbottom, L.

Gordon-Walker, L.

Phillips, B.

Wise, L.

Henderson, L.

Pitt of Hampstead, L.

Houghton of Sowerby, L.

Popplewell, L.

On Question, Amendment agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.
5.8 p.m.
Earl FERRERS Earl FERRERS moved Amendment No. 2:
Page 1, line 17, leave out ("grazing, meadow or pasture land or").
Earl FERRERS Earl FERRERS moved Amendment No. 3:
Page 1, leave out line 21.
The noble Earl said: This Amendment goes with Amendments Nos. 4, 5, 7 and 11 and I think also with Amendments put down by my noble friend Lord Caithness. The Amendments in question are Nos. 75, 76, 77, 83 and 96. Whether he wishes to address his remarks specifically to those Amendments when they come up I do not know. Therefore, I shall move only the Amendments that are in my name, even though the others relate to the same point, which is the position of forestry. Forestry is included in the Bill, but I venture to suggest that there are peculiarities about it. The problem of forestry is somewhat different from that of agriculture. The first and obvious difference is that, on the whole, forestry takes place a long way from urban centres and operates in under-populated areas on the hills in Scotland and particularly in the North of England—areas which not only have many fewer opportunities of employment but also have fewer opportunities for housing.
The Government's Consultative Document said clearly that the problems of housing forestry workers had never been particularly onerous. Paragraph 19 of the Consultative Document, which referred to the application of forestry under the provisions of the tied cottage, said:
"Provision of tied accommodation for forestry workers has seldom given rise to the kind of problems or controversy found in agriculture."
The Government have included forestry in the Bill, but they have done three things. First, they have excluded forestry that takes place in Scotland; that is because the whole of Scotland is excluded from the Bill. They have also said that tied housing accommodation where it applies in forestry should not, for some mysterious reason, apply to those people who are engaged in forestry working for the Forestry Commission. So having restricted the number of people, reducing it to a very small number, the Government then say that they do not intend that the provisions of the Bill should apply to forestry anyhow at the beginning.
Clause 1(4)(b) says that Part II, which refers to forestry:
"postpones the operation of this Act in relation to certain persons employed in forestry …"
The conclusion is that the Government obviously have some reasons for excluding forestry. My guess, and I may be wrong, is that they have not enough statistical information as to what happens in forestry, as to what happens about those who are housed in tied cottages which relate to forestry. All the arguments they

1321
have produced in the Consultative Document and elsewhere concede the fact that the problem in forestry is very much less than the problem in agriculture.
I wish to make this point to the noble Lord, Lord Peart. Forestry is, as indeed agriculture is, a very important industry. It takes place in relatively unpopulated areas. If the provisions of the Bill operate in forestry, what happens, for instance, in cases of foresters who live, say, on the top of the Yorkshire Moors or on the top of some isolated hills in the North of England? How will those involved in forestry be able to replace those forestry workers? There is no point in saying that the local authority will provide housing for them if that housing is to be 10 miles from where they work. I believe that this will produce very difficult problems for those engaged in forestry.
I should be the first to accept that the argument of fair and equal treatment for all people, as was put forward in the previous Amendment, is a perfectly reasonable argument. I do not propose at this juncture to say that if it is to be fair and reasonable treatment, that that should apply to every other form of tied cottage other than those in agriculture. The point I would make is that it is right that there should be fair and reasonable treatment, provided that all the other circumstances are the same. I believe that to make the provisions of the Bill operate in the most outlandish parts of the United Kingdom, right away from other alternative accommodation, will put a strain on the existing rural housing system which it will not be possible to accept.
As the Government have specifically excluded those people who work in forestry in Scotland and have specifically excluded those who work in the Forestry Commission, and as the Government have specifically said that they do not want this to come into operation yet, anyway—presumably because they are not quite certain that they think it is right—I hope that they will accept our little Amendment and the series of Amendments which will exclude the provisions of the Bill from forestry. I beg to move.
Lord JANNER: I have a very great respect for the views of the noble Earl who has just spoken and for the courteous
1322
manner in which he always puts his case. I am a little puzzled here. If his argument is that this forest occupation is one which is very far from places which afford employment of another kind, what is he worrying about—
Earl FERRERS: I am sorry, I could not quite hear.
Lord JANNER: With the greatest respect, I should say that a person who is offered other employment would not want to remain far from the employment to which he is going. The only circumstances of which I can conceive of people wanting to remain in a remote place might be if the then tenant died and his successor—a widow or whoever it may be—could not find any other place to go. I should not imagine that even they would want to remain in a place which was so remote from general life or that they would want to insist upon retaining accommodation in those premises.
I think the point which the noble Earl is making, the point to which he referred, is that if one starts making exceptions difficulties can arise and must needs arise, because the situation can be utilised to create further exceptions. Frankly, I do not see how a person occupied in the forestry industry, or the industry itself, will suffer in the slightest. I cannot quite see how very many people would want to remain in a place in which they were no longer working.
5.17 p.m.
Lord TRANMIRE: The noble Lord, Lord Janner, says that if one starts making exceptions difficulties arise. The whole point about this Amendment is that the exception has been made by the Government, and quite rightly, because the forestry tied cottage is an entirely different species from the agricultural tied cottage, just as the Government no doubt maintain that there is a difference between the agricultural tied cottage, the clerical tied cottage, and the mining tied cottage. We were talking in the last Amendment—
Lord JANNER: But—
Lord TRANMIRE: I must ask the noble Lord to wait a minute. He has had a good deal of the debate this afternoon and I will give him time, but he

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must not interrupt in the middle of a sentence, which is never a very good thing in either House. We were talking in the last Amendment about the need for tied cottages for a worker; that is, to have a worker nearby to be available for the humane treatment of animals. The reason for the tied cottage in forestry is to have someone on the spot to prevent fires breaking out.
Most of the Forestry Commission area in North Yorkshire has this summer been in peril from fire and the Commission has lost 60 to 80 acres of woodland because there were not people on the spot to put out the fires. If there is a delay of three months between one worker going and another coming in, and that delay occurs in the summer months, then, as the Government have rightly seen, that would be very difficult to apply in forestry. Therefore, I commend the Government for having excepted forestry in the Bill, but I suggest that the right way would be for them to take it right out now and, if necessary, bring in a separate Bill later to deal with the problem of forestry tied cottages. It is the worst way of legislating that one tries to bring in the forestry worker and then say, "We will not bring it in until the Minister makes up his mind about it, and then he will do it through a Statutory Instrument".
I would beg the Government to think again on this and to accept these Amendments, and then later, if they will, to bring it in by separate legislation. As I see it, this Bill really is the "week-ender" Bill. I know that in the general area of the North of England in the last 50 years the reduction in the number of cottages for agriculture has been worrying to everybody. What has happened is that cottages that were agricultural workers' cottages, tied or untied, are being sold to become cottages of week-enders from the towns and are being lost to agriculture. That is the danger of the Bill, particularly in the forestry areas. Directly a threat arises to the forestry tied cottage, then the owner of that cottage, whether it is the Forestry Commission or the private owner, will be inclined to put it up for sale as a weed-end cottage—and he can get something like twice the agricultural value of the cottage from a week-ender. I am afraid that this Bill is the week-end cottagers' charter.
Lord JANNER: Before the noble Lord sits down, I merely intervene in order to tell him that he had not listened, possibly, to the arguments that were put forward with regard to the other tied cottages. No one has suggested for one moment that the other tied cottages have not to he dealt with at some time or other. The only reason why one cannot deal with them all, as I tried to explain before, is because there is a lack of time and we have to deal with these matters in whatever manner is available in order to get on with some kind of legislation.
5.22 p.m.
Lord MIDDLETON: I must declare an interest as an owner of forests and of agricultural service occupancies. There is at least a logical basis for legislating for farmworkers as distinct from forestry workers. There have been bad farm employers who have sacked a man at short notice and turned him out of his house. The cases have been few, but they are fully recorded. I can easily understand the motivation behind the long, persistent and historic campaign by the National Union of Agricultural Workers on behalf of farmworkers. However, as regards forestry workers, as my noble friend Lord Ferrers has said, the Government are quite in the dark about their problems, if there are any. Indeed, they have set up an inquiry, a study, to get more information about this subject.
So far, the only reasons given during the passage of the Bill for including forestry as it is in the definition of "agriculture" in Clause I have been the following. First, that the definition of "agriculture" in existing tied-cottage legislation derives from the Agricultural Wages Act of 1948, where the use of land as woodland is mentioned and the production of consumable produce. But the Consultative Document, to which the noble Earl referred several times this afternoon, is very wary about this definition, which it says guardedly "might be taken to embrace much of forestry". In other legislation, for instance the Agricultural Holdings Act of 1948 and the Town and Country Planning Act of 1947, "agriculture" does not take in forestry. So if it is a matter of definition I think this is a shaky argument.
Secondly, another argument that was heard in another place—I think it was

1325
the Parliamentary Secretary of State who said it in Committee—was that forestry is akin to agriculture. Well, I do not think this is a very convincing reason. One might just as well say that forestry is akin to coal mining, because the one deals with fresh timber and the other with fossilised timber. I do not think this is at all convincing.
Thirdly, it was suggested that the pay and conditions of many forestry workers are subject to the Agricultural Wages Act. I think I am right in saying that it is extremely difficult to get figures—in fact it is impossible—but the majority of forestry workers are employed by the Forestry Commission and, as your Lordships know, their wages and conditions are assessed quite differently and are not subject to the Agricultural Wages Board. It is therefore not surprising that the Government have decided that the provisions of this Bill, while embracing forestry workers, will not be implemented so far as woodmen are concerned, until a future date.
I fully agree with my noble friend Lord Ferrers that forestry should be struck out altogether, not merely because there have not been produced any convincing arguments so far for its inclusion, but because the fewer the categories of displaced persons who have to he rehoused by local authorities in a situation of acute housing shortage, the more chance there is that the local authorities can perform their existing duties, to which are to be added the duties under this Bill in respect of farm workers.
The Earl of CAITHNESS: I rise to support my noble friend Lord Ferrers on this very important Amendment. In doing so, I talk to all the Amendments with regard to forestry, as I believe it would be beneficial to the forestry industry. I do not believe it is right to legislate against an industry without its support or until a proper inquiry and resulting discussion have proved its need. There is no support for this measure in private forestry, and the Government have failed to produce any arguments to show that forestry employees have been harshly treated by the tied cottage system. There has been no report on this matter, and I understand that one is not due to be published until early next year.
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Was it not only last night that the noble Lord, Lord Jacques, arguing against an Amendment, said that there should be no change in the established machinery within a business until there was a good reason for that change? No good reason has been proved in this case. If the Government have the grace to admit that no action will be taken to include fish farming until a report is considered, why has forestry been included? If the need for legislation is proved it can easily be included by an Affirmative Resolution.
Another reason for supporting this Amendment is that private forestry, as my noble friends have said, has in general to compete with the Forestry Commission with regard to wages, houses and conditions. There is no comparable situation in agriculture, and I believe it is right, therefore, that both private forestry and the Forestry Commission with its 1,500 tied cottages should be treated in the same way. The need for housing in the key positions is particularly important, so that the forester can supervise the woods and the estate sawmill and yards in much the same way as the shepherd or cattleman manages his livestock. There are areas of woodland which are isolated and this, allied to the cost of travelling, makes housing in the right situation so important. This at the moment can best be achieved by tied cottages.
More recently, the question of easy management of woods has become more important with the continued opening up of the countryside to the public. Woods can easily conceal people and any damage in the way of pollution to streams, theft and, as has been mentioned, fire, committed wittingly or unknowingly, must be discovered at the earliest possible moment. From my experience I am convinced that tied housing played an important role in reducing the risks of damage such as occurred in the recent drought. Your Lordships will recall a debate on forestry held recently in this Chamber, when we heard of the depressing situation that existed (and it still exists) in the industry. So that the problems may not be increased, I support this Amendment, which I believe to be for the benefit of that industry.
5.29 p.m.
The Earl of RADNOR: I, too, must declare an interest, in that I am a forest

1327
owner and also an owner of so-called tied cottages. I will keep your Lordships but one short moment. It occurs to me that, talking of fire and the importance of having forest workers, so to speak, on the place, we have left out one of the most vital reasons why they must be there. I say "vital" because, though it may not happen that often, it encompasses injury and sometimes even death. When we talk of forest workers and forestry we are rather apt to think of the great big woods, and so on and so forth; but of course timber grows in our hedgerows.
We are a country which is absolutely interlaced by roads and rights of way of at least three sorts. Gales, as some of your Lordships will be aware, occur and trees, however carefully you look after them, sometimes rot underground and then fall across roads. If you are an unlucky passer-by they can fall on top of you. That is unfortunate and seldom happens; but there are a lot of accidents and the matter should not be treated too lightly. Where trees are left for too long somebody may come along in their car or moped on a dark and stormy night and be seriously injured or sometimes worse. I can assure your Lordships that I do not know whose responsibility it is. I suppose the councils could be asked to take the trees away, but it is more likely to he the owner's responsibility. Speed is of the essence. The sooner that tree is cleared away, the less is there a likelihood of injury, or even death. Although this does not happen often I think your Lordships should be aware that it does happen. It is one reason for keeping at least some tied cottages for foresters, so that they can be out and about on these dark and stormy nights and in those situations.
Lord GISBOROUGH: The Consultative Document said that the provision of tied accommodation for forestry workers has seldom given rise to the kind of problems found in agriculture. Before leaving that point, I should like to say that the NUAW in a public statement said that there were no fewer than 20 evictions every year out of 70,000 tied cottages; which means that for every three and a half thousand people, one will be evicted on present trends. The danger is that one cannot see the necessity
1328
in forestry, apart from the danger of fire—and I know this, for I had a forest burnt down in, this last drought—for having a man on the spot night and day. Obviously, apart from risks of fire and trespass, there is not the same need as with cattle. While there is a need to guard against fire and damage of that nature, it might appear to the courts that the need was not there and therefore did not justify that a house should be made empty for a new forestry worker. They may well, therefore, in many areas feel that it was adequate for workers to drive into work on forestry. But the need is there and particularly in the country areas where there is large forestry and few houses of other sorts are available for other labour.
The same argument goes as for agriculture, that you are not going to get good forestry labour without houses. Good labour of any sort is always difficult to find. One sees trees and thinks that they are not doing much, just growing, and that if one leaves them long enough they will get big enough to sell. That is far from the truth. It takes a long time for damage to become apparent. A great deal of work has to be done on trees and forests all the time. Pruning, fire precautions, thinning and all sorts of processes take place. It is essential that there should be good staff available if the trees are to be of any value at the end of the time—and one is talking in terms of 60 to 100 years. An interesting point is that near my own home the Forestry Commission have a large acreage and they have not got an adequate number of houses. The result is that they cannot get the work done and they have this large forest which is going bad on them and will be virtually useless as a result. The damage to the country will take a long time to make itself apparent. My own experience of these forest workers is that few of them want this protection under this Bill. I support the Amendment that forestry should he removed from it.
Lord BURTON: Although I support the Amendment, I had not intended to speak, but having heard the noble Lord, Lord Janner, on this Amendment, as on the first one, I feel that there is some misunderstanding on the Benches opposite of the true position. He said that he could not follow why a man should want to stay in a remote area. The position is

1329
that a good man who is a hard worker has no difficulty under the present set-up in finding a good situation with a good house. But such men are scarce. It is difficult to get good men, as my noble friend, Lord Gisborough, has just said. It is therefore important that you should have houses for them. The bad man may well sit on in the house, even if it is in a remote area. The problem which may arise, although I do not think it arises extensively over tied houses, almost invariably arises where there are bad employees and where a man has to be got rid of.
The good man has no problem. He can easily find a job and, anyway, one does not want to get rid of him. The bad man can sit on, and if he has a large family he will be able to draw a great deal more as an unemployed person, sitting in a house for which he is paying no rent and causing a problem. You may have some sympathy with this individual but he could be causing a backlog. I have had a case where no fewer than three other good employees were held up and could not get into the house because a bad man sat on and would not get out. The noble Earl, Lord Radnor, knows this only too well, for one of them was to come from him. As it was, he could not get his new man in, and so it went on and three people were held up.
Lord PEART: I think I should respond now to noble Lords' speeches on these Amendments. May I say, first, that in the Consultative Document we noted that existing tied cottage legislation will apply to many forestry workers and that pay and conditions for many forestry workers are subject to the Agricultural Wages Act. It was clear when we came to frame our proposals that the links between forestry and the remainder of agriculture were such that forestry should be included in the Bill; although there was a need to improve the information available on the situation in forestry. A survey is presently being conducted by the Tavistock Institute on behalf of the Forestry Commission to provide this information. When this is to hand we shall be able to determine the appropriate appointed day for forestry. I referred to this in my Second Reading speech (at column 1093 of Hansard (Vol. 374)). I then explained why. When the results
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are available, we shall be able better to decide on an appropriate implementation date for forestry workers. I should add that when the legislation for forestry is brought into effect we shall expect the Forestry Commission who, as noble Lords are aware, are the largest woodland owners in the country, to treat their tied cottage occupants exactly as private forestry landlords will be required to treat them. Although the Forestry Commission is exempted from any statutory obligation under the Bill, there will be no question of discrimination in practice between one and the other.
I have noted carefully what noble Lords have said and may I say again to the noble Earl, Lord Ferrers, who said that the problem may be less than in agriculture but that forestry is an important industry, that I accept that point. I was a Forestry Minister. I have a house in Lakeland surrounded by forests owned by the Forestry Commission and I have always taken a great interest in this. I think it is a great industry. On several occasions I have had to deal with this industry and I have tried to avoid any rivalry between forestry and agriculture. There used to be great controversies over whether we should have sheep or trees in the hills. I think it is right to consider always proper development and a combination of both. I have argued this in the Council of Ministers in Brussels. I recognise, we on this side recognise and the Government recognise the importance of forestry. There is no question about it.
I have the impression sometimes that people always think of the forestry worker as living in isolated conditions apart from his fellow man. It is not entirely true in the area I used to represent in the House of Commons, the Lakeland area of Cumberland. Along the shores of many of our lakes we have wonderful forests and many of the forestry workers are housed there. There are occasions when we have this remoteness argument. The noble Lords, Lord Gisborough, Lord Tranmire and others mentioned this. This was also emphasised particularly by the noble Earl, Lord Caithness, who has his name down to some of the Amendments.
There are problems of care and maintenance. The noble Lord, Lord Gisborough, was quite right when he

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mentioned our experience in the drought when he was in the Forest of Dean and saw the terrible fires that broke out. There is always a risk, particularly in an area like the Lakeland where there is a great tourist industry and people can be careless. You need good forestry workers. Apart from the general looking after of silviculture you need vigilant people always around. It is not quite the same as a dairy farm which we were talking about on a previous Amendment. I am sure noble Lords will recognise that we are right to ask them not to press their Amendments and I hope they will accept that we mean to protect the industry in the best sense. After we have heard the advice given to us in the survey we shall know better what the position is. I think we are right to do this so I hope noble Lords will withdraw their Amendment.
Lord MIDDLETON: May I ask a question about dates? We welcomed the Consultative Document which came out last year. The massive public expenditure cuts announced by the Chancellor of the Exchequer in May are going to put a greater strain on housing, and by cutting out forestry workers that strain could be reduced. Surely noble Lords would agree that events subsequent to the decision made to include forestry workers would perhaps make necessary a change of mind on this.
Lord PEART: I referred to the Forestry Commission survey which is now under way, and when the results have been analysed, I would hazard a guess in the Spring of next year, it will be possible to determine an appropriate appointed day for forestry. I cannot go beyond that.
The Earl of CAITHNESS: Could the Minister inform the House what will happen if the Tavistock Report shows that legislation in this field is not needed?
Lord PEART: I would rather wait to see what happens. Obviously if the facts went against my argument I would not be such a fool as to say that I would defy facts. We must look at the survey and apply the same arguments to noble Lords opposite.
The Earl of CAITHNESS: Would it be better to delete forestry, as we have not
1332
included fish farming, until the report is before us?
Lord PEART: No, I do not think so. That is why I am asking noble Lords to withdraw the Amendment.
5.45 p.m.
Baroness YOUNG: I should like to ask the noble Lord, Lord Peart, to reconsider his reply. I support my noble friend Lord Ferrers. It goes without saying on a Bill like this that I have no interest to declare as I have no connections with agriculture and I have never owned a tied cottage, although I lived in one for a short time. That is my only interest in this connection. I speak now as the vice-president of the Association of District Councils who are clearly very much affected by the Bill. Having heard the reply of the noble Lord, Lord Peart, to my noble friend about facing the facts of the situation, I hope that that will be done on both sides of the Committee and that we are not conducting this debate in an era of wishful thinking.
As I understand it, the effect will be to remove from the farmers responsibility for housing farm employees and placing it on the local authorities. It is a Bill to add expenditure and responsiblity to local government because, at the end of the day, they will have to house every agricultural worker. This is the logical conclusion of this piece of legislation.
Lord PARGITER: Would the noble Baroness give way? Do I gather from this that all tied houses will suddenly go out of existence when this Bill becomes applicable?
Baroness YOUNG: Of course the houses will still be there, but gradually these houses will go out of existence for agricultural workers, just as the continual Rent Act legislation has removed property from the supply of furnished and unfurnished accommodation privately rented each year. The noble Lord, Lord Janner, with whom I have argued housing many times before and with whom I am delighted to argue once again, I remember saying to us only two years ago that of course the 1974 Rent Act would make no difference to the supply of furnished accommodation, that all the safeguards would apply. A moment ago he laughed at the assertion of my noble friend Lord Ferrers that

1333
people let only to foreigners. Let me tell the noble Lord from my own experience of canvassing during the district elections this year in Oxford, that I visited two flats both inmates of which said to me, "It is an extraordinary thing, but I got this flat because I had a Japanese passport"; and the other one said, "I got this flat because I had an American passport". This is the end of Rent Act legislation.
Several Noble Lords: No!
Baroness YOUNG: As you bring in more restrictions so you will find that there will be less accommodation to let. Be that as it may, the responsibility is going to fall on district councils, and I should have thought that there was a great deal to be said for taking forestry out of this Bill. As the noble Lord, Lord Peart, has said, and as the Bill itself, as I understand it, indicates in Part II of Schedule 2, under the Bill there will be an appointed date for bringing in forestry. As the facts of the situation as to whether this is a desirable end or not are not yet available, we do not know how it is going to work out. It seems to me that as housing is going to be much more difficult for local authorities, there is much to be said for saying at this stage that we will not put further responsibilities on them.
I would refer noble Lords opposite not to my words but to the words of their honourable friend Mr. Freeson in a Written Answer on 5th August, 1976, after this Bill had been through another place. He had had a meeting with local authority associations and was explaining the cuts in expenditure for council housing in the country as a whole. The argument of the Government was,
"… it would be our main aim, on housebuilding, to ensure that first priority was given to the needs of stress authorities."—[Official Report, Commons, 5/8/76; col. 984.]
If one looks at the list of stress authorities they are, of course, the city centres and the urban areas, and the list is a long one.
The second aim, further down, is designed to deal with more localised stress in areas of other authorities. It stands to reason that agricultural or forestry workers will not be in city centres; they will be in country areas, and largely the responsibility of the 333 non-metropolitan district councils. Money is going to be taken away. I cannot see how the Government can square a
1334
Bill to put further responsibilities on local authorities and at the same time take money away.
Lord PEART: I think I ought to reply to the noble Baroness. She said she agreed with the noble Lord, but I did not hear much about forestry in her speech. I understand she is arguing about the responsibilities of local authorities in rehousing people and that this could impose burdens on local councils. In the Second Reading debate on 5th October I referred to the fact that my right honourable friend the Minister for Housing and Construction has already assured the President of the National Farmers' Union that, in administering the control of individual local authorities' housebuilding programme and other housing expenditure, his Department will take into account the rehousing duty imposed by the Bill. As an illustration of this we have said that this might be £5 million extra expenditure in the first five years or so. We recognise that we may have to do something. I hope that the noble Baroness will be pleased with that reply. It is very relevant to what we are doing.
Viscount AMORY: I am glad that my noble friend Lady Young said what she did say in her usual attractive and spirited manner. Practically every Bill that comes before us nowadays lays some new commitment on local authorities with very little indeed being said as to where they are going to find the resources to carry out those commitments. I want to warn your Lordships that the time is coming when local authorities will have to say, when new commitments are laid on them in this manner without anything being said about where the resources will come from, that they will have to reject and neglect those commitments because they cannot carry them out. I hope that local authorities will not say that in this particular case if this Bill passes, because their efforts will be relied on. However, we must keep this in front of us all the time. It is not good enough. It goes on and on, and the time will come when the worm—that is not perhaps a very respectful way of referring to my colleagues in local government—will turn and say to Parliament and to the Government, "We cannot accept any more of these commitments and if they are laid on us we propose to ignore them".
Lord GISBOROUGH: May I ask the noble Lord, Lord Peart, to expand on that figure of £5 million. If one estimates £12,000 for a house—which is not unreasonable—that means 416 houses over 600 local authorities, which means that each authority will be able to build two-thirds of one house.
Lord PEART: The £5 million has been mentioned as the extra expenditure which might be involved for the first five years or so. That assumes—and I go further and quote:
"… that local authorities will have to deal with some 500 extra cases each year by new house-building."
As I have said, the Minister has replied to the President of the National Farmers' Union and one should take note of that.
The Earl of ONSLOW: Arising out of what the noble Lord has said in reply to my noble friend Lord Gisborough, may I ask if he is saying they will deal with 500 extra houses each year for five years?
Lord PEART: Extra cases.
The Earl of ONSLOW: They presumably mean that each is a house, so that is 2,500 houses extra. If the noble Lord can sell me 2,500 houses for £5 million I think that even I should get an overdraft on that particular idea, because each house cannot possibly cost £12,000. I cannot divide £5 million by 2,500 off hand, but it is certainly a good deal less than £12,000 per house.
Lord COLLISON: I promised not to intervene frequently and I will honour that promise, but I am concerned at the way the debate is going, both on the first Amendment and on this one. We started off very well by accepting the humanities and proclaiming our belief that they must be honoured. Having done that, arguments are put up why those humanitarian obligations cannot be met—the difficulties are too great, and so on. I appreciate that in debates there is an anvil and you thrash out your pros and cons on that anvil, but the pros and cons put on it must be objectively put, and what I am protesting about—and it is a sincere protest—is the wild (and I again use the word "wild") exaggeration that is going on when noble
1336
Lords opposite talk about the consequences of what this Bill proposes, both in terms of agriculture and in terms of forestry.
For example, we were told just now by the noble Baroness that local authorities would have to house all the forestry workers. That is not only a manifestly wild exaggeration but also an unbelievable exaggeration. It just cannot be like that. We are told that the farm workers are going to sit in their houses and are not going to be moved out until there are no houses left to house new workers who want to come in. That, again, is a great exaggeration. I return to my point, which is that we accept, and the noble Earl opposite accepted, the humanitarian approach to this matter. Having done that, it is quite improper and unreal to put against the acceptance of those humanitarian demands arguments which are so exaggerated. I can only think that they are put because people are biased in this particular matter.
I do not want to talk too often or too much, but I believe in objectivity, and while I am prepared to look at arguments which are put and which may clear the difficulties—and in some cases there will be difficulties—do not forget all the procedures that have to be gone through: other alternative accommodation has to be proved not to he there; and there is the committee to give advice to the local authority. All the machinery is there to protect the farmer and, in the case of the forestry worker, I suppose the Forestry Commission. It is all there. The problems, and there will be some problems which will arise—I do not deny that—will not be any greater than the problems which exist now under the present system, where people go to the courts and back to the courts, time and time again, with all the delay.
If we are to have a debate about these things, let us have it objectively, and please do not try to overturn a proper, reasoned and I believe heartfelt—so far as many of our people are concerned it is heartfelt—attempt to resolve what is thought by them to be, and thought by me to be, quite honestly, a social evil. Do not let us throw up arguments against it which are so exaggerated that they make nonsense of some of the statements that have been made.
5.57 p.m.
Baroness BIRK: I had no intention of intervening on the Amendment on forestry, but it seems to me that in this discussion at the Committee stage of this Bill we appear to be having, as my noble friend behind has just said, the same general argument on every Amendment. If that is to happen we shall not make any progress on either side. It is no good noble Lords opposite saying that they are in favour of the ideas behind the Bill and yet moving right away from the specific amendment.
The Amendment we are discussing at the moment is one to do with forestry, but there have been so many wild statements made that it is important to put the record right. The noble Baroness, Lady Young, referred to the Rent Acts. It is natural that she should do so, but it is not natural or necessary to bring that into every Amendment we have. As the Bill progresses we shall have a great many opportunities to discuss the housing provisions which are in this Bill. The noble Baroness knows as well as I do that the number of private rented houses has been declining every year since the War and there is no evidence so far that even the 1974 Rent Act has accelerated that decline. This is a decline, a graph that has been going down and we are all absolutely aware of that.
My noble friend the Leader of the House quoted what our right honourable friend the Minister of Housing said, but in addition, on the 10th of September in Birmingham, my right honourable friend the Secretary of State for the Environment made it quite clear when he said:
"By no means all the housing investment funds will be used up on new housebuilding in the stress areas. There will be funds available for new housebuilding in the non-stress areas."
It is perfectly true that any burden one puts on local authorities is difficult and will not be welcomed by them, but, as I understand it, the district councils themselves have made it quite clear that they would do whatever they could in their power.
My noble friend Lord Pargiter is absolutely correct when he says that the assumption of noble Lords opposite appears to be that all the houses which are now tied cottages will be vacated immediately or will remain empty. They
1338
will still be part of the farm housing stock. The noble Earl, Lord Onslow, referred to figures. The figures were that £5 million annually for the first five years assumes 500 houses a year at £10,000 a house. This was an extremely rough and ready figure when the Bill was first introduced. This is a tentative forecast. We cannot say what extra burden there will be. It could be very small.
The Earl of ONSLOW: May I—
Baroness BIRK: Perhaps the noble Earl will allow me to prattle on a little further. We do not know what that burden will be. It may be very much less. It may well be that in many areas things will straighten out. We are also aware—and noble Lords brought this up during the Second Reading—that there are areas where there are empty cottages on farms which will be used. We are also forgetting that whether it applies to herd farming or forestry—and I will remind noble Lords that that is the Amendment we are discussing at the moment—the plans we have in other parts of the Bill deal with housing provisions and enable local authorities to plan ahead and make things very much easier. Having made this intervention now, and having got this off our chests—and I realise there is no guarantee that this will not go on through every Amendment—perhaps we could now return to the purpose of the Amendment which is to deal with forestry.
The Earl of ONSLOW: I understood the noble Lord to say £5 million over five years for 500 cases a year. That makes the figures very different, so it is £25 million as opposed to £5 million. I totally withdraw what I said. It is very different from £5 million over five years which was what I understood him to say originally.
Earl FERRERS: If the noble Baroness feels that we have been prolonging this debate by using the same arguments again and again, I only say with the greatest respect that her intervention does not help. She complained that we made the same arguments. That is not so. She explained on Second Reading that she did not know anything about agriculture and even suggested that it was based on rotten roots.
Baroness BIRK: May I just nail that down? I did not say it was on rotten roots. This was in a part of a speech when I was winding up. I said that we should get away from the present rotten root which I referred to as the tied cottage. I did not say all agriculture was based on it. I considered the tied cottage system was a rotten root in what I felt to be a lively and vital agricultural industry. The reason why I intervened in this debate was because this particular topic, the very specialised subject of forestry, was being discussed and we moved away from this. If we had continued along those lines, I would not have done so. But we went straight into a general debate on housing and I thought it was proper for me to intervene.
Earl FERRERS: I can remember what the noble Baroness said and—a funny thing!—I have a copy of Hansard in my hand, and at column 1171 on 5th October the noble Baroness said:
"A healthy agriculture should not depend on rotten roots".
I would merely comment upon that that the inference is either that agriculture is not healthy or, if it is, it is based on rotten roots. I think that was an extremely offensive remark to make about one of Britain's best industries. The noble Baroness has next to her the noble Lord who was a Minister of Agriculture, and she will probably think that she might have been better advised not to have used those words. I will not pursue that any more, and I think we had better address ourselves to the Amendment which I moved. I hope that the interventions of the noble Baroness will be somewhat less abrasive in the future.
The noble Lord, Lord Peart, said that this Bill contains provision for application to forestry. He has said that there is a need for more information to be available. I commend him for trying to get the information. If this is needed, I should have thought that it was better to bring the appropriate measure for forestry into action when the information is available and not to pre-empt the report by including forestry in the Bill. The noble Lord did not address himself to the position of the Forestry Commission. I do not know how many people are engaged in forestry and, of those, how many are engaged in forestry carried out by the Forestry
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Commission. What the noble Lord said was that he would expect the Forestry Commission to treat their employees in exactly the same way as those employed in private forestries.
Frankly, I do not think that is a good enough argument. If legislation is being introduced to cover a whole sector of people involved in certain parts of agriculture or housing, it is inadequate to say: "We will not let this measure prevail upon certain people simply because we hope that those bodies are responsible enough to carry it out under their own auspices." In Clause 6 there is a list of people, all of whom are going to be excluded from the provisions of the Bill. The noble Lord, Lord Janner, said that we must not make exceptions. If he addresses himself to page 7 of the Bill he will see the bodies which are exempted from the provisions of the Bill regarding tied cottages such as county councils, the Greater London Council, the Commission for New Towns and the Housing Corporation. All these people, who have houses occupied under this character, are to be exempted from the provisions of the Bill.
The noble Lord, Lord Collison, referred to the humanity argument. I told him that I was absolutely with him over it. The humanity argument applies to all people who are affected by any processes of eviction. This is the real trouble that you get into when you start to single out one small facet as has been done over agriculture. I do not believe that it is right that forestry should be put in the Bill. I do not believe that we have had enough information about it. I do not believe any substantial argument has been made in favour of it. As it is, forestry workers in Scotland are excluded and forestry workers in the Forestry Commission are excluded. The Government do not intend to bring it in yet because they do not have enough information. I suggest that the Government say, "Not until we have the information, will we draw up legislation referring to this".
6.8 p.m.
On Question, Whether the said Amendment (No. 3) shall be agreed to?
Their Lordships divided: Contents, 138; Not-Contents, 49.

CONTENTS

Alport, L.

Ferrers, E.

Northesk, E.

Amherst of Hackney, L.

Ferrier, L.

Norwich, V.

Amory, V.

Gainford, L.

O'Hagan, L.

Ampthill, L.

George-Brown, L.

Onslow, E.

Amulree, L.

Gisborough, L.

Orr-Ewing, L.

Armstrong, L.

Glasgow, E.

Platt, L.

Atholl, D.

Glenkinglas, L.

Porritt, L.

Auckland, L.

Goschen, V.

Radnor, E.

Avebury, L.

Gowrie, E.

Rathcreedan, L.

Barrington, V.

Gray, L.

Redesdale, L.

Beaumont of Whitley, L.

Grey, E.

Reigate, L.

Belstead, L.

Grimston of Westbury, L.

Robbins, L.

Berkeley, B.

Hailsham of Saint Marylebone, L.

Robson of Kiddington, B.

Blakenham, V.

Rochdale, V.

Boothby, L.

Halsbury, E.

Romney, E.

Bradford, E.

Hanworth, V.

Ruthven of Freeland, Ly.

Brougham and Vaux, L.

Harcourt, V.

St. Aldwyn, E.

Burnham, L.

Hatherton, L.

St. Davids, V.

Burton, L.

Henley, L.

Salisbury, M.

Caccia, L.

Hives, L.

Sandys, L.

Caithness, E.

Hornsby-Smith, B.

Savile, L.

Campbell of Croy, L.

Hylton-Foster, B.

Selkirk, E.

Carr of Hadley, L.

Ilchester, E.

Sharples, B.

Carrington, L.

Kimberley, E.

Shuttleworth, L.

Chelwood, L.

Kinnoull, E.

Somers, L.

Clifford of Chudleigh, L.

Lauderdale, E.

Spens, L.

Clitheroe, L.

Long, V.

Stamp, L.

Colville of Culross, V.

Lonsdale, E.

Stanley of Alderley, L.

Congleton, L.

Lyell, L.

Strang, L.

Cork and Orrery, E.

Mackie of Benshie, L.

Strathclyde, L.

Craigavon, V.

Macleod of Borve, B.

Strathcona and Mount Royal, L.

Craigton, L.

Marlborough, D.

Strathspey, L.

Cullen of Ashbourne, L.

Marley, L.

Swansea, L.

Daventry, V.

Masham of Ilton, B.

Swaythling, L.

Denham, L. [Teller.]

Massereene and Ferrard, V.

Terrington, L.

Deramore, L.

Merrivale, L.

Thorneycroft, L.

Derwent, L.

Mersey, V.

Tranmire, L.

Drumalbyn, L.

Meston, L.

Trefgarne, L.

Dundonald, E.

Middleton, L.

Tweedsmuir, M.

Ebbisham, L.

Monck, V.

Vickers, B.

Elibank, L.

Monckton of Brenchley, V.

Wakefield of Kendal, L.

Ellenboroigh, L.

Morris, L.

Ward of North Tyneside, B.

Elles, B.

Mottistone, L.

Westbury, L.

Elliot of Harwood, B.

Mowbray and Stourton, L. [Teller.]

Wigoder, L.

Elton, L.

Winstanley, L.

Emmet of Amberley, B.

Newall, L.

Young, B.

Faithfull, B.

Northchurch, B.

NOT-CONTENTS

Beswick, L.

Janner, L.

Popplewell, L.

Birk, B.

Kagan, L.

Ritchie-Calder, L.

Blyton, L.

Kirkhill, L.

Shinwell, L.

Brimelow, L.

Leatherland, L.

Slater, L.

Brockway, L.

Lee of Newton, L.

Stedman, B.

Castle, L.

Longforo, E.

Stewart of Alvechurch, B.

Champion, L.

Lovell-Davis, L.

Stone, L.

Collison, L.

Lyons of Brighton, L.

Stow Hill, L.

Cooper of Stockton Heath, L.

McCluskey, L.

Strabolgi, L. [Teller.]

Cudlipp, L.

Maelor, L.

Taylor of Mansfield, L.

Davies of Leek, L.

Melchett, L.

Wallace of Coslany, L.

Davies of Penryhys, L.

Milner of Leeds, L.

Wells-Pestell, L. [Teller.]

Douglass of Cleveland, L.

Murray of Gravesend, L.

White, B.

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

Oram, L.

Winterbottom, L.

Gordon-Walker, L.

Pargiter, L.

Wynne-Jones, L.

Henderson, L.

Peart, L. (L. Privy Seal)

Houghton of Sowerby, L.

Ponsonby of Shulbrede, L.

Resolved in the affirmative, and Amendment agreed to accordingly.
Baroness STEDMAN: This may be a convenient time to call a halt on this Bill, and I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

AIRCRAFT AND SHIPBUILDING INDUSTRIES BILL
6.17 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 LORD AMHERST OF HACKNEY in the Chair.]
Clause 24 [Permitted dividends and interest]:
Earl FERRERS Earl FERRERS moved Amendment No. 131:
Page 29, line 38, at end insert—
("(2A) If, with respect to any period of control of a company payments of dividend are made on securities forming part of the share capital of the company (other than cumulative preference shares) which, when aggregated, do not exceed two-thirds of the certified net revenue of the company for that period, subsection (1)(c) above shall not apply in respect of those payments and they shall be within the maximum permitted for that period for the purposes of section 23 above.").
The noble Earl said: I wonder whether we could now address our minds to some of the more financial aspects of the Bill which we were discussing the other day, and in moving this Amendment I should like to make one or two points. At the moment, companies are limited to paying out the lesser sum of money between the previous year's dividend in which there was a final dividend paid, and the net revenue of the company. In other words, if a company has done well it may not pay out more than the previous year's dividend, and if it has done badly it may not pay out more than the net revenue of the company. It is perfectly understandable that there should be some
1344
restriction on dividends which are paid out, because otherwise parent companies could get their subsidiary companies to pay out dividends representing almost 100 per cent. of their assets; and if it was the intention of the Government to nationalise these industries and to compensate them in a certain way it would entirely frustrate the objectives if the subsidiary companies were to pay vast dividends back to their parent companies.
But the Bill effectively prevents dividends from being paid out in the years 1974, 1975 and 1976, when some firms had good years' trading which was nothing to do with the prospect of impending nationalisation. For example, the naval shipbuilders did relatively badly prior to 1974, and therefore the dividends which they paid out were correspondingly small. But since 1974 the terms of trade have turned in their favour in some cases, and certain firms have had extremely good years' trading.
I suggest that it is only fair and reasonable that where they have had a good year's trading, irrespective of the threat of impending nationalisation, they should be able to pay out dividends representing that year's trading. In the Amendment we have suggested that they should be allowed to pay out as dividends up to two-thirds of the net revenue of the company for any one year. I suggest that this is a reasonable figure to choose because the Treasury insist that when they make profits subsidiary companies overseas should remit two-thirds of their revenue to the parent company in the United Kingdom. That is the reason why this figure was taken.
One of the side effects of the legislation as drafted is that the dividend restriction which it imposes results in some naval shipbuilders being in the position where they have built up such a fund of cash, because it cannot be distributed, that the compensation which they will receive will be less than the cash in the bank. This is because the compensation is based on 1974 values, when they were not doing well; they are not allowed to take into account the cash which they have received but which they have been unable to pay out in the better years since 1974. Indeed, in one case the compensation payable will not even equal more than one year's

1345
profits. It seems to me that it is unreasonable for any Government to do this. I do not believe that it is intentionally unreasonable and our Amendment merely seeks to make the provision slightly more fair than the Bill as drafted. I beg to move.
6.22 p.m.
Lord ORR-EWING: We are now starting a series of Amendments concerned with compensation. One of the advantages of having discussed tied cottages for the last 3½ hours is that I have had a chance to look at the Amendments in rather more detail than is normally the case. First, I make the point that none of these matters was debated in another place. Therefore we are doing our duty as a revising Chamber. I think that the Government will agree that many of the Amendments concern technical points such as where a word has been left out, and all of them seem to me to be eminently reasonable. In most cases they are not contentious—certainly they are not politically contentious—and I think that they are constructive. I hope very much that we are now entering a period in which the Government will concede that we are doing our job by trying to improve the Bill, and in particular by trying to make sure that the words of Government Ministers and others—that is, that the compensation would be fair—come about as a result of the Amendments.
The previous Prime Minister, Sir Harold Wilson, wrote to the President of the Confederation of British Industry in 1975 and assured him that the compensation terms would be fair. In January 1975 Mr. Wedgwood Benn gave exactly the same assurance in another place, that the compensation terms would be fair. Also, Mr. Varley wrote in similar terms: the compensation terms would be fair to both taxpayers (I am interested in that phrase) and shareholders. Therefore we have had assurances and reassurances that the compensation terms would be fair.
I am a little puzzled by one matter which arose in your Lordships' House during Question Time on 1st October. The noble Lord, Lord Melchett, was not present, because he was in Northern Ireland at the time, and the noble Lord, Lord Kirkhill, answered in his stead.
1346
We were asking about the compensation terms and in particular about the issue of compensation stock. The Minister was asked, I believe by the noble Lord, Lord Trefgarne, whether he could give an indication of the coupon rate at which they might be issued. Perhaps we could clear up this matter right away because there is no need to debate it further. In his reply the noble Lord, Lord Kirkhill, said at col. 757 on 1st October:
"My Lords, it would not be possible for me at this time to say what rate of interest will be paid on the stock. That will be assessed much nearer the time of the date of issue which, depending on the process of the Bill,"—
and this is the significant word—
"would be probably in about one year from now".
Was that a slip of the tongue? If we are thinking of issuing the compensation stock one year from now and if there is to be a period of negotiation and arbitration which will take some time, it may be imperative after that period for companies to ask for stock to be held for a certain period. Sometimes it is held for a year in order to avoid capital gains tax and other taxation.
Perhaps the noble Lord could put us straight on this point before I continue with my speech. According to the Bill, surely the compensation stock would be issued shortly after vesting day. We were assured in another place and in formal discussion that the Government understood that these companies, a proportion of whose assets had been hived off, were desperately anxious to get some of the money in order to restructure the company, recreate the headquarters which may have been taken over, and the like, and therefore to create jobs and equip themselves with modern equipment so that they would be economically viable and able to give employment as they had in the past. We were told that a large section of the compensation would be paid. Unofficially it was suggested that something like 50 per cent. would be paid straight away. Therefore the suggestion that the stock will not be issued for another year is very disturbing. Is the noble Lord able to give an assurance on that point, or to say that he will look at it?
Lord MELCHETT: I am ready to answer questions relating to Amendment

1347
No. 131 with which the Committee is dealing. If the noble Lord cares to raise a general point on the Question that the clause stand part, I will happily deal with it then.
Lord ORR-EWING: I am delighted that the noble Lord has been so courteous and that I have had the opportunity to put the matter to him now instead of bowling it fairly fast at him just before he stands up. In this instance, of all the compensation clauses, may I endorse what my noble friend has said and support this modest Amendment which is seeking, as are many others, merely to be fair. I will leave it at that until we have heard the noble Lord's reply.
The Earl of ONSLOW: The point which was made by my noble friend Lord Ferrers in his opening remarks was that certain companies which are to be taken over will be taken over possibly at less than the value of their cash reserves, or at less than the value of one year's profits. If this is true it seems to me to produce a quite frightening result. First, it is palpably and grossly unfair. To put that right, one year's profits must be multiplied at least by 10. Consequently, this will increase Government expenditure even more. We are back to the old merry-go-round of spending money which we have not got at a time when we are beggars and are having to go to the IMF at a time of increasing Government expenditure. I know that this question has been raised before not only by myself but by other noble Lords. However, it seems to me that the noble Lords opposite, who are happily chattering away, have not grasped the simple fact that we cannot go on spending money which we have not got. Even the Chancellor is beginning to realise that. This runaway "rakism" is terrifying.
6.30 p.m.
Lord MELCHETT: The purpose of Clause 24 is to set the permitted level of dividends for the purposes of Clauses 23 and 25. It is right that dividends should be paid for the period up to vesting. In this interim period the shareholders retain their control of the companies, and this control is stringent in the case of wholly-owned subsidiaries. It is right
1348
that in this period they should receive fair remuneration for their capital.
Up to that point there is absolutely no difference between noble Lords opposite and myself. But, equally, it is important that the companies should not use the device of dividend payments to deplete the value of the business; and again I think I am in agreement with the noble Earl on that point, which is one that he very fairly made himself. The Government are paying compensation for the securities of the businesses on the assumption that in the period up to vesting the companies will continue to operate, subject to normal commercial variations, in the same way as they had previously. If companies were suddenly to make substantially increased dividend payments, it would negate this basic assumption. But to set as the base level of permitted dividends those paid in the recent past establishes the continuation of the business in the same form.
The proposed Amendment would in many cases permit sudden and, I would suggest to your Lordships, unjustified, increases in dividend payments. Irrespective of the performance of the companies between the base financial year and the subsequent period, they would automatically be permitted in many cases to increase their dividend payments. In such circumstances it would be surprising if companies did not take full advantage of such a provision. I am sure that no noble Lord would consider it right positively to encourage increased dividend payments even if profits might have deteriorated substantially.
But this is not to say that companies may not pay higher dividends. There is a provision in Clause 23 for my right honourable friend the Secretary of State to approve higher dividends if the performance of the company justifies such an increase, and it was this provision in Clause 23 which I do not think noble Lords who spoke to the Amendment touched on, certainly not at any great length. My right honourable friend the Secretary of State has made it clear, and I can reiterate now, that he will consider any applications put to him. It is perhaps significant that only nine of the 43 scheduled companies have as yet sought his approval since these provisions were announced nearly a year ago. I think it

1349
would be hard to argue on this evidence that the existing provisions are unduly restrictive. Of those nine companies all but two of them received approval for an increase above the permitted level because of special circumstances applying to the companies, and I understand that of the other two cases one is still under consideration.
The present provisions of Clause 24 allow for shareholders to continue to have their investment remunerated at the same level as in the recent past, with discretion for the Secretary of State to agree to a higher level if circumstances warrant. The permitted level may well, in the case of some companies whose prospects have deteriorated since the base period, lead the companies to pay more dividend than they would prudently have paid had nationalisation not been pending. The proposed Amendment would amount to an open invitation to the companies to dissipate their financial assets in the interim period, and for that reason I regret to say it would not be acceptable to the Government.
Earl FERRERS: I am grateful to the noble Lord, Lord Melchett, for that answer. I do not think there is very much between us over this. He is quite right when he says that it would be wrong for companies to dissipate their capital because of impending nationalisation. Certainly my Amendment would not seek to do that, and if the effect of it is that, that is not its intention. The noble Lord's argument was really based on, "Do not worry, because the Secretary of State can give approval in certain circumstances". I understand that, but I think it is another example of really huge powers being given to the Secretary of State. If a company has done better and made more substantial profits, according to the noble Lord, Lord Melchett, it can apply to the Secretary of State, and as he said nine have done so; but it is then up to the Secretary of State to say, "Yes, you can pay it" or, "No, you cannot pay it". That is, I suggest, a very powerful lever in the hands of the Secretary of State.
The noble Lord did not wholly address himself to the point I made earlier, and I think it is a valid case, that some shipbuilders did very badly because of the terms of trade and economic circumstances
1350
up to 1974. Of course, 1974 is the date upon which their assets, such as they are, arc to be valued, and if they did badly, of course their assets will be valued poorly. But then, when despite the prospect of nationalisation things suddenly have got better and they have made large profits, the Bill says, "You must not distribute those. You can, if you like, apply to the Secretary of State and he will decide whether or not your application is reasonable". I should have thought we should have something slightly firmer than that.
After all, this is a case of the Government taking over the assets of various companies, and the Government have said, and the noble Lord, Lord Kirkhill, said on Second Reading, "We want it to be fair". Yet as it stands at the moment I do not think it is fair, and the only person who is to adjudge whether it is fair is the Secretary of State, who is a very interested party. I wonder whether the noble Lord, Lord Melchett, would care to comment upon this: whether in fact it is right for companies who have done well since 1974 not to be able to distribute some of those profits. After all, if they have done very well, irrespective of the prospect of nationalisation, those were the terms of trade they encountered at the time. It is not unreasonable to say that they could distribute, not all of their profits, but two thirds of their profits. If the noble Lord could help me on that point I should be very grateful.
Lord MELCHETT: As the noble Earl says, I do not think there is a great deal in principle between us, though we may well be disagreeing about how to achieve something which we both wish to see achieved. As I said in my original reply, I would suggest, first, that the fact that only nine companies out of the large number in the Bill have applied to the Secretary of State would suggest that there is not a great deal of ground for complaint about this; but I would only use that as an indication and certainly not pretend that it is a conclusive argument. Secondly, I would suggest that the fact that seven out of those nine companies have been permitted to increase the dividend paid is an indication that my right honourable friend the Secretary of State is certainly not being oppressive in the use of his discretion. Of course I could not accept from the noble Earl for a moment any

1351
suggestion that my right honourable friend would seek to use, or fail to use, his discretion in an onerous or unfair way to prevent any increased dividends which were justified and permissible. I can assure the noble Earl that if circumstances do warrant an increase the Secretary of State will allow one.
In some cases where there is no permitted level—for example, if no dividend was paid in the base period or if only interim dividends and no final dividends, in the terms of the Bill, were paid—the Secretary of State must determine the permitted amount. Again there, I can assure the noble Earl—though I know this will not be entirely convincing to him—the Secretary of State will act fairly, and I hope that in the cases which have so far come to the Secretary of State, that has been the experience of the companies when they have gone to him under the provisions of the Bill.
Viscount SIMON: May I ask the noble Lord two questions on that point in order to help us make up our minds on what is a difficult question? Can he say whether in the cases which he mentioned—I think seven out of nine—where additional dividends have been agreed to by the Secretary of State, they were agreed to up to the extent the companies were asking for; in other words, were the companies quite satisfied with that decision? Secondly, assuming that they are not satisfied, assuming that in some cases the Secretary of State has not agreed, then, as the noble Earl has pointed out, the company is left with cash in the coffers. Will that be taken into account in any arbitration there may be on the amount that ought to be paid for the shares in the last resort when the settlement is made?
Lord MELCHETT: May I say straight away that I do not know the answer to the noble Viscount's second point off the cuff. No doubt it will come up again when we deal with compensation, and I will take an opportunity to give the answer at some convenient moment. On the first point, it would of course be for the companies to say whether they were satisfied, and not for me as a member of the Government. As I say, in seven cases there has been a permitted increase; on one of the other cases, as I understand
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it, discussions are still continuing. I think it would be for the companies rather than for me to say whether they were entirely satisfied with what has taken place.
Viscount SIMON: If they were not satisfied I imagine they may have told the Secretary of State, and the information might have come to the noble Lord.
Lord MELCHETT: The difficulty in this matter is that who the companies are and what has taken place is commercially confidential information with the Department of Industry, and must remain so.
6.41 p.m.
Lord SELSDON: I must apologise to the noble Lord for not having arrived earlier, and therefore 1 feel it would be totally wrong for me to intervene on this particular Amendment. I am sure that everything that needs to be said to make the point has been said. It is, however, much more appropriate that it should be discussed in some ways in general terms under the whole question of compensation, to which the noble Lord referred just now. I hope he will forgive me if I raise certain issues on the general theme relating to this Amendment later under Clause 35, because it is not something that we can look at in isolation. The reason why it has been included is to try to put right one element of fairness, and later we shall talk about the whole concept of fairness. You cannot put fairness right by just altering one element of it. So if you will forgive me, I will raise one or two points later in support of the whole concept on which this Amendment is based.
Lord ORR-EWING: I think we rather object to the reference date because it is rather old. It could be trading results for 1973/74, and therefore a company which has been doing exceptionally well in 1975/76 is rather harshly treated. I was interested to hear the figures given, because my information is that the companies which had applied had had rather "unsatisfactory"
—I think that was the word—results from the Secretary of State. I wonder whether I can persuade the Secretary of State to use the same flexibility as the Treasury do.

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I have had cause in the past even to ring up the Treasury and say, "Would I be in a position to pay an increased dividend as a recovery stock?" They say, "We will ring you back tomorrow". You get extraordinarily quickly highly confidential decisions, and they set standards for a recovery position, in which some of these companies arc. They were going through a very bad time in 1973. I think we should be happier if we could be given the assurance that the Secretary of State would set the same sort of standards that the Treasury do within the general provision now that they cannot be higher than 10 per cent. We are only saying in this Amendment two-thirds of the net revenue, and this is the same proposition which, under the Exchange Control Regulations, British investors controlling overseas companies must repatriate; and this is the rule of the Government, of the Treasury. We are not asking for anything unreasonable but for something that we have to do if we have overseas companies. We have to bring back and repatriate two-thirds, so it is not an unreasonable amount that we are asking.
Lord MELCHETT: No, I do not think on either side that we have claimed that the other side's position has been unreasonable. I am delighted at the spirit of compromise and good will with which the debate on this Amendment has been carried on. I would say to the noble Lord, as I have been given some information in a sense in reply to the noble Viscount's first point, that my understanding is, without disclosing which companies are involved and in how many particular cases that has happened, that in most cases we have in fact been able to agree to the request put to us by the companies.
Lord CARR of HADLEY: May I say, directly relevant to that point, and again without disclosing any names or identities, which would not be proper, that I have been given rather opposite information. I have been told that some, at least, of the companies that have applied and have been granted some permission have not been satisfied, because they have had the feeling that the judgment has been made very much in relation to an historical level of dividend. In an ordinary public quoted company the historical level of dividend
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is not always, but may usually be, regarded as a fair base from which to work. In the case of subsidiaries of holding companies that of course is not the case, where dividend policies may fluctuate considerably not only in accordance with the performance, the profitability in any given year, of the subsidiary, but perhaps even more sometimes in accordance with the financial needs of the parent.
Therefore, if the base year was a year in which the parent did not call on any particularly large dividend from the subsidiary and that year's small dividend is used as the base amount, and then the application is made to the Secretary of State, he uplifts by a percentage but really in his mind is working on the historical value, this could be very unfair. It was because of representations of that kind from firms who have applied and felt that, for reasons they understood, with the Bill drafted as it is the Secretary of State might work on a one-year base period and extrapolate from there, that we were persuaded that it was right to move this particular Amendment. I am afraid that our evidence is rather contrary to the noble Lord's; namely, to the effect that those companies who have had some increase permitted have not been satisfied because they have felt that the wrong criteria have been used by the Secretary of State—I am not saying anything critical of the Secretary of State personally, but merely because of a lack of proper yardsticks provided in the Bill.
Viscount ROCHDALE: When I heard Lord Melchett's first reply to my noble friend I was inclined to agree with my noble friend that it appeared that we were not all that far apart. The noble Lord, Lord Melchett, referred back to Clause 23 and said that these matters could be referred to the Secretary of State; that they had in certain instances been referred to the Secretary of State and that there had been certain replies. What worries me more is that here is another instance when the Secretary of State has to be brought into the discussions. But who is the Secretary of State? He is not an individual. He is, in fact, nominally the head of the Department, and obviously he will make his decision on what his officials recommend, and they equally and rightly must work to play safe.

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It seems to me that all this must make for delay. If we pass this Amendment which is now before us, here will be something that could be decided by the companies themselves without reference to the Secretary of State, and so they would not be held up. It would be much smoother and easier for them to go ahead and not always be worried by the question, "Are we right in this. We have to refer it back". I am making a point to which I referred to some extent when I spoke on Second Reading: the problem of the activities of the Department as opposed to the individual Secretary of State. Personally, despite the discussion, I am still of the opinion that it would be right if this Amendment were agreed to.
6.49 p.m.
The Earl of ONSLOW: Perhaps we could solve the argument between my noble friend Lord Carr and the noble Lord, Lord Melchett. Presumably these companies went to the Secretary of State and said, "Please, may we put up our dividends by a certain amount?" Surely the noble Lord can answer us, without any breach of commercial secrecy, how many of the companies were allowed to increase their dividends by the amount they asked so to do, or how much it was reduced by. That would settle the argument one way or the other, and would not necessarily breach any commercial secrecy.
Lord MELCHETT: I do not have the precise information with me. I know that it is most, which must mean more than half, which must mean at least four out of seven. Perhaps that helps the noble Earl.
Lord ORR-EWING: Many companies have been waiting for this debate because it did not take place in the House of Commons; they have been waiting to see the Amendment probed and to be given assurances. The noble Lord can rest assured that he will be getting a good many more than the nine applications that have come in. He must not think that they are all satisfied or are not in a position to ask for increased dividends, and certainly some more will he coming in.
Lord MELCHETT: I assure the noble Lord and, through this Chamber, those companies that apply that their applications will be treated by the Secretary of State as fairly and as expeditously as possible. Although this Amendment was not debated on Report in the House of Commons, it was discussed in Committee there.
Earl FERRERS: I am grateful to the noble Lord for what he said and for the explanation he gave. Clearly, there is some unease on our part and I hope that he will not feel that this has been in any way a frivolous discussion. This is an important point and, as my noble friend Lord Orr-Ewing, said, it was not discussed in another place, certainly not on Report, and it has been right for us to discuss it here. We still feel unhappy about it. It gives tremendous power to the Secretary of State and we want to try to make it as fair as possible. I will not take the matter any further now, although we may wish to return to it at a later stage. I hope the noble Lord will, if he has any spare time, look into the point to see whether there is not some substance in the argument we have adduced. I think there is, and we should appreciate the noble Lord's looking into it. In the meantime, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 24 agreed to.
Clause 25 [Final payments of dividend and interest]:
6.52 p.m.
Earl FERRERS Earl FERRERS moved Amendment No.133:
Page 31, line 19, leave out from beginning to ("not") in line 21 and insert ("payments on all securities forming part of the loan capital of the company of interest which has accrued up to the date of transfer and has").
The noble Earl said: This Amendment goes with Amendment No. 135 and I am hugely hopeful that the noble Lord, Lord Winterbottom, will say that the Government accepted it because, like all our Amendments, it is helpful. Indeed, it is particularly helpful because it is only a drafting, Amendment. It is also slightly grammatical, which should appeal to the noble Lord. The two references in

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Clause 25 relate to the payment of interest on loan capital in the final financial period. The present wording refers to "interest payments which have accrued", but of course technically it is the interest which accrues and not the payment, particularly if no payment has been made. We suggest, therefore, that the Amendment would relate it to the actual interest which has accrued and not the payments.
Lord WINTERBOTTOM: I am grateful to the noble Earl, Lord Ferrers, for that explanation of the Amendment, which is identical to Amendments Nos. 282 and 283 which were put down in the Commons but which fell by the guillotine on Report. I am glad to say that the Government can accept it.
Earl FERRERS: Now we are making progress. I am delighted to hear that the Government can accept it, particularly as it is one of those which fell by the guillotine in another place. May I ask the noble Lord to say that the others which fell by the guillotine will also be accepted? Perhaps that is asking a little too much.
On Question, Amendment agreed to.
6.55 p.m.
Lord STRATHCONA and MOUNT ROYAL Lord STRATHCONA and MOUNT ROYAL moved Amendment No 134:
Page 31, line 30, at end insert ("and for the purposes of this paragraph there shall be taken into account the largest amounts, if any, approved in the case of those securities under section 24(1)(c)(ii) above, and, in the case of each of those amounts and the amounts approved under section 23(1) above, where the number of days comprised in the final financial period exceeds, or is less than, the number of days comprised in the period of control in respect of which that amount was approved, that amount shall be treated as increased or, as the case may be, reduced by multiplying that amount by the fraction, of which the numerator is the number of days comprised in the final financial period and the denominator is the number of days comprised in that period of control.").
The noble Lord said: This Amendment is not only long, but complex. I am glad to see that I have sitting behind me some merchant bankers and stockbrokers who I hope understand more about this subject than I do. However, I will do my best to explain the Amendment. Clause 25(1) provides for mandatory payments by an acquired company after the date of transfer of interest and dividends
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up to the date of transfer. In the case of dividends that are for the final financial period as defined in Clause 25(4) and (5), they are basically to be of the maximum amounts which would be permitted if that period were a period under control as defined in Clause 23(7). However, under subsection (1)(b) if larger amounts have to be approved under Clause 23(1), the dividend payments are to be of " the largest amounts so approved " but unfortunately subsection (1)(d) omits to make similar provision in relation to any amounts previously approved by the Secretary of State under Clause 24(1)(c)(ii) in a case where a company has no basis financial year, and without such a provision the maximum amounts either cannot be ascertained or will be nil.
The contention, therefore, is that what should be taken into account is the largest amounts previously approved under Clause 24(1)(c)(ii) as well as under Clause 23(1), which brings me to the point that although Clause 24(4) makes provision for an increase or a reduction of amounts according to whether a period of control is longer or shorter than the basis financial year, this does not apply to either of the amounts which may be approved by the Secretary of State under Clause 23(1) or Clause 24(1)(c)(ii). As either of these amounts may govern the payment of dividends for the final financial period as determined under Clause 25 (l)(b), the same principle should, we contend, clearly be applied for this purpose, and the Amendment is directed towards rectifying both of these omissions.
Lord WINTERBOTTOM: Like the noble Lord, Lord Strathcona and Mount Royal, I am in somewhat of a fog on this issue but I hope that I may be able to convince him that the Amendment is unnecessary. As drafted, Clause 25 already contains provision which will protect the interests of shareholders of the vesting companies. As drafted, Clause 25(1)(b) provides that payments of dividends for the final financial period must be paid at the maximum level which would be permitted if that period were a period of control or, if larger amounts have been approved by the Secretary of State under Clause 23, at that approved level. In other words, the final financial period is required to be treated as though it were itself a period of control.

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Clause 24(4) already provides that the amount of dividend payable in respect of a period of control must be pro rated in accordance with the length of the period. Presumably that means that it must be proportional to the length of the period, if I translate my brief into English correctly. This also, by implication, brings in the provision in Clause 24(1) (c)(ii) since the Bill already provides for the final financial period to be treated as a period of control. I therefore ask the noble Lord to withdraw the Amendment because we believe it is unnecessary and because the interests of shareholders are adequately protected.
Lord STRATHCONA and MOUNT ROYAL: We have not succeeded in flushing out any of the experts who would, no doubt, be willing to give their additional advice to us this evening. It seems abundantly plain, since neither the noble Lord nor I would claim to be in that happy position, that the best thing we can do under the circumstances is to read what the noble Lord has read out so beautifully in his excellent English and see whether it meets the points which are being raised by those who are briefing us. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Earl FERRERS Earl FERRERS moved Amendment No. 135:
Page 31, line 37, leave out from ("securities") to ("not") in line 38 and insert ("payments of interest which has accrued on those loans up to the date of transfer and has").
The noble Earl said: This Amendment is the same as Amendment No. 133. I am not moving it formally because I long to hear the noble Lord, Lord Winterbottom, say that he accepts this Amendment too. It really makes a bit of history. I beg to move.
Lord WINTERBOTTOM: Yes.
On Question, Amendment agreed to.
7.3 p.m.
Earl FERRERS Earl FERRERS moved Amendment No. 136:
Page 31, line 43, leave out from ("statutory") to first ("of") in line 45 and insert ("provisions and rules of law applying to the company shall be deemed to permit such payments").
The noble Earl said: The purpose of the clause is to deal with the situation in which, even though a dividend is required by the Act to be paid for the final financial period, there might be some legal provision in the Companies Act or in the articles of association of the company which could prohibit, or put conditions upon, any such payment. We are concerned that the reference in Clause 25(3) to,
"statutory or other provisions relating to the company",
should overcome any inhibition on the company, whether statutory, common law, contractual, financial or any other. The Amendment attempts to produce a clearer and more all-embracing wording to avoid any potential pitfalls. That is the explanation of the Amendment and 1 look forward with heady anticipation to its acceptance to the noble Lord, Lord Winterbottom. I beg to move.
Lord WINTERBOTTOM: I am afraid that the noble Earl's lucky streak is running out, but I think that we shall he able to agree at least on this Amendment. Like Amendments Nos. 133 and 135, this is a drafting Amendment. We believe it to be unnecessary since it could, in certain circumstances, be positively disadvantageous to shareholders or creditors. Subsection (3) is designed to ensure that the payments prescribed by Clause 25 can be made irrespective of any other restrictions that might apply to the company. Such other restrictions may, under the present drafting, be statutory or other provisions, but the Amendment would confine this to statutory restrictions or the rules of law.
While this might make little difference, it is potentially more restrictive. For example, the Amendment would not release from provisions of company memoranda or articles of association related dividend payments or, for example, any conditions attached to a Ministry of Defence loan. If the Amendment could result in creditors or shareholders being in a worse position than under the present drafting, I believe noble Lords would agree that that would be wrong. For that reason I ask the noble Lord not to press the Amendment.
Lord SELSDON: Is the noble Lord saying that the Amendment is unnecessary because the points that it is trying to make

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are already made and that the Government will support the principle behind the Amendment? If so, we are not disagreeing and I shall not waste your Lordships' time, but hope that I may assist in the passage of the Bill.
Earl FERRERS: That was a very deflationary end to my noble friend's speech. I thought he was going to say that, as there was nothing between us as regards the merits of the Amendment, the noble Lord, Lord Winterbottom, might consider an Amendment at Report stage that would cover the point that we are concerned about. As I understand it—and it is, of course, always possible and, indeed, almost certain that 1 shall be wrong, though the noble Lord, Lord Melchett, should not nod his head with such glee—companies could be made to pay out a dividend even though some of their legal, contractual or articles of association obligations might prevent them from doing so. If, for some reason, a company is so constructed that it is not allowed to carry out these payments, is it right that the Bill should force it to go against its articles of association, or any other kind of legal restriction it may be under? I am not quite certain whether the noble Lord, Lord Winterbottom, has answered that point.
Lord WINTERBOTTOM: I think I did. There is a problem here. 1 believe that the Committee would wish, where there is an area of doubt, that the Government should be generous to shareholders and others who are due to receive interest or some other payment, so that if there were some grey area it could be removed and the individual and the company concerned could receive the maximum possible under the present provisions of the Bill. If there are restrictive clauses in a memorandum or in articles of association, it is right that the interpretation should be generous rather than stingy.
Lord SELSDON: When I was insisting that I would support the passage of the Bill, I meant up to the stage where we come to deal with compensation proper, rather than with all the little bits that come too soon. May I ask the noble Lord whether he is saying that the Government will not require people to do things that they are not permitted to do, or that they will not permit people to do things that
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they are not required to do? I am not sure which way round it goes. There is an anomaly here that needs to be corrected because it is not absolutely clear. I hope that the noble Lord is giving an undertaking that, in some way or another, this will be made straight, clear and legal so that there can be no doubt. Otherwise, we shall have arbitration going on and on, for ever.
Lord MELCHETT: What my noble friend said—and it might repay study in Hansard because this is a complicated point—is that what we are contending is that the Bill, as drafted, achieves the result that noble Lords opposite wish to see achieved and that their Amendment, while it achieves part of the result that they wish for, would be restrictive because it does not mention all the possibilities. My noble friend gave the examples of the memoranda or articles of a company and a Ministry of Defence contract. So, unintentionally, the Amendment would be restrictive. We are quite satisfied on our legal advice from the draftsmen that the Bill as drafted achieves what the Amendment seeks to achieve.
Earl FERRERS: I am grateful to the noble Lord. We shall certainly study with care his words and those of his noble friend. I must say that we have got into an amusing situation in which noble Lords opposite are trying not to accept our Amendments because they are too restrictive and are encouraging companies to pay out more than we might have thought appropriate. It is a fascinating exercise. I am grateful to the noble Lords for their explanation and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 25, as amended, agreed to.
Clause 26 agreed to.
Clause 27 [Removal of company from companies to be acquired]:
7.9 p.m.
Earl FERRERS Earl FERRERS moved Amendment No. 141:
Page 34, line 34, leave out ("with respect") and insert ("in relation").
The noble Earl said: This, too, is a drafting Amendment. It suggests that

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we should leave out the words "with respect to" and substitute "in relation to". Unless the meaning is intended to be different, there seems no reason for the use of the words "with respect to" in line 34 when the phrase "in relation to" is used in line 32 in a similar context. I cannot see that it is, and it therefore seems sensible to have the same words in both places. I beg to move.
Lord WINTERBOTTOM: The noble Earl is returning to a point raised in another place, and I am glad to say that this is another case where the Government are willing to accept the Amendment.
Earl FERRERS: Words fail me for the moment! I am more than delighted, and I think that we will have to celebrate on some occasion. I am most grateful.
On Question, Amendment agreed to.
7. 10 p.m.
Earl FERRERS Earl FERRERS moved Amendment No. 142:
Page 36, line 31, after ("the") insert ("transaction effecting such").
The noble Earl said: Clause 27 enables the Secretary of State to remove from the list of companies to be acquired those which, broadly speaking, are in liquidation or which have disposed of substantial assets since the initial date or which have a parent company which has already been acquired. Where Clause 27 is to operate for the last reason I mentioned—in other words, because the company has a parent company which has also been acquired—and the parent company then following service of the notice disposes of any of the shares in its subsidiary, that disposal of shares is deemed to be void. This is designed to prevent the situation where the Secretary of State has served a notice under Clause 27 that he was not intending to acquire a company because the parent company has already been acquired, the parent company could then sell shares in its subsidiary and those shares could then not be nationalised.
But in doing this the clause does only half of the job which it is intended to do. It is all very well providing that a disposal of shares shall be void, but those shares could have been transferred and considera-
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tion could have been paid for them. To achieve its purpose equitably this clause should, I suggest, make the whole transaction void, so that both the seller and the purchaser can be restored to the position they were in before the void transaction, both as regards the shares and the consideration paid.
The Amendment which I have moved, and is put down in the names of my noble friends and myself, is designed to do just this providing as it does that the whole transaction, not just the disposal, is void. I think the noble Lord will agree with me that it is almost a drafting point, but it is probably a reasonably important one. I beg to move.
Lord WINTERBOTTOM: As the Government understand it, the noble Earl's interpretation is correct. The Amendment has the effect of providing that instead of the disposal being void it would be the transaction effecting such disposal which would be void. That is correct, is it not?
Earl FERRERS: Yes.
Lord WINTERBOTTOM: Clause 27(8), we believe, is a safeguarding provision to ensure that a holding company cannot, once it has become subject to a notice of acquisition under Clause 26, dispose of the securities of its subsidiaries with the result that they would not come into the public sector. Any such disposal would be void. The use of the word "disposal" follows logically and correctly from the use of the word "disposes"; the word "disposes" precedes "disposal". Therefore it would be illogical and incorrect to refer to the, "transfer effecting such" disposal instead of merely the "disposal". We are really having a semantic argument, and for this reason I ask the Committee to reject Amendment No. 142.
Lord SELSDON: Surely the whole object of legislation of this kind is to make the law and the position absolutely clear. What the noble Lord is saying is that the position is not clear and our recommendation does not make it any clearer either, but that we have to accept law that is not clear. As the noble Lord knows from his own background, if one is dealing with the private sector and shares as such and anomalies of this kind, there is the Council

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of the Stock Exchange which gives a view and therefore law is not necessarily required. I know that it is extremely difficult to legislate in matters relating to this because it is a very complicated position.
I do not think that one can allow legislation which is not clear and where there are anomalies to pass through your Lordships' House. There is a slight anomaly here, no matter how small it may be and bearing in mind that it may never actually occur. We are not talking about an enormous number of companies. But to allow law to go through where there is an anomaly is morally wrong. If the noble Lord will not accept our Amendment, I cannot think of an alternative which he might accept, but again this is one of the matters which one should consider perhaps at a later date.
Lord WINTERBOTTOM: Noble Lords will I think agree that apart from the matters of principle in the Bill, the Bill is on the whole very well drafted—
Several Noble Lords: Oh!
Lord WINTERBOTTOM: I think that is true: it is well drafted. I say that because so far as I know there are only two Government Amendments to the Bill, so it must be well drafted—
Earl FERRERS: Could it be that the noble Lord's advisers have got so confused with their own script that they found it almost impossible to amend?
Lord SELSDON: I must say to the noble Lord that the Bill is not well drafted because it puts together draftings from previous legislation. It is not original drafting; much of it is repetitive from past nationalisation Bills and other Bills, which may have been well drafted for the particular circumstances at that time, but this Bill is not well drafted for the particular circumstances we are in today.
Lord WINTERBOTTOM: I do not agree with that. Nevertheless, I accept the fact that there is an element of doubt about the exact implications of the difference between "disposal" and "transaction effecting such" disposal, and I will have another look at it and perhaps we can come back to it at a later stage.
Earl FERRERS: I am very grateful to the noble Lord for saying that he will have another look at this point. I should like to give him an example to which he can address his mind. In July 1974 the Government announced that they were going to nationalise the ship repairing and shipbuilding industries, and in November 1974 they announced that they were going to nationalise the aircraft industry. The situation is this. If after those dates the parent companies dispose of their shares in their subsidiaries, this clause says that they should be void, and that is perfectly fair. But it is not only the disposal which should be void, but of course the whole transaction; in other words, the person who bought those shares should be legally in a position to get his money back. The noble Lord said that this was semantics, but I think it is a little more than semantics. That is the kind of situation to which I should be most grateful if he would address his mind. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 27, as amended, shall stand part of the Bill?
Lord CARR of HADLEY: I should like to ask the Government two questions before we allow this clause to go through as amended. If under Clause 27(2)(a)(iii) a receiver has been appointed for part of an undertaking, how and when will the Secretary of State decide whether to serve notice under this clause? If he does serve a notice, what will happen to the assets? Will the Secretary of State acquire them separately? If so, how and from whom? In that event, how will the company be managed under receivership, and who will want to purchase the assets of the company in such circumstances? I apologise for my voice which makes it difficult to proceed at times. I hope I have made clear my first question—what happens if we use the receivership powers in the clause?
My second question is this. If a notice under Clause 27 is served and subsequently withdrawn, will the directors of the company be liable for excess dividends, onerous transactions, et cetera between the serving and the withdrawing of the notice, or will the company have to wait until the arbitrator has ruled on the merits of the notice before it knows what it can and cannot do?
Lord MELCHETT: That is a series of very technical questions and I do not pretend to know the answers off the cuff. I wonder whether the noble Lord would agree that I could look into them and write to him between now and the next stage of the Bill, and if there is anything in the latter which he finds unsatisfactory we could return to it at Report stage?
Lord CARR of HADLEY: That would be perfectly satisfactory and I am grateful to the noble Lord for his offer.
Clause 27, as amended, agreed to.
Clause 28 [Prohibition of transfer of certain works]:
7.22 p.m.
Earl FERRERS Earl FERRERS moved Amendment No. 143:
Page 37, line 22, after ("time") insert ("after the passing of this Act and").
The noble Earl said: This is another almost drafting point, but as the Bill now stands it is intended that any transaction of transferring certain works which takes place before the vesting date but after the Bill becomes law should be illegal; and for any transaction before the Royal Assent the Secretary of State has powers to recover those assets under Clause 29. What I am sure the Secretary of State does not mean is that that transaction should of itself be illegal. It is in fact perfectly legal for companies to transfer their assets before the Royal Assent. The only thing is that if they do so the Secretary of State has the right to recover them. So I hope that the noble Lord will be able to accept this Amendment. I beg to move.
Lord MELCHETT: This was something which my honourable friend the Minister of State said he would look into following Committee stage in another place, and indeed the Government have looked into it again and taken advice on it again. As the noble Earl said, Clause 28 prohibits certain transactions. However, as there is no provision in the clause which applies the clause retrospectively to some earlier date, as there is in some of the safeguarding provisions, the clause can only be effective from Royal Assent. Therefore my advice is that Amendment No. 143, and indeed Amendment No. 144,
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which the noble Earl did not mention but which I think covers the same point, are unnecessary and I am advised that from a legal point of view they are ill-conceived, if that is not putting it too highly. To agree to them would be to imply that the clause as it now stands would be retrospective. This, as I have said, is not the case and my advice is quite clear on that.
As the noble Earl knows, the majority of the provisions of the Bill are effective only from Royal Assent, but it is not necessary to specify the fact in each clause. Likewise it would be wrong to specify the fact in this particular case, because to do so might imply that all the clauses in the Bill that did not have these particular words in them were retrospective in some way. In other words, to put it shortly, my advice is that the clause certainly is not retrospective, but if you spelled it out it might imply that in every clause where you did not spell it out they all were. I hope that with that explanation, and under a firm assurance, the noble Earl will feel able to withdraw the Amendments.
Earl FERRERS: Yes, I can see what the noble Lord means. The Bill as it reads at the moment says:
"Subject to subsection (4) below, it shall not be lawful for an acquired company … to enter at any time before the date of the transfer into a transaction …"
From that we assumed that if they had done this before the Bill became law, that itself would be illegal. But if the noble Lord says that in fact it is quite all right and that the Bill does not act in any way retrospectively I am quite happy to accept that and I am grateful to him. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 28 agreed to.
Clause 29 [Recovery of assets transferred away]:
Lord CARR of HADLEY Lord CARR of HADLEY moved Amendment No. 145:
Page 40, line 40, leave out from ("the") to ("or") in line 41 and insert ("circumstances stated in the Schedule 4 notice as having appeared to the Secretary of State in accordance with paragraph (a) of subsection (1) above do not exist").
The noble Lord said: I beg to move Amendment No. 145. It might be to the convenience of the House if I could discuss Amendment No. 146 at the same time, because they obviously go completely together. Clause 29 and Schedule 4 empower the relevant Corporation to reclaim the rights of ownership in or user of any works or industrial property, et cetera, which has been transferred to a third party by a company due to come into public ownership, where such transfer has taken place without the Secretary of State's consent. What we are dealing with in this Amendment are circumstances in which a company against which the Secretary of State has served what I think I can call a Schedule 4 notice in order to recover property alleged to have been transferred can contend that this was not properly done or that there was no need to have done it. Subsection (7), to which the first of these two Amendments applies, shows what must be contended by a company in serving a notice challenging the Secretary of State's Schedule 4 notice, and one of the only two possible contentions which can be made by a company in its notice is that the condition specified in paragraph (a) of subsection (1) above is not fulfilled.
Now the condition specified in paragraph (a) of subsection (1) to which I have just referred reads as follows:
"it appears to the Secretary of State that…"
It seems to me that it is quite impossible for a company to show that something did not appear to the Secretary of State. That seems an almost impossible task; therefore we want to remove from lines 40 and 41 the phrase:
"the conditions specified in paragraph (a) of subsection (1) above is not fulfilled"
and to substitute for it the words:
"circumstances stated in the Schedule 4 notice as having appeared to the Secretary of State in accordance with paragraph (a) of subsection (1) above do not exist".
The contention is then changed from being what seems to us a basically hopeless and impossible contention about what appears to the Secretary of State to a contention about the facts which led the Secretary of State to come to his view.
Leading directly on from that is the Amendment which we propose in the next subsection, our Amendment No. 146, because subsection (8) of this clause
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provides, or purports to provide, a right to refer the same question to arbitration. But how can there be arbitration about what appears, or indeed does not appear, to the Secretary of State? Indeed, I should like to point out to the noble Lord, Lord Winterbottom, if he is to reply, that it was stated by Mr. Neil Carmichael, then the Under-Secretary of State for Industry, in the Standing Committee in another place on an identical question:
"In principle, if something appears to the Secretary of State to be in the public interest that cannot really be arbitrable. If certain circumstances appear in a particular light to the Secretary of State, that is not an objective matter of fact which can be subject to an arbitrator's ruling."
So it would seem that this subsection (8), which purports to be a relief to an aggrieved company and to give an aggrieved company the right to go to arbitration about the argument with the Secretary of State, is, on another Minister's own admission, not aright at all.
Once again, then, we propose to insert words which will transfer the matter of arbitration from what may or may not appear to the Secretary of State, to a matter of fact. We also propose to insert after "question" in line 3 of page 41 virtually the same words as we proposed in the previous subsection. We want to say that it is a question of whether the circumstances referred to in that subsection exist; and there has to be a consequential "or". Once again, here we are proposing to put into this subsection a matter of fact which can be arbitrated about rather than the matter of the question of what did or did not appear to the Secretary of State. I hope that these two Amendments will commend themselves to the Government.
Lord WINTERBOTTOM: The noble Lord, Lord Carr, has attempted to produce greater clarity. We believe that he has succeeded. Perhaps, for the sake of other people who have to follow us in their study of the Bill, I might take some time to explain why we think the drafting is better that that we have at the moment.
Subsection (7) empowers a person on whom a Schedule 4 notice is served by a Corporation, for the purpose of reclaiming assets which have been transferred away, to dispute that notice by means of a counter notice. The grounds for serving

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notice must be that the condition specified in Clause 29(l)(a)—that assets have been transferred away between the initial date and the date of transfer—has not been fulfilled. If it can be demonstrated that the transfer has not taken place, or that it did not take place in the prescribed period, then the Schedule 4 notice falls. Subsection (8) provides that the question shall be settled by agreement with recourse to arbitration. While this intention is clear from the present drafting of subsections (7) and (8), Amendments Nos. 145 and 146 improve the drafting materially, and I am therefore very happy to accept them both.
Lord CARR of HADLEY: I am most grateful to the noble Lord, Lord Winterbottom. He has come to the Committee tonight in a generous and co-operative mood. I hope that this continues and that it may prove contagious on the Front Bench opposite.
On Question, Amendment agreed to.
Lord CARR of HADLEY Lord CARR of HADLEY moved Amendment No. 146:
Page 41, line 3, after ("question") insert ("whether the circumstances referred to in that subsection exist or").
On Question, Amendment agreed to.
On Question, Whether Clause 29, as amended shall stand part of the Bill?
7.35 p.m.
Lord TREFGARNE: Like my noble friend Lord Redesdale, I was hoping to pop up on the previous clause, but I think that the point that I have to raise is equally apposite to this clause. The other morning the Committee agreed an Amendment to delay the vesting day of the aircraft industry for a considerable period—whatever it might be, 12 months or more. I wonder what will be the position with aircraft companies who clearly need to deal with their assets for what may be a long time? I wonder whether the Government have applied their minds to this new difficulty and what conclusions they have reached?
Lord MELCHETT: I should have thought it was a difficulty to which noble Lords opposite might have applied their minds before pressing the Amendment.
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The answer is, No. The Government have not applied their minds to this or to any other of the substantial difficulties which will arise if the Amendment which noble Lords opposite pressed into the Bill should remain. All of us, the Government, the companies and the industry, no doubt will have to apply our minds seriously to the very substantial and legion difficulties which will arise if the Amendment stays in the Bill. At this stage, we have not had the time to do so.
Lord ORR-EWING: I have been examining the clauses. I am not sure which clause is appropriate to my earlier query. I must apologise to the Committee that owing to a long-standing commitment, I must leave shortly. Perhaps the noble Lord will elucidate a little the position given at Question Time on 1st October.
Lord MELCHETT: I am delighted to try to help the noble Lord. The noble Lord asked about the interest on the stock and when the stock would be paid. That, I believe, was the question.
Lord ORR-EWING: I appreciate that the interest will depend on time. It is not the interest; I realise that that must be according to the market and the position of the pound and other factors. It is when the stock would be issued.
Lord MELCHETT: I was going to cover both points. Unquoted securities will be issued when negotiations are complete, with provision for earlier payments on account. That will depend on the progress which negotiations make. I would emphasise that there would be provision for payments on account in the interim. For quoted securities, payments will be made on or about vesting day. In that respect, I think payment will be made a lot sooner than the noble Lord may have inferred from my noble friend at Question Time.
Lord ORR-EWING: I believe I am right in saying that there is only one quoted security out of the 43, that, therefore, 42 are going to have a long period; but it would not stop during the period of arbitration. Will some sum be paid on account?
Lord MELCHETT: Some sum will be paid on account. We hope that negotiations will not be too protracted and in some cases we will be able to settle reasonably quickly. With two parties involved, it will be a matter for both sides. I hope that the noble Lord will agree that the sooner the matter is settled the better.
Clause 29, as amended, agreed to.
Clause 30 [Dissipation of assets by transactions involving holders of securities etc.]:
7.38 p.m.
Lord STRATHCONA and MOUNT ROYAL Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 146A:
Page 41, line 39, leave out ("on") and insert ("following")
The noble Lord said: This is a simple drafting Amendment which, I believe, will commend itself to the Government. The underlying purpose behind what appears to be a simple piece of semantics is possibly more substantial than may first appear. The situation is that Clause 21 comes into effect only as a result of the steps which are suggested in this clause and, therefore, a certain amount of argument and negotiation would happen subsequently. It is thought it would be proper to say that the trigger action bringing in the clause should allow time to do that rather than suggesting that the thing automatic ally happens at the same time. I should add that Amendment No. 177 is directed to the same general purpose. I beg to move.
Lord WINTERBOTTOM: I assume that the noble Lord is referring to Amendment No. 177A, not No. 177, in conjunction with this one. I am able on behalf of the Government to accept this Amendment. The substitution of the word "following" for the word "on" which Amendments Nos. 146A and 177A seek to make would have the effect of more correctly describing the sequence of events in Clauses 30 and 39 in relation to the service of a notice under Clause 21. May I say that I do not claim any virtue for these Amendments. They were due to be put down by my noble friend Lord Kirkhill who is battling with the problems of Scottish licensing.
Lord STRATHCONA and MOUNT ROYAL: I am grateful to the noble Lord.
On Question, Amendment agreed to.
7.40 p.m.
Lord CAMPBELL of CROY Lord CAMPBELL of CROY moved Amendment No. 147:
Page 42, line 12, after ("if") insert—
("(a) It is a transaction the effect of which is to transfer or grant to any person any property or rights belonging to the company in connection with the business of repairing, refitting or maintaining ships carried on by it other than at a shipyard or other works in which the company had an interest in possession on the initial date, or
(b)").
The noble Lord said: In moving Amendment No. 147 may I first welcome the way in which the noble Lord, Lord Winterbottom, has been able to accept Amendments this evening, I hope that he will be able to accept more. I have just left the Committee on the Scottish Licensing Bill which I can tell the noble Lord finished this afternoon's Sitting, and I am glad to say that the noble Lord, Lord Kirkhill, has gone off with all the suggestions we have been making in that Committee to consider the Amendments which he can then bring in to meet the points. There, as here, he has been exceedingly good at listening to our points and trying to co-operate.
Turning now to Amendment No. 147, I think this could be considered with Amendment No. 152 which is on a similar point, and I would speak to that as well. These Amendments apply to those companies who, on the initial date, were carrying on business as ship repairers as well as shipbuilders. The purpose of the Amendments is to enable the companies, if they wish to do so, to reorganise their affairs so that their shipbuilding and ship repairing businesses, where they happen at present to be carried on within the one company, are treated differently. Perhaps the best example is Vosper Thorneycroft, because the ship repairing business of that company is substantial. It represents about 10 per cent. of the whole of the United Kingdom ship repairing industry. The Vosper Thorneycroft ship repairing business is organised as a separate, autonomous division. It has its own managing director, production management, accountant, personnel, purchasing and commercial managers and its separate

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labour force. It is simply an accident of organisation that it is a division of a single company rather than a separate company. Indeed, the ship repairing facilities are entirely separate geographically from shipbuilding in that they are on opposite sides of the river Itchen. Consequently, the ship repairing business could be separated without any difficulty from the shipbuilding activities of the group.
As noble Lords on the Government Front Bench will know from the debates we have had on the ship repairing companies which are affected by this Bill, we hope that the Government will think better of the 12 companies listed in Schedule 2 and in due course will agree that it would be best if they were not to remain within the Bill. If they do not come to this conclusion of their own accord, at a later stage we propose to return to that point and to commend to the House various changes in the Bill to that effect. If the ship repairing companies in Schedule 2 are dropped from the Bill, it would be only right and fair that this quite separate department of Vosper Thorneycroft should be treated similarly, and of course any other company in the same position should also be treated in the same way. The purpose of moving Amendment No. 147 is to point out that at least one company has a substantial ship repairing department which is entirely separate from its shipbuilding activities, and that if ship repairing is to be treated differently from what is now proposed in the Bill then this and the consequential Amendments should be made in order to be fair to those other companies.
Lord MELCHETT: I am glad that we have been able to make such rapid and harmonious progress this afternoon. I hope that the slight hiccup which we have now reached will not delay us unduly or disturb the calm waters through which we are managing to sail. I had rather expected that the noble Lord would include Nos. 174 and 207 which, as well as 152, seem to me to be on the same point. In fact all four Amendments fall into place as part of the declared and, if I might say so, long awaited aim of noble Lords opposite to remove ship repairing from the scope of the Bill.
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In addition to the other Amendments to which noble Lords have spoken during the Committee stage, these Amendments would permit the shipbuilding companies listed in Schedule 2 which have a separate ship repair division within the company to hive off the ship repair operations without the consent of the Secretary of State so that these ship repair operations also could be excluded from the scope of the Bill. I have already to the best of my ability explained the reasons behind the Government's policy to bring the major ship repairing firms into public ownership. I have tried to point out the industrial logic behind our proposals in that many ship repairing facilities and operations are closely integrated with shipbuilding yards. This is especially true when ship repairing and shipbuilding are carried out in the same company.
In these circumstances, the Government believe it would be wrong to permit the ship repairing part of the business to be separated off from the rest of the business which will vest in British Shipbuilders. This would be to handicap the Corporation by breaking up the logical integration of the two activities which led to their incorporation in one company. I therefore regret to have to tell the noble Lords that the Government would resist these Amendments and the other Amendments on ship repairing which we discussed.
Lord MOTTISTONE: Would the noble Lord not feel that he is being slightly unreasonable? It is obvious that there is a strong body of opinion, not only among noble Lords on these Benches, which identify ship repairing as a separate activity. In fact it might be said that those firms which are big enough to do both jobs of shipbuilding and ship repairing have, I think I am right in saying, organised their businesses virtually separately in the way outlined by my noble friend in describing Vosper Thorneycroft. There must be a reason behind that. If, as the noble Lord, Lord Melchett, said, it is better to have them all together, it would not be logical to manage them so obviously separately, so it could be that the thinking behind the advice which the noble Lord has been given is not quite as sound as he thinks it is. There are quite good arguments for keeping ship repairing and shipbuilding separate for practical reasons quite apart from businesslike ones and

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quite apart, if you like, from separating those ship repairing companies that are independent and whose livelihood may in due course be threatened by some degree of unfair competition.
Altogether it seems to me that there is quite a strong case for this, and as I understand it my noble friends are going to press for it at the varying stages of the Bill. It is an accident, so to speak, of the way in which the Bill is laid out that the Amendment we are dealing with now is effectively a consequential Amendment to one which is coming at the end. It might seem, therefore, that as there are sound practical reasons, perhaps the Government could listen a little less to those who advise on the merits of ship repairing automatically being included with shipbuilding. If it was a good commercial proposition there would be an opportunity in the future for the Corporation to attempt to buy back the ship repairing companies. I know that politics is not sensible, and in fact sometimes procedures in your Lordships' House are not sensible, but the most sensible thing to do—and the Front Bench opposite have been so sensible so far that perhaps they could keep this happy feeling going—would be to accept this Amendment now knowing that it is consequential. In due course they could have the argument on the later Amendments and see what happens. Maybe it could all be put right at Report stage.
Lord MELCHETT: I am afraid that I could not accept the Amendment whether it is consequential or not, and I am not sure that it is. This is a separate series of Amendments although it is part of the general and continuing debate about ship repairing which we have had at all stages of the Bill and almost every single day of the Committee, except for the last day and night when we did not manage to reach a point where we got to a ship repairing Amendment.
I accept that noble Lords opposite think they have very good arguments on their side, but they must accept from me that I think I have very good arguments on my side and it is something over which we shall simply have to agree to differ. I do not want to prolong the debate because it is one we have had so often before, but I make the point that my understanding is that although the parti-
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cular instance quoted, Vosper Thorneycroft, may well divide shipbuilding and ship repairing into two divisions some of the ship repair labour has been used at times for fitting out ships on the shipbuilding side. That is the experience of other countries and I have quoted before, and will not weary your Lordships with it again, the example of Japan, a very highly successful competitor of ours in this field, where labour is used on ship repairing and shipbuilding within the same companies.
Lord CAMPBELL of CROY: I am grateful for the support of my noble friend Lord Mottistone, who, in one of those previous debates on ship repairing, gave the Committee the benefit of his own experience in the Navy and his own experience of the ship repairing industry as being completely separate and quite a different business from shipbuilding.
So far as this Amendment is concerned, my object, as I made clear, was to register with the Government that there was this side which we had to consider as well, where a company had a division which was dealing with ship repairing and which was quite separate from its shipbuilding business. I pointed out that in this case it was geographically separated and certainly there was no question of integration. I do not know the details of whether some of the labour force had been used on one side of the Itchen and got crossed over to do other work, but certainly the labour forces are separate in this company about which we have been talking.
The noble Lord reminded the Committee that we had said that we were not at this stage pressing the series of Amendments on the ship repairing industry, because we are giving the Government time for second thoughts themselves on something which is a very arguable matter. It could be said that this is the Opposition being very reasonable in giving the Government plenty of time to think about things and also to deploy any arguments they may wish to deploy in support of their view.
Having made the point that when we reach a stage where we have to decide whether ship repairing should remain in the Bill or not, we must not overlook these companies and we must make sure that they are dealt with in the same way.

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Having registered that point, I now beg leave to withdraw this Amendment.
Amendment, by leave, withdrawn.
7.55 p.m.
Lord CAMPBELL of CROY Lord CAMPBELL of CROY moved Amendment No. 148:
Page 42, line 39, leave out from ("reduced") to end of line 41 and insert ("in accordance with section 38(7A) below").
The noble Lord said: I beg leave to move Amendment No. 148, and with it I suggest we discuss Amendment No. 175 which is linked to it. These Amendments are addressed to the valuation of assets which are hived off. We attach great importance to these Amendments. Apart from requiring the securities of scheduled companies to vest in the two Corporations, the Bill provides for some re-arrangement of the corresponding assets.
Under Clause 20 certain assets owned by a company in the same group but—and here I use a phrase from the Bill— "appurtenant to the undertaking" of an acquired company are to be taken into public ownership along with that company, Conversely, assets which are agreed not to be "appurtenant"—again to use the word in the Bill—may be hived off from the acquired company, subject to the approval of the Secretary of State, under Clauses 26, 28, 29 and 30. There is a difference, however, in the provisions for the valuation of such assets, and I hope the Committee will bear with me if I go into some detail here because the important point is the way in which this valuation is done.
The difference in the provisions depends upon whether the companies are to come into public ownership or to be excluded. A different valuation system is to be used depending upon which course is adopted. Clause 38(7) provides for assets included under Clause 20 to be valued by setting the base value for compensation as if the company which acquires them when it is nationalised had held them during the relevant days—that is, from the 1st September 1973. On the other hand, a company which is given approval under Clause 30(2) to transfer works to its parent or fellow subsidiary, will find that the compensation payable for its securities may be reduced under subsection (4)(b)
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to whatever extent the Secretary of State pleases.
If the assets to be transferred away are valued as if an open market transaction between a willing seller and a willing buyer were involved at the time of the transfer, it is quite possible for the compensation for the securities of the company to be reduced to nil. That is the point, that the compensation could be reduced to nothing. That is because the value of the part of its undertaking on this latter basis could be greater than the whole on the basis laid down in Clause 38(1). The Amendments are intended to ensure that assets that are transferred away with permission are valued on the same basis as those which remain with the company that is nationalised or are acquired by that company on nationalisation.
I hope that I have explained what is, I fear, a little complicated, but we feel it is only simple justice that the valuation in the two cases should be carried on on the same basis, otherwise it may lead to compensation of nil and it will certainly be unfair. I hope that the Government will be able to accept these Amendments or be prepared themselves to offer similar Amendments, because otherwise there will be great unfairness arising from this aspect of the Bill.
7.58 p.m.
Lord MELCHETT: As the noble Lord has explained, Amendment No. 148 seeks to prescribe the method of valuing assets transferred away with the approval of the Secretary of State under Clause 30, rather than leaving it to the Secretary of State's discretion under the Bill as drafted.
The purpose of Clause 30 is to prevent vesting companies or their wholly-owned subsidiaries disposing of assets, whether in the form of physical assets or money to their parent companies or other non-vesting companies in the same group. Such disposals, if subject to no controls, would reduce the value of the vesting companies without any corresponding reduction in compensation. Nevertheless, we recognise that certain disposals could be industrially sensible, or justifiable for other reasons. Provision is therefore made in the Bill for the Secretary of State to give his approval to transactions

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covered by the clause, thereby ensuring that the consequences laid down in the clause will not result.
Nevertheless, there still remains the possibility that a disposal, though industrially or commercially sensible, could give rise to a loss to the new Corporations. Subsection (4) therefore provides that the Secretary of State may impose certain conditions to his approval, which may provide for a reduction in the compensation payable in respect of the vesting securities to compensate for the loss to the Corporation.
If a transaction which contravenes Clause 30 is undertaken, then the directors become liable to the relevant Corporation for the net loss to the Corporation resulting from the transaction. Where the Secretary of State gives approval to a transaction subject to conditions, those conditions will be designed to ensure that the relevant Corporation in fact suffers no net loss. If assets are taken out of the scope of public ownership after the reference period for compensation purposes, this is equivalent to the removal of a sum of money from the Corporation equal to the market value of the assets which comprise the works. Any condition to an approval must, therefore, ensure that the compensation is reduced by an equivalent amount.
As I understand it, Amendment No. 175 (which the noble Lord took with Amendment No. 148) seeks to provide that, in the case of any disposal of tangible assets, compensation should be reduced by reference period valuation of these assets, less any consideration received. And Amendment No. 148 seeks to limit the conditions in Clause 30 to the same basis. I regret to tell the noble Lord that that would be unacceptable to the Government. We have given assurances to companies that any funds injected into them by their shareholders after the reference period shall be repaid at their face value by the Corporations. Where such injections are in the form of new securities, the Bill provides for compensation at the face value. If shareholders are to receive full face value repayment of any new funds they put in, then I suggest to noble Lords opposite that in equity the new Corporations should receive full face value compensation for funds taken out after the base reference period. This need not apply simply to cash. The
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removal of assets from a company is exactly equivalent to the removal of funds. The actual loss to the Corporation is, by direct analogy, the open market value of the assets at the time they were removed. I suggest that to allow a different treatment for funds put in and funds taken out would destroy the existing balance at present in the Bill, to the sole benefit of the shareholders and to the sole disadvantage of the new Corporations. For that reason, I regret to say that I am not able to accept Amendments Nos. 148 and 175.
8.2 p.m.
Lord GISBOROUGH: I find it difficult to follow the noble Lord in his argument that this provision is in any way fair. It concerns groups in companies where part will be nationalised and part will not. With the approval of the Secretary of State, part will be able to be kept in private hands. It is only right that the group should either pay for the part transferred back to them or the compensation for nationalisation should be reduced accordingly. As has already been stated, the Secretary of State is directed to pay compensation to such an extent as may be specified. I find it difficult to understand that where you have two different sets of valuations the whole thing can be in any way fair. You get one set of valuations on a notional stock exchange valuation, which anyhow is absurd in the first place, for the business that goes out, and to bring back part of the business at a market value is totally different. It could well—and probably will—result in the value of the part coming back exceeding at market value valuation the value of the part to be nationalised. In practice, what is happening is that the Department of Industry are using the full open value, and it seems most unfair. Furthermore, it is compulsory acquisition on one valuation and selling back on another. There will be considerable profit which will be kept by the Corporation. This Amendment will automatically ensure that the parent company will pay and be paid at the same rate of valuation. As it stands, the clause is nothing short of daylight robbery.
Lord CARR of HADLEY: This is a complicated matter and I am not sure that I understand it. I hope that my understanding is wrong, but if I and my noble

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friend are right about it, it seems to me absolutely outrageous. May I try to put it in simple terms, because it may disclose that I am failing to understand the technicalities? As I understand it at the moment, if there is a whole company which is due to be nationalised but a part of that company is permitted to be transferred back again to the original owner and not kept in the Corporation, when the whole company is valued for compensation it is done on the notional share price basis which we have in the Bill and which we have not yet discussed. I am going to assume that that is the basis on which the compensation will be paid.
Then we get to the point of the original company bringing back to itself that part of its operations which are not relevant to the Corporation. It is allowed to do this. It has to buy back at current asset value. If it is having to pass over at notional share price value and then buy back at the current asset value, it seems outrageous and cannot be equitable. The word "fair" could not possibly be stretched to cover such a case. I sincerely hope that I have misunderstood the technical complexities of the matter and that my noble friend Lord Gisborough has also misunderstood it. If we have not, the Government have a great deal more explaining to do.
Lord CAMPBELL of CROY: It seems that none of the noble Lords opposite feel that this is the moment to do the further explaining.
Lord MELCHETT: I thought the noble Earl behind the noble Lord, Lord Campbell of Croy, was about to get up to speak. I was waiting.
The Earl of ONSLOW: I was leaning back on my shoulder and making no effort to do so.
Lord MELCHETT: I apologise for not being faster on my feet. The noble Lords, Lord Carr and Lord Gisborough, have not misunderstood this matter; but at the same time they have not entirely taken the point I made. As the noble Lord said, it is a complicated subject. I made the point that we have said to shareholders that any new funds put into a company will be treated at
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their full face value, full market value. We are treating anything taken out of the company in exactly the same way. Funds put in or taken out after the base period—as the noble Lord says we shall come to a discussion on the valuation of the securities—anything going in or out of the company, will be treated on the same basis. That is what led me to say that I thought this was a reasonable and fair thing to do. I remain of that opinion. It seems to me that these are two exactly comparable although opposite transactions which should be sensibly treated in the same way.
Lord GISBOROUGH: Surely that is exactly where it is wrong. Money going in and coming out is fair enough; it is treated at the same rate. But you are taking the whole of a company in at one rate and taking half out at another rate. It is exactly against what you are saying.
The Earl of ONSLOW: The noble Lord, Lord Melchett, has just said that my noble friends Lord Carr and Lord Gisborough have got it absolutely right. What he has not done is answered the fairness point.
Lord MELCHETT: I am in the middle of a speech and am trying to do so. If the noble Earl wants to intervene, I shall be happy to give way to him.
The Earl of ONSLOW: I apologise to the noble Lord. I thought he had finished his speech. It is sometimes not easy to know.
Lord MELCHETT: The noble Lord behind the noble Earl got up to intervene and I gave way to him, I think as politely as I possibly could, and I am happy to try to finish what I was saying. As I said, we are looking at transactions both in and out of a company after the base period and it seems to me, as I have said already, that we are treating those two situations in the same way. If the shareholders put extra money into the company they will be paid that amount, and if they put extra assets into the company they will be paid for those assets at their market value, their face value. Similarly, if things are taken out of the company after the base period, they will be paid for on the same basis as something put in. That is the point I am trying to make.

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The question with which I should like to deal very briefly, if I may, is that normally, if assets are transferred from a company in this way, the seller will receive some kind of price for the sale. Normally, of course, the price will be the full market value and then there will be no question of the Secretary of State needing to impose conditions, because the full market price will have been paid to the bit of the company which is to vest. The conditions imposed by the Secretary of State will deal only with the gap, if there is a gap, between the price paid for the assets transferred away and the open market price. Unless a company actually gives away assets, I suggest that the difference between the price paid and the open market price is most unlikely to be anywhere near the compensation sum, and somebody suggested to me earlier that it would be a great deal more than the compensation sum. As I said, unless the bit of the company which is to vest actually gives away part of it to its parent, or it goes somewhere else, that is unlikely and all that the Secretary of State's conditions will be designed to do is to bring whatever price is received up to the full market value.
Lord CARR of HADLEY: I am still seeking clarification. I think it is agreed that in most cases, though not perhaps in every case, compensation based on a notional share value as at present laid down in the Bill will give a lower valuation figure than compensation based on current asset value. I agree that it need not always be so, but in a flourishing company it probably would be so more often than not. Let me give the example of a hypothetical company called Jones Group Limited, which has a subsidiary called Smith Ship Repairing and Plastic Moulding Company Limited. The ship repairing company has a turnover in the relevant period of more than £3·4 million, is in possession of a dry dock and meets all the other criteria and so falls to be nationalised. Therefore, the value to Jones Group Limited of its subsidiary, Smith Ship Repairing and Plastic Moulding Company Limited, is based on the notional share value. But the plastic moulding part of the Smith subsidiary has nothing to do with the Corporation, and Jones Group Limited will be permitted to keep it and want to keep it.
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But the compensation it receives in respect of the plastic moulding part of its Smith subsidiary will have been based only on the notional share value, and when it tries to get back to itself the plastic moulding part of the business—I have used this hypothetical example of plastic moulding because I know that it involves very high capital expenditure—the assets which it will have to buy back will have a much higher value than the value attributed to them on a notional share price valuation. It would be grossly inequitable, absolutely intolerable, and the amount that it would have to pay for getting back its high capital plastic moulding machinery, particularly if it was at the heavy end of the trade, could well be greater than the total compensation that it received, based on a notional share value, for the whole of the Smith Ship Repairing and Plastic Moulding Company Limited subsidiary. I believe that I have correctly interpreted the meaning of the Bill, and I must say to the noble Lord that it is absolutely intolerable; it cannot be tolerated and the Government must not tolerate it.
The Earl of ONSLOW: My noble friend Lord Carr has made this complicated issue totally and completely clear to me. As the noble Lord, Lord Melchett, admitted in the first part of his previous remarks that this is to be the case, I would put this to him. It is not a question of being unfair; it is a question of behaving in exactly the same way as Charles I behaved by forced loans, and your Lordships know what happened to him. It is exactly the same behaviour as that of which some of the noble Lord's colleagues in another place have accused Mr. Slater, and over which they have raised the roof with rage. It is more than intolerable, it is more than unfair, that the noble Lord and Her Majesty's present advisers should behave like this. It is pure robbery—there can be no other description of it—to buy something from somebody at one price and force him to buy back his own stuff at slightly more. That is in no way equitable, it is in no way fair and it is verging on tyranny. The noble Lord opposite ought to remember what is in the Bill of Rights, which is that no man should be deseized of his freeholds or liberties, and if noble Lords opposite go on deseizing us of our free

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holds we will end up by being deseized of our liberties.
Viscount SIMON: I do not want to follow the noble Earl, because I feel sure that the Government do not mean to do the kind of things he is suggesting. But it seems to me that this is a very complicated—
The Earl of ONSLOW: If the Government do not mean to do it, they are even more incompetent than I thought.
Viscount SIMON: I was saying that this is a very complex matter, and I would not accuse people of being incompetent if they do not necessarily understand a very complex matter—and I do not understand it. All I want to say is that I thought the noble Lord, Lord Carr, made a very strong case, which was very logically argued, and, if the effect of the Bill is as he described, then I am in entire agreement with him that it ought to be altered. Perhaps the noble Lord will tell us that that is not the meaning of the Bill, and will explain it to us. If so, my views will be different.
Lord STRATHCONA and MOUNT ROYAL: I should like to support the noble Viscount, Lord Simon, and I do not ascribe to the Government any unworthy motives—quite the reverse. I totally accept that what they say they are trying to do is inherently reasonable. I did not begin to understand the argument on both sides, until my noble friend Lord Carr put it in the kind of terms that I could understand. Having been in the plastic moulding business myself for a short time, I found it particularly relevant. But what I found difficult to follow was the argument of the noble Lord, Lord Melchett, and I reduced it to rather simple terms that I thought I understood for a moment. It seems to me that the Secretary of State agrees that action should be taken, and he gives his permission. The fact that he graciously agrees that somebody should be allowed to keep something which I consider belongs to him, is perhaps putting it in rather emotive terms. But the Secretary of State agrees that something should happen, and he agrees the basis upon which it should happen.
As the noble Lord said, the Secretary of State may reduce the compensation.
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Surely that must mean that he is going to value the transaction on a different basis, yet later on the noble Lord said, "We do not think that there should be different ways of treating these transactions". That seems to me to be a curiously inconsistent attitude.
The noble Lord then went on to say that the Government have given an assurance. This is a more general point that should be made quite clear. With the best will in the world, and I am not trying to impute any base motives or dishonesty to him, the Minister must know (because he would be saying exactly the same thing if he were standing where I am now) that Government assurances are of very little use when you are dealing with legislation that affects people's livelihoods and property. Governments change, we hope sooner rather than later. Governments have even been known to repudiate the activities of their forebears. This has happened quite often. During a Conservative Administration I remember a considerable business tycoon saying at a board meeting: "I will believe anything from people I trust, but I do not trust Governments. I never take a contract from a Government unless it is totally binding, for all sorts of reasons, but mainly because Governments change and Governments repudiate contracts and it is extremely difficult to sue Governments."
With the best will in the world, therefore, may I say to the noble Lord that we ought not to rely upon assurances. If the assurances are genuine then they ought to be written into the law of the land which, Heaven help us! we are trying to make in this Chamber this evening.
8.21 p.m.
Lord MELCHETT: Regarding the latter point which was made by the noble Lord, Lord Strathcona and Mount Royal, I shall be happy to think about it. It seems to me that it would not be in conflict with our basic argument but, to be frank with the noble Lord, that is not what the Amendment seeks to achieve. So far as the use of the Secretary of State's power is concerned, what I said was that if a company which is to vest gives away part of it to its parent so that that part does not vest and it goes to the parent, then the Secretary of State would seek to see that the part which is due to vest gets

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the market value for the bit which has gone to the parent. That is the extent to which the Secretary of State's power will be used. If the noble Lord would like that to be made clearer in some way I think that we could look at it in a constructive way. I slightly resented the way in which the noble Earl, Lord Onslow, set about us since, on the whole, we have been making fairly good progress this afternoon and, generally speaking, both sides of the Committee have been constructive. It does not help to accuse people of robbery, which is patently nonsense, but it is the kind of remark which is very easily picked up and put out of context into the newspapers. I know that the noble Earl uses extravagant language and I am sure that he did not mean what he said because it is quite unfair and not true.
The compensation paid under the Bill relates to the value of companies as a whole. The companies will be valued as a whole when it comes to determining their compensation, and this price represents the true earning power of the assets of the company. In principle, therefore, there should be no conflict over valuing a part of the assets and valuing the shares under the Bill. That is the basic tenet on which the argument which I am advancing is based. It is an argument with which noble Lords opposite will disagree when we deal with compensation, but these are the terms upon which compensation is decided under the Bill and we believe, broadly speaking, that the method of arriving at compensation will give us a fair picture of the earning power of the assets which are to vest in the new Corporations and, therefore, a reasonable indication of the value of the different bits of the companies which are to vest.
The transfer away from a vesting company of any part of its business must result in a direct financial loss to the company unless the transfer is balanced by an equivalent payment. That is all that we are talking about—the transfer away of a part and a payment back for the part which is transferred away. It is not possible to value a works or even an undertaking on the same basis as one values the securities of the company as a whole. The value of securities represents their earning power to the shareholders. The value of an undertaking which is only part of a greater undertaking is the contribution which the lesser undertaking makes
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to the total earnings of the greater. May I suggest that the only sensible way to value such an undertaking is by reference to what a willing buyer would pay to a willing seller when we are talking about a lesser part of the total undertaking, just as a Stock Exchange quotation represents the price at which securities would change hands between a willing buyer and a willing seller. As there is no Stock Market analogy for part of an undertaking, the only way to assess the correct transfer price is by an independent outside valuation—in other words, the market price of the bit which is not going to vest in the Corporation.
The Earl of ONSLOW: May I take up the point with the noble Lord, Lord Melchett, that in this instance there are no willing sellers. They are sellers who are being forced to sell by Act of Parliament.
Lord MELCHETT: No; that is not true. We are talking not about the fact that the companies are being taken over by the Bill but about the fact that the companies seek and, with the agreement of the Secretary of State, are able to divest part of the company because it does not fit sensibly into the Corporation's activities. The noble Lord, Lord Carr of Hadley, gave us a good example of that. In the situation that we are talking about, if that part of the company which is going to vest does not sell the bit that is going back to the parent at the open market price (which I think they would, so we are probably talking about only a few occasions), then the Secretary of State would seek to bring up the price to the open market price.
Lord WARDINGTON: I came in just when the noble Lord opposite was referring to a Stock Exchange price. A Stock Exchange price is as quoted in the newspapers that one sees and it is followed by investors generally and the management of investors' funds. That is what they invest in and on, with the earnings and yields commensurate with that price. However, as I submitted to noble Lords early on Tuesday morning, when you get into bid situations you have an entirely different set of circumstances. Assets then come in and have to be paid for. As I mentioned on Tuesday morning, this is best illustrated by the recent bid for

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Teachers. The Teachers' price was 190 in the market before the hid and the yield was the normal one in that brewery and distillery market, but when there was a bid the price reacted to 380 and it is still 380 on that bid.
Lord CARR of HADLEY: May I be quite clear that I am still not misunderstanding, because if I am not I shall have to stand by the strong words that I used a few moments ago. To return to my mythical Jones Group Limited, at the moment they are enjoying the use of their ship repairing and plastic moulding assets which are held in their Smith Company subsidiary. At the moment they have the use of the profit from both types of asset. Along come the Government and take from Jones Group their Smith subsidiary, and for the privilege of keeping just one part of what they possess at the moment they have to pay something to the Government. This seems to be quite appalling. At the moment, they have got both their ship repairing assets and their plastic moulding assets, and in order to keep their plastic moulding assets in the future, although they are of no interest to the British Shipbuilders Corporation, the Jones Group have to pay money to the Government. If that is not robbery, I really do not know what is. I am sure my noble friend was not wishing to accuse the noble Lord or his right honourable friend the Secretary of State of wishing to indulge in robbery. But if what I have described is possible, the effect of this clause is robbery. It is not compensation, it is robbery; there is no other word for it, and Parliament cannot allow it to happen.
8.31 p.m.
Viscount SIMON: Can the noble Lord, Lord Melchett, help us again, because this is a very difficult matter and some strong words have been used. He said in his last intervention that the basis of payment—and he implied the basis of payment in each case—was earning capacity. That is, of course, different from the basis of the market value of the assets, if you are thinking of pieces of machinery and things like that. Is he saying that the notional share price of the whole organisation, Smith Ship Repairing and Plastics, is based on the earning capacity of Smith Ship Repairing and Plastics;
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and that the amount which the company will be required to pay for retaining Smith Plastics is the earning capacity of the plastics section of that business? If that is what he is saying, it sounds to me reasonable. But I am not sure that that is what the Bill says.
Lord MELCHETT: It is not exactly what I am saying. I am saying that the compensation will be arrived at as the Bill lays down, on the stock market analogy, and we will come to deal with that later. I know this is not accepted by noble Lords opposite, from the Amendments they have put down and the remarks they have already made about the way the compensation is arrived at, but my contention was that the compensation paid will reflect the earning value of the assets of the group as a whole. But, unfortunately, it is not possible on the same basis to easily value one particular part of the group. What I am saying is, that if one part is transferred away from the group as a whole, the part that the Corporation is going to get, compensation having been paid for the whole, should have paid into it the market value of the part transferred away. It is just as if the shareholders, who get compensation for Smith Group as it was during the base period—I do not know whether this is a very good analogy, but it will do even if I have not got it quite right—paid to take over Jones Plastics Limited; the Government have undertaken to reimburse the shareholders for that amount of money and not for some notional value of Jones Plastics Limited.
Viscount SIMON: I think I follow what the noble Lord is saying. It is, of course, difficult to assess the Stock Exchange value of any part of a business; but provided it can be done, surely it can be done equally well by dividing the two and saying, "This part of the business is worth so much and that part of the business is worth so much".
Lord MOTTISTONE: This is the problem, that there are two bases being used, one being the basis of what the main business is going to be paid when the Government kindly take it from them, and a quite separate basis for any transaction which is done subsequently with a part of it. What the Minister is saying is, "Forget the first part, the major part

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of taking the company over; that is a separate issue. It is only fair that the asset value of the minor part should be paid for at the current rate because whoever has got it will be able to use it at the current rate". I am sure the Government want to be seen to be fair. There may be some of their supporters in another place who do not feel that way about it, but on the whole it must be only reasonable to assume that the Government should want to be seen to be fair. Surely it is fair that they should not have an artificial method of calculation of the asset value of the businesses they are forcing to join their organisation. It seems to me that if the Government could think about the effect of what they are trying to do on the world in general, instead of just satisfying a few of their supporters, they would be on a much better wicket and we should not be having these arguments.
The Earl of ONSLOW: Perhaps the noble Lord, Lord Melchett, can answer one very simple question. Is the situation as depicted by my noble friend Lord Carr, that the company may have to pay more for part of itself than it gets from the Government for the whole of itself? If that is not true, and we have all got it wrong, that is one thing. But if that is true, then I do not withdraw one single word about whether it is robbery or not, because it is robbery—if not highway robbery perhaps piracy, as we are talking about shipbuilding.
Lord MELCHETT: I have already said that I do not think there will be a great deal of difference between the valuation put on the company as a whole, by looking at the value of the shares of the whole thing, and the value that will be put on a part which is divested; so I do not think that would be possible. If there is a particular instance where this is happening—because, after all, we are talking about actual companies and actual parts being sold off—certainly I will be happy to look into it. But so far as I am aware there is no case where the compensation paid is less than the company is being asked to pay as a going price for the part it is buying back.
Lord CARR of HADLEY: Although, of course, one cannot be certain, because the Government cannot, or to some extent do not think it right to, give us
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much information about how these compensation values might work out, on such responsible "guestimates" as one can make, there is a particular company which believes that it is going to be in the position of my mythical Jones Group. I am not permitted to name that company, and I do not think the noble Lord would wish to press me because we both agreed that it would be improper for either side to identify particular companies. But I assure him that I raised the point only because I have been told enough to make me believe that the sort of situation I have instanced could indeed become a real one.
I cannot believe that it is the sort of situation which the Government can possibly intend to wish to happen. I feel that if they can be convinced that there is a reasonable chance that it might happen they would wish to give an undertaking to Parliament that somehow they will prevent it from happening; because, I repeat, if it were to happen it would be robbery. I also repeat that I do not imagine for one moment that the Government wish to indulge in robbery. So I do hope they will look at it.
May I just challenge one thing that the noble Lord, Lord Melchett, said. He said that it would be impossible to arrive at a valuation of the contribution made by one particular part of the Smith subsidiary, to take my mythical example again. I find that difficult to believe. If it is possible to form a judgment about a notional share value of the Smith subsidiary of the Jones group, because we have to remember that it does not have a quoted value of its own, it must be just as possible to arrive at a notional value for the two halves of it. So I am afraid I cannot accept that it would be impossible to do it, unless I am going to argue, which I may well wish to do later on, that the whole idea of calculating a notional share value is impossible in itself. If it is possible to do it in relation to the whole of the Smith subsidiary, it must be just as possible to do it in relation to part of it. If the Government are going to hold to this extraordinary business of working in terms of notional share values then the movement both ways must be done on the same basis, otherwise it will be robbery.
Lord WARDINGTON: I support my noble friend Lord Carr. Price represents the totality of its business. The components are entirely separate. Any bidder who bids for a company splits it down and assesses the value of those components. One person puts an entirely different figure on a component than somebody else. It is up to the advisers of that company, the expertise of the officers of that company, to assess what any one component is worth to them. Many bid situations actually result with a subsidiary of that company being sold off immediately. That possible price at which they can sell the subsidiary is assessed at the time of the original bid.
Lord CAMPBELL of CROY: After I moved this Amendment, the noble Lord, Lord Melchett, attempted to explain the purpose of the Government behind this part of the Bill. He was right in saying that we disagree with the way in which the Government are treating assets and the handling of compensation. But he has not met the point about two completely different systems of valuation. He has indicated that the Government are not budging on their proposal to use two different methods of measurement in valuation in the two different circumstances.
He said that assurances had been given about the valuation of injections of funds after the base period but, as he later said
to my noble friend Lord Strathcona, that does not affect these Amendments. Writing those assurances in would not carry out the purpose of our Amendments. We believe that the application of these two different systems of valuation could lead, as my noble friends have said—and some of them of great knowledge in this field—to completely different valuations, and could mean that a company received no compensation at all even though it was parting with a part of its assets.
This is entirely unacceptable, but the Amendments which we have proposed, if they are included in the Bill, would mean that compensation would be determined in a way that would ensure that the parent company is paid at the rate laid down by a general formula for compensation for those of its assets which actually pass into public ownership: no more, and no less. That is a reasonably fair proposal. What the Government have been trying to defend—and the noble Lord, Lord Melchett, has been doing his best, but again he is on a bad wicket—is, in our view, totally inequitable, and I would ask my noble friends to support me in pressing this Amendment.
8.46 p.m.
On Question, Whether the said Amendment (No. 148) shall be agreed to?
Their Lordships divided: Contents, 77; Not-Contents, 35.

CONTENTS

Alport, L.

Gray, L.

Onslow, E.

Armstrong, L.

Greenway, L.

Redesdale, L.

Atholl, D.

Grey, E.

Rochdale, V.

Auckland, L.

Hanworth, V.

St. Aldwyn, E.

Barber, L.

Hives, L.

St. Davids, V.

Barrington, V.

Hornsby-Smith, B.

Sandys, L.

Beaumont of Whitley, L.

Hylton-Foster, B.

Savile, L.

Belstead, L.

Inchcape, E.

Selkirk, E.

Blakenham, V.

Inglewood, L.

Selsdon, L.

Burton, L.

Kimberley, E.

Sharples, B.

Byers, L.

Kings Norton, L.

Simon, V.

Campbell of Croy, L.

Lauderdale, E.

Somers, L.

Carr of Hadley, L.

Lloyd of Kilgerran, L.

Stamp, L.

Chelwood, L.

Long, V.

Strathclyde, L.

Colwyn, L.

Lyell, L.

Strathcona and Mount Royal, L.

Cullen of Ashbourne, L.

Mackie of Benshie, L.

Swansea, L.

De Freyne, L.

Macleod of Borve, B.

Tranmire, L.

Denham, L. [Teller.]

Margadale, L.

Trefgarne, L.

Dudley, E.

Monson, L.

Tweedsmuir, L.

Ellenborough, L.

Morris, L.

Vickers, B.

Elton, L.

Mottistone, L.

Wakefield of Kendal, L.

Falmouth, V.

Mowbray and Stourton, L. [Teller.]

Ward of North Tyneside, B.

Ferrers, E.

Wardington, L.

Gainford, L.

Northesk, E.

Winstanley, L.

Gisborough, L.

Nugent of Guildford, L.

Wise, L.

Gowrie, E.

O'Hagan, L.

Young, B.

NOT-CONTENTS

Blyton, L.

Lyons of Brighton, L.

Shackleton, L.

Brimelow, L.

McCluskey, L.

Stedman, B. [Teller.]

Brockway, L.

Maelor, L.

Stewart of Alvechurch, B.

Castle, L.

Melchett, L.

Stone, L.

Champion, L.

Morris of Kenwood, L.

Strabolgi, L. [Teller.]

Collison, L.

Murray of Gravesend, L.

Taylor of Mansfield, L.

Cooper of Stockton Heath, L.

Oram, L.

Wallace of Coslany, L.

Davies of Leek, L.

Peart, L. (L. Privy Seal.)

Wells-Pestell, L.

Davies of Penrhys, L.

Pitt of Hampstead, L.

White, B.

Houghton of Sowerby, L.

popplewell, L.

Winterbottom, L.

Kirkhill, L.

Raglan, L.

Wynne-Jones, L.

Lee of Newton, L.

Ritchie-Calder, L.

On Question, Amendment agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.
8.54 p.m.
Lord STRATHCONA and MOUNT ROYAL Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 149:
Page 43, line 24, after ("and") insert ("unless in the case of persons who did not benefit from the transaction the tribunal are satisfied that the transaction was not entered into with a view to defeating the object of any provision made by this Act or (if the transaction was entered into before the passing of this Act) with a view to defeating any provision which might reasonably have been anticipated to be likely to be contained in this Act").
The noble Lord said: While I regret to say that this Amendment is on a somewhat similar issue to the one we were just discussing, it is a rather easier point with which to deal. We are seeking here to provide an escape clause for existing companies to safeguard the innocent. In effect, we are saying that if the Government suspect that the intentions of the Bill are being evaded, the onus of proof must lie with them. We also believe that an Amendment on these lines would go some way towards alleviating the inevitable tendency towards inertia which has been created by some of the restrictive clauses on compensation in the Bill.
Clause 30 deals with transactions involving the transfer of assets of a company coming into public ownership in a way which is beneficial to the holders of its securities, and provides that where such a transaction is entered into, in this case without the Secretary of State's consent, after the safeguarding date—that is, 17th March 1975—and results in a loss to the Corporation, the Corporation may seek, through the arbitration tribunal, compensation from the directors of the company, and indeed in certain circumstances even from those who acquired assets.
Clause 31, which provides that a Corporation may recover from the directors
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of a company coming into public ownership compensation for loss suffered by the Corporation as the result of an onerous transaction—about which there has been, shall we say, a little argument—has already been amended, and the important point is that no compensation can be recovered where the transaction was not entered into with a view to defeating the objects of the Bill; that is Clause 31(7). We are seeking here to introduce a provision similar to the conditions which apply in Clause 30 so that those who enter into an analogous transaction but who do not benefit from the transaction will have a protection similar to that which has now been written into Clause 31(7).
We are attempting to do two things: first, a certain amount of tidying up, in that it seems anomalous to have a protection in one clause which is not included in the other, and, secondly, to do the reasonable and what seems to us fair thing of saying that if the Government believe that somebody is behaving in a way which defeats the provisions of the Bill, it is basically up to them to prove it, rather than that the accused party should have to prove his innocence.
Lord MELCHETT: As the noble Lord, Lord Strathcona and Mount Royal, explained, the Amendment seeks to allow directors of vesting companies to avoid the adverse consequences of Clause 30 if they can demonstrate that a transaction governed by that clause was not undertaken in anticipation of nationalisation. I understand that a similar Amendment was discussed in Committee in another place. The noble Lord said that he has in mind a change to Clause 31 similar to that which the Government made following discussions with the companies during the summer of last year, a change which was announced in another place on 7th August 1975.

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The Government believe that the circumstances in Clause 30 are very different from those in Clause 31. While the Amendment was desirable in the case of Clause 31, I regret to say that I do not think it would be appropriate in Clause 30. As my honourable friend the Minister of State explained in another place on 2nd March, Clause 31 deals with what are termed "onerous transactions". These are unusual or imprudent transactions which cause a loss and could be foreseen to cause a loss to the company. In the commercial world, particularly in the aircraft and shipbuilding industries, many decisions involve a risk. It is a matter of commercial judgment whether the risk is justified and of course a successful business is one where this judgment is exercised wisely. But the risk cannot he eliminated entirely and a decision taken in good faith can, in the event, turn out badly. This is recognised by everybody and we should certainly not wish to penalise directors in such a case.
Therefore, Clause 31 only has effect where it can also be demonstrated that the transaction was undertaken in anticipation of nationalisation. As I say, I believe that the position under Clause 30 is entirely different from that under Clause 31. The transactions covered by Clause 30—the so-called "material transactions"—are by their very nature unusual. This, I suggest, is apparent from the definition of material transactions in subsection (1). They include capital and special dividends, premature redemption of securities, sales of assets where the proceeds pass direct to the shareholders and so on. Because they all benefit shareholders, they have a direct implication for the compensation terms.
Clearly, none of these transactions can be considered to be in the normal course of business. Equally, the clause relates only to transactions during a period when nationalisation is imminent. The fact that the transactions are unusual and are carried out in the full knowledge of nationalisation would, I suggest, clearly lead to the conclusion that there must have been at least some degree of anticipation in their taking place at all. Nevertheless, if the Amendment were carried it would be likely that directors would seek to argue the point before the arbitration
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tribunal, if only as a means of delaying the ultimate decision. I put it in that way because I think that, given the terms of the clause, it is probably unlikely that such arguments would be successful. However, if the decision were delayed, this would be in no one's interest but would involve both the directors of the vesting companies and the Corporations in unnecessary and time-consuming arguments which, in the event, could have no bearing on the issue. Release of the directors from the provisions of the clause as the Amendment envisages could make it easier for material transactions to take place and thus to invalidate the basis of compensation. For those reasons, I seek to make a distinction between Clauses 30 and 31. I hope that, with that explanation, the noble Lord will not press the Amendment.
Lord REDESDALE: I should like to raise a point which, strangely enough, comes back to the point that I would have raised on the Question, That Clause 28 stand part of the Bill—that is, the question of the "date in question". At that point, we were talking about Royal Assent and "any previous time". If one goes through the record of Standing Committee D, one sees that the noble Lord gave us almost verbatim what Mr. Kaufman said in another place. I am not criticising him for stating the argument as it is laid out there, but the point that he did not answer was that which was raised by Mr. King on the matter of "any previous time". I do not believe that that has been put on the record in this debate.
The other point which worried me and which was not answered in another place was that if the answer was that it was simply going to cause additional trouble for the tribunal, as was suggested in another place, it was not really a very satisfactory argument. I wonder whether the noble Lord could cover those two points. For his information, I am referring to cols. 1404 to 1406 in Part 2.
Lord MELCHETT: The noble Lord has managed to get in his point from Clause 28, but I must say that I do not really follow how it applies to Clause 30, or upon which particular words in Clause 30 he has hung his question. I saw the point which the noble Lord explained to me off the Floor of the Committee on Clause 28, where the words "at any

1401
time" appear, and I told him off the Floor, and it may be helpful if I repeat it now, that my understanding was that, without some particular reference in the clause, that meant from Royal Assent onwards. In other words, if the provision is to be retrospective, it must say so directly. But I am not quite clear where this comes up under Clause 30, though I admire the noble Lord for his ingenuity in raising it at this stage.
Lord TREFGARNE: It struck me that the words upon which the noble Lord hung his argument just now were his assertion that any novel transaction entered into in the knowledge that nationalisation was around the corner was, ipso facto, one to which the Government would take exception. I think that that is a very wide statement and it strikes me as quite unreasonable and unjustified.
Lord MELCHETT: If I had said it, it might have been unreasonable, but I do not think I did.
Viscount SIMON: I wonder whether the noble Lord can help us on this point. Many of the transactions referred to in the early part of the clause would clearly be transactions that could reasonably be thought to be evasive transactions, if I may put it like that. However, it is conceivable to have a transaction—for instance the disposal of some part of the plant—because the directors genuinely feel that plant is getting out of date and it is time to replace it with something else, but, as a result of a change in circumstances it is impossible to replace that plant so that a loss is in fact suffered. This loss would have been suffered through what were bona fide actions by the directors. I think that there should be some provision—perhaps I have missed it and there is already one—by which the directors would be relieved of personal responsibility for a bona fide transaction which turned out in the last resort to be unfortunate.
Lord MELCHETT: I confess that I do not entirely understand the noble Viscount. In the example that he gave, if the directors had sold part of the assets because they felt they were out of date and had given the money direct to the shareholders, that would be a material transaction under Clause 30. I believe that the noble Viscount and I would agree that that, with
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impending nationalisation, would be seen as evasive. I do not think that it would apply if the money were merely to be reinvested in other assets or held in the company rather than being transferred to the shareholders.
Perhaps I can just help the noble Lord, Lord Redesdale, in relation to Clause 30, if this is the point that he was raising. My understanding is that Clause 30 applies from the safeguarding date, which will normally be 17th March, 1975. I do not know whether that answers the noble Lord's point.
Lord REDESDALE: Yes, it answers my point.
Lord TREFGARNE: May I give an example to the noble Lord? What would happen if the directors of a company named in the Bill decided to invest in new plant and, in order to do so, disposed of assets to realise the money, then paid for the new plant forthwith but, unfortunately, the company supplying it went into liquidation and the money was lost? Would the directors then be liable?
Lord MELCHETT: It would help me to answer these very complicated questions off the cuff if the noble Lord could tell me which part of Clause 30(1)(a) to (g), which defines material transactions, he is applying his mind to. Then I would find it easier to say whether I agree with him as to whether or not the point comes under the clause.
Lord TREFGARNE: It was a perfectly straightforward question.
Lord MELCHETT: I am not suggesting that it was not, but I am having difficulty following it and I wonder whether the noble Lord could help.
Lord TREFGARNE: So that the noble Lord can consider the answer carefully I will bide my time and await the answer under clause stand part.
Viscount SIMON: Perhaps I can help the noble Lord, Lord Trefgarne, because I think he may have fallen into the same error as I did. This is a complicated Bill and I hope that we may be excused for sometimes getting it wrong. Looking carefully at the earlier parts of Clause 30, it appears that the only transactions that render directors liable in this sense are transactions which involve the payment to the holders of securities in a company

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of the proceeds of such a transaction. In that case I think that the noble Lord, Lord Trefgarne, will agree that there is no point there.
Lord MELCHETT: That is exactly why I was asking the noble Lord, Lord Trefgarne, to which part of Clause 30(1) he was particularly addressing his mind, because it seemed to me that the example he gave did not fall under it. I did not want to answer the point off the cuff unless I had a clear idea of which part of the clause the noble Lord was referring to, and I regret to say that I still do not know.
Lord STRATHCONA and MOUNT ROYAL: Here again, nobody is arguing about the fundamental concept lying behind Clause 30. One knows from long experience that there are very ingenious people who spend their lives trying to find ways round legislation, particularly tax legislation. On the other hand, because levels of tax have now become very high, many rather complicated schemes are devised by lawyers and accountants, and I suggest to the noble Lord that not all these complicated schemes are necessarily designed as means of getting round the intentions of the nationalisation legislation.
What slightly bothers me about this is that here is a list of transactions which an accountant with a slightly more devious mind than I have might regard as a perfectly sensible and normal way in which to do business. I am rather worried about the way this clause is set up, and here we are back to the very old principle of English law, which regrettably has been heavily eroded in recent years, of making the onus of proof of an allegation of some improper action lie with the Government. As this matter lies at present we are saying to a director who does something which is defined in the Bill as being an unusual transaction, "You did something unusual. Please explain to me why you thought it was a legal thing to do within the definitions of this Act from the safeguarding date".
In simple language, it seems to me that we are getting into the position whereby the person concerned is innocent until he can prove himself guilty. We all know the kind of thing that crops up. Any of us who have ever had to pay income tax—and that means practically everybody in
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the country these days—knows that when the tax people want to catch you, instead of it being up to them to prove that you owe them some tax, all they do is to raise a totally unreasonable assessment and say, "If you don't agree with us you prove that you should pay less tax". We all know that they do this. In other words, they are saying, "You are liable to this tax unless you can prove that you are not liable".
Surely it is true that the situation in this clause is that if one has performed any of these so-called unusual acts, they say, "You show that when you performed this act it was done without the purpose that we ascribed to it because we think you are trying to evade the Act". I think that that is rather objectionable in principle. However, I accept that the intention is not an objectionable one. The noble Lord has been at great pains to explain, and has patiently explained, what is intended in this part of the Bill, and I do not think that it would be appropriate for us to elaborate the point any more at this time of night. Therefore at this juncture I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 30, as amended, agreed to.
Clause 31 [Onerous transactions: disclaimer and recovery of losses]:
9.14 p.m.
Lord CAMPBELL of CROY Lord CAMPBELL of CROY moved Amendment No. 150:
Page 44, line 23, at end insert ("would be a material transaction but for an approval given under subsection (2) of that section; or").
The noble Lord said: I beg to move Amendment No. 150 standing in the name of my noble friend Lord Carr of Hadley, other noble friends and myself. Now we come to the clause dealing with what is termed in the Bill, "onerous transactions". I should like to ask the Government whether they can explain the purpose behind this part of the clause and tell us whether Amendment No. 150 would not make it clearer. Under Clause 31, subsection (2)(b), a transaction is not an onerous transaction if it is a material transaction within the meaning of Clause 30, but if one looks at Clause 30(2) we see that such a transaction ceases to be a material transaction when it is approved by the Secretary of State. On the face of it, therefore, a transaction could become onerous as a result of its

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approval by the Secretary of State. I cannot believe that this is really the Government's intention and it may be that the combination I have described of these two clauses has not been seen before. Alternatively, there may be a perfectly good explanation for this, but this Amendment seeks to make clear that an approval for the purposes of Clause 30 would not have that effect. I hope that the Government, in seeing this Amendment, will have realised the point that I was going to make and I hope they will now either accept the Amendment or be able to give an explanation.
Lord WINTERBOTTOM: The noble Lord has done the Committee a service by pointing out what is an imperfection in the Bill. Paragraph (b) of Clause 31(2) provides that a transaction cannot be an onerous transaction if it is a material transaction under Clause 30; but under subsection (2) of Clause 30, as the noble Lord has pointed out, a transaction is not a material transaction if it has been approved by the Secretary of State. The Amendment proposed by the noble Lord and his friends fills a gap in the present provisions, and we are pleased to accept it.
Lord CAMPBELL of CROY: I am glad to think that the point has been observed by us. The noble Lord, Lord Winterbottom, did say earlier on how exceptionally well drafted this Bill was, which provoked some comment from this side of the Committee. But I am glad that not only has this Amendment met a point that needs to be met, but also the drafting has been acceptable, because had the Government wanted to redraft it I would of course have withdrawn. I am grateful to the noble Lord for his courtesy in accepting this Amendment.
9.17 p.m.
Lord CAMPBELL of CROY Lord CAMPBELL of CROY moved Amendment No. 151:
Page 44, leave out paragraph (d).
The noble Lord said: This Amendment is a probing Amendment, with the intention of trying to find out from the Government what is the purpose of paragraph (d) and, if possible, to have some examples, and I beg to move Amendment No. 151, which is to leave out paragraph (d). It is not intended by this Amendment to render onerous the transactions to which the paragraph applies.
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As I said, it is purely to try to find out what it means. Can the Government give some examples of transactions made in connection with the determination of matters falling under Part II of the Bill which, but for the existence of this paragraph (d), the relevant Corporation might consider to be onerous transactions? If one turns to paragraph (d), line 25, page 44, one sees that for the purposes of this clause
"a transaction is not an onerous transaction … if it is made or entered into in connection with the determination of any question, dispute or matter falling to be determined by or under any provision of this Part of the Act"—
that is to say, Part II. As I indicated, it is not clear to us what is intended, and it would be helpful if the noble Lord the Minister could give us some examples.
Lord WINTERBOTTOM: Before I give an explanation which I hope will satisfy the noble Lord, he twitted me about saying the drafting was good, but he would agree that "good" can be translated to "excellent" and that is the help that he has given us, in achieving excellence rather than mere goodness.
Paragraph (d) is intended to afford protection to a company under action under Clause 31 which it has a right to undertake under other provisions of the Bill. The noble Lord asked for an example. For example, under Clause 26 a company has a right to dispute a notice of acquisition served by the Secretary of State. A company entering into such a dispute could, and indeed would, incur legal costs which could, but for the provisions of Clause 31(2)(d), the subsection we are talking about, be deemed an onerous transaction. It would clearly be wrong for a company to be inhibited from exercising its legal rights because of the threat of penalty under another clause of the Bill. That is one example and I expect others could be thought up. For that reason I hope the noble Lord will not press Amendment No. 151.
Lord CAMPBELL of CROY: I am grateful to the noble Lord for giving us that example. I had hoped for others; but I will not pursue the matter now. He has given one example of what the Government have in mind. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 31, as amended, shall stand part of the Bill?
Lord TREFGARNE: I wonder whether this is the appropriate time to put to the noble Lord, Lord Winterbottom, what I put to the noble Lord, Lord Melchett, a few minutes ago on an earlier Amendment which related to an earlier clause. I agree that my question could be more appropriately asked here. To recapitulate to the noble Lord, what would be the position of directors who decided to purchase new plant for their company, realised certain assets of the company in order to pay for the plant, paid (shall we say?) a substantial deposit on the purchase price, and after payment of the deposit the company who were to supply the plant went into liquidation or out of business, were unable to supply and the deposit was forfeit? Would the directors themselves be liable for that deposit?
Lord WINTERBOTTOM: I think the noble Lord is "bowling a fast one" in asking me a question that he has already asked earlier of my noble friend. As I understand the position, it is a normal commercial risk which would not be caught by the clause in question.
Clause 31, as amended, agreed to.
Clauses 32 to 34 agreed to.
Clause 35 [Compensation for vesting of securities]:
9.23 p.m.
Lord TREFGARNE Lord TREFGARNE moved Amendment No. 153:
Page 48, line 14, at end insert—
("( ) The compensation stock to be issued under the preceding subsection shall bear interest at a rate of not less than 15 per cent. per annum, and shall be redeemed for cash not later than 31st December, 1982.").
The noble Lord said: This Amendment is primarily a probing Amendment but it has the merit that if the probing is unsuccessful I could then, if I felt so inclined, press it, because I think the principles raised by the Amendment are quite important. Subsection (1) of Clause 35 provides for the issue of compensation stock to those whose assets or shares are to be acquired under this Bill. It has been my concern, and it is the concern of this Amendment, to determine the terms on which this stock would be issued. A week or so ago I put down a Question in this House which I must confess was principally aimed at another
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point. During the supplementary questioning on that occasion, I asked what would be the rate of return on the stock to be issued and whether it would be dated stock. The noble Lord, Lord Kirkhill, was unable to give me any answers on those two points.
I hope that by now the Government will be able to be more helpful, but in anticipating their answer upon the question of the rate of interest to be paid on the stock I would ask the noble Lord, Lord Winterbottom, whether he is satisfied that the rate to be paid, whatever it may be, will be no less than the rate of return that investors in the companies to be acquired have enjoyed hitherto. I know that there is no single answer to that because different companies have offered different returns on their shares. In the case of the aerospace companies, at least, the rate of return that has been earned in recent years is substantially more than the sort of rate that could be expected on Government stock of the type at present available.
The other point relates to the date of redemption. I was very disturbed that when the noble Lord, Lord Kirkhill, answered my Starred Question he was unable to confirm that the stock would be dated stock. There is nothing in the Bill as at present drafted to prevent the Government from issuing undated stock. Of course there is undated stock available on the market now, and we all know the discount at which that stock changes hands, if it ever does. Therefore, I hope the noble Lord will be able to give me some assurance that the rate of return on the stock to be issued will be no less than the rate presently enjoyed by the shareholders in these companies and that the stock will be dated. I beg to move.
Lord WINTERBOTTOM: I suspect that the noble Lord, Lord Trefgarne, is, to use a military metaphor, "tapping in", and I am afraid that having tapped in he will not find very much that will satisfy him in the undergrowth.
Lord TREFGARNE: Will the noble Lord tell me what "tapping in" means?
Lord WINTERBOTTOM: Those members of armoured car regiments will know precisely what it means. It means pushing your finger in to see if anything is there—

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and may I say that one is normally very glad when one finds that there is nothing. The noble Lord is making a valid point and is trying to find the answer to a question which is of importance. I can certainly, I hope, satisfy him on one point. The Amendment would have the effect of ensuring that, whatever the market conditions at the time of issue, the stock which will be used will have a redemption date of 1982 and will bear a minimum interest rate of 15 per cent. That is tying down the Government firmly on both interest rates and redemption date. It is not possible to say what the market conditions nearer the time of issue will be, or, indeed, to specify the coupon and redemption date of the stock, as this Amendment seeks to do. It would not only prevent the Treasury from choosing the stock most appropriate to market conditions then pertaining, but it could also have unfortunate repercussions on the gilt-edged market as a whole.
May I illustrate this point? If, because of the conditions specified in the noble Lord's Amendment (if the Amendment were carried) the Treasury were forced to issue a new stock specifically defined as in this Amendment, its marketability would be likely to be affected. If it were so affected, this could only be to the detriment of those people who have had this special stock issued to them.
Under Clause 35(5) the Treasury, when choosing what type of stock to use, will take into account the market value of other Government securities at or about the date. I can assure noble Lords that the capital value in the market of the stock issued will be such that it is exactly equal in value to the compensation due on the day of issue. The rate of interest payable will be that appropriate to the particular stock issued. I am arguing now that in the view of the Government it does not make any difference whether the stock is long or short dated. The requirement is that the value should be the same as the compensation due, and this ensures that, no shareholder will be any worse off by holding Government stock instead of his original securities. I hope that satisfies the noble Lord on the first point he made. As to the other point, the stock will be dated but the Government's view, as I said, is that it is not important whether it be long- or short-dated. I hope that satisfies the noble Lord.
Lord SELSDON: It is difficult for me to intervene on this Amendment because I agree with the principles expressed by the noble Lord, Lord Winterbottom, and disagree with the Amendment of my noble friend. But since he was putting a finger into something I am going to try to pull it out.
Noble Lords will know that I have tried in this Committee stage to intervene only on two matters, cost and compensation—which I will intervene on in a moment. This concerns cost, and obviously the Government cannot declare what coupon their stock will hold or how long-dated it will be. But the stock that they issue in the short-term interests of the nation should be as long-dated as possible. In the long-term interests that might be wrong. Many of us in the financial world are disturbed about this matter. We read that the Government may not be able to go on for ever issuing stock. That is a fact. It depends on the economic circumstances. At the moment, while we may expect long-dated stock we hope for a short-dated Government. We are concerned about the next six months and we are concerned about the moment when the Government will issue stock and how much stock they will issue. We are concerned also about the absorptive capacity of the non-bank private sector. If inflation falls then presumably interest rates will fall and therefore Government will be able to issue stock at a lower level.
At the moment Government could issue stock—and I hate to go on record on this—probably, as I said the other night, at about 16.2 or at about 16.2½, since the Government paid no attention to my recommendations the other evening. It is certainly rising and the problems of the Government raising money are growing. That we do know. I would feel much happier if the noble Lord's right honourable friend the Prime Minister had got the job as head of the IMF and that someone else were in his shoes in the country at the present time, because Mr. Witteveen and his team are not easy people with whom to negotiate, they are professionals. My concern is that the Government have not said how much stock they will issue. If they had said how much stock they would issue and when I could probably estimate what

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coupon it would be on and what length it ought to be.
The noble Lord has made these points and has moved an Amendment which I would not support because it would be dangerous for the nation to support it. The points he has made in raising the whole question of the issue of Government stock are points worth considering. We must consider also that we know the Treasury would issue Government stock only at whatever was the going rate because they could not afford for an issue to be a failure. But the Corporations, because of the question of capital gains tax and other things, will be required to hold the stock for a year. It would be fairer if the Government said to them, "You must hold the stock for a year", because in that year and the year that comes after this nationalisation Bill, God alone knows what will happen. We do not know whether the stock will go to a discount.
There are possibilities if certain things happen and the right things were done; if the level of inflation was reduced and interest rates came down, the stock might go up. If inflation got out of hand because of the 20 per cent. increase in money supply recently, the stock could fall. What would in essence be possibly a capital gain for some people, could ultimately end up as a capital loss. I hope the Government will understand that what they are doing when they are acquiring these industries is they are not giving people money that they can use today. That is the only point I wish to make and I apologise for having taken so long.
Lord WINTERBOTTOM: May I say to the noble Lord what I said to him earlier, that his contributions to this debate are both informed and serious, and naturally will be studied by those whose duty it is to follow your Lordships' discussions. I am certain that what he said will be borne in mind.
Lord TREFGARNE: I am obliged to the noble Lord, Lord Winterbottom, and indeed to my noble friend Lord Selsdon, for their interventions which are, as always, most helpful. I would make just one point. Clearly the Amendment as it stands is not a serious contender for space in the Bill, but I say to the noble Lord that if the gilt-edged market is not
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as good as it might be, come the day for the issue of this compensation stock, then those who are to be compensated will be at some disadvantage if they cannot, in a very short space of time, dispose of their stock without losing money.
I am concerned that in that situation they ought not to be taking a loss in the rate of interest that they would be earning had their shares in the aerospace and shipping companies not been acquired. I ask the Government to consider—and perhaps I can put down an Amendment to this effect—that the amount of stock ought to relate to the interest that was being earned before the companies were taken over and the rate of interest then being paid upon the compensation stock that was to be issued. With that, I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
9.36 p.m.
Lord CAMPBELL of CROY Lord CAMPBELL of CROY moved Amendment No. 154:
Page 48, line 19, leave out ("subsection (4)") and insert ("subsections (4) and (4A)").
The noble Lord said: This is a paving Amendment for the more substantial Amendment, Amendment No. 158. I suggest that it would be convenient if we now discuss Amendments Nos. 154 and 158 together. Clause 35, supplemented by Schedule 5, contains the provisions for paying compensation for the securities of companies which vest in one of the Corporations. When the Bill was first introduced in the last Session of Parliament, it did not contain subsections (4), (6), (7) and (8). These additional subsections are presumably intended to reduce the compensation which would otherwise be payable in the case of companies which receive Government assistance, where that assistance, in the opinion of the Secretary of State, saves them from liquidation or receivership. If the Government are to have an opportunity of reducing compensation in special circumstances such as these, they should also accept that they have a responsibility to increase it in other special circumstances.
Certain companies since the last of the relevant days (that is, 27th February 1974) have considerably improved their positions; but insufficient allowance will be given for those improvements in the terms of the Bill as now drafted. Those improvements

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have arisen to a large extent from special efforts in the export field, which is in the national interest. Furthermore, the profits earned by these companies have been largely derived from orders taken before 27th February 1974—that is to say, before proposals for nationalisation were put forward. This affords a further demonstration that the compensation to be paid to these companies is both inadequate and grossly unfair. The object of these Amendments is to ensure that the holders of securities of companies which have performed particularly well since the last of the relevant days are given adequate compensation. We ask the Government to reconsider the terms in which the Bill is now drafted. It does not take this into account. I beg to move.
Lord MELCHETT: As the noble Lord explained, Amendments Nos. 154 and 158 would allow an increase in compensation where the company had undergone exceptional developments since the reference period. I understand that identical Amendments were discussed for some three hours in Committee in another place. I merely mention the fact in the hope that, with your Lordships' customary speed, we shall not spend that length of time on the Amendments this evening. In the Bill, compensation is fixed on the basis of a past reference period for six months up to the end of February 1974. All the companies named in the Bill were viable concerns at the end of the reference period, and the basic assumption is they will remain in that state up to vesting day.
Clearly, the prospects of individual companies may have changed since the reference period, but this does not in itself affect the basis of compensation. By basing compensation on a past period, the compensation payable is fixed and, generally speaking, shareholders are assured as to the basis on which the compensation they will receive will be assessed. The Government will be valuing shares at a past reference period. There are good reasons for this. In particular, the reference period chosen is the six months before the end of February 1974; in other words, the most recent period before a Government committed to nationalisation was returned to Office. At that stage, the shares of the company were unaffected, either adversely or beneficially, by the prospect of nationalisation.
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The Amendment, though not drafted in so obvious a way, seeks to overthrow the whole basis of the past reference period and to substitute the present-day valuation. Any such valuation must be affected by the possibility of nationalisation. By valuing the securities of companies at a past reference period, the Government accept the risk of any deterioration in a company, short of bankruptcy, in the period up to vesting. As a converse, therefore, I suggest it is reasonable that the Government should benefit from any improvements. But as to whether any of these improvements, if there be any, constitute an exceptional development in the terms of the Amendment, I am very doubtful.
Noble Lords opposite have suggested to me on several occasions during the progress of this Bill, that these businesses are in their nature very long-term. I do not dispute that, but against this background are they not really claiming that something exceptional has happened in the last two years, which could not have been foreseen two years ago, to overthrow the whole basis for compensation? I find that hard to believe, particularly in the light of publicity given to the long-term prospects of companies. The Government believe that the compensation terms in the Bill are fair and that these Amendments, if carried, would result in excessive payment to some shareholders. Therefore, I regret to say that I must continue to take the same attitude as my honourable and right honourable friends did when similar Amendments were discussed in another place.
Lord CAMPBELL of CROY: I hope the fact that there was discussion in another place will not, in itself, rule out the opportunity of further discussion here, because we hoped that those parts of the Bill on which the guillotine allowed discussion in another place would have meant that Ministers were able to take away and consider the points that had been made, and might indeed take advantage of the debate here to come some way to meet those points, if not all the way. We disagree with the way in which the Government are proposing to handle the whole question of compensation. The noble Lord is already aware of that, and when we reach Clause 35 and the associated clauses there will no doubt be considerable further debate on that subject.

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There is at least one company of which I know which has made exceptional advances in both status and performance in the last two years. I have no hesitation in mentioning its name, which is Kincaid, one of the diesel engine manufacturers, and later on the appropriate clause I propose to expand on that. The noble Lord asked for an example and there is one, and no doubt my noble friend will produce others.
We had hoped that since the discussion in the Commons on this question, the Government would have been prepared to come some way to meet the case of companies which, in the last two years, have been transformed by their own efforts, and that some account would have been taken of this in the terms of compensation. But I shall not pursue that point on this clause, and I now beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
9.44 p.m.
Lord CAMPBELL of CROY Lord CAMPBELL of CROY moved Amendment No. 155:
Page 48, line 24, at end insert ("the resulting amount to be increased in the proportion (to the nearest one tenth of one per cent.) in which the value of the amount of compensation due to any person has fallen between 28th February 1974 and the first day of the month preceding that in which the compensation is paid to that person or, to the extent that a payment on account of compensation is made in accordance with the provisions of section 36(6) hereof, in the proportion in which the value of such payment has fallen between 28th February 1974 and the first day of the month preceding that in which such payment is made.").
The noble Lord said: With this Amendment I think it would be convenient to consider Amendment No. 157, which is associated with it. Here we are proposing a system of indexation. Clause 35 provides that compensation due to holders of securities which vest in the Corporations shall be the base value of those securities, valued in accordance with Clauses 37 and 38 as an average of the period of six months beginning 1st September 1973, less deductions.
Although Clause 36(7) gives to the Secretary of State a discretionary power to make payments on account of compensation, and although by paragraph 5 of Schedule 5 interest on compensation stock is treated as accruing as from the date of transfer, owners of securities are
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not compensated for being deprived of the use of the compensation paid for the securities between February 1974 and the receipt of that compensation. The Amendments are intended to compensate owners of securities for being deprived of the use of the compensation due to them by introducing protection against inflation into the compensation payable. This is in terms similar to the provisions of Section 2 of the Pensions (Increase) Act 1971.
The reasons for introducing this protection are as follows. Subject to the possibility that payments on account of compensation may be made on or at any time after the date of transfer, no compensation is payable for any class of securities until a conversion date for the securities of that class has been specified. In the case of the equity share capital that date cannot be earlier than the date by which both the base value of all the securities forming part of the equity share capital of the company has been determined and the amounts of all deductions from the compensation payable to any person in respect of those securities have been determined.
Amounts which are not agreed fall to be determined by the arbitration tribunal and proceedings before that tribunal may well be delayed pending appeals to the Court of Appeal. Although in many cases amounts are likely to be agreed fairly quickly, in some cases years may elapse before these amounts have been determined. Furthermore, some shareholders may be paid at any time between 1976 and 1980, or even later, for securities transferred in 1976 in exchange for compensation based on 1973–74 values. Parent companies cannot sell their investments in the companies to be acquired. They cannot replace them, therefore, until they have received the compensation. However, the real value of replacement assets bought with the value of money at 1976–80 will be significantly less than the real money value of the nationalised securities in 1974 and 1975.
The discretionary power given to the Secretary of State to make payments on account of compensation, and then only on certain terms, is unlikely to mitigate to any great extent the severity of the effect of these provisions. We believe that the inflation protection proposals which are incorporated in these Amendments are fair and reasonable, and I would point

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out that they are not linked either to the retail price index or to any rigid formula. I hope that the noble Lord will tell us that the Government have not closed their mind to a system which would give some protection against inflation 10 compensation which may be paid many years after it was originally determined. I beg to move.
Lord MELCHETT: As I understand it, the noble Lord believes that the holders of securities in the vesting companies are disadvantaged by the combination of the past reference period and the recent regrettably high rate of inflation, but stock market prices do not reflect the prevailing rate of inflation. In the past two years we have suffered a regrettably high rate of inflation, but this has not been in any way reflected in the general level of the stock market. Since the reference period, the market has fallen to a 15-year low, and while for short periods it has been above the reference level it now stands at 20 per cent. below it. By valuing the securities of companies in relation to a past reference period the holders are protected against market fluctuations.
The noble Lord, with this Amendment, would not only ignore this built-in protection but also offer a bonus which is not available to the shareholders of companies not being nationalised. Shareholders in other companies are protected against general and particular market factors, and they are certainly given no protection against the effects of inflation. If other companies do not receive these benefits, I do not believe there are grounds for giving such benefits to certain companies solely because they fall within the scope of the Bill. As I have said—and, no doubt, will say many more times as the evening progresses—the Government believe that the compensation terms in the Bill are fair. I regret to say that I believe that these Amendments would give an uncovenanted benefit to shareholders, and I would, therefore, urge the noble Lord not to press them.
Lord MONSON: I should like to give full support to this Amendment and the Amendments which follow. I do not think any noble Lord would deny that a compensation price which is less than the price at which a willing buyer would be prepared to buy from a willing seller is
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tantamount to expropriation. I do not think any noble Lord would deny that expropriation is equal to theft; it is certainly the view of the man in the street, I would suggest. Unfortunately, there is a precedent for expropriation in this country. I am thinking of the unhappy owners of small terraced houses in many of our major cities, in particular London, who have had the misfortune to live in an area acheduled for slum clearance and redevelopment by the council. Because their bedroom ceilings are perhaps four inches too low, or perhaps there is an inadequate number of air bricks in their kitchen, or possibly because the house lacks a damp course—in this respect being no different from the majority of architecturally distinguished houses in this country, but no matter—they have had their houses declared unfit for human habitation and effectively been evicted from their houses, with only the minimal amount of compensation. This is something for which both major Parties which have been in office since the war share the blame. To its credit, an earlier Labour Government did something to rectify this, but not enough. As I say, there is some precedent for citizens of this country being expropriated, but two wrongs do not make a right.
It is interesting to note that previous compensation terms agreed when other industries have been nationalised since 1945 have not on the whole been too unfair. I can think of the occasional exception, one being the Steel Company of Wales debenture stock, or possibly it was a loan stock, where the trust deed stipulated immediate repayment in certain circumstances, one of the circumstances in question being nationalisation. But in fact the stock was not repaid at par; it was paid at between 55 and 60, I believe. But, on the whole, the terms have not been too wildly unfair. However, the terms proposed in this Bill as it stands are, in many cases, if not most cases, demonstrably unfair, in some cases amounting almost to confiscation.
On Monday night or in the small hours of Tuesday morning the noble Lord, Lord Goodman, from these Benches, gave his reasons why he thought so, drawing attention in particular to the premium that is normally paid for control of a company. I am not going to concentrate particularly on that aspect,

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but merely to refer back to the median date on which the compensation terms are based, the six months between 1st September 1973 and 28th February 1974. The median date is, therefore, approximately 30th November, 1973. What distinguishes this particular period of two years and almost eleven months that has elapsed since these terms were fixed is an inflation rate of about 65 per cent. On Second Reading I said 59 per cent., but I underestimated; it is about 65 or 66 per cent. As the noble Lord on the Opposition Front Bench has said, these companies have to replace their assets at current prices, not the prices prevailing in November 1973. These Amendments would help considerably in this respect.
There is, of course, a certain element of capriciousness, naturally, if all the companies or subsidiaries which are to be nationalised have their compensation prices raised by an equivalent amount, but this excess payment, if you like, which one or two companies may receive if this Amendment is carried, does not amount to any assault on human rights. The taxpayer is affected, but that is rather a different matter. The taxpayer has to "shell out" nowadays for all sorts of wasteful things. One has only to think of the Institute of Contemporary Arts, which receives a grant from the Government and which has recently mounted an exhibition showing soiled nappies, piles of dust, bloodstained bandages, and so on. To pay a few shareholders, many of them beneficiaries of pension funds, a little above the odds is really nothing to worry about in this context.
I wonder whether the noble Lord, Lord Melchett, when he comes to reply, would deny that expropriation contravenes both subsection (2) of Article 17 of the United Nations Universal Declaration of Human Rights, and also Protocol 1 of the European Convention of Human Rights, which this country has ratified? That being the case, and leaving aside for a moment the Government's legal obligations, would he not agree that actions of this nature diminish Britain's standing in the eyes of the world at large?
9.56 p.m.
The Earl of LAUDERDALE: I should like to apologise to noble Lords for having missed some of the recent steps in this
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debate. I have had the greatest difficulty in keeping away, but I tried to keep away lest I should incur charges, which have been whispered here and there, that somebody or other was talking for too long or too much. Whether that was myself or whether it was my noble friend Lady Ward, I am not quite sure, but at any rate there were suggestions and I have tried to keep out for as long as possible. But now that such splendid progress is being made with the Bill, and we have plenty of time to look at it more closely, and a lot of progress has been made since I was last on my feet, I feel that one should address oneself to some remarks that have been made in another place.
The Prime Minister has accused your Lordships' House of taking upon themselves the self-appointed task—that was his phrase—of causing trouble with this and other Bills. If the Prime Minister is going to make speeches of that sort about this Chamber and still hope that his business will pass through smoothly and in a hurry, he is greatly mistaken. It would be to his advantage, and that of his Government's business, that aspersions made elsewhere about this Chamber should not be repeated. They are not taken kindly, because in fact there is a great deal in this Bill, and in other legislation that we have been looking at, which has not been properly debated in the other place.
It is not a self-appointed task to look at these things: it is a task laid upon us by history and by the Constitution. The minute the Executive foreswear the use of the guillotine, then the case for close examination throughout the night and throughout the day, and perhaps through another all-night sitting, falls. But in the meantime, when serious matters relating to human rights and individuals' rights are exposed to guillotine procedure, then an entirely different situation arises.
I for one will make no apology whatsoever for thumping this point home. I have much sympathy with the noble Lord, Lord Melchett, who looks remarkably bright after his marathon on Monday, and we should congratulate him for batting so well with such good humour for so long. But that does not alter the situation, which is that we have a job to do, which is to examine and scrutinise. That arises on every single Amendment that has been put down, and the things that were said

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by the Prime Minister on this matter do not help the Government's case to get their business through swiftly.
I think I am right in saying that this clause got but a few hours' consideration in the other place. I remind the Committee of what was said by the noble Lord, Lord Monson, speaking from the Cross-Benches. This is not just a question of the Tory Lords, using their inbuilt majority, to block the Bill; there is a consensus from all serious-thinking people—those who have left the Opposition Benches for the Cross-Benches, those who are chosen Cross-Benchers, Liberals and progressive Tories on these Benches—who are taking exception to what is being done.
The word "expropriation" has been used. It is a word which, if there were ever an attempt to make an issue between the Peers and the people, we should trumpet throughout the country. Do not let anybody imagine that we are frightened by the sort of blackmail talk that is heard in some quarters about curtailing their Lordships' powers. It ever an endeavour were made to raise an issue of the Peers versus the people, we could point to this clause and many others where an Executive, supported by a minority of the electors, have sought to impose measures that amount to expropriation. And it is not the expropriation of some wealthy capitalists. It is the expropriation of the small savings that have gone into small companies that have built themselves up. Baileys is an obvious case, and there are others. These are matters in which the public, the people, are interested and therefore I make no apology for spending a few minutes of the Committee's and the Government's time drawing attention to this issue. It is difficult to make a case better than that made by the noble Lord, Lord Goodman, on Monday night, and if it would serve any purpose I would produce the Hansard of those proceedings and simply read out his speech to noble Lords in case the points he made did not sink in. I say that because I had the impression that they were not, so to speak, taken on board by the Front Bench.
Lord SHACKLETON: The noble Earl will appreciate that he is in breach of Standing Order No. 25 by his speech, as was the noble Lord, Lord Goodman, the other night.
The Earl of LAUDERDALE: I am much obliged to the noble Lord, whose former leadership of your Lordships' House we enjoyed so much and whose knowledge of the rule book is very much better than mine. My recollection is that when Lord Goodman spoke he was out of order because we were not then dealing with Clause 35, but we are now on that clause.
Lord SHACKLETON: If the noble Earl would turn his attention to the Amendment instead of debating relations between the two Houses he would come to order again.
The Earl of LAUDERDALE: Again, I am obliged to the noble Lord because I had finished my sort of philosophical observations and was about to turn to the Amendment, the case for which I need not go into in detail because it has already been made. In the interests of brevity—because noble Lords know how keen I am to help the Committee in this matter—I will only add my still small voice in support of the Amendment. I am doing that as briefly as I can, but the trouble with being interrupted is that one loses one's train of thought and is tempted to go back to the beginning.
The point I want to make is that, broadly speaking, this is expropriation and everybody knows it to be such. It is only the intellectuals on the Front Bench who cannot see it. If there was ever an issue before the public, they would see it and we should make sure of that. I hope that Lord Melchett, who has shown commendable good temper in a trying time, will realise that we are not speaking for a lot of bulky capitalists but for people whose savings and efforts have gone into their businesses. "Expropriation" is not a happy word, but perhaps I can sum up the Opposition's philosophy by suggesting that behind the clause and indeed the Bill there is the principle that all that is not compulsory is forbidden.
Lord MELCHETT: Possibly it would help to bring us back to Amendment No. 105 if I answered—
The Earl of ONSLOW: Is the noble Lord really intending to filibuster by starting again from Amendment No. 105?
10.5 p.m.
Lord MELCHETT: No, I meant Amendment No. 155, but I believe that the noble Earl will agree that, while we have made very good progress this afternoon, it has been difficult on occasions during the last few minutes to remember which Amendment we were talking about because there have been a couple of speeches where the Amendment has not been mentioned at all. The noble Earl, Lord Lauderdale, pointed out how difficult it was to keep the thread of one's thoughts and how if one was interrupted one might well take up more of your Lordships' time than one would wish. I should therefore like to make one very brief point and then to sit down.
The noble Lord, Lord Campbell of Croy, in moving the Amendment, made one point that I did not reply to in my original answer. This related to the question of the delay in giving stock to shareholders after vesting but during the time when negotiations and arbitration were taking place. I did not make it clear that shareholders will be entitled to rights of compensation as from vesting day. These rights can be traded in the same way as other negotiable instruments. Shareholders will also get substantial payments on account, as I told the noble Lord, Lord Orr-Ewing, when we were discussing this matter earlier. Interest will be back-dated to vesting day. I believe that that covers one of the points which the noble Lord put to me on moving the Amendment.
Lord MONSON: The noble Lord, Lord Melchett, is not denying that expropriation contravenes both the Universal Declaration of Human Rights and the European Convention on Human Rights. Is that because he is unable to do so?
Lord MELCHETT: It is because I am talking about Amendment No. 155 and the compensation terms in the Bill and not about expropriation.
Lord CAMPBELL of CROY: I think that there are some Members of the Committee who feel that there is not a great deal of difference between the two. In his last reply to me, the noble Lord gave some information which I am sure will be of interest to those who are following the Government's proposed scheme. I am grateful for that but, in his first reply, the noble Lord gave the impression that he thought that I was suggesting that share values have a direct relationship with the rate of inflation. Of course I was not suggesting that at all. I was trying to provide a system that would enable people i who, for one reason or another, found that their compensation was long delayed in payment to have some protection against ordinary inflation, that inflation which we unfortunately know only too well and have suffered from particularly during the last three years. It was to that that I was directing my opening remarks, and I gave some instances of where payments would be delayed.
The noble Lord has replied on one of these points and I am grateful to him for that. However, there are other occasions which I mention where it is clear that a payment will be due and may not be made for some time, perhaps even for years later. It was to guard against the erosion of the value of that compensation during that period that we were suggesting in the Amendment a system of indexation. The discussion has enabled various suggestions to be made on this and has allowed the noble Lord, Lord Melchett, to give us more information. At this stage, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
10.8 p.m.
Lord SELSDON Lord SELSDON moved Amendment No. 156:
Page 48, line 24, at end insert ("or, if on application by the stockholders' representative or the Secretary of State, the arbitration tribunal consider that, having regard to all the circumstances, that amount does not represent fair compensation, such amount as the tribunal shall determine to be fair compensation in respect of those securities.").
The noble Lord said: I am in a very embarrassing position. I am going to try in a few moments to persuade the Government that they are on the wrong track on the subject of compensation, but I am also in a position where I believe that I have to declare an interest. I am a director of a merchant bank which is owned by a clearing bank, and within our group many of the companies that arc to be nationalised are clients in one form or another. I asked my colleagues whether I should declare an interest and they said, "It is nothing to do with you. You are not directly connected with any of these companies and you do not have to declare an interest. "However, in the course of the investigations that I have made privately, I have naturally spoken with numerous companies and organisations and my problem in declaring an interest here is that what I am going to say now could be against the interests of some of the clients of my group.
I happen to know, for a number of reasons, that within those companies that are going to be nationalised there are certain companies who believe that the compensation methods proposed by the Government are over-fair and over-generous and that they will certainly receive more money than they could hope to receive if they wished to sell their businesses. There are others who feel that under the terms proposed by the Government they will receive less money. And there are those, such as myself in the middle, as a banker, who believe that there is no possible way that one can describe the methods of compensation proposed by the Government as being fair to all parties. Surely it is a duty of your Lordships' House, if the Government declare that something is fair, to explore whether or not it is fair. The former Prime Minister, I believe, in a letter to the industry, pointed out that the Government thought the method was fair but that it was now a matter for Parliament,
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and surely at the moment your Lordships' House still classifies as Parliament.
I will try in a very simple way to explain also my other interest, because I am not sure whether I speak as a part-time politician, who occasionally puts his toe into the dirty water of politics and withdraws it, or as somebody who is very intimately and closely affected with matters of this kind in my commercial life. I have been employed by a quoted company that has been acquired by another quoted company. I have been employed by a subsidiary company of a non-quoted company which has been acquired by a foreign non-quoted company. I have been employed by a group which was threatened with nationalisation by Mr. Wedgwood Benn—on a list—and I am now employed by another group which is also threatened by nationalisation.
Both as an employee and in terms of an adviser, I have been involved in the buying and selling of businesses by Government sectors, private sectors and others. Therefore I must start by exploring the question of whether this is compensation or confiscation. If it is confiscation, then the question of fairness does not arise. If it is compensation, then the basic principles of whether you are providing the person you are buying something from with something reasonable, which he would put as a reasonable value for the transaction must be debated.
People have advanced the argument of whether this is a price or a method that should be fixed between a willing buyer and a willing seller. I do not accept that in this argument because at the moment the Government are a willing buyer, half of the industry, or part of it, is a willing seller but will not admit that it is a willing seller, and a large part of the industry is not a willing seller. What one must attack on this basis is the whole principle of the valuation of a business—not whether it is a valuation of a Stock Exchange quoted business or a utilisation of the Stock Exchange system.
There are four methods of valuation. The first is when a company goes into liquidation, when a liquidator is appointed and seeks to do the best he can for the shareholders. The good will element of the

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company has disappeared and it is purely a basic asset value on disposable assets. The second is an acquisition through a stock market, whereby you have a willing buyer but an unwilling seller, where the price is forced up to unprecedented heights sometimes in order to obtain the business. The third is a stock Exchange valuation which does not place a full value on a business and is merely, as we have had explained again and again in this place and in Committee, a valuation for one share, a minority interest, and does not represent the total value of a business.
Noble Lords should pause on this and bear in mind that those people who claim that the capitalisation of a business, the market capitalisation—its true value—must bear in mind one instance of a company I used to work with, which is an example of many, and the fluctuations in share prices. On Monday morning The Times produces information on market capitalisation. An analysis of those market capitalisations over the past few years will show very substantial fluctuations.
Further, one could point out that it was possible not so long ago to buy practically all of British industry for virtually a pittance. The company I used to work with, one of the major companies in the United Kingdom, at the time of the reference period had shares at a medium price. The shares went up and down but the value of the company in a period of eighteen months moved from £191 million to £19 million; yet even at £191 million the company's owners, the shareholders, might have been reluctant to sell. I will come back later, but I will pause in a moment and ask the noble Lord, Lord Melchett, to answer me.
The fourth method of valuation which one can look at as well is the principle of asset value plus something else. That asset value is not a difficult valuation to make; it is something that any accountant can make and has made again and again. It is the goodwill element that adds the difference to the price. Goodwill is something that has built up over time, and we are one of those peculiar countries that can in fact capitalise goodwill and it is taken into a balance sheet; whereas it
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is sometimes more difficult to capitalise debts, as the Government will know. What we must consider is that in this particular case it is not a willing buyer or a willing seller. The Government is seeking to acquire businesses, as it says in the national interest. It has put forward a method of valuation for compensation, I would assume in the best interests of being fair; but I would point out that unfortunately the Government has not consulted those people who know about the valuation of businesses.
Further, because of the circumstances of this Bill, many professional organisations, including the Stock Exchange and others, and the companies themselves are hesitant to advance their views to Government because they are frightened; they are frightened that this could adversely affect not only the prices that the Government would pay for their businesses but also such circumstances as credits, loans and other things that are also involved and, further, that they might seem to be hobnobbing with the capitalists and the Conservative Party and therefore being divisive. I suggest that there are Members of the Committee, perhaps not on these Benches, who are themselves concerned that by seeking to oppose the principles of compensation there are people who are saying, "You are providing more money for the capitalists". That is totally untrue.
The object of my Amendment—and the noble Lord, Lord Melchett, might be about to interrupt me, because it was exactly at this point in time the other night that he did so—is to say to the Government that its method of valuation, the basis upon which it bases its compensation, is wrong; it is not fair. As a member of the Council of Europe, if we come to the question of human rights and other questions the presentation of something such as this would prove that it is not fair. If the Government will drop the word "fair", then the position can change.
My Amendment is this: that if a government or a body produce a method that is unfair but seek morally and rightly to find something that is fair for everybody but cannot do so, and have included in a Bill the question of arbitration—and the relationship between" arbitration"

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and "fair" should be very close, although sometimes it is widened unnecessarily—then I seek to give increased powers to the arbitration committee, that the Arbitration Committee may decide what is fair, based upon the general intention of the Government to be fair. I see nothing wrong in putting an Amendment like this at this stage to Clause 35, because it is surely a question of judgment as to what is fair and what is not fair, rather than a question of legislation. If the noble Lord will answer me on this point, and answer satisfactorily, I shall sit down and shut up; but if not I must then, in the interests of democracy and fairness of your Lordships' House, and since the Prime Minister declared that this was a matter for Parliament, seek to explore every avenue to try to prove whether this method of compensation is fair or unfair.
I think it is unfortunate that on the Government Benches opposite we do not have at the present time sufficient people who have been intimately involved in the evaluating or the valuing of businesses or in transactions of this sort. I know the Government must operate from their briefs, and I am not sure whether I should address my remarks to the Government or to their advisers, but there have been fair methods of valuations of non-quoted companies by the Treasury in connection with estate duty and capital transfer tax which were perfectly acceptable. I believe that in the interests of political expediency the most important aspect of the Bill, which is fairness, has not been properly explored in another place. If the noble Lord will give way and accept the Amendment that I propose, I will withdraw all the other Amendments in my name, because the others are related to pursuing certain aspects of compensation and exploring certain alternatives. If he will allow me, I will sit down and await with eager interest his definition of what he feels is fair and unfair based on his own personal experience and the experience of the Government.
Lord WARDINGTON: I am a stockbroker and have been since the war. I have looked at the shares over the years with considerable interest. I should like first to make one point on Lord Selsdon's speech. He referred to companies and said that half were willing to sell and half were not. He could have followed that
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up by saying "at a price", but he did not do so. At a price, they might be willing to sell but not at what is proposed.
Lord MELCHETT: It might be important to get this right. I understood something different from the noble Lord and I was listening very carefully. I understood him to say—and he is here and can put us right—that he felt that some companies were happy to sell at the price they were going to get because they felt the terms were on the generous side. I may have misunderstood him, but I thought I heard him say that.
Lord SELSDON: I felt that some companies were so concerned at the non-viability of the companies in their group that the Government were going to acquire that they were willing to get rid of them. Any price which removed the liability would be a good price; but not a fair price. A fair price means fair to both sides. I would suggest that some of the companies the Government will be acquiring under the Bill will be acquired at an unfair price to the nation. The point that I made earlier in the Committee stage is that having decided to go ahead with this Bill it is the Government's duty to be not only fair but as fair as possible to themselves and to the taxpayers.
Lord WARDINGTON: A precedent is being set in these compensation terms whereby successful companies can be acquired at under 50 per cent. of the asset value. This has disturbing implications for the future. Leaving aside my belief or otherwise on the suitability of these two industries for nationalisation, let me enumerate one or two things that I consider to be unfair about the compensation terms. The first is that the conditions that existed in the six-months period which is taken for compensation were remarkable and exceptional. To enumerate five factors, there were: the Arab-Israeli war, which changed our lives completely; the petrol/oil crisis which has been in existence since but which nevertheless appeared first in this country at that time; the miners' strike, which one hopes never to see again; the three-day week, which in some industries had a beneficial effect; and then there was the run up to the Election itself with the trade union and Labour Party document (I cannot remem-

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ber its name) which appeared in August 1973 but was not available generally until 1974.
Is it fair to base compensation on a period during which these very exceptional conditions existed? Present proposals are that compensation has to be based on a price as quoted on the Stock Exchange and perhaps subsequently by arbitration, but is it fair that the Government should have unilaterally taken this decision and no authoritative financial body seems to have been consulted? I may be wrong, but I have not heard of anyone. As I said, the Stock Exchange does not purport to represent in any way a fraction of the whole, nor do the prices of the shares represent anything other than the whole based on a balance of earnings and assets. This is illustrated most strongly in many situations, most recently teachers.
The market in the ordinary way is perhaps 10,000 shares at 190p, but when you are buying assets you have to pay up for them and this puts an entirely different price on those shares in the mind of the public and in the mind of any investment manager. Is it fair that when you are acquiring assets you should relate the amount you pay to the price quoted on the Stock Exchange? If you relate it to the assets, I suggest that the cost that the Government are going to have to bear—which they cannot or will not disclose to us—is going to be very much greaetr, and the actual accounting, arbitration and other expenses will be very large indeed. This may be a reason why the Government are seeking to base the compensation on prices as disclosed in the Stock Exchange.
Referring back to the proposal that compensation is to be based on an average price over a six months' period, why has this been decided upon when previously in the steel industry it was based on an average price covering 61 months? Why should the Government consider it fair to base it on six months? Earlier this evening we debated clauses 23 and 26 on dividend limitation. Is it fair that dividend limitation imposed by this Bill has effectively stopped any increase in the valuation of those companies' shares in the Stock Exchange? Prices are related to income. Alternatively, if you accept the dividend limitation, is it fair that retained profits ploughed back into further
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expansion of those companies are not allowed for in the compensation that will eventually be paid by the Government?
I would quote again that retained profits after dividends which have been limited have been excluded from the period since nationalisation proposals were made and Swan Hunter in 1975 completed a £24 million programme. Both Yarrow and Vosper have made many major additions to their assets. Many other companies have retained from their profits, and ploughed back, substantial sums to expand their activities. Indeed, the very fact that substantial amounts have been invested has, in some circumstances, delayed the profitability of that company, with harmful results to its share price. Is that fair?
It is realised that in many cases the latest figures that shareholders had in their hands at the time of these proposals, and that the securities market had available to it, were the accounts to the 31st December, 1972, a whole year and a quarter before the final date of this period for compensation. Some of them had half-yearly statements. Half-yearly statements are not anything like as full and, although people react to them, it is not the same as a full set of accounts and directors' report. Do you think that is fair? Referring to the rate of exchange: the sterling/dollar rate has fallen from 2·3475 on the 1st September to 1·65. Yet, inflation-proof Civil Service pensions have been introduced and implemented since this Bill was introduced. Is that fair? Can it possibly be argued that it is fair to consider the price of potatoes in 1973 when one is buying them today?
It should be remembered in the case of Swan Hunter, assuming the whole group was nationalised, that compensation would amount to £16·7 million as envisaged in the Bill. That would represent a discount of 50 per cent. on the assets at the 31st December 1973, which was shown at £36 million, and that is unfair enough. But how can the Government call this fair when in November 1974 Court Shipbuilders, a subsidiary of Court Line, received compensation of £16 million and that company was one-third the size of Swan Hunter? In other words, fair takeover prices in future situations can no longer be expected if the current terms are allowed to remain. I think

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I am correct in saying—and I cannot see the noble Viscount, Lord Brookeborough, at the moment—that although we know the sum handed to Harland and Wolff, the terms and the base on which that sum was calculated has never been disclosed.
Let us consider for a moment the situation of BAC, the British Aircraft Corporation. This company is owned 50 per cent. by GEC and 50 per cent. by Vickers. Under the terms proposed in the Bill and basing the compensation as proposed in the Bill on the price of its parent companies over the six months' period, one gets a figure of compensation to Vickers of approximately £19 million and a figure of £33 million to GEC for an equal 50 per cent.
Can your Lordships imagine anything more ludicrous, and is it fair? The use of Stock Exchange prices as a method for calculating compensation in this instance is made even sillier when one considers that only two companies are directly quoted on the Stock Exchange. One of these, Robb Caledon Shipbuilders (which I am sure the directors will forgive me for mentioning) is one of the smallest shipbuilding companies, the shares of which have always been an extremely small and difficult market. It is like taking the value of a high street chemist and then trying to arrive at compensation terms for Boots. It is not fair.
In steel nationalisation, the major steel companies (eight of them) were all quoted, except for two: English Steel and John Lycaght Yard. Both were major subsidiaries of major companies. There were two or three smaller ones. There was a very active market in the leading shares in steel. They did give something to go on from the point of using price and by arbitration, arriving at a figure of compensation for the remaining companies. Is it fair in an industry like this that the profitability of one company varies in time with that of another and one of its competitors? To base it on price in the Stock Exchange is silly; it would be fairer if the period was extended. But over a short period of time it is not fair.
What I say next applies very much to this Bill. Is it fair that in respect of a subsidiary the compensation received cannot be passed on to its parent shareholders
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without that parent company in some cases having to bear a very considerable tax penalty? In many cases—and this is important—reinvestment in the normal, private commercial world will involve paying a substantial premium, as I stated happens with Teachers. The price should be based on assets and related to earnings for all these companies which are being nationalised, and not based on a very artificial price as shown by two small companies in the Stock Exchange.
I mentioned on Monday—and I am afraid many of your Lordships felt I was producing it at the wrong moment—the fact that by using a fixed interest stock to purchase shares based on a price and not assets, the Government were laying themselves open to the charge that they are following some of the financial wizardry which is not part of the established City that people are criticising at the moment. They are using an artificial price to acquire assets without arbitration, and are issuing a loan stock against it.
My last point is that I believe there to be 26,000 people employed in the ship repairing industry; I believe there to be 69,000 people in the shipbuilding industry—and that includes companies that are already under Government control; and I believe there to be 70,000-odd in the aircraft industry which is to be nationalised. That makes a total of approximately 150,000 to 170,000 people who will be affected by nationalisation, and many of them do not want it. The number of shareholders affected in the companies to be nationalised, or which have subsidiaries which are to be nationalised, amounts to 350,000. I am talking about small investors when I say that, and that does not allow for the hundreds of thousands, even millions, of people who are affected through their pensions and life assurance funds.
10.42 p.m.
Lord HARMAR-NICHOLLS: While on a number of Amendments and clauses which have been debated so far anyone could rightly have been accused of a certain partisanship—quite apart from the merits of the case—which was inevitable on a Bill of this kind, it cannot be said about the debate on this Amendment. The absolute sincerity and impartiality of

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the noble Lord, Lord Selsdon, in putting his case put it completely outside any suggestion that any axe is being ground or any partisan advantage is being sought. He moved the Amendment on the basis that if this is to be the legislation of this country, and if the Government of the day want to be fair in what they are doing—as I believe they do—then what is in the Bill will not achieve that, even with the best intentions in the world. But if the Amendment is accepted, it will be achieved.
I am convinced that the Government in general and the noble Lord, Lord Melchett, in particular are very eager to make the Bill fair, although by its nature many parts of it will remain unfair. But the Amendment of the noble Lord, Lord Selsdon, will not make the Bill more unfair, and there is a very good chance indeed that it will go some way to making it more fair. So I hope that the noble Lord who speaks for the Government will show some desire to meet the noble Lord, Lord Selsdon, and, having done that, will use what influence he possesses—which I hope is considerable—with his colleagues in persuading them to accept it.
We know that in normal times the procedure laid down in the Bill would have been fair and would have been accepted. But, as the noble Lord said a moment ago, we are not living in normal times and it is not fair that people who, unhappily, happen to be at the receiving end of Government legislation, not through their own choosing, should be the victims of abnormal times which are not of their making. If it was not possible for the Government to end the abnormal times, I would say: so be it. They think that their legislation is right: you have to take it and lump in any of the hardship which may come with it. However, by his Amendment the noble Lord, Lord Selsdon, has shown that, despite the abnormality of the times, it is possible to make what would have been right in normal times more likely to be fair today. I do not think that the Government ought to misuse the opportunity to do this.
All of us know that Stock Exchange prices today bear no relation to the true value of somebody's possessions. We all know about the uncertainty and lack
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of confidence, and that the feeling that what is just round the corner has knocked for six what would be the true evaluation of almost anything today. I gather that the noble Lord, Lord Melchett, is a wealthy man, and the best of luck to him. I have no doubt that his wealth is in the form of stocks, shares and many other things. When the noble Lord considers what the value of those possessions may be and the fact that he might have to sell some of them, if he could choose whether to sell them at a time when it was disadvantageous to do so compared with a time when he thought it was right to sell, he would find that the difference between the two figures would be considerable.
If it were not possible to dispense with unfairness I should say that I objected to the whole idea of nationalising everything but that we must grin and bear it. But it is possible to do something about it. The Amendment moved by the noble Lord, Lord Selsdon, clearly shows that it is possible to do something about it. There is no guarantee that his Amendment will produce absolute fairness, but if it ensures that the victim (if that is what the recipient of underpaid compensation is) is in a position to take his special case, which will take into account abnormality and passing difficulties, and put it to a tribunal which will have the power to take into account those special considerations, then you will remove much of the sourness which will otherwise exist long after this Bill becomes an Act. If the Government wish this legislation to be presented in a way which will produce the minimum of sourness when inevitably it becomes the legislation of the country, they will have to think very hard before they turn down this Amendment.
There is no guarantee that the Amendment will answer all of the problems which some of us think will arise, but it has every chance of reducing the number of unfair cases and minimising the difficulties which many people will have to face. The noble Lord, Lord Selsdon, may well have found a formula which ought to be used not only on this occasion but on many other occasions when compensation has to be paid because normal evaluations are going through abnormal periods. Those of us who make speeches—sometimes many more speeches than

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we ought—do not always make the impact that the research we have put into our arguments ought to receive.
I should like to impress upon the noble Lord, Lord Melchett, and his colleagues that, quite apart from any preconceived views which I may have held in the past regarding politics or economics, if we must have this legislation and recognise that we are living in abnormal times, I believe that the normal formula must not stand alone and that the Amendment moved by the noble Lord, Lord Selsdon, ought to be the accepted rule. If the noble Lord, Lord Melchett, can give the lead in so doing he may well do a good turn not only to his Government today but to the general governmental way of doing things in the future.
10.49 p.m.
Lord ORR-EWING: May I support the noble Lord, Lord Harmar-Nicholls, in urging the Government to be a little more sympathetic. The Government have heard some very penetrating speeches and good reasons why we ought to try to honour more justly the criterion of fairness. I am afraid that in the other place the Government showed a closed mind on compensation. I read at length the debates which took place there. However, we in this House are by tradition more flexible and open minded and less biased.
As my noble friend Lord Wardington said in a masterly speech, we are basing these compensation terms on results which were achieved in 1972, and we are going to pay this in 1977. I wonder whether any industry has changed more in five years than shipbuilding has in the last five years. We are taking as the criteria a period since when there has been a world crisis in merchant shipping, that has depressed merchant shipbuilding. At the same time it has stimulated the special shipbuilding in some of our yards which have specialised—Austin Pickers-gill, particularly with the SD 14. It has been a period, too, when there has been a tremendous upturn in the Free World's purchase of naval ships, particularly from British yards.
Perhaps the injustice is most stark, and seem to be stark, in the performance of our naval yards. The Government must be sensitive to the employment position. It so happens that our naval
1438
yards in two cases, of Vickers and Yarrow, are in areas of considerable unemployment and poverty. Look at the figures of those three naval shipbuilders, Vickers, Yarrow and Vosper Thorneycroft. In 1971 they were employing 22,000 people. In 1975 they were employing 25,500 and getting very much greater productivity from that team as a result of the investment. I went up to look at Yarrow's myself to refresh my memory, and I was pleased to see that they had invested in that comparatively small yard on new facilities an extra £9 million in the last year and a half. This is good for the future. I am sorry that no adjustment has at the moment been allowed because of that initiative and that sacrifice. If you look at the export performance of these three naval shipbuilding companies in the last five years, you see it is really remarkable. They have achieved in five years exports of £390 million.
Therefore, why am I asking for fairness? First, because unfairness and broken pledges further discredit our whole Parliamentary system. Our Parliamentary system is fragile enough, and respect for integrity and honesty is not as high as it should be. Therefore, we are risking democracy if we flagrantly disobey everything which has been said, by Prime Ministers downwards, on the question of fairness. But I ask the Government to think seriously of another good reason. This money, certainly in the whole of the shipbuilding area, is not going to private shareholders, although they are indirectly very concerned; it is going to recreate a viable economic engineering group, because this nationalisation measure in 42 out of 43 cases is just taking one part of a group and nationalising it and leaving the rest to reorganise itself and become economically viable. This compensation is not wanted in the majority of cases for individual shareholders, because they would, even after the Finance Bill which did help in this direction, still be very highly taxed on any compensation they received. It is wanted to buy new machinery, to create new jobs, to create the viability of industries strong in engineering; and, as noble Lords know so well, engineering is the backbone of all our exports.
We are not only risking, by under-compensating, the reputation of Parliament as a whole, not only risking criticism of unfairness and dishonouring pledges given.

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Do your Lordships really think that some of the people leading these firms are going to stay there when they see little hope, because of gross unfairness, of recreating a viable economic whole from a group which has been decimated by nationalisation? If we are dependent on anything in our engineering industry and in British industry as a whole it is the leadership provided by the managers, the sub-managers, the supervisors, the technicians, the draughtsmen. Do you think they will go on working for a group which cannot be made economically viable because they have been compensated at a ridiculous—I use the term used by, I think it was, Mr. Willey—standard of compensation? I would urge the Government, for the reasons I and so many other people have given, to think about this with a flexible mind, and think about the creation of jobs and the future of the industries which have been so attacked in this unfair way.
Lord MONSON: There is something else which has not been mentioned. I do not suppose I need to explain to the Committee the functions of that invaluable organisation, so far as Britain's export trade is concerned, the Export Credits Guarantee Department. Would the noble Lord, Lord Melchett, not agree that it is beyond dispute (as was brought out in another place) that if a foreign Government had nationalised British companies, or their subsidiaries overseas, on the same compensation terms as are set out in this Bill, the companies affected would, in many cases, be able to claim additional compensation under their Export Credits Guarantee policy, on the grounds that the overseas Government's nationalisation terms were tantamount to confiscation, or to partial confiscation?
10.56 p.m.
Lord CARR of HADLEY: Before we get too deeply involved in the description of the unfairness which we see in the terms as at present proposed, or possible alternative methods which might be fairer, it would be worth while to spend a moment or two considering one or two of the basic issues at stake and what matters about being fair or unfair. We should bear in mind throughout all our discussions on this subject exactly who it is who is going to be affected by compensation. In the
1440
first place, it is mainly companies rather than individuals who will be directly affected. Most of the companies being taken over are unquoted subsidiaries. Up to that point it all sounds nice and impersonal. Perhaps companies do not suffer too much if they get clobbered.
The degree of fairness of compensation which the holding companies get affects the financial resources which they have to reinvest in equivalent alternative assets and activities. If it is fair, they will be able to undertake this investment and new activities on an equivalent scale. If it is unfair, they will not. It is at that stage that the fairness or unfairness of compensation is immediately carried through to individual people and their families. If the holding companies are fairly and adequately compensated so that they can reinvest on an equivalent scale, then they will maintain their employment and be able to provide more jobs in the future. If they are not adequately compensated, their capacity to find jobs for people will be reduced and unemployment will be that much higher.
If they are fairly compensated, the share values of the main holding companies will remain at a reasonable level. If they are unfairly compensated, the share values will not. The share value of these main holding companies is not something which is even primarily of interest to a few rich people; it is, above all, of interest to tens and hundreds of thousands of people's future pensions. It is noteworthy that perhaps the strongest and most solemn of the representations made from an early date to the Government have been made by the Investment Protection Committee of the British Assurance Association, the National Association of Pension Funds, the Association of Investment Trust Companies, and the Association of Unit Trust Managers, all people particularly involved in people's small savings and their future pensions. They wrote jointly to the Prime Minister saying:
"We are deeply concerned that the value of certain of these pensions and savings and so on may be diminished if the compensation terms proposed in the Bill are enacted in their present form".
I stress that the fairness of the compensation affects, first, the future of the holding companies who get the compensation to employ people and, secondly, it affects more than anybody else the financial

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interest of hundreds and thousands of small savers and their prospective occupational pensions, annuities and the like.
Let us be clear what we mean by "fair", because there is a tendency—I say this with respect to Ministers; it is clear from reading the Official Report of the debates in the other place that there was this tendency—for Ministers always to react to a claim for fairness with the supposition that what we are pressing for is an increase in the total amount of compensation. Of course, if the present formula produced an inadequate amount in total, that would be unfair. Also it would he unfair if it produced an excessive amount in total. But quite apart from the total amount which a formula produces, fairness also requires that the total amount is distributed fairly between the various claimants.
On this point, one thing is so obvious that I should not have thought it needed even raising, although later I shall argue its necessity. The compensation basis that has been chosen—this Alice in Wonderland idea, as the noble Lord, Lord Goodman, described it the other night—namely, that of basing the compensation on notional share values, means that the distribution of the total, whatever size that total may be, between one company and other is almost certain to be unfair. Some will get more than they should out of the total while others will get less than they should, and that is true regardless of what the total amount is. Thus, when we think about fairness we must think that it must be fair to the taxpayer as well as to the companies: it would be unfair if it were too high or too low. Not only that, we must also consider the way, whatever a fair total may be, in which it is distributed between the different companies, and the kind of unfairness about which I have been speaking in the distribution between the different companies would have—and will have if it is persisted in—bad effects on the future both of the Corporations and the economy as a whole.
Let us consider, first, the bad effect on the Corporations. If the distribution of any total is wrong, the compensation paid to the various companies and therefore the commencing capital of the Corporations will not be properly related to the true profit-earning capacity of the assets which the Corporations take over. The Corporations will start with the wrong
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capital base and that will inevitably lead to the mismanagement and mis-allocation of capital in future. Although the aim has not yet been achieved, we should not forget that in numerous White Papers the Government have stressed that the country's and the Government's economic resources cannot be allocated efficiently unless, first, the capital resources tied up in each industry are measured properly and, secondly, that those industries earn sufficient returns on capital to justify the resources tied up in them.
The relevant part is the first of these conditions: the need is stressed over and over again by the Government that the capital resources tied up in each industry should be measured properly, so one of the effects of unfairness in this method of calculation of compensation is that the main purpose of the Government which I have just described—the economic allocation of capital—will be defeated, for the capital allocated by the compensation will not have been properly measured.
This is the bad effect of unfairness on the future economic health of the Corporations. But the same will happen in the holding companies which receive the compensation, because, if it is unfairly distributed so that the stronger companies and those with more growth capacity which are to be nationalised get too small a share, while the weaker and less efficient or less fortunate get too much, this too will produce a misallocation of capital in the private sector. One will find that the stronger, more efficient companies, with the potential for growth, will not have the resources that they could employ, whereas the less efficient, weaker ones will have more than they either deserve on the basis of true fairness or have the capacity, for one reason or another, to make good use of for the general good of the economy. So the unfairness of application will affect the economy in that way.
There are just two other factors that we must take into account. The first is that just mentioned by the noble Lord, Lord Monson, who suggested that if a British Government set an example of unfair compensation to an extent which I believe has never been done before, this will be a direct invitation, incitement or precedent—call it what you like—to Governments of other countries to treat

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our British assets unfairly if they ever decide to nationalise any of our assets in their countries.
Lastly, I want your Lordships to realise that, if we set this precedent of unfairness here, it will be a severe discouragement to foreign capital to invest here in the future. If foreign capital believes that if in future it comes into areas that are subject to nationalisation it can no longer be confident about being fairly compensated should the companies in question become subject to nationalisation, I do not think that I need stress that foreign investors will start to look at every other country but Britain to put their money into.
So I think it important that we should realise that the case for fairness is a very important one. It is not just giving a fair amount of money to a few people. The case for fairness is the well-being of hundreds of thousands, if not millions, of our own citizens, the future of full employment to a significant extent and indeed, the future economic prosperity of the country. So I beg the Government not to think that, when we discuss our complaints about the present measures or consider the merits of any alternatives we may put up, we are talking about a financial reward for a few people who will be either more or less comfortable. We are talking about something fundamental to the future economy of this country.
11.4 p.m.
Viscount SIMON: I should like to say a few words to express the views of those on these Benches before the noble Lord, Lord Melchett rises to speak. I feel that we were all very impressed by the noble Lord, Lord Selsdon, who presented his case so very frankly and in so well balanced a manner. It cannot be denied that, as he pointed out, the system of the basis of compensation proposed in this Bill will produce anomalous results. As the noble Lord said, it will not only produce too little for some people; it will produce too much for others.
Apart from altering the whole basis—at this stage of the Bill we could hardly try to do that—I can see no way of dealing with this matter that would be more effective than what the noble Lord,
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Lord Selsdon, suggested; that is, to provide for a system of arbitration to be applied in cases where it appears that the compensation under the Bill is manifestly unfair. There is only one thing I have to say, and if I do not say it, the noble Lord, Lord Melchett, will say it. The Amendment of the noble Lord, Lord Selsdon, is one-sided because it provides that people who feel that they are inadequately compensated can then make representations and have their case taken to arbitration, but those who, as the noble Lord said, realise that they are going to get a good deal more than they really expected or deserved will not move to go to arbitration. If the noble Lord, Lord Melchett, accepts the principle here, the clause would need some modification to enable the Secretary of State to ask for arbitration in cases where the boot is on the other leg—
Lord HARMAR-NICHOLLS: If the noble Viscount will allow me to intervene, I should like to say that I had that point in mind. As I read the Amendment of the noble Lord, Lord Selsdon, it states:
"… if on application by the stockholders' representative or the Secretary of State …"
So that means that both sides are allowed to go to arbitration. The point being made by the noble Lord is very proper and the Amendment, as I read it, meets the point he is making and balances it.
Viscount SIMON: I am greatly obliged to the noble Lord; of course he is right. I can only confess that after a number of late nights I was reading the Amendment incorrectly, and I thought that the word "or" was "to". I can easily withdraw the point I make. I think that the suggestion made by the noble Lord, Lord Selsdon, might well be accepted. I am sure that if the Government were to accept it in principle and wanted to suggest another clause to give effect to it, the Committee would be very grateful. I am sorry to see the noble Lord, Lord Melchett, shaking his head, and we shall now share the reason why.
Lord MELCHETT: I am afraid that I was shaking my head, because Amendment No. 156 goes right to the root of the compensation provisions of the Bill. It seeks to embody within the Bill the opportunity of valuing securities on a

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basis totally divorced from that already included. A long time ago when the noble Lord, Lord Selsdon, introduced the Amendment he said something with which I entirely agreed. I think he said that the only real test of fair compensation is whether it makes good to each and every shareholder the capital and income that that shareholder has lost from the acquisition of his or her shares. That is precisely what the Bill tries to do.
Lord SELSDON: I did not say that deliberately. These are arguments I would advance later because that is only one aspect of compensation.
Lord MELCHETT: As I say, that is what the Bill tries to do. The Bill as drafted provides for securities to be valued on the basis of their stock exchange quotations, or, if they are not quoted, what would have been their value had they been quoted. In the case of unquoted securities, the value will be arrived at by negotiation between the Secretary of State and the Stockholders' Representative with recourse to independent arbitration.
The terms of the Bill ensure that the compensation terms will be fair on two counts. First, the stock market is an independent and objective means of assessing the worth of a company at any given time. The price of shares as quoted on the stock exchange represent the price at which these shares will change hands. The use of a past reference period does not invalidate this argument in relation to the companies named in the Bill. The stock market generally is now significantly lower than at the reference period; and the quoted prices of the parent companies of those named in the Bill are for the most part also lower, some of them substantially so. While this is not the only guide, it serves to indicate that, far from being unfair, in many cases the terms are generous.
Secondly, the Bill makes provision for independent arbitration. This will ensure that all security holders will he treated equally and with impartiality under the terms of the Bill; in other words, not only are the terms of the Bill fair, but also their method of application is fair. Amendment No. 156 would overthrow all this. It replaces the defined terms with the possibility of an undefined basis of compensation. Companies which have been
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conducting their operations over the past 18 months on the basis of the published terms will be thrown into uncertainty and, in many cases, be at risk of receiving less compensation than they might have done under the present terms of the Bill. Such a breach of faith is unacceptable to the Government, and I regret to have to urge your Lordships to resist this Amendment.
Lord SELSDON: That is the most unfair statement that I have ever heard. This is the first Amendment that I have ever moved in this House. When I started I had no intention of pressing it. I sought information and thought the Government could concede on the principle of fairness. I have not argued all the aspects of compensation. It is a very confusing issue. Amendments that we have already discussed have demonstrated this. It is not something that can be fragmented. The noble Lord, Lord Melchett, was fair in one remark which he made: this Amendment gets to the root of the problem. I am seeking to ensure that, if one uses the word "democracy" at this time, it really works; and democracy means fairness. This is not fair.
There are reasons why it is not fair, many of which I can argue. I will not do so except to say that in putting down this Amendment and following it up I took advice from various bodies. The first of these bodies was the Council of the Stock Exchange. I thought that, if somebody was to use somebody else's valuation for a body that was not controlled by law, it was only fair to seek their advice. I found that the Government had not sought their advice. I asked the Stock Exchange Council: "Will you please write to me or to somebody or to the Government and say whether you feel that this is fair or unfair?" They said: "It would be unfair of us to do this. The Government is not a quoted company and of the companies with which the Government are dealing, only one is quoted. If there was an application from the Government for that one quoted company to make an acquisition, probably it would be in our interest to suspend the quotation".
The only thing that the Stock Exchange would authorise me officially to say is that they would like to be consulted and to co-operate. All I can say is that if some

1447
body has a method of valuation and produces a daily list when their name and terms on which they do this are included in a Government Bill, then if the Government have not consulted them there is something wrong. I believe that if the Government consult them, they will be advised by the Stock Exchange Council that in normal circumstances the stock exchange daily price is not a fair valuation for the total value of a business. It is only a guide to market capitalisation.
Many noble Lords have made this mistake. Perhaps it is the fault of the City and of the whole organisation for failing to explain how financial things operate. But there is absolutely no doubt that the value of a quoted security is the value of the security (be it 1 per cent. or one half of 1 per cent. or one share) to the man who holds it and the man who wishes to buy it. It is a willing buyer, willing seller concept. The value of a business is different.
I have endured many hours of negotiation and discussion when I have been acting on behalf of either foreign or British companies in international acquisitions. I have had to sit down to try to explain to one company that is unquoted that wishes to sell itself to a foreign company that because it says that its PE is so much, because the man has adjusted its profits and assets and perhaps it is under-geared, he ought to have a valuation equivalent to the market capitalisation of a company in the same sector on the Stock Exchange. This might be a high street chemists like Boots. I have had to explain to the foreign company and to both of them that this is not true. When you sit down and negotiate on price, often the differences in price can be as much as 100 per cent. or more. In the greatest single acquisition I was involved in, there was a difference of some 150 per cent. between the two factors. They ultimately came together on an evaluation which was fair. All sorts of aspects must be taken into account, not only the stock and the balance sheets, but the value of stocks.
I have been with English auditors who, when checking the value of a timber merchant's stock, insist on taking every single piece of wood in the yard to make sure that there were not two pieces joined together and hidden in a stack in
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order to get a greater value. One then realises that the valuation of businesses and acquisitions and sales is a professional business and something that costs a lot of money and something which the private sector are willing to pay for in the interests of fairness to its shareholders.
It employs professional people who are independent; it employs good accountants who produce good evaluations. If the Government really wished to be fair they should seek to approach, employ and utilise in these resources people who are known to be fair, people who give a true and fair view, and they should not forget that fairness is one of the few assets we have left in this country. If, by one Act of Parliament and the inclusion of certain clauses in it, you destroy the whole principle of fairness you will destroy more than you realise. While I will not at this stage argue the Amendments, I will repeat to the noble Lord, Lord Melchett, that if the Government will accept this Amendment I will withdraw all the others which are related to alternative methods of compensation and concentrate entirely on the principle of fairness in the Arbitration Committee. This will save time and get things through much quicker.
To me one of the overwhelming problems is not so much what we in Parliament feel about this, but what people in business will feel about it, and more important what future investors will feel about it. I do not speak for the private small shareholders or for the institutions. I speak more for those people whom the Government seek to attract to invest in this country. Both with this Government and with the past—and noble Lords may check this if they wish—I have in a private capacity as a banker sought to encourage people to invest in this country. I have written personally to 25,000 companies throughout the EEC suggesting that they should invest. I have paid for a brochure describing the advantages of the United Kingdom. I have been faced with arguments about industrial relations; I had to try to defend the Conservatives' Industrial Relations Act to foreigners, who said this might stir it up. On that Act—and my noble friend Lord Carr will forgive me—even in your Lordships' House I put down a lot of Amendments, but I was advised in the interests of expediency that I should not include them. I withdrew

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them. On this Bill I cannot do this, because I see unfairness rearing its ugly head, not just at this time of night in your Lordships' Committee, but in a much wider context throughout the world.
When you ask people abroad, "Will you invest in our country?", the first reason why was industrial relations. This is now forgotten. The second reason was inflation because inflation will lead to a weak currency. There was then a general belief—and I have had this argument abroad with people who have said, "Ah, but you cannot argue that the price should take into account inflation, because although it may be 22 per cent. at the moment the Chancellor of the Exchequer and the British Government, whom we can trust, say it will be down to 8 per cent. by the autumn of this year." These arguments create problems but they then pointed out that inflation leads to falling currencies and while inflation was then the argument, it is now falling currencies which are the argument. Only recently, when this Bill first appeared on the Statute Book and was discussed, the next argument was advanced: "How do I know that, if I set up in a business which is related to the North Sea, although I may be at arm's length with it at the present time, I will not be acquired and taken over? How do I know that, if perhaps I am allied to the pharmaceutical industry or to the construction industry, whether or not it be builders' merchants?"
Unfortunately our own Press sometimes does not serve us well in promoting the nation abroad. The points that come out are often those that are inflated out of all proportion by the foreign Press. The feeling going abroad to some extent is that there are so many areas in the United Kingdom where there is going to be Government involvement that to get direct investment into any area associated with these would be wrong. I have argued with them that you should never worry about that; that if by chance the Government do come in and require to acquire part of your business—and foreign companies will not he quoted because it is often impossible for them for technical reasons for them to meet the very stringent requirements of the Stock Exchange—I have assured them, "Do not worry; you will receive a fair price". They have never believed that the price of shares on the Stock Exchange is fair, and they do not
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believe, with all the cost of stamp duty and so on connected with investing in the United Kingdom, that it is a worthwhile activity because of the fear of declining sterling. Yet, equally, they have a tremendous regard for our industries and companies.
My biggest concern is nothing to do with the price that companies get for these businesses. I would happily form a group myself and produce fair valuations of all of them. I am concerned about the principle of fairness. The noble Lord, Lord Melchett, has tried to explain from a written brief that what the Government are doing is fair.
If noble Lords from all sides of this House say and believe that it is not fair—and there has not been one person from the Government Benches, other than the noble Lord, Lord Melchett, who has tried to say that it is fair—and there is not one argument that I can accept, then if I wish to be fair I must press this Amendment, because that is surely the object of a debate in your Lordships' House. It is fair to point out that because of an attempt and a desire to try to be fair I, because I have a full-time job, have had only six hours' sleep in the last two days. I was in Wolverhampton last night. I came on the early train this morning, and I am not being as coherent as I normally should be. But having come from that area I will repeat to your Lordships a quotation I used the other night from Tom Brown's Schooldays:
"He never wants anything but what is right and fair; only when you come to settle what is right and fair it is everything he wants and nothing that you want and that is his idea of compromise."
In the interests of fairness, if this were a private company and a private sector and I were a shareholder, I would sell my shares in the Government because of this. And if I were a director I would resign. But the way our organisation is at the moment I understand that constitutionally I cannot resign. Therefore, if I am to be connected with something like this which I genuinely believe to be unfair, I must press the Amendment; and that I do.
11.27 p.m.
On Question, Whether the said Amendment (No. 156) shall be agreed to?
Their Lordships divided: Contents, 77; Not-Contents, 33.

CONTENTS

Alport, L.

Gisborough, L.

O'Hagan, L.

Atholl, D.

Gowrie, E.

Onslow, E.

Barrington, V.

Gray, L.

Orr-Ewing, L.

Belstead, L.

Greenway, L.

Redesdale, L.

Blakenham, V.

Grey, E.

Rochdale, V.

Bradford, E.

Hanworth, V.

St. Aldwyn, E.

Burton, L.

Harmar-Nicholls, L,

St. Davids, V.

Campbell of Croy, L.

Hives, L.

Salisbury, M.

Carr of Hadley, L.

Hornsby-Smith, B.

Sandys, L.

Carrington, L.

Inchcape, E.

Savile, L.

Chelwood, L.

Kimberley, E.

Selkirk, E.

Clinton, L.

Kissm, L.

Selsdon, L. [Teller.]

Colville of Culross, V.

Lauderdale, E.

Sharples, B.

Cork and Orrery, E.

Long, V.

Simon, V.

Craigmyle, L.

Lyell, L.

Somers, L.

Cullen of Ashbourne, L.

Mackie of Benshie, L.

Stamp, L.

de Clifford, L.

Margadale, L.

Strathclyde, L.

Denham, L. [Teller.]

Massereene and Ferrard, V.

Strathcona and Mount Royal, L.

Drumalbyn, L.

Middleton, L.

Terrington, L.

Dudley, E.

Monson, L.

Trefgarne, L.

Ellenborough, L.

Morris, L.

Vickers, B.

Elles, B.

Mottistone, L.

Ward of North Tyneside, B.

Elliot of Harwood, B.

Mowbray and Stourton, L.

Wardington, L.

Falmouth, V.

Newall, L.

Winstanley, L.

Ferrers, E.

Northesk, E.

Young, B.

Ferrier, L.

NOT-CONTENTS

Blyton, L.

Kagan, L.

Raglan, L.

Brockway, L.

Kirkhill, L.

Ritchie-Calder, L.

Castle, L.

Lyons of Brighton, L.

Segal, L.

Champion, L.

McCluskey, L.

Shackleton, L.

Cooper of Stockton Heath, L.

Melchett, L.

Stedman, B.

Davies of Leek, L.

Morris of Kenwood, L.

Stewart of Alvechurch, B.

Davies of Penrhys, L.

Murray of Gravesend, L.

Stone, L.

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

Oram, L.

Strabolgi, L. [Teller.]

Fisher of Camden, L.

Peart, L. (L. Privy Seal.)

Wells-Pestell, L. [Teller.]

Hirshfield, L.

Pitt of Hampstead, L.

Winterbottom, L.

Houghton of Sowerby, L.

Ponsonby of Shulbrede, L.

Wynne-Jones, L.

Resolved in the affirmative, and Amendment agreed to accordingly.
11.35 p.m.
Earl FERRERS Earl FERRERS moved Amendment No. 159:
Page 49, line 1, at end insert—
(""independent accountant" means a person who is—

(a) a member of one of the bodies referred to in section 17(8) above; and

(b) appointed, after consultation with the company in question, to advise the Secretary of State in relation to any question whether a special declaration should be made in respect of that company.").

The noble Earl said: In moving this Amendment, I should like to discuss Amendment No. 161. Under subsection (6), the Secretary of State is given power to certify what is "the reduced amount" by which companies may be reimbursed for various reasons. If a company, subsequent to 6th November, receives a Government loan, and without it the company in the Secretary of State's view would have gone "bust", he is given
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power to impose "the reduced amount" and to make a "special declaration". If he does that, the amount which may be paid out in the form of compensation is either 5 per cent. of the notional value of the shares, or what would have been the break-up price of the company. That is a fairly stringent power to give to the Secretary of State, and the purpose of this Amendment is to say that he ought, first, to have the advice of a qualified accountant. He does not have to take the accountant's advice, and I suggest that this is a reasonable Amendment in view of the very substantial power which the clause gives to the Secretary of State. I beg to move.
Lord WINTERBOTTOM: These two Amendments taken together once again demonstrate the fear of excessive power being wielded by the Secretary of State. I recognise the concern which noble Lords feel about a possible lack of control over the Secretary of State, and I know that they wish to be assured—as I wish to

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assure them—that the Secretary of State will not use his powers in this provision capriciously. I can give noble Lords that assurance. After all, we have two Houses of Parliament, and if we do our job he will not act capriciously. That is fair comment. It is up to us.
Earl FERRERS: And if we do our job, he will act even less capriciously.
Lord WINTERBOTTOM: Measuring capriciousness is a difficult matter, but I think we can do it by instinct. In the exercise of his powers under any Statute, the Secretary of State must ad reasonably. He can act only within the framework of a Statute and is accountable for all his actions. He has at his disposal the resources of Government experts to investigate and advise on a particular case, and there is nothing in the Bill now which prohibits him from seeking outside advice if he considers it appropriate. This Amendment would impose outside advice on him.
I see the reasoning behind this Amendment. I believe that noble Lords opposite want, as it were, an independent referee. But what we are talking about is a potential bankruptcy situation, which can arise very quickly indeed; it drops out of a blue sky. If the Secretary of State were required in every case to seek outside advice, as the noble Earl's Amendment would demand, there could be such delay that a company might collapse before the aid could be given, with all the disastrous employment, social and regional consequences that that would entail. It is for that reason that I ask that these two Amendments should not be pressed.
Lord HARMAR-NICHOLLS: Is there any guarantee that the inside advice will be from an accountant? The noble Lord says that inside advice will be taken, but from whom? Can the noble Lord guarantee that the inside advice which is available will be of the quality that warrants that it should be acted upon? It may be the office cat; that would be inside advice. I understand the objections to the independent outside accountant, but the least we can be offered is that the inside advice has at any rate the qualifications of the independent accountant. Can the noble Lord give us that assurance? I was very disturbed at the end of the last debate
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when the noble Lord, Lord Selsdon, disclosed that the Government had not even inquired of the Council of the Stock Exchange whether the measuring rod that they were using was the right one. The term "inside advice" sounds very grand, but what is it? The term "independent accountant" means something and can be identified. But who is meant by "inside advice"? Is it the office cleaner?
Lord SELSDON: Having already raised the question of the independent accountant, it would be perfectly possible for the Government to appoint an accountant, in which case he would accept an assignment from the Government and would be acting for them as an inside accountant. Independent accountants always represent the interests of their clients. In this case there is an undoubted need for a qualified accountant mind—for somebody who is known to be independent and who comes from one of the acceptable, true and fair view organisations or firms of leading British accountants rather than from abroad.
If one looks at the two extremes the anomalies are considerable. Let me take the case of a company which had a thriving business and was doing well two years ago but then suffered from blight and has declined since then; it has had a declining value and now has a lower value than it would have had two years ago. In the interests of fairness, the value taken should be its value two years ago. At the other extreme, another company may not have been doing very well two years ago but has now moved forward successfully and has a higher value than two years ago. Both of these aspects have to be taken into account and the people who are best able to take them into account are accountants, not Governments.
Lord WINTERBOTTOM: If noble Lords are willing to be fair on this matter they must recognise that the Secretary of State must always act reasonably. He cannot be like the Roman Emperor who made his horse Consul, nor do I foresee any Chancellor of the Exchequer making the cat his chief adviser. He must act within the framework of the Statute. There is a major accountancy service within the Government which is at the disposal of all Government Departments

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and, with all its shortcomings, there is no doubt that the Treasury is a very acute critic of Government policies. No single Department can act frivolously in matters as important as this. As I have said, the Government have experts—and a large number of office cats as well—and those experts will advise the Government. If the Government or the Secretary of State of the day thinks that it is appropriate, I am certain he will seek outside advice as well. He is not forced to take inbred information. Since the Secretary of State must act reasonably and is accountable to Parliament, and since I am quite certain that he will be watched by Parliament, noble Lords need not worry that his powers will be used capriciously in a situation where action has to be taken quickly if a firm is sliding unexpectedly into bankruptcy.
Lord MOTTISTONE: The problem in dealing with the Bill is that our ultimate faith in Secretaries of State and Government is somewhat undermined. What sticks in my gullet about the Bill is that the Government are making their own rules—and very carefully thought out rules—for taking something from somebody else in accordance with some kind of political theory. Where a Government legislates in an impartial way, which they endeavour to do in most cases, then one accepts various statements in all kinds of Acts of Parliament that the Secretary of State will do this, that and the other, because the general framework is not one which has discredited the name of government by the very root of the Bill which they are putting before Parliament. That is why there are so many arguments of this sort in relation to the Bill, which may appear to noble Lords opposite to be a little unreasonable, and why we seek the safeguard of somebody who is independent of government, because as we see the Bill it is not one which is independent of a political theory which has discredited the Government as an independent arbitrator.
Lord ORR-EWING: Increasingly the principle in public life in recent years has been that one should have an independent arbiter. When the Press Council was set up, it was manned wholly by Press men, and then in reaction to public demand it was felt better if an independent judge was Chairman of the Press Council. The
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Police Bill, brought in by the very gallant Home Secretary who is now leaving us for Europe, made exactly the same point: that it was no good the police being judge and jury in their own cases, albeit that it was some other police authority looking into the case. We are not asking for anything exceptional; this is in the context of Government action in many other spheres. We are not upsetting the general principle of nationalisation; we are asking only that an independent accountant, properly trained, should be the assessor.
I have not got the up-to-date figures, but I remember putting down a series of Questions on how many qualified accountants were employed in various Government Departments. I am afraid they could not be counted even on the fingers of one hand because there were so few. I think in the Treasury there were nine qualified chartered accountants. When the noble Lord says that the Treasury can he relied on, I am not sure that they can. If there was an undervaluation, something which would save taxpayers' money, I think even now, flabby as they are, they would think of the advantages. But I am not sure that they can be relied on as being independent. They are, I hope, still trying to save the taxpayers' money—although they have not been very successful in recent years—but I should not think anyone could object to an independent trained accountant advising the Secretary of State. It would then be seen to be fair, seen to be independent and not partial. I should have thought there was everything to be said for the Government looking at this in that context and saying, perhaps at Report stage: "This is sensible. We might as well do it, because it accords with Government policy in recent years".
The Earl of DUDLEY: In this context, following what Lord Orr-Ewing has said, one is entitled to ask whether, when the other night the noble Lord, Lord Melchett, rejected the proposition put by the noble Lord, Lord Selsdon, that net profit was a better yardstick of efficiency than return on capital employed, he was using his own judgment or that of inside experts, or even taking the office cat's advice. I happened to study this morning, as no doubt many noble Lords did, the results of that great organisation Hawker-Siddeley, a large part of which it is proposed to nationalise under the Bill.

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I think something like 20 per cent. of Hawker-Siddeley is to be nationalised. If those results are looked at on the basis of the yardstick of efficiency that the noble Lord, Lord Melchett, proposed—he said he thought the present levels of interest on money were about appropriate, which I would reckon for a company of that size to be something of the order of 15 per cent., more or less, give or take a little—you come out with a figure of 32 per cent., or £12½ million less than the net profit earned last year by Hawker-Siddeley. If these companies are nationalised, and the noble Lord, Lord Melchett, or the Secretary of State, will be patting them on the back for making a return 32 per cent. less than they are making at the moment, then I ask myself what are the advantages of nationalisation. I trust that the noble Lord will think hard and take better advice before he rejects again the advice put forward by the noble Lord, Lord Selsdon. If Lord Selsdon presses his Amendment, I wish, on the basis of the Hawker-Siddeley results, that he had done so last night also.
11.51 p.m.
Lord HARMAR-NICHOLLS: Has the noble Lord wondered why we accept Government guidance more readily on legal matters than we do on accountancy matters? The reason is because we have law officers of the Crown, an Attorney-General, and a Lord Chancellor, who sit both as representatives of a Government but also representing the impartiality and objectivity of a profession. When you get a ruling on a matter of law, while you may not always agree with it, you know that it is coming from someone who has had in mind the stature of his own profession and the way it is generally run.
Now that we are living in an age where matters to do with accountancy are coming from a Government more than ever they did before, it may well be that we ought to have an Accountancy General as well as an Attorney-General. If, instead of having some unidentified accountant such as my noble friend Lord Orr-Ewing said exists, the Accountant General, in giving any advice to the Government, had not only to satisfy the Government's desires but to pass the test of examination by his own professional institute and general tradition, it may be that the advice given would be more
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careful and perhaps not quite as ideological in its results as comes now from the anonymous and unidentifiable inside adviser who may, or may not, be an accountant.
It is because there is this difference between legal and accountancy matters that we accept legal matters. The Lord Chancellor and the Attorney-General have too great a standing in their professions outside Parliament to be disregarded. Produce such a man on the accountancy side, and you may have less trouble. But until you do, the noble Lord ought to advise his friends to have an independent outside accountant to fill the gap.
Lord SHACKLETON: If I may follow the noble Lord's remarks, he is being unfair to the developed accountancy service in the public service. A distinguished accountant has been recently appointed as the professional head. This is part of the post-Fulton reforms, which suggests that there is a degree of ability that was not there in the past. I hope that the noble Lord will withdraw any implication that the head of the accountancy service in the public service is somehow a stooge.
Lord HARMAR-NICHOLLS: If the noble Lord would assure me that it is the head of the accountancy service who is the inside informant and adviser, I may well withdraw. But we have been told that it is some anonymous inside adviser. There is no certainty that it is an accountant, much less the leading accountant. If I can be assured that the advice given tonight has come from an identifiable person—in this instance the very eminent man mentioned by the noble Lord, Lord Shackleton—it would make some sort of difference. I do not think he can give it, and I do not think the noble Lord, Lord Melchett, can give it, and it is because it cannot be given that the uncertainty remains. Until we can be more certain where the advice is coming from, I believe that it ought to be rectified by an independent accountant, such as was suggested.
11.55 p.m.
Lord CHELWOOD: I hope the Government will think again on this issue. Having listened to the last two hours of

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debate, it is clear that the Committee is overwhelmingly in favour of the Amendment. I would remind the Government that the last Division was substantially in favour of that Amendment. I read in Clause 35 various passages about the Secretary of State making a special declaration, things in the opinion of the Treasury, what a special declaration means, and so on. I agree it would be unfair to criticise Departments and say that they do not add up properly and do not have the benefit of the advice of first-class accountants, but they are part of the Government machine, and if people are to feel that compensation is fair there must be some sort of independence which can be seen to be independent.
This subject was not properly debated in another place. I have read the Official Report of those debates thoroughly. Nor has it been really properly debated here, in the sense that all we have had in reply to the pertinent questions that have been asked are short, prepared briefs read out by Ministers and their remarks have not really been relevant to the questions that have been asked. As a very new Member of your Lordships' House I feel shaken because I have always had a high opinion of your debates, but the quality tonight has deteriorated sadly. Noble Lords of the Opposition Benches—Cross-Benchers, Liberals and my noble friends—have questioned whether the compensation will be fair and be seen to be fair. We are profoundly unhappy on this score but we have had no assurance that the basis of compensation will be fair.
We have heard that the asset values of more than half the cases are not being taken properly into account because of the five-year gap between 1972 and 1977. That has not been answered. Nor have we been told what, if any, consultation there has been with the Stock Exchange Council. We have had no reply to the important question asked by my noble friend Lord Carr of Hadley about the extent to which pension funds are involved in all this. I believe—I am open to correction—that pension funds are involved to the tune of about £2,000 million, a large part of which, no doubt, is invested by the big unions in this country. What will be the feeling of the trustees of those pension funds when they find that the
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compensation is inadequate because no independent view has been taken but that it is simply the view of the Government? I am profoundly unhappy about the way this debate has gone and I hope that before we part with the Amendment we will have a further statement from the Government dealing with the important questions that have been asked. The Government must remember that the whole question of foreign confidence in this country is involved here. As everybody knows, we desperately need foreign risk capital.
Lord WINTERBOTTOM: To answer the noble Lord, Lord Harmar-Nicholls, as my noble friend Lord Shackleton pointed out, the Government have recently appointed a well-respected accountant at Permanent Secretary level to head the Government accountancy services. I cannot give his name—that would be improper—and in any case, when a crisis situation arises, as foreseen in the clause, we do not know which individual will deal with it. But there is a body of qualified accountants within the Government Accountancy Service who are perfectly capable of giving sound professional advice to the Secretary of State.
May I interject one other argument into the debate at this late stage? A special declaration under the meaning of the Act is made before any aid is given. Before taking that aid, therefore, the company that is in trouble is free to make up its mind whether to try to solve its own problems or to accept the aid, which they realise will reduce the compensation that it will receive. A Government decision is not imposed upon the company; it can choose between following its own policies and seeking its own salvation, or following the procedures laid down in the Bill, which will, as I say, be administered fairly and not capriciously. For that reason, I would say that the noble Lord's Amendments are based on an unfounded suspicion of the character and intentions of the Secretary of State and I ask the noble Lord to withdraw the Amendment.
Lord SELSDON: I should like to intervene in case there is any misunderstanding. I think that those of us who know the Government Accountancy Service have a very high regard for it. I have such a high regard for it that I cannot believe that it

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was consulted on the subject of compensation. If the noble Lord advises me that it was consulted, my regard for it will fall, but, if not, I feel that the Government have not consulted the right people.
Lord CARR of HADLEY: Can the noble Lord tell us: was the Accountancy Service consulted?
Lord MELCHETT: This honestly is not something that arises on this Amendment. We dealt with compensation on the last Amendment and no doubt it is something which can properly be raised on the Question, That the clause stand part when we get there.
Earl FERRERS: Perhaps the noble Lord will be good enough to seize himself of the information so that when the question is asked on the Question, that the clause stand part, we shall be able to receive an answer. What we have tried to do in the Amendment is something quite modest. The noble Lord, Lord Winterbottom, will have been aware of the considerable feeling expressed for the principle that the Secretary of State should have the advantage of independent advice. My noble friend Lord Orr-Ewing said that the independent accountant should be the assessor. That is going a great deal further than the Amendment: all the Amendment says is that an independent accountant should give his advice. It does not say that the Secretary of State should take it. The noble Lord, Lord Winterbottom, said that it was necessary to act very quickly because liquidation could drop out of a blue sky.
Lord WINTERBOTTOM: I said that insolvency could drop out of a blue sky!
Earl FERRERS: I was not certain what it was, but whatever it was was rather disagreeable! However, the point is quite simple, and I believe that we are slightly at odds here because I understand that, under this part of the Bill, which the noble Lord, Lord Winterbottom, said was brilliantly drafted and he could understand perfectly—I find it possibly slightly less easy—the Secretary of State may pay a reduced amount in compensation for a company that has borrowed money from the Secretary of State.
What in fact happens is that if a company has been in a certain amount of
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financial difficulty, or possibly even if it has not, it has had a value at 1974 prices. It is perfectly possible that that company may have been able to secure an order since 1974 and that in order to do so it has had to invest some money, perhaps in order to re-tool or to buy extra machinery. In order to do that, the company would have had to obtain extra funds, but it might well have been that it could not get the extra funds from the banks or any normal lender because of the process of nationalisation, because any normal lender would say, "No, we shall not lend you this money because you are going to be nationalised." Therefore, the company has only one alternative which is to go to the Secretary of State to get the necessary money. As soon as the company has done that it has sipped from the poisoned chalice, because in fact the money having then been obtained from the Secretary of State, he can then pay only a reduced amount which means 5 per cent. of the notional value of the shares at 1974 prices, or the break-up price of the company at, presumably, current prices.
If one were to take, for instance, a firm which might have been valued at £5 million in 1974 and supposing it had required a £½ million loan, the reduced amount of compensation which that firm would be paid would be either 5 per cent. of £5 million which is £¼ million, or the break-up price. That is a very substantial reduction. It may well be that it is justified, but the object of the Amendment is merely to say that it would be fair to have an independent accountant look into this as well and give the Secretary of State his independent advice; the Secretary of State need not take it.
I hope that the noble Lord will look at this again; I hope that he will give me an undertaking that he will look again at it. But if he cannot I must say that we may have to raise it again at the Report stage. This is not a difficult Amendment, or a hard Amendment, nor is it being critical in any way of the Secretary of State. It is merely a prudent step where the Secretary of State has very considerable powers to reduce substantially the amount of compensation which could be given. I hope that the noble Lord, Lord Winter-bottom, will be able to say that he will look at this. But the noble Lord is continuing to sit in his seat. Does that mean that he will not look at it?
Lord WINTERBOTTOM: I will certainly note what the noble Earl has said and will think about it, but I cannot give any undertaking this evening.
Earl FERRERS: If the noble Lord thinks about it perhaps he will also be able to look at it at the same time. I am sure that if lie looks at it and reads the penetrating remarks which have been made from this side by my noble friends his thoughts will be very much the more concentrated. Therefore I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord MELCHETT: I hope that it was not the fact that we were able to accept so many of the Amendments of noble Lords opposite which has slowed us down so much in the later stages this evening. But despite the fact that we have gone rather slowly I understand that it might be the wish of the Committee that we resume at this hour. If that is the case, I beg to move that this House do now resume.
Moved accordingly, and, on Question Motion agreed to.
House resumed.

COITY WALLIA COMMONS [H.L.]
Returned from the Commons with Amendments; the said Amendments considered and agreed to.

AGRICULTURE (MISCELLANEOUS PROVISIONS) BILL
Returned from the Commons with certain Lords Amendments agreed to; a Lords Amendment agreed to with a consequential Amendment to the Bill; a Lords Amendment disagreed to with
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Amendments to the words so restored to the Bill; and the remaining Lords Amendments disagreed to with Reasons for such disagreement: the said Amendments and Reasons to be printed.