Lords Sitting of 30 April 1981

Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Hereford.

Cash Remuneration: The Truck Acts
The Earl of Selkirk: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are aware that only 1 per cent. of all employees in the USA are paid in cash compared with 60 per cent. in the United Kingdom; and whether they are prepared to amend the Truck Acts.
The Minister of State, Department of Employment (The Earl of Gowrie): My Lords, the Government believe there are a number of advantages in non-cash payment of wages and are aware of international comparisons. The Central Policy Review Staff have prepared a discussion document on the subject which is due to be published in the summer. A copy will be placed in the Library. We will of course carefully consider the future of the Truck Acts in the light of the response to the document.
The Earl of Selkirk: My Lords, am I right in thinking that basically the payment of wages depends upon a statute which was passed in the reign of William IV and that at present £1 billion a week is spent on cash wages? This provides a splendid target for armed robbery. Is it not a very great burden for productive industry to have to carry this expense?
The Earl of Gowrie: My Lords, I agree altogether with my noble friend. My brief tells me that the Truck Acts were passed in Victorian times, but no doubt my noble friend is right that they were passed in the reign of William IV. Nevertheless, they are certainly out-of-date. The difficulty is that there is still a very strong bias in this country towards being paid in cash, but I am glad to be able to tell the House that every year there is a slight decline in the number of people who wish to be paid in cash.
Lord Barnby: My Lords, would the Minister comment on the difference between this country and the United States? As my noble friend has said, the United States is much more advanced in paying wages otherwise than in cash and therefore in avoiding robberies than is the United Kingdom. What relationship does this bear to female emancipation in the United States compared with the backwardness of this country? Whereas we in this Chamber are graced by the presence of many fellow Members who are ladies, in the States there is none in the Senate—or at least only one from the State of Maine.
The Earl of Gowrie: My Lords, I confess to some personal bias in favour of cashless payment and, speaking for myself, I think that it would certainly do more for continued female emancipation than any other piece of legislation that we could devise.

British Exports: Non-Price Competitiveness
3.9 p.m.
Lord Gainford: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what improvements are being made in the non-price competitiveness of British exports.
The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne): My Lords, it is extremely difficult to measure the non-price competitiveness of goods. However, I believe that United Kingdom manufacturing industry is in fact improving its performance in this area and certainly the fact that design, quality, marketing, delivery and after-sales service are vitally important in gaining and maintaining export markets is one which is now much more widely understood.
Lord Gainford: My Lords, I thank my noble friend the Minister for that Answer. May I ask him whether there is any possibility of considerable improvement in British industry following such ideals?
Lord Trefgarne: My Lords, over the last two years the British Overseas Trade Board, which is under the chairmanship of my noble friend Lord Limerick, has been running a campaign on the importance of non-price factors to export performance. Conferences have been held in London, Glasgow, Newcastle, Cardiff, Bradford, Manchester and Coventry, drawing on the experience of representatives of successful exporters in these localities who attribute their success to paying great attention to these non-price factors. Your Lordships may wish to know that these conferences were chaired either by my noble friend Lord Limerick or, more importantly, by His Royal Highness the Duke of Kent, and that they have been well attended.
Lord Mackie of Benshie: My Lords, is what is meant by "non-price factors" quality and delivery?
Lord Trefgarne: Among other things, yes, my Lords.
Lord Inglewood: My Lords, may I ask my noble friend whether the ability of a salesman to speak a foreign language is a non-price factor?
Lord Trefgarne: My Lords, I believe that it is certainly a factor in achieving the orders in the first place.

Territorial Army: Man Training Days
3.11 p.m.
Baroness Phillips: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are aware of the effect on training, efficiency and morale of the Territorial Army following the decison to reduce the number of man training days in independent units.
The Minister of State, Ministry of Defence (Viscount Trenchard): My Lords, planned expenditure on Territorial Army man training days will be higher in real terms in 1981–82 than 1980–81, but we are having to impose restrictions as part of the measures to contain expenditure on the defence budget. I am aware of the concern felt within the TA about the possible effects, but I do not expect adverse effects on training and efficiency nor on the ability of the TA to perform its operational role.
Baroness Phillips: My Lords, while I thank the Minister for that reply, it is rather disappointing that, however it is worked out, the number of man training days is fewer. I wonder whether the Minister is aware—I am sure that he is—of the high cost-effectiveness of the Territorial Army. I wonder also whether he will speed the review, because in these days of very specialised training it is important that a volunteer army receives the maximum opportunity to train.
Viscount Trenchard: My Lords, I am sorry that the noble Baroness is disappointed with the Answer. My right honourable friend has already made clear in public that he attaches great importance to the Territorial Army and that its function, role and size are being reviewed in the long-term costing exercise which he is currently engaged in forming. The noble Baroness said that, whatever way it was looked at, we were bringing down the number of training days. I do not know whether that will prove to be so, but if it does it will be by a very marginal amount. In fact, although in past years the entitlement to training days for units has been 44, in 1979–80 the actual uptake averaged 38; in 1980–81 it averaged 37, and in 1981–82 we have allocated to units 36; districts have one training day up their sleeves and we have a fraction up our sleeve in the centre as well.
Lord Peart: My Lords, may I say from the Opposition Front Bench that I am grateful for the way in which the noble Viscount has treated this Question. I think my noble friend has put her finger on something which is very important, namely, to create an organisation for the defence of our country; but may I ask the noble Viscount to reconsider this, and perhaps during the defence debate which we shall soon be having he will be able to give a further report?
Viscount Trenchard: My Lords, may I first wish the noble Lord the Leader of the Opposition many happy returns of the day.
Several noble Lords: Hear, hear!
Viscount Trenchard: My Lords, having wished him a happy birthday may I then say to the noble Lord that I do not think on the aspect of my Answer to the noble Baroness I can tell him that I will reconsider it, but what I will certainly say is that I am sure that the role of the Territorial Army will be brought forward in future defence debates.
Lord Gisborough: My Lords, will the noble Viscount confirm that the transferability of man days has now been stopped, and therefore each man is only able to do his strict number of days rather than borrow from another, and will this not impinge on the maintenance of vehicles which were maintained by active members doing more than their strict number of days working in place of those who did not turn up?
Viscount Trenchard: My Lords, my noble friend is not quite correct in that. Indeed very recently we have agreed to increase the flexibility for the current year. The entitlement was 44 days but it was never taken up; it is now to be 36 days, of which 27 (and this figure has always been the same) are obligatory and 9 are voluntary. Commanding officers have always had discretion in relation to the voluntary days and we have recently agreed that they can be flexible in relation to four man days of the obligatory kind.
Lord Renton: My Lords, is it not a fact that some training days are less costly than others, and will my noble friend give some indication as to whether the Government are going to allow the less costly days to be more numerous?
Viscount Trenchard: My Lords, this comes in a further area of the CO's flexibility. We have asked COs in order to contain the over-expenditure of our budget (in regard to which the T.A. is being asked to do slightly less than the rest of the Army) to consider the various types of training days and the degree to which they can help to contain the budget in the manner suggested by my noble friend.
Lord Morris: My Lords, arising out of his earlier answer, is my noble friend the Minister aware that the reduction in man training days can hardly be described as minimal. It may be marginal, but it represents a reduction of over 25 per cent.
Viscount Trenchard: My Lords, I think I have made clear that the average number of man training days used by units in the last two years has been 38 and 37 and that we have allocations this year which, at maximum, reached 38.

Concorde: Select Committee Report
3.18 p.m.
Lord Balfour of Inchrye: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government when they will make a decision on the future of Concorde in view of the report from the Select Committee of the House of Commons on Industry and Trade (H.C. 265).
Lord Trefgarne: My Lords, the Select Committee's observations and recommendations, which cover many aspects of Concorde, are being studied in detail; and, in accordance with the normal practice, the Government's final and considered reply will be delivered to Parliament as soon as possible. However, I cannot at present anticipate when this will be, or the form or content of the Government's response.
Lord Balfour of Inchrye: My Lords, while thanking the Minister for that reply, may I ask him whether he will go this far: will he confirm that although economies may have to be made in the Concorde programme, nevertheless the Concorde achievement, which has put Britain into the first world place in supersonic travel, will not be abandoned?
Lord Trefgarne: My Lords, we shall of course have to take very careful account of the report of the Select Committee. My noble friend refers to the first place for Britain in civil aviation matters. While that is most certainly the case with regard to the technical achievements of Concorde, it is unhappily not the case with regard to the profitability of British Airways.
The Earl of Bessborough: My Lords, may I ask my noble friend two short questions: First, can he tell us what the position is in regard to discussions with the National Aeronautics and Space Administration in the United States of America regarding the loan of Concorde to them; and, secondly, whether any progress has been made in discussions between British Aerospace and United States aircraft manufacturers regarding the possible building of Concorde II; that is to say, a second generation of supersonic transports?
Lord Trefgarne: My Lords, I am ashamed to have to say that I am not able to give my noble friend an answer to either of those questions; but I will certainly find out what the position is in both cases and write to my noble friend.
Lord Beswick: My Lords, can the noble Lord at least give an assurance that, whatever decision is taken, it will not be a short-term decision but a long-term decision? Would he also say that, whatever arguments might have been made against the investment in the first place, way back in the late 1950s or early 1960s, now that this enormous sum of money has been spent, now that a great amount of expertise has been amassed, it would be sheer defeatism to throw it away and let others exploit it in the future?
Lord Trefgarne: My Lords, there are many considerations which will have to be taken into account in this matter. The financial implications are only one aspect. We shall certainly want to take all those considerations into account in reaching any new decision.
Lord Merrivale: My Lords, as this is, in effect, a joint venture with the French, can my noble friend be given an assurance that the French Government will be kept au fait with reports on this question to Her Majesty's Government, and will they also be consulted before any decision is reached on the report of the Select Committee?
Lord Trefgarne: My Lords, I think it would be possible in theory for the British Government to reach a decision unilaterally on this matter, but I must emphasise that we would much prefer to reach any new decision in conjuntion with our French partners, and I have no doubt that we should.
Lord Orr-Ewing: My Lords, before my noble friend reaches a decision, could he take into consideration whether other operators might be more enthusiastic, whether either United States operators or British independent operators might operate this aircraft on profitable routes, because British Airways has always had an element within it not madly enthusiastic about Concorde? There may be other operators who could make a profit by operating it in a slightly different way.
Lord Trefgarne: My Lords, I am not aware of any lack of enthusiasm in British Airways at the present time for the operation of Concorde. The principal inhibition against extending the route network over which Concorde could operate is securing overflight rights from the Governments concerned.
Lord Duncan Sandys: My Lords, having myself as Minister been responsible for initiating the Concorde project with the French Government, may I, following the words of the noble Lord, Lord Beswick, ask the Government whether they recognise that very great seriousness would be involved in abandoning this project?
Lord Trefgarne: My Lords, my noble friend is indeed quite right; such a decision, if we ever came to take it, would be a very serious one indeed, and would therefore receive the necessary prior consideration.

Animal Health Bill [H.L.]
Read 3a, and passed, and sent to the Commons.

Companies (No. 2) Bill [H.L.]
3.25 p.m.
The Lord Advocate (Lord Mackay of Clashfern): My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Companies (No. 2) Bill, have consented to place their interests so far as they are affected by the Bill at the disposal of Parliament for the purposes of the Bill.
Lord Trefgarne: My Lords, I beg to move that the Bill be now read a third time.
Moved, That the Bill be now read 3a.—(Lord Trefgarne).
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, before the amendments are called I should like to draw the

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attention of your Lordships to a procedural point. I do so strictly in my capacity as Deputy Leader and not as a Government Minister—I would emphasise this—and I do so with some hesitation, because I realise that the provisions of the Bill to which I am about to refer have raised considerable controversy on the Floor of the House.
Your Lordships will recall that the House recently agreed to the recommendations of the Procedure Committee which drew attention to and endorsed the practice of the House that an issue which has been fully debated and decided upon at a previous stage of a Bill should not be reopened on Third Reading. It is my view, and I fancy I am correctly interpreting the opinion of the House, that the noble Lord, Lord Mishcon, in his Amendment No. 2 reopens again the issue of the registration of business names. Although questions of order are, of course, for the House to decide, I feel that I should draw your Lordships' attention to this, as it has so recently been the subject of consideration both by the Procedure Committee and by the House as a whole, in order that the noble Lord, Lord Mishcon, may consider whether it is in accordance with the procedure of the House that he should move his amendment.
If I may, just to refresh your Lordships' minds, quote what the Procedure Committee said, it was:
"The principal purposes of amendments on Third Reading are to clarify any remaining uncertainties, to improve the drafting and to enable the Government to fulfil undertakings given at earlier stages of the Bill. It is considered undesirable that an issue which has been fully debated and decided upon at a previous stage of a Bill should be reopened on Third Reading".
The committee then went on to say:
"The Committee wish to draw particular attention to the use of the word 'undesirable' and to remind Lords that in the context of a House where there is no Speaker with powers to rule on matters of order the word as used in this House is equivalent to the expression 'out of order' in the context of the House of Commons".
Lord Mishcon: My Lords, I wonder whether, with the leave of the House, I may be allowed to comment on what the noble Earl the Deputy Leader of the House has just said. In the first instance, may I assure him, if any assurance is necessary, that we on our side of the House will always to the best of our ability abide by the rules of procedure and the great traditions in this House. But I would most respectfully submit—although obviously we are all of us in the hands of the House itself—that the amendment to which the noble Earl referred in no way breaches the principle which he read out. May I also say that if in any way it is held to breach it—and, I repeat, I, like him, am in the hands of the House—the Government themselves have brought this upon their own shoulders.
I remind the House that the principle of whether there should be—and I am not going into the debate on this, obviously—a central Registry of Business Names and whether that should continue to exist, came before the House at the Committee stage. The Committee decided after a very full debate that it wanted to retain the principle of the central Registry of Business Names. Rather unusually, if I may say so, the Government decided not to abide by the decision of the House at Committee stage, in the sense that they decided to bring, it back before the House in
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precisely the same form by way of principle at Report stage.
On that occasion, and because they did it in that way, no alternative could be considered by the House at all. On the vote being taken, the Government on that occasion—I know the noble Earl will forgive my smile—called in the cohorts from various parts of the House, not always the Chamber; the House then decided against that principle. This House has never been able to consider, therefore, whether there is any alternative to a central registry once you take it for granted that the principle of the central registry not continuing to exist must be accepted. My amendment deals with an entirely alternative position which has never been considered before—that the registry goes but there is some other form of registration, not a central registry at all, and not the Registry of Business Names. I would only weary the House, and therefore not encourage other rules of procedure if I did so, by continuing. I repeat, I am in the hands of the House, but I hope that I have said sufficient to make it open possibly to other noble Lords, who might agree or disagree with me, to voice their opinions as to whether or not an alternative on this vital issue is this afternoon to be stifled.
Lord Maybray-King: My Lords, I am grateful to the noble Earl the Deputy Leader of the House for raising this matter, and I congratulate the noble Lord, Lord Mishcon, on the courteous way in which he has stuck by his position, and yet conceded at the beginning something of the principle at which the Procedure Committee is trying to aim.
History shows that year by year and century by century we have narrowed our methods of procedure. There was a time when there were six or seven readings of any Bill coming before Parliament. Now, in both Houses, the First Reading is formal; on Second Reading the whole Bill and anything approaching it or in connection with it is discussed—almost everything is in order. Then, in Committee, we go through a Bill with a toothcomb; every detail of the Bill that anyone wants to examine can be examined in Committee. The Report stage affords an opportunity to raise matters which have been raised in Committee and which have received a promise from the Government that they will do something about it at the next stage; some new aspects can be raised and all kinds of new terms can take place on Report. In the other place the debate on the Report stage is quite tightly drawn.
The Procedure Committee has tried to tighten a practice that has been growing tremendously on Third Reading: that of a series of almost Second Readings or Committee Readings on the Third Reading of a Bill on the Motion that the Bill do now pass. I hope that your Lordships will give serious consideration to what the noble Earl the Deputy Leader of the House has said, to see whether, together, we cannot tighten up the procedure—which is in our own hands—of making the Third Reading a stage when you talk about the Bill, the whole Bill and nothing but the Bill, apart from certain exceptional circumstances which the Procedure Committee has recommended.
Earl Ferrers: My Lords, perhaps I could make one point to the noble Lord, Lord Mishcon, who said that

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the Government had brought this upon themselves. That is understandable—and I re-emphasise the fact that I speak in my capacity as Deputy Leader of the House and not as a Government Minister—and is a perfectly reasonable comment for the noble Lord to have made. He said that the Government did it rather unusually by bringing in on Report something that was identical to what was done in Committee. It might have been unwise to do that, but it was certainly in order.
The only point I would make to the noble Lord, Lord Mishcon, in addition to that, is that if one tries to interpret the spirit of the Report, one ought to try to do so by construing the Report and the Standing Orders as Standing Orders as opposed to Acts of Parliament. In trying to construe the spirit of the Report and what the House wants, once an issue has been debated and decided, it would be wrong to reopen that issue, whatever may be the nuances to it. There are stages in another place for this to be reconsidered. I shall merely leave the matter at that, for I only offer this advice to your Lordships' House to accept or reject as your Lordships see fit.
Lord Elwyn-Jones: My Lords, with great respect, would it not have been better if we could have discussed this matter when the second amendment was sought to be moved or considered? Then, among other matters, we could see the merit of the contention and the argument of my noble friend Lord Mishcon. With respect, I do not quite follow the procedure which we are adopting in this matter. I hear noises from the Woolsack, emanating in its own inimitable fashion, but I should like to hear the views of the Deputy Leader of the House on this.
Earl Ferrers: My Lords, the purpose of bringing this matter up at this stage was twofold: first, I was advised that it was the appropriate moment and, secondly, in order precisely to avoid getting the principle of the amendment muddled up with the objectives of the amendment. That is why I thought it fit to produce it at this moment, in order that the noble Lord, Lord Mishcon, could take into account what had been said when he decides whether or not to move his amendment.
On Question, Bill read 3a.
3.37 p.m.
Lord Mishcon Lord Mishcon moved Amendment No. 1:
After Clause 22, insert the following new clause:
("Preparatory steps before registration of company
.—(1) Application shall not be made for registration of a company under the 1948 Act or for re-registration under that Act or the 1980 Act until 21 days after notice of intention to apply has been published in the Gazette, stating the proposed name of the company.
(2) Any person, being a body the name of which is entered on the index of names kept by the registrar in pursuance of section 23 of this Act, may make to the Secretary of State an objection in writing within 21 days after the publication in the Gazette of notice of intention to apply for registration or re-registration, but such objection shall be limited to an objection on the grounds that the proposed name of the company is so similar to the name of the person making the objection that confusion is likely to be caused.
(3) The Secretary of State shall take account of any objection
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under subsection (2) above before deciding whether to permit the registration or re-registration of a company by a name to which objection has been made.").
The noble Lord said: My Lords, with a feeling of complete propriety, I beg to move the amendment which stands in my name. It will be remembered that one of the matters which disturbed the House on a previous occasion in regard to this Bill was the fact that the protection which is given by the existing companies legislation in regard to the registration of a similar name of a company was absent from this Bill and, indeed, was intentionally removed from the Bill in the sense that the companies' registrar was no longer to have the jurisdiction and the duty of looking at the names of proposed companies and to decide whether, in his view, a name was objectionable on the ground that it had a similar ring to an already existing company.
I am sure that I do not have to emphasise to your Lordships, with all your Lordships' varied experience, the avenues that become open to people who recklessly or intentionally wickedly try to adopt a similar name to that of an existing company. As I understood it, the Government's answer was that it was a very difficult, if not impossible, task for the registrar to carry out in view of the number of registrations that now take place, and furthermore that it was giving to the registrar a judicial duty which it was more appropriate for a court to have. That meant two things; first, that the registrar was incapable to dealing properly with this matter and, secondly, that it was not suitable for him to do so.
Your Lordships were reminded that this is a duty that has been carried out by the registrar to the great satisfaction of the legal profession, the accountancy profession and all the other people interested in company registrations over a great number of years. We heard the statistic—which was rather interesting—that even if you looked at the number of applications for registration in recent years, there were only about 300 complaints that the registrar had gone wrong; and, of course, not all those complaints were in the end held to be justified. So there was a great body of opinion in your Lordships' House which came to the view that this duty of the registrar should be continued unless some other alternative, as efficacious, could be thought of. It was in that spirit that an amendment was put down at the Committee stage and again at the Report stage, and that is the amendment now before your Lordships.
What happened at the Committee stage was that the House was sitting extremely late. Although the quality of the House was, as always, very high, I am afraid that the quantity of the House was unfortunately very low. In those circumstances, it was thought only proper to postpone the debate until the Report stage. At the Report stage it was made perfectly clear in the speech that I made to your Lordships that this was not an alternative much to be desired; it was an alternative only because the Government would not concede the much more desirable course of retaining the registrar's powers and duties in this respect.
At Report stage—and I hope that I correctly paraphrase the noble Minister, Lord Trefgarne—when this amendment was reached, the Minister said that he accepted the principle behind the amendment, he accepted the spirit of the amendment, but that the

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Government might have to go a little further or possibly a little less far. If the amendment were withdrawn the Government would try at Third Reading to put forward their own amendment along these lines. If of course they were unable to do so, then that amendment would be before another place.
As your Lordships would expect, with the Minister's customary observance of his undertakings and his customary courtesy I heard from the Minister a little while ago—a matter of only days ago—that the Government had been thinking about this amendment and that there were certain difficulties in regard to it. The Government were therefore considering not a pre-registration procedure but a post-registration procedure. I emphasise the word, "considering", because it was made abundantly clear that the Government had not made up their mind.
I was invited to attend a meeting which the Minister chaired and at which some of his colleagues were present, and certainly some of his officials. At that meeting there was a full discussion in which I endeavoured, to the best of my ability, to tell the Minister and all those present that a post-registration procedure was certainly not within the principle of my amendment and within the spirit of my amendment. It walked into the obvious difficulty that after a company had been registered and after that company had got its name—because it was not the same name, and was not objectionable on other grounds and had therefore been admitted by the registrar—and after that company had prepared all its stationery, its advertising, its communication with its suppliers and its customers, the company would always have at the back of its mind, "Is there going to be an objection? If there is an objection to be considered by the Minister, I wonder what is going to happen? Am I going to be told that I can no longer have my name or not?"
Those of us in our professional and business dealings like always to be dealing with people who are as reputable as we think we are. But it is our experience, unfortunately, that in professional, business and industrial life we come across people who have less integrity than we think we have. Can your Lordships imagine the situation of a company that has gone to all that expense and suddenly has a telephone call, or a letter—it so happens that I read out such a letter at Committee stage to your Lordships—to say: "Look, it so happens we have got a company. We were going to commence business through it, but we could, I suppose, for a very good consideration decide not to. It bears a name very similar to yours, and our advisers have told us that we ought to object to your name. It is going to take an awful long time for the Minister to decide this. There will be cross-observations from both sides, and you will not know where you stand and we will not know where we stand. In those circumstances, we are prepared to waive our commencement of business through this company in consideration of your kindly letting us have a cheque, I would hope, by return."
These are situations which are obvious. I did not get, as I did not anticipate getting, an immediate decision of Government policy at that meeting, but the Minister well understood the objections that I made and further consideration, he said, was going to be given. I ought frankly to tell your Lordships that
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here are lots of views about this amendment. I must say that in all frankness. Everybody that I know of, all the professional organisations, say, "We would prefer the registrar to continue with his present functions, and we think he could do it, and there is no reason to doubt that he could do it." They are not worried about the question of his exercising some sort of judicial process. He has been doing it for goodness knows how many years, and doing it very well. Anyway, the Minister in a post-registration procedure would be exercising the self-same judicial function, or quasi-judicial function.
What they say is, "Of course we would want that to happen and that to continue; the registrar's present use of his functions. We would want that protection to be given to the whole community. But, if we have to look to an alternative, then we can see difficulties in this amendment". I must tell your Lordships frankly that my own Law Society has itself said, after a brief consideration of the alternative, that it can see difficulties in this amendment. The main difficulty it sees—and it said so in a memorandum sent both to the Minister, and, in its courtesy, to me, which arrived only this morning—from its point of view, is the burden that is cast upon people to have to look at lists of names in order to ensure that when they register a company they are not adopting a similar name.
I face the fact that there is that onus put upon people. I say—and I hope that this will commend itself to the House—that I think it is less of an onus than having no protection at all. What I say to your Lordships is this: I took the trouble to phone, just before I came to the House, the chairman of the Companies Committee of the Law Society, having received this memorandum. I have his permission to quote him, otherwise I would not be doing it.
I said to him, "Take it for granted that the pre-registration procedure that is suggested by this amendment does create some problems in the sense that it imposes upon people the duty, before they apply to register a company, looking through the Gazette week by week in order to see that there are no similar names. Would you say that it would be better, rather than have no protection at all of this nature, to have both the pre-registration procedure and then, if something is slipped through accicentally, you have always the right afterwards to go to the Minister? "
The chairman of the committee authorised me to say that he could see no objection at all to the joint procedure of pre-registration advertisement and looking through it—if something slipped through, then the Government were considering the post-registration procedure—provided, he said, that it was not looked upon as being an objectionable item so far as the applicant or respondent were concerned when they came to the post-registration appeal to the Minister: it had in fact slipped through the observation of somebody who had registered the company and who had not seen a name that had been advertised in the Gazette. I should not have thought that presented any difficulty at all. I therefore hope that the Law Society will not be quoted against one of its loyal members in this debate by the Minister, in that the sense that the main objection is one that I dealt with and the Law Society has said that if both were there they could see no objection to it at all.
This is the last time that this House will be able to consider the matter before this Bill goes to another place. I put the issue before the House very seriously because one can use exaggerated terms, although they do not go down very well in this Chamber; we are a very equable and moderate Chamber always. But, as I have said before, this is not only endangering those who value their good name and who have a right to their good name as a result of honest trading, who suddenly find that their name is being filched from them—either mistakenly or otherwise. They are people who do not want to go to the Law Courts, or they are small companies who cannot afford to go to the Law Courts over what is a complex passing-off action. We cannot leave them undefended, and this amendment comes before your Lordships this afternoon very properly on the basis that the amendment was here at Committee stage and at Report Stage and it was only withdrawn on the basis of the undertaking given by the Government which I hope I have fairly paraphrased and which I am sure the Minister will admit having given.
Lord Mottistone: My Lords, I support the tenor of the remarks made by the noble Lord, Lord Mishcon. I would also confirm to the noble Lord that the amendment which he has put before us is not ideal, but I am delighted to see it on the Marshalled List because I believe that it is indeed unfortunate that the Government have not managed to make up their minds about the amendment which, as has been stated, my noble friend Lord Trefgarne promised to us at Report stage. I hope my noble friend will allow me to say that I wrote to him suggesting that it would be a courtesy on the part of the Government if they were to allow this House to complete its business with this amendment rather than rely on the fact that the Bill will go to another place, so that we would have an opportunity to resolve the matter once and for all here. I consider it extremely unfortunate that for one reason or another—although we now hear about a meeting at which, perhaps, certain advances were made—nothing has been put before us.
Therefore, we find ourselves with the amendment tabled by the noble Lord, Lord Mishcon, which is not ideal—although I am advised by the CBI that they would certainly recommend its acceptance in default of anything better. As there is no alternative, we do not know whether the alternative is better. From what the noble Lord, Lord Mishcon, has said, it sounds as though the Government are not thinking along the same lines as business is, of pre-registration of names, but of post-registration—and I would implore my noble friend to forget that as an alternative.
Any solution that my noble friend produces needs to be on the lines of the amendment that is now before us and the ones which were similar to it which the House took at an earlier stage. I shall find it extremely difficult to decide whether to support the Government if this particular amendment comes to a Division.
3.55 p.m.
Lord Somers: My Lords, may I just say from this Bench, as someone who is very ignorant of the matters of trade but who possesses a modicum of common
1284
sense, that I certainly support this amendment so far as it goes. I agree entirely with the noble Lord, Lord Mottistone, when he says that this matter should have been attended to but has not been attended to. This being our last chance to insert this amendment, I believe it should certainly be accepted. If there is anything undesirable about the amendment it is perfectly obvious that it could be put right in another place. I am not expert enough to say what is or what is not undesirable about the amendment, but I certainly believe that the basis of the amendment is very desirable and I do hope that your Lordships will support it.
Baroness Elliot of Harwood: My Lords, I have spoken in these debates because I have a very close association with consumer organisations—not with business as such but with all the consumer organisations which cover the whole country. It is a very wide spread of organisations and people who are deeply concerned with honesty and getting fair play for both the consumer and for the business person. I had hoped very much that the Government would put forward an amendment which we should all be able to support—including, I am sure the noble Lord, Lord Mishcon—and it is a disappointment to me that that has not happened.
I cannot express any further views on this amendment because it is a technical matter but it does seem to do something to continue the registration of business names so that people will be able to track down just what is happening. I think it would be a great pity if they could not do that.
Lord Trefgarne: My Lords, a good deal was said at the Committee and Report stages on this question of similarity between company names. I gave certain undertakings on behalf of the Government then and I should like to repeat them now. The Government are persuaded that there is a genuine problem here, and we accept that something has to be done. The noble Lord, Lord Mishcon, tabled his amendment at the Report stage. I said that the Government accepted the principle and I undertook,
"that the Government will bring forward amendments embodying the spirit … of what the noble Lord has proposed".
Very rightly and properly, the noble Lord, Lord Mishcon, quoted what I said at that time in the terms which I have repeated today.
It may be helpful if I begin by reminding your Lordships of the rationale for making any change at all in the law on company names. Very simply, it is that the present provisions of the 1948 Companies Act require a subjective decision to be taken on the desirability or otherwise of every proposed company name. This reponsibility is one which has proved virtually impossible to discharge satisfactorily, given the very large number of names already registered and the steady growth in new company registrations and applications for change of name. Accordingly, Clause 22 was designed to put the whole question on a much more objective basis, so that companies and company promoters would be able to judge from the terms of the statute the names which were likely to be unacceptable.
I concede at once that this approach was inadequate in so far as it could not deal with the problem of association and similarities. The public concern on

1285
this matter has been emphasised while the Bill has been before your Lordships' House. I do not now believe that any objective formula could be devised which would indicate whether one name was so like that of another company that it should not be allowed. Inevitably this must be a subjective judgment. Therefore, the Government have—and I want to emphasise this—accepted the principle of the noble Lord's proposal that a judgment by the Secretary of State must be reintroduced into company law.
The noble Lord's scheme has the immediate attraction that this judgment would fall to be exercised in a very much smaller number of cases; only those in which someone had seen an advertisement and registered an objection to a proposed company name. Such a scheme would of course impose new responsibilities on the department, with corresponding demands on resources, but these should be less than those entailed in administering a comparable discretion in respect of every application.
I hope the noble Lord will accept that we took his scheme up in good faith to translate into statutory form. In so doing, the department sought advice, as is normal, from those who are professionally involved in the incorporaton of companies. Consultation on this matter was inevitably curtailed. My honourable friend the Parliamentary Under-Secretary for Trade was able to discuss the proposals with the Law Society's Standing Committee on Company Law on 14th April and representatives of the Bar Council. Officials of the department have also been in touch with the Association of Company Registration Agents and the Institute of Chartered Secretaries and Administrators. Such organisations are, rightly, concerned not so much with the streamlining of administration within the Department of Trade as with the practical implications for companies themselves and their professional advisers.
As I have already indicated privately to the noble Lord, Lord Mishcon, the response to the proposed scheme for the pre-advertisement of a company name has been far from encouraging. The Government have been strongly urged to reconsider the scheme and find some alternative means of dealing with the problem of similarities. It has been represented to us that the advertisement scheme would be rigid, costly, would provide inadequate protection for existing company names and would delay the incorporation of new companies to an unacceptable extent. The department has studied in detail the nature of the provisions which would be required; this certainly demonstrates the complexity of the statutory provisions that would be needed to introduce a pre-advertisement phase into the process of registration when filled out with the necessary procedural rules and provisions for exceptional cases. The Association of Company Registration Agents consider that the procedure would be "expensive, unfair, confusing and time-consuming".
The Law Society's Company Law Committee have pressed the Government to deal with this from the opposite tack, along the lines of the provisions in Clause 24 of the Bill, and only this morning I received a letter from them reiterating their views, which of course they copied to the noble Lord, Lord Mishcon. In other words, instead of the promoter having to advertise a name before the company was incorporated,
1286
he would be entitled to register a company by any name which did not offend against the general principles of Clause 22; for example, he could not adopt a name which was identical to that of another company. If thereafter the name was found to be too like that of another company, the Secretary of State would be empowered to direct a change of name. Just as in the noble Lord's advertisement scheme, a company which felt its name was prejudiced would he free to draw the facts to the attention of the Secretary of State, but its opportunity to do so would not be limited to a short pre-registration period.
In the light of the representations that have been received, I do not believe it would be a responsible act on the part of the Government or of this House to amend the Bill at this stage by introducing a procedure in respect of which so many doubts have been expressed, and without making a further attempt to improve it. So far, the time for consultation has been very short—there have been no more than 14 working days since the Bill was reported—and we need to obtain the views of a wider constituency before coming forward with considered proposals. I very much regret that in the circumstances it has not been possible to table amendments by Third Reading, but I gave warning on 6th April that this might be unavoidable. I repeat my undertaking that the Government will amend the Bill in another place in respect of "too like" company names.
The noble Lord, Lord Mishcon, has asked me to say whether the Government agree that proposed names should be scrutinised before the company is registered. There is little I can add to what I have already said on that point. The point of principle which the Government have accepted is that a company whose name is already on the index should be able to take the initiative in objecting to a new name and be entitled to a decision by the Secretary of State on whether, in his opinion, the new name is too close to its own to be allowed. I hope that with the repetition of an assurance I gave at an earlier stage and the further amplification of the Government's position which I have given, the noble Lord will not press the amendment.
Lord Mishcon: My Lords, I should be doing less than my duty were I to concede to that request by the Minister. I do not wish to repeat the argument. I have already said that we should not put at risk the business community of this country, including the small business which we are all anxious to look after, especially at this stage, in such a way that they must deal—after they have been incorporated and started business (I have been through the various stages)—with somebody who says, "Your name is very much like mine and I am already on the register. I am now communicating with the Minister". To allow that situation is, in my view, impossible.
Does the Minister agree that when you say you are in agreement with the principle of an amendment which deals with pre-registration procedures, that means you will produce an amendment which will have, as its main purpose, protection pre-registration and not post-registration? That is how I construed the noble Lord's remarks. If they are capable of any other construction, I am sure he will point to the English that he uses with such felicity and tell me where my interpretation of that language is wrong.

1287
I got no such offer. I did not receive an offer which could be communicated to your Lordships that there would be an amendment in another place which would provide for pre-registration protection. In those circumstances, I have no alternative but to try to protect our business community, in particular small businesses, and to ask the House to express its view.
4.8 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 86; Not-Contents, 94.

CONTENTS

Airedale, L.

Lloyd of Hampstead, L.

Alport, L.

Longford, E.

Amulree, L.

McNair, L.

Ardwick, L.

Mais, L.

Aylestone, L.

Mersey, V.

Banks, L.

Meston, L.

Beaumont of Whitley, L.

Milne, L.

Beswick, L.

Mishcon, L.

Birk, B.

Morris of Grasmere, L.

Blease, L.

Mottistone, L.

Boothby, L.

O'Brien of Lothbury, L.

Briginshaw, L.

Oram, L.

Bruce of Donington, L.

Peart, L.

Byers, L.

Phillips, B.

Clancarty, E.

Ponsonby of Shulbrede, L.

Cooper of Stockton Heath, L.

Ritchie-Calder, L.

Cudlipp, L.

Robbins, L.

David, B.

Rochester, Bp.

Diamond, L.

Rochester, L.

Elwyn-Jones, L.

Rugby, L.

Gaitskell, B.

Sainsbury, L.

Gladwyn, L.

St. Davids, V.

Goronwy-Roberts, L.

Saint Oswald, L.

Gosford, E.

Seebohm, L.

Greenwood of Rossendale, L.

Sefton of Garston, L.

Hale, L.

Segal, L.

Hampton, L.

Shackleton, L.

Hanworth, V.

Shannon, E.

Henderson, L.

Simon, V.

Houghton of Sowerby, L.

Sligo, M.

Howie of Troon, L.

Somers, L.

Hylton-Foster, B.

Spens, L.

Ilchester, E.

Stamp, L.

Jacobson, L.

Stedman, B.

Jacques, L.

Stewart of Alvechurch, B.

Jeger, B.

Stewart of Fulham, L.

Kilbracken, L.

Stone, L.

Kinloss, Ly.

Underhill, L.

Lauderdale, E.

Wallace of Coslany, L.

Lawrence, L.

Wedderburn of Charlton, L.

Leatherland, L.

Wells-Pestell, L. [Teller.]

Listowel, E.

Whaddon, L.

Llewelyn-Davies of Hastoe, B. [Teller.]

Wilson of Langside, L.

Wootton of Abinger, B.

NOT-CONTENTS

Alexander of Tunis, E.

Cottesloe, L.

Auckland, L.

Cranbrook, E.

Avon, E.

Crathorne, L.

Bellwin, L.

Cullen of Ashbourne, L.

Belstead, L.

Daventry, V.

Bessborough, E.

de Clifford, L.

Bolton, L.

De Freyne, L.

Broadridge, L.

De La Warr, E.

Caccia, L.

Denham, L. [Teller.]

Carrington, L.

Drumalbyn, L.

Chelwood, L.

Dulverton, L.

Chesham, L.

Ebbisham, L.

Cockfield, L.

Eccles, V.

Cork and Orrery, E.

Effingham, E.

1288

Erroll of Hale, L.

Newall, L.

Exeter, M.

Noel-Buxton, L.

Faithfull, B.

Northchurch, B.

Falkland, V.

Nugent of Guildford, L.

Ferrers, E.

Orr-Ewing, L.

Ferrier, L.

Pender, L.

Fortescue, E.

Penrhyn, L.

Fraser of Kilmorack, L.

Redmayne, L.

Gainford, L.

Renton, L.

Gisborough, L.

Rochdale, V.

Glenarthur, L.

Romney, E.

Glenkinglas, L.

St. Aldwyn, E.

Gormanston, V.

St. Just, L.

Gowrie, E.

Sandford, L.

Greenway, L.

Sandys, L. [Teller.]

Gridley, L.

Selborne, E.

Hailsham of Saint Marylebone, L.

Selkirk, E.

Sempill, Ly.

Hawke, L.

Sherfield, L.

Henley, L.

Skelmersdale, L.

Home of the Hirsel, L.

Soames, L.

Long, V.

Stradbroke, E.

Lyell, L.

Strathspey, L.

Mackay of Clashfern, L.

Swansea, L.

Macleod of Borve, B.

Swinfen, L.

Mancroft, L.

Teviot, L.

Marley, L.

Thorneycroft, L.

Massereene and Ferrard, V.

Trefgarne, L.

Melville, V.

Trenchard, V.

Merrivale, L.

Vaux of Harrowden, L.

Milverton, L.

Vickers, B.

Morris, L.

Vivian, L.

Mowbray and Stourton, L.

Young, B.

Murton of Lindisfarne, L.

Resolved in the negative, and amendment disagreed to accordingly.
Clause 29 [Disclosure of names of persons using business names]:
4.16 p.m.
Lord Mishcon Lord Mishcon moved Amendment No. 2:
Page 37, line 16, at end insert:—
("and
(c) lodge a copy of the information referred to in this subsection with the Local Authority in whose area the business is carried on.").
The noble Lord said: My Lords, having, I hope with sufficient respect, already expressed my views on the observations made by the Deputy Leader of the House, I propose, with your Lordships' leave, to proceed with my amendment. The existence and the continuance of the Registry of Business Names has been debated at great length in this Chamber, and I should not have thought that your Lordships would have welcomed another full debate involving precisely the same issues. Indeed, that would have broken the whole of the principle to which I was hoping to have adhered in the exchange that took place earlier.
For the purpose of the Third Reading debate I must accept that the Business Names Registry is to cease to exist. I must further assume that any central form of registration must cease to exist. The amendment now before your Lordships deals with an attempt to protect the public—to protect, above all, the consumer, and to protect creditors, and to do so by way of a procedure completely different from anything ever suggested in your Lordships' House in connection with the Bill up to this very moment.
The procedure is as follows. There having been imposed the duty upon a firm to have the particulars,

1289
including the addresses, of the proprietors displayed at the main place of business, under the amendment it would also be the duty of the firm to see that a copy of the particulars is sent to the local authority in whose area the business conducts itself. This is a very simple amendment. Instead of having to travel to the business concerned, hoping that the door will be open and that there will be a welcoming courtesy if one wishes to inspect the particulars that ought to be displayed somewhere on the wall, or taking it for granted that one might not get from the firm which is behaving suspiciously, for example, as expeditious a reply to a written request for those particulars as one might want, one now has the simple task, under this amendment, of applying to the local authority, which will have kept an index of the particulars which are registered with it—particulars very easy to supply, because they are merely a copy of what ought to be exhibited at the place of business.
One might have thought that this carried implications of a yet further burden of debt either upon local authorities or nationally. Your Lordships will see from this amendment that it does not, because the charge for that registration is to be left to the local authority, with the proviso that it must make such a charge as will make this service at least self-paying.
My Lords, I do not pretend for one moment that this has the same advantages as other matters and other procedures which have already been debated in your Lordships' House, and I am scrupulously avoiding any discussion in regard to those debates. Again, it will be the last opportunity that your Lordships will have in this House of protecting the public in the way that the Consumers' Association want it protected, as does every public body that I can think of connected with trade and industry, and every professional body; and I hope your Lordships will feel that a short speech on this subject is as effective as, if not more effective than, all the long ones we have had upon another matter, another procedure, which, as I have said, we are not debating today. I beg to move.
Lord Trefgarne: My Lords, these amendments—I am referring, of course, to this one and the following one—give rise to issues both of substance and of administrative detail. First, we on this Bench consider that the proposed requirement for registration of information about business names with local authorities is unnecessary, as our own proposals for disclosure by the traders concerned will provide all the information which the public and the trading community need. As a result, what is proposed involves an unnecessary and undesirable extension of local bureaucracy, imposing still further costs by the public sector on private industry and commerce. It would also, of course, increase local authority manpower and costs for work, which bears little relationship to the general duties of the local authority. I note that it is proposed that fees should be charged to cover these costs; but if the proposed fees turned out to be inadequate, the deficit would have to be borne by the ratepayers. It would have been of interest to know whether the noble Lord had any communication with local authorities and their representative organisations before proposing to impose this additional statutory duty upon them.
The costs of a service provided by a local authority
1290
is bound to vary from local authority to local authority, and thus a proposal that the cost to individual authorities should be recovered by an appropriate level of local fees is bound to lead to considerable local variation. This seems certain to be confusing and to cause resentment among the traders affected. On the other hand, there would be obvious difficulties in determining a nationally applicable scale of fees which could be guaranteed to meet the cost of all local authorities.
What is proposed would involve an extension of public sector activity. As your Lordships are well aware, a major objective of the present Government is to push back the frontiers of the state. The amendment is of course technically defective, as noble Lords with more experience than I have of local government will have already perceived, in that it does not specify which local authorities are to undertake these new duties. Or, perhaps, had the noble Lord envisaged that the new duties would be undertaken concurrently by the counties and the districts? Surely it would be even more undesirable to require traders to register twice or more where their business straddles boundaries. There are 66 counties (or regions) in England, Wales and Scotland (including the three island authorities), whereas there are 422 district authorities (including the London boroughs). Whichever tier of local authority were to be chosen, the Government departments responsible for local government as well as the Department of Trade would have to find additional staff in order to provide guidance to the local authorities concerned and advice on the inevitable representations to Ministers.
Lord Mishcon: My Lords, I wonder whether the noble Lord the Minister will forgive me, but it might make the discussion rather easier if I were to intervene. I especially did not define the local authority because I did not want to be hoist with my own petard by it being said, "The county councils cannot do it hut, of course, the district councils could". So I deliberately left it in general terms, trying to get the principle through, and I thought the Minister would understand that. The local authority could be decided upon quite easily thereafter.
Lord Trefgarne: My Lords, I understand that the noble Lord was trying to persuade us to accept the principle, but the fact is that he tabled specific amendments to this Bill, and it is those that we have to consider, not the principles which are in the back of the noble Lord's mind and which he hopes will cover the deficiencies of his amendments.
Again, the amendments require local registration in every area where business is "carried on". This will mean that where business is done by travelling salesmen or mail order, multiple registration seems to be required in each area where customers are approached and contracts made. This will impose an intolerable burden on small businesses. If the noble Lord responds that it is only meant to require registration where there is a place of business in an area (which is not, of course, the effect of the amendment), even that will require multiple registration for many businesses. And for what purpose, where the information will be available anyway on demand under the Government's

1291
own proposals and there will be no necessary connection between a creditor and the place of business in question? Given that we have evolved what we consider to be a fully satisfactory alternative to the present unsatisfactory registry, I would ask the noble Lords to think again as to whether they should continue to press their amendments, which would impose considerable expense on industry and commerce at large as well as upon the public.
Lord Ponsonby of Shulbrede: My Lords, if I may make just one brief comment on the remarks of the noble Lord opposite, I thought that, in raising the objections which he did to the amendment set down in my noble friend's name and in my own name, he in fact himself made a very good case for the establishment of a central registry of some sort, and I found him a very powerful advocate in that cause. Of course, this amendment is not concerned with the establishment of a central registry but with the establishment of a local registry. But what I would hope is that the Government would realise the very great concern by the business community as a whole that there should be some form of registry. We have accepted, as has been made clear by my noble friend Lord Mishcon, that the old Registry of Business Names under the 1916 Act is quite dead. We accept that situation, but I think there should be some form of registry. I would hope that the House would look with favour on the amendment which my noble friend Lord Mishcon has moved, as it attempts to establish the principle of some form of registry.
Earl De La Warr: My Lords, I should be very grateful if at this stage I could ask a question about practicality. The noble Lord has said that he does not want to go over old ground again, and I do not think it is necessary to do so, but from what the noble Lord, Lord Ponsonby, has said it appears that he is looking for a register of some sort, even though it be (if you like) departmentalised geographically and spread around the country. What is not clear to me is whether he is talking about an attempt to get a 100 per cent. registry—that is to say 100 per cent. of existing business names registered somewhere. This is where there is a link with past debates. If I may say so, what was dealt with inadequately in previous amendments was that those who argued them never said how they would attack the question of getting up-to-date the existing, tattered, probably only 50-per cent-accurate register. It was on the problems of updating that it seemed to me the arguments fell down in terms of practicality. I am seeking for comments from the noble Lord. Is he trying to finish up with a register, though it be a series of local registers all over the country, which is up-to-date? Is he, therefore, going to demand that there be a sort of process of re-registration of existing businesses right across the country; so that we may end up with a series of local registers which will add up to 100 per cent. instead of the 50 per cent. to which it adds up now? If he can answer that question, then I think the House would be in a better position to assess the validity of his case.
Lord Mishcon: My Lords, with the leave of the House—and I am not now answering the debate, but answering a question—may I tell the noble Earl that the idea of this amendment is, I think, precisely what he has in mind. Under the Bill there will be a requirement for certain particulars to be shown at the place of business. That will be an obligation of everybody conducting a firm because the old Register of Business Names will go under the Bill. We will start off with a new registration of those particulars. A precise copy of those particulars will go to the local authority. Therefore, throughout the country, there will be, or ought to be, observance of this new provision; and this will mean that there will be (although scattered throughout the country) 100 per cent. correct, up-to-date registration of the particulars of firms.
Earl De La Warr: My Lords, I am grateful to the noble Lord for elucidating that point. All that I can say is that the mind boggles at the amount of work that will have to go into creating this 100 per cent. re-registration of all the 2·6 million existing businesses. I am sure that this is a real objection.
Lord Mishcon: My Lords, I find that the short winding-up speech that I promised will deal largely with the last point made. If to send a carbon copy of something, which you are obliged by an Act of Parliament to prepare in any event, is so onerous, then we are, all of us, saddled in our daily life with obligations so onerous that one would have thought it almost impossible to attend this House at all as a result of them. All that I ask for is merely a copy of what is already there to be sent to the local authority. This is a straightforward issue. I do not intend to complicate it. It is the last opportunity of those who are fearful of doing away with all registration of business names available in any public place for people to search and apply for copies. It is the last opportunity that this House will have to try in some measure to protect the public in this way. I can put it no higher; but I certainly put it no lower. I regard it, if I may say so, as the duty of all those who have favoured this principle in past debates to decide to support this amendment now.
4.35 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 67; Not-Contents, 101.

CONTENTS

Amulree, L.

Gaitskell, B.

Ardwick, L.

Galpern, L.

Aylestone, L.

Gladwyn, L.

Balogh, L.

Goronwy-Roberts, L.

Banks, L.

Gosford, E.

Beaumont of Whitley, L.

Greenwood of Rossendale, L.

Beswick, L.

Hale, L.

Boothby, L.

Hampton, L.

Briginshaw, L.

Hanworth, V.

Bruce of Donington, L.

Henderson, L.

Byers, L.

Houghton of Sowerby, L.

Cooper of Stockton Heath, L.

Howie of Troon, L.

David, B. [Teller.]

Jacobson, L.

Diamond, L.

Jacques, L.

Elliot of Harwood, B.

Jeger, B.

Elwyn-Jones, L.

Kilbracken, L.

1293

Leatherland, L.

Sefton of Garston, L.

Listowel, E.

Segal, L.

Llewelyn-Davies of Hastoe, B.

Shackleton, L.

Lloyd of Hampstead, L.

Simon, V.

Longford, E.

Sligo, M.

Mais, L.

Somers, L.

Mishcon, L.

Stamp, L.

Morris of Grasmere, L.

Stewart of Alvechurch, B.

Nathan, L.

Stewart of Fulham, L.

Oram, L.

Stone, L.

Peart, L.

Strauss, L.

Phillips, B.

Wallace of Coslany, L.

Ponsonby of Shulbrede, L.

Wedderburn of Charlton, L.

Ritchie-Calder, L.

Wells-Pestell, L. [Teller.]

Robbins, L.

Whaddon, L.

Rochester, L.

Wilson of Langside, L.

Sainsbury, L.

Wootton of Abinger, B.

St. Davids, V.

NOT-CONTENTS

Ailesbury, M.

Long, V.

Aldenham, L.

Lyell, L.

Alexander of Tunis, E.

Mackay of Clashfern, L.

Alport, L.

Macleod of Borve, B.

Avon, E.

Mancroft, L.

Balfour of Inchrye, L.

Marley, L.

Bellwin, L.

Massereene and Ferrard, V.

Belstead, L.

Merrivale, L.

Bessborough, E.

Milne, L.

Bolton, L.

Milverton, L.

Caccia, L.

Montague of Beaulieu, L.

Carrington, L.

Mottistone, L.

Chelmer, L.

Mowbray and Stourton, L.

Chelwood, L.

Murton of Lindisfarne, L.

Chesham, L.

Newall, L.

Cockfield, L.

Noel-Baker, L.

Cork and Orrery, E.

Noel Buxton, L.

Cottesloe, L.

Northchurch, B.

Craigavon, V.

Nugent of Guildford, L.

Craigton, L.

O'Brien of Lothbury, L.

Cranbrook, E.

Peel, E.

Crathorne L.

Pender, L.

Cullen of Ashbourne, L.

Penrhyn, L.

Daventry, V.

Redmayne, L.

de Clifford, L.

Renton, L.

De La Warr, E.

Rochdale, V.

Denham, L. [Teller.]

Romney, E.

Drumalbyn, L.

Rugby, L.

Dulverton, L.

St. Aldwyn, E.

Ebbisham, L.

St. Just, L.

Exeter, M.

Sandford, L.

Faithfull, B.

Sandys, L. [Teller.]

Falkland, V.

Seebohm, L.

Ferrers, E.

Selborne, E.

Fortescue, E.

Selkirk, E.

Fraser of Kilmorack, L.

Sempill, Ly.

Gainford, L.

Sherfield, L.

Gisborough, L.

Skelmersdale, L.

Glenarthur, L.

Soames, L.

Glenkinglas, L.

Spens, L.

Gormanston, V.

Strathspey, L.

Gowrie, E.

Swansea, L.

Greenway, L.

Swinfen, L.

Gridley, L.

Teviot, L.

Hailsham of Saint Marylebone, L.

Thorneycroft, L.

Trefgarne, L.

Hawke, L.

Trenchard, V.

Henley, L.

Vaux of Harrowden, L.

Home of the Hirsel, L.

Vickers, B.

Hylton-Foster, B.

Vivian, L.

Ilchester, E.

Young, B.

Lawrence, L.

Resolved in the negative and amendment disagreed to accordingly.
[Amendment No. 3 not moved.]
Clause 42 [Certain assistance for acquisition of shares prohibited]:
4.43 p.m.
Lord Noel-Buxton Lord Noel-Buxton moved Amendment No. 4:
Page 46, line 17, after ("acquisition") insert ("by another person").
The noble Lord said: My Lords, I am sure that the House is grateful to the noble Lord, Lord Wedderburn of Charlton, for drawing attention at the Report stage to the article entitled "Section 54 and all that" written by Mr. Ralph Instone of counsel. Mr. Instone has been kind enough to help me in the drafting of the amendments standing in my name on the Marshalled List. I hope that it will be for the convenience of the House if I address myself to all my amendments at once.
I move the first amendment standing in my name (Amendment No. 4) with a view to avoiding incompatibility with Clauses 44 and those that follow which empower a company to purchase its own shares, to which Clause 42 itself is complementary. The need for an express cross-reference to Clause 44 and those that follow (which for the first time empower a company to purchase its own shares, whether redeemable or not, as contrasted with mere redemption) is entailed by the substitution in what I shall call the new Section 54 of the generic term "acquisition" for the more specific "purchase or subscription". In the 1948 Act there could be no incompatibility between Section 54 and Section 58, whereas there plainly will be between the new Section 54 and Clause 44 and those that follow unless there is proper dovetailing together.
Regarding the second amendment, No. 6, subsection (2)(b) in particular is surely unsatisfactory as drafted, although the concept which appears to underline it is itself unobjectionable. Paragraph (b) begs the question of whether an "instrument or resolution" is required at all. What if a managing director of a large company authorises expenditure on a fixed asset within the limit which he is allowed to purchase on his own authority, knowing that the vendor intends to buy shares in the company? It would be reasonable to require two conditions of validity, but not those of paragraphs (b) and (c) as now drafted. The correct pair, I would submit, are those in my amendment. If, however, the Government are not insisting on express authorisation, an alternative formulation would be:
"(b) the thing is done in good faith in the interests of the company; and
(c) the doing of it is a proper exercise of the power in pursuance of which it is done".
I now refer to the next amendment standing in my name, No. 7. The phrase "employed in good faith" at subsection (3)(c) is misconceived. What must be meant is that the person has a genuine job, not just a fancy label to qualify him as a borrower. "Employed in good faith" will surely not do as a translation of "bona fide in the employment of", the phrase used in Section 54 of the 1948 Act. It is the job and not the fact of being employed which has to be genuine. If we must use the vernacular in accord with the present conventions of parliamentary counsel, I would prefer "genuinely in the employment of".
I now address myself to Amendments Nos. 8 and 9. I drafted them as one amendment; the latter is consequential on the former. I now appreciate that the word "by" has been left out after the first word of

1295
line 43. Even so, I would suggest that my wording has the merit of brevity.
Addressing myself now to my Amendment No. 10, I accept that this subsection is in essence already on the statute book and implements a second directive obligation. I am disturbed, however, by the antithesis between "balance sheet net assets" and "actual net assets". Counsel is of the view that you do not have to undertake an assets revaluation every time you contemplate a distribution in order to see whether it is lawful under the 1980 Act. Such a view would be absurdly impracticable in the case of large companies, as Clauson, J. said in Drown's case in 1937. The use in Section 40(1)(a) of the 1980 Act of the word "amount" rather than "value" reinforces this view.
Coming now to reductions of capital confirmed by the court, I do not take the Government's view that there is no doubt but that reductions of capital should free amounts for distribution. With respect, I would suggest this is just plainly wrong. When a reduction of share capital or share premium account is confirmed, a capital reserve is created which is not distributable until it has been realised (Section 39(2) of the 1980 Act). I attach more importance to adding express references to confirmed reductions of capital and share premium account (and to lawful dividends in subsection (5)) in subsections (4) and (5) than to any others of my suggestions. This is absolutely crucial in my view.
May I now address myself to Amendment No. 12. This amendment addresses itself purely to the matter of express reference to confirmed reductions of capital and share premium account and to lawful dividend, about which I have already spoken. A dividend may be a gift for the purposes of subsection (5)(a)(i); it is certainly caught by (ii). Again, the subsection must cover confirmed reductions of capital and share premium account. It is essential that all legitimate dividends should be expressly freed from any taint of illegality; otherwise, for example, ICI could never pay a dividend without first satisfying itself that no shareholder was currently buying more ICI shares. I beg to move.
4.52 p.m.
Lord Wedderburn of Charlton: My Lords, perhaps it would be useful if I say two or three sentences on these amendments, the noble Lord having made reference to my speech in Committee. I followed him with some sympathy in his early amendments from 4 through 6 to 7, but gradually as he came to what he himself called the most important part of the list of amendments he certainly lost my sympathy. My sympathy dwindles into opposition, if I may say so, when he comes to his amendment to subsection (5), because there he tries by way of a list to free certain specific transactions. One of the reasons why I wish to put this point is that I said in Committee that I thought the list approach—that is that financial assistance be unlawful except for a specific list of transactions—was still possibly an avenue to pursue. On reflection, I came to think it was not possible to pursue it, and that is why I have my name to the amendment which the noble Earl will move later.
The reason especially why I think one should not
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pursue it is that given in the noble Lord's Amendment No. 12, because if there were ever an easy way for the rogue to get round what he has understandably called the new Section 54, it would be a statute which allowed each of these transactions a dividend out of distributable profits or repayment of paid-up share capital or share premium account confirmed by the court, certainly in terms of the dividend paid by distributable profit. The rogue could plainly use that, in ways the noble Lord would not wish any more than I, as a way round the prohibition of financial assistance for the purchase of shares. I once thought the list would work. The noble Lord's list is really very short because it is all approved by the court except for the payment of the dividend. But that is his Achilles heel, and that is why I would oppose these amendments as a composite whole to the clause.
4.54 p.m.
Lord Mackay of Clashfern: My Lords, I should first like to thank my noble friend Lord Noel-Buxton for bringing forward these amendments and for the great courtesy he afforded me in giving very considerable notice of them some time ago so that we have had a considerable opportunity to think them over.
Before I deal with the detail of the amendments my noble friend has proposed, it might perhaps be convenient if I explained our present position with regard to Clause 42. The matters covered by our new Clause 42 are of very considerable importance to the business community. On the one hand, it is important that innocent transactions should not be inadvertently struck at by the new clause, and it is equally important that transactions which might be used in a sinister way by crooks or rogues, to use the term of the noble Lord, Lord Wedderburn, should not be allowed either. Accordingly, to strike the correct balance is by no means easy, and we thought it right to present to your Lordships at Report stage the Government's present position as regards Clause 42; to bring it out so that your Lordships could see how far we have got in this difficult matter.
The Government had been consulting for some time upon this matter with the bodies principally concerned, with a view to amending Section 54 in this Bill. We certainly do not claim that Clause 42 as it stands at present is our final position upon this difficult subject. The various bodies which have an interest in this matter have seen Clause 42, and some have seen Clause 42 in an earlier draft before it was put into the Bill. They are still considering in some depth our proposals in these matters. For example, we are expecting to hear shortly the considered views of the Law Society on this. We think it would he premature to reach a final conclusion on the precise form of this clause until these views have been expressed, and I hope your Lordships may feel that discussions today as these matters have been further focused would be useful, and then it would be right to allow the Government to consider further what should be done.
To illustrate how difficult it is to reach final views on this matter, could I underline the fact that the noble Lord, Lord Wedderburn of Charlton, who is very experienced in this area, has indicated that since we last discussed this matter he has, on further reflection, felt that to pursue the list approach has turned out

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not to be a particularly good idea? If a person as expert as he finds it necessary to reconsider his point of view, it is no wonder that I should find it difficult to avoid reconsideration.
May I turn now to the particular amendments. It will be appreciated that a great deal of what I have said applies to the amendments to be spoken to later on the same clause. Amendment No. 4 seeks to make clear that a payment of the redemption of purchase price in respect of a company's own shares would not fall within the definition of "financial assistance" in the clause. Our present view is that this may be already clear, but so far as the result is concerned we have very much the same point of view about the matter, although the precise relationship between Clause 42 and the clauses on purchase of own shares is a matter which requires further consideration. So from that point of view there is not a great deal between us and, as at present advised, we think that the clause as it stands is probably all right; but we shall be happy to consider it further in the light of what my noble friend has said today.
Amendment No. 6 seeks to simplify the drafting of sub-section (2)(b) of the clause and to link the proper purpose doctrine of subsection (2)(b) with the requirement that an action be done in good faith in the interests of the company by requiring that the action be expressly authorised by a resolution of members or directors of the company. We fully acknowledge that the drafting of our Subsection (2)(b) has been found difficult. It is often easier to understand a clause if you started off knowing what the clause is aiming at than reaching a conclusion about it when it is presented to you as a reader. We have had quite a lot of reaction from readers suggesting that they have not found this easy. For example, my noble friend Lord Selkirk expressed that view on the last occasion. We shall certainly take account of that point of view.
I think my noble friend was asking: does one require an authority at all? He gave an illustration of a director making a transaction within the limit of his authority. I suppose that in that case the manner in which his authority was limited would be the relevant instrument. However, we believe that there is a distinction which is worth drawing between paragraphs (b) and (c) of subsection (2), as some actions could meet one condition but not the other. We consider that the clause requires all three conditions of subsection (2) to be met, if a transaction is to be treated as exempt. I found impressive the alternative suggestion that my noble friend made in the course of his remarks, and we should certainly like to consider further whether that would help us to improve the clause.
So far as Amendment No. 7 is concerned, there are obviously differences of view as to whether "good faith" or "bona fide" is the better expression. On the whole, we have tended to go for the vernacular or for simplicity in this area, and we agree with the view that the question is whether the job is genuine. But I think that is probably accurately expressed by saying that the person requires to be "employed in good faith"; in other words, there is a bona fide employment or the person is, in fact, employed in a genuine or good faith manner.
Amendments Nos. 8 and 9 seek to improve the drafting of the last line of subsection 3(c). At the
1298
moment, we are not convinced that this represents an improvement, though we are grateful for the suggestion and will continue to consider it along with all other suggestions that may be made in the course of the discussions.
As regards Amendments Nos. 10 and 12, I find myself very much in line with what the noble Lord, Lord Wedderburn, said about these. There is, perhaps, a difference of policy between my noble friend and ourselves on this matter. At present, the Government do not share my noble friend's view. As regards the cases that he described, we believe that the test of sole or principal purpose is the important determinant of the lawfulness of a proposed payment. Such payments were thought by the Jenkins Committee normally to be innocent—and I emphasise "normally"—based on their view that the dangers arising from a company giving financial assistance were for minority shareholders and creditors only. However, the Government believe that this view is mistaken, and that to allow such a payment would undermine very much of the function of the Section 54 prohibition and the matter at which the new clause is aimed.
Permitting otherwise lawful dividends would, for example, allow a "predator" to borrow sufficient funds to acquire control of a cash-rich company, in the knowledge that he could then declare a lawful, substantial dividend from the assets of the company and repay funds borrowed from this dividend. This might well be art extremely undesirable commercial activity and we think that the prohibition should be able to catch it in such circumstances. The Jenkins Committee concluded that if the acquirer had to rely on the assets of the company to achieve acquisition, it was likely that the interests of minority shareholders and creditors would, at least, have been put to unacceptable risk, or that the company would have been made to part with assets for illusory consideration. But the objections to such activities go wider than this. Breaches of Section 54 have been significant features of many cases of asset stripping or share puffing, revealed in a series of companies inspectors' reports which have been produced over the years.
I thought it right to give our present views on the amendments which my noble friend has very carefully proposed. But I hope, in view of that explanation, and in the light of our overall approach to this matter and the open-minded attitude which the Government are taking up upon the point, that my noble friend may feel able to withdraw his amendment.
Lord Noel-Buxton: My Lords, I am very much obliged to my noble and learned friend for that very full response to my series of amendments. I am particularly obliged to him for making the points on lawful dividends, which I had not fully appreciated; and, of course, for the remarks of the noble Lord, Lord Wedderburn of Charlton. In recognition of the desirability of keeping the basis of the Government's discussions with interested parties consistent, and, of course, in view of what my noble and learned friend has said, I have no hesitation in begging leave to withdraw my amendment.
Amendment, by leave, withdrawn.
The Deputy Speaker (Viscount Simon): My Lords, I have to inform your Lordships that, if Amendment No. 5 is agreed to, I shall be unable to call Amendment No. 6.
5.5 p.m.
The Earl of Selkirk The Earl of Selkirk moved Amendment No. 5:
Page 46, line 21, leave out subsection (2) and insert—
("(2) Subsection (1) above shall not prohibit a company from doing anything if—

(a) it is done in good faith in the interests of the company and not for any collateral purpose; and

(b) it is authorised before it is done by the instrument or resolution conferring the power in exercise of which it is done; and

(c) it is authorised before it is done by a resolution of the directors stating that it is not done for the purpose of or in connection with financial assistance rendered unlawful by subsection (1) above; and

(d) it is done not less than fourteen days after either—

(i) the making of a statutory declaration by one or more directors specified in such resolution stating that it is not done for the purpose of or in connection with such assistance, or

(ii) the passing of a special resolution of the company in general meeting stating that it is not done for the purpose of or in connection with such assistance; and

(e) it is a transaction no party to which knows or ought to know that it is likely to be or to give rise to such assistance directly or indirectly.

(2A) (a) Where a person enters into a transaction with a company in good faith in reliance upon a declaration made in accordance with paragraph (d)(i) or a resolution passed in accordance with paragraph (d)(ii) of subsection (2) above, nothing in this section shall prevent that transaction being enforced by him unless he has reasonable cause to believe that the requirements of any of paragraphs (a), (b), (c) or (e) of that subsection have not been satisfied.
(b) Without prejudice to any liability imposed otherwise than by this section, where a company acts in contravention of this section a director who is in default shall be liable (jointly and severally with any other person so liable)—

(i) to indemnify the company for any loss or damage resulting from that contravention; and

(ii) to indemnify a person who has entered into a transaction enforceable by reason of paragraph (a) above for any loss or damage resulting from his entering into that transaction to the extent that that person is not so indemnified by the enforcement of that transaction against the company.").

The noble Earl said: My Lords, in moving Amendment No. 5, I should also like to speak to Amendment No. 11, which goes with it. I am grateful for what we have heard from the noble and learned Lord the Lord Advocate. He now tells us that this is an important subject. That is a very remarkable statement. It was not mentioned at all in the Bill as presented to the House. He now finds that it is important. I am delighted to hear that it is important, particularly when one remembers that what he said on the last occasion was that
"Section 54 has been criticised over the years as an unnecessary inconvenience to the honest and as being widely ignored or circumvented by the unscrupulous".—[Official Report, 7/4/81; col. 470.]
It strikes me as very odd that nothing amending that former Act was put into the original draft as presented here. Here is a clumsy piece of legislation, which is inhibiting the proper investment of money, because people are afraid of being caught up in business and the Department of Trade did nothing, nothing whatever
1300
to put that on a proper basis. We should congratulate ourselves that, at least, they are now alive to it and realise that they must do something about it, about which I am extremely glad.
I moved an amendment on this at Committee stage. The noble Lord said that the Government did not like it and would put in another clause at Report stage. The House was universal in saying that it did not like that either. So it seems to me that, as we are a revising Chamber, we ought to try to do something better. I, at least, encouraged the noble Lord, Lord Wedderburn, to have talks with the clearing banks in London to see whether those two sides could be brought together. There is nothing political about it. But it is foolish that perfectly legitimate loans in the ordinary course of business should not be made, without running into dangers which would lead into illegitimate channels. It ought to be within the wit of man to do that.
I felt that a combination of the very wide experience and deep study which the noble Lord, Lord Wedderburn, has done on those cases which came to court—in other words, the cases where something had gone wrong—and the London clearing banks, who are dealing with things which have gone right, would be valuable. There is no doubt whatever that the amendment which I put down, and which is also in the name of the noble Lord, Lord Wedderburn, is indeed very much better, and that it is a step forward.
May I explain what it does? It takes out a lot of the woolly words which were in the Government's amendment: words such as "principal purpose"; the astonishing word "contemplated" and "material extent" at the end. It lays down five fairly clear conditions. The first is that the company making the application must act in good faith, and say that it is in the interests of the company to borrow the money. Secondly, they must be empowered to do this. Thereafter, there must be a resolution by the company as to what they want to do, and they must not do anything which would be considered improper in the purchasing of shares. There could then be an interval of 14 days, which would follow either a general meeting of the company or a resolution of the directors, followed by a statutory declaration. This is to allow things to happen and, if necessary, objections to be raised.
One of the points which is particularly made by the Government is that they still want the banks and other lending organisations to be a kind of watchdog. They do not want to let them off at all. Therefore, we come to the next subsection to which I should like to draw the attention of your Lordships. It means that the banks should not get off the hook altogether. It makes it quite clear that if a situation arises in which the banks know or should know that any of the conditions laid down to which I have referred are being breached, they will not then get the benefit of the indemnity which would follow if all those conditions had been fulfilled. It places a very real responsibility upon them. These words are repeated in subsection 2(a):
"… he has reasonable cause to believe that the requirements of any of paragraphs (a), (b), (c), or (e) … have not been satisfied".
This goes a very long way towards trying to make a clear distinction, which I believe is very necessary, to enable the banking system to work to its full extent.
The noble Lord has made a great deal of play about consultation. I will tell him my information about that. No consultations are proceeding at present; no consultations have taken place in the last year; in fact, no consultations worthy of the name have taken place in the last 10 years. I am not going to say that letters have not been exchanged, but the truth is that no serious efforts have been made by the Department of Trade to put this into proportion. They have allowed it to slide on. It may be a difficult question, but I really do think that something is required. In this amendment I believe we come very near to resolving what is always a very difficult decision. It is important for the economy of this country. I hope that the Government will be able to accept the amendment or that they will give a very full undertaking that they will bear in mind what we have said. I beg to move.
Lord Seebohm: My Lords, I support this amendment purely from a practical point of view, having been in the seat of lending money for very many years and having had to contend with Section 54 and its predecessor in the 1928 Act for a very great number of years. If a company decides to buy another company, it will very probably be necessary to borrow part of the purchase price from its bankers.
If Clause 42 remains in the Bill in its present form, the branch manager will still be in considerable difficulties. The branch manager will need to satisfy himself that repayment will not come from any transfer of assets from the new subsidiary. On the other hand, the usual reason for such a purchase is the rationalisation of a group to bring a new subsidiary into the scheme. If this happens and any money from the subsidiary is used to reduce or repay the group bank borrowing, then there will have been a breach of Section 54, or its successor.
No time limit is specified after which the purchasing company or the bank are in the clear. This must be contrary to public policy, which is surely to encourage rationalisation, as is demonstrated by the fact that one can transfer group assets from one company to another within a group with considerable concessions on stamp duty. We have heard today that the Government are not satisfied with Clause 42 as it stands. They said at the Report stage that they would introduce a new clause.
I am also under the impression that the Government believe that the kind of case which I have described occurs only occasionally. Let me say that there are many hundreds of cases every year when care has to be taken not to offend under Section 54, with the result that various tortuous schemes such as the liquidation of a subsidiary have to be adopted. I am not entirely satisfied that this amendment gives to the banks as much as they would like, but common-sense surely dictates that this minimal protection is in the national interest and in no way helps the criminal who will be even further deterred under our amendment than he would be under Clause 42 as it now stands. Therefore, I strongly recommend the amendment.
Lord Boothby: My Lords, I think that the arguments put forward by the noble Earl, Lord Selkirk, are quite unanswerable. He has proved convincingly that action is required now because it has not been taken for
1302
years and should have been, long ago.
Lord Mais: My Lords, I hope that the Government will give favourable consideration to this amendment. As the position is now, a finance institution or a clearing bank makes a loan quite innocently in a situation which may ultimately prove to be a prohibited transaction. As it stands now, if my interpretation is correct, they would not be able to recover their loan under any circumstances. This seems to me, quite apart from the effect on the financial institutions, not to be in the interests of industry as a whole. I should have hoped that the Government would have been able to accept the amendment.
5.16 p.m.
Lord Wedderburn of Charlton: My Lords, before the noble and learned Lord replies to the mover of this clause, may I put to him that while I find it a compliment that he should put upon a slight emphasis of my mind the importance that he ascribed to it, nevertheless it cannot allow the Government—I say this without hostility to them, at least on this occasion—to escape from the fact that this is a legislative Chamber. If the Government come forward with a Companies Bill and say, "We haven't quite made up our minds", then they cannot ask this House not to make up its mind if it comes to a view.
Having heard the experience which lay behind the remarks of the noble Lords who have already spoken, I need say no more about the bad situation in which the law finds itself in terms of hitting the innocent, particularly when there is a case to be made (I am not sure it is a very big case) that this is some kind of legal impediment in the way of provision of capital that would otherwise be provided. I am not sure how big an impediment it is, nor of how much research has been done upon it. But that there are such cases I am sure the noble and learned Lord will not deny. That is why the Government decided, plus the fact that they had their purchase of own shares clauses, to do something with Section 54.
If I may touch upon one or two of the legal merits which would assist the innocent and which would be more likely to catch the guilty in regard to financial assistance for purchase of own shares, in my submission this would rest first upon the fact that although it uses the same definitional approach as the Government's subsection, the new subsection (2) contains many advantages, especially in relation to the new subsection (5). As the noble and learned Lord is obviously going to reply to this discussion, I submit that the omission of the words "to a material extent" in subsection (5)(a)(ii) is important.
Secondly, it drops the test—this the noble and learned Lord has already told us this afternoon is a central point of the Government's clause—of principal purpose. In dropping it, it inserts instead the test of knowledge, actual or constructive. In the phrase of the Master of the Rolls, Lord Denning, the directors are the very mind and will or nerve centre of a company. That is why I said that the rogue in the boardroom could manipulate the purpose but he cannot manipulate that which the company knows or ought to know, which is much more open to evidence attributable in terms of a prosecution.

1303
Thirdly, I believe that our clause is superior in replacing the Government's subsection (2)(b) relating to that which is contemplated. It is replaced by something which must be authorised but it is something which must be authorised before it is done. On that I would lay considerable stress, because it does not allow for any retrospective authorisation and it must be done in the interests of the company and not for a collateral purpose. Here I join with the noble Lord who spoke to the previous amendment, in that he wanted something which must be done in the proper exercise of a power. It is a well-known phrase in company law, accepted on all sides, that it must not be done for a collateral purpose other than the purpose of the best interests of the company, which includes the authority. Therefore, I would ask the Government whether they do not accept that this is a slight improvement.
Fourthly, there are the two requirements in regard either to the statutory declaration by the directors or to the special resolution with the fortnight cordon sanitaire, as it were—14 days in which people can object to this, be they shareholders or others. Lastly, there is in my submission a very important point which has not been mentioned to your Lordships this afternoon on this amendment. It tries to give some certainty to innocent third parties; as the noble Earl has suggested, and others with more experience of the banking world have suggested, the new subsection (2A) would allow the innocent third party to enforce transactions once he surmounts these hurdles. After all, what is he being asked to surmount? He is being asked to surmount a hurdle which says that he will rely upon the resolution or the declaration, and he has no reasonable cause to believe that any party to the transaction could know, or is likely to know, or ought to know, that it was likely to give rise to the prohibited effect. If we add subsection (2A) to subsection (2)(e)—I am sorry, the noble and learned Lord is looking at me in astonishment; the new subsection (2A) refers back, of course, to subsection (2)(e).
Finally, the new subsection (2A) also includes in paragraph (b) a civil remedy expressly—and this I would urge upon the Government as a reason for accepting this amendment this afternoon at the last moment. Why is it that Parliament constantly puts on the statute book sections which say, "Thou shalt not do" X, Y or Z, and if you do X, Y or Z you will be prosecuted, and then of course the courts have to look to see whether it was Parliament's intention that the person injured by the doing of X should have a civil remedy by injunction or damages. I know it has been said in your Lordships' House not too long ago that the tortious civil liability for doing damage by unlawful means does not really exist; but of course the courts are at it every day and developing that liability, and recently in the Court of Appeal, and only today in the Privy Council, the noble and learned Lord, Lord Diplock, delivered a fascinating judgment in The Times law reports on this very subject. So that it does exist, and of course the case in this area—the Belmont Finance Corporation case—was a conspiracy to use unlawful means; that is, to break Section 54 by giving financial assistance for the purchase of company's own shares, which gave rise to a civil action.
1304
It was a civil conspiracy to use unlawful means.
So while retaining, as we do, in this amendment all the existing civil liabilities without prejudice to them, why not say that the person (it may well be the bank) who has surmounted all the conditions in paragraph (a), lent the money and then found, despite all, that someone in the middle of it (after an inspector's report, no doubt) has broken the fundamental obligation not to allow his company to finance the purchase of these shares—a third party who has got himself into this position—has a civil remedy?
I should feel less strongly about this if we had a sensible and co-ordinated and coherent body of enforcement machinery for our company law, but of course we do not have that. It is not necessarily anybody's fault but from the Council for the Securities Industry, the Take-Over Panel, the Department of Trade, the fraud squad, the Director of Public Prosecutions, the inspectors to a host of other people, nobody quite knows what anybody else is up to. This is perhaps the odd case where the civil case in the courts ought to be encouraged, and I see no reason at all why this House should not express its view. Even on this particular point I would urge noble Lords to vote for this amendment, because this is something which urgently needs to be said, that people who break this sort of obligation in regard to the damage that they cause to that sort of innocent party ought to be obliged to compensate them in the courts. I hope that noble Lords will support this amendment.
Lord O'Brien of Lothbury: My Lords, I gave my strong support to an earlier amendment tabled by the noble and learned Earl, Lord Selkirk—an amendment which was not satisfactory to the Government. I was extremely pleased that that did not mean that the subject was then put to bed with what I would take to be the wrong answer and that further consultations and thoughts have been given to this very important subject, resulting in the amendment which is now before your Lordships. It seems to me to be no inconsiderable achievement to have an amendment put forward by the noble and learned Earl, Lord Selkirk, joined by the noble Lord, Lord Seebohm, and the noble Lord, Lord Wedderburn of Charlton, and I should have been very happy for my name to have been added to those. When we have the noble Lord, Lord Mais, also adding his voice in favour of this amendment I hope the Government will take it very seriously.
I was glad to hear from the noble and learned Lord the Lord Advocate that the Government's mind is not closed on this matter, as indeed on other matters in connection with this Bill, and certainly I should be sorry if satisfaction was not given to those who in my opinion, are justly concerned about the missing of an opportunity to put right a position which has prevailed for far too long under the Companies Act.
It is true, of course, that if the noble and learned Earl does not get satisfaction this afternoon he may put the matter to the vote, and possibly then party loyalty will overcome common sense and we may get the wrong answer. I hope, however, that the Government will at least keep the matter in being. I should like them to accept this amendment, but if they do not accept it I hope they will give assurances satisfactory to the noble and learned Earl which will enable the matter

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to be further considered, with a result which, in the end will give satisfaction at least to me and to others who feel strongly about it.
Lord Mackay of Clashfern: My Lords, I should like to join in the congratulations which have already been expressed in what I might call the assembly of this team—my noble friend Lord Selkirk, the noble Lord, Lord Seebohm, and the noble Lord, Lord Wedderburn of Charlton. I think we are all agreed about the importance of this subject. Certainly I have always taken the view that it was an important matter and a matter which the Government wish to take the earliest possible opportunity to deal with.
I should like to deal first with a matter raised by my noble friend, suggesting that there had been no consultation. The situation, as I understand it, is that the Committee of London Clearing Bankers—and I mention them particularly because I understood that he was in consultation with them—in February of this year received a very full account of the department's first thoughts on the scope for amending Section 54, which set out the view that an exemption should be provided for an action which did not have as its sole or principal purpose the giving of financial assistance.
The committee also received a first draft of the department's new clause, and comments from the committee were received. Consultations are still continuing with the various bodies that we have already consulted. I mentioned the committee particularly, but also the CBI, the Law Society of England and Wales and the Law Society of Scotland, among others, have been consulted. I should like to make it abundantly clear on behalf of my right honourable friend the Secretary of State for Trade and the other Ministers in his department that they would welcome any further consultation or representations upon this matter that the Committee of London Clearing Bankers would seek to put forward. What we are attempting to achieve is as much satisfaction to everybody as it is possible to achieve. There are, of course, difficulties in satisfying everyone, as we all know.
Therefore, my Lords, the situation is that the consultations are continuing and an open invitation is extended to anyone who wishes to participate in them on Clause 42, and as my noble friend Lord Noel-Buxton, said, there are advantages in a continuing consultation of this sort in keeping them on the same basis; in other words, that people know what they are referring to and can take account of new or different ideas as they are put forward.
Lord Boothby: Yes, my Lords, but may I ask the noble and learned Lord how long these consultations are going on? They could go on for years.
Lord Mackay of Clashfern: My Lords, the object of putting this clause forward at the Report stage in this House was so that the matter would be dealt with satisfactorily in the course of this legislation. Therefore, the consultations will certainly be concluded in the course of the completion of this legislation through its stages in the other place; hopefully, we will complete our consideration of this Bill this afternoon. So that the time limit is, as it were, the preparation of this legislation, and consideration of it now in the other
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place, with, of course, the opportunity for this House to consider again amendments which are made to the Bill in the other place. Therefore, I do not think that there is any force left, whatever force there may have been in the past in the point about delay on this matter. The department is certainly seeking to consult now and seeking to have the views of all interested parties as soon as possible in order that this matter should be finalised.
I turn from these more general matters to some of the matters about the amendment which has been proposed. My noble friend has explained his reasons for doing so. The first particular proposal that has caused us a certain amount of, perhaps I should say, surprise is the new provision at subsection (2)(e) at the top of page 3 of the Marshalled List:
"it is a transaction no party to which knows or ought to know that it is likely to be or to give rise to such assistance directly or indirectly".
My noble friend explained that one of our concerns was that people might be able to close their eyes to difficulties, in relying, say, on a document. I certainly accept that this clause goes in the opposite direction to that, but it seems to go extremely far in that direction. How could a banker know that no other party to the transaction "knows or ought to know that it is likely to be or to give rise to such assistance directly or indirectly"?
Lord Wedderburn of Charlton: My Lords, if I may intervene, it would not be his job to surmount that burden of proof. Would the noble and learned Lord not agree that he would have to have, under the next subsection, (2A), no reasonable cause to believe that?
Lord Mackay of Clashfern: My Lords, I have tried in my general consideration of this matter to take account of (2A) to which the noble Lord is now referring. My difficulty is to see how one could form any reasonable view. Let us say the situation was the payment of a dividend by a company with a very large number of shareholders. If I am concerned in that transaction in some way, how have I got the remotest basis for finding out whether a shareholder who is going to receive the dividend may use it to purchase shares in the company? I quite understand that subsection (2A) is intended to deal with this point, but my great difficulty is understanding how it does so. I should certainly be glad to hear an explanation from anyone who wishes to offer it as to how this is supposed to work. That is a very fundamental matter.
Of course, I can see that the desire to make sure that this clause is sufficiently all-embracing to catch all the bad transactions has prompted something of this sort. If I were allowed to guess the authorship I could perhaps do that, but I will not press my luck too far. The difficulty about it is how does the other party in a transaction which involves perhaps hundreds, thousands of parties, have a way of starting up to find out whether or not there is any such thing?
If I can go on to say a little more about (2A)(a), it allows someone to rely either on a statutory declaration or on a resolution, because there are two branches to (d) on the previous page, (d)(i) dealing with a statutory declaration and (d)(ii) dealing with a resolution of the company. I can see the possible use of a statutory

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declaration in assuring people of a state of facts, because you have the oath of the person making the statutory declaration, and, depending on who he is, it might be worth something; it might be that you have something to rely on. But I have considerable difficulty in seeing how a resolution has anything to do with a state of facts; merely because a company resolves to say something does not make it a fact, unless we are dealing with Alice in Wonderland.
The third point I make about the amendment is on paragraph (2A)(b), and the noble Lord, Lord Wedderburn, attached importance to this provision. I have found it hard to understand how this provision works. Again I would be happy to have my difficulties resolved. First, it seems to assume the possibility of liability in relation to this matter apart from this section; it opens in that way. And then it talks about "a director who is in default". I have difficulty in being certain of what is meant by that, although I am able to form some view that it is somebody who is in some way participating in the transaction knowing that it is not right, or something of that sort. Then it says "shall be liable (jointly and severally with any other person so liable)". I cannot understand at the moment what the "so" refers to, how the other person is to have the same sort of liability as the director who is in default, unless he is also a director in default.
Then, if one comes to the second paragraph of (b), that is (b)(ii), there seems to be a liability "to indemnify a person who has entered into a transaction enforceable by reason of paragraph (a) above"; that is, that the man in question is entitled to enforce his transaction and get the benefit of the transaction. But if he has any loss at all this person responsible under (b)(ii) is going to be bound to indemnify him. Does that mean—because at first sight it would seem to mean—that if a person makes a bad bargain of this kind but he is entitled to enforce it, just because it happens to be a bad bargain commercially, he can pass the loss he has sustained on to the person who is to give this indemnity, because as far as I can see so far there is nothing to prevent that particular construction? It may well be that I have not understood it right, and if so I have to apologise for that. But these are our preliminary thoughts upon this particular matter.
There is also a matter with regard to the definition of transactions involving deferred payment—this is Amendment No. 11 particularly—which are to be treated as financial assistance under the clause. These would be extended to include transactions involving transfer of something other than cash as payment. This is a point which we approach with considerable sympathy. We shall certainly take it into account in our further consideration of the clause. The amendment would make explicit that the assistance to which sub-paragraph (ii) of paragraph (a) refers includes assistance given otherwise than by the payment of money. We consider the expression used in the clause as presently drafted—"other financial assistance"—is quite wide enough to include such assistance, and so we do not at present see that this change is necessary. But this is a matter which we shall certainly be glad to consider further.
Thirdly, such "other financial assistance" is to be
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extended to include any assistance which reduces the company's net assets. This is the most important of these changes because it eliminates a significant feature of the new element of the definition of "financial assistance" contained in Clause 42; that is, that the qualification that assistance other than those types of arrangement explicitly defined as financial assistance in paragraph (5)(a)(i) should be regarded as financial assistance only if it reduces net assets to a material extent.
As I explained in the debate on Report, the purpose of this provision, which would be frustrated by the amendment, as I think the noble Lord made clear, is to allow companies to rearrange their assets in order to facilitate a takeover or group reorganisation, or to provide assistance to someone wishing to acquire its shares by provision of information or payment of minor costs associated with the acquisition, so long as there is not a significant reduction of assets. This is a liberalisation of Section 54, which the Government believe will afford a useful degree of flexibility to companies without opening up new scope for abuse. It is consistent with Article 23 of the Second Directive on Company Law in that the net asset reduction test does not apply to financial assistance of the kind prohibited by Article 23. It might be worth adding that net assets in this context are not to be arrived at by reference to the balance sheet, but by reference to the actual value of the underlying assets and liabilities.
Having said all that—and I am sorry that it has taken a little time, but I do so out of respect for the amendment and to indicate that we have endeavoured to consider it—I should like to suggest to your Lordships, and particularly to those noble Lords who have supported this amendment, that the right course would be to allow us to continue with the process which I have outlined. I undertake to your Lordships that we shall take the fullest account of all that has been said today in support of the various aspects of these amendments, and we shall see whether, on balance of the consultation, we can incorporate all or any of the features which have been put forward as improvements in the approach that we have already taken.
Lord Wedderburn of Charlton: My Lords, before the noble and learned Lord sits down—and I intervene because I know that the noble Earl, Lord Selkirk, will reply to the debate and therefore this is the only way in which I can ask a question—will he perhaps reconsider his castigation of the subsection and paragraph on civil liability on page 3 in paragraph (b), in the light of the fact that any other liability plainly would include liability for conspiracy in the cases which I mentioned in my speech; that anyone otherwise so liable would obviously include such a conspirator or, indeed, a director who was liable as a constructive trustee; that the words "in default" are adopted because they are in the Government's own subsection (7), and this amendment adopts the words "a director who is in default" as the Government put them forward themselves?
The other point that the noble and learned Lord made, that this does not work, might well be answerable by simply saying that the transaction remains illegal even though enforceable under the new subsection (2A), and therefore anyone who suffered loss from it would receive compensation.
Lord Mackay of Clashfern: My Lords, perhaps I may answer that question. I should not like to have my remarks characterised as castigation; I certainly did not intend them to be construed in that light—not at all. I intended them simply to indicate difficulties that had occurred to me in a fairly preliminary consideration of the amendment. I am certainly glad to hear some of the explanations that the noble Lord, Lord Wedderburn, has given. So far they have not entirely satisfied me that I was completely wrong. For example, I do not think he has explained why it is "so" liable; indeed, his explanation would seem to be that it was not "so" liable but liable in some other way, but that is by the way. I certainly did not want to give any impression that I was treating these amendments in any way that could be appropriately described as castigation. I should perhaps also point out that "in default" in subsection (7) is in relation to criminal liabilty.
The Earl of Selkirk: My Lords, I should like very warmly to thank noble Lords who have supported this amendment. I should particularly like to thank the noble Lord, Lord Wedderburn, who I know has spent a great deal of time and trouble putting this amendment together. I am very grateful to him and I think that the House should be grateful to him.
The noble and learned Lord, Lord Mackay, has criticised this amendment in many ways. I would venture to think that any amendment dealing with this subject will always be open to some degree of criticism, and there is not much to be gained by arguing the points of law in detail. I am worried about this because the Department of Trade has shown a great deal of prevarication here. I am suddenly told that it is an important matter, but the department did nothing at all about it in the original Bill as it came to this House. With regard to consultation, there may be different interpretations; whether or not one letter makes a consultation is a matter which we can all consider. Let us be frank, this has been here for 50 years; it has remained untarnished on the statute book for 50 years. What was the Department of Trade doing during that time? They knew perfectly well the difficulties that were taking place. Will the noble and learned Lord give an unqualified undertaking that the Government will amend Section 42 before it comes back to this House? If he can give that unqualified undertaking, I shall not ask your Lordships to divide.
Lord Mackay of Clashfern: My Lords, it is a little difficult to give an absolutely unqualified undertaking, but it certainly seems to me to be in the highest degree likely that we shall have to amend this clause. I do not wish the House to think that I can say in what directions exactly, or to what extent exactly, the clause will be amended, but I certainly believe that the clause will be amended. I think I can undertake that the Government will propose an amendment to this clause in the other place.
The Earl of Selkirk: My Lords, I think we should accept that as an undertaking beyond belief that an amendment in another place will be proposed. In those circumstances, I think that we have brought the Government to a position to which they did not
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necessarily want to come, and I am extremely glad to have done so. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.48 p.m.
Lord Noel-Buxton Lord Noel-Buxton had given notice of his intention to move Amendment No. 6:
Page 46, line 27, leave out paragraphs (b) and (c) and insert—
("(b) the thing done is a proper exercise of the power in exercise of which it is done; and
(c) it is done in pursuance of a resolution of the company in general meeting or of the directors of the company passed in good faith in the interests of the company and which expressly authorises the thing or a class of things which includes it.").
The noble Lord said: My Lords, we have already dealt with this amendment.
[Amendment No. 6 not moved.]
[Amendments Nos. 7, 8, 9, and 10 not moved.
The Deputy Speaker (Baroness Wootton of Abinger): My Lords, I have to point out that if Amendment No. 11 is agreed to, I shall not be able to call Amendment No. 12.
[Amendments Nos. 11 and 12 not moved].
5.49 p.m.
Lord Trefgarne: My Lords, I now rise to move that this Bill do now pass. In commending this Bill to your Lordships on the occasion of its Second Reading, I referred to the significant contributions which it makes within the field of company law to a number of broad policy objectives: helping small firms; reducing unnecessary burdens on companies; streamlining Government administration; countering crime and misconduct. I venture to suggest that, tested against these objectives, the Bill to which your Lordships have just given a Third Reading is an even better Bill than the Bill which we first debated some two months ago.
We have made a number of valuable technical improvements to the accounting provisions. We have found a certain amount of common ground in the field of company names. We have had more than one vigorous debate on the question of business names, and, while I would not claim that we have identified so much in the way of common ground on that subject, the House has rightly subjected the issues and arguments to the closest scrutiny. We have made some useful amendments and additions to the miscellaneous and supplemental provisions of the Bill. I would mention in particular the new clause which is designed to achieve the good consolidation of the Companies Act that all concerned so earnestly wish. Above all, perhaps, we have incorporated into the Bill the clauses that will enable companies to purchase their own shares—a major advance in company law which will be of direct benefit to many companies in the future.
As is to be expected on a Bill such as this, the Government have also accepted the responsibility of tabling additions to the Bill in due course to meet points which have been made in debate in this House. Paramount among these commitments is the Government's declared intention to bring forward proposals to amend the law relating to the disclosure of interests

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in shares, including provisions to require disclosures by concert parties. My Lords, this is a large Bill, a wide-ranging Bill and indeed a reforming Bill. I beg to move that it do now pass.
Moved, That the Bill do now pass.—(Lord Trefgarne.)
5.51 p.m.
Lord Ponsonby of Shulbrede: My Lords, in moving that this Bill do now pass the noble Lord said that he thought it was a better Bill than when it entered your Lordships' House. It is certainly a larger Bill than when it entered your Lordships' House. I think that our initial debate at the beginning of the Third Reading today showed one of the reasons for the dissatisfaction of the House at the way this Bill has proceeded through the House. The Bill which your Lordships have before you today is a Bill of 131 pages with 79 clauses. When it was brought before the House at Second Reading it had only 109 pages and 62 clauses. It has increased by 25 per cent. during its passage through this House. There have been 17 new clauses added to the Bill since the Second Reading.
I consider that there is an element of discourtesy to the House in bringing before your Lordships a Bill in a fairly undigested form, to the extent that it is necessary to table a large number of Government amendments during Committee stage and Report stage. Indeed, the noble Earl, Lord Selkirk, in moving the last amendment made specific reference to this. I should have thought that the Government should be the master of their own business, and should be able to treat this House with sufficient respect that when they bring business before the House that business is in the shape and form in which this House wishes to consider it, and on which the Government wish the House to do its duty in revising the legislation put before it. Only in this way can we in fact do our job properly.
However, having said that, I should like to take the opportunity of paying tribute to the courtesy of the Government Ministers involved in the passage of this Bill. I know that they have often found themselves labouring under great difficulties in a number of these fields. But so far as the Opposition is concerned, we have certainly received continuous courtesy from the Government Ministers, and I should like to thank them for that.
On Question, Bill passed, and sent to the Commons.

ECC 11th Report: Environment
5.54 p.m.
The Earl of Cranbrook The Earl of Cranbrook rose to move, That this House takes note of the report of the European Communities Committee on environmental assessment of projects (11th Report, H.L. 69).
The noble Earl said: My Lords, I move that this House take note of the report of the Select Committee on the European Communities, the 11th Report of this Session, on the environmental assessment of projects. The document under consideration by the Select
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Committee was the draft directive issued under reference 7972/80 or, under the Commission's reference, (80)313, which was forwarded to the then President of the Council on 16th June 1980. The draft directive is an element of the Community's environmental action programme, which has been the subject of an earlier report from the Select Committee, the fifth of this Session, and has also been debated in your Lordships' House on 6th April.
The aim of the present directive is to ensure that member states apply common procedures in the prior assessment of the environmental effects of proposed development projects. To attain this end the directive prescribes in some detail the procedures to be adopted in undertaking an assessment, including the nature of the information to be sought and the general form in which it is to be presented. It specifies the consultations that must take place and provides for public information on all issues.
The draft directive was reviewed by Sub-Committee G of the Select Committee, with the assistance of Mr. Brian Clark as specialist adviser. I should like to record the warm thanks of the Sub-Committee to Mr. Clark for his effective and valuable help. I should also like to record my personal thanks to Mr. Clark and to Mr. David Beamish, the clerk, for the odd and often uncongenial hours at which they were prepared to work in the final throes of drafting this report.
In the preparation of the report, oral and written evidence was received from sources which included the Department of the Environment. It also included European and British environmental and industrial groups; three firms of consultants with experience in the practice of environmental impact assessment, and also the national associations of local planning authorities. In addition, written evidence was received from one individual and from some 14 organisations of various kinds, presenting the views of a broad selection of affected interests, including planners, developers and other land-users, ecologists, and conservationists. On behalf of the sub-committee, I should like to express thanks to the witnesses for the time and trouble they took in coming before us.
With some small exceptions (in these cases the relevant papers are placed in your Lordships' Library) the evidence is printed with the report. The result is a bulky document of some 166 pages. I draw your Lordships' attention to the fact that also printed with the report is the text of the draft directive itself. Without this, committee members felt that items of detailed comment and criticism contained in the report and in associated evidence might prove hard to understand in practice. As it is, I feel that these red covers now contain material from a sufficiency of diverse origins, and presenting a wide range of viewpoints, and I hope that it will serve as a useful appraisal and as a background reference in the further discussions of this important proposal: not only those discussions taking place here tonight in your Lordships' House but others that will undoubtedly follow inside and outside this House.
I propose to concentrate in these few minutes on certain issues that seem to me sure to be raised again in the course of future debates on this draft directive, (80) 313. I should like to mention certain of these issues and to summarise the committee's views on

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them so far as I can. First, there is concern at the apparently limited scope of the directive. There is concern, that is to say, that it somewhat narrowly focused by concentrating purely on environmental aspects, and does not extend sufficiently to cover factors of social or economic significance.
The committee recognises that the social and economic factors, together with considerations of national policy where appropriate, must of course be taken into account by the developer and by the planning authority. All these are significant elements in the decision-making process. But this directive is intended to harmonise and to facilitate the proper assessment of factors in the environmental sphere. The approach taken is reasonable. The directive is not invalidated by failure to place equal emphasis on economic and social resources. To accept an environmental directive now would be a reasonable first step, and to do so would not be to prevent at a later date the preparation and examination of other proposals for systems which could assist the formalisation of the review of the impact of non-environmental factors.
Secondly, reservations have been expressed concerning the scope and content of Annexes 1 and 2 of the draft directive. Taken with Articles 4 and 5, Annexe 1 defines projects where an assessment would normally be mandatory, and Annexe 2 defines projects where an assessment may be required at the discretion of the planning authority. The committee considers that the provisions of Article 4 are essential for the proper functioning of the directive. Under existing legislation in the United Kingdom, it is already expected that any large development project of the type listed in Annexe 1 would normally be subject to inquiry procedures which took into account the likely environmental impacts.
Minor alterations to Annexe 1 may be desirable but in principle it is acceptable. None the less, there are potential difficulties of application if the present draft is closely followed. For instance, too rigid an adherence to a list of projects could lead to absurdity on some occasions. In the committee's opinion it will be necessary in many cases to take account not merely of the nature of the proposed development itself but also the context; that is, the characteristics of the local environment, the sensitivity of this environment to pollutants, and to other detrimental factors. The draft directive recognises that exemptions may sometimes be desirable for Annexe 1 projects but the procedure proposed is both cumbersome and onerous. It is envisaged that in every case there will need to be a separate reference to the Commission. The report recommends that an alternative procedure be sought.
The concept of thresholds also requires elucidation. Purely quantative thresholds—whether in terms of cost, labour requirements, size, or some other notion—are likely to lead to unsatisfactory and artificial divisions; that is, divisions between projects requiring assessment and those not requiring assessment. In the view of the committee, a partially subjective description is required, both for the circumstances in which Annexe 1 projects could be exempted from assessment and for the circumstances in which Annexe 2 projects should or should not be subjected to assessment. It will also be necessary at some stage—preferably within the text of the
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directive under revision—to define more precisely the nature and scope of the simplified form of assessment that is to be performed when it is appropriate.
Another issue which I personally feel sure will receive further notice in the United Kingdom is the inclusion of certain agricultural projects in Annexe 2. In this country, as your Lordships know very well, ordinarily agricultural enterprises are generally exempt from development control. For example, planning permission is not normally required for buildings below a certain size. In fact this topic was not followed up in detail by the committee but I do feel that it was worth noting that only four rather closely-defined types of project are included. They are land reform, cultivation of natural areas and abandoned land, water management—specifically, drainage, and irrigation—and intensive livestock rearing. In this country land reform is not a relevant issue at present. Otherwise, I note that all these are projects which fall within Annexe 2, for which an assessment is at the discretion of the relevant authority. Moreover, appropriate thresholds would presumably apply, involving such criteria as size, the sensitivity of the local environment, and its value in terms of conservation or landscape.
Given these three suppositions, I believe it is fair to ask, is it not true that the remaining types of project—that is to say, those other than land reform—are exactly those which are now arousing the greatest public concern in Britain and for which successive Governments have seen the need to set up mechanisms for enquiry, public consultation, and even some sort of control?
I now turn to Article 6 of Annexe 3 of the draft directive. These place the duty of preparation of the assessment on the developer, drawing on the assistance of the planning authority where necessary. In the opinion of the committee, the requirement to include descriptions of "reasonable alternatives for the site and design of the project" is justifiable and not unduly onerous. Differentiation between the respective roles of the developer and the planning authority presents a somewhat more knotty problem. On the one hand, if there is too close a relationship there will be suspicion of collusion. On the other hand, if there is inadequate co-operation and interchange of information, the system could fail to function effectively. The committee considers that the overriding aim must be to produce an assessment that is as complete as possible, but one not padded with superfluous information. Again, the approach taken by the draft directive is reasonable and does not raise grounds for concern. Article 6, Clause 2, is explicit. It states that details specified in Annexe 3 are required only, and I quote:
"to the extent that they are relevant to the stage of the planning procedure and to the specific characteristics of the project and of the environment likely to be affected, and to the extent that the developer can reasonably be expected to obtain them, taking into account existing knowledge and assessment methods".
Thus, in operation, the process will not lead to the collection of extraneous and superfluous data. Articles 7 and 8 provide for consultation between authorities and for public participation. The committee attaches importance to the notification of neighbouring states of possible trans-boundary effects. The committee would like to see the home planning authority less ambiguously charged with the duty of communicating

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directly with its opposite number in such cases. The present wording is simply that the authority "shall ensure that the information … is sent". Surely it is a simplification and a clarification to require that the authority "shall send" the information?
The committee found it difficult to decide whether in practice the procedures of the draft directive would increase or diminish opportunities for consultation and public participation, but on the whole the committee feels that it would be a step forward. The committee also feels that the relevant provisions are sufficiently flexible and would not require a notable change in present practices in the United Kingdom.
I have kept until last the main question that your Lordships might think I should have discussed first of all; that is, the question, to what extent is this directive acceptable in the United Kingdom? On the basis of evidence received, the committee understood that primary legislation would not be needed to implement the directive in its present form. Its various articles would be largely provided for under existing powers of the Town and Country Planning Act 1971 or the European Communities Act 1972. As I hope I have indicated, by my small selection—which is, of course, by no means all-inclusive—there are several minor changes which the committee considered desirable before the directive is in a position to be adopted.
Overall, your Lordships' committee supports the objectives of the directive and would welcome its implementation. The directive strikes the right balance in administrative terms; it encourages procedures that seem likely to facilitate and accelerate decision-making processes; it promotes consultation between developers and planning authorities; it specifies the transfer of information between authorities, including those in different states; it could be an important step in reducing negative controls and antipollution regulations; and it ought to achieve its aim in reducing distortions of competition within the Community for reasons of variation in the nature and stringency of development control in different member states.
The general acceptability of the draft directive and its broad compatibility with existing United Kingdom planning law owes a great deal to the constructive role played during the protracted drafting stage by the noble Lord, Lord Northfield, and I am glad we shall have the opportunity of hearing him this evening. I also look forward to hearing the noble Baroness, Lady White, the Principal Deputy Chairman of Committees, who took the chair of Sub-Committee G on an occasion when I was unable to do so. I am also looking forward to hearing the noble Lord, Lord Ashby, a past chairman of Sub-Committee G who has taken a long interest in its activities, and to other noble Lords who will be taking part in the debate. I beg to move.
Moved, That this House takes note of the Report of the European Communities Committee on environmental assessment of projects (11th Report, H.L. 69)—(The Earl of Cranbrook.)
6.12 p.m.
The Principal Deputy Chairman of Committees (Baroness White): My Lords, as a former chairman of Sub-Committee G, I wish at the outset warmly to thank
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the noble Earl, Lord Cranbrook, for the lucid way in which he opened the debate, on a subject which is both complex in itself and which has been worked on, re-worked on and studied for a very considerable time indeed. It is no coincidence perhaps that the first three speakers on the list of noble Lords to take part in the debate have all been in the chair of Sub-Committee G during this prolonged period of gestation which has resulted in our now having as a definitive publication the twenty-first draft of this particular directive.
I warmly echo the appreciation which is undoubtedly due to the noble Lord, Lord Northfield, because frankly the early stages of the discussion led one almost to despair, since one felt that the proposals—though extremely well-meaning and with the objective of which we entirely sympathise—were couched in terms which would have been so rigid and inflexible that it would have been very difficult indeed for us to have adopted them as they were first proposed.
But is it not only in the United Kingdom that concern has been expressed for the wide-ranging provisions of the draft directive. Other organisations, as noble Lords will see from studying the evidence printed in our report, in other countries and at European level have also made their contribution, in particular perhaps the European organisations representing private and public industries in the Community—UNICE and CEEP respectively—and the environmental interests having been represented by the European Environment Bureau. Your committee became more closely involved than we usually are in the consultations prior to the publication of the draft directive for the reasons on which I have touched.
We should also pay our tribute of appreciation to the Commission's staff because they have laboured with intense devotion and dedication, first trying to understand and subsequently trying to meet the problems brought forward by your own committee and by a very large number of interested organisations in the other member states. I know they have endeavoured where necessary to reword or recast various proposals in a way which would make the draft directive more easily acceptable and applicable to established methods of planning administration. We owe a good deal to Mr. Stuffman, the senior official primarily concerned, who worked with complete dedication and the most friendly co-operation with those who brought forward proposals for possible change.
At this point we might also mention that we have heard—I might say, with some dismay—that M. Carpentier, the Director General of the Environment and Consumer Protection Service in the Community, is likely to be transferred to another directorate, that of energy. We in the committee have from time to time had our occasional differences of view with M. Carpentier, but our ideals and objectives for the environment have always been the same as his and we have never for a moment doubted his great ability, flair and dedication. We would wish to record our thanks and warm appreciation of his co-operation, which we are sure will be extended to the new field of responsibility he is about to enter.
To revert to the draft directive itself, it might be helpful to put it in perspective. First, it is concerned directly with projects, not with the wider aspects of

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planning. In other words, it is about development control in particular, rather than with land-use in general. Some of our witnesses, in particular Mr. Cusell, chairman of the UNICE Environment Committee, suggested that this was to start at the wrong end and that it was important to establish the land-use of zoning pattern first; if that went wrong, the specific development project could be wrong from the start. This point has since been emphasised to me by some very experienced practitioners in this country. Of course, in a sense they are absolutely right; we have our own hierarchy of structure plans and local plans, many of them more sophisticated than some continental zoning procedures. Nevertheless, the difficulties of reconciling the practices of different member states at this level seem overwhelming and I believe the Commission had no option but to base its work on the narrower issue of specific public and private projects.
Another general point so far as the United Kingdom is concerned is that the draft directive is a natural next step in the incremental progress made in our planning legislation since 1947. We sometimes forget that it is only since the Town and Country Planning Act 1968 that the public has been entitled as of right to examine plans submitted with applications for development consent, an advance which has made all the difference to the work of statutory and voluntary bodies interested in these matters. Certain areas of control are being loosened by the present Government, but the public's "right to know" is now firmly recognised. I know, from my position as president of the Council for the Protection of Rural Wales, that a great deal of our work is done precisely in this field in examining plans put forward for planning consent.
To extend the area of information required for major developments likely to have especially significant environmental effects is a natural progression, already largely observed in this country in practice. There is therefore every reason to welcome this initiative taken at the Community level, provided that certain details can be adjusted. In the view of your committee, as the noble Earl indicated, such outstanding problems are now really very few. Most of the apprehensions stressed by witnesses we believe need not arise at all, given good sense in administration and on the part of the developers concerned.
I was interested to receive, as no doubt other noble Lords have received, the latest comment from the Royal Town Planning Institute, which represents many of the professionals in this field, who go on record that the proposals in the draft directive in its current form offer significant advantages, and that
"the major perceptions of difficulties are fallacious"
or,
"have little force".
They are particularly concerned that the directive should be introduced at the same time in all member states without long time-lags, so that the advantages of harmonisation should not be lost by leaving weak control in certain states, which could have the effect of attracting migrant industry. They point out that many environmental impact assessments have been carried out in normal practice in the United Kingdom, even if they have not been called by that term. Incidentally, I think the term does not appear in the
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directive itself. They assure us that our experties in this field is in demand overseas and that they themselves are much concerned with ensuring that the appropriate training to enable professional people to exercise this skill should be made fully available. In other words, they indicate that we have every interest in securing the acceptance of the directive by Her Majesty's Government, however reluctant they may appear to be.
It would not be improper to point out that among its members your Lordships' Committee had the benefit of a wide range of direct experience in these matters, in the environmental, industrial and legal fields. We certainly remained concerned about a few remaining problems, to which the noble Earl, Lord Cranbrook, drew attention, and which are set out in the summary of conclusions, but in general we came down firmly in support of the proposed directive.
We recognised that there are still some apprehensions, but we were not convinced, for example, that the problem of dealing with "alternatives" could not be overcome. We had a considerable argument about this point with some of the witnesses who raised the matter before us. I am sure that all of us would be dismayed if we reached a situation where we in this country adopted methods of litigation which have been all too frequent in the United States of America in particular. I see the noble Viscount, Lord Colville of Culross, smiling. Of course his profession would benefit enormously if we went down that path, but I feel that even his professional interests would not allow him to succumb to the suggestion that that would be a desirable path to follow.
There are other difficulties. The proposal which still stands in the draft directive that there should be a reference to the Commission of indidivual cases qualifying for the simplified form of assessment did not seem to us to make practical sense, as I think the noble Earl, Lord Cranbrook, indicated. Then there seemed to be some misunderstanding about subsequent monitoring of consent conditions. Of course if this is a matter of pollution control, health control or safety, there are statutory authorities other than the planning authorities which should be responsible for ensuring that appropriate conditions are observed. If it is a question of changing a planning consent after it has been given—having second thoughts, so to speak—that can raise very considerable difficulties under our own planning legislation. I am not quite sure that that particular matter has been adequately cleared up.
As the noble Earl, Lord Cranbrook, said, we made no firm recommendations about the proposed inclusion of certain limited agricultural or forestry developments. Possiby we should have embarked on this rather contentious field, but it seemed to us to open up a very wide area indeed. As our debates, and the very close votes, on the Wildlife and Countryside Bill indicated, the time might well be approaching when some further consideration of rural developments which can have significant landscape and wildlife effects will be unavoidable. But, equally, the closeness of the voting showed that opinions are still very much divided and that further thought about reasonable ways and means is needed.
On the other hand, I think that it would be unrealistic not to recognise that in other member states of the Community these problems are perhaps becoming

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even more acute than they are in the United Kingdom. I have here, for example, a report from Brussels, dated 2nd April of this year, in which it is pointed out that the very considerable assistance about to be provided for farm improvement schemes in the West of Ireland, to the tune of not far short of a quarter of a million units of account, can raise considerable areas of conflict between agricultural and environmental interests. This matter has been a point of discussion between the respective offices in Brussels itself, with the environment service arguing with the Directorate General for Agriculture that irreversible ecological damage might ensure if the proposed methods of "agricultural improvement"—I put that term in quotation marks—took place. The reply apparently from the Directorate General for Agriculture was that,
"there is an inevitable amount of environmental damage caused by every redevelopment scheme. A new ecological equilibrium will be established after a period".
That echoes some of the remarks that we have heard fairly recently in your Lordships' House, which so far as I was concerned carried little conviction.
Finally, I think we should make clear that we could not follow the proposals in particular of some of the local authority associations that a code of conduct was all that was needed and that a draft directive was inappropriate for the problems that we face. We could not assent to the proposition that a code of conduct is a valid substitute for the directive that we are discussing this evening. We are given to national self-congratulation in certain fields, of which our planning system is one. Even if we are as good as we believe we are—and we are surely far short of perfection as any observer can see for himself—there are still the problems in some other member states which might not yet be so advanced as we believe ourselves to be.
I am sure that I was not the only Member of the House to have been deeply distressed by two items which appeared recently in The Times newspaper. I am sure that a number of your Lordships will have seen them for yourselves. They are about the lamentable state of affairs in the newest adherent to the Community, Greece, To anyone brought up to revere the Hellenic contribution to our Western civilisation, it was quite horrifying to read the article on 21st March about the deplorable effects of uncontrolled industrial development and pollution in the neighbourhood of Eleusis, illustrated by a photograph depicting a range of industrial chimneys pouring out toxic or particulate waste on to some of the most precious remains of antiquity. That was followed on 13th April by the moving letter from Sir Steven Runciman on the devestation being caused to Greek landscape and townscape by what he calls, "the free-for-all development mania."
In such circumstances a code of conduct would be impotent. Surely we owe it to our common civilisation, not only in Greece, but in some other threatened areas, to support a Community initiative which we believe would not be unduly onerous for us, but which could appreciably strengthen the hands of those struggling to maintain even minimum standards of development control in areas which must surely be precious to us all and which are visited by ever increasing numbers of our own citizens. We ourselves have been learning the hard way. We should be all the more eager to
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share our own experience. We look to our own representatives on the Council of Ministers to take a constructive lead.
6.30 p.m.
Lord Ashby: My Lords, it is a great pleasure to begin by expressing gratitude to the noble Earl, Lord Cranbrook, not only for opening this debate but for the enormous amount of patient work which he has put into the preparation of the report which is before the House. It is, I think, the most important single directive to come from the environment and consumer service of the Commission, because it covers far more than just abatement of pollution. I should like to put on record a compliment to that service, under the leadership of M. Carpentier, because there has been an enormous and dramatic improvement in the quality of the directives which have come from his service since he took office.
For a long time your Lordships' committee was unhappy that directives were put in front of the committee and Governments without adequate preparation. This one, as your Lordships have heard, is the 21st version of the draft. For a long time, also, your Lordships' committee was worried that the amount of expertise consulted by the service was not as good as it should have been, or as thorough, but this time there was called a symposium of people who had actually taken part in planning, and this, again, has greatly improved the quality of this directive. As one witness said to the committee, this directive as it stands is now, as he called it,
"an olive branch in the direction of British pragmatism";
and this, I think, is an accurate and fair description of it.
Of course, as the noble Baroness has said, there is nothing new about environment assessments and projects in Britain; it is just that we have not given them the rather pejorative name that they have received in the United States, nor gone to the enormous lengths of detail in which they have been put there. One particular directive which I saw last year, for a transmission line to cross Utah, reached 2,500 pages. That is not what is in mind in the directive which is now before your Lordships.
It has a very long history, going back before 1947, even. In fact, in the year 1602 Queen Elizabeth I issued a request for an environmental assessment. She asked the sheriffs of Hertfordshire and Middlesex to inquire whether a proposed aquaduct:
"would injure the inhabitants of the two counties, and whether it would diminish the flow of any navigable river".
Now a great deal of this has been done. There have been 25 directives of one sort or another in connection with the oil industry in Scotland, and there is even a 170-page manual of guidance issued by the Department of the Environment called Research Report No. 13. So all witnesses agreed, I think, that there is need for environmental assessment; their differences were about the means to be used for getting it. I should like to deal briefly, if I may, with some of the objections, and the reasons why I hope your Lordships and the Government will not be prepared to accept them.
The first objection was one arising out of the fact that we already have environmental assessments.

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It was that it is not necessary for us, therefore, to adhere to a directive. As one of the witnesses said—it is Question 248 of the report:
"I am not convinced that the British people will welcome a directive if it is only to put the affairs of Europe right. Europe must learn from us".
The witness may not have intended this, but the impression it certainly gave to me was one of a parochial and complacent attitude, quite inconsistent with the present Government's view about co-operation with Europe and (I think I may say so as a new inhabitant of this perch in your Lordships' House) quite inconsistent with the people who sit on this Bench.
A second objection was that it was said by witnesses that any mandatory environmental assessment would delay decisions. If it does delay some decisions and they are wiser, that is no bad thing. But it is arguable as to whether this is even true. The experience of British Gas was that by taking an immense amount of trouble before putting in planning requests, the time for processing those requests was shortened greatly: indeed, in one particular instance, from an average of two years before they began their new technique to 21 months now.
A third objection was that environmental assessments would increase the costs. Of course they will. So also do all measures to preserve the amenity of the environment. But, again, when one looks at what few data there are about the amount of cost increase one sees that it is not very alarming. The land use consultants—and this is on page 30 of the report to your Lordships' House—estimated the costs of environmental assessments as being between 0.2 and 0.6 per cent. of the total development costs. In a table given by the Department of the Environment about costs of assessments in Scottish work, they range from £7,000 to £24,000. These are not very alarming figures considering the size and permanent impact of the projects concerned. I therefore hope that your Lordships will not attach much weight to objections of that kind, and I hope the Government will not attach any weight at all to them.
Then there were some other difficulties which were mentioned by the noble Earl in his opening speech and which are difficulties which need careful consideration. There is the mandatory list of projects at the end, and the need to refer to the Commission any requests for exemption. These rigidities would in fact make the whole thing very tiresome, and I am wondering whether it is possible to make an informal suggestion which Her Majesty's Government might wish to take into account and which I think would remove this need for rigidity. There would, I think, be a great deal more flexibility if, as is already laid down in Article 5, reports are sent back as to decisions taken and if there could then be a roving inspectorate of people from the member states who would go from one country to another, attend public inquiries, notice the techniques and—and this is the important thing—publish their results, so that there would gradually grow up a body of experience as to how to manage this extremely difficult operation of making environmental assessments which are not only wise but are acceptable to the public in a pluralistic democracy.
I now turn to what I think are really much more difficult and serious problems, and they are the ones
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which will have to be tackled if (and I hope it is "when" rather than "if") this directive is accepted by Her Majesty's Government. Several witnesses were apprehensive, and I think rightly so, about how this directive would be fitted into the planning laws. There seem to me to be two problems which will have to be settled, and the first is this. Precisely what is to be the competent authority, and how is it to act? The second question is: At what stage and how are the public to be involved in considerations of this kind?
One assumes—and there is no reason to doubt the assumption—that the competent authority should be the present planning authority, but if environmental assessments are to become an integral part of planning then there will have to be participation by bodies which one can describe as the statutory curators for the environment—the bodies responsible for administering the Public Health Acts and the Clean Air Act; the Alkali Inspectorate if it concerns the works which would be registered under that inspectorate; and, of course, the regional water authorities in England and Wales, the industrial pollution inspectorate in Scotland and the river purification boards there.
At present, as I understand it, planning authorities are not obliged to consult these statutory curators of the environment except in certain very restricted cases. It is not mandatory for them to do so. Circumstances can and do arise when a planning authority would like to give planning permission to some project which the Alkali Inspectorate or the regional water authority would have great apprehensions about. Circumstances also arise and have arisen when a planning authority wants to place more severe restrictions upon the operational project than would be needed by the regional water authorities, on the one hand, or the Alkali Inspectorate on the other. This would lead to difficulty if the developer and the planning authority employ private consultants who turn out to have given advice which cannot be accepted by the statutory curators of the environment who have to approve before the project (even if it has planning permission) can be allowed to proceed. In practice, there is a great deal of informal discussion. It would be an unwise developer who went forward without consultation with the Alkali Inspectorate or the regional water authority, but it sometimes happens. The point that I want to make, because it is relevant to the reaction to this directive, is that there is at present no obligation, no obligatory part in this procedure.
All this informality has worked reasonably well in our typically British pragmatic style, but if the environmental assessment becomes a statutory part of the planning process, these curators of the environment will have to be involved more officially and the risk then would be that they will become loaded with an enormous amount of bureaucratic work which they are unable to accept with their present small staffs. It is for those who have far more expertise than I to work out how this might be overcome; but if I might make an informal suggestion, it would be that in the preparation of an environmental assessment under the planning law that we have at present, the regional water authority should be approached at some stage by the developer and by the competent authority and be asked to give an informal opinion as to the consents it would allow for discharge into the river and as to

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the supplies of water that it would be able to provide for a new project. Similarly, if it is a works to be registered under the Alkali Inspectorate, they should be asked beforehand to give, again informally, a presumptive standard for the emissions and that these would be accepted by the Secretary of State if he had to call this in for inquiry as being adequate statements from experts that that amount of exploitation of the environment would not damage it. Therefore, I hope that the Government will spell out the precise ways in which the competent authority together with the statutory curators for the environment will handle these affairs.
Finally, I come to what is politically the most sensitive part of the operation and, in the minds of some of us, one of the most important parts. That is the degree of participation by the public. There are some witnesses who dislike having to put up with participation by the public at all. One piece of evidence on page 50 of the report reads:
"Article 8"—
that is the article requiring information to be given to the public and then that the public be consulted—
"must not add to existing United Kingdom provisions for public information and participation …".
Obviously, developers and planning authorities must be protected from irresponsible litigation, from such charges as that the environmental assessment has not been properly prepared or has omitted things; but it would be folly in the light of the measures that have been taken in other countries—and I think in particular of Sweden, the Netherlands and Canada—to adopt an obscurantist attitude towards involving the public in these decisions about the environment.
I am sure that I am pushing at an open door when I ask the Government to encourage planning authorities to take a constructive attitude towards the involvement of public interest groups, particularly in environmental issues. There is nothing new about this. It is 12 years since the Ministry of Housing and Local Government commissioned an inquiry by Skeffington which was published as People and Planning. One of his main recommendations was:
"Participation involves doing as well as talking and there will be full participation only when the public are able to take an active part throughout the plan-making process".
I believe that the Conservative Party Manifesto for 1959, talking about environmental issues raised over energy developments, said very much the same thing, that:
"the fullest possible participation in major new decisions will be arranged"
The trouble is that we have not yet got a proper procedure for involving the public in participation and we tend to run into the deplorable incidents that occur over such discussions as were had over Windscale and over some motorways. The difficulty about Article 8 of the Commission's directive is that it is not a good guide because it appears to bring in the public at much too late a stage. I should like to make the plea that we have the opportunity, in considering this directive and how it is acted upon, to have the courage in this country to try out some of the techniques which have been successfully tried out in Canada. To mention one example, there was the inquiry by
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Mr. Justice Berger for putting a pipeline down the Mackenzie River. At a very early stage, the Berger Commission consulted the public informally. They held hearings all the way up the Mackenzie River in school halls, Indian villages, hunting camps and outposts. The Canadian Broadcasting Commission published summaries of the hearings in French, English and in six Indian languages. The result of this, the lesson to be learned, the reason why I suggested it was a success, is that it was not so much the wisdom of the decision—that is something that only experts could judge—but that it was a remarkable revival of confidence in Canada in the methods of public inquiries and the way in which experts are used. It has done something to restore confidence in the planning process.
Of course, one has to be hardheaded about this. One of the most compelling things about the Berger Commission was that it did offer money to finance objectors but it put tough conditions on this. The objectors had to have a clearly ascertainable interest, they had to have an established record of concern in the subject and they had to put the case on paper. But the psychological result was very dramatic. I suggest that the disenchantment at present with the whole processes of representative democracy in matters of this kind can be more serious than a delay in the siting of a power station or a reservoir. There will be sceptics who will continue to say that there is nothing much to be gained by appealing to the public. If there are any such sceptics in the House now, I should recommend that they read the report of the chief alkali inspector for 1970. The British Steel Corporation ran into difficulties in one of its plants over the control of oxide fumes. It was not practicable to shut down the process. The Steel Corporation took space in the local newspaper and local broadcasting and explained to the public what the difficulty was and what they were doing about it. What was the response? I quote from the 1970 report:
"… no complaints at all were submitted and the works manager received shoals of letters thanking him for letting the public know what was happening".
This is surely an encouragement to work out methods of taking the public into one's confidence when environmental assessments are made. I hope that we may have an opportunity for a major examination of the parts that will be played by the developer, the local authority, the planning authority, the authorities that are curators for the environment, and the public themselves in these measures for protecting the environment.
6.50 p.m.
Lord Nugent of Guildford: My Lords, I feel honoured to follow the noble Lord, Lord Ashby, to whom I always listen with both pleasure and enlightenment. I should like to add my congratulations to my noble friend Lord Cranbrook on this report and his speech in introducing it which I thought was most masterly in its lucidity and analysis. I should also like to congratulate his clerk on the tremendous work that they did in getting the report out.
I have to make an apology for being a very poor attender at Sub-Committee G and my inability to make any contribution to the report, especially as I am going to make a suggestion which is not quite in line with the general burden of the report. I am very interested in

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this subject because in all these post-war years I have been a member of my county planning committee first and then, for nearly 20 years, chairman of the regional planning structure in the London and South-East Standing Conference of Planning Authorities and I am very familiar with the planning scene. I agree with the noble Baroness, Lady White, that our system of planning is good. It is rather complicated, but I think that it is a pretty effective one.
I welcome the idea of an environmental impact assessment—no one could do otherwise. As has already been said by other noble Lords, the process is not new to us. For major projects it has been employed for some time. But this draft directive will of course make the process mandatory and that is a very major step from the informal process which we now have. Of course, it would be an additional safeguard for the environment of Europe, and the noble Baroness, with her account of what is happening in Greece, makes one shudder. I very much sympathise with her. I am going to express an anxiety which I feel should be expressed in this debate about the cost and delay which could occur if and when this system is introduced. My withers have been slightly wrung in advance by the noble Lord, Lord Ashby, on this score, because I should like to see it working in practice before believing that it is going to work out at such small figures as he dramatically gave us.
The fact is that in Britain we are short of new development. But we are long on bureaucracy. This Government have succeeded in reducing the apparatus for planning by eliminating one tier, and we must make sure that this directive does not add another new one. I was not surprised to see that some anxiety was expressed in the evidence by the Department of the Environment and the CBI. I share that anxiety. New developments must be helped and not hampered. As has already been mentioned, the draft directive proposes two different classes of projects to be subject to the EIA in Annex I and Annex II. In my judgment, the projects in Annex I are of such magnitude and importance that they would normally be subject to an informal process of assessment of the impact on the environment, if for no other reason than in order to ensure that when they were presented to public opinion at a public inquiry—which would be virtually certain in such cases—they would have a reasonable prospect of being acceptable. I feel that if Annex I is made mandatory, we would not be adding seriously to costs, time, et cetera, and we would be ensuring that our precious environment is adequately safeguarded and, equally important—perhaps more so—that all other member states will conform in the same way.
However, Annex II projects are in my judgment another matter. They are of lesser magnitude and that is why the procedure for them is proposed differently. As has already been mentioned by the noble Baroness and other noble Lords, the agricultural section is a highly contentious field. The experience in this noble House on the Bill on wildlife illustrated that very clearly. There is an area here where we as a nation have to resolve our minds. There is no doubt of course that some agricultural developments injure the environment. Whether it is enough to say that they should not be proceeded with, is something we really have not worked out yet. I must say that
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before making any mandatory control in this field I should like to see us as a nation resolve our own minds on this matter and proceed with national legislation rather then bringing it in here by a side wind.
Accordingly, my advice would be that the introduction of this draft directive should be phased, as is tentatively suggested in paragraph 80 of the report. This would give all member states the opportunity, to start with, to introduce the new mandatory process of EIA for the Annex I schedule for the major schemes only. This phased introduction would enable both Government and local government to develop the scheme in the most economical and efficient way to deal with the very important technical points which the noble Lord, Lord Ashby, made in the relationship with these statutory authorities which are responsible for important parts of the environment and in various other ways. In any event, this is for projects which obviously require such treatment. If, after a sufficient trial period, experience proves that EIA can be operated without significant extra costs and time, then the next phase of Annex II, with or without amendment on the agricultural aspects, could be proposed for introduction.
Lord Northfield: My Lords, would the noble Lord allow me to interrupt? I wonder whether he is under a misapprehension. The draft directive makes it very clear that the projects listed in Annex II are to be subject to assessment in a discretionary way. It is only whenever their characteristics so require leaving discretion entirely in the hands of the competent authority. Secondly, it even leaves them with the discretion to have a simplified form of assessment after having decided whether to have them at all. There is nothing really mandatory about Annex II.
Lord Nugent of Guildford: I thank the noble Lord. My Lords, I have given careful thought to that. I am not under a misapprehension. I have studied it carefully and thought about it. I believe that it would be better not to introduce Annex II even in this qualified form at this stage. I believe it would be better to proceed with Annex I, which in my opinion makes an unanswerable case, and see how experience works out with that. There is quite a bit to learn for the planning authorities, and quite a bit to learn for all who are going to be concerned. If that works out successfully, then I would be in favour of bringing in Annex II projects as well, either with these qualifications or perhaps on a straight mandatory basis. I offer those thoughts which I hope may be helpful to my noble friend.
6.59 p.m.
Lord Llewelyn-Davies: My Lords, before I speak on this subject, I should declare my interest. I am a member of the Royal Town Planning Institute. As the head of a planning and consultants firm based in this country, I have been and expect to be in the future involved in environmental assessment. Indeed, as our firm is international, I am involved in work overseas as well as in this country and have even prepared environmental impact assessments in the United States. It is therefore as a professional that I have

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studied this report and will be speaking about it tonight.
I should like to start by expressing very warm admiration for the report of the Select Committee. I have read it with close attention and am most impressed by the depth to which the committee has been able to probe and by the logic of their arguments and recommendations. In general, I am in agreement with their conclusions and with the modifications they propose, as so clearly explained to us by the noble Earl, Lord Cranbrook. I hope the recommendation of the committee will be endorsed by your Lordships' House and, in due course, by the Government.
I was not originally very much in favour of the proposed directive. I started, as I believe many thoughtful people would, with the view that British planning procedure in its present form is adequate to deal with environmental issues, and that the last thing we want is to add to a possibly already over-elaborate planning framework. I believe that British planning has reached a point of development when we need to redefine its aims and to simplify the mechanisms by which it operates. Therefore, at first sight, the addition of a new set of requirements seems to be pointing in the wrong direction. But as I studied the evidence, the discussion and the conclusions of the committee my view changed and I now feel able to support the committee's conclusions. I should like to take a short series of points to illustrate why.
The first question must be: Do we wish, wherever possible, without disadvantage to ourselves, to avoid blocking proposals supported by other members of the Community? So long as we are members of the Community, the answer to this must obviously be "yes". Before we decide to reject a proposal we need to feel that there is a substantial disadvantage in accepting it. The fact that it would involve us in some administrative inconvenience or that we do not need it because we are managing perfectly well, thank you, is not necessarily a sufficient reason for rejection.
This leads to the next question: Does the acceptance of the directive raise real difficulties for us? The main difficulties that have been foreseen seem to me to be three. There will be additional costs, there could be worse delay in starting projects and there might be the risk of litigation in the courts, as occurs so frequently in the United States. These risks are carefully discussed and eventually discounted in the committee's conclusions, and have been further dealt with very effectively by the noble Baroness, Lady White, and the noble Lord, Lord Ashby. Nothing so far said tonight in the debate has changed my view, and so I accept that the disadvantages to us in accepting the directive are too insubstantial to warrant its rejection.
But there are more positive reasons for going along with the committee's conclusions, and one of them is related to my own concerns and interests. It arises from the need to review and revise the role of planning in Britain today. British planning is under very heavy attack from many sides. Developers tell us that it blocks their efforts to meet the public's need. Preservationists from the opposite side denounce it for condoning greedy commercial development at the expense of traditional architecture and urban quality. Sociologists claim that it is destructive of family and traditional
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social groupings. Hardly anyone has a good word to say for its achievements. I would love to enter into a vigorous defence, for most of this criticism is nonsense; but this is not the occasion. And planning is not blameless: it has brought some of this criticism on itself by a woolly, if well-meaning, set of aims and a belief that by manipulating land-use it can achieve economic and social purposes that are not in fact within its powers.
I believe that land-use and development control are an absolutely vital public need. Five years' recent work in the city of Houston, Texas—a city which glories in having no restraints whatever on the private use of land, and where land is to be used in accordance with the phrase "the highest and best use", which means that which leads to the maximum return to the land-owner irrespective of the externalised costs the community or the blight on neighbouring sites—has fortified this belief by direct experience.
But if we are to be effective in the future we must concentrate our minds on the real role of planning and development control in our society and improve our skills in dealing with those matters which are truly within its powers. Of these, I believe that environmental issues are one of the most important, and they grow in importance every day. The advance of science and technology is making these issues more vital and more difficult to resolve as every day goes by. There are real and serious difficulties in balancing the pros and cons of environmentally significant developments. The nation's need for cheaper energy may conflict, and does conflict more often than not, with environmental quality. I believe these are conflicts which are not suited for resolution in the courts by judges, as they are in the United States, due to the lack of any systematic systems or enforced systems of development control or planning. But I do think that my profession and the practice of planning have not concentrated adequately in Britain on these questions, but have wasted much human effort and public money on preparing the sort of plans which can never be used. I think that a switch in emphasis to environmental concerns is one—it is only one but it is the one which concerns us tonight—of several changes in direction which would actually help to restore British planning to a more useful and needed role, and in due course help it to regain public esteem.
This problem is not entirely new. In the United States I heard that when Moses approached the Red Sea, pursued hotly by Pharaoh and his forces, he appealed, as was his wont, for help to the Diety and after an appropriate pause received the following message:
"Moses, I have both good news and bad news for you. The good news is that I can dam up the Red Sea and give you a dry-shod passage across. The bad news is that before I can start the project you will of course have to file an environmental impact assessment".
My Lords, I believe there are vital and positive reasons for your Lordships' House to support the conclusions of the Select Committee.
7.7 p.m.
Lord Craigton: My Lords, I too thank my noble friend Lord Cranbrook for his most excellent introduction and I should like to add my thanks to those

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expressed by the noble Baroness, Lady White, and the noble Lord, Lord Ashby, to M. Carpentier. When M. Carpentier had been in office for a very short while I went to see him and suggested that we might form in Europe the equivalent of CoEnCo in this country. He warmly received the suggestion and gave not only moral but physical support. He gave some money, with the result that the EEB was formed and that is one of the organisations which gave evidence to Select Committee G. So I am speaking tonight very strongly on their behalf and also on behalf of the CPRE and other members of CoEnCo who are concerned in this matter.
I, too, of course welcome the report. I am glad to see that the Select Committee has broadly endorsed the proposals of the EEC draft directive. We support the recommendation that major industrial developers should give detailed information on a range of possible environmental consequences should the project go ahead as planned, and that these consequences should include a list of ecological factors and also possible alternative sites.
We support the suggestion that the information necessary for assessment should be available for public comment, which would probably mean a public inquiry; and I do welcome and support the wise words of the noble Lord, Lord Ashby, concerning the tremendous advantages of a correct approach or presentation to the public. The EEB tell me that the procedures set out in the draft directive are needed by most EEC member states. Furthermore, we all feel that the environmental assessment of major industrial projects is particularly important, given the omens described in the World Conservation Strategy, Global 2000 and the Brandt Report.
My noble friend Lord Bellwin knows that I am a great admirer of the DoE, but I must record that, in written and oral evidence to the Select Committee, the EEB contested sharply the DoE's strictures about the draft directive. The DoE objected to the listing of project types being subject to EIA. The DoE said that it would be impossible to define precisely the technical thresholds and criteria with which individual assessments must comply. Thirdly, they said that prescribing EIA procedures in law would invite "nuisance" litigation by objectors wishing to slow down projects. To counter-balance, the EEB proposed ways in which each of these difficulties could be overcome, and I am glad to record that the Select Committee upheld their views on each of these three points.
However, there are three more points about which we are concerned. First, we consider that there should be provision within the draft directive for consultation with the public, in advance of the preparation of an assessment. There is some British precedent for this; for example, Leicestershire County Council's wide consultations on the issues which they ought to have in mind in deciding their attitude to the Vale of Belvoir coalmine project last year.
Secondly, we do not share the Select Committee's confidence that "alternatives" to the project in question will be able to be canvassed effectively under the early stages of the EIA procedure. We feel that the "competent authority" may not be expert enough to detect what relevant information is not being made available. There is no substitute, in the EEB's view,
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for vigorous examinations of alternatives at a later public inquiry—realising, of course, the cost—perhaps by third parties using rival expert witnesses and full cross-examination. We think—and I hope I am wrong—that the Select Committee has been over-optimistic in accepting the draft directive's expectations as to what the early stages of the assessment procedure might achieve.
Lastly, various agricultural projects may be included in Annex 2. This is, of course, most welcome as it recognises formally that agricultural developments can be environmentally damaging. However, the implications of this recognition for the United Kingdom are considerable. So I am concerned—and, after the Wildlife and Countryside Bill, with some justification—about the extent and effect of any pressure brought by the MAAF in this matter.
7.13 p.m.
Lord Sandford: My Lords, at this stage of the debate, I have only two points that I want to make. I certainly do not want to say anything of a comprehensive nature about the report, except to express my gratitude to our chairman for his conduct of our scrutiny and to say what a pleasure it was to serve under him.
The first point that I want to make is about the process of the scrutiny itself in this case. The noble Lord, Lord Ashby, said—I think rightly—that it is probably the most important proposal to come before Sub-Committee G, and I shall go on to say that think it is probably the most sustained piece of scrutiny that any sub-committee of the Select Committee has undertaken on any proposal from the Commission. Our terms of reference allow us to consider any proposal coming from the Commission, and we stretched the terms of reference in this case to consider the proposal before it had actually emerged into the light of day, and before it was a formal proposal at all. I think that we have been considering this matter for something like four years—about twice the time that is actually recorded formally in the report.
I recall that we first noticed that something was going on back in 1977. I had occasion to be in Washington myself in that year, where I was able to confirm our suspicions that the drafts which we were looking at then were much too close to a crib from the Environmental Protection Agency, and that we were in serious danger of suffering from all the defects which the noble Lord, Lord Llewelyn-Davies, has enumerated before us. By 1979, we were on the tenth draft. We were instrumental in persuading the Commission to hold a symposium in Brussels, based on a later draft. The consultations early in 1980 were on the eighteenth draft and this report is based on the twenty-first. That sounds very laborious and so it has been, I want to add my tribute to the skill and patience of the Environment Service, M. Carpentier and Mr. Stuffman in all these deliberations.
On the other hand, I think that the effect of this sustained servitude has been beneficial and I should like to instance one or two examples of that effect. One of the effects—not, perhaps, the direct causal effect—is that during that process the presidents of the various national planning institutes within the Community decided to confer together, and to form a forum to which the Environment Service can refer

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matters on which it wants their professional advice. That is surely a substantial gain. We have been able, by taking note of this proposal at such an early stage, to effect adjustments in the approach of the Environment Service to this problem to a degree which has not been possible in other cases, and to prevent them inflicting on the Community much too heavy and undiluted a dose of Environmental Protection Agency philosophy, which would have been very bad for us if it had occurred.
Then there is the change in professional attitudes and understandings. I do not really need to elaborate on this, because we have had it all from the noble Lord, Lord Llewelyn-Davies, who is himself a professional planner. In addition to what he has described, we have witnessed—though not, alas!, among all our witnesses—a new understanding of the different state of affairs prevailing in the art of planning across the 10 members of the Community. We have witnessed a welcome change in the understanding of the beneficial changes that have been made in succeeding stages of the drafts that have come before us, and more people are now prepared to give credit to the Environment Service for the changes which they have made since picking up these ideas from the United States.
Fourthly, we have seen a growing understanding of the value to the United Kingdom of some equivalence in environmental standards, from the point of view of our ability to compete on fair terms with other industrial plants elsewhere in the Community. All this has required time and it has allowed time for our professional planners to see that there are considerable advantages, from their point of view, in other countries and other members of this Community adopting the standards involved in this directive. In fact, some of my more cynical friends have welcomed the directive for the inducement that it provides to our planners to go and work somewhere else. In short, it has all been a useful lesson in taking our time over this process of scrutiny and getting into the act at an early stage.
I should now like to turn to the only other point on which I want to dwell. It has been raised by a number of noble Lords already; namely, the implications in this directive for agriculture and forestry in the United Kingdom. Noble Lords, and other readers of this report, will see that we received extensive and valuable evidence from a very wide range of industry on this directive. We received very little—in fact, none—from either the agricultural or the forestry industries, and a mere three paragraphs from the Country Landowners' Association bearing on the effects of the directive on the countryside. The CLA's third paragraph ended with the words:
"We are concerned that an EEC Directive could impose new constraints and could upset present arrangements which are now working well".
That was Mr. de Salis in September, 1980.
As the noble Lord, Lord Nugent of Guildford, said, such a view could scarcely be sustained today after the revelations arising from our four months on the Wildlife and Countryside Bill. The brief which some of us have received today from the Country Landowners' Association does not now attempt to make such a bland and broad claim. Mr. Williamson, who is its
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author, refers instead to new arrangements now at last established to deal with the very serious problem on Exmoor, which is just one example of the impact of agriculture on a sensitive piece of countryside. I am among those who hope that those arrangements will work successfully.
Mr. Williamson of the Country Landowners' Association goes on to call in aid paragraph 87 of the Countryside Review Committee report, entitled Conservation in the Countryside and dated 1979, in which that committee rejects the imposition of development control on agriculture and forestry in the United Kingdom. I must say that I am against imposing United Kingdom development control on agriculture and forestry in this country, and I am glad that development of that sort is at present exempted by the general development order. But Mr. Williamson, in giving us that quotation in his brief, does not notice, or if he does notice he chooses not to quote, the preceding paragraph 86, in which the view of the Countryside Review Committee is that it is operations such as the intensification of agriculture, the afforestation of hare land and the drainage of wetlands, for which planning permission is not required, which are causing more impact on the landscape and on wildlife than petrochemical plants and mineral extraction, which do require planning permission. The next two pages after that paragraph are concerned with a search for more appropriate ways of assessing and mitigating the impact of processes such as those.
We have moved on since 1979 and, thanks to the initiative of Her Majesty's Government in the Countryside Bill, some progress is now being made in this field. For instance, there is now a general acceptance that we must have a statutory system of advance notification of certain agricultural improvement, afforestation and land-drainage proposals in certain sensitive areas such as SSSIs, national parks and so on. There is widespread support and acceptance from the Government of the principle that their Agricultural Development Advisory Service should have a wider role and embrace considerations to do with the conservation of wildlife and its habitats, with the conservation of the landscape and with public access to it. I personally was glad of just enough support in this House—two votes—for an amendment which would put the application of agricultural grants in certain areas in some circumstances in a context wider than that of mere food production.
So there are three strands of development policy which are favourable in the area that we require. My belief is that if these approaches are carried forward in the United Kingdom wholeheartedly, briskly and with vigour and imagination, as the noble Lord, Lord Nugent of Guildford, was urging they should be, it will prove possible for the United Kingdom Government to demonstrate to the Commission under Article 5 of this directive that in the United Kingdom, agricultural developments, land drainage developments, forestry developments—all the items contained in paragraph 1 of Annex 2—can continue to be given planning permission under the general development order because we shall have devised positive, dynamic and watertight arrangements of our own for complying

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with Article 4—the article which calls for proper environmental assessment to be undertaken on such projects.
On the other hand, it is quite clear to me that unless we find effective means of our own for assessing and mitigating, where necessary, the impact of agricultural technology, land drainage, afforestation and intensive livestock production on the landscape and on wildlife and its habitats, particularly in our sensitive areas, then United Kingdom agriculture and forestry will have to come to terms not only with the full rigours of an EEC directive on environmental impact assessment but also with United Kingdom planning legislation and control. I trust that a view of this prospect will serve to concentrate the minds of the Country Landowners' Association and the National Farmers' Union before it is too late.
7.26 p.m.
Viscount Colville of Culross: My Lords, I apologise for not having put down my name on the list. I also have to apologise, as a fairly recently co-opted member of the sub-committee, for the fact that I was able to put in, I am afraid, very few attendances because of various preoccupations at home and overseas. Nevertheless, it is a subject with which I have had some professional concern in the past, and I suppose I ought to declare an interest in that it is possible that I may have a professional concern with it in the future.
There are two points which I should like to draw to your Lordships' attention. First, when I saw the draft directive I was a little worried about the provisions in Article 7, which seem to indicate that the competent authority, which I take to be the local planning authority, would only start to consult the various bodies concerned in environmental matters at a stage after the planning application had been put in. I am bound to say that it seemed to me at first instance that, if that was the moment that they first started the consultation, there was a good deal to be said for the point of view that the directive would lead to massive delays.
However, upon reflection I do not think that this is really going to be a very formidable problem. Having been involved in two major exercises which involved exactly this sort of preparation, I do not believe that any developer with a grain of sense would leave it to the stage of the planning application before he approached all the people that the local planning authority would consider to be relevant for the purposes of Article 7. Consequently, all the necessary consultation would in practice have been done a long time before that stage and, indeed would have formed part of the preparation for the formulation of the planning application itself. Therefore the requirement to consult would be no more onerous in practice than that which applies under the general development order, anyway, for various consultations of a formal nature to take place and for formal representations to be made.
The second point to which I have attempted to apply my mind is the one which the noble Baroness, as it were, directed at me: the question of legal challenge. I do not think that she need worry too much about lawyers wishing to acquire to themselves new avenues of approach to the courts or extra methods of earning
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their livelihood. Projects of the size that we are talking about here are quite sufficient to engage the occupation of learned counsel for a perfectly satisfactory period of time without anybody wishing to extend it. On the contrary, I believe that the legal profession may on occasion be actually capable of reducing the time that is taken if it is consulted early enough.
I think that the problem which has been exercising the department of my noble friend Lord Bellwin is the way in which people might make use of Article 6 and Annex 3 of the draft directive so as either to spin out or to have adjournments of a public inquiry, or possibly, in addition, to take the matter up on appeal on the ground that the proper procedures as laid down by some subordinate legislation which we are anticipating have not been followed through. I would only very tentatively suggest this to my noble friend Lord Bellwin. Far be it from me to enter into all the technicalities, but I would make this suggestion: the provisions which one finds in Article 6(2) are such that, whatever seem to be the specific characteristics of the project and the environment likely to be affected, the extent to which the developer can reasonably be expected to get information, taking into account existing knowledge and assessment methods, is something which has to be decided by somebody at some time. I would suggest that there is no necessity to leave this all that long. I would tentatively put it to your Lordships that it would hardly be very harmful if, at some stage in the process leading up to the planning application, the local planning authority were to say, "Yes, in our opinion the ground has now been covered and you have dealt with the matters that are required under Article 6(2) and Annex 3 for the purposes of this application".
Alternatively, if one wanted to postone the thing a little further, if the matter was one that was going to be called in by the Department of the Environment, I suppose it would be possible to reserve powers to the Secretary of State whereby he could say that he was satisfied on the material before him at the time when he wrote the call-in letter that the necessary material had been collected for the purposes of Article 6(2). I think that would put paid to two lines of legal challenge. First, it would not be possible for objectors at the public inquiry to say that the full process of the collection of information and the examination of the issues that was statutorily required as a result of the directive had not been complied with, and therefore the inquiry must be adjourned until it was, because the letter, or the certificate, or whatever it may be, of the local planning authority or of the Secretary of State saying that he was satisfied, would be enough to fulfil the requirements of the directive.
Secondly, I should think it would make it quite impossible for anybody to appeal the matter under the legal appeal provisions of the Town and Country Planning Act, because if that certificate or letter had been issued, then for the purposes of the subordinate instrument that brings this matter into the scope of the planning acts, the procedure would have been fulfilled and that would have been an end of it.
My noble friend Lord Craigton said—he was quite right—that if that was done at that stage it might emerge at a later stage in the course of the inquiry that there was some other environmental issue which needed to

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be examined. So be it. That is perfectly possible. There is no reason whatsoever why it should not be examined. If it emerges as being relevant at a later stage the developer will, at his peril, refuse to go into it or to take the necessary steps to satisfy the inspector that the matter has been properly considered and taken into account. But that need not necessarily mean that one has to attack the perfection of the initial analysis undertaken by the planning authority or by the Secretary of State, of what they thought, at the relevant stage, were the necessary matters that had to be considered. So one gets the best of both worlds: one could have, as it were, an unchallengeable system, which I think the subordinate legislation would be able to lay down, but at the same time there would be sufficient flexibility to take into account some issue—no doubt a very important issue—which arose later and required proper examination. It would get that proper examination and no harm would be done. In those circumstances, I cannot see where the scope for major legal challenges leading to delay and to appeals will come.
The only last thing that I would say to my noble friend Lord Bellwin is that if there is any doubt about the final stage, which is the appeal to the High Court about procedures, I think the moment is coming anyway when the department will have to say—probably in legislation—who has the right to take these matters to the High Court. At the moment it is an extremely dubious point and there are various judgments and authorities which are not wholly consistent. The probability is that it is the applicant, the local planning authority and anybody upon whose land the development is going to take place. The latter can be extremely difficult in the case of coal mining, since one may go underneath a number of people's land; but merely to say that objectors are those who can take matters on appeal to the High Court, I think, is stretching the existing law a good deal further than it goes.
If there is a real fear that completely outside objectors, who are allowed by the inspector's discretion to take part in the inquiry, are in fact those who it is feared will take the matter to the High Court on appeal, that is a general matter which applies not only to this directive and to the affairs which this debate is dealing with, but in general terms to all planning matters; it is something that, if it is a fear of the Department of the Environment, ought to be dealt with. In the circumstances, I am very happy to be able to support the conclusions of the committee, and I particularly draw attention to the wise words of paragraph 83, which I have been attempting to expand and spell out.
7.36 p.m.
Lord Northfield: My Lords, as in a previous debate on these subjects I begin by declaring an interest as a part-time adviser to the Commission; indeed, I have been so close to the drafting of this particular directive, for so long, that I am not quite sure how equipped I am now to debate it. Noble Lords have said how many drafts it has been through and I am almost at the stage where, in No. 21, I am not sure whether I can still see the wood for the trees. However that may be, I should like to say first of all that I was glad that my noble friend Lady White and other noble Lords have paid a particular tribute to the work of
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Monsieur Michel Carpentier, the Director-General.
It is sad that in debating this very important directive tonight we are in fact saying goodbye to him. And it is ironic that having built up the service of the environment, and having been given a personal upgrading to the rank of Director-General, and having now had that crowned in recent days by having the service made into a full Directorate-General for the first time, the Commissioners have chosen this moment to move him to energy. I suppose it happens to all of us in these jobs that at the height of our achievement we are moved on. But I feel we should say that we know how hard he worked in this field, with wide knowledge, with immense dedication, with a great capacity for hard work, with qualities of balance and flexibility that are a delight to see in an international civil servant. It has been a privilege to work with a man who has these immense qualities and is also an Anglophile on a huge scale. I think he appreciates more than any international civil servant I have ever met the United Kingdom pragmatic approach to these problems, and it ought to warm the hearts of your Lordships when I say that he is a fervent reader of every one of your Lordships' debates on these matters concerning draft directives on the environment, and he goes out of his way to pay tribute to the work done by your Lordships' committee.
The issue we are debating tonight will come to a head during the period of the United Kingdom's presidency of the Community, beginning, I think, in the latter part of this year. Therefore I think it is important to find out how the Government now stand. So I want to base my remarks on paragraph 30 of the committee's report in which the committee indicates the questions which were worrying Her Majesty's Government.
The first issue is whether the system proposed in this draft directive would be more effective—this is what the Government said to the committee, I think—than present arrangements in the United Kingdom. Here we are up against the need to understand the basic features of this draft. Indeed the question is almost inappropriate. This is not a statutory procedure being laid down by directive to change in detail our British approach to planning applications. As the committee goes out of its way to say on two or three occasions—I quote from paragraph 1 and others—the directive is no more than an attempt to introduce a common procedural framework. It is not a set of detailed ways in which every planning application has to be handled. The discretions are enormous. The flexibility is apparent in section after section. Indeed, the noble Lord, Lord Ashby, quoted the statement of one of the most important witnesses that the whole draft can be characterised as an olive branch towards British pragmatism.
So it is a wrong question to ask whether it would be more effective than what we do now, because in fact the procedure in the United Kingdom will be hardly altered at all by the draft directive. After all, one might think—and this is perhaps the difference between draft 21 and all the others that went before it—that the draft directive itself had been built on United Kingdom experience. The developer has to give as much detail as possible about the environmental effects in his initial application. I agree with the noble

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Viscount, Lord Colville, that there is no reason at all why that should exclude his consultation with people affected in making that initial assessment. On receiving it the competent authority has to give the application proper publicity and go in for proper consultation. There has to be a decision by the competent authority in the light of the consultation. And after all this is over and the decision is announced there have to be subsequent checks on the effects on the environment of the project, to see whether public authorities need to do more to protect the environment from its effects.
So nowhere in this document are the words "environment impact assessment" ever used. The whole approach is to indicate that the effect is to encourage a pragmatic approach to checking on the effects on the environment by a logical, flexible, largely discretionary system of planning control that fully accords with what we have in the United Kingdom. The Commission has run away as hard as it can from those early drafts which indicated perhaps that we were going too near in this draft to something modelled on the United States' experience. British terms abound, even "planning permission" which had perhaps hardly been known in some member states. This is another olive branch towards us. British pragmatism shines out in words like" discretion "to" competent authority". It all has a familiar ring about it, and I cannot understand why anyone should at this stage think that one needs to pretend that this involves great alterations in our system.
The noble Lord, Lord Llewelyn-Davies, who is so distinguished in this field, made the key remark when he said that when a system like this is needed and wanted by other member states, if it involves pretty little disturbance for us why in heaven's name should we object to it? I believe that is the key question to ask.
Secondly, I think it is quite impossible to have a recommendation as opposed to a directive. This would be evaded in some countries and would not get the results that the directive requires. Indeed I quote, if I may, from paragraph 81, to sum up what I have to say on this first issue. The committee say:
"… the committee believe that the present draft directive strikes the right kind of balance: it provides a framework of common administrative practices which will allow member states with effective planning controls to continue with their system, possibly with some modifications of detail, while containing enough detail to ensure that the intention of the draft cannot be evaded".
Of course, that is the whole purpose of the flexibility and pragmatism that we have managed to get into the draft at this stage.
In those circumstances, I think the alterations to United Kingdom law will be minimal, if needed at all, and mainly will be needed in terms of secondary and not primary legislation, and probably mainly by regulations. Our system is fully compatible with this framework. I wonder whether, when one reads the work and the views of some of the witnesses who came before the committee, they were in fact still talking about the earlier drafts. In some cases that is perfectly evidently the case; they had not adapted their thinking and their reaction to the early drafts, which had not been so flexible and pragmatic, and there are contradictions in some of their remarks.
Despite that overall approval of the principle of the draft directive, I realise there can be detailed objections to parts of the approach. Article 4 is
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the main difficulty, I know, where the system of exemption for small projects is set out. The committee, I hope, has made the right suggestion, that it would be quite intolerable to go to the Commission on every case and say, "This one is so small. Can we let it off?" That would provide interminable delay and bureaucracy. Much better, as the committee have suggested, that the circumstances for exemption should be embodied in legislation and then reported to the Commission, so that the Commission can simply be satisfied that a proper system of exemption exists and that projects are not being exempted in some backward countries, if I may use that phrase without offence, by administrative discretion which borders on the improper. So, surely, the fact that we are on Draft 21 shows that all details of this kind are highly negotiable. I hope the Government are not going to start saying that because details of this kind are still unacceptable they are going to oppose the whole principle.
Secondly, there is the objection about major land uses being in Annex 2. I must repeat what I said to the noble Lord, Lord Nugent, namely, that this is discretionary, and even then the competent authority can indicate that only a simplified form of assessment is needed for such projects. So I think we have hardly anything to fear in Annex 2, given that we would in our planning system call many of the projects in for consultation, public inquiry and so on, before giving final planning permission.
I come now to the Government's second question, and I wrap it up with the third one, in paragraph 30 of the report. They ask: Will this system run the risk of increasing delays and costs of planning applications, and have other economic disadvantages? First, we must recognise that this has a very restricted application. These are major projects, as the noble Viscount said, and most of them anyway—field day for lawyers as they do provide—would be subject to the kind of procedure in the draft directive. There are 35 kinds of projects in Annex 1. I draw the attention of the noble Lord, Lord Bellwin, to the fact that one eminent witness estimated that the number of planning applications which would actually be involved as a result of Annex 1 was only in double figures, certainly not in three figures. My goodness! that shows how restricted in effect the system will be in catching large projects.
Let us now look at the question whether any evidence of extra delay would be caused by this system. Paragraphs 34 and 35 of the committee's report set out some of the evidence this way and that way. But in paragraph 53 the committee reaches a firm conclusion when it says:
"… a structured process … would speed up and rationalize, rather than delay, the decision-making process".
That after carefully hearing all kinds of witnesses.
Secondly, if there is delay, it might be at the consultation stage, but I go along with the noble Lord, Lord Ashby, in saying that we still have to improve our own system of consultation in this country, and I do not think that it is necessarily the case that a little extra time spent on some of the consultation would be a bad thing. Indeed, as witnesses suggested, it will save later delays when people begin challenging because

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there has been inadequate first consultation. I quote from Question 95 where it was said that:
"In terms of time British Gas feel they have saved several months on each planning application"
by going through the kind of process that is set out in this draft directive. That is a very good example. After all, the authorities have great discretion as regards the details of the way in which this consultation is to be carried out. So there are no overall rules that should lead to enormous disadvantages.
Secondly, could there be litigation? The noble Viscount, Lord Colville, has said a good deal about that. I should like to add just one point; that if anyone reads this directive, he will see that throughout it gives discretion wherever possible that can be laid down to the competent authority, so that no one can then challenge it in the courts. I give one example where, in tact, there was a slip up; the draft still says that the planning application shall be sent to relevant competent authorities for comment. I could well foresee a case in which people go to court to say that, this and that relevant authority was not consulted. Therefore, one of the minor amendments that is still needed to the draft is to say that those who shall be asked to comment shall be the ones who the competent authority believes to be relevant. I see the noble Viscount nodding his head. But there are other ways in which this can be tightened up to prevent unnecessary litigation. So far as possible, steps have been taken to prevent it.
I want to make two final points. Will there be extra costs? This is the other part of the Government's second question. The noble Lord, Lord Ashby, or perhaps it was another noble Lord, quoted the figure given by eminent consultants that in their experience it it between 0·2 per cent. and 0·6 per cent. of normal costs of a big development project. Here again I quote the Gas Board. Although they feared the detailed drafting of this directive, and I think were mistaken in thinking about earlier drafts, nevertheless it is revealed in part of this report that the Gas Board say that they have saved £30 million over 10 years, partly as a result of quicker authorisation of planning applications, after following the kind of open procedures set out in this document. Therefore, there is a good deal of evidence of' saving of time and of costs in carrying out the draft directive's intentions.
Finally, there is a cost advantage to the United Kingdom in having this legislation. It is the case that our planning legislation is better than that of some other members of the Community, and so in some countries our competitors do not have to go through so many costs and so many hoops in order to get planning permission. This is a direct cost disadvantage for some United Kingdom industries. So, as the report says, this draft directive would help to reduce distortions of competition in Europe that are working to the disadvantage of the United Kingdom at the moment.
I come to my final remarks. I hope, from the way in which this directive has proceeded from draft to draft with immense flexibility, gaining momentum of pragmatism inside its boundaries, that we have reached the stage where we can ask the Government to move from their opposition in principle that was voiced to
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the committee in its early stages. We have reached the point—and I say this openly to the noble Lord, Lord Bellwin—where surely this is the sort of framework directive for which they are always asking. Time and again from that Box, Ministers have asked the Community to stop making detailed legislation, but to give us a framework within which we can work. After all, this is a framework of common procedure which is fully compatible with the British system.
Therefore, I hope that, as in every sense the committee has supported the Commission in finding their case proved, and has shown that it is moving flexibly forward in matters like this, the Government will say that, given the resolution of detailed difficulties that still remain—and they are only details—in principle they will no longer oppose this draft directive.
7.56 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin): My Lords, I should like to begin by thanking my noble friend Lord Cranbrook for initiating this debate and straight away, as others have done, to say that we are indeed grateful to the Select Committee for producing this report, and for the opportunity that it gives your Lordships' House to discuss this very important subject.
Before I go any further, I should like to add the Government's own endorsement of the point which was made initially by the noble Baroness, Lady White, but which was touched upon by just about all other speakers, regarding the appreciation to M. Carpentier, who, we acknowledge, and we should like to put on record, brought an enthusiasm and personal dedication to the Community's environment policies which I submit is recognised throughout the Community. Of course, we wish him well in his new post in the Energy Directorate. On a personal note, I entirely took the point made by the noble Lord, Lord Northfield, that that is exactly the time when someone is moved on—just when he is at his very peak.
This subject is important because the subject of environmental assessment has attracted worldwide attention and interest over the last decade. It has been discussed and studied by practically every international organisation one could care to name. A number of countries have adopted systems of environmental assessment, not least one which some may call the birthplace of the idea, the United States.
It is also important because the draft directive, the subject of the report, is a significant element in the European Community's environment programme. This marks the first step in the Community as a whole in the direction of trying to prevent environmental damage rather than to cure or alleviate it. It is an ambitious step and one with important consequences for the future direction of environment policies in the Community. I am sure that everyone who has spoken and everyone in your Lordships' House will agree that we must be sure that it is sound.
We must, therefore, approach this proposed directive with caution and examine its implications carefully. I congratulate the Select Committee on the amount of work that it has put into examining the proposal. Anyone who has listened at all this evening could not fail to have been impressed by the great knowledge and

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one would say dedication of all those who have been involved with this. I unhesitatingly express my admiration for what they have done.
The committee has followed the proposal closely for several years through its unusually long gestation. The committee has collected evidence from a wide range of sources. It has analysed it in the painstaking manner which has deservedly earned the reports of the Sub-committee on Environmental Matters the high standing which it holds in this country and in the Community.
However, I regret that I cannot share all the committee's conclusions; not because the committee has, for the first time, disagreed with the Government's views on this draft directive. There has to be a first time for everything, and it is the committee's duty to tell the House when it considers that the Government have something wrong. I think it is fair to say, however, that the committee has disagreed with the preponderance of evidence presented to it and in particular the views put by industry, both public and private, by the professional institutes, and by the local authority associations. I find it highly significant that the three associations representing the local planning authorities, who would be involved in implementing the directive, should be unanimous in their doubts about it. The weight of this evidence must give us cause for thought, and at all events makes me less abashed than I might otherwise be in dissenting from the committee's conclusions.
There are three basic question which we must address: First, do we need assessments of the potential environmental effects of major development projects? Second, do we need specific legislation in this country to require such assessments to be carried out? Third, is this a suitable object for Community legislation? Let me make the Government's position clear. Our answer to the first of my questions is a wholehearted "yes". It is implicit in our whole system of planning control over development that the environmental implications should be taken into account in deciding whether to authorise projects. I was pleased to see the unanimity of all who gave evidence to the committee on this point, particularly industry. I think everyone is agreed in particular that in the case of major developments the potential effects in terms of environmental pollution must be fully evaluated, along with the technical, economic, social and employment considerations. In fairness to the Commission's proposals I think there is merit in the idea of a framework within which these effects can be considered together early in the life of a project.
The pollution of our rivers and of the air, the deposit of wastes, the disturbance and destruction of habitat, are all issues that rightly concern people and deserve to be given due weight in development decisions. Any approach that better enables these factors to be considered in a systematic way is to be welcomed. It strengthens the planning system in the eyes of those whom it aims to serve—the developer who wishes to see the benefits of his project realised quickly; the local community who may be anxious to safeguard their local environment; the wider public who expect to see national interests given due weight. And it helps to highlight environmental opportunities, as well as problems.
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But environmental assessment is not some new miraculous diagnostic instrument. It is an approach which is inherent in all decision-making on environmental matters and is indeed inseparable from the process. In one way or another we have been doing it ever since the Town and Country Planning Act 1947. As to special exercises and studies, over 25 major assessments have been carried out in Scotland alone, in particular in relation to offshore developments. Within England, major assessments were commissioned by the National Coal Board for the proposed Belvoir and Park coalfields, by the North West Water Authority for reservoir proposals, and by British Nuclear Fuels Limited for proposals to extract water from Wastwater. This is quite apart from the studies forming the basis of public consultations and inquiries in connection with motorway proposals.
My noble friend Lord Cranbrook referred to the question as to whether the directive would require amendment of main legislation. I say to him, yes, it would, though possibly through regulations under the European Communities Act. The fact is that the directive would impose on developers obligations not enactable solely by regulations under the planning Acts. So we accept the general need for environmental assessment and the need for special exercises in major cases. Properly conducted assessments can lead to quicker decisions, but equally a rigid mandatory system can add further bureaucratic hurdles, and can lead to delaying objections and to litigation.
I now turn to the question of whether it would be right to legislate for it, and it is instructive at this point to consider the particular provisions in the draft directive. First, we have the broad provisions of Articles 1 to 3 which lay down the general need for assessment of projects with significant environmental implications and the general factors to be taken into account. Then we have Article 4 which prescribes an assessment for all projects covered by Annex 1 unless, with the agreement of the Commission, the competent authority have exempted it. Then we have a requirement that projects of the kind listed in Annex 2 should also be the subject of an assessment if they are caught by certain thresholds and criteria to be established by member states themselves.
Going on from that, we have Article 5 which provides for joint Community review of these criteria and thresholds, and Article 6 which with Annex 3 prescribes the main items to be covered in assessment. In the remaining articles we have provisions covering consultation and public participation on the results of studies, a requirement for the competent authority to give its own statement of conclusions when reaching a decision, and a duty to monitor compliance with the terms of any consent given and even to consider the imposition of fresh requirements.
I do not want to comment in detail on all the individual elements in the draft. I will concentrate only on key features. Article 4 of the draft directive, as the noble Lord, Lord Northfield, so fairly said, introduces quite a considerable bureaucratic hurdle, as indeed the committee have pointed out. This article requires that the prior agreement of the European Commission has to be sought before any individual project can be exempted from the assessment procedure. This means that every time a planning application is made for a

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small insignificant project of a class listed in Annex 1 of the directive we would have to apply to Brussels and say, "This is only a small one. Would you please exempt it? "The committee suggest that this problem could be overcome by member states agreeing beforehand with the Commission criteria for exempting small projects. That would certainly help, but it would get us into the vexed problem of defining criteria for particular types of cases. It leads us also into the wider problem of deciding in advance what projects should require an assessment.
In our view it is impossible to draw up a comprehensive logical list of projects which would always require an assessment, as Annex 1 of the draft directive purports to do. The noble Lord, Lord Northfield, suggested that the number of Annex 1 proposals would be in less than double figures each year. With great respect, I wonder whether this can be true, in that the exact number must surely depend on the thresholds of the criteria that are fixed. At the moment this is unknown, and I should have thought that this was an essential difficulty of the proposal.
No doubt we can all think up a short list of projects that might be generally considered to pose complex environmental projects. But one very soon starts having to make qualifications, and runs into the problems of thresholds and criteria. One has only to cast one's eye down Annex 1 to see the difficulties. For example, is all extraction of solid fuels to be covered, or only major projects? Is all metal manufacture, or only the more substantial cases? And how are airports and harbours to be defined, bearing in mind that these are also in Annex 2? One has to start making arbitrary and artificial decisions about what would make a project significant. Its size? Its cost? Its output? And then try to place a figure on it. I am pleased that the committee recognise the problems in this concept of thresholds. And of course, once it is accepted that a project needs an assessment, one is face to face with the problem of identifying all the statutory aspects for study. Although one is required only to consider particular aspects in so far as they are relevant, there is inevitably scope for dispute and litigation on what may or may not be relevant.
There are other aspects of the draft which concern us. First, it is a long established principle of town and country planning law that, subject to certain exemptions, agriculture and forestry should be exempt from statutory planning control. By the same token we would think it wrong to legislate for environmental assessment of changes in agriculture and forestry which are at present outside statutory control. We believe—as reflected in current arrangements for consultation on forestry proposals and in the current Wildlife and Countryside Bill—that in so far as it is desirable to assess the environmental implications of such changes, this is best done by voluntary arrangements.
Second, there is a risk that the provisions for consultation and participation will extend what is already a prolonged planning process in major cases. In some cases it may be right to have a study completed, published and circulated before a public inquiry. In others, it may be sensible for the inquiry itself to be seen as part of the process of appraisal.
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Thirdly, there is a risk that the requirement for the competent authority to make its own statement of environmental implications could turn into another source of delay. Fourthly, we see problems in any requirement that, having given permission for development, one should subsequently consider tightening up the conditions subject to which it was originally granted.
Lord Northfield: My Lords, the noble Lord has said this twice. Yet it is not said at all in the directive. What the directive says, in Article 11, is that the competent authority should check that the conditions are being complied with and whether they are still adequate; whether other provisions to protect the environment are being obeyed; and whether the competent authority needs to take further measures to protect the environment from the effects of the project. There is nothing there to say that the article is leading to additional burdens being put on the developer at that stage.
Lord Bellwin: My Lords, I can only say that our interpretation of what is certainly a far from easy directive is as I have said, but perhaps I can return to that point at the end of my remarks because I should like first to reply to some of the other comments which have been made.
It may be said—and I would agree—that at least some of these matters can be put right by amending the draft proposals and that they are not a necessary part of any package. The draft directive is of course currently being considered by the Council's environment working group and I trust that your Lordships will recognise that I cannot at present comment on those discussions; they will be brought before the Council of Ministers at some later stage and I cannot anticipate that report. I may say that, so far, those discussions have not assuaged our doubts about the proposals. There remain aspects of the draft which involve basic difficulties—and I refer in particular to the problem of defining the classes of case for assessment and of defining the items to be covered by assessment. The essence of the matter is that what is desirable by way of assessment varies essentially from case to case across the whole spectrum—from projects such as nuclear power stations or motorways at one end, to manufacturing extensions at the other. It may be said that the directive could be amended to give member states discretion over which projects require assessment and the scope of that assessment. That would, of course, produce an entirely different document from that which is under consideration. I do not know whether that approach would be acceptable to other member states, but I do know that it is that one the Government would consider very carefully.
My Lords, there is no neat way of dividing sheep from goats and of saying that some types of project require a prescribed form of assessment and others do not. Nor is there any neat way of defining those factors which may call for evaluation in any particular place. So much depends on the circumstances and so much depends on the scale of what is proposed. It may be suggested that we should not object to the directive listing activities when we have lists in our own general development order and use classes order—but

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these are very different types of list and your Lordships will recall the controversy over the GDO in deciding which projects were insignificant enough to be permitted. How much more difficult it will be to decide which projects will be environmentally significant in all the circumstances. We believe that in controversial cases, as things are, all the incentive is on the developer to demonstrate the environmental acceptability of his project. We doubt whether it is necessary to reinforce this motivation with further legal requirements.
I now turn to the third issue, which is that of the Community dimension. Is this a suitable subject for Community action? There are two arguments here. The first is that prevention is better than cure; that a Community instrument in this field will provide better protection for the environment of Europe than a host of negative controls and anti-pollution policies. The second is that harmonisation of procedures is required; that different procedures for authorisation of development can impose barriers to trade. As it is based on Article 100 of the Treaty of Rome, the legal justification of the draft directive derives from this second argument. However, one may doubt whether the directive is really required to remove barriers to trade. The directive proposes only to establish a common set of procedures. It does not—indeed it would not be possible—establish a common set of decisions. Furthermore, it establishes only a minimum set of procedures. There would be nothing to prevent any member state adopting more rigorous procedures, and I do not believe we should wish to prevent it from doing so if it wished. However, the Select Committee bases its support for the draft directive on the first argument—that it will protect the environment of Europe. Reading between the lines of the committee's report I think I detect some criticism of the Government for taking a parochial and self-satisfied approach in opposing this directive. If I understand the report's conclusions correctly, they argue that the directive will have little effect on the UK because we already have a good planning system, but it will be valuable in raising standards in those member states which do not share our good fortune; that in opposing the directive the UK is behaving like a dog in a manger.
I do not believe I need to repeat our wholehearted support for a positive and realistic community environmental policy. I hope that the Government's views were made clear in the course of the excellent debate in this House in March, but the key word here is "realistic" or "acceptable". We do not believe that this particular proposal is realistic or acceptable. Nor do we believe that the detailed changes suggested by the committee would remove the main difficulty: that is the difference between the Government—not to mention industry and the local authority associations—and the committee. The committee see the problems as being ones of detail, whereas we see the difficulties as being more basic. I am not saying that the amendments suggested by the committee are wrong. They are sensible and indeed they are helpful, but they do not overcome our central concern.
I said at the beginning of my speech that this proposal was a major and important departure in the Community's environment policy. It is important that we should get it right. The Government do not believe that the present draft directive yet gets it right. As
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first step in the new field we consider it to be over-ambitious and likely to fail in its intention. If it does fail, it could bring the environmental programme into disrepute and seriously harm future progress. We have only to look at the problems encountered in the United States when that country first introduced environmental impact assessment to see the pitfalls which exist. The Americans have, I believe, substantially revised and improved their procedures, but the early teething troubles seriously soured attitudes towards environmental assessment and cast a cloud over environmental policies.
In fairness to the European Commission they have made great efforts to avoid the pitfalls experienced in the United States. Nevertheless, for the reasons I have given, their proposal also has its problems. It has become a constant concern of my right honourable friend the Secretary of State for the Environment to speed up the planning system and remove gratuitous sources of delay. In our present economic condition we cannot lightly add to the burdens on industry by introducing new requirements. I say this despite the very persuasive arguments which the noble Lord, Lord Northfield, so ably put when he suggested that this would not happen. We want to avoid legislation which could be difficult to enact, hard to implement and—by virtue of its uncertainties—be a source of litigation and dispute. I am grateful to my noble friend Lord Nugent of Guildford, who seemed to share my concern about this aspect of the matter, at least.
Before I sit down, I wish to say this. Of course we will listen and consider very carefully all that has been said today. The debate has been on the highest possible level—not least those observations made by the noble Viscount, Lord Colville of Culross, whose great knowledge and experience on planning procedures must always command the closest attention. I assure him, as I assure the noble Earl, Lord Cranbrook, and the noble Lord, Lord Ashby, and the noble Lord, Lord Northfield, and everyone else who has spoken, that we do not lightly brush off this matter and that what I have said is not simply a negative to what has been proposed. It is not that at all. We consider this matter to be far too serious and important to deal with in a light way. I hope those remarks will be some consolation—if I can put it that way and with great respect—to the noble Lords who have argued the case in a way that can only command the respect of all who have listened to them. I have given the Government's point of view. I have spoken of our concern, and I have explained the reasons why we believe it is right to regard the Community directive as now proposed to be unacceptable.
8.20 p.m.
The Earl of Cranbrook: My Lords, I think we would all agree that the debate has been one of quality and extreme interest to all participants. I must draw the attention of the House to a small correction that is necessary to the report. It has been brought to my attention that we have not correctly reproduced the draft directive. On page XXIX in Article 3(1) we have omitted consideration of the vegetable kingdom; in other words, the word "flora" has not been copied from the draft directive. In fact, the directive requires attention to be paid to plants as well as animals.

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I was very interested indeed to hear the speech of my noble friend Lord Bellwin, and particularly to note that the areas of detail that concerned him were those which in every case, or in almost every case, had already been identified by the committee. That gives me the feeling that we are all working together and that our minds are running on very much the same lines. When my noble friend was discussing his second main point—is this the right topic for legislation?—I do not find any problems in the directive that have not already been discussed either in the report or by speakers in the course of this debate.
It was my role as chairman to present the views of my committee, but before closing I wish to make a small personal point. I am concerned that in this country today there is under the surface a sense of antagonism between what is seen as authority and what is seen as public rights and public processes. I feel that this antagonism is dangerously near the surface on many occasions. It expresses itself in the dissatisfaction of those who lose—the minorities who maybe feel they have not had the fullest opportunity to express their case. I felt that the opportunities for public participation, consultation and so on that were developed in the European Community's document, possibly illustrated a line that could profitably be followed in our inquiries into major development projects. I should like to feel that point could be followed up. Finally, I wish most warmly to thank all those who have participated in the debate.
On Question, Motion agreed to.