LORDS AMENDMENT TO COMMONS AMENDMENT No. 197 (Hansard, 27 March 1980)

§ Lord SELSDON
My Lords, at the risk of being accused of nit-picking, I have put this amendment down because subsection (7) of Amendment No. 197 is intended to permit a company to make a loan to one of its directors, or a director of its holding company, for the purpose of purchasing a house, among other things. The figure of £50,000, which is the upper limit permitted for such loans, was first mentioned in a White Paper dated November 1977, since which time we have enjoyed a substantial level of inflation and an escalation in the price of houses to such an extent that a figure of £50,000 in 1977 is equivalent to £75,000 today. I should therefore like to ask my noble friends, if they are unwilling to accept this amendment—and I would not propose to press it—first of all whether they will say it was their deliberate intention to reduce effectively the purchasing power of the maximum amount which could be permitted for a loan by about 25 to 30 per cent.; or whether they would perhaps make the statement that, as one 1054 can increase the limit by order in accordance with the Bill, they would propose to increase that limit in line with inflation. Or, if my noble friends are unwilling to say that, perhaps they would point out, in line with their economic policies, that they would not expect £50,000 to purchase any less by the time this Government come to the end of their period than it does now. My Lords, I beg to move my amendment to Amendment No. 197.

§ Lord WEDDERBURN of CHARLTON
My Lords, I shall be very brief, but perhaps I may address two sentences to the noble Viscount the Minister. There are thousands of ways through these sections. Of course, the Government must have our sympathy, because the matter is one which demands complexity; but my prediction is that within three or four years there will be a number of reports which get through the holes in these sections. Our 1978 Bill was not sufficient, and this Bill is not sufficient. We shall need a better system of mobile administrative control than these clauses, which get more and more complex as company law continues. The second comment I would make is in relation to the amendment moved by the noble Lord, Lord Selsdon. Of course the Government will be pressed to raise this figure as inflation increases. If this were not a non-party debate, almost, at the moment, I would say they could expect it very much in view of their other policies.
Of course, the figure will have to be increased; and it is the problem of clauses of this sort that you cannot really therefore trap the malpractices, because the malpractices are sometimes forced upon companies by directors who demand more than the statutory limits. These clauses are good as far as they go, but in five years' time we shall see that they are not suitable in their structure to modern company law. We need administrative agencies which have powers, not necessarily draconian powers but some powers of this sort, backed by law. That is the only way we shall ever deal with these problems.

§ Lord LYELL
My Lords, I should first of all like to thank my noble friend Lord 1055 Selsdon for moving this amendment so clearly, so briefly and so succinctly. I think the House would be happy if I replied to both my noble friend and to the brief and, may I say, helpful comments from the noble Lord, Lord Wedderburn. Indeed, the Government believe that this is an attempt to be reasonably realistic at this level in regard to the type of house which, overall, a company director might need or might be concerned with in this part of the legislation. In reply to the noble Lord, Lord Wedderburn—and I hope it will assist my noble friend Lord Selsdon —one point i would ask them to consider comes in Amendment No. 209, which is a fairly short new clause to which we shall be coming.
Amendment No. 209 has a heading, "Power to increase financial limits". This is a very wide-ranging power which enables the Secretary of State to raise the limits which are provided for where we have made an attempt to set what we believe to be realistic limits in this part of the Bill. This power is necessary and I have it clearly that the Secretary of State will not refrain from using this power where any figures which have been suggested by my noble friend are seen to be unrealistic.
I wonder if my noble friend would agree that we should see how this Bill operates in practice before assuming that the limits provided for it now are not high enough. Would he accept that we have adequate power in Amendment No. 209? I see that my noble friend has further amendments down which probably deal with the realism of the figures which we have made an attempt at. The Secretary of State will not be waiting for five years; he will be looking at these limits as a matter of urgency.

§ Lord SELSDON
My Lords, I am grateful to my noble friend for that reply. I understand why he is unwilling to comment on the level of inflation in the United Kingdom over the next few years. I would ask, as we have a Government of action, why cannot they act now rather than in the future? Since he shows his reluctance to act, then, in withdrawing the amendment, may I remind my noble friend that there are many employees in companies who have beneficial loans fro m their employers which would, in effect 1056 be greater than those permitted for directors? Thus, there would be a disincentive for people to become directors. I beg leave to withdraw my amendment.