INDUSTRY BILL

HL Deb 28 April 1980 vol 408 cc1034-79

4.13 p.m.

Committee stage resumed.

Debate on Amendment No. 1 continued.

Lord BRUCE of DONINGTON

I should like to reinforce some of the arguments which have been put forward by my noble friend Lord Lee of Newton in regard to the amendment which we are moving. One of the functions of your Lordships' House—many noble Lords may perhaps think that it is the most important function—when considering legislation that comes to it from another place is to give the Government of the day an opportunity to reflect upon what has previously been done.

This afternoon we are moving Amendment No. 1 in the hope that the noble Viscount, Lord Trenchard, will see fit to announce that the Government are prepared to accept it. Indeed, at a later stage I am sincerely hopeful of being able to carry the noble Lord, Lord Rochester, with me in seeking to convince the Committee that this amendment is vitally necessary and that, so far as the matters dealt with in this paragraph are concerned, the Industry Bill 1975 is much better left in the form in which it now stands, unamended.

In the euphoria after a General Election one can expect the newly elected Government to seek to demonstrate that they really believe in what they say and to try to enact, with some emphasis, those political objectives to which they have frequently given such strident voice in the course of the election itself. Given their mandate, one would therefore expect this Government not to be exactly enthusiastic about nationalisation. The argument on this issue has gone on between the parties for many years, and nobody would blame the Government if, in general terms, they stuck to their attitude. If, however, the Government wish to prevent the National Enterprise Board from embarking upon any further nationalisation, one finds they already have powers, under Section 7 of the Industry Act 1975, to give specific directions to the hoard on what it may or may not want to do.

I should have thought the most sensible way of going about this would be to leave the Industry Act as it is. Each proposal—if, indeed, one came from the National Enterprise Board—for possible further nationalisation, or demand from Parliament or elsewhere for this or that to be done, should be dealt with on the pragmatic basis that if the Government seek to exercise their will that such-and-such an industry shall not be nationalised they already have adequate powers under Section 7 of the Industry Act to give a direction that it shall not be done. I should have thought that this was the more sensible way of going about it. What is now happening is that the Government have not only closed the door but have bolted that door against themselves. Are the Government really quite sure that over the next two or three years circumstances will not arise in which they would be very glad indeed if the National Enterprise Board had retained this power?

As your Lordships know, one of the greatest problems in British industry ever since 1950, although it was not so much of a problem in the years 1945 to 1950, has been to get a sufficient amount of manufacturing and industrial investment out of the private sector or the financial interests, who presumably are there to serve precisely that purpose. This has been not only the experience of successive Labour Governments; it was the experience of Mr. Heath's Administration. The noble Viscount, Lord Trenchard, who has a very good memory, will doubtless find engraven on his soul at some point the cri de coeur from Mr. Edward Heath in August 1972, when, in the course of a bitter address to the Institute of Directors, he said that they had given them every possible inducement—taxation, credit or otherwise—and still, said Mr. Heath, they refused to invest.

The present Government have gone on a different tack. They have said, first, that industry has been groaning under a burden of taxation. All those of your Lordships who are aware of the reliefs granted under Schedule 5 to the 1976 Finance Act in regard to stock appreciation relief may perhaps be permitted to raise an eyebrow as to the groaning of any corporation under the burden of taxation. After taking into account the provisions of Schedule 5 to the Finance Act 1976 and the earlier Act, has been reduced to an almost derisory 26 per cent. in real terms, as against the higher rates of corporation tax on the Continent. I think the noble Viscount is aware of that, but it is said that if one reduces personal taxation, particularly at the higher levels (or so it has emerged), there will be much more enthusiasm in the private sector.

Similar arguments have been adduced by the Government as regards the progressive reduction of the public sector borrowing requirement, on the grounds that it will free funds to be invested in industry. Even the Government cannot remain insensitive to the fact that, so far, the response has been completely negative. Moreover, the Government themselves in their own recent White Paper envisaged a further decline in industrial development. We know where the funds have gone, of course, because, as one could observe from the Financial Times of 25th April, invest- ment overseas by British financial institutions has risen sharply since the ending of exchange controls last year. Essential statistical figures published yesterday showed that purchases of overseas company and Government securities totalled £490 million in the second half of last year, compared with £195 million in the preceding six months.

The question I have to ask the noble Viscount is this: What happens if the new incentives offered by the Government for investment in manufacturing industry in this country do not produce any more favourable response than the old ones? Are the Government content, for the sake of maintaining party dogma, to refuse to acknowledge for the good of the country as a whole that private investors have for one reason or another failed to respond to the incentives that have been so generously bestowed upon them? If they fail to invest, are the Government prepared to confront the country with that failure and at the same time to say to the country "We, for our part, are so committed to our dogma that we would sooner the whole spectrum of manufacturing industry and its place in the economy went to the dogs than abandon our cardinal principle"? That is ultimately what the Government will have to answer for to the country.

As my noble friend Lord Lee of Newton has pointed out to the Committee, there is the case of INMOS—the case of investment in the micro-chip industry. The noble Viscount knows quite well that private enterprise capital, in view of the heavy risk involved is up to now unprepared to take the risk on its own. But there is a very good reason why. It is because they are in competition, or at any rate in potential competition, with the Americans in this field, and the Americans, partly as a spin-off of their space programme, have been completely State-subsidised in this aspect of their industry. Is the noble Viscount prepared to face the possibility that this country might be denied the development of this most important section of manufacturing and commercial activity purely for the sake of keeping to a party dogma? It is quite clear—and I shall be glad to hear from the noble Viscount to the contrary—that if this industry is to get firmly on its feet (and I am speaking of the microchip and INMOS) to compete on any scale with the United States of America, it will have to receive sustained and very significant Government support. Whether or not the noble Viscount likes that, I am afraid that the opinions of most experts in the matter, of which I have here several copies but with which I will not weary the Committee, are exactly to the contrary.

Does it not follow that, if the State—or, if the noble Viscount prefers it, the British taxpayer (which means all of us)—is going to support industries of this kind, it is right that the nation should have some interest in its outcome? The most that the noble Viscount has said so far, in his Second Reading speech, is that the Government look to the NEB to maximise the involvement of the private sector in these companies as soon as as practicable.

On this side of the Committee it has been emphasised by my noble friend that we do not take such a dogmatic attitude. The noble Viscount, Lord Trenchard, will have observed that, with regard to the Industry Act 1975 and also the Scottish Development Agency Act 1975 and the Welsh Development Agency Act 1975, we have not raised any objection to the insertion of the words, promoting the private ownership of interests in industrial undertakings". There is no reason why we should, because we take a very pragmatic attitude towards it. What we want within a mixed economy—and I take it that the noble Viscount is as committed to the mixed economy as other parties in this House—is for all sections of British industry to prosper, whether they be under national ownership or whether they he in private hands. That, surely, should be the yardstick.

Therefore I reiterate the argument with which I started, that surely in the light of the six months' experience that the Government have had since they first drafted this Bill—I believe it had a Second Reading in the other place on 6th November and it must have had a two months' period of gestation prior to that, during which time the noble Viscount's own party's dogmas have come under some query, not the least from substantial sections of his own party, as well as from the CBI—the time has come for the Government to take another look at this.

What harm can there be in leaving the industry as it was in 1975? In so far as it was going to be affected by Clause 1 of the present Bill, why should it not be left as it is? The Government have lost nothing thereby. They are still at liberty under Section 7 of the Industry Act 1975 to enforce their will in so far as that will may remain constant, although, as past experience has shown, it has occasionally exhibited symptoms of wavering. Just leave that as it is. If for the time being Sir Keith Joseph in another place still holds on to his dogma, which is beginning to become a little shaken in view of the wide doubts which are now spreading within his own party, he can always issue a direction under Section 7.

I think it is most dangerous that these prohibitions should be put on the statute book. I would think otherwise if there were not powers in the Industry Act for the Secretary of State to issue specific directions in specific cases. I do hope that we on this side of the Committee shall not only carry the support of the noble Lord, Lord Rochester, and those who sit with him, but shall also, upon reflection, carry us with the noble Viscount, Lord Trenchard, who, as past experience has shown, is a most reasonable Minister.

4.32 p.m.

Lord CLEDWYN of PENRHOS

I will, if I may, confine my remarks, for the sake of brevity, to the problem posed in the Bill for the Welsh Development Agency. No one, I think, on either side of the House would doubt the importance of the Welsh Development Agency; certainly there is no one, of whatever political complexion, in Wales who would seek to argue today that the Welsh Development Agency is not an essential instrument for the purpose of seeking to resolve some of the more acute problems which confront the Principality at this time.

When the Welsh Development Agency Act was going through Parliament the party opposite saw fit to oppose it. In fact they were able successfully, within the proper rules of parliamentary procedure, to delay implementation of the Act for 12 months. We protested at the time. In due course the Bill became law. But after the Act had been in operation for two or three years the views of the party opposite changed, and it is very much to their credit that their views changed. They then said publicly that they thought the Welsh Development Agency was a first class instrument, and I think they took the same view about the Scottish Development Agency, and to a lesser degree the National Enterprise Board as well. But certainly so far as Wales is concerned the then Front Bench spokesman for Welsh Affairs, Mr. Nicholas Edwards, who is now the Secretary of State, said publicly in the other place and in the Welsh Grand Committee that the party opposite had changed their minds, that experience had shown them that this was an agency worth keeping, worth building upon. This was good news to us and certainly it was good news to the people of Wales. If it was true then it is even more true today. With the worsening employment situation. with the increasingly grave economic position in Wales, the Welsh Development Agency is of even more crucial importance than it was.

I have in two or three speeches gone into some detail on the present unemployment and economic situation in Wales and I do not propose to repeat myself on this occasion. But I would refer to a memorandum which was submitted by the Welsh Office to the Committee on Welsh Affairs. The report of the committee was recently published, and therefore I take it that the House as a whole, including the Government, will regard this report as a detached report, and it is therefore worthy of our consideration.

What the report says on page 1 is that the pattern of employment in Wales in recent years shows four major features: (a) unemployment rates continually higher than the Great Britain average; (b) changes in the structure of employment; between 1967 and 1979 there has, for example, been a severe decline in mining and quarrying, down by 52 per cent., agriculture, forestry and fishing, down by 41 per cent., metal manufacture down by 28 per cent., growth in professional scientific services, insurance, banking and finance up 44 per cent.; between 1967 and 1976 employment in miscellaneous manufacturing rose by 44 per cent. Those figures I think summarise the development of employment opportunities in Wales over the last few years.

Then the report goes on: (c) a decline in the total number of male employees in employment and a steady increase in the number of females coming into employment; and, lastly, (d) an expectation that the labour force after a period of comparative stability will rise by some 179,000 in the period between 1976 and 1991. This represents an increase of 15 per cent. compared with 10 per cent. in Great Britain as a whole.

That report from the Welsh Office, under a Conservative Administration, summarises the problems which face the Principality at the present time, and these are the problems which the Government and the House have to face. Certainly we who live in Wales and meet the people who are affected, those like myself who meet people who are going into unemployment for the first time in their lives, who are meeting young school-leavers with no chance of a job, are truly deeply and profoundly disturbed about the implications of the present trend. That is why we are entitled to take seriously the Government's proposals in this Bill.

We have been told of a £35 million cut in the industrial assistance being given to Wales. I would ask the Minister of State, whom I have always found both in and out of Government to be a reasonable man, for further clarification of this. The noble Viscount, Lord Trenchard, referred to this when lie made a speech in the House in our Welsh Affairs debate on 20th February. Then we were told by him, and by the Secretary of State for Wales, Mr. Edwards, that Wales is to receive an additional sum of money amounting to £48 million. These figures need to he brought together; they need to be explained to the House so that there can be no misunderstanding about the situation. What is the nature of the £48 million? How is it to be paid? Through what channels is it to go? Again, how is the £35 million cut analysed? How are we losing that £35 million? Is it that what we are to receive over the next two years is in fact a net £13 million, which is the difference between £35 million and £48 million? If that is the case let us be told; let us have no playing about with words. If it is £13 million, well, £13 million is better than nothing, but it certainly is not enough to deal with our present problems. That is the reality of the problem Ministers opposite have to face.

As I understand it—I would ask the Minister to deal with it in rather more detail—the rates of regional development grants in the development areas are to be reduced from 20 per cent. to 15 per cent., and regional development grants in intermediate areas are to be eliminated altogether. Are those two cuts in fact responsible for the overall cut of £35 million in grants to Wales? If that is the case perhaps the Minister will so tell us.

Then there are the functions of the Welsh Development Agency. Would he be precise as to these? Are they to be affected in any way, and if so in what way, by this Bill? We are, of course, concerned not only with the functions but with the resources available to the agency. If the functions remain the same but the resources are reduced, then the operations of the agency are much crippled at a time when they should be receiving more resources.

There are noble Lords in the House—and I respect them—who take the view that no agency is justified and that no kind of instrument is justified. There are those who would go the way of laissez-faire, the way of the last century. They are perfectly entitled to their point of view, but they are very fortunate that they do not live in a Welsh valley at present. It is very easy to make these points from an easy chair in the Athenaeum but it is much more difficult to swallow them if you and your family are out of work.

Therefore, when we deal with this matter we need to deal with it with a certain amount of realism, and I hope that that is what we shall get from the noble Lords on the Government Bench. Given the enormity of the problem we need the fullest possible resources. Because I am not clear on the matter, I should be grateful if the Minister of State would differentiate between the resources made available under Section 7 of the Industry Act, which now come under the Secretary of State for Wales, and the operations of the Welsh Development Agency.

Our present fear is that the resources will not be adequate. What will be made available in South Wales and Deesside—however welcome that may be—will itself not be enough, but it will certainly preclude necessary funds and resources being made available to those other parts of Wales which are more sparsely populated, but where the problem is equally serious—for example, in areas like the island which I had the honour to represent for so many years, and where unemployment at present is running at about 15 per cent. of the insured population. It could be argued that we must leave Angelsey at present, with its small population of 65,000, and we must consider the hundreds of thousands of people living in the industrial areas of South Wales and on Dee-side. I appreciate that point and the problems of the area mentioned by the noble Lord, Lord Brooks of Tremorfa, who spoke so well at the beginning of this debate. But, it does not make the problems of the rural areas and the small towns of Wales any less: they must be given equal consideration by the Government and by Ministers opposite. Therefore, unless I hear some very powerful arguments from the Minister of State, I see no apparent justification for the changes which are now proposed by the Government.

The Welsh Development Agency is working well, as is the Scottish Development Agency. The National Enterprise Board is, at present, an absolutely essential instrument in Great Britain. To interfere with their operation for apparently doctrinaire reasons is absolutely inexcusable and I hope that the Committee, on all sides, will have the courage to defeat this proposal unless the Government put forward very strong arguments indeed in favour of it.

4.45 p.m.

Lord HATCH of LUSBY

Clause 1, which we are seeking to amend, is obviously the philosophical core of the whole Bill, and I would dearly love to debate the issue on those grounds, but this is not the time to do so. I wish to refer very briefly to two issues raised in Clause 1 and those parts of Clause 1 which we are seeking to amend. According to the Explanatory and Financial Memorandum they are covered in the words: the NEB and the Agencies shall cease to have the function of promoting industrial reorganisation and industrial democracy". I want to make a special appeal to the Government, to the Liberal Benches and to the Cross Benches to consider what has happened since the Bill was first drafted. A number of important things have happened which concern the industrial and economic future of this country, and which I believe should lead us, and should lead the Government, to think again about this section of Clause 1.

The Government, like all of us, have been deeply concerned about the decline in manufacturing industry. The Government, again like most of us, have been constantly making pleas for greater wealth production in this country. Yet, since the Bill was drafted it is the Treasury that has forecast that manufacturing industry in this country will fall by 20 per cent. over the next two years. That was not a forecast that was available to the Government at the time the Bill was drafted. However, further to that point, since the Bill was drafted the Government have had the opportunity of discovering what effect the dropping of foreign exchange control has had upon investment in this country.

My noble friend Lord Bruce of Donington gave some figures. I would remind the Minister who is to reply that this was an issue which I raised at the time that exchange control was dropped, during the economic debate of last summer, when I pointed out to the Government that there was a precedent here from which they could learn—namely, that when they were in office in 1970 they could see during the first two years of Mr. Heath's Government what was happening to investment when the restrictions on overseas investment were removed by that Government. I gave figures at that time and I asked the Government why they thought that their experience in 1979–80 would be different from that in 1972–73, when, as I pointed out to them, there was the massive exodus of investment to Western Europe and North America compared with the minimal investment in industry in this country.

Now, again since the Bill has been drafted, they have been told by no less an authority than the Financial Times that, within the first two months of the dropping of exchange control, this country lost in overseas investment a greater sum than the Prime Minister is now trying to recover from our contribution to the EEC. During the first two months of the dropping of exchange control we lost well over £1,000 million in overseas investment. I would suggest to the Government that that should eive them some cause for thought. If at one and the same time our manufacturing industry is declining—and if my noble friends Lords Balogh and Kaldor were present we would be told for how long it has been declining; that it has been declining at least since the nineteenth century, and it is now declining very rapidly, indeed it has almost disappeared—and also investment is going overseas instead of into industry here, what is the Government's remedy? Surely at least one of the major factors of that remedy must be the operation of the National Enterprise Board.

Instead of repudiating the Keynesian remedy for industrial decline and depression, as they have done, I would suggest to the Minister that many members and supporters of his own party are now beginning to recognise, and are now saying, that Keynes should have been used more and that there should have been an increase in Keynesian operations, rather than a decrease, to meet exactly the situation with which we are now faced.

But let me go one stage further than that. Most, if not all, of the industries that have been supported by the National Enterprise Board have been industries which are export-orientated, and which certainly export more than they import; whereas, as we know, our country as a whole imports more manufactured goods than it exports. Again, let me make this plea, in particular to the Liberals and to the Cross-Benches. Surely in these circumstances it is only common sense—indeed, it is our responsibility to the people of this country—to ensure that when we are faced with rising imports and falling exports, the Government take some action to reverse that position. The machine that they have to hand—and have to hand in the Industry Bill—is the National Enterprise Board. The National Enterprise Board can be used in order to stimulate industrial development in this country and in particular our export-orientated industries.

I shall deal very briefly with the question of industrial democracy; the Liberal spokesman accepted that part of our amendment and has tabled an amendment on industrial democracy. Surely the argument that I have just put to the Liberals would convince them that industrial reorganisation is essential for the future, if we are to maintain just the present standard of living of the British people; that that reorganisation needs the use of the National Enterprise Board, but that it is an extremely dangerous, difficult and complex human problem.

The reorganisation of industry in this country—which means concentrating upon those industries which we can develop while inevitably allowing certain industries to run down—requires mobility of labour. That is a very nice phrase, but in fact it means people being prepared to tear themselves away from their familiar surroundings, their friends and relatives and moving to other parts of the country. It often means retraining men and women who are 30 and 40 years old—people who thought that they had finished their educational activities many years ago. It often involves a deep and wounding argument within the family itself. It is a very complex and profound human problem.

If it is to be achieved successfully, surely the first thing required is an involvement of the workers themselves in the organisation of the industry in which they are asked to take part. Is there any way in which industrial organisation can be achieved without the measure of industrial democracy which gives the worker a stake, a feeling of possession, a new home in the industry which he is entering? Therefore, I am suggesting that industrial reorganisation and industrial democracy are inextricably linked and that our amendment, which includes both of them, should be accepted by the Government and, above all, should be accepted and supported by the Liberals and the Cross-Benches.

Viscount TRENCHARD

May I take a little time in my answer to the important statements that noble Lords have made in relation to this Clause 1 amendment? As various noble Lords have said, it is a fundamental one. I do not wish to repeat, more than I need to, what has been said in the Second Reading debate, but a degree of repetition has already taken place and I feel that I must answer some part of it. Perhaps if I take the time to do so on this fundamental clause, we may not need to repeat ourselves; I shall try to follow that lesson myself hereafter.

The noble Lord, Lord Lee of Newton, gave a perfectly correct definition of the purpose of his amendment. We see the amendment as having exactly the effects which he declared. It is because we are fundamentally opposed to them that I shall have to advise the Committee not to accept it. At this point, if I may, I shall turn to the interesting remark that the noble Lord, Lord Bruce of Donington, made when he said, in a voice of astonishment, "Unless the noble Viscount tells us that this Government really believe in what they say". Odd as it may seem, I can confirm to the noble Lord that a responsible party and Administration should really believe in what it says and said before the election; but, yes, against the failure of the previous policies, we believe in what we say and intend to carry it out.

Is it more dogmatic or less dogmatic to believe in furthering public ownership by one means or another, or Government agencies for reorganisation, rather than furthering private enterprise? We need to recognise that at first base there is no more intrinsically dogmatic view on this side of the Committee than on the other side on this question. We believe most sincerely not in winding up all public ownership or all important functions of the NEB—to which I shall return in a moment—but in moving towards the maximisation of private enterprise. We believe in it and we believe that the evidence in the major economies of democratic countries is on the side of those who believe that this is most likely to produce success and to raise standards of living, as indeed it has raised them above those of the United Kingdom by a long way.

We believe that ours is the more humble of the two beliefs, whether dogma or not, because it is based on a humility about what Ministers, Governments or centrally created Government agencies can do. We believe that the success of a country depends upon a free market because it harnesses all the efforts of all the people. We believe that the market system and private enterprise have—

Lord WIGG

Will the Minister give way? If he is arguing the case for or or against dogmatism, will he tell us the meaning of his previous words?

Viscount TRENCHARD

I am sorry, I did not catch the noble Lord's question.

Lord WIGG

The noble Viscount said that the Government believe in having as much private enterprise as they can because it releases all the efforts of all the people. If that statement is not a dogmatic one, I should like to know what is.

Viscount TRENCHARD

I think that the statement that public ownership should be expanded and that Government agencies should investigate and reorganise large branches of successful private industry is much more dogmatic. My statement at the beginning was that there was no prima facie case either way. We happen to believe—and we believe that the evidence is on our side—that the success stories of world economies go the other way, and that they permit the kind of thing we all need and want; a rise in the standard of living, a rise in our social policies, and our educational policies, about which we have to discuss so many things because at the moment we cannot afford them.

Lord HOWIE of TROON

I wonder whether the noble Viscount would give way for a moment? Is he not just over-egging the pudding a little? Could he tell us why all the advantages he has adumbrated arise from private rather than public ownership? It is not as easy as that, is it?

Viscount TRENCHARD

I think that, as I continue, the balance of what we believe will become clear.

Lord HOWIE of TROON

Why should it not become clear now?

Viscount TRENCHARD

I believe that the noble Lord will be satisfied. Well, I doubt whether the noble Lord will be satisfied, but certainly his question will be answered as time goes on.

Lord HOWIE of TROON

Why not at this time?

Several noble Lords: Order!

Viscount TRENCHARD

We believe that the health of the private sector of industry, which has in the past created the wealth for this and other nations to a greater extent than the public sector, has been debilitated over two decades in which controls, lack of incentives, taxation policies, have made sure that it has neither the money nor the freedom with which to operate. My answer to noble Lords opposite who have argued that the investment was not available in the past—and I include the period of the previous Conservative Administration mentioned—is that the whole system had been reduced to a level of profitability which I have quoted many times in this House and which is about a quarter of that of our main international competitor countries; a quarter of the profitability level; barely a level at all in current cost accounts.

In that situation we do not believe that one can instantly wave a magic wand and have universally a really profitable private sector of industry. One has to move gradually. We believe, however, that the alternative roads have been tried with no success, and that the road to follow is the one we have described often, and which I have mentioned this afternoon. But we do not believe that any one Government agency, the NEB or the Scottish and Welsh agencies, can be a panacea for putting right all that is wrong across the whole field of a complicated industry. Neither do we believe that they can conceivably, within the resources left to us in this country, either put right the total investment that we should like to see in this country, or be a prime way—as I think the noble Lord, Lord Lee of Newton, said—to save any appreciable numbers of firms against bankruptcy.

That does not mean that either this Bill or our intention is to reduce the NEB, let alone the agencies, to which I shall return later, to, as the noble Lord, Lord Rochester, said the odd "lame duck" function. The functions that remain were well outlined on Second Reading. There are some 60-odd holdings of NEB, and they are important. The new function, of returning some of those investments as soon as it is possible to do so to private ownership, is an important and a difficult one. The catalytic function in high technology areas which remains, and which is in the guidelines in the Library, has been completely ignored by speakers opposite. The functions in the assisted areas and in relation to small businesses have been ignored. These are formidable functions by any standard. I can tell noble Lords opposite that I would find those as much as any one board of directors could begin to carry out efficiently.

We leave to the NEB not a short-term role, not the odd "lame duck", but major and important functions. We leave precisely these parallel functions to the agencies, and we do not interfere with the other functions that the agencies have. There was a suggestion that the agencies were being emasculated; that NEB was being emasculated. I reject the word. In the case of the agencies, other functions not mentioned in this Bill remain, including their factory building functions for instance, the promotion of investment, their inward investment functions. Formidable functions, important functions, remain, but we believe that the direction must be to maximise private investment.

Lord HATCH of LUSBY

Would the noble Viscount allow me to intervene for a moment? I have followed the argument closely so far, but if one reads Hansard tomorrow I think one will see the reason for my question. If you believe so fervently in private enterprise, then why do you maintain any nationalised industries at all, and in particular the NEB and the agencies we are talking about? If private enterprise is so wonderful in its investment, management and profitability, can you philosophically explain why you are maintaining the public sector that you are now claiming has so many important functions?

Viscount TRENCHARD

Because we are not dogmatic.

Lord HATCH of LUSBY

You cannot have it both ways.

Viscount TRENCHARD

It is because we are not dogmatic. Certain functions of the State have been agreed for many years, and we go right back to defence and other things here. Nationalisation has taken place in many areas over a prolonged time. The NEB exists, and my right honourable friend and I have paid tribute to the work they are currently doing, in fact because we are not dogmatic.

It was suggested that reorganisation was to be forbidden—I think that is what the noble Lord, Lord Lee of Newton, said.

There is nothing in our philosophy which forbids reorganisation taking place. We believe that in the main this will take place if the normal market forces are allowed to operate. In addition, reorganisation in the areas within the guideline rules of the NEB can be prompted, within the rules and within the safeguards that exist.

Lord BRUCE of DONINGTON

I promise not to interrupt the noble Viscount again, but if what he said be the case, then what is the reason for removing the words "reorganisation of" from Section 2(2)(b) of the Industry Act 1975?

Viscount TRENCHARD

Probably I did not make myself clear. I said the market system would cause reorganisation, and I further said that while the general reorganisation powers of the NEB over an extraordinarily wide range are to be curtailed, there is nothing to stop the NEB—within its terms of reference in the advanced technology industries, in its existing holdings and in the assisted areas once more—from prompting reorganisation.

In turning to the advanced technology situation, I remind the Committee that we have said that the catalytic function in advanced technology must continue. And I say to those who have said that we are dogmatic in being non-interventionists, that we are supporting—I leave out for the moment, because I shall come back to it, the question of a further £25 million—INMOS, we are supporting the electronics industry through MAFF and MAP and we are continuing various schemes which help research, development and technology outside the NEB; and the NEB role will specifically be to include the catalytic function in the high technology areas.

In relation to INMOS, at present the question of the further £25 million for which they have applied and the location of their production unit are, as the House knows, under consideration. Both those questions raise many very important issues on which noble Lords opposite and their right honourable friends in another place have been making very clear to me in the Department of Industry that they have definite views. I can only tell them that there is more than one view in both parties about exactly what we should do on those two issues. However, we do not plan to cause a hold-up of any consequence to the INMOS operation in coming to these decisions in terms of meeting the market-place requirements. They have asked for this money in advance of their absolute need and we are coming to the point of decision as fast as possible.

The noble Lord, Lord Bruce of Donington, suggested that the Secretary of State could use Section 7 to give directions, and we shall come to amendments later. Section 7 is the one dealing mainly with regional support and Section 8 with support for special industries or industry reorganisation plans. These functions will continue to be functions of the Secretary of State and the Department of Industry, but we do not think they should be muddled with the question of the NEB's powers. NEB subsidiaries with support from the NEB itself can, in accordance with the regulations of those schemes, apply for aid and these matters can be judged in the normal way and on merit.

The noble Lord, Lord Cledwyn of Penrhos, asked questions about Wales and the noble Lord, Lord Brooks of Tremorfa, made a number of important points relating to Wales. We have had a Welsh debate—as the noble Lord, Lord Brooks, knows because he introduced it—and we have had a great many steel discussions, and I do not want to go into either of those subjects. It is perhaps a pity that South Wales has depended to such a high degree on public ownership industries where, for one reason or another, demand, which has nothing to do with the fault of anybody, has fallen, or our share of markets due to our failure to remain competitive has fallen. There is a good deal of growth, as the noble Lord knows, in Wales now. I do not accept the extrapolation of figures which were mentioned as rising as high as even 160,000 unemployed in Wales; I believe the present figure is just below 90,000.

The reorganisations plans of the BSC have yet to be confirmed, agreed and timetabled and, in anticipation of those, we have already gone ahead with £48 million extra authorisation for factory building. I will write to the noble Lord, Lord Cledwyn, in relation to the exact calculation of the £35 million he mentioned. If I have noted his intervention aright, it is that £35 million less would be likely to be available under the regional programme plan. I will confirm to him what aspects of the plan are involved. At this point I will merely say—and I do not want to debate regional policy either—that I am convinced of the need for a change away from a regional policy which covered 43 per cent. of the population and 56 per cent. of the travel-to-work areas in Britain as assisted areas, with the whole of the intermediate areas having unemployment no higher than the non-assisted areas (to the decimal point it was the same) meaning that approximately half of them had more unemployment than the assisted intermediate areas. That sort of nonsense—I have to call it that—relieved me when I examined it because it has enabled us to make large economies, economies which we must make because of the situation of the economy of this country, and yet retain a sharply pointed and effective regional policy. So while I confirm the figure of less money for Wales, I can tell the noble Lord that Wales has a bigger percentage of assisted areas than Scotland or even the North of England—the vast majority is assisted in one form or another—and even though the grant may not be available in the intermediate areas, Section 7 assistance for good projects is.

I leave the general questions which have been raised, except to return briefly to the statement by the noble Lord, Lord Hatch of Lusby, that we have lost £1,000 million overseas in relation to investment. There is no evidence that money, either nationally or internationally, is a completely finite quantity in terms of investment. If there are more good things to invest in and if things are going well and expanding, investment can follow. It does not start the other way, and all the studies reveal, for example, that greater investment overseas in a particular country is almost always mirrored by greater exports to that country within a certain time-lag of years behind it.

I will not go into the question of the decline over the century. As I pointed out in the economic debate last week or the week before (as recorded in Hansard) it has not been a decline over a century. Indeed, there was a major period of recovery between the wars, but there has been a catastrophic decline in the last two decades—

Lord HOWIE of TROON

The noble Viscount mentioned a time-lag. Will he tell us what the time-lag is?

Viscount TRENCHARD

No, but I shall write to the noble Lord. These matters are never entirely regular; they will differ from country to country. However, as I understand it, the majority of academic evidence is quite clearly that overseas investment is compatible with increasing exports—

Lord HOWIE of TROON

Yes, but we are not interested in other countries; we are interested in our own country.

Viscount TRENCHARD

May I now turn to the major remaining function that the amendment seeks to change; that is, the question of the NEB ceasing to have the function of promoting industrial democracy. Of course, everyone in your Lordships' Committee and every industrialist I know is trying in every way possible to arrive at a situation where all the people in a particular company will work with the same objective, and much information is already being made available to all employees and trade unions within companies in order to do this. I believe that every responsible company, and certainly the NEB, will probably encourage its subsidiaries, according to their various and particular needs, to do everything they can to promote this situation, because it is so important for productivity.

However, we do not believe that we should impose particular forms of employee participation on companies, nor in general—and this is a matter of industrial organisation—involve the NEB in the relationships between an NEB subsidiary and its work force. This should be a matter for the companies themselves, and for the NEB, as it finds appropriate and necessary in a particular case, gently to prompt or prod. Perhaps I may remind your Lordships that under the previous Administration the NEB found itself quite unable to exercise its industrial democracy function because of the absence of any coherent Government policy on that subject.

I do not in any way wish to discourage; I wish to encourage in every way possible, within sensible management organisation, the furtherance of the working together that we need so badly. I always find it a little strange that noble Lords opposite, and the party that they represent, should be so keen to force things in this area—even though they did not really do this themselves when they had the opportunity—when they resist so fervently legal questions in relation to trade union affairs which will only take the situation in this country to a far less legalistic point than that of all our major industrial competitors. I invite the Committee to reject the amendment.

Lord KALDOR

Before the noble Viscount sits down, may I ask whether I heard him correctly when he said that this country suffered a catastrophic decline in the last two decades? If that is what he really said, I fear that he was in error. We may have suffered a catastrophic decline in the last decade, the 1970s, but in the 1960s our productivity growth was considerably better than it was in the 1950s, and in no sense can one describe the 1960s as a decade of catastrophic decline.

Viscount TRENCHARD

I stand a degree of correction and accept it from the noble Lord, but the decline has been accelerating. I do not think that in the 1960s our record internationally was good and we lost a large share of world markets during that period; but I accept that the situation has become very much worse in recent years.

Lord LEE of NEWTON

I have heard nothing which prompts me to withdraw the amendment, but may I mention one or two matters before we divide. The noble Lord, Lord Rochester, is, I know, a very fair-minded man. He said that he and his party would not accept any further nationalisation, but the fact is that no one is asking them to do so. We are asking that the 1975 Industry Act be retained, whereas the Government are asking us to make changes. It is not the case that anyone is asking anyone else under this proposal to accept any further nationalisation.

I do not think that the noble Viscount really expects us to be very enthusiastic when he tell us that the NEB has an enormous role to play in emasculating itself. That may be a process that improves certain steeplechase jumpers, but it hardly has that kind of effect for the NEB. Again in this case it is the Government who are taking an initiative of that sort, whereas we, like good Conservatives, are asking to retain the status quo.

Viscount TRENCHARD

I must say that I said that the four roles of the NEB that I outlined constituted a major task.

Lord WIGG

I wonder whether the noble Viscount is able to acquit himself of the charge of being over dogmatic on the issue of public ownership versus private enterprise. It seems to me that here he is fighting a battle which in fact is over and done. I believe that there is a considerable body of opinion among members of the Labour Party that ownership as such is not the dominant issue; ownership can take varying forms. So I am not going to battle with the noble Viscount on that issue. Rather I want to make a point as follows. He said that he is not dogmatic, but when I intervened earlier it was in order to underline the fact that on the issue of the pricing system and the practicability of leaving everything to the market forces, as the Government are doing, the noble Viscount is dogmatic and, in my view, is 100 per cent. wrong. I should go so far as to say to him that if he went to a place where the free market really operates—for example, Epsom Downs on Derby Day—in view of the philosophy that he has expounded, with an incompetence which passes belief, the one thing I would guarantee is that when he came away he would not have even his braces.

Viscount TRENCHARD

I must tell the noble Lord that one of my earliest commercial duties was to be in charge of the sale of ice cream on the free side of the race course that he mentioned, and so I am well aware of the situation there.

5.29 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 57; Not-Contents, 105.

CONTENTS
Ampthill, L.	Gore-Booth, L.	Phillips, B.
Ardwick, L.	Goronwy-Roberts, L.	Ponsonby of Shulbrede, L.
Barrington, V.	Gregson, L.	Robson of Kiddington, B.
Bernstein, L.	Hale, L.	Rochester, L. [Teller.]
Beswick, L.	Hampton, L.	Seear, B. [Teller.]
Birk, B.	Hanworth, V.	Stamp, L.
Blease, L.	Hatch of Lusby, L.	Stedman, B.
Boston of Faversham, L.	Hylton-Foster, B.	Stewart of Alvechurch, B.
Brockway, L.	Irving of Dartford, L.	Stewart of Fulham, L.
Brooks of Tremorfa, L.	Jacques, L.	Stone, L.
Bruce of Donington, L.	Janner, L.	Strabolgi, L.
Byers, L.	Kaldor, L.	Taylor of Gryfe, L.
Chitnis, L.	Kilmarnock, L.	Taylor of Mansfield, L.
Cledwyn of Penrhos, L.	Kirkhill, L.	Thomson of Monifieth, L.
Collison, L.	Leatherland, L.	Underhill, L.
David, B.	Lee of Newton, L.	Wells-Pestell, L.
Davies of Leek, L.	Maelor, L.	Wilson of Radcliffe, L.
Davies of Penrhys, L.	Northfield, L.	Winterbottom, L.
Donaldson of Kingsbridge, L.	Ogmore, L.	Wootton of Abinger, B
Evans of Hungershall, L.	Oram, L.	Wynne-Jones, L.
Gaitskell, B.

NOT-CONTENTS
Abercorn, D.	Forester, L.	Murton of Lindisfarne, L.
Airey of Abingdon, B.	Fortescue, E.	Newall, L.
Alexander of Tunis, E.	Fraser of Kilmorack, L.	Northchurch, B.
Avon, E.	Gainford, L.	Onslow, E.
Balerno, L.	Galloway, E.	Orkney, E.
Bellwin, L.	Glenarthur, L.	Pender, L.
Belstead, L.	Gowrie, E.	Penrhyn, L.
Bridgeman, V.	Greenway, L.	Rawlinson of Ewell, L.
Campbell of Croy, L.	Gridley, L.	Redmayne, L.
Cathcart, E.	Grimston of Westbury, L.	Robbins, L.
Chelwood, L.	Hailsham of Saint Marylebone,	Rochdale, V.
Cockfield, L.	L. (L. Chancellor.)	St. Davids, V.
Colville of Culross, V.	Harmar-Nicholls, L.	Sandys, L. [Telllr.]
Cork and Orrery, E.	Holderness, L.	Savile, L.
Cottesloe, L.	Hornsby-Smith, B.	Sempill, Ly.
Craigavon, V.	Killearn, L.	Sharples, B.
Cullen of Ashbourne, L.	Kimberley, E.	Strathspey, L.
Daventry, V.	Long, V.	Sudeley, L.
Davidson, V.	Loudoun, C.	Swinton, E.
de Clifford, L.	Lucas of Chilworth, L.	Torphichen, L.
De La Warr, E.	Lyell, L.	Tranmire, L.
Denham, L. [Teller.]	Macleod of Borve, B.	Trefgarne, L.
Drumalbyn, L.	Mancroft, L.	Trenchard, V.
Ebbisham, L.	Marley, L.	Tryon, L.
Eccles, V.	Merrivale, L.	Vaux of Harrowden, L.
Ellenborough, L.	Middleton, L.	Vivian, L.
Elliot of Harwood, B.	Mottistone, L.	Wise, L.
Exeter, M.	Mowbray and Stourton, L.	Young, B.
Ferrers, E.

On Question, Motion agreed to.

Resolved in the negative, and amendment disagreed to accordingly.

5.37 p.m.

Lord ROCHESTER moved Amendment No. 2:

Page 1, line 9, after ("effect") insert ("() after paragraph (b) there shall be added— (c) in undertakings which the Board control encouraging action aimed at increasing the involvement of employees in the making of decisions which affect them."").

The noble Lord said: As has already been said, one effect of subsection (1)(a) of Clause 1 of this Bill is to remove from the National Enterprise Board the function of promoting industrial democracy in undertakings that the board control. The purpose of the amendment now before us is to ensure that, at a time when more than ever it is necessary for management and employees to work together to improve our industrial performance, the National Enterprise Board should play a part in achieving that objective by encouraging action aimed at increasing the involvement of employees in making decisions which affect them. In conjunction with my noble friend Lady Seear, I have endeavoured to frame the amendment in such a way as to invite the maximum support from all parts of the Committee. The term "industrial democracy" is not used because of the offence which that term can cause in certain quarters. To accommodate those who feel that it is not for the National Enterprise Board but for the undertakings themselves to initiate action in this area, the amendment does not even "empower" the board to promote but merely to "encourage" such action.

The word "involvement" is used deliberately, in part because when I referred to the amendment which was put forward from the Conservative Front Bench to the clause of the 1975 Industry Bill which gave the Board the function of promoting industrial democracy, I found that this was the word which was then advocated in substitution for the offending phrase, "industrial democracy" It was also the word used by Sir Raymond Pennock, President-elect of the CBI, at an industrial society conference that I attended last Wednesday, when he said that one of the three main personal objectives that he had set himself for his term of office was to raise the standards of involvement of employees in industry. I fear that Sir Raymond may have to modify these objectives somewhat in the light of the sad death, later the same day, of Sir John Methven, but, knowing him. I somehow do not think that this particular objective will be one of those to suffer.

Having mentioned Sir John Methven, and since it is the Industry Bill that we are discussing, I hope the Committee will think it fitting for me, as a former colleague of his who held him in high respect, to say how widely his loss will be felt and how much many of us, in whatever part of your Lordships' House we may sit, admired the unstinting way in which he devoted himself to the wellbeing of British industry. The amendment calls for increased involvement of employees in the process of decision-making. Again, I should like to call in aid the president-elect of the CBI for, in the same speech to which I have referred, he said that in his view there were still, in industry generally, too few opportunities for employees to influence, before they were made, decisions that could directly affect their livelihood. I suggest that my amendment goes a little way to remedy that deficiency.

It does not advocate that employees should join in the taking of decisions nor that there should be any alteration or extention of existing arrangements for collective bargaining, for negotiation with trade unions and so on; what it recognises is the situation which already exists in our most progressive companies. I could elaborate on this from my knowledge of what goes on in the great company for which I myself used to work; but that would take too long. It is perhaps sufficient to say that in the consultative framework that has been built up in that company over the past 50 years—very properly starting at plant level and working upward to the very top; and not the other way round—what is now talked about is not the food in the canteen but relevant business facts such as where the money comes from and where it is going to; the criteria which should determine how capital is invested and the plans for that investment extending over the next two or three years, including the location of new plants and so on.

I suggest that it is that best industrial practice that needs to be encouraged. Surely, the NEB is a body which should have the function of giving such encouragement to the undertakings that it controls. I am convinced that this gradual approach to greater employee participation is the way forward. I hope that we shall not be told that if this paragraph in the 1975 Industry Act is removed there still will be nothing to stop the NEB from making sympathetic noises if the companies under its wing wish to do more of this sort of thing. I took some encouragement from what the noble Viscount, Lord Trenchard, said in his winding-up speech at the end of the discussion on the last amendment when, if I heard him correctly, he said that in this area he thought that the function of NEB should be to exercise what he called gentle persuasion on the companies which it controls.

The point is that the Government are now proposing to take out this paragraph. If it is removed without putting anything better in its place, this will be seen as a setback to industrial relations at just the time when we should be advancing on this front together. In my view, we cannot afford to stand still. If we do, I fear that in time employers will find that they will have changes imposed upon them which do not have their consent and we shall have missed the chance of obtaining the political consensus in this field which in my view is absolutely essential.

I hope that the amendment will commend itself to noble Lords in all parts of the Committee. May I say at this point how grateful I am for the assurance that, as I understood it, the noble Lord, Lord Lee of Newton, speaking for himself, has already given. I hope that his example may be followed by members of his party. I hope also that it may command support from noble Lords on the other side of the Committee and particularly from those who have experience of industry. More than that, I trust that the noble Viscount, who well knows about—and, I I do not doubt, has sympathy with—the kind of thing that this amendment intends, will feel able to accept it on behalf of the Government. I beg to move.

5.45 p.m.

Baroness SEEAR

I should like to add to what my noble friend has said. The noble Viscount, Lord Trenchard, in his summing-up speech said that this was going on in any case. I think that he said that every company of which he was aware was doing all that it could to see that all important information got through to the whole of the staff. The noble Viscount, Lord Trenchard, moves in the best circles. I do not. I frequently talk about these matters on managerial courses—at which I get rather a different clientele from that with whom the noble Viscount mixes. I can assure him that there is no such widespread conviction that this is what we ought to be doing.

On the contrary, the position at the moment is that there is widespread belief in the rank-and-file management of British industry that Bullock is dead, thank God!—and I refer to the report, of course—and that Heffer is temporarily out of the way and that there is therefore no need to do anything.

This is the greatest folly from every point of view. It is the greatest folly, as the CBI are fully aware, from the point of view of employers because they now have a heaven-sent opportunity to experiment and develop their own patterns of involvement. This is what they say they want to do; this is what they said in response to Bullock; and this is what, in my belief, they ought to do. I do not believe in mass produced formulae for involvement. They must be tailor-made to suit individual organisations, but they must be prodded into doing it. We are not talking about the Unilevers or ICIs (with respect to the noble Viscount, Lord Trenchard, and my noble friend) but about the great mass of British industry which, left to itself, will do little or nothing because it does not believe that it has to do anything.

I would underline what my noble friend has said. If there had never been any mention of industrial democracy in relation to NEB perhaps there would be some argument in support of what the noble Viscount, Lord Trenchard, has said: but to take out the reference to industrial democracy and to put nothing in its place will be seen by the type of manager to whom I am referring—and he is in the great majority in this country—as a message, a signal, that efforts to increase employee involvement are now no longer of any considerable importance. What we are making is a very modest request. There is to be no force behind this; it is only encouragement. Surely the noble Viscount, Lord Trenchard, can agree that encouragement in this field has everything to be said for it. I beg noble Lords on all sides of the Committee to see that at a time when we need technical change, and we need consent to get technical change, we must do nothing whatsoever to discourage new experiments and efforts in the field of employee involvement.

Lord LEE of NEWTON

This is the old story: if only everybody was as good as the best we should have no cause for complaint. I agree with what has been said from the Liberal Benches. It is now essential that we should try to get the people working in any industry utterly involved, and to encourage them to seek information on decisions which are of great importance to them. I agree with what the noble Baroness, Lady Seear, was saying. I can remember being on production com- mittees long before the war; they all became devolved during the war. In factories where work people really are taken into confidence, this is part of the make-up and part of the set-up. We did not need a war to start going on to production committees, although they functioned very well during that period. In a great many factories that I know it is not the case that there is the slightest encouragement given in this respect.

There seems to be a fear that if employees know the state of the order book or the rate of investment, in some way or other this is treading on what we used to call "managerial functions". "Managerial functions" have a very bad taste in my mouth: they caused the biggest lock-out I can remember in the whole of my life. We have to start from the point that trade unions were not set up to co-operate with management. There are still a number of important unions that do not wish to do so. They take the view that their job is to get the best possible terms and conditions for their members, and that management is for others. That is arguable, of course; but it is the wrong approach. It is an approach which, especially in these days, probably finishes up with the situation where many of their members are unemployed anyway.

I want to support this amendment in the hope that we can get a far wider anticipation by those employers and unions which have not yet thought of dedicating themselves to a vast increase in productivity, to getting their people to want to know some of the things now, regarded almost as confidential by some managements for some reason that I have never understood. I came to the point of agreeing to a reduction in piece work prices in order to get a contract; and, in consequence, men who would have lost their jobs did not do so. This is the atmosphere we can create if we get people together to discuss the way a company functions. The future prospects may depend on succeeding in getting those contracts which we may fail to get by a short head.

For my part, I believe that there has been a great deal of movement in some national trade unions on this issue. There is still a long way to go, and I think that this amendment will help bring it about.

Lord SHINWELL

I had the good fortune this afternoon of listening to several of my colleagues from the Front Bench arguing in support of the retention of the very useful and desirable functions of the NEB. All of them argued with great force and ability against, as they alleged, the emasculation of the NEB. Unfortunately, I left the Chamber before the noble Viscount, Lord Trenchard, made his response. Whatever, that was, I have no doubt that it was executed with his customary ability. Whether or not we accept his arguments is beside the point because a Division was taken. The decision has been reached; I do not quarrel with that. It derives from what happened at the last general election and one has to face facts.

Now we are being asked to accept an amendment which, in its general objective and based on the principle involved, follows what members of the Liberal Party have been advocating for many years; namely, a form of co-partnership or (to present it in the form in which the noble Lord, Lord Rochester, argued it) involvement of the workers in decisions. I respond to that to begin with by making this comment: it is quite unnecessary to have such an amendment or to promote legislation towards such an objective. Almost any trade union in the country, particularly those with substantial memberships and—to use the jargon that is now common—plenty of "muscle", could force or persuade ("persuade" is a more appropriate term) the employers concerned to agree that the workers in the industry should be involved in decisions, not merely regarding—and I use the expression we have just heard from my noble friend Lord Lee—productivity, but on administration, organisation and indeed almost every aspect of the industry concerned.

There is a history about this project. My noble friend touched upon it when he referred to the efforts that were made in the past through the medium of productivity committees to assist in reaching decisions which presumably were intended to benefit not only the industry itself but, in particular, the workers involved. I have had something to do with this. I now venture to impart to all the members of the Committee who are present—not a great many, which is perhaps a pity—that I was engaged in preparing legislation for the nationalisation of the coal mining industry.

Unfortunately, not one of the miners' leaders of the time who met me and fully represented the workers in industry are alive today. But in the course of our discussions I used language which is on record in a Government document, so that it cannot be challenged. One could challenge the argument, but not the existence of what appears in the record. I said to them that I did not want them to regard themselves as employees; when the National Coal Board was actually formed, with responsibility for the administration of the industry and all of the aspects associated with it, I wanted them to regard themselves as partners, not only concerned about wages, health and safety, but also about the organisation of the industry and the administration. I said that if they would agree to my suggestion—subject, although I did not say so at the time, to Cabinet decision, which was obvious; I had to have their consent—I would embody the proposal in legislation. They rejected it out of hand. They said to me, in the language that miners' leaders were accustomed to use at the time, that they were concerned about the interests of their members and they wanted none of my fancy ideas.

That is the position. The fact is that if the trade union movement wants to participate in industry in the various industrial firms existing in the United Kingdom, it has only to ask and to press for it, without an industrial dispute, and it will be embodied in industrial language without any difficulty at all. The fact remains that the workers do not want to do so; they do not want to be involved in administration. It might lead to a loss or, if it led to a profit, they would have no assurance that they were going to derive any advantage, so why should they do it? In their view they should go on in the old-fashioned way with their collective bargaining.

The only comment that I want to make about collective bargaining—and we have had it from the beginning of the century, as I well know; I was involved in it early in the century—is that it has never proved successful or effective. It is no more effective today than it was at any other time. Sometimes advantages have been gained, such as changes in wages, in the hours of labour and in working conditions. But very often, no sooner had they attained these advantages than they disappeared because of the construction of the industry itself, the difficulties associated with finance, and so on. That is the position; the trades unions do not actually want it. Let me leave that for a moment to deal with the question of nationalisation, because that has a bearing on this—the NEB, for example. Our opponents, if I may use that term, on the other side of the Committee and elsewhere, dislike nationalisation. They say that they do not like nationalisation because it is socialism. All I have to say, having had something to do with it, is that it is nothing of the sort. If, for example, one takes the nationalised coal mining industry, of course the miners have succeeded in obtaining wages far in excess of what was anticipated in the past, and working conditions on the whole are satisfactory; safety, so far as it is practicable, is ensured; and all the advantages have been derived as a result of a change in legislation. But there is no socialism in the industry. It is a very class-conscious industry, although not class conscious in the socialist sense at all.

We have the various grades, beginning at the top with the chairman of the Coal Board, with a very substantial salary. I will say nothing of the perks—I set those aside. Then we have the members of the Coal Board; then the general managers, the under-managers; and so it goes on, from the top to the bottom, a whole series of relations, and at the bottom are the people who do the work. The others are responsible for administration and policy. So far as those who do the work at the coal face are concerned—and heaven knows, anybody who has seen the men working at the coal face realises that it is pandemonium, and no one should ever express a feeling of dissent because they get very high wages—they have no say in the administration of the industry or of its organisation. They tried it.

I shall come back to the point raised by my noble friend Lord Lee about productivity. They created pit committees, and they were to sit down round the table and discuss, what? Even while they were discussing, as they had to do from time to time, there was a decision of the Coal Board to close down a number of pits. That was the great achievement of my noble friend Lord Robens, not Lord Robbins. I am speaking of the industrialist—not the economist—who was responsible for the most remarkable achievement. He closed down 250 pits. I could have done that myself, without a salary. Anybody could have done so. That feat was equalled only by the noble Lord, Lord Beeching, who closed down two-thirds of the railway system—a wonderful achievement!

But the people in the coal mining industry, the men at the coal face, at the surface, those who assisted in cleaning and processing the coal—I wish they would process it even more; I tried to introduce that myself but failed because the processors were not available—take their wages and do what they like with them. They enjoy themselves, but so far as the administration and being involved in decisions are concerned, there is nothing at all. They may believe from time to time that they exercise some power during a strike, but so far as the administration is concerned, there is not a word. That is nationalisation. One of these days it will change and we shall convert it into a form of socialism. Then one will get industrial democracy as I understand it. Industrial democracy is not achieved merely by allowing the workers to have a discussion with management about productivity and the like.

Therefore, I say to my friends of the Liberal Party that their amendment, however well intentioned it may be, and though the principle is one that sooner or later will have to be adopted, is quite unnecessary, for the simple reason that if the trade unions wanted it, if they could make up their minds and, instead of having that one-day strike about which there is considerable controversy, they went to those at the head of the industrial firms and said that they wanted more say in the running of that industry, it would be impossible for the employers to reject that request. That is how it can be done. This will not please the people on the other side of the Committee. They are on the road to socialism. We shall have nationalisation with socialism and industrial democracy, but not until then.

Lord BRUCE of DONINGTON

I rise briefly to say that, so far as I can see, the amendment proposed by the noble Lord, Lord Rochester, does not carry any reference either to trade unions or to co-partnership. I prefer to think that the amendment means what it says. I think there can be no doubt that we can all have own own views as to what "industrial democracy" may or may not be; but there can be no doubt that over wide sections of industry, in some of which I have myself had a managerial responsibility, one of the problems leading to industrial unrest is the undoubted feeling by some workers, particularly those in large industrial undertakings, that they are alienated from the whole ethos of the firm in which they operate. I cannot help feeling that anything which encourages a company or a works to operate more as a social organism—for that is what in fact it is—is something that ought to be encouraged.

I say nothing about the involvement of trade unions, either officially or unofficially. These are matters in which there is some argument even within the established political parties in this Chamber. But of this I am sure: the more a worker feels himself identified with the progress of the firm and with the whole climate which is in existence within that firm, the less likelihood there is of the industrial disputes that we have experienced these many, many years. Therefore, in principle, we on this side of the Committee, with a few exceptions, are generally in support of the involvement of people who work within undertakings in the objectives, purposes and decisions that are pursued.

May I say, as one who some years ago managed a public company in the North, that I found it of tremendous assistance to technical directors, to works directors, inspectors and so on, that one could get first-hand opinion from the floor of the shop on a whole series of matters. I recall one instance where the works director, in conjunction with his technical director colleague, proposed changes of layout within a factory which it was thought would work to far greater advantage. We had a works committee on it which took place in the boardroom. The representatives were invited and shown models.

They contributed their own views as to how they thought the same thing could be accomplished but in a much more profitable and easier fashion. I must tell the noble Viscount that we benefited very considerably from that advice: in fact a good part of it was preferred by the board to the advice which was given by the works director. The final conduct of a company's affairs must reside in a company's board and its chief executive and managing director, but that does not prevent the workers from being involved in consultation in the whole of production and also, in some cases, in the marketing process. I think this amendment should be supported.

The noble Viscount, Lord Trenchard, in dealing with the previous amendment, which mentioned "industrial democracy", said, I think very truthfully: "We all have different definitions of industrial democracy." But I do not think there can be any difficulty in the correct interpretation of what the noble Lord, Lord Rochester, really means. They are plain words, and the noble Viscount opposite understands them just as well as the rest of your Lordships do. He says, however, that this should be the function of the company and not of the NEB. But I thought the noble Viscount attributed great regard to ownership. Ownership, in his view, is of the utmost importance. All publicly-owned things are bad and all privately-owned things are good.

If there is one responsibility which ownership has, whether it is public or otherwise, it is the right to appoint directors to the boards of companies who are responsible for policy decisions. I cannot for the life of me see why the NEB, which, as this report shows, is the owner, part-owner or substantial owner of a number of firms and is likely, if what the noble Viscount says is true, to participate in private industry even further, should not have this mandate. It is a mild mandate, a good mandate: it is not a dogmatic mandate. I suggest it is in keeping either with what is the spirit of the times now in certain areas, or certainly with the spirit of the times as they ought to be. Therefore, I hope the noble Viscount will accept this amendment.

Lord GORE-BOOTH

Your Lordships may be a little surprised that I should intervene in this debate, and so I had better present my credentials. The first one is that I went the whole way through the debate which we had in connection with the Bullock Report. I sat through all that and made a speech on it. I also studied some German work on this precise subject, so that I have grappled with it before. But perhaps my most powerful qualification to say just a word on this subject is that in fact my father spent practically the whole of his working life manufacturing steel in Sheffield, and so one got a little insight into these things, particularly as the rest of our lives at that time were spent only about six miles from Doncaster. Therefore I was able to visit and talk with people for many years in those great industries.

I should like to express a warm acknowledgement to the noble Lord, Lord Rochester, for introducing this subject. Certainly, with the growth of education and the general growing versatility of the people of this country, it is quite clear that you cannot deal with this problem in the old way; namely, as appeared to grow up in some of the cities such as I mentioned, with what are called "workers"—I dislike that term because I worked quite hard myself and yet I do not think anyone would call me a worker, so it is a bad one for this purpose. However, leaving that behind, it certainly was the fashion then in that part of industry that the people who were the employees and doing the hard work on the floor, were regarded, in a way, as citizens entirely separate from the rest of us. I am quite convinced that society will not go on being like that. It will go on in the way that it is going now: that more and more people will combine knowledge of and experience in differing industries at different times. The ability of the people who do mainly manual work to understand other things has grown enormously and greatly to our benefit in our life time.

I am therefore extremely grateful to my noble friend Lord Rochester for raising this matter because I am sure it is a very up-to-date and useful thing for us to talk over. To try to see, through the mists of the next part of history, whether society is going in the direction in which people who do manual work also do a great deal of mental and intellectual work, and therefore feel that they have some claim to take part with management in certain processes of running industry and in which both sides can help each other to an important extent.

I do not accept in these days the enmity theory of industry. Neither do I accept that it is one big happy family. I am sure, and again this is from seeing it if not actually practising it, that both elements subsist in a natural and normal industry. In other words, that at times, particularly over economic matters, there will be perfectly honest conflict between those people who really are working and, at other times, it will be a happy family. That can be done with intelligence, good temper and a real consideration for other people on the side of management. Equally, it can happen, because it does happen in quite a lot of industries, that the people doing the manual work enjoy it and are not people who resist management all the time.

It is quite clear, from such spectator experience as one has had, 'that that mood can exist and then there is real and genuine co-operation between what are, not perhaps very happily, called the two sides of industry. Although one has to admit that in certain respects two sides do exist. With those few words, taken from a little experience, I would very much support the ideas contained in the speech of the noble Lord, Lord Rochester. I hope very much therefore that the Government will feel able to give this amendment a fair wind, whether it is done directly by accepting the amendment or at least by associating themselves with the ideas that the amendment contains. I believe that something along the lines of the noble Lord's thinking is basically helpful to the modernity and prosperity of our industries.

Lord ROBBINS

I cannot believe that there is anyone in this House who will find himself in disagreement with the spirit underlying the statements of Lord Rochester and Lady Seear. While in harmony with that spirit, while wishing—to use the words of Lord Bruce of Donington—to diminish the sense of alienation, I can believe, however, that some reserve may be expressed regarding the wording of this amendment. After all, this is the Committee stage, and we are obliged at this stage to pay attention to the implications of the words to which we are asked to agree as well as to the spirit which underlies them.

It seems to me that the words, involvement of employees in the making of decisions which affect them", are capable of interpretation in ways which are not beneficial to mutual understanding. It is all very well to elaborate arrangements which acquaint the employees of any undertaking, large or small, with the situation and with the prospects of that undertaking, but involvement in the administrative decisions of the board—and it is those decisions which principally affect the future of the employees—is another matter.

Lip service has been paid by various speakers to the fact that the board must eventually decide. But in so far as the decisions regarding, let us say, reorganisation. regarding the installation of advanced technology, are taken at board level, may it not be that if we pass this resolution with these precise words that some of the employees can say, "I was not involved in the making of those decisions"? I submit that this is not a frivolous point.

Baroness GAITSKELL

I would add one sentence to this. It seems to me that if we do not carry this amendment we shall be so much behind the times in the world—in the way the whole argument is going about employees and management—that we shall be ashamed of what we are doing. It has now become the problem, and we should not be arguing about it at all but accepting it wholeheartedly.

Viscount TRENCHARD

I covered parts of these points in resisting the previous amendment, but this has been a most interesting discussion and I shall read it again with extreme care. May I start by saying that I should like to associate myself and the Government from these Benches with the sentiments expressed by the noble Lord, Lord Rochester, in relation to Sir John Methven. We have lost a man of exceptional ability, with a record of service to the private sector, then to the public sector at the Office of Fair Trading, and then again to the private sector. He was a man of great qualities and, I know, a personal friend of many of us here. We shall miss him very badly.

The Government are not saying just that this amendment is unnecessary because there is nothing to stop companies introducing employee involvement systems of one kind or another. That is true. But we resist it on wider grounds than that. What we are really asking is: Does an amendment in the words of this amendment in legislation, have any substantial effect in the direction which nearly all noble Lords have supported this afternoon, in terms of improving and increasing employee involvement? Is it, in that context, necessary and would it, in that context, achieve anything?

Let me say straight away that perhaps I should not have given the impression, if that is what I did do, as the noble Baroness, Lady Seear, suggested, that everything in this area is perfect—of course it is not perfect—and that everyone is doing what we would wish him to do. But I said that, in any event, at the appropriate time, the NEB would no doubt prod, or, as the noble Lord, Lord Rochester, suggested, gently persuade, those of its subsidiaries where they felt there was improvement in this area to be made.

Here I would ask the Committee to consider whether it is really likely that the distinguished industrialists on the NEB—and I hope in the future, once more, trade unionists, where seats have been kept—and the representatives of leading companies, where, as the noble Lord, Lord Rochester, suggested the best practice is practised, will not put this sufficiently importantly to their subsidiaries in the way and at the time that seems right to them?

I certainly did not wish to give the impression that I was looking only at the leading company areas, but I think that the small business area there are fewer problems here than anywhere else. The problem is where you get size and big areas of employment, whether in the nationalised industries or in the private sector. What Government do think is that where involvement is inadequate, there is almost certainly a history of problems with, quite possibly, faults in relation not just to management but also to employees and their representatives.

There are complicated problems. There are some of those problems from some while ago, which the noble Lord, Lord Shinwell, described and which still exist in some areas. Even the noble Lord.

Lord Lee, said that there were certainly areas where the representatives of employees went single-mindedly for the best terms, rather than participating in the organisation. In the Bullock debate, in which the noble Lord, Lord Gore-Booth, made a notable speech and in which I made a very inadequate maiden speech, some of us questioned whether, in all cases, the same objectives were shared and whether this was a necessity before any particular systems were introduced.

The noble Lord, Lord Robbins, has suggested that even the mild words—and they are mild words—of this amendment could be taken to go too far and to impinge on decisions which are, essentially and finally, those of management. I have very considerable experience in the countries of the Continent, where the systems are more specified and more detailed. I tell noble Lords that whatever the systems written, the situations come down to the same problems. Management has to get its head clear on what seem to it to be the possible alternatives, before it starts consultation and finally has to decide. If one of three factories has to be closed management, in the end, has to decide which it shall be.

I wondered whether the noble Lord, Lord Shinwell, with all his wisdom, was going to support words such as "encouraging" in legislation, and in this respect, he made some very interesting observations out of the history of some time ago. I hope very much that the picture he paints is diminishing. I should like to assure the noble Lord, Lord Gore-Booth, that I associate the Government fully with the desire that that picture of employees refusing to be interested in the objectives of a company will fade, and that management will play a major part in making sure that it does fade.

If we are to have the success of countries such as Japan, we really must have employees not just being involved, but chasing management in order to get management to change processes, to introduce new products and to become more effective, even if it means redundancies in some areas, in order that, at the end of the day, their firm shall be competitive and that there, therefore, will be something in real money terms, not paper terms, to share. So perhaps, in those terms, I can assure the noble Lord that the Govern- ment associate themselves with the desire to see this kind of progress.

But we are left with the question of whether an amendment using the all-important word "encouraging" should find a place in legislation, in relation to what a board of very distinguished industrialists from leading companies advise their subsidiary companies to do. It is in that sense that the Government believe that the amendment is unnecessary, that it is perhaps capable of the kind of misinterpretation that the noble Lord, Lord Robbins, explained and that it should be resisted. But the record should stand in this House, as I believe it does in the other place, that the whole House—and I hope that the noble Lord, Lord Rochester, who moved this amendment will make clear that it is the whole House—supports the greater involvement of people, particularly in the large employment areas, as all leading industrialists, including those he mentioned in the CBI, will of course support it.

6.39 p.m.

Lord ROCHESTER

I am grateful to all those who have spoken in this little debate. I am particularly grateful to the noble Lord, Lord Lee of Newton, to the noble Lord, Lord Bruce of Donington, and to the noble Lord, Lord Gore-Booth, for their support. I was frankly depressed by the contribution of the noble Lord, Lord Shinwell. If, and in so far as, it is that union members do not want the sort of thing that this amendment seeks to achieve, then I suggest that that is largely why we are in the mess that we are in.

I was not going to say anything more about the company of which I spoke in my opening speech, but perhaps in the circumstances I may be forgiven for just adding this. In that company, in all the committees, at each level from the plant to the very top, all the employee representatives are, in fact, shop stewards, and there is absolutely no doubt in their minds that they wish to influence decisions, of the kind that I was talking about, before they are taken. It is of interest that near the top of that consultative framework there is a business and investment committee, upon which sit employee representatives—again shop stewards who have received training from the London Business School, the TUC and the company. I suggest that it is highly significant that at a meeting last year of the central committee, at the very pinnacle of this framework, it was an employee representative, a shop steward who has since become a union official, who presented the company's investment plan. It was not presented by a main board director, and I am told that it could not have been done better. Surely it is that sort of thing which we want to develop.

The noble Lord, Lord Bruce of Donington, was absolutely right to say that there is no intention in this amendment of interfering with collective bargaining on the part of trade unions. I was sorry that the noble Lord, Lord Robbins, interpreted the amendment as he did, given that I had sought to say in my opening remarks that the intention here is not that the employee representatives should themselves join in the taking of decisions. Nevertheless, I have to recognise that the noble Lord speaks with great experience, and clearly it is possible to misinterpret what I had in mind since that is what he did.

Had it been the noble Viscount, Lord Trenchard, who had said that the wording was defective, that could easily have been put right; I am sure that between us we could have sorted out some wording that would be generally acceptable to accommodate the difficulty. But the noble Viscount, Lord Trenchard, as I understood him, was saying something quite different. He was saying that this was not necessary, that it would not substantially improve things, and so on. If the National Enterprise Board are in any event going to give encouragement to the companies under their control, what is the objection to putting in a simple phrase of this kind?

I do not want to detain the Committee any longer. My noble friends and I will give further consideration to the possibility of coming back with a further amendment to take care of any defective wording that there may be. I am clear that there has been a good discussion of the principle underlying the amendment. It has enjoyed a lot of support, and I think that I should be letting down not simply my noble friends but others who have spoken if I did not take this opportunity, as a matter of principle, to press the amendment to a Division.

Noble Lords on the other side are not now present in large numbers, but no doubt shortly they will be pouring in. Some of them have considerable industrial experience and, I do not have very much doubt, must feel that there is a lot to commend this amendment. I hope that for once, if they feel they should, they

will have the courage of their convictions and vote for this amendment. If they cannot—well, let them at least not vote against it.

6.45 p.m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 61: Not-Contents, 84.

Lord DENHAM

My Lords, I do not know quite what the feeling of the Committee would be, but we agreed to adjourn for dinner at approximately 7 o'clock. It seems a pity to start another amendment and then possibly break off in the middle.

Lord WELLS-PESTELL

My Lords, may I ask the Government Chief Whip whether we are in a position to proceed with the next business?

Lord DENHAM

Yes, we are, my Lords.

Lord WELLS-PESTELL

Then I would agree entirely with what the noble Lord has said.

Lord DENHAM

My Lords, if all sections of the Committee are in agreement, I will move that the House be resumed and perhaps if the next business is finished before five minutes to eight, then at the end of that business we will adjourn until five minutes to eight, so that we restart this Committee stage at that time. I beg to move that the House be now resumed.

Moved accordingly, and, on Question, Motion agreed to: House resumed.