Lords Sitting of 22 February 1978

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

LORD CHARTER'S OF AMISFIELD
Lieutenant-Colonel the Right Honourable Sir Martin Michael Charles Charteris, GCB, GCVO, OBE, having been created Baron Charteris of Amisfield, of Amisfield in the District of East Lothian, for life—Was, in his robes, introduced between the Lord Maclean and the Lord Adeane.

THE DISABLED: THREE-WHEELER VEHICLES
2.48 p.m.
Baroness MASHAM of ILTON: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how many new and reconditioned three-wheeler vehicles adapted for disabled people are being put into storage by the Department of Health and Social Security and what they intend to do with them.
Lord WELLS-PESTELL: My Lords, the Answer is some 500 vehicles, which will be issued as replacements as required. My honourable friend the Minister for the Disabled has given a commitment that vehicles will be replaced, as they wear out, up to at least 1982, and possibly 1983. While production will soon cease, building up an adequate stock of three-wheelers is essential if Her Majesty's Government are to honour the commitment made by my honourable friend.
Baroness MASHAM of ILTON: My Lords, while thanking the Minister for that reply, may I ask him whether he knows that there are several hundred
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brand new vehicles rusting in the snow in York at the moment, and that there are many 16-year-old disabled school-leavers who were able to use three-wheelers but who are now, completely, prisoners in their own houses and cannot get out to look for a job? Could he make any of these vehicles available to these 16-yearolds?
Lord WELLS-PESTELL: My Lords, in reply to the last question, the answer is, no. In reply to whether I know that there are several hundreds rusting in Yorkshire, this is news to me and it is news to my Department. I should want some evidence of that, and I hope the noble Baroness will supply it. It is perfectly true that there are something like 2,000 vehicles with approved repairers all over the country. Noble Lords may know that, when a three-wheeler breaks down, the owner can take it to an approved repairer to be repaired. At the premises of these approved repairers it is necessary to have a stock of three-wheelers, so that while one is being repaired the recipient has another in which to drive around. Over the whole country there are something like 2,000 with approved repairers. We shall be keeping in the Property Services Agency buildings another 500, of which 250 are new and 250 have been repaired and are fit for the road. This is a necessary number so that we can cope with the demand for them from time to time when vehicles are undergoing repair.
Lord SANDYS: My Lords, arising out of the Minister's original reply on the closure of the production line, could he tell us whether there will be a spare capacity and also whether there will be a loss of jobs resulting from this closure?
Lord WELLS-PESTELL: My Lords, this is a matter to which we have given great attention. I can safely say that while three-wheelers are in use, which will be for several years to come, we do not envisage having any difficulty at all about spare parts. There have been some difficulties; but, if I may say so, there have been difficulties in getting spare parts for almost everything and anything. We do not envisage any great difficulty and therefore feel we shall be able properly to maintain these three-wheelers.

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The noble Lord asked about the firms engaged in this field. They have known the situation for some considerable time, and have tried to diversify their functions and to take on other work. So far as Invacar Ltd. is concerned, I understand that it has issued to date something like 58 redundancy notices to workers. AC cars will have to make some workers redundant, but the extent will depend largely on the additional work they hope to get in the next few months.
Lord WINSTANLEY: My Lords, will the noble Lord bear in mind that, while these invalid tricycles are unsatisfactory in many respects, they have nevertheless proved totally satisfactory for a small number of handicapped people who would be unable, if not unwilling, to drive anything else? Is he aware that many of these handicapped people have felt intensely bereaved at the prospect of losing their tricycles? Will the noble Lord take every step to make sure that this reprieve to 1982 or even 1983 is brought to the notice of all those people who are now worried about the prospect of losing their tricycles?
Lord WELLS-PESTELL: My Lords, I am obliged to the noble Lord. It is true that we on this side of the House have from time to time said that we did not accept that three-wheelers were such dangerous vehicles as a large number of noble Lords in this House have indicated. At one period pressure was put upon us to withdraw this vehicle. In fact, as the noble Lord has said, it serves a useful purpose. My honourable friend—and I should like to repeat this—on 26th April 1977 in another place, said that existing trike holders' interests are being carefully protected by the Government. He said:
"I shall stand by … the commitment that we shall not allow people who need a vehicle to find themselves immobilised because we have not been able to provide one.—[Official Report, Commons, 26/4/77; col. 1063.]
We are taking steps to see that vehicle holders know that we hope to be able to continue them until 1983.
Baroness MASHAM of ILTON: My Lords, is the noble Lord aware that there are 350 spina bifida newly-disabled people with no vehicle at all, and also many other disabled people who have
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become disabled since the Government did not supply further? Do the Government intend to give disabled people another, more suitable vehicle to make them independent?
Lord WELLS-PESTELL: My Lords, the noble Baroness knows better than anyone else, since she is a member of the Goodman Committee, that the Government have said that they will consider what can be done in this matter of providing another vehicle for that small number of disabled people who will need it. We are looking at this question and taking advice from our colleagues in the EEC. I must point out that when the policy changed on 1st January 1976 we said that we should have to stop issuing three-wheelers—we were under some pressure to do so—and we would therefore give mobility allowances only. This did not affect those who had a trike prior to 1st January 1976. We were faced with providing three-wheelers for disabled people who needed them to get about and to go to work, or with providing a system which would include disabled people who could not drive. By changing the policy, it may be that there are some people who could use a trike but will not have one. This has become necessary in order to apply mobility allowances over a much wider field of people.
Lord PAGET of NORTHAMPTON: My Lords, could the noble Lord tell us whether the Government have in mind the situation of the school-leavers in circumstances in which it is difficult to find jobs for those who are sound? Will not disabled school-leavers have very little prospect of finding jobs at all unless they can be made mobile?
Lord WELLS-PESTELL: My Lords, school-leavers today are 16 years of age. If they had four-wheeled vehicles they could not drive them because in this country they are not allowed to do so until they are 17 years of age. They are entitled to mobility allowances at the age of 16; so that from 16 to 17 years of age they will be getting, come next July, £10 a week to help them overcome that difficulty.

HEATHROW TERMINAL PROJECT INQUIRY
2.57 p.m.
Lord BALFOUR of INCHRYE: 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 when it is expected that the public inquiry into the proposed construction of a fourth terminal building at Heathrow Airport will commence; how long it is anticipated the inquiry will last; and, assuming the inquiry favours the project, how soon afterwards construction can commence.
Lord ORAM: My Lords, the public inquiry is expected to begin at the end of May, but it is not possible to say how long it will last. Assuming approval of the fourth terminal project, it would be for the British Airports Authority to decide when building should commence.
Lord BALFOUR of INCHRYE: My Lords, is it possible for the noble Lord to say what the British Airports Authority's view is on how long construction will take?
Lord ORAM: No, my Lords, I am afraid not. The original thought was that it might be completed by 1982, but that was before the process of inquiry was entered into. That date will not now be reached.
Baroness BURTON of COVENTRYMy Lords, might I ask my noble friend whether the inquiry will include the question of access to this new airport for people dependent on public transport?
Lord ORAM: Yes, my Lords, certainly. The Government recognise the need for adequate access to major airports and will take this into account in considering schemes for roads for which they are responsible.
Lord ARDWICK: My Lords, can the noble Lord say whether the work on Terminal Two will have been finished before the inquiry into Terminal Four begins; or even whether it will be finished before the work on Terminal Four is finished?
Lord ORAM: My Lords, I doubt whether it will be finished by May, but I hope that it will be finished this year.
Lord TREFGARNE: My Lords, in view of the fact that this terminal is planned to be constructed outside the present island site in the centre of Heathrow, can the noble Lord say what communications will be provided between the new terminal and the present central area?
Lord ORAM: No, my Lords, I cannot give the exact information on that. No doubt the local authorities responsible for the roads will include this in their planning and I have no doubt that this matter will be fully considered at the inquiry.
Lord TREFGARNE: My Lords, with respect is it not the case that this has nothing to do with the local authority? It is all inside the existing boundaries of the aerodrome. I am asking about communication between the new terminal and the existing central area.
Lord ORAM: My Lords, I am sorry if I misunderstood the noble Lord. That would be a matter for the British Airways Authority in achieving its plan after the conclusion of the inquiry.
Baroness BURTON of COVENTRY: My Lords, I do not know whether I am going to ask the same question as the noble Lord, Lord Trefgarne, but as the Minister said that roads would be taken into consideration, is he aware that I am concerned not only with roads but with what goes on them? Will there also be consideration of passenger conveyance on public vehicles from the centre of London to the new airport?
Lord ORAM: My Lords, it is open to anyone to make written representations to the inquiry. There is no limit on the subject matter about which people can write. Therefore I am quite sure that the matters that my noble friend has in mind will be before the inquiry.
Lord NUGENT of GUILDFORD: My Lords, is the noble Lord aware that, as well as conveyance to the airport, passengers will need service when they get there? Will he take into account

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that a great deal of extra labour will be required if this fourth terminal is brought into existence? Is he aware that there is already acute over-employment in that area and the local authorities there are extremely anxious? Will he please make sure that he hears their views and takes them into account before he considers sanctioning the fourth terminal?
Lord ORAM: My Lords, the noble Lord seemed to be addressing those remarks to me personally. It will be for the inquiry and, subsequently, for the BAA, to take these matters into account. They are important ones; I do not deny that. I will ensure that the points which the noble Lord has made are conveyed to those concerned.
Lord SEGAL: My Lords, will the fourth terminal provide for the more expeditious handling of luggage than the existing three terminals?
Lord ORAM: My Lords, I have no doubt that will be looked at.
Lord PARGITER: My Lords, will my noble friend have regard to the fact that many view this area as having reached saturation point now from the transport point of view? Will he consider what the position will be with another terminal, bearing in mind the commuter traffic which goes in and out along that route every morning and night?
Lord ORAM: My Lords, I am of course aware of the anxieties that have been expressed in these matters. They will undoubtedly be before the inquiry and will be raised by people like my noble friend who is particularly concerned with the amenities in the area.
3.2 p.m.
Lord BALFOUR of INCHRYE: 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, assuming that the public inquiry rejects the proposed construction of a fourth terminal building at Heathrow Airport, how the growth of passenger traffic to
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London area airports up to 1990 will be handled, given the maximum expansion of the three other airports already allowed for in Airport Policy (Cmnd. 7084).
Lord ORAM: My Lords, I would not wish to anticipate the outcome of the public inquiry, but clearly an unfavourable decision on the fourth terminal at Heathrow would introduce a new factor in the development of airports policy which the Government would have to consider.
Lord BALFOUR of INCHRYE: My Lords, supposing the terminal is rejected, can the Minister explain how the passengers who they have assumed in this document will use London Airport up till 1980 will be looked after having regard to a new terminal's existence? The other London area airports will, according to this document, be at saturation point all the time up to 1980.
Lord ORAM: My Lords, the Government have explained in the White Paper to which the noble Lord refers that the expected growth in air traffic demand up to 1990 could be met by the expansion of the four London airports. Without the fourth terminal at Heathrow, capacity in the London area is likely to reach saturation earlier than expected. But traffic forecasts are inherently uncertain, and this would depend upon the actual demand that transpired.
Lord BALFOUR of INCHRYE: My Lords, according to the reply, do I gather that, if there is no new terminal and the capacity of the other airports is up to saturation, the Government have no plan which they can now announce as to how they will cope with the excess at the other airports which have already reached saturation?
Lord ORAM: My Lords, of course there will be consequences which the Government will have to take into account and other airports will be affected. I should not like at this stage of the proceedings to speculate at Question Time on the particular consequences that might ensue for the other airports.
Lord DARLING of HILL-SBOROUGH: My Lords, to deal with the problem of congestion, will my noble

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friend ask the Government to consider now a proposal that was put forward when the Roskill Report was under consideration—that is, that the next London Airport should be built on Thorn Waste, with a direct rail link to King's Cross?
Lord ORAM: My Lords, there is a long and vexed history about this matter, with many propositions such as my noble friend is now reviving. We ought to rest on the White Paper which is now before Parliament and the inquiry which we have been discussing, and see what progress can be made on the basis of this policy.
Lord AVEBURY: My Lords, is the Minister aware that at a very interesting seminar given by BP to a number of noble Lords yesterday morning it was shown that a world supply of oil could not possibly he maintained beyond the year 1990, or thereabouts? In view of the fact that this implies diminishing supplies of oil and rapidly increasing price, would it not be realistic to assume that airline traffic will peak in about 1990? It would therefore be folly for us to provide very expensive terminal facilities which could only he used for a very limited number of years.
Lord ORAM: Yes, my Lords. Oil supply is of course one of the major factors that has to be taken into account in making forecasts of future demand. The kind of information which the noble Lord has brought forward is one of the hazards in this business. I indicated earlier that the forecasting of demand for airport facilities is a very tricky business because of the kind of factor that the noble Lord has mentioned.
Lord LEATHERLAND: My Lords, is my noble friend aware of the fact that the hidden motive behind this Question was to see that Stansted in Essex is made into a major airport? Is he aware that such a step would have the effect of destroying one of the most delightful, quiet parts of England and would do very great damage indeed to very efficient agriculture?
Lord ORAM: My Lords, my noble friend is perhaps more expert in detecting
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sinister motives in Questions than I am. I am sure that my noble friend, with his particular interest in Stansted, will have read the White Paper and seen what is the Government's position in respect to this.
Lord BALFOUR of INCHRYE: My Lords, in a stupid slip of the tongue used the figure 1980 when of course I meant 1990. I apologise.
Viscount MERSEY: My Lords, is the noble Lord aware there is very great concern at Gatwick Airport about the additional runways being started? Will he confirm the undertaking given on several occasions to the West Sussex County Council that there will be no further development there? Will he confirm that that is so?
Lord ORAM: My Lords, it depends what the noble Lord means by "development". He referred to a second runway. The White Paper makes it clear that there will not be a second runway. The Government have firmly made up their mind on that point. Equally, there is development proposed in the sense of a second terminal, which is another matter, of course.
The Earl of CORK and ORRERY: My Lords, is it the expectation of the Government—
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I feel a little embarrassment about rising because I am to answer the next Question. But I think I have the feeling of the House when I say that we have had over 20 minutes on this third Question—
Several noble Lords: Hear, hear !

AID TO UNDERDEVELOPED COUNTRIES
3.8 p.m.
Lord CAMPBELL of CROY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they take into account the

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effects upon United Kingdom invisible exports, as distinct from visible trade, in their aid policy towards underdeveloped countries.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, yes. In general, the aid programme gives a direct stimulus to invisible exports from the United Kingdom. The economic development which our aid programme seeks to provide naturally adds to the volume of both invisible and visible exports.
Lord CAMPBELL of CROY: My Lords, I thank the noble Baroness for her reply; but is she aware that the proposed deal with India appears to be virtually giving away ships as aid at a time of a world surplus and with many ships laid up? India certainly needs aid for her rural areas, but not in shipping. At present, India carries half the trade between Britain and India. As these ships will be competing directly with British merchant vessels, are the Government taking this fully into account in the arrangement?
Baroness LLEWELYN-DAVIES of HASTOE: Yes, indeed, my Lords. We are very much aware of the whole question of Indian shipping. We are also aware of the over-capacity of shipping and in many international meetings have done our part to try to reduce that. I am sure that the House will understand that India would have bought these ships from somewhere else—Japan, possibly. In any case, the competition would have been there. Her Majesty's Government considered that it would be a good idea for aid to be given which would at the same time provide employment for people in areas of Britain where there is high unemployment.
Viscount ECCLES: My Lords, can I ask the Minister whether the teaching of English and also the training of technicians in developing countries figure largely enough in our aid programme? Would it not be a good thing to give the British Council rather more resources?—because, with the furtherance of English teaching and particularly with the training of the young men and women who service the plant which goes abroad under physical aid programmes, we should be benefiting both ourselves and them.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, as the noble Viscount will know, we have a very large technical co-operation programme: I think it was about £124 million last year. Of course we do a great amount of teaching of the language and of training of people to run the plants. We do a great deal for invisible exports of all kinds, but we did feel that India needed the ships, and wanted the ships. If we had not done this under our aid programme, someone else would have provided them.
Lord LEATHERLAND: My Lords, is my noble friend aware of the fact that, if we taught more of these Commonwealth citizens the English language it would make more of them eager to come to this country—and that would get us into trouble with Mrs. Thatcher?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I think that my noble friend has a marvellous command of the English language.
Lord CAMPBELL of CROY: My Lords, while I accept that there are cases where other countries might supply ships, is the noble Baroness aware that, in this case, the British shipping industry believes that no other country would have supplied these ships had they not come as aid from this country? Will the Government also bear in mind that India charges a turnover tax on British shipping, whereas there is no equivalent tax which Britain charges on Indian shipping?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, as I think the noble Lord will know, my right honourable friend the Minister has met the General Council of British Shipping and is very much aware of their views on this. They have been taken into account. I do not think there is really anything more I can add. It is not our information that India would not have obtained ships from elsewhere: rather to the contrary.

PROFIT SHARING: THE FINANCE BILL
3.12 p.m.
Lord BYERS Lord BYERS rose to move, That this House welcomes the Government's declared intention to include in this year's Finance Bill provisions to encourage

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profit sharing. The noble Lord said: My Lords, I beg leave to move the Motion standing in my name on the Order Paper, and I should like to begin by saying that Liberals are naturally delighted that the Prime Minister and the Chancellor of the Exchequer have agreed to incorporate in this year's Budget and Finance Bill incentives to encourage profit sharing. These were contained in the consultative document and in the reply to a Question put by Mr. John Pardoe in another place on 2nd February.
As a Party, we have been campaigning for the adoption of such a policy since 1928, when it was included as a major feature of the Liberal Yellow Book or, to give it its proper title, Britain's Industrial Future. Many of your Lordships will have read that book: I do not suppose there have ever been brought together, as authors of a detailed political and economic testament, so many distinguished thinkers as were assembled by Lloyd George to compile that particular book. It was compulsory reading at the universities in the 1930s, and had a profound effect on political thought, not least upon members of the Labour Government of 1945. Unfortunately, that was too shortlived. Among its contributors framing these policies were Walter Layton, H. D. Henderson, John Maynard Keynes, Ramsay Muir, Seebohm Rowntree, Sir Herbert Samuel, Sir John Simon and many others.
Oddly enough, the section dealing with profit sharing never attracted the support of the Labour Party and the trade unions. I say "oddly enough", because profit sharing was specifically not dealt with in isolation; nor do we believe that it should be. The recommendation was:
"The real purpose of profit sharing is to show that the worker is treated as a partner and that the division of the proceeds of industry is not a mystery concealed from him but is based on known and established rules to which he is a party and must be regarded, together with the system of organised consultation, to form the basis for a satisfactory industrial relations policy".
When one looks at the detailed policy laid down in that Liberal Yellow Book, as compared with the amateur nonsense contained in the Bullock Report, one wonders why we have been wasting these last 50 years. Perhaps 50 years is now regarded as a short time in British politics; and I must say that I would have welcomed
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as many trade union Lords taking part in this debate today, a debate which will do something to help their members in the field of profit sharing, as took part in the Bullock debate, which was merely to give more power to the trade union movement.
Looking back, one can appreciate the relative simplicity of those early Liberal proposals—an approach which could have made a lot of difference to our economic growth had it been adopted, based as it was on the concept of a standard wage, extra reward for extra effort and the recognition of the worker's interest in the concern for which he works by providing that he receives a share in its prosperity to which he contributes.
The authors of the Liberal policy also stressed other principles—and these principles are just as true today. The first was that the amount of the bonus must not depend on the will of the employer but should be determined by a scheme settled beforehand and clearly understood. Secondly, workers entitled to benefit under any scheme should be given access to such financial data as would show that it has been carried out. That was 50 years ago. This disclosure of financial data is vital even if there are no profits to divide, because it explains what is happening in the business and gives the worker a real interest in the prosperity, or lack of it, of the concern.
Having expressed our general welcome for the adoption of incentives for profit sharing or, I believe more correctly, schemes for profit equity sharing, I should like to spend a moment or two on the three proposals contained in the consultative document. Of these, our preference would be for Method III, in which a company can make an allocation from profits each year which can be used to buy shares at full value. The shares would be apportioned between the employees but retained by a special trust for a period of five years, during which the employee would not be permitted to sell the shares. When he did sell the shares there would be a charge to income tax on a reduced scale, depending on how long the shares would have been held and, subject to the sum realised being within the exemption limits, there would be no charge to capital gains tax.
So far so good; but three main points arise from this scheme on which I would ask the Government to comment. First, why is the tax relief obtainable only if the shares are held for a minimum of five years? I had personally hoped it would be possible to persuade employees to hold on to their shares for a very long time, but if the policy is to adopt a fixed term of, say, five years—and I would love to see them holding shares for a minimum period of five years, though not compulsorily—there will inevitably he a tendency for a very substantial number of shares to come on to the market at a particular time, with a resultant unnatural depression of the price. Even if the number of shares sold is not substantial, the market anticipation will inevitably adversely affect the price. I think it would be better to leave the employee free to dispose of the shares when he wanted to do so.
Secondly, the consultative document states that it would be necessary for the trust which is holding the shares to arrange for the employing company to apply PAYE to the appropriate part of the sales proceeds. I do not believe that the authors of the document have appreciated what a tremendous administrative burden that could pose, even to the point of deterring companies from adopting profit-sharing schemes. In my view, this reinforces the argument that the shares should be allocated directly to employees, who should deal with them as any other shareholders do.
Thirdly, I do not follow the thinking behind the insistence that there should be an upper limit of £500 worth of shares per annum per employee. I do not think we can continue to subject our middle and upper management to much more leveling down and egalitarianism. If it is the Government's intention to restore the real standard of living of middle management by very substantial tax cuts, there could, of course, he a case for some upper limit. But I will believe these tax cuts when I see them, and not before. In the meantime, the imposition of an upper limit of £500 makes the scheme derisory above certain salary levels.
There are already two limitations at work; namely, the amount of shares a company is prepared to make available for
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its scheme—that is quite a serious limitation—and the incidence of high taxation which erodes the net gain to the higher paid individual, and that, certainly, is a limitation. I think that this aspect should be re-examined, if substantial tax cuts are not forthcoming in the upper income brackets. In this connection, I think that we should look carefully at the possibility of resurrecting share option schemes for senior and middle management, such as we had before 1974. This was a system by which profit from the sale of shares was subject to capital gains, but not to income tax.
The political objection to this was that it discriminated strongly in favour of the very highest salary earners. But I believe that the situation changes when a profit-sharing scheme is introduced to cover the whole business. Those with lower salaries and low taxable incomes will find profit-sharing proposals very attractive—at least, I hope so. But the higher salary earners, because of the upper limit and the very high incidence of income tax, need something like a share option scheme to give them an equivalent incentive. I believe that this is worth Government consideration, and that it could help to provide the industrial stimulus which we need in this country for economic growth. It is interesting to note that British Airways staff have come out overwhelmingly in favour of a scheme to allow them to buy shares in their own airline.
If the Government do adopt Method III unamended, I would ask them whether there will be any liability to tax when the trust hands over his shares to the employee at the end of the five-year period, or is tax to be chargeable only when the employee sells his shares? I must say that I do not feel attracted to Methods I and II, but I should like to take this opportunity of asking the Government whether they could elaborate on the discount which it is permitted to make in arriving at the cost of employee shares by virtue of any restrictions placed upon them. In other words—and I have given the Government notice of this question, because it is puzzling a lot of people—what restrictions will be regarded as equivalent to the maximum 30 per cent. discount referred to in the consultative paper?
There is, I think, a strong parallel in these proposals to the way in which some

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of us, in all Parties, were able, with good will, give and take and patience, to get across-the-board agreement on the 1975 Social Security Pensions Act. I would plead that we should get something like that political consensus in this matter, because I want to make it clear that, although I may have certain criticisms and reservations, I and my colleagues wholeheartedly support the giving of incentives to encourage profit sharing. Without the incentives, I am afraid that such schemes will inevitably be limited to the few really enlightened employers. I want to see them more widely spread.
But if this is to happen and we are to turn—as I hope we will—our few hundred schemes in this country into several thousands, I believe that we need to examine certain aspects with great care. We must not make the administrative burden on employers too great; otherwise, we will deter them from going ahead. We must aim for flexibility which avoids the imposition of one standard scheme for the many different companies and the many different circumstances which exist in British economic life. And, as I say, we should try to obtain all-Party consensus on the schemes and the structure which are finally adopted, because this is something which ought to be with us for a very long time as part of our economic system.
I referred to the consensus and goodwill which we managed to bring about on the Social Security Pensions Act, and I hope that all Parties will now approach this field of profit sharing in a similar spirit, and build up together acceptable structures which will not be dismantled at every change of Government. I believe that we could be witnessing a new era in industrial relations, a new era in the mixed economy and the beginning of really enlightened capitalism. I welcome the Government's intentions. My Lords, I beg to move.
Moved, That this House welcomes the Government's declared intention to include in this year's Finance Bill provisions to encourage profit sharing.—(Lord Byers.)
3.26 p.m.
Lord CULLEN of ASHBOURNE: My Lords, the whole House will be grateful to the noble Lord, Lord Byers, for initiating this debate today. He seems to me to
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have made a Conservative speech, because so many of the things that I was going to say he has already said much better. It is indeed appropriate that the noble Lord should have introduced this debate today, because, as he said, the Liberal Party has campaigned for profit sharing for half a century or more. Also, as is well known, we on these Benches are in favour of this principle and now it seems that the Government, for whatever reason, also favour the principle. That, for this Government, is a really remarkable development. Up until yesteryear they appeared to have a distaste for the profit motive, so this is an astonishing transformation. If the Liberal Party has done nothing else, to have succeeded in effecting a consensus on this concept, which, if we get it right, has enormous potential for improving both productivity and industrial relations, is no mean achievement.
But, my Lords, have they? We should be wise to ponder on the announcement in the recent consultative document, which reads as follows:
"The Government has agreed to consider ways of encouraging the creation of schemes for profit sharing in private industry with a view to legislation".
This, of course, is no commitment to embark on legislation; just an agreement with the Liberal Party to consider. But even this is remarkable, so let us not be too cynical or grudging in our welcome of this change of heart.
Many policies of the Government have altered dramatically since the bad old pre-IMF days, and greatly for the better so long as they are not transitory. So that, however tentative the Government's intentions may be, let us try to establish a real all-Party consensus to the principle of profit sharing, and to undertaking an exhaustive study of the subject, so that we get the legislation right, so far as is humanly possible, first time.
Fortunately, there is a great deal of experience on which we can draw. There are only some 100 profit sharing schemes for general employees in this country, so that we shall also have to look elsewhere. In France and West Germany, many millions of employees benefit from such schemes. But by far the most fruitful area is the United States where nearly 200,000 companies operate voluntary schemes, all enjoying fiscal encouragement

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and predominantly based on deferred share ownership. Many of these schemes have been going on for a long time, and their value is revealed by a study over 18 years, from 1952 to 1969, which shows that companies with significant employee shareholdings grew faster than those without them, their share prices grew twice as fast, earnings per share 1·9 times, net worth per share 1½ times and sales revenue 1⅓ times. Is it not possible that profit sharing could be the key to the radical improvement in productivity that we so desperately need?
Having given a warm welcome to the Government's conversion, I should like to make a plea that we should, in future, seriously consider the term "productivity sharing", rather than "profit sharing". There are, I believe, still areas where the word "profit" is regarded with suspicion, but no sensible person thinks other than that the continuing improvement of productivity and efficiency should be the goal of any enterprise.
It could very well be that a value added system would be preferable to one based on profits. This is the system now used by ICI after more than 20 years' experience. If we keep on referring to the word "profit" we may be muddying the water and making it harder for employees to understand how their bonuses are calculated. There is another reason why profit may not be the best yardstick. What would happen in a loss-making company which the management is straining to make profitable? Are the employees, however hard they work, to wait for their bonuses until some particular figure of profit has been reached at some indeterminate time in the future?
Several aspects of the consultative document concern me. First, in paragraph 5 it is admitted that the three methods of fiscal encouragement are to apply only to employees in the corporate sector. But looking at paragraph 6 the term "market value" of shares is used. This suggests that unquoted companies are to be excluded. I hope that this is not the intention because there are many unquoted companies, such as Habitat, who have adopted such schemes and I see no reason why they should be excluded. I should be grateful to the noble Lord, Lord Oram, if, when he comes to wind up,
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he would clarify this point. I imagine that the reason why the Inland Revenue have limited their proposals to the corporate sector is that this is much the easiest way to start. Unless it is made clear that this is just a start and that it is intended, with the light of experience, to cover other sectors as quickly as possible, are not the Government asking for trouble? Millions of workers would be excluded—those in the nationalised industries, those in partnerships and so on. There is of course the argument that those who enjoy indexed linked pensions require no further incentives, but I think we must be careful.
Incidentally, on the subject of the nationalised industries we should study the Renault scheme in France. As regards nationalised industries I think it would be better to use the term "productivity"—and hopefully get some—rather than profits. I appreciate that to incorporate all employees is a colossal and perhaps impossible project and I agree that the first priority, as expressed in the Conservative Green Paper of last year, is:
"to make work in the wealth-creating sector relatively more attractive again".
So I hope that the Inland Revenue proposals will be warmly welcomed as a spearhead to a wider application in future to such sectors as it proves practicable to include.
Secondly, returning to paragraph 5, I understand the view that to allow tax relief for profit sharing in the form of cash would be tantamount to payment of wages free of tax. But I suggest that there should be a cash alternative. It will take time for employees to realise the advantages of holding shares with tax benefits and much education will be necessary. There will often be occasions when cash in hand will be more beneficial to the employee than a more valuable stake several years later. Interest in share ownership is likely to build up gradually as employees become aware of the capital which has been accumulated by their more prudent colleagues. As I see it and I am speaking only for myself—I do not think that it should be compulsory to take the bonus in the form of shares. The fiscal inducement should apply only to shares but the cash alternative should be taxable.
Thirdly, I wonder whether, as the noble Lord, Lord Byers, mentioned, the egalitarian approach is necessarily correct.

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One of the main problems today is the narrowing of differentials, and though tax reliefs on £415 or £500 per annum may well prove to be an incentive to the lower paid, it would be insignificant for skilled workers and middle management. Again I speak only for myself and I am open to persuasion that any two-tier arrangement or one based on a percentage of salary would not be practical. I hope not, as I personally believe that it is from those who hold responsible positions that the leadership and the drive to greater productivity and efficiency should come.
Fourthly, I doubt whether participation should in all cases be restricted to employees of five years' standing. Though this would no doubt be appropriate in some industries, a shorter period, say two years, could be appropriate in others. I also wonder whether part-time employees would be eligible. Fifthly, I am more attracted to the tax reliefs outlined in the Conservative Green Paper. Under the Inland Revenue schemes no tax relief would be available, except in compassionate or special cases, unless shares had been held for a minimum of five years. Conservative proposals envisaged a tapered deferred tax with a minimum holding period of two years during which any compassionate disposals would be subject to tax at the standard rate. In the third year disposals would be taxed at 20 per cent., in the fourth year at 15 per cent., in the fifth year at 10 per cent., and after five years tax free. At this point the shares could either be sold and the proceeds reinvested or retained and the then share price would be the base value for capital gains tax for a future disposal.
I now come to the oft repeated argument about eggs in baskets. I do not think this argument can simply be brushed aside. There are many thriving companies in which employees will have no inhibitions on this score—IBM is a very good example. But what would be the position of an employee in a well run company in an industry which was going through a particularly difficult time? Not only would he be likely to have qualms about the security of his job but he would see little incentive in having a stake in the company. I think it would be worth considering the idea that an employee could, if he wished, be offered the alternative of applying his bonus to
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the purchase of authorised unit trust or investment trust securities. I fully appreciate that this departs from the basic conception of involvement by participation by an employee in the enterprise in which he works, but I think that there should be some provision for circumstances in which the incentive is negligible or non-existent.
My last question about the proposals is the assertion that profit sharing is quite distinct from industrial democracy. I disagree, but I think that this provides an opportunity for the noble Lord, Lord Oram, to explain to the House what, in the opinion of the Government, industrial democracy really is. Are not involvement and participation essential ingredients of what most people think industrial democracy is all about, whether it be in decision-making or having a personal stake in the enterprise concerned? It is almost as bad as the different interpretations of the world "détente". We really should clear up this point or all sorts of actions that are taken by one Government or another in the name of industrial democracy will be tangential. Perhaps we should first have debated industrial democracy before today's debate. Moreover, it would have been better if it had been debated before the Bullock Report.
I have made inquiries with several publicly quoted and private companies who have profit-sharing schemes. Naturally there is a general welcome for tax reliefs of any kind. Method III seems to be preferred to I and II, but what is thought to be vital, as the noble Lord, Lord Byers, said, is flexibility so that companies can design schemes which suit their particular circumstances. For example, some companies regard eligibility after five years' service as suitable, but others find that to be too long a period. There are different views as to whether shares should be immediately encashable or have to be held for a period, and as to whether a five-year period may be too long for many employees to contemplate. When discussing Method III, one company put forward the suggestion that when the shareholding period was completed the shares should be transferred out of the trust into the name of the employee. Another company operates a system whereby the bonus is proportional to salary or wages, quite contrary to the

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Inland Revenue proposals. So it all boils down to the need for flexibility.
In conclusion—and I feel that I have spoken for rather too long—I commend to your Lordships the Conservative proposal that new shares should be issued rather than buying in existing shares on the market, up to a limit of 10 per cent. of pre-tax profits if we are working on a profit basis. This not only would be a safeguard against excessive cost but would prevent disturbance of company cash flow. Having touched on some of the many points that we need to consider, I should like to repeat my welcome to the Government's change of heart. I hope that their heart will beat strongly. Converts are often the greatest enthusiasts and I am hoping to hear from the noble Lord, Lord Oram, that the Government are truly converted. If that should be the situation, the Government will need to pursue policies which positively encourage the creation of wealth so that there is some wealth to share.
3.42 p.m.
Lord DARLING of HILLSBOROUGH: My Lords, I hope that no noble Lord will read too much into the fact that I am going to begin by agreeing quite considerably with the views which have been expressed, on both the Liberal and the Conservative Benches, but I promise to be duly controversial before I sit down. I am glad that the noble Lord, Lord Byers, did not give an unqualified welcome to these proposals. I agree with him that even Method III, which is far less complicated than Methods I and II, is so complicated that it will deter companies which might otherwise wish to adopt the proposals from doing so. The proposals are far too restrictive. Certainly they are not attractive to employees. This is a point which it is necessary to get over if it is the intention of the Government to go ahead with the proposals contained in the Finance Bill.
All that the proposals mean, taking Method III as the example, is that the equivalent of a few weeks' wages of an employee would be tied up for five years without much chance of that investment increasing greatly in value, unless the shares are in a company where the share values increase enormously over that
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period. Clearly that is a risk that I am not sure the employee should be called upon to take. Most employees would prefer to take a cash bonus rather than to have this complicated arrangement of shares being handed to them, whether they like it or not.
Assuming that this proposal is accepted, no doubt the noble Lord, Lord Byers, would go on to say that the employee should have complete freedom to sell the shares. I should prefer to put it the other way round: that whatever incentive bonuses we may agree on for an incentive scheme such as that to which the noble Lord, Lord Cullen of Ashbourne, referred, of which I am in favour, the payment to the individual workman for taking part in these schemes should be in the pay packet. This is the trade union point of view and I thoroughly support it. The workman should be allowed to decide for himself what he is going to do with the cash which the company has now agreed he has earned. It is part of the incentive arrangements for the benefit of the company. The workman should be allowed to have the cash and to spend it, or to put it into savings schemes, of which there are plenty, or, if he wishes to do so, to buy shares in the company under the share option schemes or any other schemes for the favourable purchase of shares. A great matter of principle is involved. I disagree entirely that even in this beneficial way we should return to any form of the truck system, by saying to workers, "You'll get the pay in the form that the employer determines". To lose the freedom of the workman to decide for himself what he is going to do with the cash is reprehensible.
I am dubious about the wisdom of inviting the employee to put both his job and his savings into the same basket. That is why I want savings schemes to be developed. As I have said, if the employee wants to buy shares in the company he should be allowed to do so, but there should be no compulsion about it. I do not care for some of the proposals contained in the document. I want there to be what I call fair and honest incentive schemes. I do not agree with the suggestion contained in the document that it would be impossible to work out fair tax relief on cash bonuses. I do not believe that is the case. We ought to examine the possibility of obtaining tax relief on genuine incentive schemes.

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Then there is the further drawback, which I have already mentioned, of the five-year period during which, according to these proposals, the employee has to hold the shares. If the purpose of incentive schemes, or profit-sharing, or whatever you care to call it, is to obtain from the employees a greater degree of loyalty to the company, may I suggest that the encouragement should not be a reward for past loyalty but should start right away and be given, if that is the right word to use, to the newest and the youngest employees in the business. This is how loyalty is encouraged.
Many noble Lords, if not all, will know of my connection and association with the co-operative movement where there is partnership in practice on a very large scale. I should like to stress the view now that in this country there are many enterprises that would benefit greatly from changing their status from public companies and registering under the Industrial and Provident Societies Acts. However, I agree right away that there is very little chance of that happening on any scale. I want there to be more workers' co-operatives. Certainly this would be beneficial, but I do not think that it is a very practical idea. However, we need a new type of company that incorporates some of the virtues of the industrial and provident societies as well as some of the virtues of the company system. I believe that we can now make a start. I have been trying to pursue this idea and have advocated it for the last 25 years.
The noble Lord, Lord Byers, said that the Yellow Book made very little impact on anybody outside the Liberal Party. So far my ideas have made no impact on anybody, but that will not deter me from putting them forward again. The reason why I do so is that I think that in this country there is an area of enterprise which greatly needs a new type of company for entirely different reasons from those that we are discussing now. Those are the close companies, the partnerships, the unquoted companies. Their legal status is, to say the least, ambiguous and their fiscal position is deplorable. The small family business—although many of them are not small—is far too heavily taxed.
If we want partnership in industry, which I gather is being advocated by the
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noble Lord, Lord Byers, and apparently it has not been turned down by the noble Lord, Lord Cullen of Ashbourne, surely the way to get it is to have a company that is a real partnership right from the beginning. I do not think you can attach to the ordinary public company these ideas of partnership that are now being canvassed, because the employees' position is always going to be a small one; he is not going to have control of the company. Even with wide profit-sharing schemes and shareholding schemes, he is not going to have a great deal of influence on management, as a shareholder, as an employee or whatever. Therefore, if we really mean that we want to develop a partnership the thing to do in a new type of company is to have fixed value and fixed interest shares which are non-transferable; in other words, get them out of Stock Exchange gambling.
Many of these companies are afraid to go public because the family does not want to lose control, and they do not want to get into the greedy paws of the take-over people and the asset strippers. So they do not go public, and they suffer all the disabilities of the very high taxation that is levied upon them. So get rid of that by having fixed value fixed interest shares. When all the other arrangements have been made for the disposal of the surplus of the company, every six months or every year, reserves, depreciation and so on, whatever is left, let the partners decide how to divide it up, bonus on wages, bonus on shares or whatever. This is the way to do it, so that all the partners are completely and deeply involved in the business and take part in the management of the business.
I know very well that there is very little chance of ideas like those I am putting forward being accepted unless you can put in a financial inducement; and, of course, the financial inducement is that if you establish the legal basis, the legal status for this kind of company, a close company that takes advantage of this idea and registers as a new kind of company, what I would call a partnership, would get the tax relief that it now should have as a close company. I think a great deal could be done in that direction if we set our minds to it.
As for the proposals in this document, they are too restrictive. I do not know

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whether it will be possible for the criticisms and suggestions that have been offered so far to persuade the Government to make changes, to widen the scope, to make the proposals less restrictive. We shall have to see when the Finance Bill comes along. But even when that is done, they are so complicated; I do not think you can get rid of the complications if you are going to have this form of tax relief, because I doubt very much whether more than a handful of companies in this country will take advantage of the proposals.
3.53 p.m.
Lord DRUMALBYN: My Lords, we have had three splendid speeches to lead off this debate. I thought the noble Lord, Lord Byers, if I may say so, made a model speech to kick off a debate of this kind, and I am sure all noble Lords appreciated the thoughtful and very well researched speech of my noble friend Lord Cullen. The noble Lord, Lord Darling, made the classical opposition to profit-sharing investment schemes, and put forward suggestions which I am afraid he himself admitted are going to be rather difficult to realise. We are really dealing in this debate, as I see it, with the particular proposals that the Government have put forward to encourage share holding by way of concessions on employees' share holdings.
The debate, on the face of it, is on profit sharing, and one could say very broadly that there are two forms of profit sharing; first of all, the annual cash bonus, and, secondly, the annual allocation of cash out of profits for the purchase of shares. I did not interpret the Government's consultative document as indicating any opposition to a straight cash profit bonus. What they were talking about was the kind of tax concessions which you could give in certain cases. It seems to me, taking all into account, that it is reasonable that cash bonuses should be chargeable to income tax. It is, if I may put it this way, a reward for collective effort in the past. But profit-sharing investment schemes are quite different in that they involve allocation of profits in the past year for purchases of shares the value of which in future will reflect collective effort over the years to come. They represent a combination of reward for past effort and encouragement to effort in the future.
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What is perhaps more important still is that, properly devised and with general support in the company, they can engender a sense of common purposes and an industrial commitment to the interests of the company as an entity, to its wellbeing and to the advancement of the services it provides for the community.
It will not do so if the scheme is in any way divisive. I agree with the White Paper in that. I agree, too, that the scheme should be open to all employees who have qualifying service prescribed in the scheme. I agree that this should be left flexible, whether it is one year's service or many years' service. I am afraid I do not agree with the noble Lord, Lord Darling of Hillsborough, that it should run from the start. I think there are very few such schemes in being that do run from the moment a person becomes an employee of the company.
The social usefulness of employee share investment will be small if share investment in general is discouraged, as it is at present, notably by the enormous surcharge of 15 per cent. on investment income and by the very large chunk of any appreciation in value of shares which the Government take on realisation. This is a severe deterrent, particularly in times of high inflation. This is particularly disadvantageous to the employee who holds shares only in his own company, since he would not be able to set any fall in the value of shares in his company against gains in any other investment. The first priority should, therefore, be to reduce taxes on savings in general.
I shall confine my remarks to profit sharing by way of employee acquisition of shares in the employee's company. I share the view expressed by the noble Lord, Lord Byers, and by my noble friend Lord Cullen, that Method II in the consultative document is not a satisfactory alternative within the confines of the Government's consultative document. I do not myself regard Method II in the consultative document as coming into the category of profit sharing by way of employees acquisition of shares in their company; it is a different animal altogether, as it would simply enable individual employees to acquire shares on favourable terms. It could be described, perhaps, as dividend and appreciation in value sharing, rather than profit sharing. It

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seems to me that it would be divisive as between employees who availed themselves of the offer and employees who did not. Nor am I attracted to the idea of encouraging a company to lend money, or arrange for money to be lent, to employees to purchase shares in the company for which they work.
With regard to Method I, that involves investment of profit bonuses in shares of the company after deduction of PAYE on the bonuses, subject to a condition that the shares would not be sold for five years. I am not clear about this, but it appears that, under this scheme, the employee would have the option of either keeping the bonus as a cash bonus and paying income tax on it, or investing it in shares in his company. If he chose to invest the bonus, it seems that he could buy shares at up to nearly 5 per cent. more than the full value of the bonus at a preferential rate, which would, in effect, give him shares free of income tax at the basic rate.
I should like to ask, because it is not very clear from the somewhat schematic explanations of how the release would work, whether all these are to be charged at the basic rate of income tax, or whether the rate of income tax that would apply would be in accordance with the whole range of income tax on the higher incomes? I am not at all clear what is meant and I hope that when the noble Lord replies he will bear that point in mind. No doubt, a trust would have to be set up to hold the shares for at least the restriction period of five years, to receive the dividends and to pay them to the individual holders, less income tax at the basic rate. The extent of the preference—that is the discount on the current market price—would apparently be left to the company to decide.
Under Method III, the shares would be purchased by trustees at full market value and would be held by them for the restriction period of five years. There would thus be no complications in cases where the employee died during the period, because his representatives would, as I understand it, simply receive the current market value, less tax. After the end of the restriction period, he would be encouraged to hang on to the shares for a period of up to 10 years by a tax concession of either half the original cost
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on realisation after five years, or one quarter after 10 years. Alternatively, as my noble friend Lord Cullen of Ashbourne suggested, there could be a tapering scale, which I agree, would be more desirable. The proposal would result in an annual rate of tax of 17 per cent. over five years at the current basic rate of 34 per cent., or 8½ per cent. after 10 years. I hope that I am right about that.
In both methods, any appreciation in the value of shares over their full purchase price would be chargeable to capital gains tax. I suggest that the shares should be free from capital gains tax during the restriction period. Of course, the market value of the shares could go either up or down during the restriction period. If it went down, the employee who wanted to realise his shares would receive less than the amount he might have expected. I suggest that that is as it should be. It is all part of the collective responsibility of the employees for the fortunes of their company.
However, I suggest that, because of its relative simplicity, Method III is much to be preferred to Method I. From the start, the employee would know the value of his shareholding at any point in time. It is, of course, possible that the market value might fall so heavily that, after five years, the realisation price would be less than the preferential price he had paid for the shares, but that is, as they say, "one of those things"—it is inherent in this kind of system.
I should like to ask the Minister a few questions. First, am I right in thinking that the Government intend the sums allocated for profit sharing to be deductible from the pre-tax profits and not post-tax profits in the hands of the company? Secondly, would it be open to companies to issue new shares under Methods I and III rather than to purchase—or, rather, get trustees to purchase—existing shares on the open market?
I entirely agree that the tax advantages should not be allowed to a range of shares reserved for employees only. However, provided that the new shares issued each year for employees ranked equally with the category of shares already issued and could be sold pail passu with them on the open market, new shares would have advantages over the purchase of existing shares.

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For instance, the annual purchase of existing shares could tend to distort the market just as, as the noble Lord, Lord Byers, said, the sale of the shares after five years, once the restriction period was over, would tend to distort the market.
Moreover, the purchase of existing shares would, in much the same way as the distribution or profits to shareholders reduce the resources of the company that were available for internal financing, whereas the issue of new shares would have much the same effect as profits retained in the business. It would represent new capital resources available to the company. The employee would be contributing, in effect, to the capacity of the company to modernise and expand. I am sure that the Government must have considered this matter and I look forward to hearing their view.
Thirdly, is there any reason why trustees used by one company should not also be used by other companies? So long as the trustees were not in the public sector, that would seem a reasonable proposition. If companies could get the expertise, a single block of trustees or a corporation of that kind could handle the trusts.
My fourth question is slightly curious. What happens if a multinational board, based in Britain, runs similar schemes for its subsidiaries in other countries? The Government's proposals are limited to employees in the United Kingdom, no doubt because they are considering United Kingdom tax concessions. However, would it be right—I merely pose this question—in principle for United Kingdom employees to share in the profits of an overseas subsidiary which had its own profit-sharing investment scheme and which, indeed, might be obliged by the law of the host country to have such a scheme? I merely pose that question for consideration. I do not expect an answer today, but I hope the Government will think about the matter.
I do not know what the Government have estimated would be the cost of the three methods outlined in the consultative document. However, I would hope and expect that, if the schemes proved successful and if the economic climate was right, the Government would stand to gain much more in increased revenue than the amount that the tax
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concessions would cost. Even if that proved an over-estimate, the intangible gain in wider understanding of what the company was trying to do and in greater confidence and co-operation would be considerable indeed.
I am glad that the Government have made it clear that profit sharing is quite distinct from industrial democracy. Of course, we have been waiting a long time to hear exactly what is meant by "industrial democracy". However, if it means what we have come to understand the Government to mean by it, then I think that it is absolutely right. Nothing could be more divisive than getting the two confused or making the share of profits a subject for the kind of negotiation that take place on wages and conditions of work. That does not mean that there should be no democratic element in this matter. I entirely agree with what I gathered from the remarks of the noble Lord, Lord Byers—that is, that there should be the fullest consultation with all the workers in whatever body it might be—a works' council, a company's council, or something of that sort—before such a scheme was instituted.
Not very much has been said about small businesses. The noble Lord, Lord Darling of Hillsborough, referred to this matter, but clearly the Government's present proposals are limited to quoted companies and for my part, can understand why, although I hope that the categories of companies to which they apply can be extended. I do not want to develop this matter as time is limited. However, there seems to be no reason why comparable, though not identical, schemes should not be devised for small businesses, and I hope that that will be the next step which will soon be taken.
To conclude, I support the encouragement of profit-sharing investment schemes by tax incentives and in any other possible way, though I suggest that they do not go far enough. I believe that all of us are seeking—or at least most of us—ways in which to raise the level of productivity, which has fallen so far behind that of other comparable countries in too many sectors of our industry. The more employees can feel themselves involved in the interests of their company and the stronger becomes the sense of common purpose, the more chance there will be of us catching

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up and even overtaking our competitors abroad. In some instances groups of employees can be stimulated towards more efficient production by productivity deals or stimulated to more efficient marketing by bonuses of one kind or another. But there are many activities where the collective efforts of an enterprise can only really receive tangible recognition through bonuses in the form of profit-sharing, varying from year to year with the financial success of the company.
I am no new convert to the idea that profit-sharing investment can play an important part in improving the collective efficiency of a company and, above all, in enhancing the sense of common purpose within the enterprise. Obviously, this is not a panacea; but neither is it a placebo; nor is it merely an attempt to placate the Liberal Party, important as that may be to the Government. It is something that has a useful contribution to make towards stimulating the ability of the British quoted company to compete successfully in a highly competitive world as an efficient and mature team. It is for that reason that I support what the Government are trying to do, and hope that between now and the Finance Bill the scheme itself will be improved.
4.12 p.m.
Baroness ROBSON of KIDDINGTON: My Lords, I am, of course, delighted that my noble friend Lord Byers should have raised this subject for discussion here today. I have been tremendously impressed by the contributions made by noble Lords on both sides of the House, much of which I fully endorse. But at the risk of being repetitive, I should like to state what I believe the basic objectives of schemes designed to encourage share ownership through profit sharing in the corporate sector should include or should achieve.
First, such a scheme must be aimed at achieving greater company loyalty. It must be aimed at better industrial relations; it must be aimed at greater productivity and it must be aimed at more effective employee participation in the managerial process. Above all, it must be aimed at creating a property-owning democracy in this country. I agree with my noble friend Lord Byers and everyone else who has spoken that Method III is preferable. If
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we look at the proposals emanating from the Treasury on Method III and measure them against these criteria, I, personally, do not believe that they go far enough in creating a property-owning democracy.
Like my noble friend, I am delighted that the Government should have listened to Liberal proposals for profit-sharing. I am sad that the suggestions put forward in the Liberal Yellow Book in 1928 have had to wait 50 years because, although I agree with my noble friend that they are still perfectly relevant today, our economy has changed to such an extent that many more things are needed today in order to create a property-owning democracy. Perhaps I may return to one of those later in my remarks.
As I have said, I agree with many of the contributions already made as regards Method III and, although I agree with the suggestion that to qualify for membership of a profit-sharing scheme one should have had to work for the company for some time, I think that five years is much too long; because if we superimpose upon that the fact that one would have to wait another five years before one could obtain a tax benefit, that would mean that it would take a person 10 years to achieve a share in the company for which he works. Not only is that not enough of an incentive at this time—because I think people are more impatient than that—but also it can be a dangerously long period, because it can add to the already difficult problem of the immobility of labour.
The other aspect of Method III about which I am a little concerned concerns the conditions under which an employee can withdraw his shareholdings prior to the five years. The conditions include injury, ill-health and death. But I think they lack one reason which should also be included. Some kind of phased tax relief should be given depending on the number of years the person has had the holding if he withdraws it for the purpose of purchasing a house for himself and his family. Again, I believe that the basis of a property-owning democracy is the capability of owning one's own house. If, having contributed to the scheme for two or three years, he has the opportunity to purchase a house, I believe that that should be one of the conditions under which he could withdraw his shareholdings from the trust.

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I am also very much in agreement with the remarks made by the noble Lord, Lord Cullen of Ashbourne, about the problems of the loss-making companies. I am enamoured of the idea mentioned by him of using the value added principle in order to encourage workers in companies such as British Leyland to become involved in a productivity drive for this country.
Other problems that have been raised by various noble Lords include the problem of subsidiary and close companies. I should like to ask the Government, in conjunction with the Institute of Chartered Accountants, to see whether it would be possible to include the close companies under this particular method of profit sharing. I do not believe that it is beyond the wit of man to design a system whereby we could include those companies that are at present not viable under the scheme.
Those are some of the remarks I wanted to make about the scheme itself. But I said earlier that our nation's economy has changed enormously in the last 50 years and there are large sections of the community that work in the large nationalised industries—the service industries—that are not included in the scheme. I should like to ask the Government to think in wider terms and to devise a tax incentive designed to encourage wider share ownership by all salary and wage earners. In one sense all of them are engaged in the production process, including those employed in the public services and in the private sector.
Few Members of this or the other House in the 1930s envisaged the scale of the pension fund and insurance savings that would flow from allowing, as a charge for tax purposes, company contributions to superannuation funds and the personal income tax relief for savings by insurance methods. Pension funds for the benefit of large sections of our national workforce, including employees in our nationalised industries and public services, now total £26 billion and insurance funds are estimated at £30 billion; that is, £56 billion in all. We therefore live in a society where large sectors of industry are owned directly, or indirectly, by employees in both the public and corporate sectors of our society. Why should not we, as a
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nation, build on this success by taking more ambitious steps towards a property-owning democracy by the provision of attractive taxation incentives designed to encourage share ownership by all members of the nation's workforce? Such incentives can be designed to play an important role in the wage and salary structure.
Other nations' economies, including those of Germany and Japan, have for many years adopted these policies which have been an important strengthening factor and have resulted in much higher capital investment in their industries. The total payroll of the nation is £80 billion. Personal savings schemes encouraging savings of 5 per cent. would produce £4 billion of extra savings per annum. The Chancellor, I believe, has the opportunity in this coming Budget to encourage savings rather than consumption, and savings are badly needed if we are going to conquer unemployment and if we are going to get additional investment in British industry. I know that this is not exactly the subject of the Government's proposals on profit sharing, but it is related because we have to get a system which brings the whole nation together to work for a better future.
4.22 p.m.
Viscount HAMPDEN: My Lords, the noble Lord, Lord Byers, when introducing this Motion quoted from the Liberal Yellow Book of 1928. I should like to go back a little earlier than that, with the following quotation:
"We shall not have a satisfactory settlement of the wages question until a labourer receives, in some way or other, a share, however small, in the profits of the business in which he is engaged".
Those words were spoken by my great, great grandfather in 1872, when introducing a profit sharing scheme to his own agricultural employees in Sussex. As he was for about eight years Chief Whip of the Liberal Party in another place, I am sure he would be delighted that what he practised in the 1870s is now being preached in the 1970s.
While I welcome the general tenor of the Motion which the noble Lord, Lord Byers, has introduced, I have certain reservations about it. I think what we are trying to do is to improve the general profitability of industry by creating a

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better atmosphere through having employees more involved in industry by owning shares. But we have a problem here. I am a director of a small public company which has two subsidiaries doing totally different things. The morale and the esprit de corps in both those subsidiaries is very high, but the morale is to the different subsidiaries and not to the head office or to the group as a whole. I am sure that if I went to our employees and asked whether they would like an investment in their own jam-making factory, or whatever, they might be quite interested in the idea; but actually to buy shares in a publicly listed company which they know very little about, I think would cause them not a great deal of interest at all.
There are a number of big companies which are one product companies in which a share incentive scheme is a natural. I noticed that Lloyds Bank introduced one last week. That is perfectly natural because employees of Lloyds Bank, whether they are the cashiers in a small branch office or in the head office, can feel associated with such a bank. But a large part of our industry is spread over a number of very large companies which are very diversified, and one wonders really whether employees are very interested in having shares in the large holding companies.
The noble Lord, Lord Cullen, mentioned ICI and said it had had a very successful scheme for the last 20 years. I say, Yes, but there is a slight query over that because I remember in the days when I worked in the City, that people dealing in ICI shares were always anxious to know when the company was sending out the stock certificates because they knew that the following day there would be a large number of ICI shares being sold by the employees. Now a nice cash bonus for the employees is what I think the noble Lord, Lord Darling, was talking about, and I think that is perfectly satisfactory. But I do not think it is what we are really trying to do. There are problems about the attractiveness of these private profit sharing schemes.
The other point which I should like to make concerns the question of share price. Noble Lords who follow the stock market will know there has been a great deal of volatility in stock markets over
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the last five or six years. A high was reached in May 1972 when the Index reached 550. By December 1974 it was down to below 150, and again in September last year it went up to 560. I can foresee a great deal of disappointment, indeed bitterness, among employees who get offered shares when the market is at the top against those who get offered shares when the market is at the bottom. Some make a lot of money and some do not make any at all.
A little more concrete example of what looked an attractive way of getting employees involved in a company but which backfired rather badly occurred some 10 years ago, when a very well known private company, with a fine product and a fine profit record, decided to make an issue of its shares to the public, becoming in fact a publicly listed company. Under the Stock Exchange rules applying at the time—and they are still the same now—10 per cent. of any public issue can be applied for and allotted in full in a preferential way to employees and executives. This company announced that it was going public. There was a great deal of excitement among the employees, and they applied for these shares allotted in the pool. Unfortunately, the public took a slightly different view of the pricing of the issue and did not subscribe for that share in the way in which it was hoped they would do so. The result was that two days later, when the dealings started in that company, the employees suddenly realised they had made nearly a 10 per cent. loss on their initial investment. That caused a great deal of not exactly unrest, but disappointment. Therefore, while I welcome the general tenor of Lord Byers' Motion, I should like to make the appeal that any scheme that is put forward does not do exactly the opposite of what is intended; and if we are going to have a share in democracy, do not let us have that share in democracy with a number of very bitter shareholders.
4.27 p.m.
Lord HANKEY: My Lords, I agree warmly with the noble Lord, Lord Byers, and the noble Lord, Lord Cullen, not only on their technical comments but on their anxiety that this problem of profit sharing should be the subject of an all-Party consensus. It ought not to be subject to

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constant change, as the kaleidoscope of our Party structure changes, if that can be avoided. I agree that a measure of profit sharing, very flexibly framed, would be a good thing in principle. I think it would encourage workers to take an interest in the profitability of the enterprise they work for, and would encourage sensible productivity agreements, though I do not think that the Inland Revenue proposals are very generous.
We have to face the fact that now we are in the Common Market we must, over the years allow our levels of salaries and wages, and our productivity, both artificially held down by the Government and the trade unions and workers respectively, to rise to more or less European levels. They must, incidentally, be got to move together, and that is pretty difficult to ensure. If profit sharing would help, that would be an excellent thing in principle.
I also agree with the noble Lord, Lord Byers, that this ought not to be dealt with in isolation. In practice—and I repeat "in practice"—we have to look at profit sharing against the general background of the muddle in our economy and in our industrial relations. I suggest that profit sharing should be brought in as part of a general reform of taxation, social security and industrial relations, which really is essential for our long term survival. All these things have got terribly complicated. They really need simplifying. It is because there are hardly any profits by the time the Government have taken a huge slice of them and after the workers have so often refused to make proper use of new machines and production methods that we have so little investment in Britain.
The return on ordinary shares is in general much less than the current rate of inflation, even the present rate of inflation, especially when income tax is deducted, and this reduces the incentive effect which workers would be given when they got the shares. This has been recognised by some noble Lords who have suggested with considerable point that there should be a cash bonus. I believe the object should be to get workers to take the shares in the company in which they work because that would increase to some degree their interest in making the firm work profitably.
Will the Government tax profits less highly to change this situation and will
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the workers then agree to make a proper use of profitable machinery? The history of the last years is littered with almost inexcusable absurdities to raise one's doubts on this. The magnificent new steel works at Llanwern costing many millions of pounds were idle for 18 months or even two years before they were put into proper use. Skelmersdale, full of top quality textile machinery used profitably elsewhere in the United Kingdom, is now bankrupt and closed with many people unemployed. The first-class motor factory at Speke is now to be closed. Halewood, also a motorcar factory, is teetering on the brink of disaster. The list is long and I will not bore the House by reminding noble Lords of it.
I wonder whether a measure of profit sharing would be liable to start another round of strikes and stoppages to raise the workers' share? Under the Government's legislation the workers can break any collective agreement more or less at will. If so-called collective wage bargains are not kept they become rather an organised swindle. The system which has been imposed on this country by the Left Wing is exactly that which the Swedish Communists wanted to have in Sweden but which the Swedish TUC would not allow them to have. The result is what we see at British Leyland, in British Steel, at Swan Hunters and elsewhere.
Where do profits go when, after the ridiculously short-sighted disruptions by the outfitters and then the boilermakers at Swan Hunters, those who have to be dismissed to avert bankruptcy of one of our best shipyards have to be rewarded with up to £10,000 each in redundancy payments? Is this not completely quixotic? Where do profits go in those circumstances? And how can we expect workers to work well or even obey their own trade unions if we distribute public money to them when they strike in breach of agreements? What, I wonder, will be the cost of closing Speke? It must be at the expense of profits in British Leyland. All this money is paid out without any condition about retraining for another industry which is short of skilled labour. Our retraining programmes are still inadequate anyway and, as a matter of fact, they are not adequately used.

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If it were not for the oil money I think the whole country would be much more nearly bankrupt than it was before the oil money began to come in. We shall find that in the long run this country must depend on commerce and industry and competitive exports for the imports we require to live on. The oil money is a valuable addition but is small by comparison, and if we have more industrial disasters like Swan Hunter, Speke and Skelmersdale, and do not correct the scandalous abuses which cause them, the oil money will be wasted like most of our investments which earn such meagre profits, if they earn any profits at all.
Profit sharing, yes, very good in principle, but there must be sensible profits to distribute. It is high time for the Government and Parliament to examine why there are so few profits, where the tax money goes and what in the last resort is being done with it. When they have set flatters right we can usefully discuss profit sharing in practice, and I hope that the most careful consideration will be given to it.
4.36 p.m.
Viscount MASSEREENE and FERRARD: My Lords, it is very cheering to hear all this talk of profits, but, personally, profits are something that I have always found it very hard to come by. So many people think profits fall from the sky without much effort, but many of your Lordships will know that, as I say, they are very hard to come by. I have always been keen on some form of profit-sharing basis in companies and, as the House will be aware, many companies today indulge in various schemes of profit sharing and bonuses. My noble friend Lord Cullen of Ashbourne mentioned ICI in this connection. That excellent firm Marks and Spencer I believe indulges in all sorts of such schemes. Going further down the scale, even private employers give bonuses. Yet, for instance, in agriculture—I have had a factory but I also employ people in agriculture so I can speak about both sides—bonuses are paid to shepherds for the number of lambs produced over a certain percentage.
Profit sharing is, therefore, no new idea, and I agree it is a very nice idea. However, it is a difficult one to put into law. The 64,000-dollar question is this: If all
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employees are to share in profits, will they also share in making up any losses which their firms suffer? The answer, of course, is, No; in any event, it would be quite impracticable to have such an arrangement. To put it another way, is it morally right that a man who is assured of a wage from a firm with no risk to himself should share in the profits when he is under no obligation to pay his share of any losses, and when of course he has the protection of the Employment Protection Act and the Welfare State to give him complete security?
On the other hand, the poor employer with enterprise and energy who builds up a company, together with the aid of shareholders who have invested their money, can be completely destroyed financially if things go wrong. However, having said that, I am still not against profit sharing; I wanted to make the point that profits do not fall from heaven, though many people think they do. Profits are extremely hard to come by unless one is a pop star—something which I have never aspired to; I do not think I would be very good at it, anyway. Suffice to repeat that profits are very hard to come by.
I thank the noble Lord, Lord Byers, for initiating this debate and I agreed with him about Method III of the proposals. I agreed also with much of what was said by the noble Lord, Lord Darling of Hillsborough. I am all for the share bonus idea. I, too, question the period of five years in this respect because, if it is a matter of giving encouragement to employees to work harder—I do not want to appear smug about this—or making them more responsible to and having a greater interest in the firms, for which they work, I should personally prefer the share bonus idea; but I do not think the average employee would prefer it, and certainly not if he had to wait five years. Could we not have a bit of both? Could we not have some shares (that is, if the company has had a good year, of course) and some cash? I think that might perhaps be possible.
This profit-sharing idea could work very unfairly for some employees. If you take the employees of a number of the nationalised industries, which make no profits but enormous losses, they would be very badly off, and I think they would

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look with envy at their colleagues in some highly-profitable private enterprises. I do not want to go from the sublime to the ridiculous, but if you are also including unquoted companies—and I think it ought also to apply to unquoted companies—there could be two theatre companies, say, one of which puts on a play of pornographic filth and makes a fortune and the other which goes in for Shakespeare and very highbrow performances. If you take the stagehands, the scene-shifters, of those two companies, the ones who are working for the company which puts on pornographic filth and which makes a vast profit will do very well out of a profit-sharing scheme, but those working for the highbrow company—Covent Garden, for instance, which I think makes a loss, as do, I believe, the Royal Shakespeare Company, too—will fare very badly. That may seem a rather ridiculous example to your Lordships, but it is a factor which will lead to unfairness in many instances.
I have very little to say on this, but I have made a few notes to try to answer one or two other speakers. I favour share bonus profit-sharing, because, if it is all given in cash, you may think that the individual will go and buy shares in his company, and some of them probably will. They might also put the money into savings; but I am afraid that a great many of them will spend it in the betting shops and in the pubs, or perhaps on trashy consumer goods which will be of very little use to them. There is also the tax angle. Unless the Government give tax benefits to employees who have cash or shares in some profit-sharing scheme, I think it will fall rather flat.
I should like to say that owning shares ought to bring responsibility, but that what the public—the working man—would really like—and I do not think the present Government are really keen on it—is to own his own house. I think that comes before profit-sharing schemes, and I should like to see every help given to home ownership. I am for profit-sharing, but I am just a little worried about the firms which do not make a profit. The employees in such firms would come off badly; and, if you apply to the Registrar of Companies, I believe you will find that far more companies have "gone down the drain" than have succeeded. I think that
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it is a valid point that profit sharing might work unfairly as between employees in different firms. But, as I say, I support the noble Lord, Lord Byers, in his Motion, and I am very glad that he brought it forward.
4.44 p.m.
Baroness SEEAR: My Lords, neither the authors of the Liberal Yellow Book 50 years ago nor my noble friend Lord Byers today suggested for one moment that profit-sharing schemes are a panacea for all our ills, or will do more than take a small step in the direction in which we all want to go. I think both the proposal and today's debate, interesting and valuable though it has been, have to be put in that perspective. It is, however, a step in the direction in which we wish to go: the direction of a much wider diffusion of wealth and, therefore, because of a wider diffusion of wealth, a wider diffusion of power. The over-concentration of both power and wealth is probably the basic ill from which this country suffers today.
Having said that, we on these Benches of course welcome very greatly the Government's conversion and commitment—and I would say to the noble Lord, Lord Cullen, that it is a commitment. If he reads the reply given in another place to my honourable friend Mr. John Pardoe by Mr. Joel Barnett, he will see that the Financial Secretary said:
"It is the Government's intention to include in this year's Finance Bill provisions to encourage profit sharing".
It is their intention: they have it there in writing, and there is no harm in repeating it in your Lordships' House today to get it on the record once again. It is a commitment of the Government, and it is a commitment which we very greatly welcome.
My Lords, not only is profit sharing a small step in the direction in which we want to go, a small instalment of Liberal policy for which we have been pressing for a very long time, a small achievement out of the pact which all the world will recognise for what it is—for they do not always recognise the achievements of the pact for what they are—it is also a peculiarly appropriate step to be taken at this time. The nature of Method III is also particularly appropriate to the needs of the present time. A great many speakers

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today have said that employees would much rather have some money in their pocket than a share which they cannot get hold of for a period of five years. This may well be true. I would agree that it is a pity that the shares should be tied up for five years. Of course, they are not absolutely tied up, even in Method III. It is possible for the employee, at a sacrifice of tax advantages, to get hold of the money. I would suggest to the Government that it should be made somewhat easier to do so. I think it should be possible for the person who has received the share, if he wishes to forgo the tax advantage, to be able to get hold of the money; because there are reasons—very good reasons; some of those put forward by my noble friend Lady Robson, such as the desire to purchase a house—which might make it sensible for him to get hold of that money. So I would ask the Government to look again to see whether it could not be made slightly easier, with slightly less discouragement, for the employee with the share to get hold of the money without too much discouragement before the period of five years is up.
Having said that, my Lords, of course it is desirable, in present circumstances, that the money should, as far as possible, be retained in industry; just because we want, on the one hand, a much higher degree of investment and encouragement for investment, and, on the other hand, because we do not want additional money going into circulation over and above what is being paid out as pay. This is the answer, I think, to the noble Lord, Lord Darling, who was arguing that really this money belongs directly to the employee and that it is being held back from him, as it were, by encouraging him to hold it in shares rather than in cash in his pocket.
All Liberal schemes, from the days of the Yellow Book onwards, have said that profit sharing must be something which is paid out over and above what is paid as a result of a trade union agreement. Any idea that this is in substitution for the proper, paid wage, the result of a proper trade union agreement, is against the whole principle of profit sharing. It is essentially something extra which they get, and to that extent it cannot possibly be seen as being something which they are entitled to have immediately because they have earned it but which is being withheld from them.
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If one can say, in the much-used phrase, that the employee will have "all his eggs in one basket", he will have the company's egg in his basket. That is something quite different. His egg is his wages. This is an additional egg laid by the company that he is then able to put into, normally, his nest. So do not let us get too confused with the egg-in-the-basket analogy which is used too easily in this case. It must be seen as an extra. In the particular context of today, it is desirable that as much as possible should be retained in the company. For my part, I see this only as one form of encouraging employees to develop the habit of investment because I should like to see the encouragement extended way and beyond the company in which the employee is employed.
But I think probably we will have to start the investing habit in the company in which the employee is employed. It is not a habit which has been acquired widely by wage earners in this country in comparison with those in the United States, for example, where shareholding is very common. The habit goes against the tradition, perhaps, in this country. A break with that attitude has to be made and encouragement in share holding in one's own company is a step towards wider share owning which, I think, should be the next phase to receive encouragement by means of tax concessions of one kind or another.
I should like also to pick up a point which has been made, and is often made, about the risk, the fact that sometimes people will not get the additional payment because the company has not done well. There are two things I would say about this. First, I agree—and I think it was the noble Lord, Lord Cullen, who said this—that it would be a good thing to talk not so much about profits as about value added: about payments being related to value added, that value added being the value added by the people who have been employed in the company. Profits are subject to variation for matters which are quite beyond the power to influence of the individual employees: a change in raw material prices, for example, may have a considerable effect on the profits. But value added is more closely related to the contribution made by the employee. It is also a term—and this is, perhaps, really in the nature of a trick; but one has to indulge in these things—

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that gets away from the term "profits". That term is so misunderstood and so abused that we want to get on with the idea of encouraging people to recognise that if there is to be any real increase in wealth and in standards of living, there must be value added.
The term "value added" has not been denigrated in the way in which the term "profits" has been denigrated. So, both the real meaning of the term is better in this context for what we are trying to do; and also the word itself gives the scheme a better chance than the use of the word "profits". But that is, to some extent, beside the point.
If we are going to do this, I think the fact that sometimes there will be a good return and sometimes there will not, so far from being a disadvantage, is a positive advantage; because industry, by its very nature, is risky. Sometimes it does well and sometimes it does not. One of the things we suffer from is that people apparently find it difficult to understand that there is no automatic increase in wealth, no automatic rise in value, which justifies a continuously rising level of expectations, which is always being referred to. If, by the experience of participating in value added schemes, employees come to realise—and the country as a whole comes to realise—in quite a different way from the present state of affairs, that there is no way in which standards of living are going to be improved unless there is genuine value added, then the overall educational effect of this and the opportunity it gives for real improvement in living standards are of very great value.
That is learnt only when people experience both the benefits which come when an enterprise is successful and the falling away of benefits when the enterprise is not successful. I believe that just because schemes of this sort could bring home to people this simple truth, which is not understood and accepted, this is, in itself, a great and strong reason why we ought to proceed along these lines. I would ask the Government, while thanking them for the progress which is being made, and while recognising that it is only a small improvement which is being undertaken, whether they will look again at the opportunity for people to withdraw
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shares more easily; to think about the incentives to share owning outside one's own company; to begin and to look beyond to what might be possible inside the nationalised industries. It is not beyond the realms of possibility that value can be added in the nationalised industries. I believe that there is room for a committee to consider ways in which some of the same kind of ideas might be applied inside the public sector. With those comments, I should like to give the greatest welcome to the Government's intention regarding the Finance Bill.
Viscount MASSEREENE and FERRARD: My Lords, I agree that it is a good idea to change the name "profits" to something else; but does not the noble Baroness think that "value added" might be a dangerous term? Some people might get it mixed up with value added tax, which is not popular in many quarters. It is rather near to that term.
4.56 p.m.
Lord ORAM: My Lords, I should like to join those who have thanked the noble Lord, Lord Byers, for having introduced this debate this afternoon. From the Government's point of view, I am sure that it has been a most useful exchange that has ensued. For me, personally, to take part in a debate on profit sharing has a considerable element of nostalgia; for in the distant past, now, alas! nearly a quarter of a century ago, I made my maiden speech in another place on this subject of profit sharing. I do not think that the great-great-grandfather of the noble Viscount, Lord Hampden, was Chief Whip at the time; but sometimes I feel as though that might have been the case.
I mention this; but far be it from me to suggest that that particular copy of Hansard should be "required reading" for anyone beginning to study this subject now. However, I recall that my first nervous efforts on that occasion long ago were directed to a comparison between the profit sharing schemes in companies such as we have mainly been discussing today and what is to me, and to my noble friend Lord Darling, the more adequate involvement of workers in economic enterprises through the methods used in workers' co-operatives. In co-operative societies,

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which I have sought to serve throughout my life, workers are the owners; and profit sharing is complete. Indeed, that is very heart and driving force of the co-operative method.
In companies, on the other hand, profit sharing, however successful, is only a secondary part of the financial operation. But I can assure your Lordships that my personal preference for co-operatives does not make me less appreciative of the points of view that have been put forward in today's debate. I know that the Liberal Party, which, as we have been reminded, has espoused this cause of profit sharing, also favours the development of co-operatives. Indeed, as I understand it, they espouse the concept of the Co-operative Development Agency to which this Government are committed. So there is nothing between us, or little between us, in respect of the two methods.
As I have said, the co-operative method is, to me, the best; but the best should not be the enemy of the good and I agree that the proposals for profit sharing put forward in the consultative document are good. As we were reminded, they are a good and fruitful outcome of the discussions which took place some time ago between my right honourable friend the Chancellor of the Exchequer and Mr. John Pardoe on behalf of the Liberal Party and other interested parties.
We have heard, largely from Liberal spokesmen, many of the more general arguments for profit sharing. First and foremost is the argument that when employees enjoy a share of the company's profits, they will show a greater personal interest in the company's well-being. From this increased involvement in the company, it is argued that various other advantages will spring. These include an increase in efficiency, an improvement in industrial relations and a reduction in labour turnover. Other benefits claimed for profit sharing are that it will help promote social justice by redistributing wealth and income more fairly, and that it will encourage savings and so lead to an overall increase in investment. A number of these points were made recently by the noble Baroness, Lady Seear.
They are perhaps rather bold claims, though I was glad to hear the noble Baroness say that this is only one step towards fuller objectives. But it would
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not be unreasonable to hope that some at least of these objectives will be achieved. But just how great an impact profit sharing will have on the economy is perhaps debatable. I sound this note of caution for a number of reasons. First, firms are already free to introduce profit-sharing schemes, but not many have done so. Some half million employees currently benefit from profit-sharing schemes, and there are indeed some quite notable schemes such as that mentioned by several speakers, run by ICI. But the half million employees represent only some 2 to 3 per cent. of the total workforce.
Secondly, profit sharing will not encourage employees to identify their own interests with those of the company unless the profit sharing is on a sufficient scale to make the employee feel he has a real stake in the company; and some schemes have not been generous enough to achieve this. Thirdly, profit sharing could foster income inequalities because it favours employees in buoyant parts of the economy to the disadvantage of employees whose companies fail to make good profits for whatever reason. There must be some doubt, therefore, about how great an impact profit sharing will have on the economy. As I have suggested, it would be wrong to be swayed too much by the claims for it which have been made. On the other hand, if companies and their employees wish to introduce such schemes, it does not seem unreasonable that some encouragement should be provided through the tax system.
I now turn more specifically to the consultative document on tax incentives for profit sharing which has been the main subject of today's debate. I should like again to pay tribute to the constructive outcome of the talks between Mr. Pardoe and the Chancellor and other interested parties. I think the suggestions contained in the consultative document form an extremely useful basis for comment and discussion on how we might legislate on profit sharing. Having said this, however, I think it is important to stress that the suggestions set out in the consultative document are not firm proposals—we have not been dealing with a Parliamentary Bill—but are intended to serve as a basis for comment and discussion, which is why I welcome the debate today. There is nothing sacrosanct at this stage about any

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of the schemes set out in the document. The Government have made it clear that in drawing up the legislation which they intend to include in this year's Finance Bill—and I therefore repeat what the noble Baroness repeated—they will take full account of any comments which are made on the document. It follows that the views expressed by noble Lords and noble Baronesses in the course of this debate will be drawn to the attention of those concerned, and I hope your Lordships' will agree that because it is at that stage of discussion it would not be appropriate for me to pretend to give a final view on most of the points that have been made.
As I have said, nothing in the document should be regarded as sacrosanct at this stage, and it will be clear to noble Lords that the degree of fiscal generosity to be provided in any scheme which may finally be selected for legislation must be a matter for decision in the context of the Budget as a whole. But the limits on the value of the shares which might be taken up by an employee in any one year—£415 in two cases or £500 in the other case—are intended to ensure that any scheme which might be introduced would not be exploited by companies by making large parcels of shares available to higher paid employees. This was one of the points which the noble Lord, Lord Byers, had in mind. He may not agree, but that is the reason for the Government's suggesting these limits.
The Conservative Party's latest scheme, to which the noble Lord, Lord Cullen of Ashbourne, referred, is conceptually somewhat similar to the third method set out in the consultative document. But these Conservative proposals are in the Government's view over-generous. As I understand them, they envisage a scheme under which companies would allocate shares to employees up to a maximum of £1,000 a year—as distinct from the figures in the consultative document of £415 or £500—and while the shares would, as under Method III in the document, be held by trustees for a five-year period, participants would be free to sell them after two years and would escape income tax altogether if they sold them after five. I hope I have summarised the new proposals which I have characterised as having been overgenerous.
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Under Method III in the consultative document there would be an income-tax charge—though on a reduced basis—whenever employees sold their shares after five years. This was a point again which the noble Lord, Lord Byers, raised about the disposal of the shares after five years. I would say to him that the £500 or the £415 ceiling is an annual ceiling and would permit employees to acquire quite substantial holdings of shares over a period. As I have said, the Government are concerned that any scheme introduced should not be open to exploitation as a tax saving device for higher paid employees and directors. With this in mind, we believe—although I can see that it is a matter of dispute—that a limit of £500 or £415 seems about right.
Lord DRUMALBYN: My Lords, I do not know whether the noble Lord is going to answer the question that I put. It may be convenient to answer it at this moment. Does the income-tax payment that is envisaged in the consultative document vary with the totality of the income or is this a fixed amount proposed under the scheme?
Lord ORAM: I was proposing to try to answer the many questions asked by the noble Lord, Lord Drumalbyn, and perhaps I can do that by means of a sort of package deal. There has been some speculation about how the sorts of profit sharing schemes contained in the consultative document would relate to incomes policy. The essential feature of sucessive incomes policies has been the restraint of the growth of earnings. No attempt has ever been made to restrict money income from the selling of capital assets, and it seems unlikely that such an attempt would be made in the foreseeable future. The schemes put forward in the consultative document are all schemes for the acquisition of capital by workers and are prevented from being turned into devices to avoid any current incomes policy by the "locking-in" period of five years. As regards existing profit sharing schemes, provided the scheme was in force before the beginning of the present pay policy it is considered to be allowable outside the guidelines. For schemes which have been introduced since then it depends on the details: any cash pay-out, as distinct from capital

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acquisition, would have to be set against the guidelines currently in force.
The noble Lord, Lord Cullen of Ashbourne, queried a point made in the consultative document about profit sharing being distinct from industrial democracy. Perhaps "distinct" is too strong a word because there are obvious links; but noble Lords will be aware that the Government plan to publish a White Paper on industrial democracy, and their profit-sharing proposals in no way preempt the discussions on industrial democracy which are still proceeding with the TUC and the CBI. As I have said, the Government intend to put forward proposals on industrial democracy as soon as the discussions are complete.
I am grateful to the noble Lord, Lord Byers, for having given me notice of one point that he raised; namely, concerning the restrictions which would reduce the value of shares by 30 per cent. under Method I. The extent to which any particular restrictions would reduce the value would be a question of fact, and the actual restrictions to be attached to shares would be for determination in a particular scheme. One restriction, which is a necessary part of the scheme envisaged under Method I, is the restriction on disposal within five years of acquisition. Another restriction might be a limitation on the right to receive dividends. It is that kind of restriction that we have in mind, but the facts would have to be determined case by case.
The noble Lord, Lord Byers, then went on to raise two or three other points, including the question of shares needing to be held for five years. If the shares could be disposed of forthwith, we should have the situation that giving tax relief for shares allocated to employees would be tantamount to the payment of wages without tax; it is to avoid that situation that we are suggesting the five-year restriction.
The noble Lord, Lord Byers, also raised the point about companies operating the PAYE scheme in relation to these proposals. It is not thought that there would be a heavy burden on companies, and it was thought better to do it that way than to have an additional burden placed on the Inland Revenue, because they are pretty burdened at the moment, as is well known. But I recognise that the
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noble Lord has raised a point which needs to be given further thought, as is the case with many other points that have been raised today. I have already dealt with the point about the upper limit of £500.
I should like to reply to one other point which was raised by the noble Lord, Lord Cullen of Ashbourne, concerning unquoted companies. It is for companies themselves, of whatever kind, to decide whether to introduce profit-sharing schemes, and there is no reason in principle why tax relief for profit sharing should not apply to the unquoted sector—I see that the noble Lord nods approval at this point.
The noble Lord, Lord Drumalbyn, was very interrogative: I do not blame him for that, and I hope he will not blame me if this afternoon I cannot answer all his points, but I will do my best. He made a most helpful point in reply to certain other speakers when he said that he assumed the Government were not opposed to cash bonuses, as had perhaps been implied by other speakers, provided that the bonus is subject to tax. The schemes in the consultative document apply to shareholdings and it is in relation to those schemes that tax incentives are proposed, and so it is not a matter of opposition to cash bonuses as such but rather making sure that tax incentives apply only to the kind of scheme that we have in mind. Perhaps I should make an additional point concerning any cash pay-out from profit sharing schemes: as I said before, those schemes introduced since the beginning of the present pay policy must be within the incomes policy guidelines.
Then the noble Lord, Lord Drumalbyn, asked about the rate at which the tax would be charged. That would be according to the individual's own tax position and the rate would vary in accordance with the person's income from this and other sources. The noble Lord then asked rather rapidly for information on interesting but perhaps intricate points. I will just indicate the position in outline and, if necessary, write to him with further details. First, it is envisaged that the amounts expended by a company on profit sharing would be deductible in measuring its profits in much the same way as amounts expended

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on wages. With regard to the second point, newly-issued shares could be used if the company so wished. As regards whether a body of trustees could act in several schemes, and the tricky point about multi-national companies, these are certainly points which would need consideration and I will undertake to see that they are considered.
I hope that in one way or another I have answered the specific questions put to me, though perhaps not all of them. However, I will check through the record and write to any noble Lord who may feel I have passed him by. We have been examining in this debate a particular proposal as an incentive for economic growth and I think that many of the speakers indicated that was their approach.
May I now ask that we step back for a moment and look not at the particular proposals but at the whole economic scene in a wilder panaorama. Let us confess—all of us, whether we sit on these Benches, on the Liberal Benches, on the Conservative Benches or on those where the noble Lord, Lord Hankey, sits—that whatever our political philosophy, if we look at the economic system in which we are involved we all see problems for which we do not have a complete answer. I believe that that is true, whatever we may say at the hustings, in Ilford or elsewhere.
Surely, the most ardent advocate of nationalisation must recognise that there are great unsolved problems in the State sector of industry. Surely, the most naive advocate of private enterprise must have doubts in his or her heart, from time to time. What we should all be seeking to do is to establish a third sector of the economy, which is socially responsible—indeed, I would say socially-owned—but not cast in the mould of the Morrisonian nationalisation sector. It is within this third sector of the economy that, clearly, my own co-operative philosophy very well fits. I suggest, too, that it is within such a third sector of the economy that these profit-sharing schemes that we have been discussing also fit. I think that there must be forthcoming other contributions to this debate, the suggestion put forward by my noble friend Lord Darling among them. There must be other experiments in this whole area of what I have called the socially responsible and socially-owned sector.
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I suggest that it is not only the philosophy of Chairman Mao which can proclaim "Let a thousand blossoms bloom." Dare I suggest that it can be part of the Liberal philosophy, too? It is certainly basic to my own social democratic way of thought. Whether it can be embraced on the Conservative Benches, I am not too sure: that is for them to judge. But in this garden with its thousand blossoms, the flower which we have been admiring today is labelled "profit sharing". Time alone will tell whether it is to be a glorious rose or a modest violet. But we recognise that, for many, it is a worthy flower, and your Lordships have agreed that in the consultative document we have a valuable help and guide to any company that wants to set about cultivating this particular flower of profit sharing. In conclusion, I should like to thank all those who have taken part in the debate, and I reiterate my assurance that all points of view will be most helpful to the Government in reaching their conclusions as to the best way to proceed.
5.24 p.m.
Lord BYERS: My Lords, it only remains for me to thank all those who have contributed to the debate, which I do most sincerely, and also to thank in particular the noble Lord, Lord Oram, for answering our questions in his usual courteous manner. I was interested in his final remarks about welcoming the possibility of a land of a thousand blooms. It certainly would be a change from Governments of a thousand bloomers. I should like to feel that profit sharing could help a little towards the avoidance of bloomers in the future.
I quite appreciate the noble Lord's preference for co-operatives. We favour the development of them as part of the sector, as he said. I see nothing which in any way inhibits co-operatives, side by side with enlightened capitalism, in applying profit sharing for the benefit not only of the employees and the people working there but of the country as a whole. And I think that a third sector could be developed along the lines which the noble Lord suggested. I say to him that I think there will be a lot more argument on the question of the upper limit. It may be that there should be an upper limit, but I suspect that if the marginal tax rates remain anywhere near what they are now,

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this will not give us the incentives right through the business that we need. While there may be a case for some upper limit, I believe that it is a matter about which there will be argument and discussion, and I think that that is right.
I must apologise, on her behalf, for the absence of my noble friend Lady Seear, who had to go to a very important trust meeting. But I welcome the assurance from the noble Lord, Lord Oram, that nothing is sacrosanct, and that discussion will take place on this consultative document. I understand that contributions, comments, amendments and suggestions will be welcomed by the Treasury up to 23rd March. I only hope that the noble Lord will feel, as I think he has already implied, that this is our contribution from your Lordships' House. I also hope that your Lordships will feel that we have devoted a Liberal day to some good effect. Since the proposals have been received, in principle at least, with widespread approval in your Lordships' House, I ask the House to agree to the Motion.
On Question, Motion agreed to.

THE LIBRARY: WORKING GROUP REPORT
5.26 p.m.
Lord TEVIOT Lord TEVIOT rose to move, That this House takes note of the Report of the Working Group on the Library and the subsequent changes that have taken place. The noble Lord said: My Lords, two years ago the House of Lords Library celebrated 150 years of its existence. While, since 1826, the Library has had its ups and downs, never in its great history has it undergone such major changes as we are witnessing today. True, there were changes when the new Library came into being in 1854, and when it acquired various collections, such as those presented to us by Lady Truro. I must declare an interest, in that I am a Member of the Library Committee and I must confess that, until very recently, I had been very wary indeed about the need to alter the Library in any way.
When I came to your Lordships' House 10 years ago, I remember being very impressed by the almost halcyon atmosphere of the Library. Here was a place
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where one could relax in a comfortable armchair and work in a peaceful atmosphere. Whenever one wanted a book or to seek out some special information, one had only to ask the Chief Librarian or his assistant. Either would do his best to answer one's inquiry and produce an answer from whatever source was available, and always did so with great courtesy and, apparently, little trouble. The clerical staff, too, were most helpful and kindly photographed whatever material one wanted. One thought that the quality of the speeches in your Lordships' House was absolutely perfect, and there was no reason at all to change.
In 1975, I was invited, with some other Peers, to serve on the Library Committee and was told not to worry at all, that there was not very much to do, that the Committee would meet only once a year or so and that the meeting would not last for very long. Soon after joining the Committee, one became aware of the fact that changes were in the air. My noble friend who is to reply asked for our approval of the setting up of a working party to review the House of Lords Library. One thought "Oh, dear!", but since then a lot of water has flowed under the bridge, and it is here that I must congratulate my noble friend Lord Eccles on his stealth, zeal and tenacity in introducing the many alterations and improvements that have taken place.
One is delighted to see that other noble Lords will be speaking, including distinguished and hard-working Members like the noble Lord, Lord Darling of Hillsborough, and the noble Earl, Lord Listowel, a former Chairman of Cornmittees. But, with the exception of the noble Lord, Lord Airedale, who is most welcome, I am very disappointed that other noble Lords have not seen fit to intervene. After all, to all of us who attend regularly, the Library is an extremely important place. It is our laboratory, if you like, while the Chamber is our workshop, so we should very much take an interest in it.
I should like now to run through some of the recommendations that have already been acted upon or are in the process of being acted upon. I shall not go into great detail, as I am sure that my noble friend Lord Eccles will do so when he replies. But let us look at some of the

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pluses. One of the main attributes has been the service given to the European Committee. The services offered have been greater than those offered by the other place. Another is the increase in the research staff.
I know that some of your Lordships have taken advantage of the services given by the Library Clerk. When the proposal was made to engage more highly qualified staff I felt, quite wrongly, that they would have very little to do, would be bored doing nothing and that it would be a complete waste of manpower. I take that back and say what an excellent job the Library Clerk is doing, and I would support the recommendation that the staff be increased. Only last week I had need of some research which would have been completely beyond me. Not only did she produce some excellent notes but she brought out the definitive work on the subject, published in 1902 which had been in the Victoria Tower and had not seen the light of day for years.
Following this personal service is the advent of a new machine and others are to come. The Queen's Room is beginning to look like a space city. We have all taken full advantage of the photocopying machine. This has been long overdue, but, unless I am mistaken, the other aids that we have, and those which are yet to come, have yet to come into their own. It is at this point that I think your Lordships need a little instruction in order to gain the maximum advantage. I know I do, and I should like to ask my noble friend if it could be arranged for us to have a seminar and if we could be instructed in the virtues of BLAISE—the British Library's Automated Information Service—and so on. This is recommended in paragraph 20 of the report where it suggests that the services of the Library should be much better known.
The only other improvement which I should like to mention is the importance of conservation and of the need for a new site for the bindery. Clearly, when resources are available, steps to deal with the backlog of books to be rebound and refurbished should be speeded up. The only real sadness was the removal of the showcases owing to lack of space. In 1851, the Clerk of the Parliaments' Committee recommended that the death
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warrant of Charles I be placed in the Library. Now it has been relegated to the Somerset Room. Later came the Act of Union with Scotland and other documents of prime historical importance. I appreciate the argument for placing showcases on the line of route, but they can only be there if maximum security is afforded. I should like my noble friend to comment on the present position regarding them.
Finally in what may be an extremely short speech in introducing this Motion, I should like to say that I hope your Lordships will make your views on these changes much better known so that those of us on the Committee and my noble friend have a much clearer idea of what should happen. I should also like the suggestion book to be more used. It is a book which is hardly ever used, and I am guilty together with others. I should like regard to be paid to the new Library Bulletin. Here, I should also like to congratulate the Librarian on the very hard work he has undertaken—always with a smile, may I say—in the short time since he has taken over, and to thank the staff for the very hard work they are doing. This Library has a very much greater future than ever before. I beg to move.
Moved, That this House takes note of the Report of the Working. Group on the Library and the subsequent changes that have taken place. (Lord Teviot.)
5.34 p.m.
Lord DARLING of HILLSBOROUGH: My Lords, I should like to begin by thanking the noble Lord, Lord Teviot, for bringing forward the Report of the Working Party on the Lords Library. I think it is something that we ought to discuss and I should like to take this opportunity of congratulating the chairman of the Working Party and the chairman of the Library Committee. I do not think your Lordships quite appreciate what a job was given to him. I will not go through the terms of reference, but what they really meant was to ask the chairman of the Library Committee and such other members of the Working Party as were appointed to take a good look at the Library and decide what to do with it. As we went on examining the job it became more and more difficult; we were faced with an immense number of problems.

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I do not think we could have produced these 33 recommendations—I would question whether some of them will achieve what we want to achieve, but I shall come to that in a moment—if we had not been guided by the noble Viscount, Lord Eccles. We were fortunate in having as chairman of the Working Party the chairman of the British Library. This is a fact which your Lordships should take into consideration. As I said, I should like to criticise some of the recommendations. At one point I was stimulated by the chairman of the Working Party to put in a minority report. I refused to do so because I would have split the recommendation.
I think the recommendations are not sufficient. They are all right for the time being, they deal with immediate problems, and this is the important thing the Working Party had to do. The development of the Library and Library services still poses immense problems for the future. The most important problem of all is that of space. Again I pay tribute to the chairman of the Working Party for the way in which he tramped up and down the corridors trying to find walls on which to pin more bookcases, and the fact that the books are being spread around is good. At least we are beginning to know where they are.
I think your Lordships will be surprised when I explain that, as pointed out in paragraph 12, the Library possesses about 74,000 volumes, of which 22,000 are in the four rooms of the main suite that we think of as making up the Library; 24,000 in corridors, 13,000 in the basement and 15,000 elsewhere—in the Victoria Tower among other places—and difficult to get at. There was also the further difficulty about which books were in which place because the catalogue had not been kept up to date. It is still not up to date. As I am sure the noble Viscount, Lord Eccles, will explain, the new arrangements for cataloguing with the help of computer intakes will help us to get over that problem but we are still faced with the appalling problem of where to put the books.
Within these Parliamentary buildings there is a limit to corridors on which to hang bookshelves, a limit to the space you can take, and unless both Houses of Parliament face up to the problem of space I do not think we can make much progress with either the reorganisation of the
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Library or anything else. This Palace of Westminster was not built to accommodate the kind of services that we must put into it. The Commons are desperately short of Committee Rooms. I do not want to develop this point at any great length, but I think that the Commons, in trying to solve their problem, have given us a bit of a solution to the problems we face in this House.
A large part of the Commons services are on the other side of Westminster Bridge Road in what I gather (because they do not want to call it New Scotland Yard) they call the Norman Shaw Building—we know what the building is. They have Committee Rooms there. Also, part of the Commons Library information service, which is important to both Houses, is now located over there. They have the problem of double indexing.
I know very well that again I am going to be controversial, but I am afraid that I cannot help it. In the discussions about how to make best use of Parliamentary space I do not believe your Lordships can say that the Lords have got what they want, that they are going to stick to it and adopt a dog in the manger attitude, that there is nothing that they are going to give up to the Commons and that there is nothing they are going to move out of the Palace of Westminster. I do not believe that we can solve the problems of the Library by taking that kind of attitude. I think it is wrong.
There are very guarded recommendations, but at least they are there. For instance, there is the recommendation that a joint staff working party should be set up by the two Libraries to make sure that they provide a proper information service to both Houses. The time has come when we must have joint working of both Houses in order that both Houses make the best use of the available accommodation. Because the action taken by the Commons in moving over so much work to the other side of Westminster Bridge Road has made the Palace of Westminster elastic, the precincts of the Palace of Westminster now stretch to the other side of Westminster Bridge Road and there is no reason why they should not stretch further, perhaps to the other side of Parliament Square.

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I do not wish to develop this point except to say this. We are not dealing with one Library. There are four libraries here which have to be organised in some way. There is a reference in the report to one or two members of the Committee who suggested that we should amalgamate the Lords' Library with the Commons Library, so may I make clear what I meant by that.
First, there is a club library consisting of current books which your Lordships want to read in the comfort of their comfortable chairs in the Library—and perhaps to be slightly somnolent over them. Nobody wants to interfere with that club library. I hope that the arrangements we are proposing will increase the number of current books and periodicals which your Lordships may wish to read in that kind of atmosphere. I am all in favour of that; I believe it should be developed.
There is also an information service for our use in this Chamber and in Committees. As we tried to point out in the report that was produced on the computerisation of the information services, we can have only one, not two information services in Parliament, in particular if we go over to computerisation, as quite obviously we must. We cannot have two possibly conflicting services; they have to be complementary. There can be only one service which must be developed jointly. The proposals contained in this report recommend the joint development of a Parliamentary information service to serve both Houses.
The second library consists of books which we found in the Library but which doubt very much whether any of your Lordships would ever want to read. They are valuable books. I remember that during the course of our discussions in the Working Group we received a comment from a member of staff—not the Library staff—that he wanted to refer to one of John Ruskin's books and that he knew very well there was a set of Ruskin's works in the Library. Those works were found. They have been here for about 75 years with the pages uncut. Also in the Library are the French classics which were collected and placed there by Sir Edmund Gosse. Nobody ever gets hold of them, and because they are in
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French I doubt whether any noble Lord really wants to read them. Also upstairs are books in Latin about the history of Canterbury. I do not believe that any noble Lord will make a claim to be an avid reader of those books.
Noble Lords should not forget that we are up against the problem of space. There are a great many books here that noble Lords do not want to read but which other libraries could possibly make use of. I believe that we should give them away to the appropriate libraries on the advice of the noble Viscount, Lord Eccles—who I am sure, as chairman of the British Library, can find libraries which will make use of them—but on one condition: that they must go not to lending libraries but to reference libraries. A further condition would be that if any noble Lord wished to borrow any of these books—and I think there are hundreds of books of this kind which would be of value to other libraries—it must be provided quickly and brought here for him. If this does not happen, these books w ill go on mouldering away, some of them in the basement. There are references in the report to the fact that the bindings of many of these books are in a terrible state, and we shall have to spend a great deal of money upon trying to deal with that problem.
Finally, there is the law library. I know very well that what I am going to say will get me into a great deal of trouble. I do not know whether your Lordships appreciate that the library of the final Appeal Court of the United Kingdom is lodged on shelves that go along a little corridor that runs at right angles to the Upper Committee corridor. So far as I can discover and I shall be corrected about this if I am wrong—there is no arrangement for the books to be consulted there; they have to be taken away for consultation. I do not know whether this is efficient, but it is certainly undignified.
I come back to the point I made at the beginning: that although the precincts could be made elastic by transferring some of the work from here to other buildings which were then placed within the precincts of the Palace of Westminster, this building itself is not elastic. Therefore it is questionable whether the space which is now taken up by the law library and

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by the Committee Rooms which are used for Appeal Court purposes should be located within this legislative building.
I shall not develop that point further. I know very well that I shall bring upon myself considerable criticism and opposition. However, I do not believe that the Law Lords can be excused and exempted from the problems that we face in trying to use the accommodation in the Palace of Westminster for the best legislative purposes. Given the shortage of space, I question whether the Appeal Court should be located within this part of the Palace of Westminster. I do not want it to be located far away. I shall not suggest, as I suggested during the Working Party proceedings, where I think the Appeal Court could be beautifully located, only a stone's throw away, with far more space than it has now, with a library in a proper condition and housed in rooms big enough to accommodate it; but these are matters which I believe must be considered
I must apologise to your Lordships for speaking for so long. However, as I am sure that the noble Viscount, Lord Eccles, will appreciate, it was far better that I should voice my criticisms of the report that we are considering in, I hope, a constructive way, rather than that I should have taken the advice he gave to me when we were having some of these arguments; namely, that I should put in a minority report. My Lords, I finish as I started by saying that this is a very good report. It is largely due to Lord Eccles that it is a good report, and I support the recommendations contained in it.
5.50 p.m.
The Earl of LISTOWEL: My Lords, I should like to add my voice to those of the two noble Lords who have just spoken in commendation of this report of the Working Group. The noble Lord, Lord Darling, was perhaps not wholehearted, but he did at the end say that he thought it was a very good report. The future of the Library services is obviously a matter for the House as a whole to decide: it is not a matter for the Government, although I am delighted, as I am sure other noble Lords are, to see two Ministers on the Front Bench to take note of what we say. But, because it is a matter for the House, I hope the proposals in the report will
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receive the support of noble Lords on the Back Benches in all quarters of the House, and I am glad to see on the list of speakers that there are Back-Benchers speaking from all three political Parties.
At the same time, I share the disappointment of the noble Lord, Lord Teviot, that more noble Lords of the Back Benches have not expressed their opinions. This is, after all, the first time in 150 years that important changes have been suggested in the Library, and changes that have been recommended by a body that gave the problems of the Library a most careful study. I hope that noble Lords on the Back Benches who are not present, or who do not intend to speak, will take advantage of the suggestion of the noble Lord, Lord Teviot, that they might communicate their views to members of the Library Committee.
The modernising of the Library and its services will be a most useful contribution to the efficiency of the House, and the proposals of the Working Group seem to me exactly what is needed to meet present-day requirements. We are all deeply indebted to the noble Lords, the chairman and members, who gave so much time and thought to the work of the Working Group. I think we are also indebted—and I can say this more easily because although I use the Library a great deal I am not a member of the Library Committee—to the chairman and members of the Library Committee, to the Librarian and his staff, for the very good beginning they have already made in putting into effect the main recommendations in the report. I was simply astonished to find how much had already been done in the past year to prepare for a better information service and to acquire more books and other material of topical interest.
However, I think we should look as far as we can into the future, and I should like to say something about two subjects. The first is an improved information service, and the second is the space that will be required for it and for the other facilities offered by the Library. I note that the noble Lord, Lord Darling, regarded the question of space as the most important problem of all, and he may be right, although I do not think I share his view.
I put the information service as a more important problem because I think it

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could do even more for the efficiency of the House. The report says, rightly, I think:
"A much better information service ought to be available to all Peers, and if it were it would be increasingly used".
I regard this as the most important recommendation. I should like to see an information service in this House comparable in quality to the information service in the House of Commons. Of course, we must use theirs. The noble Lord, Lord Darling, very rightly pointed out the necessity for a partnership so far as possible with another place, but at the same time we shall always be the last in the queue; we must, therefore, have an information service of our own. And this service should provide not only briefing and background material for noble Lords who ask for it on a particular subject but similar material prepared in advance of debates and available to any noble Lord who may wish to speak on a Bill, on a Motion or on a Question. This, I think, is something entirely novel, but I do believe it could be of immense advantage to the Members of your Lordships' House.
As demand will increase when this new service is known to exist—this improving service, perhaps I should say—we shall need more staff for the Library. The enormous disparity between the Lords and Commons Library staff—anyone who looks at the figures will agree with me—is an indication of the extent to which we are still under-staffed. Another requirement for a better information service, besides staff, will be the full use of computer services as and when they become available. I believe good progress is being made with our own catalogue, so that it will be completed within the three years envisaged by the report, and can then, of course, be computerised. But we shall also need to use external computer services, commercial as well as public. We are not a Government Department—I think we sometimes make the mistake of supposing that we are—in our administrative capacities. I fail to see why we should be obliged to apply to the central computer agency whenever we want to use an external commercial service. The increased cost of doing this on our own would be trifling if we were thus allowed to link up with any external
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commercial service that, in the view of the Library Committee, could be useful to the House.
The expansion of the Library, when it has become an up-to-date information service and will require a larger staff, will also require much more space than we now have. Of course, we should begin by making use of the five rooms in the Library suite. The only one of these rooms that is not fully used at the moment is the Salisbury Room, which many of us will remember as Committee Room C. At five o'clock tonight, half an hour before this debate began, the Salisbury Room was empty and in darkness, whereas there was hardly an empty chair in any of the other rooms of the Library. This is not an isolated example of the neglect of the Salisbury Room. I believe the reason of this neglect is the difficulty of access. It is cut off from the other rooms by the absence of a door from the Queen's Room into the passage leading to the Salisbury Room. Many of us realised in 1975 that this door would be essential to make Committee Room C, as it then was, really used and recognised as part of the Library. Its construction is now suggested in the report, and I very much hope the work will be authorised in the the very near future so that it could be undertaken in the Summer Recess.
However, where is the Library to look for the additional space it will need for all to make use of its improved services? I can see only one answer to this question in the near future, and it is hinted at in paragraph 14 of the report. The Lord Chancellor's Office has now become a small Government Department, but it is still largely accommodated in this building. I would hope that as time passes more of its staff will be hived off, without, of course, in any way detracting from the efficient and effective service that the noble and learned Lord the Lord Chancellor requires. In this way the needs of an expanding House—and, of course, our numbers are increasing every year, unlike those of another place—could be given the priority they should have over the needs of a Government Department. I will conclude my remarks by making an appeal.
Lord SHINWELL: My Lords, before the noble Earl comes to his conclusion, may I ask him whether the Committee have considered, or any members of the

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Committee have considered, proposals that have been made here and there, now and again, about House of Lords reform? There are some proposals which, if acceptable—note the term—would mean some reduction in the number of Peers in the House; obviously this might affect the Law Lords, and might even affect the noble Prelates; you cannot tell. Ought not the possibility of House of Lords reform be taken into account?
The Earl of LISTOWEL: My Lords, I am afraid that I cannot reply to the question of my noble friend Lord Shinwell, because I am not a member of the Library Committee. However, I can safely leave the noble Viscount, Lord Eccles, to answer the question.
I should like to conclude by making an appeal to the Government—which I am sure will be noted by the Government Ministers on the Front Bench—to support the small increase in public expenditure that will be necessary if the efficiency of the House is to benefit to the fullest possible extent from the improvement in the Library service recommended by the report. That is surely not an unreasonable request at a moment when constraints on public spending are so much less than they were even a year ago.
6.1 p.m.
Lord AIREDALE: My Lords, the noble Lord, Lord Teviot, and the noble Earl, Lord Listowel, both regretted the small number of speakers taking part in this debate, but I think that I can take some comfort from that fact. People are usually much more ready to come forward with their complaints than with their expressions of satisfaction. I should have thought that the small number of speakers is an indication that there is widespread satisfaction with the Library services.
The noble Lord, Lord Teviot, referred to the Truro Collection—that magnificent collection of law books given in memory of Lord Chancellor Truro by his widow after his death in 1855. It occurs to me that now that that collection is being moved from the Truro Room to a corridor upstairs, there may be some danger that the link with the name of Lord Truro will be lost unless special care is taken to preserve the association.
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I think that the new corridor upstairs at present is known as the East-West Link Corridor, which may be a very accurate description. However, "The Truro Corridor" would certainly trip more easily off the tongue. If that suggestion were adopted let the corridor be boldly sign-posted "The Truro Corridor". In addition, or alternatively, let the new glass-fronted shelving which is to contain the collection be boldly inscribed "The Truro Collection". In that way we shall continue to respect the wishes of Lord Truro's widow when she made us this magnificent gift.
6.4 p.m.
Viscount ECCLES: My Lords, I rise rather embarrassed by all the kind remarks which your Lordships have made. The tribute really goes to the working party as a whole: it met many times and discussed everything, I think, as carefully as your Lordships would wish and we produced between us a report which evidently commands a large measure of satisfaction. I should like to thank my noble friend Lord Teviot for introducing the subject in such an able speech. His own great knowledge of genealogy and heraldry makes him a good library man and he has always helped us very much on the Library Committee.
I agree with the noble Lord, Lord Airedale, that one should not be disappointed that there are only a few speakers. When I was for many years in the other place and a General Election came round, as the sitting Member defending my seat I was always delighted when nobody turned up at the meetings and there was no heckling and no questions because I knew perfectly well that I was going to get in again! That experience is, perhaps, valuable to us here tonight.
Before I turn to the main points, I should like to pay a tribute to Mr. Christopher Dobson, our Librarian, who has now retired, and to wish him well, surrounded by the books in his own library, which he has chosen with great discrimination. His kindness, patience and great knowledge of the history of Parliament were very much appreciated by many of us.
The impetus behind setting up this working party was the frequently expressed desire that the books, journals, information and services in your Lordships'

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Library should be made as effective as the library services available in another place. I always thought that there was more in that demand than just a sense of unjustified inferiority because, in both Houses and outside, anxiety is felt about the growing power of Ministers over and against Back-Benchers of all parties. We know that the gap has widened rapidly between the information available to the Executive and the information available to Parliament as a whole. If Parliament does not have adequate information, its sovereignty is easily transferred to Whitehall or to bodies not elected by the people. My noble friend, Lord O'Hagan, wrote an admirable article in The Times this morning in which he said that one way to deal with this problem was by more Select Committees. I quite agree, but a Select Committee is no good if it does not have adequate information with which to do its work of inquiring into the actions of the Executive.
The other place has had greater resources than we have ever had to cope with this information problem and we cannot ever expect to match the size of its library staff. Even if the money was forthcoming, as several noble Lords have said, we would not have the room to accommodate staff on a scale equal to that of the other place. The wonder is that your Lordships have enjoyed such a good service, rendered by so small a staff, working with such a modest collection of material relating to current affairs.
The working party was faced, as the noble Lord, Lord Darling of Hillsborough, said, with a large number of difficulties in proposing any significant improvements, because not only is space very short in our part of the Palace, but the pressure on the space that we have has increased enormously in recent years following the appointment of several hundred Life Peers. However, the picture is not all gloomy. We found that it was physically possible, and agreeable to the Lords of Appeal, to transfer large quantities of legal records and books from the main rooms of the Library to the corridors upstairs adjacent to the Court of Appeal. Among the books which we decided to transfer was the Truro Collection, to which the noble Lord, Lord Airedale, has referred. I quite agree with him that
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we ought to perpetuate the name of such a splendid gift and I have no doubt that the Librarian will come up with some ingenious suggestion—perhaps the one made by the noble Lord, Lord Airedale—to ensure that that is done.
The movement of the books provides us with a good deal of space for greater acquisitions on current topics. We always had in mind that if, after all the legal books had gone upstairs, there was still not enough space in the main Library rooms, we could consider moving some of those books to which the noble Lord, Lord Darling of Hillsborough, referred, which are splendid in themselves and look very nice on the shelves, but which are not very often consulted. I must tell him that they are sometimes consulted. Even I look at the French books occasionally.
Of course, the trouble is where to put the extra staff. We cannot accommodate staff on shelves. Therefore, we had to select one of the rooms in the main Library in order to concentrate there the information clerks and assistants, without whom the improved inquiry service could not be brought about. I shall return to the nature of the change in the Queen's Room in a moment.
But we faced another severe handicap which actually had a considerable effect upon our recommendations. There has never been a comprehensive catalogue of all the material in your Lordships' Library. For example, the legal books have never been catalogued with the other books; they have been kept quite separate. But two or three years ago the Library Committee made a start and when we came to look at the situation in the working party we realised that the time taken to compile this catalogue in modern form, but with the existing methods, was quite intolerable. If you do not have a good working catalogue, you really cannot have good information services. It is the background for these.
Given these daunting handicaps—and they were daunting—it was natural that the suggestion should be made that the best and quickest way in which Peers could enjoy equal facilities with another place would be to amalgamate the two Parliamentary Libraries. That was on the assumption that the other place would agree and then your Lordships would have access to all the facilities for inquiry and

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research now enjoyed 200 yards down the corridor. Whether the other place would have looked favourably on such a suggestion, we do not know. Perhaps those of us who served there for some years may be permitted to doubt it. But, in fact, we never put the suggestion to their Committee because the majority of the working party were firmly in favour of retaining your Lordships' Library as a separate organisation.
I should like to give the reasons. I imagine that in the 19th century most noble Lords had adequate private libraries of their own. Anyway, your Lordships' Library began, not as a general library in support of our legislative functions, but as a law library in support of the Court of Appeal. That has always been a prime function of our Library. The happy result is that we possess collections of legal records and books far wider than those of the other place, and we must not forget that the noble and learned Lord the Lord Chancellor lives and works in the Palace and that he requires books for carrying out his Office. On the other hand, I agree with the noble Lord, Lord Darling of Hillsborough, and the noble Earl, Lord Listowel, that now that the Lord Chancellor's Office has become a small Department of State and now that a good deal of it is already out-housed, there seems to be a case for containing the expansion of the Lord Chancellor's use of the space in the Palace. However, that is not for me to comment upon, except to say that I do not think that there are any other rooms which might, sooner or later, be available for the Library of your Lordships' House.
I am not at all in favour of moving the Law Lords and the Court of Appeal out of this House. I say this simply as a Member of the House, but I think we benefit enormously by having the advice of the Law Lords during all our Committee stages and the general business of the House. It appears to me to be part of the British Constitution that the Supreme Court of the land should be composed of Peers, and that is one of the reasons why this House is distinct from another place and needs a separate Library to serve its Members.
Obviously, any working library comes to reflect the functions and practice of the institution which it serves. Your Lordships' House is not a duplicate of the
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House of Commons, but a separate Chamber of the legislature, having a style, a composition, powers and functions different from those of the other place. Therefore, I hope that your Lordships will agree that our Library does and should continue to reflect these differences. Perhaps I could give one small example—we have no Smoking Room; we use our Library for relaxation as well as for working in. When we are there, and awake, we want to know what is happening in the Chamber and to have available information about our current and future business and much other historical and literary material. We want the chairs to be plentiful, comfortable and covered in red leather, and the atmosphere to be congenial. All that is very different from the greeen and dramatic atmosphere along the corridor.
Although the majority of our working party were firmly against amalgamation with the Commons Library, we were all wholly in favour of the closest possible co-operation between the two. One of the best things to come out of our report is the machinery that we have set up for this co-operation. It is working very well. In addition, last week we had a joint meeting on computers—chaired by the noble Lord, Lord Darling of Hillsborough—with the other place, where we agreed to share the experience of all the computer services that might be installed in either Library.
If complete amalgamation was not desirable—and we did not have enough space to bring our information services up to the level of those of the Commons—what were we going to do? Very fortunately, the development of computerised information services is just reaching the stage when we can be really confident that these devices will give us a service adequate to our needs, with far fewer staff and at much cheaper cost than would be the case if we emulated their organisation and their methods.
Very shortly (I think in a week's time) we shall be linked with the British Library Data Base and, among other things, this will enable us to be one of the first—I think the first—libraries in the United Kingdom to produce, and month by month to keep up-to-date, a comprehensive catalogue of all the material that we possess. This operation will cut down the time needed to get the new catalogue to

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something between two and three years. It will take a little time to learn how to use these instruments. But once we know how, things will move fast, and it will be much cheaper than if we had to take on the number of cataloguers who would otherwise be required.
The main change in the suite of Library rooms on the principal floor is the conversion of the Queen's Room to an inquiry room, and there the reference books will be collected, the information clerks will have their desks and telephones and most of the new machines will be installed. As was mentioned by the noble Lord, Lord Airedale, that has meant that the historic documents have had to be moved to the Salisbury Room, but this is only temporary because we hope to find a secure position for them on the line of route. The Salisbury Room is a little cul de sac and far fewer members of the public who are interested in these documents now get to see them. That is a pity, but I think that, if we talk this over with the Lord Great Chamberlain and Black Rod, it is possible that we shall be able to solve what is really only a security problem, though an important one.
The Librarian is to be congratulated on the speed with which the changes are being made. He took to computerised information services like the proverbial duck to water. It was very gratifying to see his skill and enthusiasm. But it will take a little time before all the equipment is in operation and the staff are trained to use it to the full, and before your Lordships are familiar with the new services at your disposal. It was an excellent idea that we should have some seminars, or teach-ins, as to how to use these machines. They are very simple but a little frightening when you first start to use them. When you find out what they will tell you about yourself, you become very respectful towards the automation and telecommunications industry.
I hope that the changes in the main rooms meet with general approval. We cannot satisfy everybody. For instance, I am sorry for the noble Lord, Lord Maelor. He regrets that he cannot smoke in the Truro Room. I am no longer a smoker so I cannot share his discomfort, but I understand it. I can only say that we asked a good many noble Lords, and the great majority were in favour of
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making the Truro Room a non-smoking room. The Derby Room is certainly improved by taking away the clerk's desk and by adding quite a large number of additional working places, and that is a smoking room. The Brougham Room is improved by having the journals and newspapers all together, and that also is a smoking room. The Salisbury Room is not a smoking room. I know that it is often empty because I use it a great deal just because it is often empty. I do not know whether I want to encourage other people to use it or not.
The Library Committee are anxious to serve the House. That is what we are there for. We wish that noble Lords would not be backward in telling us what they want. When we know what noble Lords want, then we shall do our best to supply it. The Librarian and his staff would be glad to have suggestions of any kind for any aspect of the Library. I am sorry to have kept your Lordships so long. We have a fine Library. It has had a great tradition, but after 156 years it is time that we should try to bring it more or less into the world in which we now live.
6.24 p.m.
Lord TEVIOT: My Lords, there is virtually nothing left for me to say except, Thank you. This short debate has been most worthwhile, and I concede to the noble Lord, Lord Airedale, that Members must be satisfied and that is the reason why there have been so few speakers. The noble Lord, Lord Darling, gave the debate some colour by voicing his differences. I cannot say that I altogether agree with him about the removal of books to other libraries. It is an idea, but whether the extra footage gained would be worth all the upheaval is something we must think about. We have all benefited from Lord Listowel's interesting speech. Finally, my noble friend's speech was one of the most interesting that one has listened to for a long time. For a long time to come if anybody wants to know what has happened to the Library, or anything about the Library, he should read his speech. I commend this Motion to your Lordships.
On Question, Motion agreed to.
House adjourned at twenty-six minutes past six o'clock.