Lords Sitting of 4 July 1977

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

BP SHARES: PENSION SCHEMES ALLOCATION
Lord BOYD-CARPENTER: 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 why preferential treatment in respect of the disposal of shares held by Her Majesty's Government in the British Petroleum Company Limited is being given to applications made by or on behalf of United Kingdom occupational pension schemes; and whether it is intended that this shall set a precedent for giving preference to one category of citizens over another when other public property is being disposed of by way of sale.
The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey): My Lords, the Government were concerned to give United Kingdom citizens every opportunity to take a stake, directly or indirectly, in this company. Occupational
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pension funds, which represent so many individuals, were therefore accorded formal preference in the allocation; and, moreover, applicants who applied for up to 150 shares obtained in full what they applied for. The disposal of nearly 67 million ordinary stock units was wholly exceptional and does not set a precedent in any respect.
Lord BOYD-CARPENTER: My Lords, while declaring an interest as, unhappily, a very small shareholder in this company, may I put to the noble and learned Lord that there is here a question of principle affecting the disposal of public property? Has it not been the practice for many years, at least since the Crichel Down affair, that when the property of the State is disposed of all citizens have an equal opportunity to acquire it?
Lord McCLUSKEY: My Lords, in this matter, on the part of the Government there was a deliberate wish to favour the small investor. That is a wish which has been commended by many commentators, and indeed every member of the public could qualify as a small investor, come forward and obtain a preference. That was plain and the Government went to unprecedented lengths to ensure that members of the public were made aware of their right. Occupational pension schemes cover 14 million people in this country and I would respectfully suggest that the Government's action in disposing of this property in such I a way should not incur criticism.
Lord BOYD-CARPENTER: My Lords, whatever the merits of occupational pension schemes, and I share the Government's admiration for them, may I ask the noble and learned Lord whether there are not other bodies of equal merit, such as charities and the Church Commissioners? Will the noble and learned Lord, none the less, come back to the real point which I put to him earlier: Is not this a departure from the previous principle of equality of opportunity when Government property is disposed of? Will be answer the terms of my original Question: is it or is it not intended hereby to create a precedent?
Lord McCLUSKEY: My Lords, may I remind the noble Lord that this was not a sale of Government property direct to a member of the public, but was simply conferring a preference in the event of there being over-subscription. I would suggest that that matter ought to be looked at on its own merits.
Lord PAGET of NORTHAMPTON: My Lords, have we not reached the stage when it is quite difficult to find out who is a citizen of this country and who is not? Pension funds are a jolly good way of finding out, so are not the Government to be congratulated on their ingenuity?
Lord McCLUSKEY: We will accept congratulations even from our own Back-Benches, my Lords.
Lord THORNEYCROFT: My Lords, while fully understanding and agreeing with the importance of occupational pension schemes, may I ask whether the noble and learned Lord is saying that this will not be done again? Is that what he means when he says that this is a wholly exceptional situation? I cannot quite follow his reasons for saying that this is an exceptional case. On future occasions when public property is being disposed of, are we right in assuming that all potential shareholders will be treated in the same way?
Lord McCLUSKEY: My Lords, I do not think I said—or, if I did, I did not intend to say it—that it would not be done again. What I said and what I mean, and what I want to say quite clearly, is that this was an unprecedented sale, and I am sure that the noble Lord would not disagree with me in relation to that. This
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was a sale of nearly 67 million units of stock for a price of about £560 million. That was unprecedented and it does not in itself set a precedent for other matters; each case of this kind requires to be looked at on its own merits.
Lord HARMAR-NICHOLLS: My Lords, does the Committee which used to sit under the chairmanship of the Chancellor of the Duchy, in order to recommend the disposal of Government property, still exist? If so, did it sit in this case and did it recommend the action that has been taken?
Lord McCLUSKEY: My Lords, if the noble Lord will look at the original Question, he will see that it concerned giving preference to one category of citizens over another. When considering that Question, I did not take into account the point which the noble Lord has raised, and I will, if he wishes, write to him on the matter.
Lord LEATHERLAND: My Lords, does my noble and learned friend agree that undue fuss is being made about this matter? Is it not a fact that, in every issue for the sale of shares, where there is extensive stagging individual applications do not get equal treatment? Is it not a fact, for example, that applicants for up to 500 shares may get a full allotment, that those for 1,000 shares may get three-quarters of their application, while those for 20,000 may get 5 per cent. of their application?
Lord McCLUSKEY: My Lords, on the second part of my noble friend's supplementary question, he is absolutely right. In relation to the first part, it may be that there is too much of a fuss; but, having regard to the scale of the operation and the fact that it is Government property, the Government welcome the opportunity to explain themselves in public, and I do not retreat from that.

ANGLO SOVIET MARITIME DISCUSSIONS
2.43 p.m.
Baroness WARD of NORTH TYNESIDE: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government to make a Statement on the recent visit of the Soviet Minister of Marine, Mr. Guzhenko, and in particular on the meeting of the Anglo Soviet Joint Maritime Commission recently held in London.
Lord ORAM: My Lords, the visit of the Soviet Minister of Merchant Marine, Mr. Guzhenko, provided the opportunity for some frank discussions on maritime problems. The issues raised with Mr. Guzhenko included Soviet under-cutting of freight rates, the provision of excessive capacity on certain liner trades, and the need for a fairer balance between United Kingdom and Soviet ships in our bilateral trades. Although we prefer a policy of co-operation rather than confrontation, we left the Soviet side in no doubt about the need for movement on their part in the search for mutually satisfactory solutions to current difficulties. Detailed discussion of these difficulties and of possible remedies was undertaken by officials within the Anglo Soviet Joint Maritime Commission. Further discussions will be held in the near future.
Baroness WARD of NORTH TYNESIDE: My Lords, I wish to thank the noble Lord very much for that Answer, and for his help in this matter. Can he say whether there was any indication that we are likely to get just and fair treatment as a result of this visit and the discussions which are going on, which are very important to our shipping interests, as well as to our national interests?
Lord ORAM: My Lords, as my original Answer indicated, we stated the British point of view very firmly. No agreements on matters of substance were reached, but we hope that the Soviet authorities will have noted the depth of our concern and will give urgent consideration to the various proposals that we have put forward. One of the next major steps will be to try to work out a set of principles to act as guidelines for the orderly development of maritime trade; at least, there was agreement to take it that far.
Baroness WARD of NORTH TYNESIDE: My Lords, I wish to thank the noble Lord again. Can he tell me how long I shall have to wait before I can put down another Question?
Lord ORAM: My Lords, I imagine that if there is a vacancy, the noble Baroness can put down a Question for tomorrow; I hope she will not. The meeting to which I have referred is to take place in August.

CROWN AGENTS: FAY COMMITTEE REPORT
2.45 p.m.
Baroness WARD of NORTH TYNESIDE: My Lords, I beg leave to ask the Second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will give an assurance that the report of the Fay Committee on the Crown Agents will be published in time for debate before Parliament rises for the Summer Recess.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, my right honourable friend the Minister for Overseas Development does not expect to receive the Fay Committee's Report for the next few weeks, and I am afraid that there cannot therefore be a debate before the Summer Recess. The report will be published as soon as possible after it is received.
Baroness WARD of NORTH TYNESIDE: My Lords, though I cannot thank the noble Baroness for that Answer, I should like to ask her whether the Government are quite certain that they are not holding back the Fay Report so that we cannot have a debate on the matter, having regard to the fact that Statements have been made from time to time that the Fay Report was to be produced? Does the noble Baroness not think that it is absolutely ridiculous that we have had to wait as long as we have, and that we still have to wait before we can even have a debate upon this very important matter? I am very much upset and annoyed.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I am deeply upset that the noble Baroness is very much upset, and gratitude, I am afraid, is the last thing I look for. But I must make clear one point which I have made many times previously in this House: no Minister has ever said that the Fay Report would be ready in under two years, and that probably it would be longer. I should like to remind the noble Baroness that I wrote to her in February saying that we could not expect the report until midsummer, and probably later.
Lord BROCKWAY: My Lords, in thanking my noble friend for that reply, may I ask whether she is satisfied that the past deficiencies and inefficiencies of the Crown Agents have now been remedied?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, it would take a very rash Minister to say that all inefficiencies have been remedied; and I will not go that far. But this Government, and previous Administrations, have done everything in their power to uphold the excellent institution of the Crown Agents, and to iron out the difficulties that have arisen.
Baroness WARD of NORTH TYNESIDE: My Lords, having regard to her last reply, does the noble Baroness agree that it would be in the interests of the Crown Agents to have the report, which will no doubt make various complimentary remarks about the Crown Agents in general? Does she agree that the Crown Agents are being held up in terms of getting satisfaction because of the problem of a few who have, perhaps, not been quite so helpful as they might have been? It is too silly.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I have had no complaints from the Crown Agents about the time it has taken; indeed, they specifically asked that such a complex matter should be gone into as thoroughly as Judge Fay thought necessary.

EEC COUNCIL OF MINISTERS: JULY BUSINESS
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, a Statement is being made in another place today about
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business to be taken in the EEC Council of Ministers during July. I will, as usual, arrange for the Statement to be made available in the Official Report.
Following is the Statement referred to:
"With your permission, Mr. Speaker, I will make a Statement about business to be taken in the Council of Ministers of the European Community during July. The monthly forecast for July was deposited on the 22nd of June.
"At present four meetings of the Council of Ministers are proposed for July. Finance Ministers will meet on the 18th; Agriculture Ministers on the 18th and 19th; Budget Ministers on the 20th, and Foreign Ministers on the 25th and 26th of July; or possibly only on the 26th of July.
"At the Finance Council, Ministers will have their second quarterly examination of the economic sitution in the Cornmunity.
"Agriculture Ministers will be considering fisheries matters, together with proposals for a potato régime, the labelling of milk products and aid for producer groups.
"At the Budget Council Ministers will establish the draft Community Budget for 1978.
"Foreign Affairs Ministers will discuss the outcome of the European Council on the 29th and 30th of June, relations with Spain, Cyprus and Malta, the accession negotiations with Greece and possibly fisheries matters".

NORTHERN IRELAND (EMERGENCY PROVISIONS) (AMENDMENT) BILL
Brought from the Commons, read 1ª, and to be printed.
LONDON TRANSPORT BILL
Read 3ª, with the Amendments, and passed, and returned to the Commons.

HOUSE OF LORDS' OFFICES
2.50 p.m.
The CHAIRMAN of COMMITTEES (Lord Aberdare): My Lords, I beg to move that this report be now agreed to.

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Perhaps I ought to draw your Lordships' particular attention to Item 2 of the Committee's report, concerning the Library. The Committee agreed to the recommendation of the Working Group on the Library that the Queen's Room should be converted into an Enquiries and Information Centre. I beg to move.
Moved, That the Third Report from the Select Committee be agreed to.— (Lord Aberdare.)
The Report was as follows:
1. COMPUTER FACILITIES
The Committee approved the appointment of a Sub-Committee and to its proposed terms of reference with the following Lords as members:—

Lord Darling of Hillsborough

Viscount Eccles

together with the Clerk of the Parliaments and with power to co-opt further Lords and to appoint their own Chairman.
The Committee also approved provision for the payment of expenses incurred by the Sub-Committee and for additional computer typing assistance.
2. LIBRARY
The Committee were informed that the Library Sub-Committee had considered the Report from the Working Group on the Library and supported the recommendation that the Queen's Room be converted into an Enquiries and Information Centre.
The Committee approved the recommendation and the proposals for implementing this decision.
The Committee were also informed of the appointment of Mr. D. L. Jones as Assistant Librarian.
3. PARLIAMENT OFFICE
The Clerk of the Parliaments informed the Committee of the promotion of Mr. C. H. Cumming-Bruce to Senior Clerk.
The Committee approved the appointment of two additional Personal Secretaries and an additional Clerical Officer.
4. HANSARD REPORTING STAFF
The Clerk of the Parliaments informed the Committee of the following arrangement of the Editorial staff on the retirement of Mr. C. W. H. Blogg, O.B.E., the Editor of Debates, on 1st July 1977:—

Mr. C. R. Stanton to be Editor in the place of Mr. C. W. H. Blogg;

Mr. D. A. Dumbreck to be Assistant Editor in the place of Mr. C. R. Stanton;

Mrs. M. E. E. C. Villiers to be Second Sub-Editor in the place of Mr. D. A. Dumbreck.

The Committee instructed the Clerk of the Parliaments to convey to Mr. Blogg their warm appreciation of his long and valuable services.
The Committee authorised:—

(a) increased charges under the agreement with Haynes Secretarial Services for the supply of typists for the reporting of Debates;

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(b) revised attendance fees to temporary reporters.

5. OFFICIAL SHORTHAND WRITER
The Committee approved an increase in the fees payable to the Official Shorthand Writer.
6. REVISED SCALES OF PAY
The Committee confirmed the application of the following Civil Service Code Memoranda:—

CM/241 dated 12th April 1977;

CM/252 dated 1st June 1977;

giving supplements to pay to Officers and staff of the House of Lords.
7. SUPERANNUATION
The Committee sanctioned the payment of the following superannuation awards:—

(a) Pension and lump sum to Mr. C. S. A. Dobson, C.B.E., Librarian, who retired on 1st June, 1977;

(b) Pension and lump sum to Mr. C. W. H. Blogg, O.B.E., Editor of Debates, who retires on 1st July 1977.

8. DOORKEEPERS
The Committee approved the appointment of two additional Doorkeepers.
9. SUB-COMMIFTEES
Lord Wigoder was appointed to the Administration and Finance Sub-Committees in the place of Lord Amulree.
On Question, Motion agreed to.

COMPUTERS: CONSIDERATION OF COMMONS MESSAGE
The LORD PRIVY SEAL (Lord Peart): My Lords, I beg to move the Motion standing in my name on the Order Paper. A similar Motion has already been agreed to in another place. Your Lordships' House has just agreed the report of the Offices Committee appointing a Sub-Committee on computers, and it is desirable that this Sub-Committee should be able to meet jointly with any Sub-Committee of a Services Committee on the same subject. I beg to move.
Moved, that the Sub-Committee on Computers appointed by the Select Committee on House of Lords Offices shall have power to join with any Sub-Committee thereon that may be appointed by the Select Committee of the House of Commons on House of Commons (Services);
That the Sub-Committee shall have leave to agree with the Commons in the appointment of a chairman for any joint meeting;
That the Sub-Committee shall have power to appoint persons with technical knowledge either to supply information

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which is not readily available or to elucidate matters of complexity relating to the matter referred to them; and
That the Sub-Committee shall have power to adjourn from place to place within the United Kingdom.—(Lord Pearl.)
On Question, Motion agreed to; and a Message ordered to be sent to the Commons to acquaint them therewith.

RENT BILL
Report received.
PROTECTION FROM EVICTION BILL
Report received.

NORTHERN IRELAND (EMERGENCY PROVISIONS) BILL [H.L.]
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I understand that no Amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript Amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the Order of Recommitment be discharged.
Moved, That the Order of Recommitment be discharged.—(The Lord Chancellor).
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, may I ask one question before we part with this? We have just given a First Reading to a Bill from the Commons with exactly the same Title, except that it is an Amendment Bill. This is a Consolidation Bill. I merely want to ask the noble and learned Lord what relationship the two Bills have to one another; and, if indeed the Bill from the Commons is an Amendment Bill, whether it would not at some stage, and probably at this stage, be wise to include in the Consolidation Bill which is now going through this House any provisions which become law in the Amendment Bill.
The LORD CHANCELLOR: My Lords, I understand that the Bill to which the House has given a First Reading does involve Amendments which will be relevant to the present Consolidation Bill. My understanding is that when this Bill is referred to another place the Consolidation Bill, with which we are presently dealing, will be amended there to take account of the new Bill. The noble and learned Lord may feel that that is a satisfactory way to deal with what is purely a consolidation measure.
On Question, Motion agreed to.

LICENSING (AMENDMENT) BILL
Lord HARMAR-NICHOLLS: My Lords, I understand that no Amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript Amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the Order of Commitment be discharged.
Moved, That the Order of Commitment be discharged.—(Lord Harmar-Nicholls.)
On Question, Motion agreed to.

RENTCHARGES BILL
Report received.

UNFAIR CONTRACT TERMS BILL
2.56 p.m.
Report received.
Clause 1 [Scope of Part I]:
Lord JACQUES Lord JACQUES moved Amendment No. 1:
Page 2, line 1, leave out from beginning to ("subject") in line 2 and insert—
("(2) This Part of this Act is subject to Part III; and in relation to contracts, the operation of sections 2 to 4 and 7 is")
The noble Lord said: My Lords, Part III of the Bill contains various provisions exempting certain types of contract from the controls in Parts I and II.

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This Amendment makes it clear that the provisions of Part I are subject to the provisions of Part III. An Amendment making a similar provision for Part II was introduced by my noble and learned friend Lord McCluskey during the Committee stage, and was accepted by your Lordships. I beg to move.
On Question, Amendment agreed to.
Clause 2 [Negligence liability]:
Lord JACQUES Lord JACQUES moved Amendment No. 2:
Page 2, line 26, leave out from ("notice") to ("a") in line 28 and insert ("purports to exclude or restrict liability for negligence")
The noble Lord said: My Lords, this is a drafting Amendment. If noble Lords wish for details, I shall be glad to supply them. I beg to move.
On Question, Amendment agreed to.
Clause 4 [Unreasonable indemnity clauses]:
Lord JACQUES Lord JACQUES moved Amendment No. 3:
Page 3, line 13, leave out subsection (2) and insert—
("(2) This section applies whether the liability in question—

(a) is directly that of the person to be indemnified or is incurred by him vicariously;

(b) is to the person dealing as consumer or to someone else")

The noble Lord said: My Lords, during the Committee stage a Government Amendment deleted the words "his own" from Clause 4 as being unnecessary and likely to cast doubt upon the meaning of the clause. The noble and learned Lord, Lord Hailsham, questioned whether the amended wording of Clause 4 made it quite clear that the negligence referred to was that for which the person in question was himself responsible, whether directly or vicariously. On reflection, it seemed to us that the wording was not wholly clear. The present Amendment has therefore been tabled for the avoidance of doubt. In addition, the noble Lord, Lord Lyell, indicated that he thought that subsection (2) was not clear. This Amendment, as well as dealing with the point made by the noble and learned Lord, Lord Hailsham, also clarifies the subsection. I beg to move.
Lord LYELL: My Lords, I should like to begin this afternoon's proceedings from these Benches by thanking the noble Lord, Lord Jacques, for his very brief and swift clarification of the points which we raised at an earlier stage. He is satisfied, so are we, and we should like to thank him.
Lord AIREDALE: My Lords, perhaps this is the moment at which I should speak to my Amendment No. 4, because my Amendment is an attempt to redraft the Amendment which is now being discussed. It is a drafting point, really. In the Amendment which is now being discussed, your Lordships will see that there is no word connecting paragraphs (a) and (b). I should have thought that it would be better drafting to have the subsection read as in the next Amendment, No. 4, which enables a connecting word to be inserted between paragraphs (a) and (b), so as to make the new subsection flow.
Lord JACQUES: My Lords, the noble Lord, Lord Airedale, has really changed his role in this House. His role is normally to have words deleted because they are not necessary. Here he wants to put words in; and, I might add, they are not necessary. In that sense, he is doing exactly the opposite to what he usually does. We are confident that our Amendment is perfectly clear, and we prefer it because it is shorter. The noble Lord very often takes that view.
On Question, Amendment agreed to.
Lord AIREDALE Lord AIREDALE had given Notice of his intention to move Amendment No 4:
Page 3, line 13, leave out subsection (2) and insert—
("(2) This section applies—

(a) whether the liability in question is directly that of the person to be indemnified or is incurred by him vicariously; and

(b) whether the liability in question is to the person dealing as consumer or to someone else.")

The noble Lord said: My Lords, after those fierce words from the noble Lord, Lord Jacques, I dare not move this Amendment.
Clause 5 ["Guarantee" of consumer goods]:
Lord JACQUES Lord JACQUES moved Amendment No. 5:
Page 3, line 23, after first ("by") insert ("reference to").
The noble Lord said: My Lords, may I say that I would only use those words to a friend; I dare not use them to anyone else. This is a purely drafting Amendment bringing Clause 5 into line with the rest of Part I of the Bill. I beg to move.
On Question, Amendment agreed to.
Clause 7 [Miscellaneous contracts under which goods pass]:
Lord JACQUES Lord JACQUES moved Amendment No. 6:
Page 4, line 23, leave out ("and (3)") and insert ("to (3A)").
The noble Lord said: My Lords, I hope that it may be to the convenience of the House that I speak to Amendment No. 7 in moving Amendment No. 6. At the Committee stage the noble Lord, Lord Lyell, made what I described as a gallant attempt to rephrase this subsection so as to get clarification. Unfortunately, I had to indicate to him that his Amendment was defective. I now produce an Amendment which achieves the purpose which the noble Lord had in mind and which, I hope, is not defective. I beg to move.
Lord LYELL: My Lords, we are very happy that the noble Lord, Lord Jacques, is being entirely consistent. He is removing inconsistencies and curing defects that we introduced into his Bill. We made an honest and gallant attempt to improve the Bill and our attempt has been crowned with success. We thank him for it.
On Question, Amendment agreed to.
Lord JACQUES Lord JACQUES moved Amendment No. 7:
Page 4, line 31, leave out subsection (3) and insert—
"(3) As against a person dealing otherwise than as consumer, that liability can be excluded or restricted by reference to such a term, but only in so far as the term satisfies the requirement of reasonableness.
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(3A) Liability in respect of—

(a) the right to transfer ownership of the goods, or give possession; or

(b) the assurance of quiet possession to a person taking goods in pursuance of the contract,

cannot be excluded or restricted by reference to any such term except in so far as the term satisfies the requirement of reasonableness".
On Question, Amendment agreed to.
Clause 8 [Misrepresentation]:
The Earl of SELKIRK The Earl of SELKIRK moved Amendment No. 8:
Page 5, line 16, leave out from ("1977") to end of line 17.
The noble Earl said: My Lords, this Amendment is an Amendment to a clause brought in from an entirely different Act of Parliament, the Misrepresentation Act 1967. This deals with innocent misrepresentation and not with fraud at all. It makes any restrictive practice in the clause, such as an error, subject to Clause 10, which is the reasonableness clause. This seems to be quite sensible; but it goes further than that. It changes the onus of proof on a different Act of Parliament in order to gain consistency with this Act of Parliament.
We had a long discussion on this Bill last time, but we did not really deal with this clause at all. We dealt with the main clauses, two other clauses, dealing with the question of onus of proof. Under this, "contract" applies to every kind of contract, so far as I can see, and is not in any way limited by Schedule 1. That is my interpretation. It is a different Act of Parliament.
Mr. Fraser, the Minister of Consumer Protection, says that any changes in the onus of proof should be backed with overwhelming and convincing arguments. In this case there was none. There was only one argument, and that was consistency with the Bill which we are discussing. This Bill is a separate Bill and it does not really deal at all with the main issue of the Bill on unfair contracts which we are discussing. It does not affect any other part of the Bill at all. What I do think is unwise is that purely on the grounds of consistency we should change another Act without considering the content of that Act at all. I do not know whether

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changing the onus of proof alters any other part of the Misrepresentation Act. I am not sure. I find it hard to believe it does not have some effect. I do not know how it is worked. It does not apply to Scotland, but I think it unwise to change a clause in another Act purely for consistency in the existing Bill.
There was no argument about consistency particularly which makes it desirable. It has no bearing on the standard of practice. I should have thought it very much better to leave out these words and let the normal procedures go ahead. I do not think it matters very much, because if anyone wants to bring forward a case—a case where someone has received some error of information not in the contract but in some letters or some conversation beforehand—he will have to go to court and explain, in the first place, what is the information he has received and why he thinks it affects him fundamentally. He must do this in any case. He must make something which may be called a plausible case. I do not think it makes much difference; but if a decision here is going to be regarded as binding on other parts of the Act, I would object to it being included. I think it unnecessary to put it here. It will not affect anybody else and I think that changing one Act on the grounds of consistency with another is wholly wrong. I ask the House to leave out these words which change the onus of proof in the Misrepresentation Act 1967. I beg to move.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, it may be that the noble and learned Lord is about to do what I am now going to ask him to do. It may be that I am pushing at an open door. In my simplicity, I had thought that this was just one of the onus of proof Amendments which my noble friend is putting forward, but it was clear from the way he put his case that this is not so. Therefore, I hope that the noble and learned Lord will tell us exactly what is the argument for consistency before we part with the Amendment in one way or another.
The LORD CHANCELLOR: My Lords, I confess that I also thought and have assumed that this Amendment was directly interrelated with Amendments Nos. 12 and 33 and that it would enable
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us to deal with the general question of the onus of proof at one and the same time. I confess that that is the approach I have made to the consideration of Amendment No. 8 and I would think that that is a convenient course. Perhaps the noble Earl, Lord Selkirk, would indicate whether he is, so to speak, taking a stand on a question of principle and distinction between Amendment No. 8 and the others or whether he would not agree that it would be convenient for us to discuss the general principle at one and the same time while taking a decision upon them at the appropriate intervals.
The Earl of SELKIRK: I think that this case is totally different from the others and that the word, "consistency" seems to me to have no bearing on it whatsoever. However, if the noble and learned Lord wants to do so, I have no objection. If he has no argument to put on this, then will be please give me the Amendment?
The LORD CHANCELLOR: My Lords, my proposal in this regard is to leave the Bill as it is. There then will be a consistent provision in the Bill for putting the onus of proof on those who seek to rely on the exclusion term in the contract. If it would be convenient for me at this stage to explain why we should do so, I should be willing to embark on that at this moment. I suggest, with respect, that that is the better course. There is a history to this matter of the duty of the burden of proof in the context of the reasonableness test. The history of the matter is as follows. Perhaps I ought to explain what I have just been reminded about. The Bill as it stands now does not change the law and we see no reason for amendment of the 1967 Act. If I may, I will come back to the general matters I was dealing with. When we considered the question of the burden of proof of reasonableness in Committee, there were three alternatives before us: the Bill as it now is, with the burden of proof on the person who seeks to rely on the exclusion term; the Bill as it was when it was originally introduced, with the burden of proof on the person who seeks to upset the term; or an intermediate alternative, which was to have one burden of proof for consumer cases, and another for cases not

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involving consumers. That last suggestion, the so-called "split burden", attracted very little support in Committee. I submit that the House should now decide which of the first two alternatives should be applied. This is the view which the noble and learned Lord, Lord Hailsham of Saint Marylebone, took in Committee, and it is a view with which I agree.
The noble and learned Lord suggested in Committee that the right course for the House to pursue would be to decide on this question irrespective of Party politics and upon a free vote, and I agree with that because there is no dogma on any side on this matter. This would be convenient, as there has frankly been a certain amount of shifting of ground over the course of the Parliamentary passage—
The Earl of SELKIRK: My Lords, I do not want to interrupt the noble and learned Lord, but I moved a very limited Amendment. I have not spoken to the other Amendment. This being Report stage, I am inhibited from speaking more than once. I feel slightly embarrassed; I have not moved the Amendment to which the noble and learned Lord refers.
The LORD CHANCELLOR: My Lords, I do not want to embarrass the noble Earl. What I have said in reply to his limited submission on Amendment No. 8 is that the Bill as it stands does not change the law. If I may say so with respect, it is for the noble Earl to indicate why he wants to amend the 1967 Act.
The Earl of SELKIRK: My Lords, I do not want to press this; I have said I do not think that this is all that important except in so far as consistency is concerned. It is curious if the law is not being changed because that is exactly what happened in the other place; it was changed from one side to the other. It was changed from what I regard as the normal, ordinary procedure of law to the procedure which is not normal. If the noble and learned Lord feels that he wants to retain consistency, I must say that, if this is to be regarded as consistency, I object to it. However, I would rather take the argument on the main clause. This particular clause is not any part of
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the report of the Law Commissions of England and Scotland. It is something which is entirely separate and which has been imported into the Act. Therefore, many of the arguments in regard to this Amendment do not apply, though they will apply to the other Amendments. Therefore, I would rather take the argument on the Amendment which comes later than on this one.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, may I, with the leave of the House, make a suggestion? I had thought, and apparently the noble and learned Lord on the Woolsack had thought, that this simply involved the same point as the other Amendments. It was obvious to me from the way in which the Amendment was moved by my noble friend that he does not think that that is so, and that there is a separate point involved in the proposed text affecting the Misrepresentation Act 1967. I wholly agree with my noble friend that it would be much tidier if we decided the question of principle first, and that means postponing the discussion until we come to deal with the other Amendments. But perhaps the noble and learned Lord can tell us that he will look at this between now and Third Reading and, if there is a separate point, perhaps he will write to my noble friend and me indicating what the point is and how he views it. In the meantime, the House would be assisted in its business if my noble friend withdrew his Amendment at this stage without prejudice to what he may want to do on Third Reading.
The LORD CHANCELLOR: My Lords, I am very happy to follow the suggestion that the noble and learned Lord, Lord Hailsham of Saint Marylebone, has made. Indeed, I was about to make it before he so helpfully intervened. I hope that the noble Earl, Lord Selkirk, will be assured that he will not be prejudiced as regards the consideration of this point. If correspondence does not satisfy him, he can return to the matter on Third Reading. I should not want to embarrass him by giving an advance version of the opponent's view of the question of principle, and we look forward to hearing him in due course. In the meantime, if he sees fit to withdraw this Amendment, I shall be happy to proceed as has been suggested.
The Earl of SELKIRK: My Lords, I thank the noble and learned Lord the Lord Chancellor for what he has said. I am happy to withdraw the Amendment on the understanding that it does not prejudice any other decision to which the House may come at a later date. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
The LORD CHANCELLOR: My Lords, Amendment No. 8 is withdrawn. Amendment No. 9 is in the name of the noble Lord, Lord Lyell.
Lord LYELL: My Lords, I shall certainly have something to say when the noble and learned Lord has spoken; but I think that it would be presumptuous for me to adopt the posture of the noble and learned Lord on the Woolsack at this stage in my career!
The LORD CHANCELLOR: My Lords, it is apparent that I have now moved into the "Department of Utter Confusion", from which I hope to escape at the earliest reasonable opportunity!
3.17 p.m.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 9:
After Clause 9, insert the following new clause:
Arbitration of differences (consumer dealings)
.—(1) As against a person dealing as consumer, an agreement to refer future differences to arbitration cannot be enforced except—

(a) with his written consent signified after differences have arisen; or

(b) where he has himself had recourse to arbitration in pursuance of the agreement.

(2) Subsection (1) does not affect—

(a) the enforcement of arbitration agreements to which section 1 of the Arbitration Act 1975 applies (that is, arbitration agreements other than "domestic" within the meaning of that section);

(b) the resolution of differences arising under any contract so far as it is, by virtue of section 1(2) and Schedule 1, excluded from the operation of sections 2, 3, 4 or 7.

The noble and learned Lord said: My Lords, this Amendment relates to arbitration and, when we were considering this matter in Committee, I gave notice that we were contemplating the introduction of an Amendment to Clause 12 so that any agreement requiring a consumer
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to submit future differences to arbitration would be unenforceable unless the consumer consented to arbitration. This is the proposal which is now before your Lordships. I asked for comments on the proposal, as indeed did the Minister of State for the Department of Prices and Consumer Protection some weeks ago in another place.
During the debate which we had here, the noble and learned Lords, Lord Hailsham of Saint Marylebone and Lord Denning, spoke warmly in support of arbitration and against the proposal. I acknowledge with respect their learning and experience; but I venture to question whether they are right on this matter. The fact is that the Amendment would not in any way interfere with the process of arbitration as such. It would not make arbitration more difficult to administer; it would not make it less available. Were it to do any of those things, I should not support it. I believe arbitration to be an excellent way of settling a dispute; indeed, in some cases, arbitration is the best way of settling a dispute. The reputation that British arbitration has is due in no small part to the standards set and upheld by the Institute of Arbitrators.
I should also like to make it plain that this Amendment will not in any way interfere with the arbitration machinery in the county courts which has been such a warmly welcomed feature of recent reforms in the administration of justice. What concerns me is not that a consumer may be offered arbitration, but that it might be forced upon him when, for whatever reason it might be, he would rather go to court and have the dispute settled in court. All the Amendment would do is to ensure that, when a dispute arises, a consumer will be free to choose to go to court or use the arbitration service offered.
The Director General of Fair Trading believes that, in many cases, arbitration is preferable to going to law; but, in codes of conduct negotiated by his office, the consumer always has the choice. Once the choice is made to use arbitration, of course the ordinary law on arbitration applies. I hope that your Lordships will agree that the consumer's right to go to court rather than to use arbitration is not something which ought to be taken away from him by a discreet clause in a contract.

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If arbitration is cheaper and easier than going to court in a given case would be, and if a consumer has faith in its impartiality, then he will choose it. But, until the dispute has arisen, he should not be forced to decide which he prefers. This Amendment, I submit, safeguards a fundamental freedom of choice without in any way undermining or interfering with the normal process of arbitration, and I invite your Lordships to accept it.
3.20 p.m.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, let me, first of all, make two points. The first is that this matter is, of course, absolutely non-Party. There is no possibility of whipping on this and if a Division were to take place it would be an absolutely free vote. In the second place, I should disclose an interest in that I am a Fellow of the Institute of Arbitrators, and not just an honorary Fellow but, at any rate theoretically, a practising one who pays a subscription. So I have a direct financial interest although it is a pretty unusual one.
Having said that, I am myself persuaded that this proposal is a retrograde step. May I say just a word by way of introduction. Arbitration has been introduced into this country very slowly and rather hesitantly because of the jealousy of the courts in preserving their jurisdiction and their doctrine that to exclude the jurisdiction of the courts is a contract against public policy. I am speaking, of course, of the law of England. I am not sure that I know exactly what the history of the law is in Scotland.
From 1889 onwards, arbitration has been compulsory in a slightly modified sense. If you agree to refer disputes to arbitration—future disputes or actual disputes—and then bring an action in the courts contrary to your agreement to refer to arbitration, the courts still have jurisdiction to entertain that action and they occasionally do so. But under the provisions of Section 4 of the 1889 Act, which has since been replaced by subsequent Statutes, and ever since, the courts stay the action pending the arbitration as a matter of common practice, because they have found in practice both that arbitration is convenient in many circumstances—which the noble and learned Lord has
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accepted to be the case—and also that people on the whole should be kept to their bargains, and where bargains are to refer to arbitration not less than in the case of other bargains.
Not only has that been the case, but subsequent commercial practice has been safeguarded expressly in the Amendment put by the noble and learned Lord, but none the less giving an indication of what international opinion is about the subject: that we have entered into a number of international commitments by Convention to make arbitration virtually compulsory where the parties have so agreed, without even the degree of discretion which our own domestic law has retained since 1889. So the tendency has been absolutely consistent, up to and including the moment at which I am speaking, to advance arbitration and to compel parties who have undertaken to submit their disputes, present or future, to arbitration, to abide by their decision.
There is, therefore, no absolute right to take things to court at the moment if you have agreed not to take them to court, and up to this moment that has been considered to be good public policy, either in domestic law, subject to the overall supervision of the court, or in so much of international law as the Conventions apply to, compulsorily and without the option. The noble and learned Lord, by a side wind, is now proposing to reverse the process on a limited class of contract. It is that which I describe as retrograde and retrogressive, since I believe that it is.
This Bill, which has had a fairly wide blessing during its passage through both Houses and particularly in your Lordships' House, does in fact protect consumers and others from the small print of clauses exempting suppliers of goods and services from the consequences of their negligence or breach of statutory duty. That is the purpose of this Bill and there is one clause—Clause 4, I think—which extends to clauses imposing an indemnity upon the user of goods and services so that they are also subject to the reasonableness test. But, at any rate prima facie, the agreement to refer future disputes to arbitration is not within the scope of what has hitherto been supposed to be the purview of this Bill at all. It came in rather later without, I think, adequate consideration from the Govern-

25
ment, and is now on the Report stage in the second of the two Houses through which this Bill must pass, proposed to be inserted by the Lord Chancellor.
I am myself convinced that, although it is a matter of limited importance, this is a retrograde step. As the noble and learned Lord, Lord Denning, said in the Committee stage when this was first outlined in debate to us, we, as a country, give much less respect to arbitration than almost any other modern industrial, commercial country. This proposal would make us even further out of step than we already are. As I say, nobody can pretend there is the slightest scintilla of Party politics about this—I happen to be speaking from the Opposition Front Bench, but I might equally well be speaking from the Cross-Benches or from the Government Benches so far as the value of my argument is concerned—but, as at present advised, I must tell the House that I am opposed to this Amendment.
Viscount HANWORTH: My Lords, I rise to support this Amendment. The noble and learned Lord, Lord Hailsham, has said that he considers it to be a retrograde step but, with all due respect, I do not think he has really made a very strong argument as to why it might be. His argument, if I am correct, is simply to say that we ought to be more in line with Europe. There are a great number of things, of course, which are not in line with Europe—
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, with respect to the noble Viscount, my main argument was that people should be held to their bargains and, if they promise to do something, they should keep their promise unless there is good reason for not holding them to it.
Viscount HANWORTH: My Lords, I was not for one moment disputing that. What is happening, of course, is that they are in a contract, and they really do not have a choice at all. If you are going on a holiday, for example, you are made to sign a form and we all know it is not very easy to cross out certain terms: it is just not accepted.
I, for one, would think that arbitration in many cases is excellent, but we have a very good alternative which in certain cases favours the consumer even more.
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There are 300 county courts which are able to operate the small claims procedure, and in certain cases that is cheaper. Moreover, it may be that arbitration occurs at some place far more distant than the county court would be, and there are cases of arbitration where there has to be documentary evidence. We all know there are a number of people who are not so good on paper, whereas if you go along to the county court you can get help with your case. You do not have to rely solely on the documents you produce. So what I am saying is that this Amendment is right. It leaves a choice to the consumer. I think that that is common sense and t he way that it ought to be.
Lord DARLING of HILLSBOROUGH: My Lords, I too should like to support the new clause. I agree with the noble and learned Lord, Lord Hailsham, that it would have been far better if there had been no reference to arbitration in the Bill. However, now that the reference to arbitration is in, I think we must look the facts in the face.
The new clause refers to persons dealing as consumers. In my view all the noble and learned Lord's argument would rightly be directed at an arbitration clause in a contract where the contract was between two traders or two manufacturers, hut not between manufacturers, traders and consumers. Many of the arbitration clauses which consumers sign—as my noble friend has just said—without fully realising the import of the arbitration clause, are denying those consumers the right kind of arbitration. They are accepting terms of arbitration which are, in fact, laid down for them by the traders' organisations. They themselves have had no part at all in drawing up the arbitration contract. In these circumstances, as the reference to arbitration is in the Bill I think that, in all fairness to the consumers and to the general public, it should be made perfectly clear that they have a right to refuse the arbitration terms that are laid down, if they wish, and go to the county court.
The argument that has just been put forward about convenience is most important. There are about 300 county courts in this country. I speak only for England and Wales again, but very few people are far away from a county court. Most of the arbitration cases that crop

27
up in implied contracts between a trader and a customer involve the customer, if the matter goes to arbitration, in travelling to London, getting documentary evidence and doing a great deal of hard work without the help that he ought to receive—in cases like this, the kind of help that he receives from the registrar of a county court. Therefore, I sincerely hope in justice and equity that the House will agree to this new clause.
Lord HAWKE: My Lords, I support my noble friend as regards this matter. In the distant past I used to be involved in selling cargoes of cotton and wool et cetera and where there was an arbitration clause one naturally expected, if there were a dispute, to go to arbitration. Any other course, such as this Amendment would provide, would have enabled a slippery customer to avoid payment while a long protracted law suit took place. All these big commercial contracts on commodities and so on are done on extremely fine margins, and on the expectation that one will be paid immediately or else receive very quick justice from arbitrators who always know the subject. Quite frankly, in matters of that kind I should much prefer to put myself in the hands of arbitrators than the courts, because I think that one would be more certain to get justice as it is known to be done in the particular trade in which one is engaged.
Lord DRUMALBYN: My Lords, I certainly agree with what my noble friend Lord Hawke has said in the realm of business. However, the problem is that a consumer will see a reference to arbitration in a contract; he will not really know what it entails or involves, but will put his name to it. In these circumstances, it seems to me that, certainly unless the meaning of arbitration is spelt out in the contract, the Amendment which the noble and learned Lord has moved should apply. However, it may be that there should be an exception where exactly what is meant by arbitration is spelt out in the contract.
Lord JACQUES: My Lords, I should like to follow up what the noble Lord, Lord Drumalbyn, has said. The position is quite different between when it is a consumer contract and when it is a
28
commercial contract. The Amendment deals only with consumer contracts. Let us consider for the moment its relevance to the Bill. The Bill is concerned with the small print terms which have reference to future liabilities such as negligence or breach of contract. One type of term found in small print is that all disputes in the future will be referred to arbitration. If it is relevant for the Bill to deal with the terms which are concerned with negligence and with breach, it is relevant for the Bill to deal with the terms that force upon the consumer arbitration as regards future disputes. The consumer view—it is pretty unanimous among the consumer organisations—is that at the time when the dispute arises the consumer should have the choice whether he goes to arbitration or to the court and should not have forced upon him something which has been in small print in a notice or a contract.
The LORD CHANCELLOR: My Lords, I think that it may well have been my fault that, in moving the Amendment, I did not explain sufficiently clearly its limited scope. It is limited, as has been said, to consumer agreements. It reads:
"As against a person dealing as consumer, an agreement to refer future differences to arbitration cannot be enforced except—

(a) with his written consent signified after differences have arisen; or

(b) where he has himself had recourse to arbitration in pursuance of the agreement".

I respectfully agree with the realistic way in which the noble Lord, Lord Drumalbyn, viewed the position of the consumer in this matter. In fact, for the consumer it would be in most cases a great advantage to go by way of arbitration in the county court, but with the right, if he wishes to do so, of course, to go to arbitration without the court arrangements.
The advantage of going by way of arbitration to the county court would be, as has been pointed out by my noble friend Lord Darling and, indeed, by the noble Viscount, Lord Hanworth, the excellent procedures which now exist for arbitration in the county court and which enable these disputes to be disposed of without the incurring of legal costs. If it went into ordinary county court proceedings outwith arbitration—strictly speaking, under the court arrangements—the consumer might well be entitled to

29
legal aid to which he would not be entitled in arbitration proceedings. He would also be entitled to the economies of scales of costs in the county courts, which are relatively cheap.
The emphasis of the Bill, frankly, is to help and protect the consumer. I should have thought that it is reasonable that he should be able to decide not at the time of entering into the contract, when the arbitration provision itself may be part of the small print, but when a dispute or difference has arisen between him and the supplier. At that stage he should be free to elect what he wants to do. That I regard as a fundamental principle.
Contrary to the view of the noble and learned Lord, Lord Hailsham, I do not regard this as a retrograde step. On the contrary, it would be in keeping with the whole trend of the use of arbitration through, and under the aegis of, the courts which have already helped thousands of people and which I suspect the noble and learned Lord himself would wish to encourage. I hope that, in the light of this explanation and the speeches that have been made, the noble Lord, Lord Hawke, will now be satisfied that it does not except his worry about commercial contracts at all because it does not affect them. I hope that the noble and learned Lord, Lord Hailsham, in view of the weight of opinion —or at least the quantum of opinion—will be disposed to withdraw this Amendment.
Lord McCLUSKEY: Before the noble and learned Lord, Lord Hailsham, replies, I should like to point out that I think that there is no separate Scottish point. Noble Lords will see that Amendment No. 24, to which we shall come, introduces for Scotland a similar new clause. I shall be moving that Amendment formally when we come to it. However, perhaps if we look at its wording, it will help to make the points which certain noble Lords have made. It refers to "an agreement to refer future differences to arbitration". The point of timing is, on the merits, surely all-important. When two commercial enterprises enter into a contract containing an arbitration clause, they both contemplate that in the future differences may arise, because that is what experience tells them. So they provide for a method of settling them, and they do it with their eyes open. But when a person who is simply a
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consumer enters into some kind of deal, he is not thinking of how things go wrong. He just wants to take his goods away, or to have the service. Therefore, there is a justification for drawing this distinction, and I support it by reference to the language in the Scottish new clause.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, by leave of the House, it will probably save time if I say a couple of words now. I still am completely unconvinced about this, but there are overwhelming arguments why I should not divide the House about it. I am not saying a word against the county court arbitration system; indeed, I think that the noble and learned Lord on the Woolsack might have remembered that I invented it. All the same, I think that this is a retrograde step, but I recognise that a very large number of Peers might come into the Chamber and vote with me if I were to divide the House, and the preponderance of speeches in the Chamber has been on the side of the Government, even if I discount the two Ministers who have spoken. In those circumstances, and having made my protest articulate, I do not propose to divide the House against the noble and learned Lord.
The LORD CHANCELLOR: My Lords, I apologise to the noble and learned Lord for not acknowledging the paternity of the arbitration court procedure. He founded it, and he is glad to know that his offspring is doing very well.
On Question, Amendment agreed to.
Clause 10 [The "reasonableness" test]:
3.42 p.m.
Lord LYELL Lord LYELL moved Amendment No. 10:
Page 5, line 34, at end insert ("only").
The noble Lord said: My Lords, it may be to the convenience of the House if, with this Amendment, I speak to Amendment No. 30 to Clause 22 which covers the analogous Scottish point. The purpose of the two Amendments is to attempt to remove an inconsistency in the Bill. Clause 22(1) applies to Scotland, and provides that in applying the test of reasonableness some

31
"regard shall be had only to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties to the contract at the time the contract was made".
Clause 10(1) applies to England and Wales, and omits the word "only". The reason for raising these two Amendments again is to seek a full explanation from the Government. My Lords, I beg to move.
The LORD CHANCELLOR: My Lords, this Amendment is, in the view of the sponsors and of myself, unnecessary and, I submit with respect, undesirable. It is true that, on first sight, the formulations of the test of reasonableness in Parts I and II appear to be inconsistent, but they are not. In no part of the United Kingdom will the courts, in applying the reasonableness test, be permitted to have regard to circumstances other than those mentioned in Clause 10(1) and Clause 22(1).
For England, Wales and Northern Ireland, the circumstances to which regard shall be had are expressed as part of the test. Clause 10(1) sets out the requirement of reasonableness. The requirement is,
"that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made".
That is the test and, obviously, the court is not permitted to have regard to any other circumstances.
The Scottish provisions are formulated somewhat differently. The test whether it was fair and reasonable to incorporate the term is set out in Clauses 15, 16, 17, 19 and 21. Clause 22 provides a general explanatory provision, and provides that in determining whether the incorporation of the term was fair or reasonable regard shall be had only to certain circumstances. Noble Lords may well agree that the word "only" is necessary there. If Amendment No. 30, to which the noble Lord has already spoken, were accepted and the word "only" was deleted, it could be argued that it was open to the courts to have regard to other circumstances. To sum up, I submit that the word "only" is unnecessary in Clause 10, but is essential in the different context
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of Clause 22. In those circumstances, I hope that the noble Lord will not press his Amendment.
Lord LYELL: My Lords, I should like to thank the noble and learned Lord for his very full explanation of my semantic point. I have understood about nine-tenths of what the noble and learned Lord said, and I am sure that he and the House will be happy to allow me to study the remaining portion of what he said at my leisure, and not at the leisure of the House. My Lords, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
3.47 p.m.
Lord HAILSHAM of SAINT MARYLEBONE Lord HAILSHAM of SAINT MARYLEBONE moved Amendment No. 11:
Page 6, line 5, at end insert—
("(3A) Where by reference to a contract term or notice a person seeks to restrict liability to a specified sum of money, and the question arises (under this or any other Act) whether the term or notice satisfies the requirement of reasonableness, regard shall be had in particular (but without prejudice to subsection (2) above in the case of contract terms) to

(a) the resources which he could expect to be available to him for the purpose of meeting the liability should it arise; and

(b) how far it was open to him to cover himself by insurance.")

The noble and learned Lord said: My Lords, I think I can propose this rather technical but important Amendment in rather few terms, because it only takes up a controversy which we had on Second Reading and pursued at rather greater length in Committee. If the House will forgive me for referring back to it, both the noble and learned Lord, Lord Denning, and I were concerned on Second Reading to deal with contracts, possibly by individuals or partnerships, where there was no possibility of insurance, and where, without going bankrupt, it might well be beyond the capacity of any single person without limited liability to meet the obligations which might arise.
I proposed an Amendment in Committee which would have dealt with that by way of adding to the guidelines in the Schedule. This was technically defective, for reasons which we discussed in Committee; so I withdrew the Amendment, the noble and learned Lord proving—I will not say unexpectedly or unwontedly

33
—particularly co-operative and sympathetic to the views behind the Amendment which I was then proposing. Since then, I have taken a certain amount of advice and, in particular, I should like to give a word of thanks to the noble and learned Lord himself and his staff for the assistance which they have given to me. This is the best that I can do. The draftsmanship is not mine, and that I would add as a word of commendation of it. I hope that, having pursued the matter thus far, we have now come near to a point where we are going to put something on the Statute Book which will be an improvement. My Lords, I beg to move.
Lord JACQUES: My Lords, we are grateful to the noble and learned Lord for pursuing this matter which, as he said, was raised by himself and the noble and learned Lord, Lord Denning, on Second Reading. I am happy to tell the House that the Amendment proposed by the noble and learned Lord has the support of both the sponsor and the Government, and I commend it to the House.
On Question, Amendment agreed to.
3.50 p.m.
The Earl of SELKIRK The Earl of SELKIRK moved Amendment No. 12:
Page 6, line 6, leave out subsection (4).
The noble Earl said: My Lords, the purpose of this Amendment is to restore the onus of proof to those who challenge as opposed to those who are challenged, as it at present stands in subsection (4) of Clause 10. Secondly, the point which has been made frequently is that there should be a division between consumers and business. As the noble and learned Lord the Lord Chancellor has told us, this point has not been accepted. Therefore, what is now proposed in the Bill will affect both consumers and all business interests, and it is the latter to which I want in particular to draw attention. What is curious is that no less a person than the Promoter of the Bill elsewhere and two Ministers have suggested that the issue should be further considered in your Lordships' House—that is, Mr. Fraser, the Minister of State, Department of Prices and Consumer Protection, and the Lord Advocate.
To go back, it is worth telling your Lordships that the Royal Commission
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were set the task of seeing how they could check exemption clauses. This is simply a label of convenience rather than any precise designation. It is all very well for us to think of a man who buys a ticket for a steamer, and the company repudiate any liability for damage or injury, whether or not it is caused by the negligence of their staff. This can be so easily struck at by the Bill that in a sense it is quite irrelevant to the Amendment. The Law Commission examined the position and how best they could control this kind of activity. They thought of imposing a total ban. However, they said that this would be too rigid. The Law Commission also considered going to the Restrictive Practices Court, but they thought that that would not work, either. They thought of prior validation by the Director General of Fair Trading and they thought, too, of giving very wide powers to Departments to lay down specific regulations. They discounted all those courses in favour of the principle of the Bill as we now have it—that is to say, a judicial decision regarding the reasonableness and fairness of the arrangements—but they were deeply concerned with several propositions which come into the question.
The first is interference with the freedom of contract, a matter of enormous importance to business in general. Secondly, on account of the uncertainty of the law there would certainly be marginally different opinions. Thirdly, there was the unreliability of contracts. The Law Commission had to balance these factors against the relative bargaining strength of the different parties, which, if one thinks about it, requires a very delicate balance, one which nobody should hurriedly conclude he can hold. Nobody has gone into this problem more thoroughly than the two Law Commissions who worked in very close concord, except for two or three rather minor points. I am going to read their conclusions which appear in their report at page 66:
"Both Commissions concur in recommending that a reasonable test is the appropriate form of control in these cases, and it is for the party challenging the exemption clause to show that it is not fair and reasonable".
This is a decision made by the parties who have examined the problem more closely than anybody else in the country. I believe I can say that in Scotland they are men who are held in the highest

35
respect. I cannot speak of England, because I do not know, but I believe that exactly the same remark can be made about them.
Let us consider for a moment what happened. First, there was a private Bill, but there was no Second Reading debate. There was a short discussion in Committee which lasted just over 15 minutes. This discussion was largely based on the totally false assumption that they were speaking about consumer contracts. This is quite untrue; they were speaking about a wide range of contracts except those excluded by Schedule 1. A Division was taken, and if one adds up those voting on both sides they amounted to rather less than two figures. The Division put the onus of proof on to the party challenged to justify his position. After that, the alterations were made to the Bill, including the one to which I have just referred, purely on the grounds of consistency, without any discussion taking place.
I think that the decision to put the onus of proof on to the party who is challenged is a fundamentally dangerous principle so far as those who are engaged in business are concerned. Instead of a contract standing until it is challenged, no contract stands until it has been upheld by a judicial decision. This seems to me to place a fundamental difficulty in the way of assurance regarding the world of contract, with minor exceptions which may or may not arise.
Noble Lords may say that this applies to exemption clauses. An exemption clause is a condition. Almost anything might be interpreted as an exemption clause. I will give one or two examples, because I do not believe that anybody knows quite how far this Bill will penetrate, and it is for that reason that it should be regarded with considerable caution. Perhaps I may give indemnity as an instance. If a person discharges an indemnity by means of an extrajudicial settlement, that settlement can be challenged in the courts. At least, that is my interpretation, although the noble Lord may correct me if I am wrong. It means that if anybody enters into an agreement to pay damages, that agreement can be overturned by the court. I imagine that the result will be that there will be no extra-judicial settlements and
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that delay and public expenditure will be involved in going to the courts. I believe that this is quite dangerous.
I am thinking also about continuing contracts. It is very common for us all to have continuing contracts for deliveries, on condition that the price will go up, if necessary. We all know only too well that that is exactly what is happening. That provision is struck out of the Bill by Clause 3. Anybody can challenge it for a number of different reasons, and if he refuses to pay the bill he will have to be brought before the court. This will happen very often, simply as a means of evading the contract as a whole. Clauses providing for liquidate damage can also be struck out because the damages may not be considered to be enough. These are just some of the problems and I have no doubt that, using their imagination, most noble Lords can think of a range of others which quite rightly could be mentioned.
For that reason, it is a matter of principle running through the whole range of the law of contract whether this is the right way to approach it. The law respects small people just as it respects large people. It would undoubtedly encourage litigation which I should have thought should in every way be discouraged. I am putting forward the point of view of business and contracts. I do not believe that changing the onus of proof will damage the consumer. I can see no reason why it should. There could be no difficulty in the case of the blatant example I gave earlier, no matter where the onus of proof lay. I do not believe that it would create any great difficulty. They would have no difficulty over papers. Certainly they can be provided very easily in the Scottish courts. In the end, what will happen is that there will be insurance against this liability and, directly or indirectly, the premiums will be charged to the consumer. I suggest, therefore, that very great care needs to be exercised over changing a long established procedure in the courts without adequate reasons being put forward.
So far as I know, the Law Officers in the other place certainly did not think that this would be a good change to make. May I add that on the whole we

37
are a consumer community. Probably that goes to the root of some of our present economic problems. This is placing an additional burden on those who produce and those who distribute goods in this country, and if that happens it is the consumer who will suffer in the end. We should be very rash if we added to the work of those who are involved in the productive, executive and economic work of this country without putting forward any convincing arguments. I believe that the normal procedure is right, and that is the procedure supported by both of the Law Commissions. I believe that we go against that procedure at our peril. I beg to move.
4 p.m.
Lord JACQUES: My Lords, I should like to put the layman's point of view on this question. If the consumer suffers damage it is his responsibility to show that such damage is due to negligence or some other similar act on the part of the other party to the contract. Quite properly it is his responsibility, so that the principal onus of proof rests upon the consumer. But once he has proved his point, if the other party to the contract comes along and says, "But I have a fair and reasonable exemption clause," it is surely up to that other party to show that his clause is fair and reasonable, and it is unreasonable to expect the consumer to have to show that that exemption clause is not fair and not reasonable. It is unfair because the other party knows exactly why he put the exemption clause into the contract. He knows the actual circumstances, he knows the facts about the case; he also knows the technical arguments behind the need for an exemption clause. To throw that burden upon the consumer, who cannot be familiar with those technical circumstances, is completely unreasonable and I hope the House will reject this Amendment.
Lord AIREDALE: My Lords, I should like to support the noble Lord, Lord Jacques, in what he has said. I think it is useful to look briefly at the Long Title to this Bill. It is
"An Act to impose … limits on the extent to which … civil liability … can be avoided …"
In other words, it is a Bill to impose limits on the extent to which one can set
38
oneself outside the reach of the law. If you seek to say: "In this instance I can properly set myself outside the reach of the law because what I am doing is reasonable," it seems right that the burden should be upon you to assert and to prove that what you are doing is reasonable, in order thereby to set yourself outside the reach of the law.
Baroness PHILLIPS: My Lords, I too should like to support the noble Lord, Lord Jacques. While I appreciate that this is a highly technical Bill, basically it is a consumer Bill. I am sorry to disappoint the noble Earl, Lord Selkirk, but the people who are behind this were seeking to put right something which has caused a lot of discomfort—I put it no higher than that. To give an instance, yesterday I was at a swimming pool where it is obligatory to hand over all personal possessions in a basket and they are then placed in the care of a cloakroom attendant. A very large notice tells you that the authority is absolved from all responsibility for fire, loss, acts of God or anything else, so if your clothes and possessions disappear there is nothing you can do about it. I cannot see why, in that instance, the consumer should be asked to prove that this is an unreasonable exemption clause, and I suspect that this is the kind of action that will be taken.
Lord BOYD-CARPENTER: My Lords, the noble Lord, Lord Jacques, did not do complete justice to the argument put by the noble Earl, Lord Selkirk. It will be in the recollection of the House that the noble Lord addressed himself solely to the question of the consumer, but as I understand the position the changing of the onus of proof applies not only to the strict consumer type of case but also to the ordinary business deal. It may well be your Lordships will feel that different considerations—if it be technically possible so to draft, and I stress that—should apply in those two cases. But with great respect to the noble Lord, Lord Jacques, he cannot just brush aside my noble friend's argument that this reversal of the normal elements of proof in strictly commercial and business cases at least requires some fairly solid justification.
With great respect to those who have spoken, I have not heard such justification. Therefore, as one who has been listening

39
to this debate and who came in with a wholly open mind, my disposition now, in the absence of any real evidence to the contrary, is to support my noble friend, who bases himself on the ordinary operation of the law that those who assert something have the onus of proof, and he is entitled to have a massive argument produced to show that in this particular case, because of the purposes of this Bill, that view is wrong. So far as the business type of case is concerned we have not had a scrap of evidence. If the matter remains that way and if my noble friend wishes to divide the House, I shall be with him in the Lobby.
Lord JACQUES: My Lords, before the noble Lord sits down I should like to point out that if there is a Division and he supports the Amendment he will be voting against the conception which I put to the House in regard to the consumer.
Lord BOYD-CARPENTER: My Lords, with great respect to the noble Lord, that is absolutely wrong. The noble Lord having failed to give any argument whatever about the commercial case, cannot really get out of it by then saying that those who take a different view from him are not supporting the consumer. It really is up to the noble Lord to answer his part of the case and not to indulge in that sort of argument.
Lord MORRIS of BORTH-Y-GEST: My Lords, I find myself very much in agreement with all that the noble Lord, Lord Jacques, has said. It is useful to approach this matter by remembering the situation with which we are dealing. We are dealing with the situation of somebody who is shown to have been negligent; the situation in which somebody is shown to have broken his contract. Also, in so far as it is relevant to refer to the misrepresentation point, we are dealing with somebody who is shown to have been guilty of a misrepresentation.
It seems to me that we are invited by the Bill to make new laws, but we either welcome the general proposal of the law or we take a different view. We could take the view, "Let freedom of contract never suffer any interference". I do not myself take that view. It seems to me that we are giving further validity to a new
40
principle which has crept into the laws enacted by Parliament within the last few years, if somebody wants to excuse himself for his own negligence, if somebody wants to avoid the consequences of his own breach of contract, if somebody has been guilty of a misrepresentation and he says, "Oh, but I have put a clause in my contract saying that I am not to be liable", as I understand it, the principle of this Bill is that that should be allowed only if it is reasonable.
Where should the onus of proof lie? While seeing with admiration the persuasiveness of my noble friend Lord Selkirk, for myself my approach is that one almost follows the acceptance of the principle of this Bill. In the Sale of Goods Act in 1893 there were certain implied terms. If the noble and learned Lord on the Woolsack is going to speak in this debate, I hope he will correct anything that I say that may not be entirely correct. We had the principle in the Act of 1893 that there were certain implied terms. We have lived with that through all the years since 1893, and we have been very happy to do so. They were implied terms of merchantability and quality, fitness for the purpose.
Then, as I follow the argument, after an earlier report from the Law Commission, your Lordships and another place passed the Act in 1973 which somewhat altered the law. Although there had been a provision in the original Bill of Sales Act that it would be possible to contract out of the Act, I think Parliament in 1973 accepted the new principle that there are certain clauses from which people should not be allowed to escape. So in the 1973 Act it was said that a term exempting from liability, under Section 12, was to be void. That is very strong. A term exempting from liability, under Sections 13, 14 and 15, was to be void in the case of a consumer:
"… and shall, in any other case, not be enforceable to the extent that it is shown that it would not be fair or reasonable to allow reliance on the term".
There might have been a question, was it a sale to a consumer; and a subsection in that Act said:
"The onus of proving that a sale falls to be treated for the purposes of this section as not being a consumer sale shall lie on the party so contending".
This also follows very much the line of reasoning that was adopted when the

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Misrepresentation Act was passed. Originally there was no redress if misrepresentation had been innocent. Fraud, of course, was always heavily condemned by any court—there was always liability for fraud—but an innocent misrepresentation gave rise to great difficulty. The 1967 Act removed certain bars to rescission for innocent misrepresentation, and in sonic circumstances, where there had been a contract after a misrepresentation, enabled damages to be given for innocent misrepresentation. Then, by Section 3, it was enacted in these terms:
"If any agreement (whether made before or after the commencement of this Act) contains a provision which would exclude or restrict—

(a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or

(b) any remedy available to another party to the contract by reason of such a misrepresentation;

that provision shall be of no effect except to the extent (if any), that, in any proceedings arising out of the contract, the court or arbitrator may allow reliance on it as being fair and reasonable in the circumstances of the case".
So have we not for some years recognised that people should not be allowed to have complete freedom of contract, for if there is complete freedom of contract, even apart from fraud, one party to the contract is very often at a disadvantage. So we have introduced this principle of accepting what is fair and reasonable.
Your Lordships might say. "No, do not let us interfere with freedom of contract at all". But once we accept that, I for my part would feel it a natural step to say that it is to be justified by the party who comes to court and says, "Look, I have got a term here saying that I am not liable, though I have been negligent" or, "I have got a term here saying that I am not liable, though I have broken my contract"; or somebody may say, "Though I was guilty of misrepresentation, I have excluded liability". I find myself in complete agreement with the argument put by the noble Lord, Lord Jacques, in support of that point of view. Those who would introduce this exemption clause know why they have introduced it; it must be the easiest thing in the world for them to justify it. Is not that the fair way round, for them to justify it? They know the trade conditions. If it is something that is quite clearly fair and reasonable, what an easy task for them
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to show it is so. They have all the ammunition. They know the approach. I, for my part, would feel that it is a reasonable and natural step to say that it is for those who are seeking to rely upon these exemption clauses and who put them into the contract or arrangement to show that they have only done what is fair and reasonable.
The LORD CHANCELLOR: My Lords, the noble and learned Lord invited me to correct him if he was wrong on any matter of law or reference to any Statute. It would indeed be a very bold Lord Chancellor who would venture to do that. It used to be said in the Temple that the judicial decisions of your Lordships' House were infallible because they were final, but in the case of the decisions of the noble and learned Lord Lord Morris of Borth-y-Gest, it was said they were final because they were infallible.
I have given very careful thought to this matter since we discussed it in Committee. We are very grateful to the noble Earl, Lord Selkirk, for raising the issues again. They are not by any means simple, and I certainly do not take a dogmatic view. But having given it further thought, and having heard that explanation given, if I may so, in limpid clarity by the noble and learned Lord who has just spoken, I have come down in opposition to the proposal of the noble Earl, Lord Selkirk.
Your Lordships may like to know that since the Committee stage I sought the views of the two Law Commissions. The Law Commission for England and Wales saw much force in the arguments in another place against the burden of proof in the Bill as it was introduced originally in relation to Clause 2, the burden of proof resting on the person who seeks to upset the reasonableness term, at least where the victim was a consumer. I venture to think this is the area of difficulty: whether it should be extended across the board to the business contract as well. In their view, in the consumer context good arguments have been put forward for placing the burden on the person who relies upon the exemption clause. They took the view, and we have just heard it expressed, that the necessary technical and business information will be available to the person relying upon

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the exemption clause, the supplier, and the other party will be unable to challenge it.
This, and the general point that there should be a presumption against the exclusion or restriction of liability as against consumers, led them to suggest that the so-called "split" burden, which has not found favour in your Lordships' House, might be the solution. That, I think, would create a great deal of confusion, and I do not, frankly, think it would be practicable. The view of the Law Commission for England and Wales was that if it was impracticable, as I think the House may well think to be the case, the burden of proof should be placed in all cases on the party relying on the term. They found the analogy of the Misrepresentation Act 1967, and, earlier, the Railway and Canal Traffic Act 1854, to be helpful in this context.
It is right that I should say that the Scottish Law Commission, on the other hand, suggest that the decisions in another place should be reversed, and they have not shifted their ground. They stress that the Bill was put forward on the basis that a clause is valid until it is challenged; reversal of that, as in the Bill as it now stands, might, they thought, lead to an increase in litigation and in uncertainty. If exemption clauses do not have any effect unless they are brought to life in the courts, they thought, parties may refuse to comply with their contracts pending determination of the questions they wish to raise. They thought that the proponent of the term might be put in an unfair position in that he would not know what case he had to meet. They thought that the wide meaning to be given to an exemption clause might increase uncertainty over a wide range of different terms in contracts. Therefore, their conclusion was that the Bill should revert to its original form. I thought it right to inform the House of the up-to-date views of the Law Commissions upon this matter but, as I say, I have given great thought to it since the Committee stage and I conclude in supporting the view that the Bill should not be amended.
But I wonder whether it is primarily a legal issue after all. As I see it—and I think it has been put by the noble Lord, Lord Airedale, in this way—the funda-
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mental question is really whether our sympathies are to lie with the person who seeks to upset his own agreement or with the person who seeks—as the noble and learned Lord, Lord Denning, put it in Committee—to exclude the ordinary liability imposed by law. The noble and learned Lord, Lord Morris of Borth-y-Gest, put it that way just now. In the context of the Bill—which is carefully drawn so as to confer benefits only on persons who are economically inferior or who have suffered as the result of negligent conduct or disregard of basic contractual rights—I come down on the side of casting the burden on the person who is seeking to exclude the ordinary law. At the end of the day, I do not think that there is much dispute about the consumer's position in this context.
I believe that the case for the Bill in the context of negligence is very strong, and it would seem rather odd that a Bill designed in part to remedy the deficiencies in the law which have damaged consumers should cast a burden of proof upon them. As I do not regard the point as being of first importance in the business context, because businessmen are usually sensible about sorting out their differences without recourse to court proceedings, I think that this is an occasion where the arguments in favour of protection across the board should determine the point for the Bill as a whole.
The main argument which has been made against what I contend to be the better course is that, as it stands, the Bill will introduce a great deal of uncertainty. I doubt whether in practice that will arise. The experience that has followed the Misrepresentation Act 1967, where the same onus as is now proposed in the Bill applies, does, I think bear that out—short though the experience since then has been. Accordingly, I do not think that the uncertainty factor is a substantial one in the context of where the burden of proof is placed. The main significance of the burden of proof question is with regard to the pleading part. I am inclined to agree with the noble Earl, Lord Selkirk, about this; that is, that in the outcome of a case it may not be of determining influence. However, on the whole, my view on this matter—and, of course, it would be a matter for a free vote—is that, if the

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noble Earl presses his Amendment, it should be opposed.
Lord ROBBINS: My Lords, I should greatly reproach myself if I was thought to be opposing a measure designed in the interests of consumers. I freely admit that, in that respect, it may well be—as is apparently admitted by the Law Commissions of England and Wales—that the law needs amendment. But, with very great respect, and speaking as an amateur, I do not think that the noble and learned Lord the Lord Chancellor or the noble and learned Lord, Lord Morris of Borth-y-Gest, have completely met the arguments put forward by the noble Earl, Lord Selkirk.
I believe that, if the clause as at present drafted is passed, a great element of uncertainty as regards business transactions will necessarily be introduced. I believe that, as a consequence of that, there will be a great extension of insurance against such contingencies, and in that event the consumer will definitely suffer. Therefore, I humbly submit that there is a case for further consideration as to whether a distinction cannot be drawn between the ordinary course of business contracts, which I think can be left to take care of themselves within the framework of the law as it at present exists, and such cases as the noble Baroness, Lady Phillips, mentioned, where the unsuspecting consumer may easily be entrapped by notices and representations which obviously are not designed to carry the weight in the mind of the consumer which they should.
4.26 p.m.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I rise only to confirm what the noble and learned Lord the Lord Chancellor has said about the character of the vote, if there is to be a vote. It will be entirely free. It is very important that I should emphasise that, because, of course, the majority of persons inside the Chamber—and possibly outside the Chamber too—are members of my own Party. Therefore, it is absolutely vital that I should underline the fact that any vote that is taken should simply be a question of judgment as to the party upon whom the burden of proof in the se cases should rest. It is not at all an easy question to answer. Any attempt to
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answer it in a facile or superficial way is really doomed to failure.
Perhaps I could recall the history of the Bill. It has now been, I think, universally accepted that attempts by traders and suppliers to exempt themselves from the consequences of negligence, breach of contract—that is, breach of the terms of a contract which would otherwise be implied if nothing was said—or breach of statutory duty where that can be contracted out, have been a considerable abuse. The object of this legislation is to get rid of the abuse in the interests of those who receive goods and services, whether as consumers or sometimes in other capacities. There, I think, we were all at one.
But the particular road by which both Law Commissions have chosen to achieve this end is by imposing a test of "reasonableness" and not the various other alternatives which at some other stage of the debate were advanced for their consideration. On Second Reading, I expressed considerable caution about this test of "reasonableness", because the difficulty about the burden of proof arises not from the requirement that those who wish to escape the ordinary implications of law should have to prove the route by which they escape those implications. I believe that it arises from the difficulty of choosing "reasonableness" as the test and then saying to the person who wishes to escape from the ordinary implications of law, "You have got to prove that what you were doing is reasonable" when, as a matter of fact, that is one of the most difficult things to prove about anything in any circumstances that one cares to enumerate. That is where the legal difficulty is involved.
At that stage, both the Law Commissions and the law officers were in favour of the more cautious line of approach. They were beaten out of the field by the Conservative Party in the House of Commons in a very thinly represented Committee led by Mrs. Oppenheim and supported by the Labour Members of the Committee, so that the law officers received a defeat. This encounter has apparently led to a complete change of heart on the part of the Government, of the sponsors of the Bill and of the English Law Commission, although the Scots, with their character-

47
istic pertinacity, have continued to defend their corner. That is something one can only admire.
In this House the balance of legal talent has undoubtedly been with the Government in their new armour as the gallant protectors of the consumer and not with the Government in their old armour as the protectors of the sanctity of contract. The noble and learned Lord, Lord Denning, in an earlier debate, and the noble and learned Lord, Lord Morris of Borth-y-Gest, in the present debate, in a magnificent piece of legal exposition, have come down on the other side. Thus, the legal balance has rather shifted in favour of the sponsors of the Bill in their present stance.
I am not going to give a conclusive view because, if I began to do so—or even voted in any Division that there might be—I should be accused of departing from the absolute freedom of the Division, which I am particularly anxious to safeguard at the present time. But I would ask those who are so enthusiastic about the Bill as it now stands to bear in mind very carefully what the noble Lord, Lord Robbins, was saying, because, at the end of the day, it is a commercial, not a legal judgment that has to be made.
What are the interests of the consumer? Of course, if somebody has a suit which does not fit, his interest is to rely upon the implied term as to fitness, merchantability and the particular use to which the suit is to be put. The well-known articles of the Sale of Goods Act—which the noble and learned Lord, Lord Morris, inadvertently referred to as the Bill of Sales Act—cover the interest of the consumer in that type of case. But the interest of consumers in any given case is rather more difficult to define. It is that they should have a supply of goods or services at a reasonable price and in sufficient quantities. If the fact be, as I think it is, that, over the wide range to which this Bill will apply, the wise supplier of goods and services will insure against whatever liability there may be under the Bill—and that that will be the commercial reality in the vast majority of cases—we are really asking whether it is in the interests of consumers to give compensation by way of litigation in cases where they have a just complaint of negligence or breach of contract. Alternatively, we are asking whether it is in the interests of
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consumers to get a supply of goods at a slightly better price, because, of course, if the risk is one which will in fact be insured against, the injured consumer will be protected by the Bill but the premium will be passed on to the consumer in the form of a heightened price. There is no question in my mind that that is the commercial reality we are discussing.
Lord JACQUES: My Lords, would the noble and learned Lord not agree that that is fundamental to the whole Bill and not just to this Amendment?
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I do not think that it is fundamental to the whole Bill rather than just to this Amendment, although I would agree with the noble Lord, Lord Jacques, that it was very much in my mind to make the point on Second Reading that this was a factor that ought to be taken into account. It seems to me that this clause is precisely the point which may be the critical factor, and that is not true of the Bill as a whole.
I can only leave the case with the belief that those who have listened to this interesting debate should come to a conclusion. The matter was not adequately discussed in the Commons. The Commons certainly did not have the advantage which we have had in the course of our successive debates of listening to the speeches in this House on the subject. It only remains, if my noble friend Lord Selkirk pushes this to a Division, for the decision to be taken in accordance with the ordinary procedures of Parliament, with the provision that, so far as this Party and, I believe, the Government are concerned, the vote is an absolutely free one. I have not tried, and I shall not try, to make up other noble Lords' minds for them in what I believe to be a difficult but important decision.
Lord McCLUSKEY: My Lords, may I rise to my feet because the matter is entirely free? I am in a difficult position in that, if I say which way I would vote, I shall differ either from the Scottish Law Commission or from my noble and learned friend the Lord Chancellor. Let me try to suggest that the matter is of less importance than the debate has suggested. What is at issue is not sanctity of contract

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at all. Any of the contracts to which the Bill applies is at risk if it contains a clause which the court may regard as unfair and unreasonable. To that extent, a bad contract contains the seeds of its own destruction, regardless of where the onus lies.
We are concerned with one very limited matter. It is a highly technical matter; namely, onus of proof. The onus of proof arises when, and only when, parties are in court. If what is at issue is a question of fact, then the legal question as to whom the burden rests upon to prove that fact is an important one because that person has to gather the necessary resources together and produce the witnesses. If he does not prove his fact, he fails. However, what is at issue here is, in truth, not an ordinary matter of fact at all but a matter of judgment whether something is fair or whether it is reasonable. In these circumstances, once the court has been told what happened when the parties entered into the contract, it then makes a judgment not of ordinary fact at all but of reasonableness and fairness. Therefore, I am entirely with the noble and learned Lord, Lord Hailsham, in saying that, if there is a problem, it arises through the introduction of the test of reasonableness and not through the way the onus is put. For that reason, I would ask your Lordships to regard it as a technical matter and not a matter of great importance in which anyone is challenging important principles.
4.38 p.m.
The Earl of SELKIRK: My Lords, I must say with great respect that some of the replies to this argument are very thin. The noble Baroness, Lady Phillips, brought forward a glaring example and suggested that I would have stopped the consumer getting her benefit. Nothing could be more untrue than that. I might even have been rejecting the Bill completely. I welcome the Bill, but we have to get the balance right, and the consumers are not the only people who are deeply affected. In some ways, they are affected perhaps even less than some others. The noble Lord, Lord Airedale, said that this puts people out of reach of the law. That is not true. All sorts of things will arise in the ordinary course of business which will be profoundly
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affected by this. The Lord Chancellor said so. He said there would be uncertainty, and that affects all kinds of business, one way or another.
I hesitate to criticise the noble Lord, Lord Morris of Borth-y-Gest, but I wonder whether he really saw how far this might go? He treated people as if they were wicked, but many of these people are not wicked at all; we are talking about liabilities which arise in the ordinary course of business, liabilities which cannot be avoided. In any case where a liability of this kind arises, this provision can come into play. Indemnity is an obvious example, or the continuing contract which I mentioned. There is nothing wrong with that; it is the way in which business is conducted and in my view it is important it should be so conducted.
The noble and learned Lord, Lord McCluskey, said that it did not matter all that much. Does the word, "uncertainty" not matter? Is it of no consequence that many contracts of business are uncertain? Might that not have a slightly adverse effect on the structure of business and the ways in which it is conducted? Although there is a thin House, I think we should divide on this Amendment, because a point of major principle has arisen here.
I want to make it quite clear that, in my view, it will not affect adversely the consumers at all. If this was meant to be a consumers' Bill, which it is not—but, if it is, it is only partly so—it should have been made such a Bill and I would not have minded a split if it were essential. I recognise the difficulties of doing so, but it cuts wider than even the noble Lord, Lord Jacques, seems to think. No doubt the Consumer Council is enthusiastic, but this is supposed to be fair in a much wider context. If it is necessary to make a split, let us do so, but I fear that I must press the Amendment because it is one of very great importance to the whole business community of the country.
Lord SHEPHERD: My Lords, before the noble Earl, Lord Selkirk, presses the matter, I wonder whether he would consider making an appeal to the Government. Most of us who have listened to the debate on the Amendment, particularly those of us who are not lawyers, recognise

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the considerable dilemma which exists within the law and the way in which this provision may affect both business and the consumer. While I think the noble Earl would be right to press the matter to a Division, may I ask whether he would consider making an appeal to the Government to see if it is possible to devise some method within the Bill to meet the points which the noble Earl has made in terms of commercial law and practice? Such a method would not be in any way upset by this change but would meet the undoubted points advanced by my noble friend Lord Jacques and the noble and learned Lord, Lord Morris of Borth-y-Gest. I hope the noble Earl will make that appeal because I have a deep sense of unease as to which way I should vote.
Lord WAKEFIELD of KENDAL: My Lords, I support what the noble Lord, Lord Shepherd said. In view of the great interest and importance attaching to what has been said, I too have unease about which way to vote on this issue. I do not like sitting on the fence and I hope that my noble friend Lord Selkirk will accept Lord Shepherd's constructive and helpful suggestion.
Lord DRUMALBYN: My Lords, I wish to add my voice to the plea made to my noble friend Lord Selkirk by the noble Lord, Lord Shepherd. Many of us feel in difficulty over this simply because we feel that in a consumer case the onus of proof should lie on the supplier while in a business case it should lie on the person challenging the transaction. The noble and learned Lord the Lord Chancellor indicated that, in his view, this would cause confuson. I suggest that it is the quantity of confusion at which the Government should look and whether it is worth incurring that confusion to achieve, if I sense the opinion of the House, what noble Lords would like to achieve. Is it really the case that the confusion would be real and damaging? If not, surely it is possible to devise a formula which would put the onus of proof in the one case on the supplier and in the other case on the challenger.
The LORD CHANCELLOR: My Lords, perhaps I may be permitted briefly to address the House again. I pointed out the view of the Scottish Law
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Commission that confusion would be caused. My view is that the risk of confusion in the business contract field would not be great, for the reasons I gave; but it is also my view that confusion, if we had an attempt to distinguish between the class of consumer cases and the class of business contract cases, would be far worse, and then we should be in the department of utter confusion. We have considered the split burden idea—we considered it in Committee—and the view which emerged was that it was not practical, indeed that it would bear very hard on the small businessman who would bear the burden both to his consumer customers and to his suppliers; so the view which I thought emerged then was against the split burden.
Therefore, although no appeal has been directed towards me by the noble Earl, Lord Selkirk, I am afraid that, speaking frankly, I could not give any reassurance that further consideration would alter the position. That, I fear, is where the matter stands, and if the noble Earl, Lord Selkirk, decides to press the matter to a Division, then I think the House should come to a decision, and I say that without dogma on my part.
The Earl of SELKIRK: I hope the noble and learned Lord the Lord Chancellor is not accusing me of not appealing to him, my Lords. We had appeals in Committee, and although I thought the Lord Chancellor was very fair I thought he was also rather dogmatic in his approach. I feel very strongly about this issue and I feel that the anxiety which has been expressed is real and that the confusion which may result may be much greater than expected. We are in large part on unknown land here. I would certainly be willing to appeal to the Minister, but I do not know what procedure we might adopt. We have only the Third Reading to come. Could we defer this stage of the Bill to another day or adjourn it? Certainly I would welcome the opportunity of further discussion.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I too seek the leave of the House to speak again. I have given considerable thought to this matter, and if I speak shortly it is not because I have not given thought to it at considerable length. Sooner or later we must come to a

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conclusion about this. It is a very nicely balanced argument, but there is in the end only one way of coming to a conclusion about it; that is, by voting on it. If my noble friend's Amendment is lost on a free vote, it will be open to him on Third Reading to propose the compromise which has been canvassed. If it is won on a free vote, then it will be open to the Government or the sponsors to propose the compromise which has been suggested on another free vote. But I believe that until
Clause 11 ["Dealing as consumer"]:
4.57 p.m.
Lord AIREDALE Lord AIREDALE moved Amendment No. 13:
one really knows where, after this prolonged debate, the balance of opinion lies, one will not be able to devise a compromise or identify the side which will have to put it forward.
4.49 p.m.
On Question, Whether the said Amendment (No. 12) shall be agreed to?
Their Lordships divided: Contents, 52; Not-Contents, 77.
Transpose Clause 11 to the end of Clause 3 as subsections 3 to 5 of that Clause.

CONTENTS

Aldenham, L.

Exeter, M.

Reigate, L.

Amory, V.

Fairhaven, L.

Robbins, L.

Auckland, L.

Fraser of Kilmorack, L.

Romney, E.

Avon, E.

Fraser of Tullybelton, L.

Ruthven of Freeland, Ly.

Balfour of Inchrye, L.

Gridley, L.

Sackville, L.

Berkeley, B.

Hereford, V.

Sandys, L.

Boyd-Carpenter, L.

Hornsby-Smith, B.

Savile, L.

Bridgeman, V.

Kinnoull, E.

Selkirk, E. [Teller.]

Brooke of Cumnor, L.

Long, V.

Strathclyde, L.

Brooke of Ystradfellte, B.

Lyell, L. [Teller.]

Strathspey, L.

Camoys, L.

Marley, L.

Teviot, L.

Cathcart, E.

Molson, L.

Trenchard, V.

Cottesloe, L.

Mottistone, L.

Tweedsmuir, L.

Cullen of Ashbourne, L.

Mowbray and Stourton, L.

Vickers, B.

Daventry, V.

Moyne, L.

Vivian, L.

de Clifford, L.

Northchurch, B.

Ward of North Tyneside, B.

Elliot of Harwood, B.

Nugent of Guildford, L.

Emmet of Amberley, B.

Orr-Ewing, L.

NOT-CONTENTS

Airedale, L. [Teller.]

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

Morris of Borth-y-Gest, L.

Amherst, E.

Evans of Hungershall, L.

Noel-Buxton, L.

Ampthill, L.

Greenway, L.

Oram, L.

Aylestone, L.

Greenwood of Rossendale, L.

Peart, L. (L. Privy Seal.)

Banks, L.

Grey E.

Phillips, B.

Barrington, V.

Hale, L.

Ponsonby of Shulbrede, L.

Beaumont of Whitley, L.

Hampton, L.

Popplewell, L.

Blyton, L.

Hanworth, V.

Rathcreedan, L.

Broadbridge, L.

Henderson, L.

Sainsbury, L.

Brockway, L.

Houghton of Sowerby, L.

Shepherd, L.

Brown, L.

Hylton-Foster, B.

Shinwell, L.

Buckinghamshire, E.

Jacques, L. [Teller.]

Sligo, M.

Burntwood, L.

Janner, L.

Stamp, L.

Byers, L.

Jessel, L.

Stedman, B.

Champion, L.

Killearn, L.

Stewart of Alvechurch, B.

Chorley, L.

Lee of Newton, L.

Stone, L.

Clancarty, E.

Leinster, D.

Strabolgi, L.

Clwyd, L.

Listowel, E.

Taylor of Mansfield, L.

Collison, L.

Llewelyn-Davies of Hastoe, B.

Thomson of Monifieth, L.

Craigavon, V.

Loudoun, C.

Vaizey, L.

Darling of Hillsborough, L.

Lovell-Davies, L.

Wallace of Coslany, L.

Davies of Leek, L.

MacLeod of Fuinary, L.

Wells-Pestell, L.

Davies of Penrhys, L.

Maybray-King, L.

Wigoder, L.

Douglas of Barloch, L,

Meston, L.

Wynne-Jones, L.

Douglass of Cleveland, L.

Monck, V.

Drumalbyn, L.

Morris, L.

Resolved in the negative, and Amendment disagreed to accordingly.

The noble Lord said: My Lords, this Bill is riddled with definitions in all kinds of places. Parts I and II each have their own interpretation clause, and, in addition to that, many of the clauses use terms which they proceed to define. For instance, line

55
1 of Clause 1 defines the term "negligence", and Clause 1 goes on to use and define the term "business liability". Clause 5 uses and defines the expression "in consumer use", and examples of other clauses in the Bill which make use of terms which they then proceed to define are Clauses 16, 26 and 27. But in relation to the expression "deals as consumer", a different pattern of work is used. The expression "deals as consumer" first occurs in Clause 3, but it is not there defined. Clause 4 uses the expression "dealing as consumer". Clause 6 uses the expressions, "dealing as consumer" and, "dealing otherwise than as consumer". Clause 7 uses the term "dealing as consumer". Clause 8 does not refer to this expression, and nor do Clauses 9 and 10.
It is, therefore, rather surprising to find, on reaching Clause 11, that it is entirely devoted to defining the expression "dealing as consumer" Clause 11 is not part of an interpretation clause; it is not even next to an interpretation clause. It seems to have been cunningly placed where it is in order that the hurried reader shall have the least possible chance of finding it.
My Lords, would it not be more reasonable and sensible to print the words of Clause 11 as the final subsections of Clause 3, which is the clause in which the expression, "deals as consumer" is first used? In that way it will avoid the reader speculating on what these words mean and having to search to a rather strange place in the Bill in order to find the definition of the expression. I floated this idea at the Committee stage, and I was much encouraged by the support for it which I received from the noble Lord, Lord Drumalbyn. I hope that it commends itself to your Lordships this afternoon, and I beg to move this Amendment.
Lord DRUMALBYN: My Lords, I have not changed my view on this. The noble and learned Lord the Lord Chancellor very kindly said that he would look at this kind of suggestion. I think that the form which the noble Lord, Lord Airedale, has devised to remedy what I thought was a defect is a good one, and I hope it commends itself to the Government.
Lord JACQUES: My Lords, since the Committee stage both the sponsors and
56
the Government have had a look at this to see whether they could meet the point of view which was put forward by the two noble Lords. We have come to the conclusion that the Bill should stay as it is, for this reason. People who look at a Bill such as this usually look first of all at the page which shows the arrangement of the clauses. People do not get hold of a Bill with a view to reading it right through from beginning to end; it is used as a reference. They refer to the arrangement of the clauses, and, as the Bill is at present, they see in the arrangement of the clauses quite clearly where "Explanatory provisions" are. They see that in fact under "Explanatory provisions" there is, in Clause 11, a definition of "Dealing as consumer". It is clear right from the beginning.
If we transposed Clause 11 to Clause 3, as is now suggested, it would not be clear; it would not be on the front page; it would not be seen. We also feel that, if it were included in Clause 3, as suggested, we should then have to cross-reference to Clause 3 every other place in the Bill where the term "Dealing as consumer" is used; and that, we think, ought to be avoided if possible. We therefore feel that, on balance, the present arrangement is the better of the two possibilities.
Lord AIREDALE: My Lords, I wonder whether the noble Lord, Lord Jacques, is right about this. Is it true that, if you open a bound volume of the Statutes, you find at the beginning of each Statute the arrangement of clauses such as you have in a Public Bill? The noble Lord may be right about this, but my instinct is to believe that you go straight into Section 1 of the Act when you open the bound volume of the Statutes; and, really, if my instinct about this is right, I believe that that demolishes the argument that the noble Lord, Lord Jacques, has just put forward. I do not know whether the noble Lord wishes to interrupt me in order to say anything? He does not, apparently. My Lords, I have a private arrangement with myself that I will not divide the House on any matter which is a matter of drafting, but I think we really might look at this point again before the next stage of the Bill. In the meantime, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
clause 12 [varieties of exemption clause]:
5.5 p.m.
Lord JACQUES Lord JACQUES moved Amendment No. 14:
Page 6, line 38, at end insert—
("(3) A person is not bound by any contract term prejudicing or taking away rights of his which arise under, or in connection with the performance of, another contract, so far as those rights extend to the enforcement of another's liability which this Part of this Act prevents that other from excluding or restricting.").
The noble Lord said: My Lords, the purpose of this Amendment is to prevent evasion of the controls in Part I of the Bill. It does so by ensuring that where one party to a contract, party A, is prevented by Part I of the Bill from excluding or restricting his liability to the other party, party B, then B, as the party whose rights under the contract are protected by Part I of the Bill, is not bound by a term of another contract made with a third party that B will not enforce his rights against A. This is not an easy point to explain, and I think I might do it by way of example. Suppose a shopkeeper wishes to have installed a system of central heating. For that purpose he enters into a contract with a company which installs central heating. Let us suppose that in the contract there is either no exemption clause or, if there was one, it would not stand up to the test of reasonableness.
The heating system is installed, but it has to be serviced, so company A, which did the installation, say, "We would recommend you, Mr. Shopkeeper, to go along to company B", which is one of their subsidiaries and which specialises in servicing. So we now have the second company, the servicing company. The servicing company say, "We will not merely service your central heating but we will look after any defects which might arise from the installation. But you will have to give us an undertaking in the contract that you will not take action against the installing company; the liability will rest solely with us". Let us suppose that the shopkeeper enters into that maintenance contract and that there is an explosion of the boiler due to negligence on the part of the installers. Now action against the service company alone would not satisfy the shopkeeper,
58
because not merely are questions of defects in the central heating to be put right, but his shop has been shattered by the explosion. Consequently, he sues the installing company and says, "You have been negligent". He proves negligence, and he claims not merely to have the central heating system put right but to be compensated for the damage to his shop.
The installing company then sues the servicing company for indemnity because it has had had to pay where it did not expect to have to pay, to the shopkeeper. The servicing company can then take action against the shopkeeper for breach of contract because he has taken action against the installing company when, under the contract, he said that he was not going to take such action. This Amendment seeks to deal with that situation. By itself, Clause 2 of the Bill could not apply to such a case. It assumes that a contract term excluding or restricting a supplier's liability to a customer will be contained in a contract between the supplier and the customer; that is, between the installer of the system and the shopkeeper. For the same reasons, Clause 3 would also be evaded. This Amendment seeks to prevent these evasions. In conclusion, I should mention that the Sale of Goods Act, as amended, and the Supply of Goods (Implied Terms) Act 1973 make provision for preventing evasion of the controls under those Acts by the methods I have just described, and it is clearly important that we should also have such a provision in this Bill. I beg to move.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I wonder whether this is a necessary improvement, or an improvement at all. I do not think there is any difference in principle between the noble Lord, Lord Jacques, and myself but I would ask him to reflect upon the following considerations. This Bill has been produced after prolonged scrutiny by the two Law Commissions, both in Scotland and in England. It has had careful consideration before a Commons Committee and a Commons Report. It has been examined by this House in Committee. Now, on Report, we are told that this Amendment is important and necessary. I wonder whether it really is so at this stage. I am always a

59
little suspicious of provisions in Bills which are not desired for their own sake but seek to forestall evasion, which is a dirty word among anybody in modern Parliaments. But there will be attempts to evade any kind of Bill. I have never known Parliament successfully prevent them in advance. Ex post facto if they become a nuisance they can be dealt with fairly easily. I am a little suspicious of clauses which have it as their sole purpose to prevent evasion. I doubt whether it is necessary to prevent evasion.
I am not sure whether, in the suppositious case that the noble Lord has given, the contract would effectively be valid. To begin with, supposing the suppositious maintenance engineer brought an action on the clause of his contract seeking to protect the original installation engineer, one wonders what damage the service engineer could say that he had suffered. If you paid a couple of pounds into court, I think that would put an end to the whole proceedings. I cannot see a court giving an injunction in such a case. It would be a very perverse court if it did so. So I doubt that it is necessary.
Let us look at the drafting. It is put as a new subsection in Clause 12. Clause 12, which comes between two interpretation clauses, is designed to say that if, for instance, a clause already makes liability or enforcement subject to restrictive or onerous conditions, it is already excluded by the Bill; you are to take it into account as amounting to the same thing.
There is a very clear interpretation grafted on to an existing prohibition. But this clause inserts, to my mind, a totally new prohibition and tucks it away in the middle of a lot of interpretation matter and leaves somebody almost bewildered as to what it is about. With his customary lucidity, the noble Lord, Lord Jacques, has told us what it is about, but I do not think anyone reading the clause would know what it is about. Look at what it says! I am going to read it out slowly and ask noble Lords, and in particular the noble Lord, Lord Jacques, who is a very sensible noble Lord, if I may say so, this question: If somebody else produced a clause saying this, would one have the slightest idea of what on earth it meant:
"a person is not bound by any contract term prejudicing"—
60
whatever that may mean—
"or taking away rights of his which arise under, or in connection with the performance of, another contract, so far as those rights extend to the enforcement of another's liability which this Part of this Act prevents that other from excluding or restricting".
I can see the noble and learned Lord, Lord Morris of Borth-y-Gest, smilling, but I wonder whether this is a wise thing to introduce at this stage of the Bill. The noble Lord, Lord Jacques, can introduce an Amendment on Third Reading. I wonder whether he would not be rather better advised to take this wretched little misery away and see if somebody cannot make sense of it for him.
Lord JACQUES: My Lords, I am impressed by the argument as to the lack of clarity, but I am not impressed by the argument that the Amendment is not necessary. In fact, this Amendment carries out a Law Commission recommendation that evasion should not be possible, subject to the reasonableness test, by means of that or any other contract as in the Supply of Goods (Implied Terms) Act. I believe that the noble and learned Lord took an active part in the Supply of Goods (Implied Terms) Act. The Bill was considered during the period when he was Lord Chancellor. I am suggesting that there should be an Amendment to this Bill making a provision which is identical to that in that particular Bill. Therefore, I would not accept that the Amendment is not necessary, but I am a little concerned at the lack of clarity. For that reason I will withdraw the Amendment, but with the promise that it is almost certain to come back at Third Reading.
Amendment, by leave, withdrawn.
Clause 13 [Interpretation of Part I]:
5.17 p.m.
Lord AIREDALE Lord AIREDALE moved Amendment No. 15:
Page 6, line 40, after ("and") insert ("all").
The noble Lord said: My Lords, Amendment No. 36 is an identical Amendment to Part II of the Bill; so perhaps we could discuss these two Amendments together. This is another Amendment to try to overcome lack of clarity in the

61
definition of the term "business" which reads:
"'business' includes a profession and the activities of any government department or local or public authority".
I should have thought there was an ambiguity as to whether that meant that "business" includes the business activities of any Government Department, et cetera, or whether it means that "business" includes all the activities of any Government Department, et cetera.
I should have thought that the reader would have been excused for thinking to himself that the non-business activities of Government Departments surely cannot be intended to be included in the definition of the word "business" because, for one thing, is it not straining language to say that "business" shall include non-business activities? Further, the reader would say to himself: "Surely, if that was what Parliament intended, Parliament could so easily have made its intention clear. Therefore I, the reader, am driven to the conclusion that these words are put into the Act because local authorities do not normally, for the most part, engage in business activities and are not therefore regarded as businesses; and, therefore, it is made clear in this definition that in so far as local authorities do conduct some business operations, to that extent they shall be included in the Bill".
My Lords, we know that the intention of the sponsors of the Bill is that all the non-business activities of the public authorities are to be covered by the Bill. Surely we need to make this clear in the interpretation clause so that the reader is not left wondering exactly what it means. My method of doing so is simply to insert the word "all" so that the definition reads:
"'business' includes all the activities of any Government Department …".
Reading that, the reader will be left in no doubt. Without the word "all", I feel sure that some readers will be left in serious doubt as to whether the non-business activities of the public authorities can possibly be intended to be included in the definition of the word "business". I beg to move.
Lord JACQUES: My Lords, I assure the noble Lord that the present wording covers all and not just some of the activities of Government Departments and
62
local and public authorities. In those circumstances, we feel that the addition of the word "all" is unnecessary.
Viscount BARRINGTON: My Lords, does it do any harm? Would it alter the intention of the Government if it were included?
Lord JACQUES: My Lords, no. We intend the wording to cover all activities, and we believe the present wording does so.
Lord AIREDALE: My Lords, I cannot go on encouraging the noble Lord to make speeches, but although nobody is going to be left in any doubt, they would be left very much happier if the word "all" were included so that they could see that Parliament obviously did intend all the activities of public authorities to be covered.
Lord JACQUES: My Lords, we believe that the present wording is clear. It covers all the activities and it is not necessary to add the word "all".
Lord AIREDALE: My Lords, I am not overcome by the volume of support that I am receiving from other parts of the House, and I think I had better beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord LYELL Lord LYELL moved Amendment No. 16:
Page 6, line 41, at end insert ("or statutory undertaker").
The noble Lord said: My Lords, for the convenience of the House I will speak to Amendments Nos. 16, 37, 51 and 52. All of these stand in my name and they are, in broad terms, the same Amendment which I moved at an earlier stage. In case the House thinks that it is sheer impudence on my part in again raising these minor, semantic points, the reply which the noble Lord, Lord Jacques, gave us was brief, swift and to the point. It achieved its purpose. I wonder whether the noble Lord might be able to give a slightly more detailed explanation of why the term "statutory undertaker" is not in the Bill? I understand that its omission from the Bill will have results in other legislation and enactments. I do not think that there

63
is anything sinister in wishing to insert "statutory undertaker". It is not an office under the Crown or anything else. It is a plain definition. I beg to move.
The Lord CHANCELLOR: My Lords, the definition of "business", which is fundamental to the Bill because of its operation only in relation to "business liability", makes it clear that the activities of various kinds of public body (Government Departments and local and public authorities) are included. In the draft Bills prepared by the Law Commissions, the definition of "business" made a specific reference to the activities of statutory undertakers but, as has been rightly pointed out earlier, not in terms to those of public authorities.
The expression "statutory undertaker" does not however have a specialised meaning, though in the context of the Bill it may be taken as covering any body, such as the nationalised industries, which undertakes to provide goods or services in the exercise of statutory functions. However, it is doubtful whether certain statutory bodies being bodies which are of a public nature but whose functions do not involve, or do not primarily involve, the provision of goods or services, would be included in that expression. For example, the National Consumer Council, the British Airports Authority or the Police authorities. Yet bodies of that kind have occasion to make contracts (either with members of the public or with people or firms carrying on business in the conventional sense) which might contain terms which ought to be subject to control under the Bill.
These bodies are more aptly described in modern legislation as "public authorities", an expression which equally covers those, like the nationalised industries, which are aptly described as "statutory undertakers". Hence the former expression has been substituted for the latter to which on that basis, it becomes unnecessary to refer. It is not thought that any body exists which could aptly be described as a "statutory undertaker" but not as a "public authority" but which was not carrying on a business in the conventional sense and whose activities are therefore within the general meaning of that expression, apart from the special cases covered by the definition. I hope
64
that that explanation will satisfy the noble Lord.
Lord LYELL: My Lords, I was in error earlier in looking towards the noble Lord, Lord Jacques, for an explanation. I wondered what was awaiting me when the noble Lord, Lord Jacques, showed no emotion. I am immensely grateful to the noble and learned Lord for his very full explanation. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 14 [Scope of Part II]:
5.25 p.m.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 17:
Page 7, line 15, leave out ("17") and insert ("(Arbitration of differences in consumer contracts)").
The noble and learned Lord said: My Lords, it will be for the convenience of the House if, with this Amendment, I also speak to Amendments Nos. 19 and 24. Amendment No. 24 is the Scottish equivalent of the matter which was discussed in reference to Amendment No. 9, the clause in relation to arbitration. There is a difference in relation to the drafting and that derives from the fact that the Scottish Part of the Bill, which is Part II, is structured differently from the English Part. The shape is different and the terminology is to some extent different. I should say—because this applies to a number of other Amendments—that the basic difference, as one can see from Clause 14, is that the Scottish Part of the Bill applies to contracts which are in effect listed or specified, whereas, as one sees from Clause 1(2), the Bill is intended to apply to all contracts unless they are excepted. That gives rise to certain differences in terminology.
Just to exemplify it briefly here, there is no equivalent in the new clause which is mentioned in Amendment No. 24 to the provision in the new clause mentioned in Amendment No. 9, Clause 9A(2)(b). Its scope does not apply to disputes arising under any of the contracts listed in Schedule I. This is because the same effect is achieved in the context of Part II by bringing the new proposed clause 17A within the ambit of those contracts to which clauses Nos. 15 to 17 apply. This is achieved by amending Clause 14(2)

65
and (3) by Amendments Nos. 17 and 19 to extend the references therein to Clauses 15 to 17 to include the new clause. It is therefore unnecessary to have any equivalent in the proposed new clause to the provision made by new Clause 9A(2)(b).
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 18:
Page 7, leave out line 25 and insert—
("(d) relates to the liability of an occupier of land to persons entering upon or using that land;
(e) relates to a grant of any right or permission to enter upon or use land not amounting to an estate or interest in the land.")
The noble and learned Lord said: My Lords, this Amendment should be considered along with Amendment No. 20. The general purpose of these Amendments is to replace the existing provisions of Clause 14(2)(d) and Clause 14(3)(a)(i) by a more precise description of the types of contractual provisions relating to land to which Clauses Nos. 15 to 17 are to apply and by doing so to make those provisions more easily understood. It is intended that those clauses should apply, first of all, to provisions relating to services in any contract including a lease. This is already achieved by Clause 14(2)(c) and the Amendments do not affect this position.
Secondly, it is intended that those clauses should apply to provisions relating to an occupier's liability to persons entering upon or using his land, such as provisions excluding or restricting such liability. That is achieved by the proposed replacement of Clause 14(2)(d). And, thirdly, the provisions relating to a licence to enter upon or use land—this is achieved by the new paragraph (Clause 14(2)(e)). Your Lordships should be aware that, as the expression "licence" is not a term of art in Scots law, it has been found necessary to define what is meant by it in such a way as to distinguish it from a lease or other contract relating to land. The way which has been adopted is precedented in Section 32(1)(d) of the Caravan Sites and Control of Development Act 1960.
As a result of specifying precisely the types of contractual provisions relating to land to which Clauses 15 to 17 are to
66
apply, it is unnecessary and indeed inappropriate to retain any general exception relating to land contracts, as was contained in Clause 14(3). Accordingly, that part of Clause 14(3)—in other words, 14(3)(a)(i)—is to be deleted. I beg to move Amendment No. 18.
The Earl of SELKIRK: My Lords, I take it from what the noble and learned Lord has said that there is no intention of any change in meaning whatever in the references to land occupation. The noble and learned Lord made a change recently —and I am afraid I did not read it at the Committee stage—so that the word "refers" has become "relates". May I ask whether there is any difference between those two words? "Refers" strikes me as slightly narrower in meaning than the word "relates", particularly in time. "Refers" would tend more to relate to a situation at a given time but "relates" might be extended over a considerable period. I wonder whether any real alteration in meaning has been made, particularly relating to events occurring before or after certain things have happened. If there is no change in meaning I am quite content: if there is a change, f should like to know what it is.
Lord McCLUSKEY: My Lords, I think I explained at the time why we were changing "relates" to "refers". and that was accepted then. There was no intention to change the matter. This is merely a matter of consistency in that regard with the rest of the Bill. No other change is intended in relation to occupiers' liability. What I think would be achieved if Amendments Nos. 18 and 20 are accepted would be a clarification of what it is intended to cover. I think it emerges much more precisely, and I hope we shall see that when the Bill is ultimately reprinted. It is perhaps rather difficult to see it at this stage when we are working with bits of paper and going from one to the other.
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 19:
Page 7, line 27, leave out ("17") and insert ("(Arbitration of differences in consumer contracts)").
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 20:
Page 7, leave out lines 30 and 31.
On Question, Amendment agreed to.
Clause 15 [Liability for breach of duty]:
5.34 p.m.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 21:
Page 8, line 24, leave out ("or") and insert ("and").
The noble and learned Lord said: My Lords, with your permission, in moving this Amendment I should like to refer to a great many other Amendments which are of exactly the same kind. They are Amendments Nos. 22, 23, 25, 26, 27, 28, 29, 31, 34 and 40. At one stage it was suggested by the noble and learned Lord, Lord Hailsham, that perhaps the noble and learned Lord the Lord Chancellor might consider conferring an honorary Q.C. upon the noble Lord, Lord Lyell. When his petition to be made a Q.C. goes forward, I should like to add my name to those supporting it, because this is another example of the noble Lord's having brought good sense to a Bill.
Several noble Lords: Hear, hear!
Lord McCLUSKEY: The Government accept what the noble Lord has proposed. The Amendment being made here to delete the word "or" and insert the word "and" are merely to do what the noble Lord, Lord Lyell, asked us to do at Committee stage. We are very grateful to him. We accept it, although I would defend the draftsmen and indeed the Law Commission, who used the term "fair or reasonable" rather than the one to which we move, by saying that I think ultimately it makes no difference but it certainly makes good sense. I commend these Amendments to your Lordships. I beg to move.
Lord LYELL: My Lords, I am very grateful for your Lordships' acceptance of these Amendments. Indeed, they follow from points that I raised which I regarded as semantics and mere questioning at an earlier stage. I am very flattered by the kind remarks that have come my way at this stage and at an earlier stage
68
of the Bill from both sides of the Border, so far as law is concerned. I must say I was a little apprehensive when the noble and learned Lord, Lord McCluskey, accepted all these Amendments. He says that "fair or reasonable" or "fair and reasonable" makes no appreciable difference. I am glad that he says so, because I have learned to my cost, I hasten to add, that in a theoretical examination room all is not what it appears to be in the legal paper. Certainly, if the noble and learned Lord, Lord McCluskey, believes that I have added clarity to the Bill, I feel that his remarks will not reflect solely upon me but also upon an institute not a hundred miles from the Law Society of Scotland: indeed, their address is in Queen Street, Edinburgh. I am sure that they, too, will be pleased that my legal training has shown an independent and inquiring mind into these small differences. But if the noble and learned Lord, Lord McCluskey, says that the removal of "or" and the insertion of "and" makes no difference to the Scottish law, then I, and I am sure the whole House, will be delighted.
On Question, Amendment agreed to.
Clause 16 [Control of unreasonable exemptions in consumer or standard form contracts]:
Lord McCLUSKEY Lord McCLUSKEY moved Amendments Nos. 22 and 23:
Page 9, line 3, leave out ("or") and insert ("and");
Clause 17, page 9, line 14, leave out ("or") and insert ("and").
On Question, Amendments agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 24:
After Clause 17, insert the following new clause:
Arbitration of differences in consumer contracts.
—(1) In the case of a consumer contract, an agreement to refer future differences to arbitration cannot be enforced against the consumer except—

(a) with his written consent given after differences have arisen;

(b) where he has himself had recourse to arbitration in pursuance of the agreement.

(2) Subsection (1) above does not affect the enforcement of arbitration agreements to which section 1 of the Arbitration Act 1975 applies (that is, arbitration agreements other than "domestic" within the meaning of that section).
The noble and learned Lord said: My Lords, I spoke to this Amendment in connection with earlier Amendments, and I now beg formally to move Amendment No. 24.
On Question, Amendment agreed to.
Clause 19 [Obligations implied by law in sale and hire-purchase contracts]:
Lord McCLUSKEY Lord McCLUSKEY moved Amendments Nos. 25 to 29:
Page 10, line 21, leave out ("or") and insert ("and");
Clause 20, page 10, line 30, leave out ("or") and insert ("and");
Page 10, line 33, leave out ("or") and insert ("and");
Clause 21, page 11, line 15, leave out ("or") and insert ("and");
Clause 22, page 11, line 23, leave out ("or") and insert ("and").
On Question, Amendments agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 31:
Page 11, line 29, leave out ("or") and insert ("and").
On Question, Amendment agreed to.
Lord HAILSHAM of SAINT MARYLEBONE Lord HAILSHAM of SAINT MARYLEBONE moved Amendment No. 32:
Page 11, line 35, at end insert—
("() Where a term in a contract purports to restrict liability to a specified sum of money, and the question arises for the purposes of this Part of this Act whether it was fair and reasonable to incorporate the term in the contract, then, without prejudice to subsection (2) above, regard shall be had in particular to—

(a) the resources which the party seeking to rely on that term could expect to be available to him for the purpose of meeting the liability should it arise;

(b) how far it was open to that party to cover himself by insurance.")

The noble and learned Lord said: My Lords, this is the Scottish equivalent of Amendment No. 11 which was accepted. I therefore beg to move it formally.
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 34:
Page 11, line 36, leave out ("or") and insert ("and").
On Question, Amendment agreed to.
Lord McCLUSKEY Lord McCLUSKEY had given Notice of his intention to move Amendment No. 35:
After Clause 22, insert the following new clause:
Interference with provisions of Part II.
(".Any term of any contract shall be void which, either expressly or by implication, disapplies or restricts the application of the provisions of this Part of this Act in respect of that or any other contract.")
The noble and learned Lord said: My Lords, this is the Scottish equivalent of Amendment No. 14 and, having regard to the fate of that Amendment, I shall not move this one.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I was going to commend this one to the noble Lord, Lord Jacques, as being a better version, but perhaps it is right not to pass it now. I was really going to say that if the noble Lord, Lord Jacques, had taken a leaf out of the Scottish draftsman's book he would have had a less violent reaction from me.
Lord McCLUSKEY: I almost said that myself, my Lords, but I am happy that it should come from the noble and learned Lord, Lord Hailsham of Saint Marylebone, rather than from me.
Clause 23 [Interpretation of Part II]:
5.40 p.m.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 38:
Page 12, line 30, at end insert ("act or omission giving rise to that").
The noble Lord said: My Lords, Amendment No. 38 is purely a drafting Amendment. When I spoke to Amendments Nos. 66 and 69 in Committee I indicated that I was not entirely happy with the wording. I think that the reason was that although the wording was perhaps readily comprehensible it was not entirely logical as it stood in the Bill, because it is not the breach which is not intentional or deliberate but rather the act or omission which causes the breach. This Amendment is intended to remedy that logical defect by altering Clause 23(2) so that it reads:
"… whether the act or omission giving rise to that breach was inadvertent or intentional".

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That is the only purpose of the Amendment. I beg leave to move Amendment No. 38.
On Question, Amendment agreed to.
Clause 24 [International supply contracts]:
Lord LYELL Lord LYELL moved Amendment No. 39:
Page 13, line 18, leave out ("subsection (3) below") and insert ("this section").
The noble Lord said: My Lords, it might be for the convenience of the House that I should speak not only to Amendment No. 39 but to other minor Amendments that appear in my name—namely, Amendments Nos. 41, 42, 43 and 44. I hope that such a course will be convenient. It would certainly add to the speed of our proceedings. Clause 24 as it stands at present excludes from the scope of the Bill any international contracts for the sale and supply of goods. However, the Bill does not exclude international contracts for the supply of services. Let us take an example of the kind of services that I have in mind. There are professional engineers, management consultants, chartered accountants and many others who render service overseas.
The reason for distinguishing in this particular way between the two different types of contract—international contracts for the supply of goods and the supply of services—is not immediately clear. Indeed, the position is that much more difficult to understand when we consider that international agreements often combine the sale of goods with the provision of services. The noble Lord, Lord Jacques, had a florid example, of the heating that blew up and I presume that he was referring to a United Kingdom boiler. We can foresee many refrigeration services that might be going to lands in the Middle East and, clearly, combined with contracts for the sale of these refrigeration plants or whatever is being sent to Saudi Arabia and other places in the Gulf, one finds a contract for the provision of services for maintenance of this complicated and complex equipment.
Of course, these services are of considerable importance to all professional groups. It is not clear from the Law
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Commissioners' Second Report that they specifically directed their minds to this particular class of international contract. There were no precise reasons that we could find for not treating contracts for the supply of services in the same way as contracts for the supply of goods. Finally, we could not really believe that the acceptance of the Amendments would have any serious effect on the protection which the Bill is intended to give and, we believe, does give to consumers. We hope that that is not a reason for not giving further and more detailed consideration to these Amendments. I should therefore now like to move Amendment No. 39.
The LORD CHANCELLOR: My Lords, the noble Lord, Lord Lyell, has returned with his Amendments to the discussion which we had on the same matter during the Committee stage. In Committee the noble and learned Lord, Lord Hailsham, asked whether I would consider between then and the Report stage the position of a supplier of services who wishes to supply them abroad under a contract concluded here. I have given this consideration and am grateful to the noble Lord, Lord Lyell, for putting down these Amendments so that we can consider the matter.
The Amendments raise the question whether the Bill should deal with international contracts for the supply of services on the same, or roughly the same, basis as the provision which it makes for international contracts for the supply of goods. Clause 24 in part restates the law as laid down in the Supply of Goods (Implied Terms) Act 1973. So far as Clause 24 relates to the sale of goods, it is a pure restatement. Clause 24 extends this régime to international contracts for the supply of goods otherwise than by sale.
The 1973 Supply of Goods (Implied Terms) Act gave exemption to international contracts for the sale of goods which satisfied the characteristics which are given in subsections (3) and (4) of the clause, and the reasons for this were the following. First, where goods are exported from one country to another protection for consumers and purchasers is really a matter for the importing State. Secondly, international contracts

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are usually transactions of some considerable size between commercial men who wish to be free to negotiate their own terms without the controls imposed by the Bill. Thirdly, it was suggested to the Law Commission before 1969 that control over international sales of goods could damage our export drive. These reasons appeared in their First Report.
With these Amendments the noble and learned Lord now asks why that reason is not equally applicable to international contracts for the supply of services. It is a very reasonable question to ask. The answer, in the first place, is, I think, that the Law Commissioners themselves considered that there was a distinction between contracts for the supply of goods and contracts for the supply of services. The main reasons given were that in the context of personal injury and death there was no need to provide an exemption from the categories of exemptions to be rendered void, and this reason is, if anything, stronger as a result of the general acceptance that has been given in both Houses to Clause 2(1) of the Bill. Furthermore, the reasonableness test was, they thought, likely to prove flexible enough in operation to be able to take account of the international character of the contracts in question.
The noble and learned Lord, Lord Hailsham, put to the Committee the case of the consulting engineer who contracts for the supply of services in New Zealand. The reasonableness test would, I think, enable the courts to take account of the fact that there was international corn-petition for the order in question, and would give full weight to this when deciding whether or not the exception clause was reasonable. If the competition for the services of an architect was keen so that the foreign customer was in a strong bargaining position, then the fact that he had none the less accepted a contract which contained an exemption clause, could operate as an indication that it was fair and reasonable for it to have been included. At any rate, it is the kind of factor which the court could, and would no doubt, consider.
In dealing with this Amendment in Committee my noble friend Lord Jacques mentioned that the Amendments might impose a serious limitation on the protection which the Bill gives to consumers. He and I have since discussed this and are
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agreed that this criticism would apply to the Amendments in question only in so far as the consumer was contracting with someone across an international frontier from him. None the less, I think there is still something in the point.
A further reason for not extending Clause 24 for contracts for services is that this would indeed pose serious problems of drafting. The Amendments of the noble Lord, Lord Lyell, go as far as possible towards a satisfactory draft, but they raise a difficulty about where a contract for the supply of services is to be performed. This has caused difficulty in the context of value added tax and would, I think, prove substantially more difficult here. The difficulty is that there is not always something tangible which can be seen, as in the case of goods as they move from one country to another. So that, ill general, I believe there is a good deal of practical sense in the Law Commissions' joint recommendation, which, in a sense, suggests that these difficulties can be left to the operation of "reasonableness" in the courts and the way in which it is interpreted. It may not be a completely satisfactory answer, but I hope that it is, at any rate, thought to be a practical one.
Lord LYELL: My Lords. I should like to thank the noble and learned Lord for his very lengthy, detailed and concise reply to my Amendment. I was pleased that he said that it might not have been a full argument, and I hope that at some stage we may be able to obtain the full argument. But I take his point that it was a practical answer, and it provided much more information than I had received before. I am grateful to the noble and learned Lord, and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord McCLUSKEY Lord McCLUSKEY moved Amendment No. 40:
Page 13, line 22, leave out ("or") and insert ("and").
On Question, Amendment agreed to.
Clause 25 [Choice of law clauses]:
5.52 p.m.
Lord JACQUES Lord JACQUES moved Amendment No. 45:
Page 14, line 8, leave out ("that") and insert—
("(either or both)—
(a) the")
The noble Lord said: My Lords, I think it will be for the convenience of the House if, in moving this Amendment, I speak to Amendment No. 46. These Amendments are designed to give consumers additional protection against terms in contracts which, by providing that the law governing the contract is to be the law of a country outside the United Kingdom, would prevent the Bill from applying to the contract. Under Clause 25(2) as it is now, the Bill will have effect despite the fact that the parties have chosen to apply a foreign law to the contract, but only where it can be proved that the choice of the foreign law was made in order to evade the operation of the Bill. It is now recognised that, in practice, this may well throw a heavy burden on the very person whom Clause 25(2) is seeking to protect, because he will have to prove that the sole or main purpose of the other party in applying the foreign law was to evade the operation of the Bill.
We consider, therefore, that additional protection is needed for consumers as regards contract terms which apply a foreign law, and this Amendment will give it. It does so by providing that, where the consumer is habitually resident in the United Kingdom and takes all the steps necessary on his part for the conclusion of the contract in the United Kingdom, the Bill will apply despite the term which applies the foreign law. In other words, where a foreign law is chosen and consumers are involved, the rules in the Bill will prevail. But in dealings between businessmen, their express choice of that law will normally prevail. My Lords I beg to move.
On Question, Amendment agreed to.
Lord JACQUES Lord JACQUES moved Amendment No. 46:
Page 14, line 11, at end insert—
("or
(b) in the making of the contract one of the parties dealt as consumer, and he was then habitually resident in the United Kingdom, and the essential steps necessary for the making of the contract were taken there, whether by him or by others on his behalf.
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(3) In the application of subsection (2) above to Scotland, for paragraph (b) there shall be substituted—
"(b) the contract is a consumer contract as defined in Part II of this Act, and the consumer at the date when the contract was made was habitually resident in the United Kingdom, and the essential steps necessary for the making of the contract were taken there, whether by him or by others on his behalf.".")
On Question, Amendment agreed to.
Clause 27 [Saving for other relevant legislation]:
Lord AIREDALE Lord AIREDALE moved Amendment No. 47:
Page 15, line 26, after ("function") insert ("and is not a term in a contract to which the competent authority is itself a party.")
The noble Lord said: My Lords, this is an Amendment to a new subsection which was introduced into the Bill at the Committee stage by the noble Lord, Lord Jacques. That new subsection propounds the proposition that a contract term is to be taken as satisfying the requirement of reasonableness if it is approved by a competent authority—and that includes a statutory undertaker—acting in the exercise of any statutory jurisdiction. Perhaps I may pause there and say that I have no quarrel at all with this subsection so far. It is the last two words "or function", that I suggest to your Lordships need qualification, because it seems to me that if those words are not qualified they will establish a charter for statutory undertakers, merely by giving their blessing to the terms of their own contracts with their customers, to oust the jurisdiction of the court and to prevent the customer, if he is aggrieved, from taking the case to the court and getting an impartial decision from the court as to the reasonableness of the terms of the contract of the statutory undertaker about which he is complaining.
I therefore seek to insert the words in this Amendment, which make it quite clear that the subsection is not intended to apply in a case in which a statutory undertaker is itself a contracting party, and that the clause is therefore referring solely to cases in which the competent authorities are exercising a quasi-judicial authority in relation to contracts entered into between other people, and not contracts to which

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they are themselves a party. My Lords, I beg to move.
Lord JACQUES: My Lords, it has never been intended that a public authority could take advantage of this clause in relation to contracts to which it is a party. I have had consultations, and I am happy to say that the draft is acceptable to both the sponsor and the Government. Therefore, I accept the Amendment and commend it to the House.
On Question, Amendment agreed to.
Clause 29 [Commencement; amendments; repeals]:
5.57 p.m.
Lord JACQUES Lord JACQUES moved Amendment No. 48:
Page 16, line 4, leave out from ("force") to end of line 5 and insert ("on 1st February 1978").
The noble Lord, said: My Lords, this Amendment arises out of a minor debate that we had in Committee as to the commencement date. The effect of it is to delay the commencement from three months after the Bill is passed to six months after it is passed. We are very reluctant to extend the date, but we recognise that it will be necessary for business and professional men to have a look at their insurances, in order to make sure that they get adequate cover. I am happy to commend this Amendment to the House. My Lords, I beg to move.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I am very grateful to the noble Lord, Lord Jacques, for paying attention to what we said in Committee. I expect that this will be just long enough, but not much more.
On Question, Amendment agreed to.
Clause 30 [Citation and extent]:
Lord HAILSHAM of SAINT MARYLEBONE Lord HAILSHAM of SAINT MARYLEBONE moved Amendment No. 49.
Page 16, line 14, leave out from ("the") to end of line and insert ("Exemption Clauses").
The noble and learned Lord said: My Lords, here again we come to the famous question of the Short Title of the Bill. I really take exception to Unfair Contract Terms Bill. It is a completely misleading, name, it is ungrammatical English and
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I think that if we were labelling goods in this way we should render ourselves liable to prosecution under the Trade Descriptions Act. I venture to take a leaf out of the book of the noble Lord, Lord Airedale—or perhaps it was another noble Lord on the Liberal Benches—who gave me qualified support for an earlier and limping suggestion which I made and I think that, on the whole, the term which I have inserted into the Amendment is not misleading, is fairly honest and is not unduly long and cumbersome, as my previous suggestion was. I know it may be said that it does not cover the entire area covered by the Long Title, but what Short Title does? The Long Title covers, by Clause 4, the indemnity clauses and will also cover the arbitration clause if the final Amendment is accepted. However, I think that I have done better than the sponsors. Therefore I commend the Amendment to the House and beg to move.
Lord AIREDALE: My Lords, I am very happy to give my support, for what it is worth, to this Amendment—as I did, indeed, at the Committee stage. Very briefly, I should like to mention one point which has not been made. My problem is that the existing Title of the Bill begins with an adjective which is in common use; one visualises the harassed, busy practitioner racking his brain to try to remember what common adjective it is that the has to look up in order to find the Title. Is it "unfair", is it "unreasonable", is it "inequitable", is it "objectionable"? Which of these common terms is it that he has to try to search for and find in the index to the Statutes? I should have thought that that was a solid ground for objecting to any Title which begins with a common adjective having many synonyms. I hope the House will consider that the noble and learned Lord's alternative Short Title is very much to be preferred.
The LORD CHANCELLOR: My Lords, what is important in the Bill is not its Short Title but its content, and I hope that we shall not have too prolonged an argument about the mere Title. The difficulty is that, so far, no wholly satisfactory Title has been discovered. At least the present Title is meaningful. I do not believe that it is emotive. It will be easily understood by

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the man in the street and the small shopkeeper. The name "Exemption Clauses Bill" does itself have a number of drawbacks. For instance, a number of the provisions in the Bill are not exemption clauses but conditions under which licences are granted or benefits voluntarily conferred. In addition, in Clause 4 We have indemnity clauses which, in general, are not exemption clauses, either. Certainly there is no perfection, nor, indeed, is perfection claimed for the proposed substitution.
My view of the matter is that the Bill is directed towards controlling the major kinds of unfair contract terms. I am informed by the sponsors of the Bill that not only do they desire to adhere to the present description but that they believe it highly likely that, if your Lordships reject the present Title, it will be reinstated in another place. However, that is a factor which certainly ought not to dominate decisions in this House, though it is perhaps worth bearing in mind at this stage. Although I agree that "Unfair Contract Terms Bill" is not perfect, it has the merit, at any rate, of being short and easily understood. I hope, accordingly, that your Lordships will leave it unchanged.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, I find that a very unsatisfactory reply. Our Title is as short and it happens to be accurate and honest. The existing Title is, I think, misleading and therefore dishonest. If the Commons have nothing better to do than to change the names of Bills without altering their content, I am rather unimpressed by their threats. However, as it is going to waste a great deal of your Lordships' time to have this Amendment back again, perhaps I had better withdraw it with as ungracious an attitude as I can possibly adopt.
Amendment, by leave, withdrawn.
Schedule 2 ["Guidelines" for application of reasonableness test]:
Lord JACQUES Lord JACQUES moved Amendment No. 50:
Page 18, line 4, after ("7(3)") insert ("and (4)").
The noble Lord said: My Lords, this Amendment is consequential upon Amendment No. 7. I beg to move.
On Question, Amendment agreed to.
The LORD CHANCELLOR The LORD CHANCELLOR moved Amendment No. 53:
In the Title, line 7, at end insert ("and (for the whole of the United Kingdom) to render arbitration agreements unenforceable in certain cases").
The noble and learned Lord said: My Lords, this Amendment extends the Long Title of the Bill to cover the addition of the new clause on consumer arbitration. I beg to move.
On Question, Amendment agreed to.

INSURANCE BROKERS (REGISTRATION) BILL
6.7 p.m.
Report received.
Clause 10 [Code of conduct]:
Lord DRUMALBYN Lord DRUMALBYN moved Amendment No. 1:
Page 7, line 44, after ("and") insert ("may").
The noble Lord said: My Lords, the Amendment which I am now moving is very simple. It is designed to amend an Amendment which was made during the Committee stage. The words:
"The Council shall draw up … a statement of the acts and omissions which, if done or made by registered insurance brokers or enrolled bodies corporate, or by registered insurance brokers or enrolled bodies corporate in particular circumstances, constitute in the opinion of the Council unprofessional conduct"
were amended to read:
"The Council shall draw up and from time to time revise a statement of the acts and omissions …".
It seems very curious to oblige the Council from time to time to revise the statement, whether or not it requires revision. Therefore, what was probably intended was that the Amendment made during the Committee stage should make subsection (1) read:
"The Council shall draw up and may from time to time revise a statement …"
rather than that it should state that the Council must revise it. I beg to move.
Lord ORAM: My Lords, on behalf of the Government, may I indicate briefly that the Government are happy to accept this Amendment. It is useful for it to be made perfectly clear that the Council is not compelled to revise the code of conduct at frequent intervals and regardless of whether it requires revision. I think that the noble Lord, Lord Drumalbyn, has made a perfectly fair point and hope that the House will agree with him.
On Question, Amendment agreed to.
Clause 27 [Rules etc. made by Council]:
6.9 p.m.
Lord DRUMALBYN Lord DRUMALBYN moved Amendment No. 2:
Page 19, line 35, leave out from ("Act") to end of line 36.
The noble Lord said: My Lords, I beg to move Amendment No. 2. This is a much more substantial Amendment, and I am afraid that I shall have to take up a little of your Lordships' time in order to explain its background. We are dealing here still with the question of the statement which is to form the basis, at any rate, of the code of professional conduct. This subsection of Clause 27 empowers the Secretary of State not only to vary or revoke any rules made under Clauses 8, 11 or 12 of the Bill, but also to revise the statement in Clause 10. This is the statement dealing with the code, and I will refer to it as "the code" for the sake of simplicity. The earlier part of Clause 27, with which I shall be mainly dealing, provides that the code can come into operation only if it is approved by the Secretary of State by order—and in passing may I say that is an order which the Secretary of State may revoke under Clause 28, as he can revoke any order that he makes.
I should also like to ask this question in passing: As one reads the clause literally all he has to do is to make an order indicating his approval, but am I right in assuming that the approval will cover the actual code and that the code itself will also be presented to Parliament? The Bill does not say that, but I imagine that is the intention. I have not sought to make any amendment to that because I think it is perfectly proper. What will happen is that the Council will draw up
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this code, will submit it to the Secretary of State for approval and, when it is approved, it will come into operation.
It is also provided that the Secretary of State may make any modifications in the code as submitted to him. No doubt this is not unreasonable, especially as he has first at least to notify the Council, and secondly he has to consider any observations that the Council may make. Then we have the code. What I am seeking to leave out by this Amendment is the power of the Secretary of State on his own initiative to revise the code which is made under Clause 10 of the Bill. Again he has to consult the Council, and again, if he exercises that power the order falls to be approved under the Affirmative Resolution procedure, whereas an order approving the code in the first instance, or approving amendments subsequently made to the code at the instance of the Council, would be subject to the Negative Resolution procedure.
I raise this in order to raise the whole question whether it is really appropriate for the Secretary of State on his own initiative to alter the code of a professional body as to what conduct is to he adjudged unprofessional. I noted that my noble friend Lord Mansfield congratulated both the insurance brokers and my noble friend Lord Orr-Ewing on introducing the Bill into this House and on the degree of self-regulation, and approved of self-regulation in principle. However I am doubting whether it is really appropriate for the Secretary of State on his own initiative to alter that code of professional conduct.
I agree that, since the interests of the clients and the brokers are involved, the approval of the Secretary of State to the code should be obtained and that the Secretary of State should signify his approval by order in the first place. But as noble Lords will have noted in Clause 10, the code itself is to include provisions which constitute "in the opinion of the Council" unprofessional conduct. Admittedly, the Secretary of State could revise and amend that and, if necessary—and certainly in practice—would consult with the Council before making any amendment. But it seems to me there is a difference. The words "amend" and "revise" have a rather different connotation. If we give the Secretary of State power to revise the code he can look

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through it, make one amendment in it or he may strike out some of those acts or omissions which are proposed to be regarded as unprofessional; he may add other acts or omissions which are proposed to be regarded as unprofessional. He may amend the terms of any such item, and the power to revise may enable him on his own initiative to change the whole character of the professional code. I am not saying that will necessarily be done, but that is the power which is given to him.
It is evident that some approval of the code is needed, as I have said, but it is difficult to see why, in a self-regulating profession, the Secretary of State should be able to dictate what should or should not be unprofessional conduct. Let us consider how this might arise. No doubt the Secretary of State's Department will be in close touch with the Council; it would be very unfortunate if they were not. And the Department, as also their predecessors, have had close relationships with various bodies of this description and have managed to retain the confidence of those various bodies. I myself have the greatest respect for the way in which this is done.
Let me say in passing that one of the things they are very good at is resisting pressures for changes which superficially seem sensible and indeed from time to time obtain considerable popular support, but which are not adjudged, after consideration, to be in the real interests of the public or of the profession itself. What would happen? Supposing there is some abuse, or something which some complainant thinks is an abuse, which is brought to the attention of the Secretary of State. Unless it is trivial, he will bring it to the attention of the Council. He may even suggest that the code of conduct should be amended, and there would be a discussion about that. In many cases no doubt, as has happened in my experience, the Council will be able to convince the Secretary of State that such an amendment would not be an improvement. But there may remain a difference of opinion; there may be considerable pressure and then the Secretary of State can overrule the Council, can produce his own order on his own initiative, and has to go through what would then really be a farce of again consulting the Council
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whose views he already knew, and then would present the order to Parliament.
I really do not think that this is the best way of running a self-regulating system of this kind because the Secretary of State will always be talking and negotiating with the self-regulatory bodies, but having behind him the power to override them at any time. That is not the best way to get sensible discussion on important matters affecting a profession and the profession's clients. I should much prefer to see these words omitted altogether.
What I am saying is that if the words I desire to leave out remained in the Bill they would in effect be a bludgeon in the hands of the Secretary of State, so that his will would without question prevail. It seems to me that that is the antithesis of self-regulation. It would make discussion very difficult and it would make impossible any normal relationship between the Secretary of State and the Council. It is for that reason that I raised the matter at what I quite admit is a late stage. I am afraid I myself came into the discussion of the Bill at a fairly late stage. My claim to detain the House on this is that I have had some experience in this field. I beg to move.
6.21 p.m.
Lord ORR-EWING: My Lords, I have been looking at this Amendment very carefully since my noble friend tabled it. I think if we were starting this Bill afresh there might be some merit in having a longer discussion on it. I am sure my noble friend does well to put it down so that we can probe it, and I very much hope that we can have some assurances on the issue. On balance, I have come to feel that there are sufficient reasons not to divide the House and amend the Bill at this stage. After all, the Secretary of State—any Secretary of State—would feel obligated to consult the Council most carefully before he did anything against their wishes. After all, 12 members of the insurance profession will be members of that Council, and another five will be appointed by the Secretary of State himself. So he would not wish to override the professional considerations and the knowledge and experience of such a Council without their agreement.

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Moreover, if he did wish to do it he would have to get an Affirmative Resolution through both Houses in accordance with that wish. That gives people every opportunity to lobby, people who are earning their daily bread in this profession and who have great knowledge and experience; they will have an opportunity of seeing their Members of Parliament and seeing others who know about these technicalities and putting their views forward. So I cannot feel that the knowledge will go unheard and the experience will go unsung. There is a Parliamentary opportunity, in both Houses, to hear the case put by the Secretary of State, and most people would probably side with the Council because they have first-hand knowledge and professional experience.
I also rather hope that my noble friend will not feel it necessary to divide the House because one of the merits of this Bill is that we have had in this House, where I had the honour to introduce the Bill, Labour, Liberal and Tory support for this measure. I do not think one should lightly cast this aside, because I can imagine giving all sorts of good reasons, when these Amendments go back to another place, for prolonging the discussion to those who wish to slow it down and filibuster. So I hope the Minister will be able to find some form of words and some assurances which will allay my noble friend's very real anxieties on this point.
Lord ORAM: My Lords, I shall try to respond to the suggestion contained in the last few sentences of the speech of the noble Lord, Lord Orr-Ewing, in meeting the real point that the noble Lord, Lord Drumalbyn, has raised. As he quite rightly said, this is a matter of more substance than the one to which I was glad to agree on behalf of the Government earlier. I am afraid this is an Amendment which is not acceptable, because it would remove from the Bill an important safeguard of the public interest.
Before I go on to explain why we take that attitude, the noble Lord, Lord Drumalbyn, asked me a question and perhaps I can seek to deal with that first. As I understand it, he was asking whether the code itself would be subject to Parliamentary approval. The Secretary of
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State must lay before Parliament his Instrument giving approval to the code, and presumably the code itself would be annexed as a Schedule. This Instrument would be subject to Negative Resolution procedure.
If I may now return to the main argument about the noble Lord's Amendment, let me first reassure the House over the extent of the Secretary of State's power under Clause 27(3), because it is subject to important limitations. He may revise the code of conduct only after consulting the Council, as the noble Lord, Lord Orr-Ewing, pointed out. I would remind noble Lords also that any order revising the code in this way would be subject to Affirmative Resolution in each House. There would, therefore, be no question of the Secretary of State using this power in any ill-considered or irresponsible manner. He could not make any changes in the code of conduct until they had been considered and approved by both Houses. The power in Clause 27(3) is not something that the Government inserted in the Bill against the wishes of its sponsors; it was in the Bill from its introduction in another place. None the less the Government were very glad that the safeguard was included. It was a material factor in the Government's decision to support the Bill.
Lord DRUMALBYN: My Lords, I wonder whether I may interrupt for one moment because the noble Lord is making a rather important point. Of course, I am well aware that what he has said is true; I am sure everyone would accept it. But that surely does not mean that the Department did not see the Bill until it was brought before Parliament. It seems to me highly improbable that the insurance brokers themselves would have suggested this power. Surely it must have come from the Department in the first place?
Lord ORAM: My Lords, during the Second Reading we spelt out the degree of collaboration between the sponsors and the Department. It is a Bill which we welcome, and clearly what the noble Lord says is right—the Government did see it. We were glad to see this particular point included, and it had the approval both of the Government and of the sponsors.

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I would suggest that it is important to remember that the Bill confers considerable privileges on insurance brokers. It provides them with machinery for effective self-regulation under Statute, including the right to give or withhold use of the reserve title "insurance broker", a sanction that I am sure will become still more important as time goes on. We have every confidence in the present leadership of the broking community. Otherwise, we would not have supported their proposals for self-regulation.
However—and I would urge the noble Lord to consider this—when enacting measures that are intended to last for many years, perhaps many decades, it would be irresponsible not to include some safeguards against (shall we say?) lethargy or poor judgment on the part of future generations. It is true that when it is first drawn up the code of conduct is subject to the approval of the Secretary of State, but I suggest that that is not enough. Circumstances change; new abuses can creep into insurance selling, as they can into other areas. If insurance brokers are to enjoy continuing statutory privileges, it is important for the Government to be able to make sure that the brokers continue to be responsive to the public's needs for protection against new abuses and, therefore, that they keep their code of conduct up to date.
If all goes well—and we fully hope and expect that it will—this is a power that will be seldom, if ever, used. But I suggest that it is an essential long-stop in case things do not go well. I hope that the noble Lord will accept the points I have raised. We fully understand why he raised the question but I believe that when he gives further consideration to what I have said and to what the noble Lord, Lord Orr-Ewing, has said he will appreciate that there is sufficient reason to keep the present wording in the Bill. If he reaches that conclusion, I hope that he will agree to withdraw the Amendment.
Lord DRUMALBYN: My Lords, I am grateful for the way in which the noble Lord, Lord Oram, has responded to my Amendment. Perhaps he has not given the House quite as clear a picture of the way in which the relationship between the brokers and the public will be controlled and is likely to operate. In addition to the
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code there are, of course, the rules that must be made by the brokers—rules as to eligibility for admission to make certain that the brokers really are brokers; rules to indemnify those members of the public who may be defrauded or suffer from dishonesty in some way; rules for the setting up of a compensation fund to meet such payments and also compensation for the civil liabilities of brokers themselves; and rules as to disciplinary procedures.
Of course, any person who goes before the disciplinary committee that is to be set up and is found guilty—if that is the right expression—would have the right of appeal to the courts. It is for that reason —and I would think for that reason alone —that the approval of the Secretary of State is required for the strictly professional part of the code. This is quite different from the rules. Otherwise, there would be no means of appeal to the courts —there would be nothing for the courts to go on. So that, essentially, is why the code would need the approval of the Secretary of State and would need to be sanctioned by Parliament. That is fine, but I still think that the relationship between the public, the Council and the brokers themselves would be sufficiently controlled by the rules. Of course, the public would always have access to the courts direct where fraud or dishonesty of any kind was involved.
However, though I should be really reluctant to see an extension of this principle of control over professional codes by the Secretary of State on his own initiative, it would not be right for me in any way to attempt to make an Amendment at this stage. However, I would ask the Minister what precedents there are for Secretaries of State—that is, for the Government—to approve codes of conduct of this kind. This is entirely different from the Highway Code and from the code under which employers give information to trade unionists, and that sort of thing. Therefore, this may well set a pattern and create a precedent. In earlier days, professional bodies tended to be chartered and then it was the Privy Council that controlled them, not a Minister. Therefore, I have misgivings about this. I recognise that it is too late to do anything about it now.
I welcome the assurance of the noble Lord, Lord Oram, that if all goes well the

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power will seldom, if ever, be used. That is probably true but, in fact, it slants a self-regulatory system in a way which I believe detracts very much from self-regulation. If the noble Lord is unable to tell me now what precedents there are, I should be grateful if he could write and tell me. Having said that and made the position clear, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Schedule [Constitution, etc. of Insurance Brokers' Registration Council]:
6.37 p.m.
Lord DRUMALBYN Lord DRUMALBYN moved Amendment No. 3:
Page 22, line 12, at end insert—
("(2) Before nominating the persons mentioned in sub-paragraph (b) of paragraph 1 above the Secretary of State shall consult in the first instance the British Insurance Brokers' Association and thereafter the Council".)
The noble Lord said: My Lords, this is a point with which I can deal very quickly. The Schedule provides for the composition of the Council and states how it is to be set up. In addition to the 12 persons chosen to represent registered insurance brokers, one of whom is to be chairman, there are to be five persons nominated by the Secretary of State. I tried to table a briefer Amendment—one similar to my first Amendment—but it was not possible because there have to be two stages. To begin with, the first Council has to be set up and thereafter the independent members will be replaced and the professional members will be elected.
It seems obvious to me that the Secretary of State will, in fact, consult the Council once it has been set up. I think it desirable that, in the early stages, the British Insurance Brokers' Association should also be consulted on the type of independence that the Association would be likely to find appropriate and easy to work with, because it is very important in setting up a Council to have a team working together. I should be grateful for an assurance that such consultation will take place. If the noble Lord is prepared to give such an assurance, I need say no more about this Amendment, which would merely spell out that assurance in the Bill.
Lord ORAM: My Lords, I can straight away give the noble Lord, Lord Drumalbyn, the assurance that informal liaison with the British Insurance Brokers' Association would certainly take place about the Secretary of State's first round of nominations. That is bound to be so in view of the history of the preparation of the Bill so far and of what we have said in this House. Indeed, whenever the Secretary of State makes nominations he will, where possible, obviously wish to avoid nominating people who would be unacceptable to the broker members of the Council. However, I am afraid that I see no need for such consultations to be enshrined in the Bill. An undertaking to consult the British Insurance Brokers' Association could only lead to other interests, such as, for example, the Law Society, accountancy bodies, or bodies claiming to represent consumers, asking why they were not given a statutory right to be consulted.
I here again urge the noble Lord to think again as to whether this Amendment is necessary. I feel that it is not. I can assure him that the Government fully accept the need to work in close liaison with the British Insurance Brokers' Association and with the Council, when it comes to be established, in this matter. With that assurance, which I hope he will feel is adequate, I hope he will withdraw this Amendment.
Lord DRUMALBYN: My Lords, I am grateful for the assurance the noble Lord has given. Without further delay, I gladly ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.

WATER CHARGES EQUALISATION BILL
6.41 p.m.
Report received.
Clause 1 [Equalisation levies payable by certain water authorities]:
Lord SANDFORD Lord SANDFORD moved Amendment No. 1:
Page 2, line 7, at beginning insert ("Subject to subsection (4A) below").
The noble Lord said: My Lords, the House will remember that at the previous stage of this Bill there was what I might describe as a slip in the drill at the point where I moved Amendment No. 6. The Chairman of Committees explained later on the same day what had occurred, and generously attributed it to the fact that it was his birthday. This means that the Amendments that I moved, and which the Committee accepted after a Division, could not be printed in the Bill that is before us now, and have to be moved again. I understand through the usual channels that it is not the wish of anybody that all the substantial arguments should be redeployed. Therefore, I think I can describe the Amendments that we have down as being drafting Amendments to the original Amendments to make sure that they fit into the Bill as we now have it. In that sense I beg to move Amendment No. 1, and to indicate that Amendment No. 3 goes with it. I beg to move.
The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk): My Lords, the noble Lord, Lord Sandford, is of course absolutely right that this was lost on a technicality, so I do not propose to repeat my arguments why the Government still find these Amendments unacceptable. All I will say is that, even at this late stage, if the noble Lord, Lord Sandford, has a change of heart we will not hold it against him. I would not think it in the slightest inconsistent. I would think that in the period between Committee stage and Report he has had second thoughts which were much better than the first thoughts, and I would strongly urge him to withdraw his Amendments. If he insists on pressing them against the extraordinarily good advice that I am giving him, I do not propose to divide the House.
Lord SANDFORD: My Lords, I am grateful to the noble Baroness for those gracious words, but I shall not succumb to that siren voice. I should like to press Amendment No. 1, but I should like to correct what I said before and say that it is Amendment No. 4 that is linked to this one.
On Question, Amendment agreed to.
Lord SANDFORD Lord SANDFORD moved Amendment No. 2:
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Page 2, line 11, after ("of") insert ("the aggregate of").
The noble Lord said: My Lords, I beg to move Amendment No. 2. The same point that I was making about having been lost on a technicality applies here. The point is a different one. Amendments Nos. 2 and 3 are linked together. I beg to move.
Baroness BIRK: My Lords, the same applies to this. It really suffered what I could call a posthumous technical knockout. In any case, the same arguments I used before still apply. I do not know whether the noble Lord will change his mind, but I have nothing more to say on this.
On Question, Amendment agreed to.
Lord SANDFORD Lord SANDFORD moved Amendment No. 3:
Page 2, line 26, at end insert ("multiplied by the appropriate factor.
In this subsection the "appropriate factor" means the proportion which the average bill for general rates and water services in respect of premises to which a supply of water is provided by the undertaker on an unmeasured basis bears to the average bill for general rates and water services to such premises throughout England and Wales").
On Question, Amendment agreed to.
Lord SANDFORD Lord SANDFORD moved Amendment No. 4:
Page 2, line 26, at end insert—
("(4A) The amount ascertained under subsection (4) above shall be reduced by any relief received in the corresponding accounting period through the rate support grant by premises to which a supply of water is provided by the undertaker on an unmeasured basis to the extent that such grant takes account of water supply charges.")
On Question, Amendment agreed to.
6.46 p.m.
Lord TREFGARNE Lord TREFGARNE moved Amendment No. 5:
Page 3, line 5, at end insert ("but shall not in any case exceed the amount of any such levy which the undertaker was directed by him to pay under that subsection in the preceding financial year allowing for any appropriate adjustment in respect of that year made under the said section 3(3).")
The noble Lord said: My Lords, this is a new Amendment. The point we are seeking to raise is a new one. I am sorry that we were not able to raise it at an earlier stage. As the noble Baroness

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is aware, a number of new features were brought into the Bill at a later stage in the Bill's progress and it has only just now been possible for us to form a view on this matter. Clause 1 empowers the Secretary of State to direct equalisation levies to be paid to the National Water Council by those water authorities, and now water companies, with a unit cost below the national average. The Amendments we have just been considering somewhat amended this arrangement, but the amount of any equalisation levy which a water authority, or water company, may be directed to pay is to be calculated in accordance with the formula set out in Clause 1, from which it is apparent that the amount of a levy may, and probably will, vary front year to year.
The object of this Amendment is to seek to place a limit on the amount of the levy which an authority may be directed to pay so as to secure, so far as possible, that householders in the area of an authority or company which is so directed to pay a levy are not subject to an ever-increasing demand to contribute towards the water rates payable by householders in a recipient area.
During the third sitting of the Standing Committee in another place on 8th February the right honourable gentleman the Under-Secretary of State for Wales, Mr. Jones, at columns 125 and 131 of the Official Report, drew the Committee's attention to paragraph 73 of the consultative document, Review of the Water Industry in England and Wales, which states:
"The interim equalisation scheme will have a progressively limited effect over a period of years".
I repeat, those were the words of the Under-Secretary of State. During the debate, the right honourable gentleman reaffirmed that equalisation levies would be of a progressively diminishing amount, and that within about five years they may be phased out altogether. In the circumstances, the Government may seek to argue that the Amendment is not necessary, but I would put to the noble Baroness that if the assurances that the Government have given on this point are worth anything then there will be no objection to writing this Amendment into the Bill.
Baroness BIRK: My Lords, the noble Lord, Lord Trefgarne, is not right because the two things he is trying to do, do not add up. They are two entirely different things which, with great respect, have become confused here. There is in this Amendment a technical defect in that it refers to the preceding financial year, but that is neither here nor there. It is in substance that the Amendment is quite unacceptable.
We have always said that the equalisation scheme is a self-wasting one and that its effect will diminish over a period of years. That is certainly the case. But the main reason for that effect is not that the equalisation transfers will get smaller year by year, but that they will constitute a smaller proportion of each authority's revenue requirement each year as the cost of financing new capital expenditure, and operating costs increasing in line with inflation, outstrip them. There should certainly be a steady decline in equalisation transfers as the historic debt is paid off, and so the "qualifying asset value" as defined in subsection (3) of Clause 1 gets steadily smaller.
But this does not mean that the relevant financing costs will necessarily fall year by year. The most important element in those costs is interest charges, which of course depend on the current level of interest rates. If there is a marked increase in interest rates from one year to another, then even with the smaller volume of debt, the total financing costs may well be higher. This applies of course to the total equalisation pool—that is, the total financing costs of all authorities which go into the equalisation pool—but it need not affect all authorities or companies equally; interest rates do not always move precisely in line.
Moreover, even if interest rates remain stable and the total equalisation pool diminishes, the position of different undertakers may change. This can arise not only from varying movements in interest rates, but from differences in the rate at which they are paying off their qualifying historic debt. This means that an undertaker's average unit cost may fall significantly faster than the national average unit cost, in which case his equalisation levy might well increase though the total volume of transfers was falling. This is an inevitable consequence of a scheme which

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equalises a moving figure of costs, and that is what this scheme does.
Unfortunately, it is not possible to provide detailed estimates of levies and payments in future years because they will depend on these individual movements in interest rates. What we can say with some certainty is that if, as we all must hope and indeed can expect, interest rates fall below the very high levels prevailing when the notional figures for the current year were prepared, then the total size of transfers should fall and no authority or company should be faced with any dramatic change from year to year.
There is one further objection to the Amendment. The limitation would apply only to equalisation levies; there is no such limitation on equalisation payments. But if the amount of money raised in levies was reduced below the figure necessary to meet the equalising criteria prescribed in Clause 1(7), there would not be enough money in the pool to make the equalisation payments prescribed in Clause 2(2). As we have said before, equalisation is a self-contained game; you cannot reduce one side of the equation without reducing the other by precisely the same amount. I hope that that clear exposition has convinced the noble Lord that his Amendment is really off-side.
Lord TREFGARNE: My Lords, I am not convinced that it is off-side. The noble Baroness, Lady Birk, says that no provision is made in the Amendment for equalisation of the payments; we were well aware of that when we tabled it, and indeed, had we been able to persuade the Government to accept the Amendment, that matter could have been put right on Third Reading. However, I do not think it will come to that. The noble Baroness has totally resisted the very notion of what we are proposing and it is certainly not my intention to pursue the matter to a Division now. I would have wished that she had been able to repeat the assurance given by her right honourable friend the Secretary of State for Wales, when the Bill was in Standing Committee in another place, indeed, I am sorry she has not felt able to repeat that assurance in even firmer tones than did her right honourable friend.
Baroness BIRK: My Lords, while I do not have a note with me, though I have read it, of what my right honourable friend said in another place, if the noble Lord reads that again together with what I have said today, I think he will find that my right honourable friend was saying the same thing. I suggest that the noble Lord has mixed up—I will not use the word "confused"—the point about interest rates and the point about equalisation. I listened carefully when he repeated what my right honourable friend said, and it seemed to me that it was exactly what I was saying. I was pointing out the difference between the running down which he was describing and how it would work if the Amendment became part of the Bill. There really is no difference between us, as I think the noble Lord will find when he reads the two speeches side by side. I appreciate that this is a very complicated subject.
Lord TREFGARNE: The noble Baroness, Lady Birk, is very likely right, my Lords. I prefer to reserve my position on the matter and study carefully what she said, and if I am so moved and if my noble friends agree, I may consider returning to the matter on Third Reading, having regard to the restraints on our procedures as they apply to Amendments that may be moved at that stage. I do not think there is much profit to be derived from taking the matter further at this point and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
6.56 p.m.
Lord TREFGARNE Lord TREFGARNE moved Amendment No. 6:
Page 3, line 13, at end insert—
("(10) In the first financial year in respect of which an order is made under subsection (1) above, the amount of the levy calculated under subsection (7) above shall be reduced by two-thirds and in the second financial year in respect of which such an order is made the said levy shall be reduced by one-third.").
The noble Lord said: I will, with the permission of the House, speak at the same time to Amendments Nos. 7 and 8. Your Lordships know that this Bill provides for money to be levied on water companies and certain water authorities and then paid over to others less fortunately placed than the companies on which the levy falls. When we moved a similar

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Amendment in Committee we rather underestimated the position and, as I explained at that time, we had not received all the information that we now have as to how these levies and the resulting payments will fall on the newly included water companies.
In Committee I suggested that the water charges falling on consumers living, for example, in the area served by the Thames Water Authority might increase by 10 per cent. or so, and I advanced such figures as being typical; but I underestimated the figures considerably. New figures have come into my hands which I will put to your Lordships and apply them in the hope of persuading the House to accept the Amendment. I am advised, for example, that under the Bill the Bournemouth and District Water Company—I take this and other examples quite at random—will have to increase its charges by 22 per cent. to provide the necessary monies for the levy to be paid. Another company, in Hartlepool, will have to increase its charges by 24 per cent; I noticed that another company, West Hampshire, will have to increase its charges by 27 per cent; and those served by the Portsmouth Water Company will suffer an increase of 23 per cent. in the charges they will have to pay, all these charges applying starting this year.
It is not beyond the bounds of possibility that inflation generally next year will be 10 per cent. or 15 per cent. That inflation will of course apply not only to the costs of water companies but to all other costs incurred by local authorities, and that will increase the general rates which those authorities have to levy. It appears to us therefore that the increase in the burden on householders, taking together the water rates and the local rates, will be very substantial indeed. It seems to us that this very substantial increase ought to be phased and brought in gradually.
Therefore it is our proposal—and in substance it is the same as the one which we put before your Lordships at the Committee stage—that the increase ought to be phased over a period of three years. Amendment No. 6, which is the one that I am formally moving at the moment, provides that the levy should be reduced by two-thirds in the first year and by one-third in the second year, so that on the third year it comes into full force. Amend
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ments Nos. 7 and 8, which relate to Clause 2, have the same effect with regard to the payments to be made from the levies collected under Clause 1. I hope that your Lordships will agree that this phasing arrangement (as we have called it) will be beneficial to the water consumers and, indeed, to all the householders in the areas served by the authorities affected by the Bill. I beg to move.
Lord PEDDLE: My Lords, I am sure that there is some virtue in the suggestions behind this Amendment—and I should like to speak with particular emphasis to Amendment No. 8. I think that the Amendment provides the means to staunch the wounds that the Bill, when it later becomes an Act, is likely to inflict upon some water companies and water authorities. In view of the fact that the Bill is theoretically concerned with equity, it seems difficult to argue against the basic principle involved in the Amendment. On Second Reading and at the Committee stage, I stated my views on the basic principles upon which the Bill is based. I think that it is ill-timed, and it certainly does not achieve the objectives that the draftsmen intended to secure. But I was pleased that the Government listened to our plea that the water companies should be included, and I thank my noble friend for her contribution to that end.
Therefore, I do not quite share the point of view in the remark, "Oh yes, we wanted to be in, and we are in, and now we squeal like stuck pigs because it is likely to hurt". I welcome the inclusion of the water companies. I recognise that some will gain and some lose, and that the water companies will lose collectively, or will pay out rather more than £3¼ million more than they receive. What we are concerned with is the effect on the ordinary householder user. He is the person with whom we are concerned, not the company that will be paying out. I have had support for the figures that have already been mentioned, and there will, for instance, be more than nine companies which will have increases in charges of over 12 per cent. One instance of an increase as high as 27 per cent. has already been quoted. I am concerned with the effect upon the user.
The original theoretical concept behind the Bill was equity in the burden of charges. If there are transfers that

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heighten the inequity and at the same time introduce a measure of distortion, then it is perfectly obvious that we should try to adopt some measures in order to reduce the rather savage impact in certain areas. It is interesting—at least to me—that, tomorrow and the following day, I shall be chairing a seminar at Keble College, promoted by the Water Research Council, which will be concerned with the economics of charging structures in the water services. A high-powered team of people drawn from all over the world will be lecturing there, and the point that is to be emphasised is that charging within the water industry today has a dynamic function. That is something of tremendous significance and, to an increasing degree, the whole modern philosophy with regard to charging within the water industry emphasises that the charges should be a reflection of costs. Yet the Bill is doing precisely the opposite. For a variety of reasons acceptable to them the Government are going to obscure that objective.
I should like also to refer to a booklet which I wrote two years ago at the behest of the Chartered Institute of Public Finance and Accountancy. I had the opportunity of recording the first report of the Secretary of State for the Environment in 1973, in which the statement is made that charging policies should be influenced not only by the need to cover revenue expenditure, but also by the aim to make consumers aware, as far as possible, of the real cost of those services. That was the very kernel of the Government's attitude towards pricing policy at the time. I wrote that booklet only two years ago, and I am very anxious to know whether or not there has been a fundamental change in the policy of the Government, because if there has been a fundamental change, it must, as I said previously, apply to other industries.
We must recognise that, today, charging has a dynamic function, particularly in the nationalised industries. I believe that the Bill will, when it becomes an Act, obscure the relationship between charges and cost. I hope that this Amendment will be accepted, because, if we are to proceed with the proposal inherent in the Bill, I believe that the application of the Amendment will at least soften the blow
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in some areas. Let us look at the situation. We are introducing a Bill to soften the blow of high charges in certain areas of the country. To do this, we are "clobbering"—and unrealistically so—another area of the country. It is not right. There is something fundamentally wrong with proposals of that kind.
We have gone along with the Government's point of view, and I appreciate the fact that water companies have been included. However, I ask that serious consideration be given to this proposal because, as is shown in the evidence that has been produced, the effect, at least upon the water companies and some water authorities, could be considerable, if not catastrophic, in the initial stages. In turn, there will be the effect on the ordinary user. In the interests of the ordinary user, I ask the Government to adopt this phasing principle, because such a method would at least soften the blow.
Baroness BIRK: My Lords, I am sorry that I cannot agree, either with the noble Lord, Lord Trefgarne, who moved this Amendment, or with my noble friend who has just supported it. Let me start off by pointing out once again that neither the Amendments nor the Bill itself have anything to do with inflation, because the Bill has no effect whatever on public expenditure. What it does is to provide for a self-balancing scheme: one where total payments into the equalisation pool will be exactly matched by total payments from the pool. In that way it is a purely redistributive measure, and it is designed in such a way that it will by easy and cheap for the National Water Council to administer. It is true that the increases in some of the company areas are bigger (although I think I would say that the figures quoted by the noble Lord, Lord Trefgarne, are a bit on the high side), but the Government argument is still valid. These companies will pay more because their charges are so very low. They will all, nevertheless, remain a long way below the national average.
Then, we have not heard anything about the companies which are well above the average. Our scheme will still leave consumers in some companies well above the average—mid-Sussex, for instance, 43 per cent.; East Surrey, 22 per cent.; and mid-Kent, 20 per cent. Phasing over three years means that it will be three years

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before they get even to that level. Mid-Sussex is still nearly 60 per cent. above the average next year. Doing it in this way—and this, my Lords, is really a very modest Bill—will be long-drawn-out agony. It means that taking the Thames area, for instance, the per capita contribution required of Thames consumers will be low—as little as 2p a week for the average household—while the benefit to Welsh households will be considerably greater—7p a week. There are, it is true, more people in the Thames area than in Wales.
What the Bill does is a great deal to help people now facing very high average water bills, at minimum expense to consumers in areas where average water bills are relatively low. I should have thought that it was helping the fight against inflation to bring down these extraordinarily high charges in Wales, in the South-West, for instance, and in East Anglia. People in these areas—and we are talking about the individuals—feel the high charges, and are suffering from them at the present moment. The Government's proposals are, as I have said, a modest measure, and they fall well short of full equalisation of bills. To reduce the transfers, which is what these Amendments seek to do, by two-thirds in the first year of the scheme and one-third in the second year, would make the transfers really derisory and reduce the whole scheme to a nonsense. The life expectancy of the scheme is about five years. In successive years its significance will diminish as transfers become a smaller and smaller proportion of the undertakers' revenue requirements. For these reasons, I cannot advise the House to accept Amendments which would dilute what is a very modest equalisation proposal.
Lord TREFGARNE: My Lords, how disappointing. The truth of the matter is that, if you live in London, your water rates are going to go up, and the household rates which you pay are already astronomic. So for the noble Baroness to throw away so lightly the effect upon inflation is, I believe, unfortunate, unsatisfactory and misleading. There are many poor people in London, and at the moment they enjoy quite modest water rates. It is the proposal of the Government that these water rates should be substantially increased next year. They are not to be
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phased over one, two or three years but, next year, are to be increased by 20 per cent. or so. At the same time, the domestic rates which those unfortunate people pay, calculated on the rateable value of their property, as are water rates, will also go up, very likely. Heaven knows! they are high enough already, but that the noble Baroness just dismisses.
As for the unfortunate people of Wales, who the noble Baroness says suffer such astronomic water charges at the moment, it is indeed the case that the people of Wales, although served by the Welsh Water Authority, pay somewhat higher water rates at the moment than those paid elsewhere. But, of course, the truth of the matter also is that the domestic rates paid by those people are substantially lower, and thus the total burden falling upon householders in Wales is significantly less than the burden falling upon householders where, under the proposals of the present Government, the water charges are to be increased.
My Lords, I am not the least bit persuaded by the noble Baroness. She talks of figures somewhat as if it did not matter about the individuals involved. But the individuals do matter, and I believe they are the people we ought to seek to protect. The water companies are not complaining, as I understand it, of their inclusion in the Bill. Indeed, they were anxious to be included, and now, thank goodness! they are included; but it is right and proper that their inclusion should be equitable and that the burden falling, not only upon them but upon the water authorities which are already covered in the Bill, should be phased in gradually, so that the increases which fall upon householders are not lumped on them suddently next year, or even this year, as is the proposal of the Government. I am very disappointed that the Government have found it impossible to yield in any way on the proposal that we have put to your Lordships.
Baroness BIRK: My Lords, I wonder if at this moment, without interrupting the noble Lord's flow, I may put a point to him. I do not accept that I have dismissed lightly the plight of people in different areas. What I should like to put to him is whether he thinks that

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everyone in, for example, Wales, the South-West, East Anglia or Northumbria is well off, while all the poor of the country are concentrated in the Thames area and in the other areas which will be contributors under the Bill? Because it is just not so: the population there is a mixture, as it is anywhere else. Furthermore, I wonder whether the noble Lord could clarify his view on this figure with regard to the Thames area. The actual figure, as I understand it, is a 5 per cent. increase. In Committee the noble Lord said it was 10 per cent.; now he is claiming 20 per cent. We seem to be having a great numbers game going on here, and I think we ought to get it clear.
Lord TREFGARNE: My Lords, as to the number of poor in Wales or the West Country compared with the number of poor in London, I do not have at my fingertips—nor, I suspect, does the noble Baroness—the total number of those below the average national wage, or whatever line she likes to draw, living in the West Country or living in London. But one thing I do know is that there are a great many people living in the Greater London Area who are very hard-up. They are hard-up for all sorts of reasons, no doubt, but one reason in particular is that the general rates they have to pay are very high. The cost of all the social services and other things provided by the Greater London Council is no doubt very high. All the householders living
in the Greater London Area have to contribute to those costs, and thus the rates they pay reflect that situation.
As for the percentage increases, I do not think it is profitable to bandy detailed percentages around if the noble Baroness does not want to, but the truth of the matter is that the people in London, for example, will pay substantial increases. All the figures that I produce and all the figures which the noble Baroness produces are forward projections, and may in the upshot prove optimistic or pessimistic. If the noble Baroness thinks that my figures are unduly pessimistic and hers are unduly optimistic, or the other way about, so be it. The noble Baroness says that she thinks her figures are right. I wish all her noble and right honourable friends were as confident and accurate in their predictions of, for example, the rate of inflation. I remember, in August 1974, her right honourable friend the Chancellor of the Exchequer announcing to the world that inflation was down to 8 per cent. My inflation was not down to that level then, nor has it been since. I am firmly convinced that this Amendment is a significant improvement to this Bill and I hope your Lordships will agree with me.
7.20 p.m.
On Question, Whether the said Amendment (No. 6) shall be agreed to?
Their Lordships divided: Contents, 44; Not-Contents, 30.

CONTENTS

Alexander of Tunis, E.

Hereford, V.

Reading, M.

Amherst of Hackney, L.

Hornsby-Smith, B.

Romney, E.

Amory, V.

Long, V.

Sandford, L.

Avon, E.

Lyell, L.

Sandys, L.

Brooke of Ystradfellte, B.

Merrivale, L.

Southwell, Bp.

Brougham and Vaux, L.

Monck, V.

Strathclyde, L.

Camoys, L.

Monson, L.

Strathcona and Mount Royal, L.

Cathcart, E.

Morris, L.

Sudeley, L.

Cullen of Ashbourne, L.

Mowbray and Stourton, L. [Teller]

Swinfen, L.

de Clifford, L.

Trefgarne, L.

De La Warr, E.

Newall, L.

Vivian, L.

Denham, L. [Teller]

Northchurch, B.

Wakefield of Kendal, L.

Drumalbyn, L.

O'Hagan, L.

Ward of North Tyneside, B.

Elton, L.

O'Neill of the Maine, L,

Westbury, L.

Hatherton, L.

Rankeillour, L.

Young, B.

NOT-CONTENTS

Allen of Abbeydale, L.

Goronwy-Roberts, L.

Peart, L. (L. Privy Seal)

Avebury, L.

Hale, L.

Phillips, B.

Banks, L.

Harris of Greenwich, L.

Pitt of Hampstead, L.

Birk, B.

Houghton of Sowerby, L.

Ponsonby of Shulbrede, L.

Blyton, L.

Hylton-Foster, B.

Popplewell, L.

Champion, L.

Jacques, L.

Stone, L.

Collison, L.

Lleweiyn-Davies of Hastoe, B.

Strabolgi, L.

Davies of Penrhys, L.

McCluskey, L.

Taylor of Mansfield, L.

George-Brown, L.

Milner of Leeds, L.

Wallace of Coslany, L. [Teller]

Gore-Booth, L.

Oram, L. [Teller]

Wynne-Jones, L.

On Question, Amendment agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.
Clause 2 [Equalisation payments to be made to certain water authorities]:
7.27 p.m.
Lord TREFGARNE Lord TREFGARNE moved Amendments Nos. 7 and 8:
Page 3, line 21, after ("to") insert ("subsection (3A) of this section and")
line 38, at end insert—
("(3A) En the first financial year in respect of which an order is made under section 1(1) above, the amount of the payment calculated under subsection (2) of this section shall be reduced by two-thirds and in the second financial year in respect of which such an order is made the payment shall be reduced by one-third.")
The noble Lord said: My Lords, Amendments Nos. 7 and 8 are consequential upon Amendment No. 6. I am not, therefore, proposing to make a further long speech but would merely say that Amendments Nos. 7 and 8 apply to Clause 2 and their effect is to phase the payments while the Amendment to which your Lordships have just agreed was to phase the levy. I hope you will agree that these two Amendments are consequential. I beg to move.
Lord TREFGARNE Lord TREFGARNE moved Amendment No. 9:
After Clause 2, insert the following new clause:
Grant in lieu
.—(1) The Secretary of State may, with the approval of the Treasury out of money provided by Parliament, make to any water authority a grant in lieu of the whole or part of an equalisation payment.
(2) Where such a grant is made the amount of the grant shall be deducted from the amount of the equalisation payment to that water authority and shall also be deducted proportionately from the equalisation levies to be paid by statutory water undertakers under section 1 above.
The noble Lord said: My Lords, this Amendment is similar but not identical to the one moved by my noble friend Lord Sandford during the Committee stage of the Bill. As your Lordships have heard, the Bill provides for a system of levies and payments to equalise the charges of water companies across the land. However, in my view and in that of my noble friends, and, indeed, of my honourable and right honourable friends in another place, this is not a satisfactory method of equalising the charges, if equalisation itself be desirable; and there is certainly room for more than one view as to that. We believe it would be appropriate to give to the Secretary of State the power, but not the obligation, to make certain payments by way of grant where, for one reason or another, the system of levies and payments does not appear appropriate.
During the Committee stage in this House the Amendment that was moved by my noble friend was resisted by the noble Baroness. As I recall, she had three principal objections. The first was that this was an increase in public expenditure; and she "twitted" my noble friend and myself, and others on this side of the House, with our apparent desire to increase public expenditure in this specific area while we have constantly resisted any increase in public expenditure across the whole range of Government activities. We accept that as a reasonable objection to what we were then proposing; that is why this Amendment is not mandatory upon the Secretary of State. It is enabling only, and enables him to take what we believe to be the desirable course when Government finances allow it.
The second objection which the noble Baroness raised was that the Amendment was limited in its scope in that it provided only for a grant to the Welsh Authority.

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In deference to the wishes of the noble Baroness, we have amended the Amendment—if that is the right expression—so that now the Secretary of State can use the power that we seek to give him to make a grant to any authority covered by the Bill.
The third objection was that the Amendment was out of order because we were encroaching upon the prerogative of the other place. I am sorry to tell the noble Baroness that there was no need for us to alter our Amendment in that respect because the noble Baroness was plumb wrong on that matter. I have taken the best advice, and I am informed that there have been many cases in which the Government have proposed Amendments in this House which are either not covered by the money resolution or which are to a Bill in respect of which no money resolution has been applied. In all such cases, a money resolution has been passed in the Commons when the Lords' Amendments are considered. I am further informed that this is also the view of the authorities in the other place.
I hope that your Lordships will agree therefore that the shortcomings, if there were any, in regard to our Amendment at the Committee stage have now been substantially overcome and that your Lordships will therefore agree that this Amendment ought to be included in the Bill. I beg to move.
7.34 p.m.
Baroness BIRK: My Lords, the noble Lord, Lord Trefgarne, is quite right when he says that there are several reasons why the Government cannot accept the Amendment. In the first place it would be redundant. He reminded me that I "twitted" him last time about the increase in public expenditure. It does not alter the substantial point because the Secretary of State is not making the power mandatory, but, nevertheless, there are some extremely unpalatable implications for public expenditure, even if the Amendment is now on the basis of the Secretary of State being able to choose whether or not he will do this. What would still be very dangerous would be to inaugurate Government subsidies to an industry whose annual revenue requirement is about £1,200 million, and for this reason
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the Government opted for a self-balancing scheme avoiding central subsidies.
I do not know whether the noble Lord has in mind the possibility of a future Conservative Government having to operate the Bill, because his noble friend all the way through the Committee stage talked as though he was ready to throw the whole Bill out of the window. If one noble Lord wants to keep it with extra public expenditure and the other wants to get rid of it, are they seeking to ensure merely that they will have adequate powers to distribute Exchequer subsidies without having to obtain their own approval? Maybe this is part of the Tory Party's bold new programme of reducing the burden on the taxpayer.
Lord TREFGARNE: My Lords, if the noble Baroness will allow me, I am not forecasting an Election this week, next week or next year, but I have been listening to her right honourable friend the Prime Minister who assures us that all is going to be all right next year. If we are to be guided by what he told his audience at the weekend, then by next year the Government should have plenty of money for subsidising everything, including the unfortunate water consumers in Wales.
Baroness BIRK: My Lords, with great respect, if in the future a Conservative Government are elected—and I hope that does not happen—for the sake of the country I hope that the noble Lord, Lord Trefgarne, does not become the next Chancellor of the Exchequer, because the idea of a Government subsidising an industry with the annual revenue requirement of the water industry, and which has been able to be self-balancing, seems absolutely wrong. I do not think we are going to have that much oil pouring in from anywhere.
However, apart from the public expenditure point, the Amendment now, as the noble Lord quite rightly said, is not restricted just to Wales. Nevertheless, my basic objection is the same. We are keeping to a self-balancing scheme. That means that equalisation involves some going up and some coming down. The argument is the same, except on the last round Wales was just picked out for special preference. It does not alter the basic point that underlying the whole

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scheme is the question of redistribution and self-balancing. This Amendment removes that and brings it into the taxation and taxpayers' area.
Regarding privilege, I take the point that that is something for another place. I am not convinced that it will not raise a point of privilege. That is no reason to deny it in this House. That is a matter for another place and I certainly would not rest my case solely on that argument. The case is on the main point of a self-balancing scheme. That is the underlying motive of the whole Bill. Therefore I ask the House to reject the Amendment.
Lord TREFGARNE: My Lords, I am sorry that the noble Baroness is not able to offer us a more helpful approach to this Amendment. I am convinced that she and her advisers have not really appreciated the merit of it. It was certainly not our intention that the grant should totally replace the unhappy and, we would say, unsatisfactory equalisation arrangements, but that it should be complementary to them. Our Amendment is drafted in such a way that the grant could be of a sum much less than the total revenue requirements that the noble Baroness has bandied around, which are irrelevant figures in the context in which we are considering them.
We had in mind, as the noble Baroness knows, because this was implicit in the Amendment we moved on Committee stage, that the Secretary of State should have the power to make a grant on a selective basis to certain water companies or water authorities who were particularly hard hit in any one year. However, we find, to our regret, that the Amendment is not acceptable to the noble Baroness and therefore will not pursue the matter further. We are disappointed that the noble Baroness does not agree with our desire to give the Minister this more flexible power. In the circumstances, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 3 [Supplementary provisions as to directions and orders]:
7.41 p.m.
Lord TREFGARNE Lord TREFGARNE moved Amendment No. 10:
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Page 4, line 19, leave out ("he considers") and insert ("is").
The noble Lord said: Clause 3(1) of the Bill refers to the determination of levies and payments on the basis of estimates. Clause 3(3) prescribes the procedure for subsequent adjustment of these estimates to bring them into line with actual figures when the accounts are available; but it leaves it open to the Secretary of State to make such adjustments to the levies or payments as "he considers necessary".
It is not clear why the clause cannot simply prescribe that when the actual figures are known the levies and payments will be adjusted accordingly, unless it be the fact that the Secretary of State wishes to retain the power to change the figures if they do not happen to be to his liking. I am informed that it is quite possible that there will be substantial changes in the amounts when they are recalculated on the basis of the true figures as these become available. We therefore think it is very important that the Secretary of State is not, as is provided in the Bill, empowered to make adjustments to the levies which he alone considers necessary, but clearly as they are necessary. That is the purpose of our Amendment, and I beg to move.
Baroness BIRK: My Lords, as the noble Lord, Lord Trefgarne, has said, the calculations for equalisation levies and payments under Clauses 1 and 2 have of necessity to be based on estimates, since the orders have to be made before the start of the year to which they relate. Clause 3 requires the Secretary of State to recalculate the levies and transfers in the light of the actual figures as soon as they are available and to take any discrepancy between the two sets of calculations into account in subsequent years.
The purpose of this Amendment is presumably simply to remove what might appear to be an unacceptable degree of discretion to the Secretary of State in deciding what adjustment he will make. I have explained why it is essential for the Secretary of State to retain considerable discretion in making the basic calculations —because of the unavoidable need for working to broad assumptions—but I do accept that there is no need for similar discretion at this point. The Secretary of State will indeed do what "is" necessary.

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In those circumstances, I accept the Amendment.
Lord TREFGARNE: My Lords, words fail me! I am grateful to the noble Baroness. It was a point that we considered to be very important. The noble Baroness has saved the House and my tonsils quite a bit of effort, and I am happy to acknowledge her acceptance of our Amendment.
Clause 6 [Citation, interpretation and extent]:
7.46 p.m.
Lord SANDFORD Lord SANDFORD moved Amendment No. 11:
Page 5, line 29, at end insert—
("() This Act shall come into force at the expiration of the period of three months beginning with the day on which it is passed.")
The noble Lord said, My Lords, I beg to move Amendment No. 11. I have to go back to a point I made at Committee stage, the main substance of which was that I felt it was not appropriate for this Bill to be enacted before we saw the results of the Government's consideration of the issues raised in their Consultative Document, with which they initiated the review of the water industry.
The noble Baroness was able to tell us at Committee stage that a White Paper will be with us quite soon. It was promised for the spring, and she told us it would be here this month, in July. It seems to me important that there should be a period during which the implications of that can be read, marked, learned and inwardly digested by the regional water authorities and the water companies, and indeed all concerned, before starting work on this Bill, if, unfortunately, it is enacted. The noble Baroness resisted the Amendment I moved then on the grounds that its effect would be to delay the issuing of the orders called for in the Bill which, because of the Amendments she was tabling that day, would begin not when I thought they would begin and when they would have begun if the Bill had just included the regional water authorities. The noble Baroness told us that it is necessary that they should first be issued in November because of the different
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financial years followed and adopted by the water companies.
I withdrew the Amendment in order to take both those points into account, and the new Amendment, I think, does so. It will still ensure that there is a delay after the passing of this Act so that the implications of the Government's White Paper on the water industry can be absorbed; but the delay has been reduced to one of three months, which will not cause any delay in the issuing of the first orders under the Bill. I hope that, with those adjustments, this Amendment will be acceptable to the Government. I beg to move.
Baroness BIRK: My Lords, I appreciate that the Amendment which the noble Lord, Lord Sandford, has now moved will avoid the effect of his earlier Amendment, which would have delayed equalisation for another year; but, frankly, I do not see what possible practical effect his new Amendment would have. He told us on Committee stage, and has repeated it now, that his purpose was that implementation of the Bill should take place only after Parliament has seen and debated the impending White Paper concerning the review of the water industry. I explained to him the Government's intentions on publication of the White Paper, to make equalisation orders under this Bill.
The White Paper will be published later this month and, subject to the Bill gaining Royal Assent, we shall make equalisation orders governing next year in November or December. I very much hope there will be time for a debate on the White Paper before November but, as the noble Lord must be aware, one cannot make promises in such matters. But, whether or not time can be found for such a debate, the arrangements proposed in the Bill would still go ahead. They must go ahead, because those water companies whose financial year starts on 1st January must be given time to take their levy or payment into account when fixing their charges, and the water authorities will have to take equalisation of payments into account in the lengthy process of preparing and submitting their budgets to the Price Commission, which also has to begin in November.
The Amendment, it is true, still allows us to make the orders as planned in

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November, but I really do not think it would serve any useful purpose. What it may do is to hinder us in one way: it would prevent our making orders any earlier than November if we found ourselves in a position to do so. In that sense, it could be counter to everybody's interests. We should get the orders made as early as possible in order to give people as much notice as possible. I say, frankly, that if the noble Lord wants to press his Amendment I shall not force a Division, but I hope, in view of the time sequence I have pointed out, that he will withdraw the Amendment. I think he will get the opportunities he wants, and his Amendment would merely result in delaying the possibility of getting on with some of the orders before November.
Lord SANDFORD: My Lords, I am grateful to the noble Baroness, Lady Birk, for the way in which she has received this modified Amendment. This, of course, is not the end of the day. The Bill will not be enacted in precisely the form in which it leaves this House. The Amendments that we have been proposing, though primarily designed to improve the Bill, are also to give another place an opportunity to reconsider a number of matters.
I think that the question is whether they want the Bill to come into force the moment they have enacted, which I imagine will be later this month, and before—if it is before—they have seen enough of the White Paper. I am inclined to accept the point that the noble Baroness has made and move this Amendment, knowing that if the Government present our Amendments to another place with reasonable despatch and the White Paper has, in fact, by then been issued and they have seen it—and they can see for themselves whether it has implications for the operation of the Bill—then the Amendment can come out. If, on the other hand, another place take the view that it is inappropriate to have the administrative actions that flow from the Bill operating before they have seen the White Paper, then they can leave it in and it will have that effect. I do not think that the effect it will have will be all that disastrous.
I believe that it is necessary to give another place an opportunity to consider the matter which this Amendment raises; namely, the appropriateness of having a
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Bill on this minor matter coming into force, before the White Paper reviewing the whole industry is before Parliament. For that reason and bearing in mind that it is quite open to another place to take it out if, in the circumstances, they think that it should come out, I commend Amendment No. 11.
7.53 p.m.
Lord TREFGARNE Lord TREFGARNE moved Amendment No. 12:
Page 5, line 30, leave out subsection (3).
The noble Lord said: My Lords, this Amendment is in the nature, I believe, of a probing Amendment. Clause 6(3) defines an unmeasured water supply as a
"supply to consumers whose charges for the supply are not payable by reference to the volume of water supplied".
I believe that this observation will require some clarification.
Many measured consumers—consumers who have meters installed—do not in practice pay by reference to the volume of water supplied because of the effect of the minimum charges based upon the rateable value of the premises supplied. If these consumers had to be included in unmeasured supplies a very considerable administrative problem would be created. Furthermore, there are some other added complications of which I believe the Government have not seized themselves. I am told, for example, that in one particular city certain premises are supplied wholly by meter while some similar premises are supplied partly by meter and partly by reference to a fixed charge, while some other equally similar premises are charged on a wholly fixed basis.
I suspect that this inconsistency and, indeed, this haze of mystery, which perchance the noble Baroness, Lady Birk, will be able to clarify, results from the haste with which the Government introduced the Bill in another place, hoping then that the Bill would come into law in time to be brought into force this year. It was, I suspect, for that reason, that those consumers who have metered supplies were totally, or so the Government hoped, excluded from the Bill. Unhappily, as I have related, there are a number of consumers who either wholly or in part are

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supplied through a meter but who none the less may in fact be charged on a basis related to the rateable value of the property because they consume below the minimum quantity specified for meter charges. I hope that the noble Baroness will be able to help me on this matter. I beg to move.
Baroness BIRK: My Lords, I am glad that the noble Lord, Lord Trefgarne, made it clear that this was a probing Amendment, because this is a difficult matter. The Government have always made it clear that our objective in introducing the Bill is to bring some relief to those people who most need it; namely, the domestic consumers in those areas where charges are above average. We should have liked to limit it entirely to domestic consumers but that simply was not practical: there is no easy way in which either the water authorities or the water companies can distinguish the householder from the other consumers who get their water on an unmeasured basis, and in practical terms we have had no alternative but to include all unmeasured consumers. There are, of course, relatively few non-domestic consumers who get an unmeasured supply; nearly all industry and most commercial premises pay by meter.
It is, however, the normal practice for consumers who pay by meter to be liable to a minimum charge based on rateable value which applies if their consumption falls, so that the metered charge would be lower than the water rate. In this way all consumers are liable to pay no less than the water rate, but those with heavy demands pay more.
The effect of equalisation transfers under this Bill will be to increase the water rate of those undertakers who have to pay levies and to reduce that of those who receive payments. Clause 4 ensures that this is the effect. It is our intention that these changes in the water rate should apply also to minimum charges for metered consumers. That seems to us right and equitable. As I have said, the principle of the minimum charge is that all consumers should be liable to pay at least the basic water rate, and we clearly cannot have two levels of water rate in the-same area. So I can confirm that the definiton in the subsection which this Amendment
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seeks to remove will allow the water undertakers to increase or reduce minimum charges to metered consumers on the occasions when those minimum charges apply.
I think, in addition, that I should also make clear that for simple practical reasons we do not propose to include such properties in the total numbers used to make the calculations under Clause 1 and Clause 2. There we shall stick to the number of properties without a meter. The reason, of course, is that the basic calculations have to be made before the start of the year and there is no way of knowing which, if any, metered properties will end up paying a minimum charge. At the end of the year it would be a lengthy process to identify those properties which had done so and we believe that bringing them in would make no significant difference to the calculations. It also is our understanding that all the water authorities and the companies are content with this approach. I hope that this rather lengthy explanation makes the position clear. I concede that we are prepared to look at the matter at the end of every year and see whether an adjustment is necessary.
Lord TREFGARNE: My Lords, I believe that in this matter the noble Baroness, Lady Birk, has helped me considerably. I cannot pretend that I am precisely clear about the effect of what she has said, but she sounded very convincing. I shall study very carefully what the noble Baroness has said and see whether the matter needs to be raised again. She certainly grasped the point which I was seeking somewhat inadequately to put before your Lordships; namely, the effect upon those consumers who have a meter installed but who consume less than the minimum requirement. I think that the noble Baroness has made the situation clear. I am sorry that they are not to be included in the calculation, but if, as the noble Baroness has said, the effect of their exclusion is really not to make any significant difference then I suspect that on consideration I shall be satisfied with what the noble Baroness has said. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.

CHARITY LAW AND VOLUNTARY ORGANISATIONS
8 p.m.
Lord ALLEN of ABBEYDALE Lord ALLEN of ABBEYDALE rose to ask Her Majesty's Government whether they have come to any conclusions on the recommendations made in the report of the Goodman Committee on Charity Law and Voluntary Organisations. The noble Lord said: My Lords, the report of the Committee on Charity Law and Voluntary Organisations, which was so skilfully chaired by the noble Lord, Lord Goodman, is an important document on an important topic, and I am grateful for the opportunity of initiating a short discussion about it. It is particularly pleasing that the noble Lord, Lord Goodman, himself, and the noble Lord, Lord Nathan, who was the vice-chairman of the Committee, are to speak this evening.
From about the time that I became chairman of the National Council of Social Service in 1973—although I hope and believe that this was pure coincidence —we became increasingly aware of concern about the law and the administration relating to charities. We learned of this concern through books and articles, as well as through representations made direct. I suppose the issue which most caught the eye was that relating to the extent to which charities can engage in political activity. But there were other points, too, which is hardly surprising as there was by then a good deal of experience, and circumstances had changed since the Charities Act 1960 had been passed. After a good deal of discussion and consultation, the National Council concluded that the time was ripe for launching a committee of inquiry. I am very grateful that the noble Lord, Lord Goodman, agreed to chair this inquiry and that we were able to support him with a strong membership. The inquiry elicited a great deal of evidence, and I am particularly glad to place on record that the Government Departments concerned co-operated and gave a great deal of help.
It so happens that after the Committee had got under way, the Expenditure Committee in another place reported on the Charity Commissioners and their accountability, and we have the added
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bonus that the Goodman Committee were able to include their comments on the Expenditure Committee's recommendations. I do not suppose that many people will agree with every single thing in the report—I do not myself. Indeed, the report itself contains a minority recommendation. But there will be general agreement that this is a most valuable report, raising all the relevant issues. It is not only the National Council who have great cause to be grateful to the noble Lord and his colleagues. I noted that the Charity Commissioners themselves, in their recent report for 1976, said how much they welcomed the Committee's report, and in view of the high regard I have for the chairman of the Charity Commission I feel that this comment is particularly valuable.
I am not sure that it is universally recognised how important charities are in this country, and how fortunate we are to have such a wealth of activities carried out by charitable bodies for the benefit of the community. A good deal of money is involved, too. Charities hold substantial assets, they have incomes which must total at least £400 million a year—although I am bound to say that some of this income is looking a little precarious, in present circumstances —and they enjoy tax exemptions totting up to well over £100 million a year. All this means that a balance has to be kept between, on the one hand, encouraging voluntary effort without stifling initiative, and, on the other hand, seeing that the money which the public contribute as donors and as taxpayers is not wasted through diversion to non-charitable purposes through incompetence or, indeed, through fraud.
The Committee's report deals with all these issues, but I should like this evening just to pick out four points. The first arises out of the basic recommendation that a definition of "charity" is not practicable, but that the categories of permissible activities should be restated in modern simple language, if those two adjectives are consistent. This proposal rests on the assumption that, very broadly, the present basis of deciding what is a charity should be continued. But Mr. Whitaker's minority report reflects the view held by some, that private charity should now be drastically limited

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just to the prevention and relief of deprivation, and that the rest of the money should go to the public social services which are democratically determined.
I myself believe that the nation's investment in charity is amply justified, even if, in practice, the interpretation of what constitutes "charity" goes wider than perhaps the man in the street would ordinarily understand by charitable purposes. It is an investment which taps resources of effort on a scale which the statutory services simply could not match. I do not know what will be the reaction of the Government to the recommendation about defining "charity", but I hope that they accept the underlying assumption on which it is based. I am encouraged in this by the decision which the Government recently took to exempt all charities from the two points surcharge on the employer's National Insurance contribution, and I am glad to have this first opportunity of expressing appreciation of this important concession.
I can deal very briefly with my remaining three points on the report. I should like to call attention to what the Committee say about the test for securing registration as a charity. This involves not only the question of political activity, but also whether there should be a right of appeal to a tribunal against administrative decisions of the Charity Commissioners, and whether there should be legal aid for appeals to the courts on points of law.
Then there is the suggestion that the Charity Commissioners should have a power to register a charity provisionally for a period, to give them time to resolve doubts whether the organisation is serving the community in a reasonably effective way. Lastly, there is the suggestion that the cy près doctrine should be relaxed, so that when a charity is obsolete some new purpose can be substituted to serve a real current need of society. There are a great many other recommendations, but the only other one I want to refer to is the proposal for a new charity board. On this, I just want to say that this is a recommendation which, in the course of consultations after the report was published, has not found very much favour. Many of those consulted say that they would prefer to see some lay element introduced into the Charity Commission itself.
I am certainly not expecting the Minister to come out tonight with a list of Government decisions, and an announcement of an early Bill. The National Council themselves are still brooding over the Committee's recommendations on fiscal issues and the reviews of local charities, and I know that the meeting, at which they hope to give to the Home Secretary the views that they have formed so far, has had to be postponed until after this debate, because of a little local difficulty. I also recognise that the forthcoming report of the Committee chaired by the noble Lord, Lord Wolfenden, on the future of voluntary organisations, is likely to have some bearing on some of the issues involved. Nevertheless, there are propositions in the report which involve changes of administration and not necessarily changes in the law. We shall listen with close attention to anything that the Minister can tell us at this stage about the Government's reactions to the report and also to anything he may be able to say about the possible programme of consultations; whether, for example, in these days of open government, he is thinking of the possibility of a Green Paper at some stage. I have already spoken for rather longer than I had intended, and I should now like to give way to those who are rather more knowledgeable than I.
8.10 p.m.
Lord GOODMAN: My Lords, those of us who were on the Committee are most indebted to the noble Lord, Lord Allen of Abbeydale, for securing this opportunity to discuss the two years' work that was involved in preparing this report. May I say at the outset that, as the chairman of the Committee, I do not regard it as appropriate that I should press on anybody the virtues or advantages of our recommendations. I do not believe that that is the function of the chairman of a committee. The recommendations are there on paper for everybody to see. Whether or not they are agreed with is obviously a matter for Governmental consideration, for democratic consideration and, at the end of the day, for decisions to be made by other people. We have made our recommendations and suggested what we think ought to be done, and we must leave it to others to judge their merits or demerits. However, there

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are a few observations which can usefully be made by the chairman of such a committee. They can also relate to some of the criticisms which have already been uttered.
There was a basic criticism—not very widely uttered—about the selection of the Committee. I should like to say in quite unequivocal terms that the committee was admirable. The people on it were experts. We did not know, except in one rather spectacularly obvious instance, the political colour of anybody who was on the Committee, nor did it have any bearing on the recommendations which were made. It was a wholly nonpolitical committee until it emerged that what we were saying was the subject of very political comment. The most violent criticism directed against us came from groups who do not, in a simple word, believe that government ought to exist. The most bizarre suggestion we received was that any organisation of a voluntary nature that was non-profitmaking should receive the fiscal benefits and advantages that are now available to charities. I asked one of the proponents of this proposal whether he included, for instance, a body such as the Stock Exchange. I believe that there was a slight pause before no answer was furnished to the question.
All I can say is that I encountered this form of philosophy as Chairman of the Arts Council. A great number of people —great in relation to the numbers interested in the arts but a tiny minority of the population—proposed that the Arts Council should be taken over by another body which would not seek to impose the intervention of any discretion or choice in matters of art. It would be a case of first come, first served, which they saw as the best way of dealing with any administrative problem that arose. I remember that, on one occasion, a particular body was formed which had what seemed to me the wholly virtuous object of showing pictures in tents in the park. This object had our strong support until it emerged that the method of selecting the pictures was simply the order in which they arrived for selection. The first dozen to arrive were exhibited; the others, even if painted by Rembrandt, or Van Gogh, or whoever it was, would still not be exhibited. The notion that any human mind should
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intrude into the question of selection was wholly unacceptable, authoritarian and, to these people, thoroughly repellent.
To my astonishment, the same idea emerged in relation to charities. It is felt in some quarters—and this view is slightly reflected in the minority report—that no organisation should exist to make any decision about other human beings. This would make our lives here much easier, because we could all go home and leave matters to be dealt with simply on the basis that whoever came first received what there was and those who came later received nothing. No doubt the revolutions and riots which ensued would not be dealt with because there would he no police force to deal with them.
This is perhaps a slightly lighter and more frivolous note in relation to our report, but it is important that we should know that these opinions exist. I did not even know of their existence except for my encounter with them at the Arts Council, and the vehemence with which those opinions were expressed to us in evidence and in after-comment came to me as a mild surprise. It seemed to me, at my age and very embedded in Establishment notions, inconceivable that one could bestow upon any organisation that happened to form itself the fiscal benefits which today are available to a very carefully monitored charity. It still seems to me inconceivable. But that there are many other people who do not consider it inconceivable is a matter for reflection —and, I think, for rather chastened reflection. There are people who think differently from ourselves, and it is probable that one of them is in this Chamber at the moment. Nevertheless, those views have to be taken into consideration. That they should arise in the case of a highly technical subject like charities was certainly an agreeable surprise, because it lent a little colour to the discussions which might not otherwise have taken place.
I do not intend, in our nocturnal "romp" discussing charities in this House, to occupy much of your Lordships' time. I have said that I think the composition of the Committee excellent. The philosophy of everybody on the Committee was a profound belief in the need to maintain charitable organisations, which was perhaps based on the rather wide

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concept of the need to retain the volunteer in English national life. I do not think that anybody features more importantly than the voluntary worker. It is in connection with charities that one sees him at his best and that one sees him making his most valuable contribution to social life. I encountered it in my work at the Arts Council, as chairman of the Housing Corporation and throughout those small aspects of public life with which I have been concerned. It is impossible to exaggerate the importance of the voluntary worker and what he does to maintain institutions which would not otherwise be there.
Hence, the Committee has reported that we are not in favour of discouraging small charities simply because they are small or even because they may, on the face of it, seem to involve a degree of effort and exertion that is not related to the results achieved. Of all the activities in this country which are the least mischievous and do the least harm, the people engaged in pursuing charities to relieve poverty, or to provide gowns for virgins, or whatever other activities saw them established in the 15th or 16th centuries, seem to me to be the least harmful of all. I should not like to see small charities swept away into a common pool under some kind of authoritarian direction because it would be profoundly discouraging to an immense number of people who are engaged in this wholly innocent and, I think, benevolent and godly activity, and I do not believe that they ought to be discouraged. That was certainly the philosophy upon which we, as a Committee, worked.
What else needs to be said? Perhaps that there are something like 30,000 small charities in this country. There are a great number—much less than 30,000 —of large charities. There are immensely important activities which are maintained by charities and charitable workers. It is obvious from the strength of interest in these matters, from centuries ago, that this is something which will endure in English life. I do not believe that any statutory discouragement would at the end of the day destroy the charitable impulse, the impulse to bring voluntary aid to human beings, which exists so deeply in the structure of our society. I believe, therefore, that it calls for careful governmental consideration. It is a very
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long time since 1601. It is a very long time since Pemsel's case. It calls for all the recommendations in this very detailed and careful report to be taken carefully into account, together with the recommendations of the Expenditure Committee and those of Lord Wolfenden's Committee when they emerge.
As the noble Lord, Lord Allen of Abbeydale, has said, we had very great assistance from the Government Departments that are involved in these matters. I should like to mention in particular that we had very considerate, careful, detailed and time-consuming help from the Inland Revenue, who gave us evidence on more than one occasion and sent very superior people, if I may use that word. Those of us who are merely concerned with dealings with H.M. Collector of Taxes may not realise that such superior people are available within the organisation. We had assistance from people of high intellectual quality who came and, in fact, rather changed our view. At the outset, many of us were of the view that the job should be done entirely by the Charity Commissioners and that the function of the Inland Revenue was redundant and superflous but, having heard the Inland Revenue on the subject, we revised our view on that aspect of the matter. We are extremely grateful to all the people who so willingly gave us assistance.
I will conclude simply by reading a word or two from the minority report because it demonstrates the profound difference in approach between the majority and the minority in this matter. The minority report says somewhere that, in its view, some matters are too important to be left to private charities and should he referred to the State. Frankly, the view we took was that some matters are too important to be left to the State and should remain in private hands. We held this view very strongly. It is not in the least a political manifestation; it is a belief that the qualities of mercy and compassion and attention to the needs of the elderly, the poor and the afflicted cannot be adequately dealt with by any State or governmental organisation. It is only through the intervention of a person who is privately concerned and who is deeply concerned not because he is employed to do the job but because of an urge from within that the job gets properly

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done. In that spirit, it was with pleasure that we presented this report, for what it is worth and for good or ill. We shall be interested to hear the Government's view on the matter.
8.21 p.m.
Lord PONSONBY of SHULBREDE: My Lords, I am sure we are all very grateful for the opportunity this evening to debate the report of the Goodman Committee on Charity Law and Voluntary Organisations and to hear the chairman of that Committee himself speaking about the work of the Committee. It is almost three years since the Committee was established, but it is almost five years since a Committee of which l have the honour to be the chairman—the Charity Law Reform Committee—started its campaign to press for reform in the existing charity law. I should like to say straight away that we in the Charity Law Reform Committee have been disappointed that the report has not produced radical suggestions for the reappraisal of our attitudes to charity law.
We are grateful that a number of detailed proposals about the administration of charities which have been put forward to the Goodman Committee and, previously, to the Expenditure Committee in the House of Commons, have been accepted, but the central problem of charity law has been tackled in such a way that, if the proposals are enacted, vagueness and uncertainty of law will be increased. The problem is the reliance on a definition of "charity" and this has led to arbitrary distinctions between the bodies which can and those which cannot gain the financial advantage of charitable status.
The report adds endless elaboration to the existing definition in the Act of 1601 to cover every conceivable charitable object. Time and again, the report places great emphasis on the ability of the Charity Commissioners to decide what is appropriate, suitable and deserving, but it fails to appreciate that the real need is to rid the system of value judgment and compounds this with statements of doubtful political philosophy such as, however liberal or tolerant a society may be, it has a duty to determine what is and what is not beneficial to it. Accordingly, between good and evil it cannot be neutral; it must exclude from
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charitable status what it regards as evil, just as it can and does outlaw what it regards as detrimental to its moral welfare.
The Committee has spent too much of its energy on the wrong question. For example, it discusses whether or not contemplative religious orders and ethical and philosophical systems bring benefit to the community, yet it does not address itself to the one important question: Why is it necessary, as the Committee asserts without argument, to have a system of fiscal advantages based on value judgments rather than on objective evidence?
We live in a plural society with many different sets of values. It is invidious for small groups of people to apply any specific set of values to the exclusion of others. No new definition of charity can possibly meet the evident need for fairness, clarity and certainty. For example, ethical societies not founded on a belief in a deity have not been accepted as charities. In principle, the Committee supports the advancement of such movements and considers that, if not detrimental to the community's moral welfare, they should be encouraged and should, in fact, be granted charitable status. However, they should be required to satisfy the Charity Commissioners or the court that their advancement is for the benefit of the community.
But what if the Charity Commissioners think that agnosticism is an evil? What then will become of their particular beliefs? According to the report, the fiscal reliefs granted to charities cost the taxpayer at least £75 million a year. But probably they cost about £100 million when one takes into account the reliefs granted by local authorities. The Committee suggest ways in which further reliefs can be given. For example, they suggest that covenanted donations should be allowed as deductions for higher rate tax purposes and also that company donations should not be taxed as distributions to shareholders. Both these items would be of financial advantage to individual charities.
How the Government will look upon these proposals at the present time I know not, hut I should have thought that in a time of economic stringency the Government would be unlikely to look favourably

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upon any proposals which involve an expansion in the amount of monies given to charities as a whole by the national Exchequer. I should have thought that a better starting point for the deliberations of the Committee, given a limit on the amount of relief to good causes, would have been to consider whether the right organisations were receiving that relief. That is the crucial point with regard to charity law. Because of the unfairness which inevitably occurs at the edges in the definition of charity law one has various arbitrary decisions made, which means that there can be an element of unfairness.
I think that the Committee should have concerned themselves with doing away with this element of unfairness and making proposals to that end. Indeed they did try to ameliorate the position to some extent by pushing further back the boundaries of charity definition, what is and what is not acceptable as a charity. But inevitably this will create a mass of new case law; not case law created in the courts but case law made by the decisions of the Charity Commissioners at individual points of time, as to what is and what is not a charity. Because of the high cost of legal expenses, the impossibility of any small oganisation challenging the decisions of the Charity Commissioners in the courts is well known. It was for this reason that my Committee advocated the granting of fiscal benefits accorded to charities to all non-profit distributing organisations. In paragraph 23 of the report the noble Lord, Lord Goodman, argues:
"We can see no justification for saying that the difficulties should be side-tracked by giving the same status to all NPDOs as is now given to charities. This is really to abolish altogether the concept of charity as it has developed over the centuries and to alter radically the commonly accepted meaning of charities in the minds of most people".
My Lords, this is really nonsense. The ordinary concept of charity is already miles away from its legal definition. By all means let us keep the word "charity". Let charities be sub-categories of NPDOs worthy of the name of charity. The Inland Revenue also suggested to the Committee that the extension of fiscal advantages to all NPDOs would give rise to considerable opportunities for abuse. Yet when members of my Committee met them, the Inland Revenue were not able to
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point to any way in which this scope for abuse came about.
My Lords, I hope this House will not regard this report as the last word about charity law. As I have said, the report contains some very useful proposals about the administration of charities. But it is a report prepared largely by those with a vested interest in the status quo for charities. Both the noble Lord, Lord Allen of Abbeydale, and the noble Lord, Lord Goodman, were on the defensive about attacks which they said had been made about the membership of their Committee. Lord Allen of Abbeydale called it a strong membership; Lord Goodman defended the membership. But the point is that the membership did not reflect the concern of those organisations, like the Disablement Income Group, Amnesty, the National Council for Civil Liberties, the Campaign Against Racial Discrimination, who are outside the traditional ambit of charities. It was their concern and the concern of other organisations which was one of the motivating forces which led the Charity Law Reform Committee to press for an inquiry into the existing law regarding charities. I hope, therefore, that the Government will feel that this is a matter which needs to be looked into further, because I think that a lot more could be said on this matter.
8.34 p.m.
The Lord Bishop of SOUTHWELL: My Lords, I am grateful to the noble Lord, Lord Allen of Abbeydale, for giving us the opportunity of this debate, and I am glad of the chance to express from these Benches what I think is the view of the mainstream Churches in the country. We welcome this report, and not least for the fact that it does not attempt at this time of great change to be drastic in the remedies it suggests for any excesses or deficiencies in the law concerning charities at the present time. The Committee chaired by the noble Lord, Lord Goodman, was generous enough to say that after very careful inquiry no large problems existed, and in consequence only a few matters of obvious demerit needed rectification.
My view, which clearly differs from the view of the noble Lord who preceded me, is that this is a proper kind of report,

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one which proposes changes where change is necessary and declines to meddle where there is little advantage to be gained from meddling. In this field evolution is a far more fruitful process than drastic changes in the law. The long history of case law in charity matters provides us with an invaluable corpus of sound judgment on real situations from which sensible deductions can be made as new situations emerge. Perhaps being born and bred in the Church of England I may have the via media too deeply ingrained in me, and for that reason I may see merit in this report which others may not. But your Lordships may note that my few utterances in this House have not always supported the status quo.
There is no doubt that this matter before us today is a very important matter. There is sometimes expressed the view that if something is worth doing it should be done officially by the decisions and actions of central or local government. But, as this report reminds us, this is a simplistic view.
"Charity will never be altogether superseded by State activity, even in the field of poverty and social welfare. There will always be gaps in the services run by the State. Further, the voluntary services may not only be quick to identify new needs and cater for them before the necessary statutory powers can be given to the State welfare services, but also may give a more individual service less trammelled by the limitations of the rule books under which the State welfare services operate".
Those words are quoted from paragraph 19 of the report.
I would go a stage further by saying that the official agencies cannot avoid being classed as "them", as those who are paid to do good, and so there builds up a natural barrier in the heart of the recipient, who, like any of us, does not like to be done good to. But more than this, voluntary action may not only be swifter, it may also be more daring. Local authorities cannot vote money for what are untried ventures, but voluntary enthusiasts will do just that, risking a lot in order to get a sad gap plugged or a new need met. Perhaps your Lordships will allow me to say one more thing on this point, and it is this. It would be a sad day if the society in which we live was robbed of the challenge to do something positively good out of sheer good will. At a time when we are all naturally
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cautious and anxious not to worsen our lot, we need the challenge that voluntary service can offer to lift us out of our selfishness.
I would agree with the report that motivation to engage in charitable works is not confined to those practising the Christian religion, or indeed any religion. There are many who love and serve their neighbours from what the report calls genuine altruism. But religious belief is a strong motivation, and for this reason, if for no other, it is important that religious bodies should continue to be classed as charities. In many local situations I find that much of the voluntary and statutory social work is being done by people with religious motivation.
I am glad that the report recognises the importance of the nation's spiritual welfare as well as its physical and social welfare. No man can be regarded as whole while his mental and spiritual needs are unsatisfied. We witness today, in my view, a spiritual deprivation on a large scale. The provision of religious amenities and the staffing of religious institutions is not properly done by the State, as in most European countries, but by voluntary contributions, and this charitable work must surely continue to be given the financial privileges which charity status affords. At present ordinary God-fearing people in town and country are giving sacrificially for the maintenance of their religious institutions. This task should be encouraged along the lines of this report.
May I at this point make a tiny plea that the contemplative orders of the Churches and their work should not be overlooked. It may seem to the uninitiated that such prayerful activity is wholly subjective and therefore inappropriately classed as charitable work. I find it hard to distinguish between this prayerful activity and the aim and purpose of the Church's work as a whole. For those of us who have to be inordinately activist, almost to the neglect of our own spirituality, it is comforting to know that we are supported by the prayers of those who have devoted their lives to this one thing; and let no man think it an easy option—it is in fact the hardest of work.
I hope that when reconsideration is given to the question of contemplative

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orders being charitable bodies they will be given generous recognition. I know that there is a need to discriminate between the beneficial and harmful activities undertaken by religious bodies. I have no doubt that there will always be conscientious people aggrieved at any discrimination against them in regard to their religious affiliations. But my view is that up till now the matter has been dealt with, on the whole, very realistically and beneficially, and under the terms of this report there is every chance that this situation will not change.
There will always be religious cranks and people who will capitalise out of other people's susceptibilities, but the English people are not easily "conned" and such aberrations quickly fade away. In passing, I am sure that Mr. Ben Whitaker's remarks in the minority report, that religious bodies should be granted charitable status only in so far as they carry out charitable activities—for example, for their work in relieving poverty—but not for providing vestments, were a convenient shorthand but an unfortunate phrase. The embellishment of Churches or their ministers is a very costly business nowadays and the laiety who pay for it well know their priorities. It would be impossible and wrong for religion to be divested of its symbolism, for it is through symbolism that some truths alone can be communicated.
In conclusion, I should like to say a few words about religion and politics. I trust that your Lordships do not regard the presence of the bishops in this House as a sort of chaplaincy, but rather as a recognition that religion cannot escape involvement in politics if it is to impinge on life. We realise that there is no single area of life that can avoid political involvement. We may regret that so often politics prevents the staging of certain sporting contests, whether it be rugby football, cricket or chess. International sport is bound to arouse political feelings. So also the activities of the Church in this country, and in countries overseas, will require a political stance on the part of the Churches. It is hard for Christians not to express common cause with their fellow human beings in matters of simple justice when they are living under other skies and sometimes alien ideologies. Still less can they stand aside
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when their fellow Christians are concerned, to whom they are bound in ties of affection and international organisation. Here, clearly, we are at the heart of a very difficult problem—the relation of politics and charity law.
Once more may I support the view that the Committee of the noble Lord, Lord Goodman, has taken in this matter. There are political activities which are inappropriate activities for a charity organisation, and the guidelines suggested in paragraph 104 of the report seem to meet this point. In this way charitable bodies will be free to face the inevitable political challenges of the work they seek to do and will also be able to engage in proper political action.
My Lords, I do not intend to comment on the financial section of this report. The Churches are very glad that Her Majesty's Government were ready to concede that charities were suffering grave discrimination by the proposal to levy on them the National Insurance surcharge. I should like to take this opportunity on behalf of the Churches to express their thanks to the Government that that particular financial proposal was withdrawn. It is a great relief to Churches and charities alike, and we are indeed grateful. I am sure that the people of this country will not want charities, and among them Churches, to suffer financial hardship by the withdrawal from them of the financial privileges that they enjoy under charity law. We are glad that this report comes out firmly in our favour on this point.
In general, the Churches support the recommendations of the report and hope that such legislation as is necessary can be introduced at the appropriate time and in the not too distant future for our consideration in this House, when any minor blemishes in these proposals can quite effectively be corrected.
8.45 p.m.
Lord GORE-BOOTH: My Lords, we are very much indebted this evening to my noble friend Lord Allen of Abbeydale for giving us this opportunity to talk about the report which my noble friend Lord Goodman has produced. At once I should like to say that I agree with my noble friend Lord Goodman very much in his commendation of his Committee. I should

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also like to add my commendation of what he himself has written in the preface.
Perhaps I may begin with a quotation from the report which says:
"The mainstay of charity is a general altruism."
I make that my first comment because it is important in this debate to recognise what those who enter into charitable work are like and what they do. Here I believe that the report is very strong—even if it does not use precisely this language—when it says that people who engage in this work are people who quite simply want to do some good to those who fare less well than they do.
Charity is not really about a fundamental theoretical problem. Charity is about the fact that someone gets to know that several hundred thousand babies in Bangladesh do not have enough to eat or enough milk; it is about someone who gets to know that there are a number of children on the streets of Belfast who have nowhere to go to get out of the range of casual gunfire and who would be much better off if a few people subscribed so that they could play together not on the streets but in a hut or in someone's house. That is what the whole motivation of the charity movement is about.
The great strength of this report is that it has regard to this all the time. In other words the report always says, if not in so many ways, do not try to tidy up charity too much. That is the soundest possible advice. I really must take this opportunity of replying to the remarks made by the noble Lord, Lord Ponsonby of Shulbrede, who told us that the motivation of people engaged in charity—such as my noble friend Lord Goodman and the rest of us—is the maintenance of the status quo. If that is said to a playgroup in the East End, they would make a very odd face if not a very odd noise. People are interested in behaving to others as they would like others to behave to them, and the report is quite right in the instinctive understanding that one does good works of this kind when one can, where one can, and with the means that one is fortunate enough to have.
It is also very wrong to talk about a charity "benefiting" from some concession by the Government or some extra money. It is not the charity which benefits; in my case it is the children, but
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it may be the disadvantaged, the aged or whomever one likes. It is they who benefit, not the charity. I am sure that the Committee was right and that we shall be right if we constantly keep this principle in view.
That brings me, with perhaps a bit of a drop from the principle of what we are doing, to the finance of what we are doing. If we try to get away from fashionable motivations, surely we must all be a little horrified at the figures that are given in paragraph 116. These are the figures which indicate that if you have a certain income level (certainly it is a high one) and if you wish to give a charity £1,000, you have to earn £3,280. This is, with great respect, crazy. The charity needs the money for the people whom it benefits. The way in which this scale is arranged is precisely to offer people who are in high income brackets a "disinducement", going up and up, to contribute to charity at all, and this cannot be sensible.
The noble Lord, Lord Ponsonby, said that it might be difficult for the Government to do this, but good heavens! in the sort of world about which we are talking this evening if nobody ever did anything that was not convenient, or might be a little difficult, nothing would get done at all. So I feel bound to protest that the Committee are right in their strictures on this financial situation. I hope that it will be possible that the Government may consider this with some speed because a decision like that takes a good deal less time than decisions of organisation, administration, and the setting up of bodies and so on.
While I am on the matter of finance, perhaps I could also express agreement with the Committee that there would not be great sense in overturning our taxation system in this particular context, but I am sure that the Committee are right to suggest that the period of the covenant has become too long. It has become too long because the people you meet about the place who are able to sign covenants, and want to pledge themselves to the future, cannot in all good conscience to their own families pledge themselves in these uneasy days to periods as long as seven years. I should like to commend the Committee's suggestion that for the time being the covenant period should be reduced to four years. That at least

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would give the charities some assurance of getting a regular sum, but it would not place too unknown and rather frightening a burden on the person contemplating making some kind of a pledge.
May I conclude by once again thanking the Committee very much for what they have done; for their intelligent and sensitive humanity, which I hope, in nearly all the respects which they have considered, will be a guide to a future which will be sufficiently orderly not to raise suspicions of charities but sufficiently relaxed to let people who want to benefit the less fortunate to go ahead and do it.
8.53 p.m.
Lord NATHAN: My Lords, I had the privilege of serving under the noble Lord, Lord Goodman, as vice-chairman of the Committee. To my mind the most remarkable fact is that people give to charitable causes—and, in aggregate, in huge amounts—every year, and they give in voluntary service as well as money. There is ample evidence that the young give no less generously than the young of previous generations, and perhaps more so. This intense desire to give has not been stultified by the Welfare State, as some thought it might be, but rather has, since its inception, gone from strength to strength. It has found new outlets not dreamed of half a century ago. This tenacity of the desire to give has been demonstrated with special significance in these past difficult years of economic stringency. So the first question with which we might have been confronted, whether the changes in social and economic circumstances have rendered charity redundant, answered itself; charity is a central institution in our society.
In view of the remarks of the noble Lord, Lord Ponsonby, I should like to spend a moment or two on the question of the definition of "charity" and the other points to which he referred. First, perhaps, in view of his observations concerning the names of those who were members of the Committee, I might indicate to the House who these were. Apart from the noble Lord, Lord Goodman, as chairman, there were Mr. Montgomerie and myself as vice-chairmen. There was Mr. Ames Lewis, a recently retired Charity Commissioner; Mr. John
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Balcombe, Q.C., since elevated to the Bench; there was Stewart Bates, Q.C.; Professor Sewell Bray, who practises as a chartered accountant; Mr. Cracknell, general secretary of the National Children's Home; Martin Grundy, general secretary, Exeter Council for Voluntary Service; Mr. Nicholas Hinton, director of the National Association for the Care and Resettlement of Offenders; David Hob-man, Director of Age Concern; T. McMillan, director and general manager of Related Banking Services Division of the National Westminster Bank; Mrs. Charles Morrison, then vice-chairman, now chairman, of the National Council of Social Service; Air Commodore Milligan, secretary of the Rayne Foundation; J. K. Owens, director of the National Council of Social Service; Colonel Satterthwaite, director and general secretary of the National Playing Fields Association; Ben Whitaker, of whom mention has been made; and Peter Williams, director of the Wellcome Trust. It is not a bad list, with a variety of interests, experience, and contributions to make to such discussions.
Returning, if I may, to the difficult question of the definition of "charity", we received evidence such as the noble Lord, Lord Ponsonby, has described, from those who would like to see the privileges afforded to charities extended to all organisations constituted so as to eliminate distribution of profits whatever their objects or activities. We rejected this proposition for a number of reasons given in our report, but most importantly because it would eliminate the concept of charity as an institution in our society.
"Charity" has a moral connotation and it is this, in part, which attracts such widespread support. There has been much emphasis on the tax and other privileges which charities enjoy but enormous sums, let alone voluntary service, are received by charities which attract no tax benefit at all. It is this moral connotation which, in large part, attracts this widespread support.
There were those who believed that one should first determine what purposes or activities should attract the tax benefits presently accorded to charities, and confine the legal status of charity to those organisations which conform to those requirements. But to define charities

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according to such a formula turns the argument upside down. What is required is an assessment of the criteria required for qualification of a charity—or a definition—and the tax and other privileges would flow only to those so qualifying.
It is worth mentioning perhaps that the position is that since the beginning charities have, in principle, not paid tax on the ground that they do not make profits. To my mind it is a misconception to say that they are subsidised in the way that word is so often used. We were not surprised, and your Lordships will not be surprised either, that a definition of "charity" eluded us as it has the greatest minds in all generations—with which we do not seek to compare ourselves in any way.
One reason for the difficulty is that from age to age the concept of charity has been moulded by changing social conditions. It is therefore in a constant state of flux. If the concept had remained unchanged it might have died or become of minor importance, yet it is perhaps more vigorous than ever. It was tentatively suggested to us that the Home Secretary should have powers to make changes by Statutory Instrument in what is, or what is not, considered to be a charity. We rejected that proposal for many reasons. Above all, we felt that charity provides an opportunity for individuals to stake out priorities for themselves. By giving for spastic children, or cancer relief, or overseas relief, whatever it may be, the giver is identifying himself with that cause and establishing for himself, and perhaps by his example for others, a priority for it. Governments have constantly to establish their priorities but their choices are much constrained by political and financial factors. Government do not and cannot therefore reflect the aspirations of all, all of whom are individuals with personal predilections and all of whom are in one way or another within minority groups within the whole. The old, the sick, the sportsman, the musician—each in some aspect of his life is within a special group with interests in common. Government intervention in establishing what is and what is not a charity contradicts the basic concept of charity itself.
It is in this context that I turn to some of our main recommendations. The noble
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Lord, Lord Allen of Abbeydale, in opening referred to our view that the preamble to the 1601 Act had served us well. But we thought the language was so out of tune with current usage that it would be well, first, to update it and, secondly, to set out the categories of activity, or rather purpose, now regarded as charitable. Therefore we set that out in an appendix to the report which we hope might be of use in case this were acquired for incorporation in a statutory provision.
I wish, first, to refer to the environment, a comparatively new field of charitable activity. The widespread and increasing support for and interest in such charities derives from a new philosophy. It is increasingly coming to be thought that the heritage of the land, the trees, the beauty of landscape, the antiquities and curiosities which previous generations have created, are not dispensable as rights of property by private or public interests based on personal preferences or economic pressures, but that the public have an interest of their own, separate and distinct from rights of property for their enjoyment and as trustees for future generations. Further, this philosophy extends to the development of new landscape, both rural and urban. We believe that every encouragement should be given to charities with such purposes and that they should not be constrained by any narrow interpretation of law or practice.
The question arose in regard to the overseas activities of English charities, and our own recommendations on this have received some comment in the Press, so perhaps I might comment on the subject. We start from the proposition that the purposes and activities which are charitable if carried out in England should likewise be charitable under English law if carried out overseas. Poverty, ignorance or the desecration of ancient monuments are as much an affront to civilisation if carried out overseas as they are here. Such activity abroad by an English charity could, we appreciate, be contrary to the public interest of the United Kingdom.
In principle, we believe that Governmental intervention or direction in relation to charities should be avoided wherever possible; any such intervention should be public and open to debate. In these circumstances, we recommend that the Foreign Office should be empowered to

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make an order requiring a charity to cease an activity overseas, but subject to safeguards. These safeguards would be that the order should be made only after giving an opportunity for representations to be made, including the possibility of debate in Parliament, and the order should be published.
We were also concerned about what might be called international charities. Generally, the need and demand for action by charities across national boundaries have greatly increased in recent years, and this is likely to continue with increasing pressure. We believe this should be encouraged. However, the need for effective supervision and control over charities by the Charity Commission, the courts and the Inland Revenue to avoid abuses is of overriding importance to maintain public confidence, which now justifiably stands high.
However apparently insular and nationalistic such a policy may appear, we believe the current position, under which only charities constituted in England can enjoy privilges accorded to charities, should be maintained. I would hope, however, that by international agreements, possibly instituted under the aegis of the Council of Europe, some means may be found to meet the requirements of supervision and thus enable trans-national charities to be constituted.
Possibly a step by step approach relating to particular charitable projects, such as the conservation of Venice, the development of specific youth programmes or particular projects for education, might be more fruitful than an attempt to formulate some all-embracing convention covering all forms of charitable endeavour. As the noble Lord, Lord Allen, pointed out, the problems in regard to the political activity of charities proved, as we expected, to be the most difficult which we had to consider and I will not detain your Lordships by referring to our proposals in that regard; it takes a complete chapter of the report and at least I hope the points in favour of different courses are clearly set out.
Our brief was to consider charity law and voluntary organisations. Law does not create charity; it provides a framework within which it may be exercised. In delimits the scope of charity for legal
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purposes, so that it shall not be so narrow as to stultify endeavour nor be so wide as to dilute its meaning. The law may be changed marginally or radically without destroying the concept. Once the concept is undermined by the general body of opinion, it will die; directly or indirectly, a few have started on this road.
A declaration now of the importance of charity as a central institution in our society maybe reeks of platitude. If left until an attack is mounted, it comes too late. If our report is criticised for platitudes, I would rather that than have to plead for a lost cause. I therefore hope that the Government and your Lordships will affirm the central importance of charity today, and that the Minister in his reply may be able to indicate some steps which he has in mind to make in regard to the changes in law and practice which we have recommended.
9.7 p.m.
Lord PLATT: My Lords, you will be pleased to know that I rise only to ask a question which, after all, is what we are here for. I may possibly ask another related question, and I shall, I am afraid, have to take a little of your Lordships' time in explaining how this question arises. My impression from the debate is that charity is entirely run by very high principled saints. Perhaps all saints are high-principled—but, at any rate, those are the people involved. Your Lordships may find some of my questions rather unwelcome in that context. I will have to be quite specific. But I do so only to give your Lordships an example of the way that some charities are managing their affairs. I shall have to be specific, but I shall not name the charity, because I think that that would be unfair as I have no evidence that they are in any way breaking the law.
Let us call it the National X Research Fund, X being a group of illnesses in which I have myself been interested. A strong committee of very distinguished men of complete integrity was called. It was a scientific committee, which was to decide on how the money should be spent, and what projects should be supported. But like most scientific and medical men in general, they were far more interested in what they would like

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to do with the money than in how it was to be obtained.
I was asked to act as sponsor, which I gladly did, and as your Lordships know, a sponsor does not usually expect to have to do anything, except perhaps turn up at one or two Press conferences. But surely the one thing he must do is ensure that all the methods used by the fund which he is supporting are those of which he can approve, and he must, in other words, be able to guarantee the integrity of the charity.
After a few years I found that all kinds of peculiar fund-raising activities were in use, including bingo, which is probably perfectly legal, and so on, and there were collectors going around, visiting public houses, especially on Saturday nights. They were able to bring in large sums of money for this fund. I then found that the collectors were entitled to take 30 per cent. of the money collected, the supervisors of each district were taking another 10 per cent., and there seemed to be certain people in the background who were perhaps getting some other, unspecified, rake-off.
The facts were made known in articles in the Guardian and in the News of the World. Needless to say, I inquired into all of this because it seemed to me that they were evading at any rate the spirit of the Charity Commissioners, if not the actual rules. After some evasions, I was told that the activities which seemed to me to be rather questionable, with these enormous sums going into the pockets of the collectors, were all put into action by something called the Appeals Society of the Research Fund. This was not registered as a charity, and so it has no reason to respect any of the kind of rules which normally govern charitable institutions.
But I checked up on the collecting boxes, and I found that they were clearly labelled as collecting for the research fund, and not for the Appeals Society. Whether they still are, after some comments that I have made, I do not know because I resigned my position as a sponsor. The registered number of the charity was in fact given, although this money was going into the Appeals Society. As I said, it may be that nobody was breaking the law, but the innocent public who put their
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50p pieces or pound notes into the boxes, little knew that about half of the contributions would never reach the fund at all.
This makes it very easy for the central fund. All it has to do is register that so many thousands or hundreds of thousands pounds were paid into its fund by the Appeals Society. Of course, there are no central expenses on that, and so they can show a nice pretty picture of having got all this money without having to put up their central office expenses. But of course they can do it only because all the expenses have been paid out to the collectors before the fund ever sees the money at all.
Now we come to the question. Nothing I have read in the Goodman Report—and I admit that I have looked only at parts of it which I think might be relevant to my question—gives me to understand that they knew that this kind of thing was going on. Nothing that I have heard tonight would make me think that any noble Lord who has spoken thought that this kind of thing was going on. I should like the Minister to try to give me some guidance as to whether all this is accepted and acceptable practice, or whether it really does need looking into a little more closely.
Lord GORE-BOOTH: My Lords, may I ask the noble Lord a question? Is he somewhat tending to take a single case of abuse to prove a general point, or is he drawing our attention to a single case where abuse has been possible?
Lord PLATT: My Lords, I cannot answer that question absolutely because I happened to he involved in this and, therefore, went into it very carefully; but I was told that there was nothing unusual in this procedure. I think that is the best answer I can give the noble Lord, because I have not studied charitable institutions in general. I was taking a specific example in order to demonstrate what could be done.
9.14 p.m.
Lord STRATHCONA and MOUNT ROYAL: My Lords, clearly one of the more valuable functions of charities is indeed to produce a report about charities, which has given rise to this debate this evening. I have served, and still do serve, on several registered charities, and I have had experience (shared by most of

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your Lordships, I expect) in trying to extract support from other charitiable organisations. I dare say the noble Lord, Lord Ponsonby, would therefore say that I had a vested interest in what we are talking about this evening. Equally, I suspect I am probably not alone in not having devoted a great deal of thought to some of the fundamental issues until I looked at this report, which made me aware how incredibly ignorant I was about some of the underlying problems. I suspect this is a condition shared by a number of others, and I am afraid it may continue to be so because I had quite a lot of difficulty in getting hold of a copy of the report. That is a great shame because it should be widely read. It does, at least, offer a primer which sets out many of the questions that we need to answer, even if we do not necessarily agree on some of the answers which are put forward in the report.
I was very glad to find that, right at the outset, the report laid the ghost of some of the unthinking and iconoclastic, rather cynical critics who dismiss all charities as a racket. On page 4 one finds the interesting comment:
"At the beginning of the Committee's deliberations, there was an indication that there were a number of problems which might have suggested that radical reform was necessary. However, after considering the evidence and making an analysis of the problems which were discussed with a number of witnesses on several occasions, it was evident that no large problems existed "—
although they then go on to say there were certain areas which called for further thought. I find this very reassuring, and I hope I shall not sound presumptuous if I say that the whole report seemed to me to be shot through with ordinary, sound, common sense. I think it would be recommended reading to anybody who is going to indulge in philosophical thinking about the place of charities in our national life.
We on this side of the House are, I think, bound to welcome the conclusion at the end of Chapter I, where the third recommendation in the Summary says:
"We do not agree with those who say that the concept of charity is outmoded and that all its activities should be functions of the state".
This, of course, was against some of the comments made in the minority report, which seemed to me to devote a great deal of time beating the air and making a
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mountain out of a molehill on the issue of rationalisation. The minority report says:
"The fact that, 16 years after the Act, over half the charities registered with the Charity Commission have an annual income of less than £50 and nearly 25 per cent. have an income of less than £5, speaks for itself".
Indeed it does speak for itself, and one of the things it says to me is that it is not a terribly big problem because the sums of money involved are so extraordinarily small.
Going back to the more general question, it was also interesting to find that in this House in 1959 a noble Lord called Lord Nathan made a great speech on this subject in which he quoted from a debate 10 years before. He said:
"It was my noble friend Lord Pakenham who, in the debate 10 years ago, speaking then for the Government of the day, said that:
'Without voluntary service the State would lose its soul';"
and went on to say:
"I adopt that phrase". —[Official Report, 13/5/59; col. 366.]
It is interesting to find the same general comment cropping up again in this report. I must say that I, too, was slightly worried by the question of the moral value judgments which have to be made on this issue of charities and it troubled me that the report appeared to feel that it was possible for the Charity Commissioners to make these judgments. But I am bound to say I did not find it very logical of the noble Lord, Lord Ponsonby, to suggest that what we apparently have to call the NPDOs should all be allowed to enjoy the fiscal benefits which relate to charities and at the same time that the Government would control the amount of money allocated to charities. I cannot see how you can have it both ways, but perhaps I misunderstood the noble Lord. If so, I apologise and no doubt we shall be able to work it out later.
I believe that the question of the State's participation is an important one. It seems to me that, almost by definition, the State cannot deal with many of the issues which the charities have set up to handle. Added to that, we have the possibility of political interference in charitable organisations, the sheer inhumanity of size and what I might call the irresistible "Parkinsonian" tendency of the self-perpetuating bureaucracy which all these

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organisations tend to create around themselves, where what we ought to see is a reduction in bureaucracy. One of the ways in which we can achieve this is to recognise the great value—as the report did and as the noble Lord, Lord Goodman, emphasised again this evening—of the enormous voluntary efforts which are put in, particularly by after-hours activity at local level and by people slaving away for salaries which would not be regarded as competitive at the central administrative level of charitable organisations. I hope that we shall take to heart the resistance in the report to the imposition of coordination and uniformity in the name of administrative tidiness. This is another point which struck me as being very much a part of the minority report with which I could not agree. Instead, we should be doing all we can to encourage local variations which are appropriate to the disparate needs of all areas of this country. It was clearly no accident that, in the days of the Arts Council under the noble Lord, Lord Goodman, of which I had some experience, one of the criteria for giving grants was the amount in local contributions which had been forthcoming.
The other point that I think we have not made at all is that we need to encourage sources of volunteers outside the State and quasi-State organisations by the obvious means of increasing profits and reducing taxes. Here, I hope the noble Lord when he comes to reply will be able to tell us what is the Government's attitude to the rather anomalous notion that supertax is not allowable whereas the basic rate of tax is allowable. There is no defence for this. This is a point which has already been made at least once this evening and I shall not reiterate it.
My Lords, I was attracted to the idea of a charity board to advise on policy because it seems to me that this is a good way to make sure that policy issues are kept under review. This is a function which has recently been handled in other areas by organisations like the Public Accounts Committee. We do not want the Charity Commissioners to become set in their ways. I hope that the next time we come to have a report on this subject we shall not find in it the splendid phrase—whose author I think I can guess—
"A fine selection of vituperative epithets has been levelled at the Charity Commissioners in the evidence".
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I hope that the existence of a charity board might help to avoid that happening and might also help to prod the Government into a constant examination of whether the policies in the Charity Commissioners are being adapted to the continually changing circumstances in which they are being operated.
Then also there is the concept of an appellate tribunal which is sensible if one is going to ask the Charity Commissioners to operate their administrative functions rather more intensively. The caveat one would utter here is to ask whether this might add a further cost. In my ignorance, I do not know who pays for the Charity Commission at the present time. One would be worried as to whether some of the suggestions would be liable to increase the cost of the charitable administration.
The Report makes it clear that the law may need some revision and updating—which is reasonable enough when, as several noble Lords have mentioned, the basic law was made in 1601—but there is no need for major surgery. It also mentions that the law is not clear. My worry here is that it is seldom clear to the layman, anyway, and nothing that I have seen in recent years has led me to believe that Parliamentary draftsmen are likely to add a great deal to the clarity of the law. I am sorry to say this, but it has to be said.
My Lords, I do not think that I can do better than end by quoting the last paragraph (paragraph 251) of the report which sums up exactly what we ought to he thinking about at the present time. It is headed "A More Imaginative Approach".
"The main considerations which we have had in mind in drafting this latter part of the Report are firstly the hope that it will be possible, as a result of the recommendations, to bring a more imaginative and positive attitude to bear on the subject of charities, and secondly, by making a clear distinction between the small local charities and the large national charities, and by decentralising the surveillance of the former to ensure that more time is spent in the years to come on the study of the problems and needs of the larger national charities".
Lord PONSONBY of SI-TULBREDE: My Lords, before the noble Lord sits down, may I say that he heard me correctly. The question is whether the

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jam is spread thickly over a smaller area or more thinly over a much larger area.
9.29 p.m.
The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich): My Lords, all will agree that the House is indebted to the noble Lord, Lord Allen of Abbeydale, for having given us the opportunity this evening of discussing the report of the Committee on Charity Law and Voluntary Organiations, of which the noble Lord, Lord Goodman, was chairman. We also agree that the subject is one of considerable social importance. That has been testified to by virtually all who have participated in the debate. It should be of interest to the very substantial proportion of the public who contribute to or benefit from charitable and voluntary work.
On subjects of this kind, this House is often able to bring to bear a degree of expertise which could not readily be found elsewhere. It has been so this evening because the noble Lord, Lord Allen of Abbeydale, who initiated the debate, only recently relinquished the chairmanship of the National Council of Social Service which of course set up the Goodman Committee.
I am always in a slight difficulty when referring to the noble Lord, Lord Allen of Abbeydale, whom, according to the rules of the House, I cannot appropriately describe as "my noble friend". I have to refer to him as "the noble Lord, Lord Allen", although he and I served together in the Home Office for quite a substantial time. However, I was reassured, as I am sure the rest of your Lordships' House were also, to hear the former Permanent Under-Secretary of the Foreign Office refer to the former Permanent Under-Secretary of the Home Office as "his noble friend". So, I am quite sure, were the rest of the Civil Service.
Among those also who have contributed to the debate today have been the noble Lord, Lord Goodman, who presided over the Committee, and the noble Lord, Lord Nathan, whose interest in this subject continues a family tradition. His father was chairman of the Committee appointed in 1950 to review the law relating to charitable trusts in England and Wales and on whose report the Charities Act
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1960 was based. The noble Lord has continued his father's interest in the law on charities; he is one of the leading authorities on the subject and was also a vice-chairman of the Goodman Committee. We are also glad that the debate has enabled my noble friend Lord Ponsonby of Shulbrede to speak to us and give us his views. He provided the House with a critical analysis of the report of the Goodman Committee and I think the debate was very substantially improved as a result of that.
It is difficult, inevitably, to deal with some of the more detailed points that have arisen, but perhaps I could start by dealing with a point made only a few moments ago by the noble Lord, Lord Platt, who referred to a particular charity. I do not know the name of the organisation to which he was alluding, but all I would say about his speech is this. The law, as I understand it, is that house-to-house collections and street collections for charities are subject to the control of the local authority. In the case of London, in the Metropolitan Police District it is the responsibility of the police. Collections in public houses are not subject to control, but the Committee of the noble Lord, Lord Goodman, in paragraph 213(c) of its report recommended that they should be brought under control. We shall, of course, be looking at that recommendation—
Lord PLATT: My Lords—
Lord HARRIS of GREENWICH: It is the practice, if I might just continue to deal with the point, to permit charities to retain a commission, provided that the commission does not appear to be excessive; but I should like to look more carefully at what the noble Lord said. If he would care to provide me with further information on the matter I should be glad to receive it and then I, or perhaps my honourable friend the Parliamentary Under-Secretary, who deals with these matters, will write to him.
The Committee whose report we are discussing was set up in 1974 with a very wide remit, as I am sure the noble Lord, Lord Goodman, would agree: to examine the effect of existing legislation about charitable organisations in England and Wales, and to suggest improvements to

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benefit the work of voluntary organisations. The report, of course, was neither produced nor directly sponsored by the Government, but it was, and in my view will be, of great value to us. We had been awaiting it not only because of its intrinsic significance but also because in the autumn of 1975—and this point has been mentioned by a number of speakers this evening—the Expenditure Committee in another place produced a report dealing with the accountability of the Charity Commissioners. During the 1974–75 Parliamentary Session, the Expenditure Committee in another place and the Committee of the noble Lord, Lord Goodman, were both at work simultaneously. The Expenditure Committee, as is customary, completed its work within the compass of a single Session. It produced a report which was necessarily a great deal shorter than that of Lord Goodman's Committee and, of course, it covered a far narrower field.
When the Expenditure Committee's report appeared, it seemed sensible to the Government that our consideration of its recommendations should be deferred until we received the report of the Committee of the noble Lord, Lord Goodman. Now, of course, we have both reports before us. With the aid of the helpful comparative summary in Appendix III of the report of the noble Lord's Committee it can not only be seen that the two reports cover some common ground but also that, on a number of issues, they disagree.
I should like to begin by dealing with some of the recommendations of the report of the noble Lord, Lord Goodman, and his Committee. The Committee began, naturally enough, by considering the definition of "charity". The Nathan Committee recommended in 1952 that the definition then in force, which operated by reference to the examples of charities given in the preamble to the Statute of Charitable Uses passed in the reign of Queen Elizabeth I, should be replaced by a shorter and simpler definition in modern terms, but without abolishing the existing case-law. However, the then Government rejected this recommendation in 1955, on the ground that it was impracticable to devise any "new" definition which would not be new in substance as well as in form.
The Committee of the noble Lord, Lord Goodman, has now recommended a restatement of the categories of charities in
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simple and modern language, on the lines suggested in Appendix I to the Committee's report. The Committee has given up the Nathan Committee's hope for a short definition; but in other respects, particularly as regards preservation of the existing case-law, the recommendations of the two committees have a great deal in common.
Reference has been made to the minority report of Mr. Whitaker. It was referred to by the right reverend Prelate the Bishop of Southwell and others. It relates to issues of broad social policy rather than questions of legal definition. Mr. Whitaker urged that the scope of charity should be restricted to the relief of poverty and deprivation, and to social welfare in general. As is clear, this restriction advocated by Mr. Whitaker was not supported by the other members of the Committee who considered that other causes to which people were willing to devote money and voluntary effort without material reward also deserved the protection which the legal status of charity affords. All I can say is that this is a matter of considerable importance. There is here a substantial philosophical divide and it is clearly an issue upon which the Government must form a view and so must Parliament.
The Committee of the noble Lord then went on to express general satisfaction with the present arrangements for the control of charities by the Charity Commissioners. I am grateful for the generous words bestowed on the civil servants in various Departments by the noble Lord, Lord Goodman, because, as he rightly observed, the Committee obviously derived a great deal of benefit from the very substantial assistance it rightly received from officials of various Departments. I am sure that all those who assisted the Committee will be grateful for what the noble Lord said.
Having indicated their general satisfaction with the control of charities by the Commissioners, the Committee went on to recommend certain extensions of the Commissioners' functions. In considering these recommendations we shall need to take into account the demands that their implementation would make on public service manpower, and the consequent effect on the level of public expenditure. We shall also have to consider the objections that the Goodman Committee

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expressed to financing the work of the Charity Commission by levying a registration fee on charities. This is an issue—and there are others—where there is a difference of opinion between the report of the noble Lord and his Committee, and the recommendations of the Expenditure Committee in another place.
There are also divergent recommendations from the two Committees on the arrangements for the review of local charities—whether responsibility for these reviews should rest with local authorities, as is the situation at the moment, or with the Charity Commission, and whether there should be powers of compulsory amalgamation. There are also differences of view about the structure and accountability of the Charity Commission—whether the Commissioners should, as they are now, be civil servants, or be drawn from a wider field; and whether they should be made answerable to Parliament, through my right honourable friend the Home Secretary, for their day-to-day work.
Of course, the Committee of the noble Lord, Lord Goodman, submitted its report not to my right honourable friend the Home Secretary nor to any other Minister, but to the National Council of Social Service. The House will understand, therefore, that the Government cannot take their consideration of the Goodman Committee's Report very far until we know how far the recommendations are endorsed by the National Council of Social service itself. The NCSS, for its part, has decided to consult widely before formulating its own views. The noble Lord, Lord Allen of Abbeydale, presided at a conference on the Goodman report in April, which I know was also addressed by the noble Lord, Lord Nathan, and some other members of the Committee. No doubt, other representations have been made to the National Council by its constituent bodies. I understand that the Council is now drawing up a memorandum for consideration by the Government, and we look forward to receiving it.
The present Chairman of the National Council of Social Service recently asked for a meeting with my right honourable friend the Home Secretary to discuss the report of the noble Lord, Lord Goodman, and his Committee, and this meeting—
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having been deferred on one occasion, as the noble Lord, Lord Allen, has rightly observed—will be taking place later this week. In these circumstances, I know that the noble Lord, Lord Allen of Abbeydale, will not be surprised to hear that the Government have not as yet reached any conclusions on the recommendations made by the Goodman Committee. Not only would it have been somewhat discourteous to the National Council of Social Service if we had attempted to do so without knowing what their views might be, but the very breadth and scope of the Committee's report would have rendered it an exceptionally difficult task. Nevertheless, as I indicated at the beginning of my speech, this is clearly a most important matter and so we regard it.
The work of charities affects the lives of many millions of our fellow citizens. The noble Lord, Lord Goodman, referred in his speech to the role of the volunteer in our society, and certainly I would agree with him. For the first two years when I was at the Home Office, I had responsibility for the voluntary service unit of the Home Office which, as the noble Lord will know, has an important role in relation to the voluntary organisations and their total relationship with Government—not only my own Department, but all others. Therefore, I had a great deal to do for those two years with representatives of the voluntary organisations and, certainly—and I am sure that my experience will be very similar to that of the noble Lord—one could not but be impressed, and sometimes moved, by the tremendous amount of dedicated and disinterested work that takes place among people of this kind. Certainly, I agree with the noble Lord, that, at a time of great national economic difficulty, there is no doubt that, whatever philosophical differences may exist, in many cases if the voluntary movement—if I may so describe it—does not take on certain functions, no one else will do so.
The blunt reality is that we as a country are in a position where we can define without any difficulty urgent social problems, but we shall be unable to devote enough in the way of resources to dealing with those social problems. As a result, we shall be heavily dependent on the work of people in voluntary organisations. To take only one obvious example, this

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is particularly true in the area with which I am involved; namely, the general question of penal institutions, probation and after-care, and so on.
In many of these areas we are increasingly dependent upon the disinterested work of a large number of people who are prepared to give of their time. Therefore, I very much agree with the general approach of the noble Lord, Lord Goodman. Certainly it gives us an indication of the importance of the subject which we have been debating this evening. In the situation which we have been discussing and which I have just identified, it is clearly desirable that the Government should determine their policy without unreasonable delay. Of course the examination of the two reports will take some time because, as the noble Lord, Lord Goodman, pointed out, many Government Departments are inevitably involved with both. Given its responsibilities, my Department will be particularly closely involved.
The noble Lord, Lord Allen of Abbeydale, asked whether the Government are thinking of producing a Green Paper. As the noble Lord will be well aware, the Government are under an obligation to reply in due course to the report of the Expenditure Committee. Such a reply is normally conveyed in a White Paper. Whether or not at a later stage it will be appropriate to publish a Green Paper I do not know, but certainly I shall take into account the suggestion of the noble Lord and make quite sure that it is considered by those concerned.
To sum up, as I indicated at the beginning of my reply, I take the view—and I think it is the view of all noble Lords who have participated—that this has been a valuable debate. Certainly it will be of value to both the National Council for Social Service and the Government. I should like to assure the House that my right honourable friend the Home Secretary, knowing of your Lordships' interest in the subject and that there is this report from the Expenditure Committee in another place to which the Government
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have yet to reply, is determined to ensure that we should now proceed to formulate our views on these important issues as speedily as possible.