Lords Sitting of 4 June 1981

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Salisbury): The LORD CHANCELLOR on the Woolsack.

Afghanistan: Representations to the USSR
Lord Shinwell: 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 was the last occasion on which they made representations to the Soviet Union about the invasion of Afghanistan; what form those representations took; and what was the response.
The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne): My Lords, my right honourable friend the Prime Minister discussed Afghanistan with the Soviet Ambassador on 9th March. There have been subsequent exchanges in Moscow. The Government have made it clear that we expect the Soviet Union to withdraw their 85,000 troops from Afghanistan and leave the Afghan people free to determine their own future. No satisfactory response has been obtained.
Lord Shinwell: My Lords, does the noble Lord realise—not because I asked the Question but because of the personal involvement of the Foreign Secretary—that the Foreign Secretary might have been present in order to answer the Question himself? However, can the noble Lord recall when the invasion occurred, the demonstrations of hostility against Russia, the resentment expressed, and the determination of the United Kingdom and some of the allied countries to prevent any further invasions following the incident in Czechoslovakia some time ago and now in Afghanistan? We seem to have completely surrendered. There has been no bang and hardly a whimper of protest. In spite of the peregrinations of the Foreign Secretary all over the globe, not a word is said about Afghanistan. Can we have some assurance that no other invasion is in contemplation, or is that beyond the knowledge of our intelligence department or the Foreign Secretary himself? Is it not an absolute scandal that this sort of affair can occur and almost simultaneously, or at any rate not long after the event—
Noble Lords: Too long!
Lord Shinwell: My Lords, perhaps I might finish my question, with the consent of the noble Lord the Chief Whip. I notice that he was getting up to interrupt me. I advise him not to do that; it will not do him any good. I mean what I say.
Noble Lords: Order, order
Lord Denham: My Lords, if the noble Lord, Lord Shinwell, will give way for just half a minute I will allow him to finish his question. I apologise for interrupting the noble Lord, but I think that he is verging on disturbing the patience of the House. If he would be very kind and finish his question, my noble friend will be able to answer him.
Lord Shinwell: My Lords, the noble Lord the Chief Whip is quite wrong. I am not talking about the patience of the Government or the patience of your Lordships' House. I am talking about my patience and that of many other Members of your Lordships' House because of what has occurred or what has happened since. Can we have some assurance that it is within our knowledge that it is contemplated by the Soviet Union to indulge in further invasions, and if so, what do we propose to do about it?
Lord Trefgarne: My Lords, I am afraid that I cannot answer for the Government of the Soviet Union and I cannot say what further incursions upon the liberty of individual nations they have in mind. I hope that they have none in mind. As regards Afghanistan, we remain deeply concerned about the invasion of that country and the continued occupation by the 85,000 Russian troops to which I have referred.
Lord Goronwy-Roberts: My Lords, while entirely in accord with the purport of the Question of my noble friend Lord Shinwell and, if I may say so, gratified to understand that the démarche to the Soviet Ambassador on 9th March has been followed up at diplomatic level in Moscow since, may I press the Minister to assure the House that any further incursions, which may or may not be considered by the Soviet Union or any other country, will be regarded by the rest of us—and that means not only this country but also the Community and, indeed, the United Nations—with the utmost disapproval, leading possibly to action to mark that disapproval? In particular, will the noble Lord give an indication that above all the integrity of Poland will continue to be respected physically by the Soviet Union?
Lord Trefgarne: My Lords, my noble friend the Foreign Secretary has made clear on several occasions the consequences that would flow from a Soviet incursion into Poland. I reiterate and reconfirm everything that my noble friend and, indeed, my right honourable friend the Prime Minister have said on that account.
Lord Gladwyn: My Lords, if the Prime Minister receives no satisfactory response from the Russians in respect of the representations that she made last March, are we to assume that our relations, both political and commercial, with the Soviet Union will then be the same as they were before the invasion of Afghanistan?
Lord Trefgarne: My Lords, I fear that, following their invasion of Afghanistan, and in the absence of any satisfactory settlement of that matter, our relations with the Soviet Union can never be the same as they were before this monstrous act of aggression. We shall

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be considering what further diplomatic moves we can make.
Lord Brockway: My Lords, have the Government noted the condemnation of the Soviet action by the non-aligned nations of the world? Will the Government give the utmost support to the efforts which the non-aligned nations are now making to bring about a solution to this problem by a conference between Afghanistan and the neighbouring states?
Lord Trefgarne: My Lords, we have certainly noticed the condemnation that has been issued on this matter by the non-aligned nations and, indeed, almost every civilised nation of the world. As for a conference, that could indeed play a useful role at the right time.
Lord Shinwell: My Lords, perhaps I might ask a question that I was about to put when I was interrupted by the noble Lord the Chief Whip. I apologise to the noble Lord the Chief Whip, for I meant no offence when I refused to sit down. We are very good friends and would remain so despite our political views. In view of what has occurred and the intransigent position of the Soviet Union over this affair, do the Government contemplate any discussions with the Soviet Union on the control of arms or any matter of that sort?
Lord Trefgarne: My Lords, certainly from time to time—indeed, regularly—we have discussions with the Soviet Union in various fora about arms control and disarmament matters. However, since Afghanistan those discussions have had to proceed in the light of what has happened in that unhappy country and in the sure knowledge that any proposals that are made in respect of arms control or disarmament have, as I have said before in other contexts, to be verifiable and effective.
Lord Gisborough: My Lords, can my noble friend say whether there is evidence that the West is still offering cheap interest loans to the Soviet Union? Can he assure the House that at least this country will not be associated with such things?
Lord Trefgarne: My Lords, I cannot of course answer for other Governments, but I can say that the concessional credit arrangements that were formerly available to the Soviet Union have now been terminated.
Lord Gore-Booth: My Lords, in the matter of making our representations to the Soviet Union, which I hope we do in an extremely definite manner, may I ask whether we are using the language to the Soviet Union which would make it extremely clear to them and also, I hope, to our own public, that in behaving in this way they are completely destroying the credibility of anything which they may eventually say in the cause of peace? In other words, they are destroying their own position of being people who are credible in bringing about peace.
Lord Trefgarne: My Lords, of course the noble Lord had a long and distinguished career in the
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Diplomatic Service and will know better than I the ways of expressing diplomatic displeasure to those with whom one disagrees. I can assure him that we have certainly gone to the limits of diplomatic propriety in this matter.

Nationalised Industries: Capital Expenditure
3.11 p.m.
Lord Orr-Ewing: 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 satisfied that their control over nationalised industries is sufficient to ensure that money provided for capital expenditure is so used.
The Minister of State, Treasury (Lord Cockfield): My Lords, external financing limits are set at a level which takes account of the approved investment programmes of each industry. In setting these limits regard is also paid to the extent to which the industry concerned may have internally generated funds to finance investment and the extent to which it may need to borrow to meet losses or other outgoings.
It is the primary responsibility of the management of the industries concerned to ensure that they meet their targets and carry out their investment programmes within the resources provided for this purpose. But sponsoring departments do keep in close touch with developments in the financial position and investment programmes of the individual industries.
Lord Orr-Ewing: My Lords, I thank my noble friend for that reply. Is it not time that a better method was introduced whereby monies granted for capital expenditure should be used for capital expenditure and should not be used to subsidise uneconomic competition against the private sector?
Lord Cockfield: My Lords, I entirely appreciate the point that my noble friend makes, and it is always a matter of regret when rising costs result in money, which was intended to provide for investment, being diverted to other purposes. Perhaps I might draw his attention, however, to what was said by my honourable friend the Minister of State for Industry when announcing the increase of £200 million in British Telecom's external financial limit. He said:
"As a condition of the increased external financing limits the chairman has agreed to make the necessary arrangements to ensure that the additional sums are used exclusively for capital expenditure".
I am sure that my noble friend will welcome that development.
Lord Bruce of Donington: My Lords, is the noble Lord aware that there is a widespread and responsible opinion which says that the controls that the Government have over the financing of the nationalised industries are being badly applied and make economic nonsense? Is he aware that those views are shared

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by the Confederation of British Industry, by the National Enterprise Board, and also, one would hope the noble Lord notes, by the man who was designated by the Prime Minister as a "super guy", the chairman of British Steel?
Lord Cockfield: No, my Lords, I do not agree with the views expressed by the noble Lord, or quoted by him. If he would care to refer to the actual figures for last year he would find that investment undertaken by the nationalised industries fell short of the original planned figures by no less than £730 million, despite the fact that external financing limits had been increased by £585 million over the figure originally provided. The reason for this was that the losses of the nationalised industries increased, or their operating surpluses fell, by no less than £1,315 million. The best way that the nationalised industries can provide additional funds for investment is to control their costs, reduce excessive manning levels, and improve their efficiency.
Lord Bruce of Donington: My Lords, perhaps the noble Lord will explain in those circumstances why it was that the investment programme of the Gas Board was restricted so that a poll tax could be obtained from the public as a result of the increased prices that were ordered by the Government, in order that more money could be paid in Government funds by way of tax?
Lord Cockfield: My Lords, it is essential from the point of view of energy policy that gas prices should be realistic, and the Government are doing no more than that. The very large apparent profits of British Gas are really a rental from North Sea equivalent to the kind of rental enjoyed by the oil companies operating in the North Sea which is skimmed off by the petroleum revenue tax—a tax which no doubt the noble Lord supports.
Lord Tanlaw: My Lords, in view of the noble Minister's answer about telecommunications, would he be able to say to the House that it is now the Government's policy to assess financial assistance to nationalised industries on the basis that capital programmes are distinct from expenditure programmes? In which case, would he also give an assurance that the British Rail electrification programme will be judged on exactly the same terms in which he described the capital programme for telecommunications?
Lord Cockfield: My Lords, there is a fundamental difference between British Telecommunications and British Rail. British Telecommunications are making a profit; British Rail are making a huge loss. The loss which is estimated for the current year in fact amounts to well over £800 million—the figure is £885 million—which shows an increase compared with the last year's loss of £818 million. The very large investment programme to which reference has been made in the press so far as British Rail is concerned is primarily intended to enable them to continue to operate at a loss, although at a smaller loss than they have hitherto achieved. Whether that is the right way to use scarce natural resources is a debatable question.
Lord Beswick: My Lords, may I ask the noble Minister this? If he thinks that British Rail are being run so badly, why did he not hand it over to private enterprise and not just the profit-making hotels?
Lord Cockfield: My Lords, I am grateful to the noble Lord, as I always am, for his wholehearted support for the principle of privatisation, which we propose pursuing as vigorously as we can.
Lord Orr-Ewing: My Lords, is my noble friend aware that some of the figures he has given the House will be of tremendous encouragement, and have drawn attention to the need to improve the system of control so that capital expenditure is used for modernisation of our nationalised industries, and to provide jobs in the private sector who meet these needs? Is he aware that BSC only in recent months has spent £3 million buying up a private steel stockholders in the Midlands, and that does not create extra jobs? It only means that you are using public money to subsidise and to compete against the private sector, and this tends to be inefficient and is certainly not the intention of Her Majesty's present Government.
Lord Cockfield: My Lords, I fear I cannot comment on the specific case raised by my noble friend. I agree with him in his general proposition; the most fruitful source of additional revenue for capital development lies in the nationalised industries improving their performance. A reduction of 1 per cent. in their operating costs would make another £300 million available for investment.
Baroness Gaitskell: My Lords, may I ask—
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, it seems that the possibilities for supplementaries on this Question are absolutely legion as well as being fascinating. I suggest it might be prudent if we moved on, but I know that the noble Baroness, Lady Gaitskell, has been trying for some time to put a supplementary. Perhaps noble Lords would agree that she should put her question and we should then move on.
Baroness Gaitskell: My Lords, in view of the fact that the Government have increased unemployment time and again since taking office, may I ask the Minister to agree that instead of bamboozling us with figures—figures which are quite meaningless to most noble Lords here and certainly to most people outside—it would be more becoming for the Government to be rather less proud of what they are doing?
Lord Cockfield: The rise in unemployment is not primarily due to the Government's policies, my Lords, but is the result of three factors. The first is the long-term problems of the British economy, which were greatly exacerbated during the period of office of the previous Government. The second is the world recession. The third is the very large rise in levels of pay in 1979–80. As for the general point which the noble Baroness raises, I would remind her that the money provided for capital development by the nationalised industries in the coming year will

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show an increase from about £4½ billion, at which it stood in the last three years, to £5·2 billion. That illustrates the importance the Government attach to capital development, including capital development by the nationalised industries.

Extremist Literature: Circulation in Schools
3.22 p.m.
Lord Gridley: 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 steps they are taking to contain the spread of inflammatory literature that is at present being circulated by politically extremist groups, particularly among school children and young people.
The Minister of State, Department of Education and Science (Baroness Young): My Lords, it is an offence to publish or distribute written matter which is threatening, abusive or insulting, and likely to stir up hatred against any racial group. It is the responsibility of local authorities and teachers to deal with any attempts to distribute politically extremist literature in schools and other educational establishments; they have a good record in this respect. I would advise them to inform the police if they believe that an offence may have been committed.
Lord Gridley: My Lords, while I thank my noble friend for that Answer, may I ask whether she would agree that my Question is of national importance, being concerned with education and the youth of this country? Is any procedure in operation by her department or the Government to monitor the distribution of pamphlets by extremists to schools, colleges and, even now, to the unemployed? They seem to set one section of our youth against the other. Is my noble friend aware—I think she is—that since tabling the Question, further pamphlets which I consider to be inflammatory have come into my possession? I am of course prepared to hand them to my noble friend. In the circumstances, as it would be more appropriate for the House to debate these issues so that noble Lords could express opinions and we could have the benefit of their experience, may I ask my noble friend to agree, through the usual channels, to have such a debate?
Baroness Young: My Lords, to answer the first part of my noble friend's supplementary, my right honourable friend the Home Secretary recently announced the setting up of an inquiry into the activities of racialist organisations and incidence of racialist attacks. One of the areas to be covered during the course of the inquiry is alleged recruitment and racialist activities by extremist groups in schools and other educational establishments, and in that connection my department has recently initiated further inquiries of local education authorities for information on this matter.
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To answer the second part of my noble friend's supplementary; yes, I should be glad to have copies of the pamphlets to which he referred and, indeed, detailed information about any distribution of which he may know in particular schools. Regarding his comments about an Unstarred Question, that is of course a matter for him to determine through the usual channels.
Lord Paget of Northampton: My Lords, may I ask the Minister to say whether the documents referred to by the noble Lord, Lord Gridley, as advertising racialism, genocide and violence include the Old Testament?
Baroness Young: No, my Lords.
Baroness David: My Lords, would the Minister agree that it is really up to the heads of schools to notice what is going on? There is of course a difference between this and proper political education, which I hope young people would receive, as they are often at school until they are of an age to vote. I believe that a number of heads in some London schools are taking responsible action and, in that connection, may I ask her to agree that it is up to the heads to keep an eye on the matter?
Baroness Young: Yes, my Lords, I would agree with both parts of that supplementary. There is of course a distinction between political education whereby children learn about democratic processes, and the type of literature which is circulating, which could in effect be a breach of the law. The noble Baroness is right to say that this is a responsibility of head teachers and local education authorities, and, as I indicated in my original Answer, we have reason to think that they act responsibly in this matter, so I entirely agree with the points that the noble Baroness made.

Air Tickets: Evidence of Discounting
3.26 p.m.
Baroness Burton of Coventry: 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 are the difficulties in ascertaining "who has committed the offence of selling or using an air fare other than the one which is part of the authorised agreement" [Official Report, 19th May 1981, col. 829] when the Government have received from organisations concerned actual tickets purchased by them from bucket shops.
Lord Trefgarne: My Lords, in answer to a Question by the noble Baroness on 21st May, I indicated the nature of the evidence that would be required in order to prove that an offence had been committed by the airline or the agent concerned in the sale of tickets at fares not authorised by the Government. It is not at all easy to obtain such evidence. The mere purchase of a ticket at an alleged discount is not enough, more especially if the ticket shows the correct fare.
Baroness Burton of Coventry: Unfortunately, my Lords, the Minister has referred to the wrong date; if he looks at the Question on the Order Paper, he will see that I have taken it from 19th May, and it is that to which I should like an answer. Is it not a fact, first, that he has received from a large organisation discounted tickets which it has succeeded in purchasing? Secondly, is it not a fact that in a number of the cases those tickets were issued by an airline, and two photostats show the validation certificate supporting that? Additionally, is it not a fact that the firm holds copies of receipts showing that they paid for those tickets and which show that the money paid is less than in the tariffs? As the Minister has seen those figures and has that evidence, may I ask what he is prepared to do about it?
Lord Trefgarne: My Lords, I was well aware that the Question referred to the Answer which I gave the noble Baroness on 19th May. I am further aware that the Answer which I have just given referred to another Answer which I gave to her on 21st May. I assure her that that was deliberately intended because on 21st May I explained in more detail the matter I had referred to on 19th May. It is quite correct to say that I have received certain documents from an important organisation in the travel trade about this matter which purport to be evidence of illegal discounting. But I have to tell the noble Baroness that the evidence which has been presented to me so far would not support a prosecution.
Baroness Burton of Coventry: My Lords, is the Minister actually saying that the evidence which he has and which he knows is also in my possession merely purports to prove those facts? Is he not aware that the purpose of sending that evidence to the Minister was to show that tickets could be sold by an airline through a bucket shop at a discounted rate—the sort of information for which the Minister had asked—and that they can be freely obtained in the United Kingdom? What more are people to do if evidence which they submit is just swept under the carpet by the Minister, who answers a question he has not been asked?
Lord Trefgarne: My Lords, the truth is that there is very little between the noble Baroness and myself on this matter. I am as anxious as is she to ensure that the law is upheld, and I certainly regard it as my duty to see that that happens. But according to my legal advisers the evidence which I have received, and of which the noble Baroness is aware, is not such that a prosecution is justified. The fact that the purchaser of a ticker holds a receipt which shows that the amount of money that he paid is not the same as the amount shown on the ticket voucher does not necessarily mean that the ticket was sold at a discount. I say that, because, for example, the airline might owe something to the potential traveller—
Several noble Lords: Oh!
Lord Trefgarne: Noble Lords laugh, but in fact in years past it was a well-known ruse that airlines would enter into certain agreements for advertising with a
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travel agent. For example, an airline would pay the travel agent a fee for exhibiting the airline's advertising matter in the travel agency, and by so doing it got around the price control arrangements.
Lord Renton: My Lords, in default of the co-operation of all concerned, would it not be better to acknowledge that the law is unenforceable in these cases and that the policy that it purports to uphold is contrary to the spirit of free enterprise?
Lord Trefgarne: My Lords, I entirely agree that some of the fare control arrangements are unsatisfactory. That is why we are seeking to produce, and to achieve by negotiation with our international partners and indeed with the airlines concerned, a more competitive and appropriate régime of air fares. I wish that we had made more progress, but we have made a little.
Lord Airedale: My Lords, might it not be a good idea to send round someone to whom the airline does not owe money and see whether he can collect evidence similar to the evidence that the noble Baroness is speaking of? That might advance the matter a stage further.
Lord Trefgarne: My Lords, the difficulty with that suggestion is that it falls within the category of agent provocateur, I am told, and I understand that the courts have taken a dim view of that.
Lord Morris: My Lords, does not my noble friend agree that, if the law as it is at present appears to be manifestly unclear, and/or indeed unenforceable, it is the bounden duty of any Government to initiate legislation to clarify the law as a matter of urgency?
Lord Trefgarne: Yes, indeed, my Lords; I should be happy to do that. However, the difficulty is that I can do it only with the agreement of our international partners, which so far has proved difficult to obtain.
Lord Bruce of Donington: My Lords, so that the matter may be elucidated, will the noble Lord undertake to communicate to the House the specific points relating to the evidence that he has already received? I have in mind the specific facts that have been admitted, the specific points that he considers to be defective. Steps might then be taken to provide the noble Lord with evidence which will meet the requirements of even his legal advisers.
Lord Trefgarne: My Lords, I can assure the noble Lord that nothing has been admitted by alleged offenders. But what I want to stop short of is actually offering a detailed and definitive legal opinion on some hypothetical case.
Lord Derwent: My Lords, is it not a fact that the whole House much enjoys these monthly matches between by noble friend and the noble Baroness? Today I think it is a draw so far.
Lord Trefgarne: Would that they were only monthly, my Lords!

Business
Lord Denham: My Lords, it may be for the convenience of your Lordships if I announce that dinner will be available this evening at the usual time. The Committee will adjourn at approximately seven o'clock for a short period. During the adjournment the Third Reading of the Fisheries Bill will be taken.
With the leave of the House, at a convenient moment after 3.45 my noble friend Lord Mansfield will repeat a Statement that is to be made in another place on local authority expenditure (Scotland).

Licensing (Amendment) Bill [H.L.]
Read 3a, and passed, and sent to the Commons.

Transport Bill
3.35 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Bellwin.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 1 [Railways Board's powers of disposal]:
[Amendment No. 1 not moved.]
Lord Underhill Lord Underhill moved Amendment No. 2:
Page 1, line 12, leave out from ("subsidiaries") to end of line 2 on page 2.
The noble Lord said: This is the first of a number of amendments dealing with the provisions relating to British Rail's subsidiaries. It has been stressed—I refer to what the noble Lord, Lord Bellwin, said on Second Reading—that Clause 1 will enable private capital to be introduced into the British Railways Board's subsidiaries. However, subsection (1)(b), to which the amendment refers, provides for the disposal of the whole, or part, of any subsidiaries. That will not merely bring private capital into a subsidiary; it will enable British Rail to dispose of any part, or the whole, of any property belonging to a particular subsidiary. As we shall see in regard to a later amendment, the Secretary of State may even instruct the board to do that.
It has been suggested that it has been contemplated that British Rail will always retain an interest in the subsidiaries and that, if a subsidiary is successful, that will help British Rail. One would have thought that if that were the case, there was a business reason for keeping the subsidiary entirely within the province of British Rail. Moreover, there is nothing in the Bill about British Rail retaining an interest in any of the subsidiaries.
The Government have always argued that in their proposals for disposing of publicly-owned organisations they are following a commercial principle, but it will be seen from this Bill, and I suggest from other Bills introduced by the present Government, that in this direction they are following a piece of Conservative dogma, and, frankly, this makes one question their oft-repeated statement about their belief in a mixed economy.
Time and time again Ministers on the Benches opposite refer to having a mandate for a particular proposal and say that it was included in the Conservative Party's manifesto. But where in the Conservative Party's manifesto for the last election is there any reference to the disposal of British Rail's subsidiaries? This clause neither names any particular subsidiaries, nor limits the subsidiaries that may be dealt with. In fact Ministers have made clear that the subsection could cover all the subsidiaries and that, if desired, all of them could be disposed of. We shall be dealing with this matter in later amendments. This wide-sweeping provision must also be linked to the power of direction given to the Secretary of State under Clause 3—another matter which will be the subject of a further amendment.
Clause 1 provides that the Railways Board may deal with disposal,
"in such manner as they think fit".
But no unfettered power is to be given to the board. The board is not to be left to determine its own commercial attitude. The Government argue—this was stated by the noble Lord, Lord Bellwin, on Second Reading—that these particular subsidiaries have nothing to do with the business of running a railway. We shall deal with that point when we come to some of the other amendments. But the Transport Act 1962 lays down the powers of the Railways Board. Section 3(1) of the Act states that it is the duty of the board to provide railway services,
"and, in connection with the provision of railway services, to provide such other services and facilities as appear to the Board to be expedient".
I would ask whether the Railways Board has stated that it is not expedient for it to retain any of these subsidiaries?
This leads me to a statement that was reported in the press yesterday and which is quoted in the Hansard report of the debate in another place. This was a statement by the Secretary of State about the arrangements for the sale of three British Transport hotels to a new private sector company, with British Rail holding one-third of the shares. I must make the most emphatic protest. On the day before this Bill comes before the Committee of this House, we learn that there has been an announcement about the sale of part of a British Rail subsidiary. The Secretary of State stated that British Rail already has the power to do this under Section 14 of the Transport Act 1962. If that is correct, why bring forward that paragraph of the Bill which my amendment seeks to delete? If the power is already there, why bring forward this provision? This suggests that there may be doubts in the Government's mind as to whether Section 14 of the Transport Act really does cover this particular provision.
When the Secretary of State made his first statement about the sale of British Rail subsidiaries on 14th July 1980, he said that "the Government will introduce the necessary legislation". There was no reference to the fact that legislation was already on the statute book which would enable the sale of subsidiaries to take place before this Bill had even passed through Parliament. Neither was reference made to this fact in your Lordships' House during the Second Reading debate. I feel that the House has been treated with some disdain, that we should learn of this act even before a single amendment has been proposed to the Committee today.
Finally, subsection (3) of the same clause refers to the powers of the British Railways Board to transfer property rights and liabilities to subsidiaries under Section 7 of the Transport Act 1968. On reference to that provision there is an indication that this was intended to relate only to transfers between public sector organisations. In fact, this particular section of the Act is headed, "Redistribution of activities between Freight Corporation and Railways Board or Scottish Group". It was not intended to transfer subsidiaries to facilitate their sale to the private sector.
In this connection, it has been pointed out by the Finance Houses Association that Clause 1(b), which my amendment seeks to delete, introduces an entirely new provision; that a subsidiary may be sold or that part of its assets or liabilities may be disposed of to a private institution regardless of the rights and wishes of third parties—that is, the creditors and beneficiaries of the transferred liability. The Finance Houses Association claims that those who have entered into agreement with British Rail subsidiaries will, if Clause 1 remains unamended, find that the value of covenants in their agreements will become less if the relevant subsidiary is hived off. The association has also raised the important question of insurance. Without taking too much time, I should like to read out just one paragraph of a letter I have received from the Finance Houses Association:
"The problem is not hypothetical. Our members have entered into hire purchase, leasing, maritime mortgage and other contracts with British Rail and Sealink on terms which would never have been contemplated for a private firm—contracts of a very substantial nature. We are here expressing or implying nothing at all about the policy of privatisation but we do object most strongly on principle if that policy is applied in such a way as to affect adversely and retrospectively the rights of third parties".
When the noble Lord the Minister replies to the debate on this amendment I hope that he may be in a position to deal with this matter as well as with the general question of the amendment. If by any chance the noble Lord, the Minister, has not received a letter from the Finance Houses Association I will readily ensure that he is provided with a copy so that he might deal with the matter at Report stage. I beg to move the amendment.
3.44 p.m.
Lord Bellwin: Let me make one point very clear at the beginning of our discussions on Part I of the Bill. The Government and the British Railways Board have agreed what the policy should be. We are clear about the goals for which we are aiming; namely, to put these businesses into the private sector where
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their future will be determined not by external pressures and constraints but by their own performance. The Government have accepted that the best way to proceed is for the board to take the lead. Advised by the holding company which they have established, British Rail Investments Limited, they will put forward proposals to the Government. For our part we are undertaking to promote legislation, including the full range of powers which the board may need to carry out the policy.
The board are hoping to proceed mainly through the sale of shares in its businesses using the power in Section 1(i)(a). They may sell shares either in the businesses as they stand or in new companies set up to operate parts of the undertaking of existing subsidiaries. For example, Sealink is likely to be dealt with as a whole while the hotels business will probably need to be reorganised in order to put it into a state better fitted for privatisation. Whichever approach the board adopts, the powers proposed would allow the board to retain a stake in the business concerned. It is, however, possible that in some cases the board will not wish to proceed in this way but will want to sell the assets of the businesses outright. There may, for instance, be some hotels for which this is the only sensible solution. This is not especially surprising since British Transport hotels have sold hotels from time to time in the past. The point is that it will be for the Railways Board to decide what approach to adopt, bearing in mind the requirements of the policy, the interests of the business, and the interests of the staff. The purpose of this clause is to give the Railways Board the full range of powers that they may need to do the job.
The noble Lord, Lord Underhill, was very concerned about the sale announced yesterday and he questioned why this provision is in fact necessary in view of the Board's existing disposal power in Section 14(1)(e) of the Transport Act 1962. The answer is that, although that earlier power seems to be sufficient, it was not enacted with the present purposes in mind and in practice has been used in a limited way. Rather than relying on such a power for the implementation of a new policy of much wider scope than anything from the past, it seemed to the Government to be better to put the matter beyond doubt by including in this Bill a new power designed for the present purpose. In this way Parliament's intentions will be quite clear. The new power is, of course, as the Bill says—without prejudice to the Board's existing powers. I see nothing at all sinister in the fact that a transaction took place before this Bill came before your Lordships' House. The fact is that the powers were already there. There have been precedents, and quite clearly it would not be right that matters of this kind, having commercial implications, should be subject to the timing of the bringing forward of a Bill of this kind when, as I have indicated, the powers already existed. We cannot accept this amendment. Like a number of others in this part of the Bill, it is calculated either to water down or—as the noble Lords opposite would probably concede—to wreck this part of the Bill, with which they patently do not agree. I understand that and I understand their position. In turn, I hope that the noble Lords opposite understand the Government's position, which I represent and which is that we are

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anxious and think it right that we should be carrying out these steps in long-term better interests, not least those of the British Railways Board.
Lord Mishcon: I wonder if the noble Lord the Minister would be good enough to deal a little more fully with the very potent point made by my noble friend Lord Underhill. It is not a question of dealing with policy. It is a question of dealing as a matter of respect with Parliament. If it be a fact that there was some doubt about the utilisation of the previous power, which necessitated for the purposes of clarity and for the purpose of effectiveness a clause in this Bill (which was debated at very considerable length in another place) is the noble Lord the Minister saying that the approach which was made with regard to the sale of these hotels and their purchase, and the formation of a new private company, which was announced yesterday, was so infinitely commercially desirable that it was something that had to be entered into immediately and could not wait for the ordinary performance of parliamentary duties in order to see whether this power should in the end be contained in this Bill?
It is a matter of general principle that my noble friend has raised, and of very real principle, because time and again over the past year in your Lordships' House and in another place protests have had to be made about the lack of respect that was being paid to Parliament generally and to democracy generally because acts were taking place before matters had come to and been decided by Parliament. It is because of the serious nature of the principle involved that I personally would ask (my noble friends also ask it with me) whether the Minister cannot make a fuller statement in answer to my noble friend Lord Underhill and, in particular, deal with the question as to whether he is satisfied, as I repeat, that the commercial expediency, indeed excellence, of this offer was such that it just could not wait for the parliamentary time which might otherwise have been necessary for this Bill to be enacted, if it is to be enacted in its present form.
Lord Donaldson of Kingsbridge: Before the noble Lord answers that question perhaps I may add another, while being in full support of the complaints made from the Opposition Front Bench in relation to the very casual attitude towards your Lordships' deliberations which are going on at this moment. When we were discussing this on Second Reading these deals were presumably three-quarters made, and were known about to the Minister and to the Railways Board. I should like to ask, while we are discussing the rest of these things, whether there are any other deals for which we are today going to give permission to be done and which have already been done.
Viscount Simon: May I, from these Benches, say that we do not object to the principle of the Railways Board disposing on suitable terms of subsidiaries or interests in subsidiaries, but I would feel much happier about this part of the Bill if it was not for the introduction of, first, subsection (2), which says that the Board cannot do these things except with the consent of the
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Secretary of State, and then later on Clause 3, which says that the Secretary of State can require them to take this sort of action whether or not they want to do so. The noble Lord the Minister said a few minutes ago that it was entirely in the hands of the Railways Board to decide what to do, but that does not appear from the Bill. I am just wondering whether the Government would not consider some amendment to remove this interference (if I may put it that way) by the Secretary of State, which I thought the noble Lord, Lord Bellwin, had said was not what they wanted to happen.
Lord Bellwin: If I may deal first with the point raised by the noble Lord, Lord Mishcon, with great respect I think that this is very much ado, not about nothing but about a matter which is really, as I tried to say in my opening remarks, outside the scope of what we are talking about in this Bill. The fact is that it is for the Railways Board to decide on the scope and use of its existing powers. The Board have decided that they can use Section 14(1)(e) to sell Gleneagles and the other hotels, and that is a matter for them. The Secretary of State's consent is not required, and in those circumstances I do not see where lies the complaint about the Government and their timing in bringing this Bill forward when (if you like) it coincides with the Railways Board's deciding on the scope of what they are doing. As to the point raised by the noble Lord, Lord Donaldson—
Lord Mishcon: I ask the pardon of the noble Lord the Minister for interrupting him. I would not have done it were it not that he said something just now which was extremely serious, and I am sure he did it on information that was before him. I am not able to read from the Official Report—I wish I were—but I am reading from The Times parliamentary report of this morning of what his right honourable friend Mr. Fowler said to another place yesterday.
"A shareholding of this kind requires my consent and on the material available to me, I am ready to consent to such an acquisition".
That runs completely contrary to what the noble Lord the Minister said just now, which was that no ministerial consent was required and none had been given.
Lord Bellwin: I think it would be fair to say that what the noble Lord has read out is indeed what my right honourable friend said in another place, but in fact the Secretary of State's consent is required to the acquisition of the hotels; and I think it is also right to say that the proposal is still the subject of informal discussions between the advisers to British Transport Hotels and the potential investors. I do not want to go into the details of the transaction, and I am sure the noble Lord does not wish me to do so.
Lord Mishcon: I am sorry; I apologise to the Committee, but this is a very important matter of principle. Is the noble Lord the Minister now saying that what he said before—namely, that ministerial consent was not required—was (I am sure inadvertently) inaccurate; and, if not, how does he, please, distinguish between the words "acquisition" and "purchase"? Because in ordinary English I do not know the difference.
Lord Bellwin: The position is that the consent of the Secretary of State is required to the acquisition of the shares, and presumably he can give that consent only when the details are known. So far as I am aware the details of a transaction are not yet finalised, and I am assuming—I say this in good faith—that it is that which (if you like) is the caveat that I use.
So far as concerns the point made by the noble Lord, Lord Donaldson, about other deals (that is the word he used, but "transactions" might be a better word), to the best knowledge of the department I am not aware of any other transactions which are at the moment under consideration. The only other point I want to make is that I did not answer the point that the noble Lord, Lord Underhill, made when he asked whether I had seen the letter from the finance houses. The answer is, No, I have not seen that letter, and if he would care to send it to me I should be glad to have it. I think we come back to the point I made earlier, that this and indeed all the other debates on the amendments to these parts of the Bill will bring out more and more the basic difference between the parties on this matter, and there really is not much further I can add to it.
So far as concerns the point raised by the noble Viscount, Lord Simon—his suggestion that perhaps in this part of the Bill we should be trying (as I think I understood him to say) to remove the power to put limitations on the powers of the Secretary of State because he felt there was some confusion—I wonder whether he might allow us to proceed, because I think that as we go along and debate the various amendments we will see that this comes out rather better in the later amendments, as I recall. If not, I am sure he will have many opportunities to bring us back to that point.
Lord Underhill: I will not go further with the protests which have been made, supported so ably by my noble friend Lord Mishcon and also by the noble Lord, Lord Donaldson. I believe we have made our view emphatic on this. The points raised by the noble Viscount, Lord Simon, are issues which, as the Minister says, can be dealt with on other amendments, and I would hope that we may get the noble Viscount's support when those amendments are considered. I will readily send the Minister a copy of the letter from the finance houses. This is an important amendment, but I believe the position of the Government is now thoroughly made clear. We will not withdraw the amendment, but we will not press it to a Division.
On Question, amendment negatived.
4 p.m.
Lord Underhill Lord Underhill moved Amendment No. 3:
Page 2, line 3, leave out subsection (2).
The noble Lord said: This is the first of the amendments to which I referred which deal with the power of the Secretary of State. Various Ministers have stressed that one of the objects of Clause 1 and the general policy of the Government towards British Rail and its subsidiaries is to remove what are called public sector constraints. It is claimed that the provisions of this part of the Bill will enable the board and the subsidiaries to act commercially. I have referred to the Conservative manifesto. In that,
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in its reference to publicly owned-industries, it is stated:
'We will therefore interfere less with their management".
Noble Lords will have seen Bill after Bill introduced in this House which increases the interference of the Secretary of State with various publicly-owned institutions. Subsection (2), which my amendment proposes to delete, provides that the board can exercise powers under subsection 1(a) without the consent of the Secretary of State, but that one deals with the powers of disposal of any securities of any of the board's subsidiaries. As I stated in relation to the previous amendment, this clause provides that the board shall have this power of disposal in such manner as it thinks fit. That will give the board the power to take decisions. But that is not so because in subsection (2) in effect this provides that they can act as they think fit but only with the consent of the Secretary of State; that is, as he thinks fit. Mr. Kenneth Clarke, the Parliamentary Secretary for Transport has said that the Railways Board is in the driver's seat. That does not appear to be the situation. I would suggest that it is a dangerous practice to be in the driver's seat with someone else's hand on the steering wheel. That is why we move this amendment. If the Government mean that they intend to take the restraints off British Rail there is no reason why they should not accept this amendment. I beg to move.
Lord Bellwin: Subsection (1)(a) gives the Railways Board a new and specific power to sell shares in their subsidiaries. I have no doubt that the Board will use their power responsibly. It is, on the other hand, a very wide power and the Government have thought it right to propose that there should be some check on its use. That is the purpose of subsection (2), which provides that the board shall not sell shares without the Secretary of State's consent.
As I and my colleagues have in the past explained, the implementation of the policy agreed between the Government and the board will be in the hands of the board and its holding company British Rail Investments Ltd. The Government have acknowledged from the outset that this is the best way to proceed. It is not, I say again, our intention to interfere in the running of the holding company or to try to dictate in detail to the board how private capital should be introduced. Those are decisions which the holding company must take in the light of the state of the market and the opportunities available. We do not intend to tell the board which bids it must accept and which must be turned down. If that had been the intention, it would have been much simpler for the Government to take over the businesses and do the job themselves.
On the other hand, this is an agreed policy and Government have a clear interest in how it progresses. We shall want to be consulted about the proposals and convinced of their merit. We shall want to see that they conform to the objectives which have been laid down for the exercise and which were explained to this House when the Bill received its Second Reading. So it seems to me to be reasonable that the Secretary of State should have an opportunity formally to consider the holding company's proposals and to give his consent to them. That is why subsection (2) is required.

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It is correct that some proposals could be put into effect without the Secretary of State's consent under subsection (1)(b). But I do not think that these will be the major initiatives and I do not, therefore, see anything surprising in this.
The requirement for consent is not a novel provision—there are many instances in the Transport Acts and legislation applying to other nationalised industries requiring an industry to obtain ministerial consent before exercising a particular statutory power. I see no reason why this provision should cause special difficulty. Nor do I expect the Secretary of State to use his powers in a way that would conflict with the interests of the Railways Board. In our view this amendment is not acceptable, and I hope that in the light of the explanation and assurances which I have given, the noble Lord opposite will agree to withdraw it.
Lord Underhill: The amendment will be withdrawn, but I should like to put to the Committee that when a power is in the Bill—and we have said this time and again—it is in the Bill; and no matter what a present Secretary of State may say, it can be used at any future opportunity. That is why we wish to have this provision taken out. In the light of what the noble Lord has said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Avon: This might be a convenient moment to take the Statement. I beg to move that the House be resumed.
Moved accordingly, and, on Question, Motion agreed to: House resumed.

Local Authority Expenditure (Scotland)
4.6 p.m.
The Minister of State, Scottish Office (The Earl of Mansfield): My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Scotland. The Statement is as follows:
"I will make a Statement on current expenditure by local authorities in Scotland. I have today notified the Convention of Scottish Local Authorities of my proposals which I shall discuss with them at our next meeting on 15th June.
"It is a matter of extreme concern to me that, in their budgets for 1981–82, local authorities in Scotland plan to spend about £180 million at November 1980 prices (8·8 per cent. in volume terms) more than allowed for in the 1980 rate support grant settlement. Authorities have also made provision for higher pay and price increases than allowed for in the cash limits and have thus budgeted for a cash excess of £235 million above the amount in the RSG settlement. This is a totally unacceptable response to the Government's request for lower public expenditure in the interests not only of the national economy but also of ratepayers.
"I propose a twofold response. First, I am asking all local authorities to undertake an immediate review of their budgets in order to reduce their
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spendings to levels consistent with the Government's expenditure plans. Authorities are being asked to report to me by the end of July.
"Secondly, should the Local Government (Miscellaneous Provisions) (Scotland) Bill be enacted, I intend to take immediate action to reduce the rate support grant payable to certain local authorities who are planning to incur expenditure in 1981–82 which I am satisfied is excessive and unreasonable. The procedure (set out in the Local Government (Scotland) Act 1966) requires me to report to the House on the circumstances of each case and to obtain the approval of the House to such grant reductions, after giving the opportunity to the local authorities concerned to make representations. In order that the local authorities which may be affected initially may have the maximum opportunity to consider their responses and to examine the scope for reductions in planned spending, preliminary notice has today been given to them of the assessments upon which I have based my provisional conclusions. I shall, of course, be prepared to consider reducing the assessments in the light of any representations I receive. This preliminary advance notice is my response to requests for early notice of my intentions. It does not rule out the possibility of later action against other authorities.
"The extent to which I reduce rate support grant will depend upon the results of the revised budgets. If present spending plans were to remain unchanged, I consider that it would be appropriate to withhold £100 million. It will be my objective to secure as much as possible of this reduction by selective means but, as I have already warned the Convention of Scottish Local Authorities, it may also be necessary to reduce grant generally if present budgets are not substantially reduced. This would be achieved by reducing the amount of grant which might otherwise have been paid at increase order stage. I must therefore ask all authorities to review their budgets for further savings to keep any general abatement of grant to the minimum necessary. Such general abatement should be significantly lower than would otherwise have been necessary provided that the selective powers sought in the Bill are granted to me, since this would enable me to concentrate the necessary abatement upon those most responsible for the excess. This will be of benefit to the majority of local authorities in Scotland.
"I now turn back to 1980–81. As honourable Members will recall, local authorities' original budgets for 1980–81 suggested a planned excess of £83 million (or 4·9 per cent.) at November 1979 prices above the figure provided for in the 1979 rate support grant settlement. I called for revised budgets from all authorities and their response was that the outturn would be significantly less than the budgets. The provisional outturn figures for 1980–81 suggest that this did not happen and I have already expressed to the Convention my deep concern about this situation. I shall consider further action when final figures are available in the autumn, but I am bound to make clear now that it remains my intention to effect reductions in the rate support grant under my existing powers where I am satisfied that excessive and unreasonable expenditure has been

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incurred. If the final figures for outturn continue to disclose an unacceptable excess, I intend to effect grant reductions in the range of £40 million to £60 million. The higher figure will be appropriate if the excess of £83 million disclosed by the provisional returns is confirmed. I will give further consideration to the means of securing such a reduction and the possibility of part or all of it falling upon rate support grant for 1982–83.
"In the more general context, my right honourable friend the Secretary of State for the Environment announced on 2nd June that the Government are considering further means to bring home to individual local authorities and their electorates the consequences of high-spending policies. I shall be considering with my colleagues the action, including legislation next Session, which may be required in Scotland. The Government must also consider the unfairness of the rating system. I shall undertake discussions with the Convention of Scottish Local Authorities on the consultation document (which as my right honourable friend said we intend to issue in the autumn) which will deal with the alternatives to domestic rates".
My Lords, that concludes the Statement.
4.12 p.m.
Lord Ross of Marnock: My Lords, with this Statement local government in Scotland as we know it, responsible and independent and accepted as such, is at an end. Hitherto it has been the advice given to electors in Scotland that the hope of the Conservative party was to make Scotland's local government more financially independent and responsible. You could paper the walls of this Chamber—big as it is—with White Papers and papers of speeches made to that effect by members of the party opposite.
But now local government is denied independent judgment, responsibility for its decisions, to its own people, and they are the people properly to judge whether or not the electors were wrong in placing their faith there. The fact that 59 out of 65 local authorities could not reach the guidelines is an indication that there was something wrong with them. If reckonable expenditure is reduced to an unreasonable amount, and if one further reduces the part that Government pay—as they have in Scotland—over two years, then inevitably rates will rise and expenditure will seem excessive. But you have to relate that to services. We are told in this Statement—I wonder why it was made at all because there is a lot more information on the tape than in the Statement—that there are seven local authorities which are being specially reprimanded and warned. This is the selective element which can be implemented when the Government get the Act of Parliament. Am I right in thinking that those seven have been told? We have not been told which they are. Why were they selected? What were the priorities in respect of that?
Dumbarton, for instance, is one of them. Dumbarton is one of the local authorities which is not seventh or even eighth on the list of high spenders. What is their percentage increase?—remembering that 8·8 per cent. was the average for them all. Could he compare that with Edinburgh districts? Since this
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letter has been sent to all the local authorities, I should be able to be told what the increase is for Edinburgh. What was it for the Western Isles? Bearing in mind the actual facts are that in the islands neither of the authorities could reach the guidelines, you can put the two together and the increase above the guidelines is 34·9 per cent. All this information has been available since the month of March. This is why we kept on asking during the proceedings on the Bill for some information from the Minister. How can he justify that decision? What was the means of selection, and was Dumbarton merely dragged in because it was a Labour authority? There are Tory authorities way above the guidelines and much higher than some of those that have been mentioned.
The Statement said that the local authorities have already made provision for higher pay and that price increases have been allowed. What are the payments that have been made that are higher than the guidelines? For the teachers? Have the Government nothing to do with that? Local authorities cannot settle without the authority of the Government because the Government are to participate within that settlement of the teachers. What about the police? Remember that the guidelines were 6 per cent. You cannot possibly breach the guidelines realistically in respect of this kind of thing. Can we be told what are the pay settlements which are higher and to which the Government object, and can we be told the extent to which the Government themselves are participants in those settlements?
Taking the outturn for last year, the suggestion is that they are going to be penalised probably between 40 per cent. to 50 per cent. This year in relation to the estimates they are going to withhold £100 million. That is £160 million worth of unemployment. What will be the unemployment factor if these default powers are carried out? It involves teachers; it involves social workers. The Minister says that the ratepayers will benefit. The ratepayers want services. They want a reasonable standard of services. This unreasonable attitude of the Government means that we may have a certain amount of reduction in rates if we get the new power in respect of that, but services will be considerably reduced.
What does the Minister think will be the reaction of local authorities to this? The local authorities are where the Government want to sack people. It is the local authorities who have to reduce their services. They are to be just puppets of Whitehall. Is there any possibility that any of the local authorities will say: "Well, if we have got to do this, you come in and do the dirty work yourself"? They have gone down a road of confrontation, and now we are coming up against the reality of the meaning of the policies.
Am I right in thinking that what is being done in Scotland is far worse than what is being done in England? The reduction in Scotland is £160 million. I think we in Scotland have an eleventh of the population of England and Wales, and the reduction there is about £450 million. That is the extent. This is not democracy; this is tyranny. It is from a Government with no mandate at all to do anything in Scotland. They may have a mandate in this House by numbers, but they have not got it in another place when it comes to Scottish Members. I think that the present

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Secretary of State has a lot to answer for, and eventually he will be asked to answer to the electors of Scotland.
4.20 p.m.
Lord Tanlaw: My Lords, we from these Benches wish to thank the Minister for the Statement. While agreeing with the principle of cost effectiveness for both the local and the central executive we have some doubts about the method outlined in this Statement. Would the noble Earl the Minister perhaps be aware that certain quarters in Scotland interpret this Statement in its present form, as no more and no less than a threat from South of the Border to the authority of locally elected councillors, as well as creating doubts as to their competence in budgetary matters? The noble Earl is well aware that the Scots have a tradition of competence in this area, to the extent that we are often a butt of jokes, but I am afraid this is not a subject for much humour for those councillors in Scotland who will receive the Statement.
Would the Minister not accept that, in its present form, no distinction has been made between capital expenditure and running revenue expenditure? There are certain capital programmes already in train in a number of the local authority areas in question, if not in all of them, which will actually reduce the annual expenditure year by year but, if they are not allowed to be implemented, they will, like any other capital programmes become inefficient and un-cost-effective and will add to the burden on the ratepayers. Therefore, can the noble Minister make a distinction between capital budget programmes in this expenditure, which is only described as current expenditure for local authorities, and that which is annual expenditure of costs, which is not capital? If this distinction can be made—and I doubt whether it can because the Government themselves do not make this distinction in their own budgetary matters—I believe there will be some more co-operation North of the Border in Scottish authorities in accepting a cost-effective programme. But if the Minister is unable to make the distinction between what is capital expenditure and what is running revenue expenditure, then I cannot see how any councillor can take this Statement helpfully or constructively.
The Earl of Mansfield: My Lords, perhaps I may respond to those two speeches from the Front Benches first. The noble Lord, Lord Ross, alleged, or certainly implied, that my right honourable friend's Statement and the action which the Government have been reluctantly impelled to take in this matter are bringing the responsibility of local authorities to an end and that in effect local authorities are being denied judgment to make decisions about local affairs. I think one has to keep a sense of proportion in this. Ever since this Government came to power, my right honourable friend, on what might be described as a quarterly basis, has made no secret of his dismay at the spending plans of local authorities and has told them they are too high and that the country simply could not afford them. When one considers that no less than two-thirds on average of every pound which local-authorities spend comes from the pockets of the tax payers through central Government, it is a negation of function for Government simply to turn a blind
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eye or not to take the requisite action to see to it that local authorities, or some of them, who refuse to comply with the guidelines which are laid down in the interests of the whole country, and not least of our inflationary policy, are complied with.
The noble Lord asked me about the seven local authorities whose names have already appeared on the tape. The information which has already appeared is minuscule in scope compared with the content of my right honourable friend's Statement, and I am sure that the noble Lord, who has seen both, would agree with that. The answer is that they have already been communicated with by letter.
The noble Lord went on to say that the ratepayers want services. Of course the ratepayers want services, but what they want above all is a level of rates which is not going to cripple them; and when one bears in mind that a very large proportion of business firms who have the privilege of paying rates have no vote and no local say at all in how their money in fact is going to be spent, then I suggest that democracy is not quite so apparent as the noble Lord seems to imply.
The noble Lord also asked me why apparently there are to be reductions of £100 million in Scotland and £450 million in England. He says it is unfair when one has regard to the levels of population in each country. The determination of grant reductions is not an exact science, but if noble Lords were in a position to compare the figures in my right honourable friend's Statement with those which were given by my right honourable friend the Secretary of State for the Environment on 2nd June, they would know that the overspend we expect for 1980–81 and for 1981–82 is proportionately very much higher in Scotland than in England.
The noble Lord, Lord Tanlaw, asked whether it was possible to distinguish between capital and revenue. The figures which I quoted of course exclude loan charges and relate to current expenditure which qualifies for rate support grant. Therefore, if I may say so, I do not think that was a particularly good point. The noble Lord talks about the tradition of competence so far as Scottish local councillors are concerned and of course I concur that in the vast majority of local authorities in Scotland the vast majority of councillors perform their tasks in a competent and faithful manner. Unfortunately, there are exceptions, and the totality of what they have done by way of performance is such that, reluctantly, the Government have been driven to taking the action they have.
Lord Wilson of Langside: My Lords, may I ask the noble Earl two questions? The first arises out of the conclusion of the Statement which referred to the unfairness of the rating system in Scotland. Can he tell your Lordships for how long this matter of fairness of the rating system has been under consideration in the Scottish Office under successive Governments? If my recollection that the period of time may be calculated in decades rather than years is correct, can we expect an answer to this problem to be forthcoming soon from the Government?
My second question arises out of the general. Are the Government conscious, in this context and at this particular time, of the importance of having in mind the political tensions which have always existed and

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which have varied only in degree from time to time—political tensions between the Scots and the English? This is of particular importance at the present time when of course, as the noble Lord, Lord Ross of Marnock, has already said, the Government are not significantly supported in Scotland. In that situation, my question is: are the Government aware, in handling this matter, of the need for very great political skill and wisdom?
The Earl of Mansfield: My Lords, I am not, happily, privy to what went on in the Scottish Office before the latter part of May 1979. But we all know that there has been discontent with the rating system, probably throughout the 20th century. It has been getting more and more unfair, and more and more unsatisfactory, as the increasing complexity of our business, economic and social life has, as it were, disturbed the balances between domestic and industrial or commercial properties which have to pay rates. Nevertheless, I think that things have moved with a good deal greater speed in the last two years than they have before. We have been actively considering how we can remedy the present totally unsatisfactory and unfair system. There will be a discussion paper in the autumn, and I hope that when it comes out the noble and learned Lord will read it and, no doubt, will have a part to play in future discussions.
So far as his second question is concerned, which was whether the Government are conscious of the political tensions in Scotland, my answer is: Yes, of course. There are bound to be political tensions in any part of the country and, indeed, throughout the United Kingdom, if we continue to live so high above our means that we enter into an era of high inflation, with all the dangers for political stability which we know that can bring about. It is to reduce these potential dangers that, reluctantly, the Government are acting in the way they are.
If I may say so, it is a very dangerous road for the noble and learned Lord to go down when he talks about the Government having support, or lacking it, in one portion of the United Kingdom or the other. We are the Government of the United Kingdom. If one had wanted to go down that road, one could have said that the last Government had no mandate in England. But I do not think it would have been profitable or even proper—and it was never said when noble Lords who are now on this side of the House were sitting on the noble and learned Lord's side of the House—to make that kind of suggestion now.
Lord Galpern: My Lords, the noble Earl has agreed this afternoon that the local people desire public services, but they have a greater regard for the incidence of the amount of rates that they have to pay for the provision of them. We have heard this afternoon the statement that some local authorities have paid wages which are beyond the guidelines and far too high. Is it then suggested—bearing in mind that the highest percentage of local government expenditure goes on wages and salaries—that the wages and salaries ought to be cut? Furthermore, in cases where local authorities carry out a sincere and genuine review—for that is what they are being asked to do now, irrespective of what has gone before—and are unable to effect any cuts, will the Government or the Secretary
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of State for Scotland then step in and indicate to those authorities where, in their opinion, these cuts could be effected?
The Earl of Mansfield: My Lords, there will obviously be a continuing dialogue between my right honourable friend the Secretary of State, and local authorities. But I would remind the noble Lord, Lord Galpern, that, in order to produce rate support grant, my right honourable friend has to be satisfied and, indeed, has to satisfy the House of Commons that the expenditure plans are not excessive and unreasonable. That, I think, is the criterion which we should have very much in the forefront of our minds.
I am not going to point at any individual local authority or at how it comports itself, but I suggest that, bearing these matters and considerations in mind, the Secretary of State will make up his mind in any report that he sees fit, if the Bill which is presently awaiting its Third Reading in your Lordships' House reaches the statute book, and the Secretary of State is given power to approach the House of Commons in the way that is contemplated in the Bill.
Lord Ross of Marnock: My Lords, I am sure that the Minister does not want to mislead the House and those who are unfamiliar with the Bill that is now passing through the House, but it is not simply a question of being unreasonable and excessive. There are also certain comparisons to be made, and regard to be had to financial situations and economic situations of comparable local authorities, as well as all kinds of other things. We have been given no information at all about the seven which have been selected.
I asked the noble Earl a question about Dumbarton vis-à-vis Edinburgh. He has not replied to it. I asked him a question about pay settlements and about the extent to which the Government are visiting the inequities of failures of their own, in respect of pay settlements, upon local authorities. If the noble Earl wants to stop for advice, I can sit down and let the noble Lord, Lord Bellwin, say what he thinks the answer should be.
But I sincerely hope that the noble Earl will not fail to appreciate that this really is the end of an era. I was reading the report of the Royal Commission on Scottish Affairs last night, and followed that up with what was said by working parties about the position of Scottish local authorities vis-à-vis central Government. We have moved a long way from the hopes that were expressed and, indeed, the votes of confidence that were given to Scottish local government. Let us bear in mind that after two years of Tory Government, we have reached an impasse such as we have never known before.
But may I have an answer to those two questions, and may I make one other point, if we are to make preliminary judgments? Will the Government publish the budget estimates and the percentage of their excess over the guidelines of all the local authorities? The noble Earl must have the information, because he has sent out that warning letter to all local authorities, apart from the selected seven. Let us see how he did his selection.
The Earl of Mansfield: My Lords, we, as opposed to us, are not going to see that in the content of a

1371
Statement which is repeated in this House. As the noble Lord, Lord Ross, well knows, there are much more complex features about the Bill and its effects than were apparent from either the question of the noble Lord, Lord Galpern, or my reply. Both were expressed in, possibly, simplistic terms. Neither am I going to comment on the effect on individual local authorities. It is much too early to give any precise indication of the possible effects on individual local authorities, how they are to be treated and how they will respond. This must depend upon detailed consideration, which my right honourable friend will have to give to the individual situation of each local authority. That is the basis upon which—if he does—he will seek reductions on a selective basis.
Lord Tanlaw: My Lords—
Earl Ferrers: My Lords, with respect, we have been on this Statement for half-an-hour and, considering the amount of business that there is to take place, I think that we should move on.

Transport Bill
4.39 p.m.
House again in Committee on Clause 1.
Lord Mishcon Lord Mishcon moved Amendment No. 4:
Page 2, line 5, at end insert—
("( ) In exercising their powers under sub-section (1) the Board shall retain at least a 51 per cent. holding in any of their subsidiaries").
The noble Lord said: I shall be extremely brief on this amendment, for a reason which will become apparent. But I wonder whether I may be permitted, for the purposes of the record, since we are dealing at this stage with percentages of holdings in subsidiaries, to make clear the point which I was trying to make before, without expecting this to be debated any further? May I say at once, that, of course, I appreciated that, under Section 14 of the Transport Act 1962, if that power was a clear one—and there appears to be some doubt about it, as expressed by the noble Lord the Minister—the British Railways Board had the right to dispose of assets without ministerial consent.
An essential part of the transaction for the hotels sale which was announced in another place yesterday was the acquisition of one-third of the shares in a new private company by the British Railways Board. It was that which required ministerial consent. Apparently, as announced in another place, that ministerial consent, on the information before the Minister, was forthcoming. My noble friend Lord Underhill and I believe that this was a transaction which as a whole had obtained ministerial consent and which could not have taken place as a whole without it. This is what we thought was wrong, having regard to the Bill which is now passing through your Lordships' House.
Having said that—I have, I hope, made my point clear so that there is no misunderstanding—may I turn to the amendment which stands in my name and that of my noble friend Lord Underhill. It is well known that on this matter the Government have
1372
one point of view, and the Opposition another, as to whether or not subsidiaries of British Rail should have their assets sold to private parties or whether those subsidiaries should move into private hands. The Government have made the point and it is one which is very easily understood—one can agree or disagree with it but it is a transparently clear principle—that in the main these subsidiaries need private capital. For them to obtain private capital and for them to get away from the limitations of the public sector borrowing requirement and the external financial limit, they must be out of the control of the nationalised British Rail. Control was discussed at some length in another place. One is not quite clear what is meant by it, but there can be no doubt at all that a 51 per cent. retention by British Rail means that British Rail is retaining control of the subsidiary.
In view of the essential difference between the Government and the Opposition, as I see it there is no point in my conducting a long debate. My noble friends and I take the view that it is wrong to dispose of the controlling interest. The Government say that the whole of the policy that they are trying to put forward is completely dismembered if the controlling interest is not part of it. While, therefore, registering very clearly the view of the Opposition in this House, it seems to me to be sensible to move this amendment, as I do now, and then to sit down and await the decision of the Committee, which in the circumstances I believe I am able to forecast.
Lord Donaldson of Kingsbridge: We on these Benches are unable entirely to support the amendment which has just been moved. It seems to us to be based on a doctrinaire view which we do not share. We believe it is absolutely wrong that British Rail should sell its assets for ideological reasons to suit the Government, but we do not believe it is wrong that British Rail should dispose of its assets in order to use the money for something else. We have already expressed our conviction that if they do that under the present arrangements—we shall come to these later—they will probably be unable to use the money for something else. But that is a different point.
Although in general we fully support the Labour Party in their approach, when it comes to asking for a 51 per cent. retention I think we should have to abstain.
Lord Bellwin: May I say at once that I am very grateful to the noble Lord, Lord Mishcon, for the way in which he has very fairly stated the clear difference that exists between us. He is right that we could debate this matter; I assure him that I have copious notes in front of me, and I am sure he has, too.
All I want to say, in the same spirit, is that the Government are strongly opposed to the amendment, which we think would undermine the policy which we have agreed with the British Railways Board. If the amendment were to be accepted, we think that it would make it very difficult to work out any sensible policy which would offer to the subsidiaries a decent future.
I listened carefully to what the noble Lord, Lord Donaldson of Kingsbridge, had to say. Again I think that he put his point very fairly. In the interests

1373
of progress, unless noble Lords wish to protract the debate on the amendment I will leave it at that.
On Question, amendment negatived.
Lord Mishcon Lord Mishcon moved Amendment No. 5:
Page 2, line 5, at end insert—
(") ) In exercising their powers under subsection (1) above and notwithstanding anything hereinafter contained, the Board or such other subsidiary shall retain after all such disposals securities controlling not less than 26 per cent. of the voting rights of any such subsidiary.").
The noble Lord said: It is in an entirely different spirit that I move the amendment which is now before the Committee. I hope that the reasonableness which the noble Lord the Minister, with his usual courtesy, ascribed to me in dealing with the previous amendment will commend itself to your Lordships now and therefore make your Lordships think with some amount of concentration about the wisdom and propriety of this amendment.
Only so that we know what the policy is that we are discussing, I wonder whether I may be allowed to quote what the Minister said in another place to Standing Committee E at col. 1029 of Hansard of 17th March, 1981. Your Lordships will be glad to know that I shall quote only one sentence. However, in my view, it is a transparently clear declaration of the policy of the Government.
"As the right honourable gentleman said",
said Mr. Kenneth Clarke.
"the policy is that the subsidiaries Will be sold to private investors and will become private sector companies passing out of the effective control of British Rail, although British Rail will retain a minority shareholding in them".
The Government are there saying very clearly, for reasons which I ventured to repeat to the Committee a moment ago, that the idea is that you remove a controlling interest in the subsidiaries from British Rail in order that private capital may move in and that therefore there will be freedom from the limitations of the PSBR and also the external financial limit. The Government's policy is that a minority interest in the subsidiaries shall be retained by British Rail.
It appears that in effect this policy is being carried out before the passing of this Bill in the transaction that was announced yesterday in another place and to which I wish to give no more publicity than it has already been given in your Lordships' proceedings today; namely, the creation of a new private company, presumably a Companies Act company, in which British Rail are to retain one-third of the shareholding, two-thirds being made available to private investors, that private company to have vested in it three Scottish hotels, including I believe Gleneagles which is, of course, an extremely well-known hotel and one for which many people have learned to have a great affection. Therefore one sees, as I have said, that the policy is the retention of a minority interest. If one is still to have, through British Rail, a minority interest, it must surely be the duty of Parliament to see that it is at least a minority interest which is accompanied by some amount of safeguards in regard to the minority shareholder. One does not want to see a situation where British Rail has to rely, for example, on those sections of the Companies Act which deal with oppression by a majority and finds itself before the court,
1374
seeking either a winding-up order or the purchase of its shares from a majority shareholder, and the only sort of shareholding which gives some sort of rights of a very positive kind is one which has a minimum of 26 per cent., thus robbing the other shareholders—if "robbing" is quite the right word—of the power to achieve a 75 per cent. vote at any meeting of the company.
I am perfectly sure that your Lordships are well aware of what a 75 per cent. vote entails under the Companies Act. It confers the ability to pass an extraordinary or a special resolution under company legislation, and the Committee may wish to be reminded of what statutorily—of course one can write other things in addition into the memorandum and articles of association—cannot be done within a company unless a special or extraordinary resolution is passed which, as I have said, commands the 75 per cent. One of them is changing the name of the company; altering the objects as stated in the memorandum is another; altering conditions contained in the memorandum which could have been contained in the articles is another; altering or adding to the articles or any existing special resolutions; reducing capital; declaring that any portion of the unpaid capital should only be capable of being called up in the case of a winding up and other such matters are others. Another is—vitally—the ability to wind up a company and sell off or distribute its assets in a winding up—a matter of great importance, obviously, in the conduct of a company's affairs.
So, if I may say so very briefly, your Lordships are faced with the following propositions—and the more simply and the quicker I put them forward, I imagine the more likely I am to have your Lordships' support.
Baroness Gaitskell: Hear, hear!
Lord Mishcon: I am so glad that I have the acclamation of the noble Baroness, Lady Gaitskell; that means that I am half way home! The first proposition is that it is the Government's own statement of policy that a minority interest is to be retained; the second point is that, if that is so, it must be a minority interest, surely, which does not just have burdens and risks attached to it but has certain minimal rights, although they are not the rights of a controlling shareholder. We have already dealt with that in a short debate.
So it is a matter which I venture to suggest is not contrary to the announced Government policy but is the proper, sensible way in which to deal with this matter in this Bill, safeguarding as we would want to do, the rights of British Rail as a minority shareholder in any subsidiary that is disposed of. In those circumstances, I beg to move this amendment.
Lord Bellwin: The policy of the Government and the Railways Board is that in disposing of their non-rail subsidiaries the board should, if they wish, be able to retain a substantial minority stake in the businesses. This recognises the historic links between the railway and these ancillary activities and would enable the Board to participate in any future growth of profits and to continue to exercise over the businesses the influence appropriate for a major shareholder. In deciding how large a stake to retain, the board will

1375
have to take account of the need to relinquish control of the business in order that it may pass into the private sector and may enjoy the full commercial freedoms available there.
The main point that I want to make in relation to this amendment is that it ought to be for the board to decide (taking account of the factors which I have mentioned) how large a shareholding they wish to retain in each case. I do not see why we should attempt to lay down in this Bill some lower limits which will limit their freedom of action regardless of the particular circumstances. I understand the significance of the 26 per cent. which the noble Lord, Lord Mishcon, explained very carefully, but in some cases the board may wish to retain rather more than 26 per cent.
Indeed, the proposals with regard to the three British Transport hotels that we were discussing earlier is a case in point. If the proposals come to fruition British Transport Hotels would hold 33⅓ per cent. of the equity, but in other cases the figure could be more, or it could be rather less. In the property field in particular, in which the board have traditionally sold surplus assets outright, the board might well decide that they did not wish to keep so large a holding in any property company that might be floated or otherwise sold. So it seems to me that this is something which we should leave to the board and the Government are opposed to the amendment for that reason.
There is one other point which I think should be made. If the noble Lord, Lord Mishcon, expects this to be a long-term safeguard of a minimum public stake in these businesses I respectfully suggest that that may be mistaken. The point is that, once in the private sector, these businesses will want to raise investment capital and one of the ways of doing that will be by means of a rights issue. If the businesses are successful it is quite likely that they will wish to arrange such an issue and in that event the board, with the consent of the Secretary of State and if they could afford it, could take up their allotted shares. But if they decided not to do so these amendments would clearly not affect the matter. Their proportion of the total equity of the company would be reduced perhaps below the level stipulated in the amendment. I hope that the noble Lord will feel able not to press this amendment. I understand that this is one of the several basic differences that exist between us, but in the light of what I have said I hope he will not wish to press it.
Viscount Simon: With great respect to the noble Lord, Lord Bellwin, I should not have thought that this was an issue on which there was a great basic difference between the two sides of the Committee. It is a question of a business transaction and what it is wise to do. The noble Lord said that they might wish to have more than 26 per cent. and quoted the case which has been mentioned already, in which they evidently do, but there is nothing to prevent them having more than 26 per cent. I would of course agree that this is a matter for the board of British Rail to decide but it might perhaps be a good idea to protect them from themselves by reminding them that if they get less than 26 per cent. they will find themselves locked in, with no say whatever.
Lord Mottistone: I think it would be reasonable to assume that the people running British Rail are good sensible people who will be fully aware of the points made by the noble Lord, Lord Mishcon, and if they decide that they want to sell a larger share than he is proposing they will surely do so with full cognisance of the implications of it. As it stands, they are given sufficient power to retain control to the degree to which he said. I should have thought that if British Rail is being run by people who are so ignorant and incompetent as the noble Lord and the noble Viscount were almost suggesting, perhaps it is as well that they should have only a minority control because they are not really capable of running anything.
Lord Harris of Greenwich: Rather like the noble Viscount I do not see that there is a substantial ideological issue here and I was mildly surprised to hear the Minister suggest that there was. It seemed to me that the noble Lord, Lord Mishcon, made a reasonable case. He pointed out the relevance of the 26 per cent. proposal in this amendment. With great respect to the noble Lord who has just resumed his seat, I do not think that any of us doubt that there are very large numbers of very capable high-minded people working in British Rail now and no doubt will be in the future. The fact is that it is an illusion to imagine that they are entirely free and independent agents. They are leant on from time to time by Governments of different political persuasions.
If one hears what is said by anyone who has had the responsibility of being chairman of British Rail one knows the degree of interventionism, not only by Ministers but also by civil servants acting on their behalf. Therefore, it is not a question of saving British Rail from itself. It is that the proposal ensures that the taxpayers' interest should be preserved in a highly desirable fashion. Without this amendment I do not think we would have done our duty today. I repeat that I do not see that there is a great ideological gulf on this particular issue. Certainly with my noble friend Lord Donaldson I would not have supported the last amendment, but there does seem to be merit in this one.
Lord Bellwin: All I would like to add, if I may, is that if we are not concerned that this is a matter of major ideological significance—and really I said it was in the same way that I say I believe most of the amendments are in these parts of the Bill, because there are differences of view of where we want to be—I would rest the whole case regarding this amendment, as indeed I do regarding most of the other amendments in this part, on the basic assumption that we do not want to place unnecessary restrictions on the board's freedom of action. The difficulty is to do that in line with wishing to retain the percentage of shareholding, but I do not think the two things are incompatible. There are many examples in the private sector where things go along hand in hand. I would like to rest the case, certainly on this amendment, on that particular point of the freedom to act.
Lord Mishcon: As usual, I find myself in the position that other noble Lords have made my points for me very much better than I would have been able to make

1377
them myself. I only want to make one observation on what the noble Lord the Minister said, which I think characterises, if I may say so without disrespect, the nature of his reply. If what we heard from him is to be taken literally, I do not know why ministerial consent is required for the transactions. We heard about it in regard to the hotels. If British Railways Board is so competent to make business decisions, why not leave it to them; why have ministerial supervision? I am not saying anything disrespectful to the British Railways Board, but I so much agree with the wise words of the noble Viscount, Lord Simon, when he said it is a salutary thing to have the provision in the Bill.
The only other observation I want to make is on the rather peculiar point about the rights issue. One would have thought that the Board would consider was it worthwhile to keep on having 26 per cent. and therefore take up the rights issue? I am merely saying that in any sale that takes place they should retain the 26 per cent. What happens in the future in regard to a rights issue will obviously be dealt with at the time. But at least they will have a 26 per cent. vote in regard to any decision made on a rights issue. I think I ought to leave it at that. We do not regard this as a doctrinaire difference at all between ourselves and the Government. We merely say that this is a sensible provision to have, taken for granted that the Government policy is what is it. In those circumstances, I hope the Committee will now divide with objectivity.
5.5 p.m.
On Question, Whether the said amendment (No. 5) shall be agreed to?
Their Lordships divided: Contents, 66; Not-Contents, 112.

CONTENTS

Ampthill, L.

Llewelyn-Davies of Hastoe, B.

Beaumont of Whitley, L.

Lovell-Davis, L.

Bernstein, L.

McCarthy, L.

Beswick, L.

Milford, L.

Bishopston, L.

Mishcon, L.

Blyton, L.

Ogmore, L.

Boston of Faversham, L.

Parry, L.

Briginshaw, L.

Peart, L.

Brockway, L.

Perry of Walton, L.

Brooks of Tremorfa, L.

Phillips, B.

Bruce of Donington, L.

Ponsonby of Shulbrede, L. [Teller.]

Collison, L.

Cooper of Stockton Heath, L.

Rochester, L.

David, B. [Teller.]

Ross of Marnock, L.

Donaldson of Kingsbridge, L.

Rugby, L.

Elwyn-Jones, L.

Sainsbury, L.

Ewart-Biggs, B.

Seear, B.

Gaitskell, B.

Sefton of Garston, L.

Galpern, L.

Shinwell, L.

Gladwyn, L.

Simon, V.

Gosford, E.

Stewart of Alvechurch, B.

Hale, L.

Stewart of Fulham, L.

Hampton, L.

Stone, L.

Hanworth, V.

Strabolgi, L.

Harris of Greenwich, L.

Strauss, L.

Irving of Dartford, L.

Taylor of Blackburn, L.

Janner, L.

Taylor of Mansfield, L.

Jeger, B.

Underhill, L.

Jenkins of Putney, L.

Wallace of Coslany, L.

Kaldor, L.

Wells-Pestell, L.

Kilmarnock, L.

White, B.

Kirkhill, L.

Wilson of Langside, L.

Leatherland, L.

Wootton of Abinger, B.

Listowel, E.

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NOT-CONTENTS

Ailesbury, M.

Hylton-Foster, B.

Airey of Abingdon, B.

Ilchester, E.

Alport, L.

Kemsley, V.

Armstrong, L.

Killearn, L.

Atholl, D.

Kilmany, L.

Auckland, L.

Lauderdale, E.

Avon, E.

Long, V.

Bellwin, L.

Loudoun, C.

Belstead, L.

Lucas of Chilworth, L.

Berkeley, B.

Lyell, L.

Bessborough, E.

Macleod of Borve, B.

Boyd of Merton, V.

Mancroft, L.

Bridgeman, V.

Mansfield, E.

Caccia, L.

Massereene and Ferrard, V.

Campbell of Croy, L.

Melville, V.

Carrington, L.

Middleton, L.

Cockfield, L.

Monk Bretton, L.

Colwyn, L.

Montagu of Beaulieu, L.

Cork and Orrery, E.

Montgomery of Alamein, V.

Cottesloe, L.

Mottistone, L.

Cranbrook, E.

Mowbray and Stourton, L.

Crawshaw, L.

Murton of Lindisfarne, L.

Cross, V.

Northchurch, B.

Cullen of Ashbourne, L.

Nugent of Guildford, L.

Daventry, V.

Orr-Ewing, L.

Davidson, V.

Portland, D.

de Clifford, L.

Rawlinson of Ewell, L.

Denham, L. [Teller.]

Renton, L.

Dilhorne, V.

Robbins, L.

Drumalbyn, L.

Rochdale, V.

Dundee, E.

Romney, E.

Dundonald, E.

St. Aldwyn, E.

Eccles, V.

St. Davids, V.

Ellenborough, L.

Sandford, L.

Elliot of Harwood, B.

Sandys, L. [Teller.]

Elphinstone, L.

Savile, L.

Exeter, M.

Seebohm, L.

Faithfull, B.

Sharples, B.

Falkland, V.

Skelmesrdale, L.

Ferrers, E.

Sligo, M.

Ferrier, L.

Spens, L.

Fortescue, E.

Stamp, L.

Fraser of Kilmorack, L.

Strathcarron, L.

Gainford, L.

Strathclyde, L.

Gisborough, L.

Sudeley, L.

Glenkinglas, L.

Swansea, L.

Gowrie, E.

Swinfen, L.

Gridley, L.

Terrington, L.

Grimston of Westbury, L.

Trefgarne, L.

Hailsham of Saint Marylebone, L.

Trumpington, B.

Vaux of Harrowden, L.

Hawke, L.

Vickers, B.

Henley, L.

Vivian, L.

Holderness, L.

Wakefield of Kendal, L.

Home of the Hirsel, L.

Westbury, L.

Howe, E.

Young, B.

Hunt of Fawley, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.13 p.m.
Lord Underhill Lord Underhill moved Amendment No. 6.
Page 2, line 5, at end insert—
("( ) When in accordance with the provisions of this Act, British Rail disposes of more than 50 per cent., of the shares in any of their subsidiaries, British Rail shall not be held to be in control of that subsidiary for the purpose of public sector control of the British Railways Board external financing limit").
The noble Lord said: I beg to move Amendment No. 6. This amendment takes in some of the points that were made during consideration of the last amendment in so far as we are dealing now with the question of the external financing limit of the British Railways Board. The principle of the EFL has been

1379
argued in relation to proposals in other Government Bills when there has been a great deal of sympathetic support for the principle contained in this amendment not only from the Labour Benches, but from all parts of your Lordships Committee. It has been argued by Ministers that even when more than 50 per cent. interest in a subsidiary is disposed of it will not necessarily mean that British Rail is still not in control. It has been stated that in such circumstances the subsidiary would still come within the external financing limit.
We must keep in mind the statement made by Mr. Kenneth Clarke, the Parliamentary Secretary for Transport, in Standing Committee in the other place on 10th February when, at col. 174, he said:
"Receipts from sales merely assist the British Railways to live within its EFL. In future years, as in any past year, in negotiating an EFL some consideration is bound to be given to the likely capital receipts by the board".
Therefore, we have the position that, where less than 50 per cent. is disposed of, those sales will affect the level of the external financing limit for the next year; so British Railways will not get the full benefit of the sale. But also, in the event of more than 51 per cent. being sold, it may be decided that the circumstances are such that British Rail is held to be still in effective control, and so again British Rail will not get the full benefit of the sale.
The purpose of the amendment is very clear. What we are asking is that when more than a 50 per cent. interest is disposed of, it will be held that British Rail is not still in control, so that the external financing limit will not come into consideration. This is a principle which so many noble Lords have expressed that I hope that the Government will find their way clear to accept the amendment. I beg to move.
Lord Mishcon: I should just like to say that we are in entire agreement with the amendment.
Lord Bellwin: This issue was discussed extensively in another place. The Government explained then at some length why it is necessary for the Railways Board to relinquish effective control over its subsidiaries if these businesses are to enjoy the full freedoms of the private sector and if their borrowing and investment are no longer to count against the Railways Board's external financing limit and investment ceiling. I have already touched on this issue in the discussions on previous amendments, but I shall try to explain the position a little more fully now.
The objective of this whole exercise is to transfer these businesses to the private sector where they can be free of existing constraints. There are two stages in this process. Once the board no longer hold the majority of the shares in a business and can no longer control the composition of its board of directors, the company will cease to be a subsidiary within the meaning of the Transport Acts and the statutory controls in those Acts will no longer apply to it. However, even where the board hold a minority of the shares, it is possible in some circumstances—depending on the distribution of the other shareholdings and the trading relationship, if any, between the board and the company—that the board would still be able to exercise
1380
de facto control over the company. In that case, the company would still be classified to the public sector and its borrowing and investment would still score against the board's EFL and investment ceiling. Also, of course, its borrowing would continue to count against the PSBR. The question of whether the board would still be exercising effective control of a company, would have to be determined on the facts of the particular case and it is not, perhaps, very profitable to try to discuss it in the abstract.
The purpose of this amendment is to shortcircuit this process by statutory means: to provide that once the board cease to hold a majority of the shares in a business, they shall no longer be held to control it, no matter what the reality of the situation is. I respectfully submit that this will not do: it is based on a fundamental misconception of the nature and purpose of the PSBR and of the controls over nationalised industry borrowing. The point is that Government or Parliament cannot merely decide what shall and shall not be held to count against the PSBR. The PSBR is a practical, factual definition, and the real world cannot just be altered by a wave of the legislative wand.
Once you start debasing the definition of the PSBR—of which external financing limits are part—then the PSBR figure will become meaningless and irrelevant. The financial markets will start to look beyond it to the real facts of the matter; they will start taking their own views of who is effectively borrowing with the backing of the Government's credit, as of course the nationalised industries effectively do. And however hard the Government try to pretend that the PSBR is defined in one way, the markets will see the truth of the matter as markets always will. You cannot alter interest rates or inflation or any other economic facts, just by juggling with words. But I am afraid that an attempt to alter the real facts is what the amendment represents.
I hope that the Committee will therefore see why we cannot accept the amendment. I submit that this is not a party political point at all. External financing limits were introduced by the last Government, and the rules on what counts against EFLs and against the PSBR are common both to the last Administration and to this one. The fact is that in order for these businesses to escape public sector constraints the board must relinquish effective control. The board accept this. In the Bill we cannot try to avoid the reality of the situation.
5.20 p.m.
Viscount Simon: I cannot quite follow what the noble Lord, Lord Bellwin, is saying. If the board has disposed of more than 50 per cent. of the shareholding, why should it be argued that it has not abandoned effective control? Why should it be thought that it has effective control if it has disposed of more than 50 per cent. of the shareholding? I thought that the noble Lord threw something like a red herring across the trail by referring to outside bodies which are making advances to a company with a Government guarantee. But once British Rail has disposed of more than 50 per cent. of its shareholding, that subsidiary will not have a guarantee any more. Therefore, why should it be part of the public sector?

1381
I thought that the whole object of the exercise was to make it part of the private sector. There may be some very unusual arrangement by which, if British Rail holds less than 50 per cent. of the shares, it retains control. It would be quite easy, would it not, if there is a loophole there, to stop up that loophole? I should have thought that once the shareholding had fallen below 50 per cent. the natural assumption would be that the British Rail Board no longer had control.
Lord Bellwin: I tried to explain this on an earlier amendment when we spoke about the 51 per cent. We have been at some pains to emphasise the fact that a shareholding of 51 per cent. has significance, but we have said again and again that as a Government we do not want to interfere with the day-to-day management and control of business, least of all this business. I think that this will arise again in the next few amendments. As the noble Viscount knows, to hold a majority of the shareholding does not by any means necessarily affect day-to-day control. Indeed, if the other shareholdings are widely spread, a dominant shareholder can, in effect, control a company even though he has a minority shaerholding. It depends on the facts in each particular case. That is almost standard practice.
I am anxious to argue this case against the amendment on the ground of principle rather than of legal technicalities, because I think that the amendment centres on the question of control and whether, once the board has sold a majority of its shares, its borrowing should continue to count against its EFL and hence against the PSBR. The reason I gave the instances that I quoted earlier was to try to illustrate the kind of situations that could arise. However, once again it seems that we are not of one mind on this.
Lord Mottistone: I am really a complete ignoramus on these matters. On many occasions I do not agree with or even understand what my noble friend on the Front Bench (not this one) says. However, in this case the argument that he advances seems so very clear and understandable that I do not know what the amendment is all about. Why bother with it? May I suggest that we move on as quickly as we can and forget this one?
Lord Underhill: That would be very nice for the noble Lord, Lord Mottistone, but the noble Lord, Lord Bellwin, has said that we are juggling with words. He used the word "dominate". The word "dominate" has a different meaning from the word "control", and we are talking about relinquishing control, not about relinquishing domination. We are talking about a company in which British Rail will have less than half the shares, and even though all the others will be made up in small portions, British Rail will still be the majority shareholder.
Lord Bellwin: I shall be very interested to read in Hansard tomorrow whether I did, in fact, use the word "dominate". I do not recall having done so, but I am open to correction.
Lord Underhill: I think the noble Lord will find that I am correct. He said that we are juggling with
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words; but we are talking about something which is rather artificial. We on this side of the Committee, with support from our noble friends, are trying to assist British Rail, so that when it sells a majority shareholding it has the right to obtain further investment without fear of it coming within the EFL of British Rail. This seems reasonable. As simple as the explanation of the noble Lord, Lord Bellwin, seems to the noble Lord, Lord Mottistone, our attitude seems simple to me and I cannot understand why it cannot be accepted. Because it is so sensible and there is obviously support for it in the Committee, we must insist on the amendment.
5.25 p.m.
On Question, Whether the said amendment (No. 6) shall be agreed to?
Their Lordships divided: Contents, 52; Not-Contents, 108.

CONTENTS

Beaumont of Whitley, L.

Lovell-Davis, L.

Bernstein, L.

Mishcon, L.

Beswick, L.

Ogmore, L.

Bishopston, L.

Peart, L.

Blyton, L.

Phillips, B.

Boston of Faversham, L.

Ponsonby of Shulbrede, L. [Teller.]

Briginshaw, L.

Brockway, L.

Rochester, L.

Brooks of Tremorfa, L.

Ross of Marnock, L.

Bruce of Donington, L.

Seear, B.

Collison, L.

Sefton of Garston, L.

Cooper of Stockton Heath, L.

Segal, L.

David, B. [Teller.]

Shinwell, L.

Donaldson of Kingsbridge, L.

Simon, V.

Elwyn-Jones, L.

Stewart of Alvechurch, B.

Gaitskell, B.

Stone, L.

Galpern, L.

Strabolgi, L.

Gladwyn, L.

Strauss, L.

Gosford, E.

Taylor of Blackburn, L.

Hale, L.

Taylor of Mansfield, L.

Hampton, L.

Tordoff, L.

Hanworth, V.

Underhill, L.

Jeger, B.

Wells-Pestell, L.

Kilmarnock, L.

White, B.

Leatherland, L.

Wilson of Langside, L.

Llewelyn-Davies of Hastoe, B.

Wootton of Abinger, B.

Longford, E.

NOT-CONTENTS

Airey of Abingdon, B.

Daventry, V.

Alport, L.

Davidson, V.

Ampthill, L.

de Clifford, L.

Armstrong, L.

Denham, L. [Teller.]

Atholl, D.

Dilhorne, V.

Auckland, L.

Drumalbyn, L.

Avon, E.

Dundee, E.

Bellwin, L.

Dundonald, E.

Belstead, L.

Eccles, V.

Benson, L.

Ellenboriugh, L.

Berkeley, B.

Elliot of Harwood, B.

Bessborough, E.

Elphinstone, L.

Bridgeman, V.

Exeter M.

Caccia, L.

Faithfull B.

Campbell of Croy, L.

Falkland, V.

Cockfield, L.

Ferrers, E.

Colwyn, L.

Ferrier, L.

Cork and Orrery, E.

Fortescue, E.

Cottesloe, L.

Fraser of Kilmorack, L.

Cranbrook, E.

Gainford, L.

Crathorne, L.

Gisborough, L.

Cross, V.

Glenkinglas, L.

Cullen of Ashbourne, L.

Gowrie, E.

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Gridley, L.

Orr-Ewing, L.

Grimston of Westbury, L.

Peel, E.

Hailsham of Saint Marylebone, L.

Portland, D.

Rawlinson of Ewell, L.

Hawke, L.

Renton, L.

Henley, L.

Rochdale, V.

Holderness, L.

Romney, E.

Home of the Hirsel, L.

Rugby, L.

Howe, E.

St. Aldwyn, E.

Hunt of Fawley, L.

St. Davids, V.

Hylton-Foster, B.

Sandford, L.

Ilchester, E.

Sandys, L. [Teller.]

Kemsley, V.

Savile, L.

Killearn, L.

Sharples, B.

Lauderdale, E.

Skelmersdale, L.

Long, V.

Sligo, M.

Loudoun, C.

Spens, L.

Lucas of Chilworth, L.

Stamp, L.

Lyell, L.

Strathcrron, L.

Mancroft, L.

Strathclyde, L.

Mansfield, E.

Sudeley, L.

Massereene and Ferrard, V.

Swansea, L.

Middleton, L.

Swinfen, L.

Monk Bretton, L.

Terrington, L.

Montagu of Beaulieu, L.

Trefgarne, L.

Montgomery of Alamein, V.

Trumpington, B.

Mottistone, L.

Vaux of Harrowden, L.

Mowbray and Stourton, L.

Vivian, L.

Murton of Lindisfarne, L.

Wakefield of Kendal, L.

Newall, L.

Westbury, L.

Northchurch, B.

Young, B.

Nugent of Guildford, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.34 p.m.
Lord Underhill Lord Underhill moved Amendment No. 7:
Page 2, line 13, at end insert ("save that the Board may not establish as a subsidiary a company operating a particular railway line or network of railway lines owned by the Board").
The noble Lord said: This amendment seeks to provide that any disposal of assets or of a subsidiary shall be such as it may not be the establishment of any company to operate a particular railway line or network of railway lines. The Transport Act 1962 in Section 3(1) lays down duties upon the British Rail Board to provide railway services in Great Britain. The purpose of the amendment is to ensure that that power continues to remain solely with British Rail.
Noble Lords will have listened to Ministers explaining provisions in the telecommunications Bill for licensing private sector companies to provide services using the Telecom network. They would also have heard Ministers explaining other provisions in the same Bill for granting licences to break the Post Office monopoly in certain areas. The amendment seeks to ensure that there can be no possibility of the creation of a subsidiary for eventual disposal of any part of the rail network, or for any other concern other than British Rail to operate a particular rail service.
Having read debates in the other place, I am sure that the Minister will say that this should not take place and that I am raising needless fears. However, in a later amendment we shall be coming to the question of Clause 3, and subsection (2) of that clause says that it will be a duty of the Railway Board to carry out a direction to dispose of any subsidiary, and continues:
"(notwithstanding any duty imposed on them by section 3(1) of the Transport Act 1962)".
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The reference to the Transport Act 1962 refers to the duty of the Railways Board to run a railway service.
Therefore, if a subsequent clause says that the Railways Board must carry out a directive of the Minister notwithstanding that power, it means that that power could be set on one side. If the power can be set on one side there is a 100 per cent. justification for this amendment. What we are endeavouring to do is to ensure in this amendment that what the Government believe will not happen, will not happen. We want to make sure of it by putting it in the Bill because of this reference to the duty of the board to carry out any directive of the Minister, notwithstanding the powers in the 1962 Act.
Lord Bellwin: As the noble Lord, Lord Underhill, anticipated, I say that his fears are unnecessary. I can see why the amendment is put down. They fear that the powers in Clause 1 will open the way for de-nationalisation of parts of the railway itself The amendment attempts to prevent that happening by debarring the board from establishing a subsidiary company to operate part of the rail network. The logic is apparently that since the board's disposal powers in this clause apply only to subsidiaries, that will block the use of these powers in relation to the railway.
I do not think—I say it again—that the fears are in any way justified. It is no part of my or my colleagues' policy to dispose of parts of the railway network and nor have the board the slightest intention of pursuing such an unrealistic course. That the railway network should remain in the public sector is surely something that we are all agreed on. I do not see how I could be much more categorical than that. We had at first thought of making it plain that the railway network would be excluded from the application of the powers in Clause 1. But we did not follow that course because we felt it was unnecessary. The board could not on their own initiative use the powers in Clause 1 to dispose of part of the railway network. The board have a duty under Section 3(1) of the Transport Act 1962 to provide railway services and these disposal powers do not override that duty. If the board chose to sell part of the network as a going concern they would be in clear breach of that duty. If the board wish to cease to provide a passenger rail service they are required to go through the statutory closure procedures. So Clause 1 does not enable the board to sell off parts of the rail network and that is why I say that this amendment is therefore unnecessary.
I could also point out that the amendment is not within the spirit of Part I of this Bill, the main purpose of which is to give the hoard new powers. This amendment would actually prohibit the board from doing something which they can already do; namely, to form subsidiaries to carry on part of their undertaking. In view of the noble Lords' strictures on the Government for allegedly interfering with the board's freedom to run its business as it thinks best, I would respectfully suggest that that is a rather curious position for the noble Lord to get into.
To sum up, I understand the fears of the noble Lord, Lord Underhill, but I hope he will be satisfied when I tell him that I think they are misplaced. That is why the amendment is not necessary, and it would in any

1385
case take away powers the board already have. I hope that in the light of that explanation he will not press the amendment.
Lord Underhill: I am delighted to have received those categorical assurances from the Minister, but in my political life it has always been emphasised to me that it is not what Ministers say in their speeches but what is contained in the Bill that matters. After all, what one Secretary of State may feel inclined to do, another may have different views about. I therefore urge the Minister to re-read in the Official Report what he has said and study carefully the reference in Clause 3(2):
"notwithstanding any duty imposed on them by section 3(1) of the Transport Act 1962".
I am not a lawyer, but those words seem definite and appear to indicate that things could be done notwithstanding the power placed in the board. I hope the Minister will examine the matter to see if an amendment needs to be made, but, in view of the assurances he has given, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 8 not moved.]
5.42 p.m.
Lord Underhill Lord Underhill moved Amendment No. 9:
Page 2, line 26, at end insert—
("(6) In this section the term "subsidiary" shall not apply to Sealink UK Ltd.").
The noble Lord said: This is the first of a series of amendments dealing with particular subsidiaries. We feel it important to deal with these subsidiaries because they are important units of British Rail and the country in general. The Government have argued that the four subsidiaries to be involved initially in relation to Clause 1 will have no relation to British Rail activities, and I am questioning whether that applies to Sealink.
Sealink has a number of subsidiaries. It operates 48 ships and 11 harbours, and the involvement of the railways in shipping goes back about a century, and the link-up of the railways with shipping services and harbours has over the years been a very useful development. We on this side therefore question why that should not be allowed to continue. Our view on Sealink and several other subsidiaries is reinforced by the fact that repeatedly today the Minister has referred not only to the bringing in of private capital but to the purpose of the Bill being to dispose of items.
Over the years, Sealink has been a profitable subsidiary; we are not dealing with a loss-making body. In 1980 there was an operating surplus of £6.5 million. I appreciate that one must compare that with almost double that surplus in 1979, but the 1980 result was achieved despite the recession, which in particular affected Sealink in terms of the carriage of freight. On Sealink's shipping side, it provides ferry services on 25 routes—to the Continent, Ireland and some of the islands round our coast—and although handicapped during the year by protracted delays in the delivery of four new ships, nevertheless it was able to achieve the operating surplus in 1980 to which I have referred.
The operation of its 11 harbours produced a surplus of nearly £4 million in 1980, almost the same surplus as was achieved in the previous year. Operating surpluses on the harbours side have increased steadily from 1976. The harbours are mainly small and have close links with rail services, and in a later amendment we shall be dealing with the proposal to separate them from the general Sealink organisation, but that is not the issue here. The link between rail, ferries and harbours should be preserved, and the only reason for breaking it must surely be to open the way for the disposal of all or part of Sealink to the private sector. If that is the intention, and it is not merely the attraction of private capital, then I trust that that will be seriously considered by the Committee.
There are a few questions I hope the Minister will answer. Will the Government oppose any possible proposal to sell off Sealink ferries to any of its existing competitors? There is a danger there of monopoly coming in. What is there to prevent the Secretary of State or a future Secretary of State from directing British Rail to establish a number of separate subsidiaries of Sealink with a view to the disposal of specific ferry services, not necessarily the whole of Sealink? Some of Sealink's services are operated in agreement with continental partners, generally the state rail lines of Belgium, France and Holland. Have those partners expressed a view about possible proposals to split Sealink form British Rail or to sell off specific ferry services with which they may be involved? I understand that the joint companies in which the continental partners share, take in some 21 per cent. of the harbours' revenue. For all those reasons, this seems to be one subsidiary which should be left with British Rail, and that is why in the amendment we are asking that the provisions of Clause 1 should not apply to Sealink.
Lord Bellwin: I am sure the noble Lord, Lord Underhill, will not be surprised to know that the amendment is unacceptable to the Government. It cuts right across our policy, and I therefore assume that this is a probing amendment designed to discover the Government's intentions towards Sealink. Our position is simply that we want Sealink to be transferred to the private sector as soon as possible, for reasons which are well known and which I shall therefore not repeat.
We have open minds on how this should be achieved. The Railways Board are in the lead in implementing this policy and it is for them to put forward proposals. That is the key point. The board have said that they would like to float Sealink on the Stock Exchange. If that proves to be possible within a reasonable period, the Government will be quite content. If, on the other hand, Sealink's financial performance rules are a general flotation, the board will need to examine other solutions. The board clearly recognise this because Sir Peter Parker recently referred to the board's willingness to consider joining forces with a commercially suited private sector partner, perhaps as a preliminary to a flotation of shares.
The noble Lord expressed concern about Sealink's shipping services being a necessary adjunct to the railways, but I suggest that his fears do not stand up. It may have been true many years ago, but it is not the

1387
case now. Only about a quarter of Sealink's traffic is now railborne; the great majority consists of cars and lorries. Thus, there is no fundamental operational link which will be broken if Sealink is majority owned by private investors. There are, admittedly, areas in which Sealink will need to continue to work closely with the railways—for instance, in the co-ordination of rail and shipping services, especially container and train ferry services and in the through booking of tickets—but surely those are matters which can be covered by appropriate commercial contracts.
I repeat—I hope this will assuage some of the noble Lord's fears—that the present intention is that Sealink should be kept together as one company. I understand that Sealink's board have had discussions with their continental partners and that there are no objections to the proposed policies. I listened carefully to what the noble Lord said about a possible monopoly, but that, should it occur, would surely be a matter for the Monopolies Commission to decide. I do not think I can say more on the subject. I understand the concern which led the noble Lord to raise the matter, but I hope that he in turn will understand why we feel unable to accept the amendment.
Lord Underhill: I should like to ask the Minister a question before he sits down. He said that the present intention is to keep Sealink in one company. Does that apply only to Sealink shipping, or are all Sealink shipping and harbour interests to be kept together?
Lord Bellwin: I cannot answer that question because I do not know the position. However, I shall be glad to write to the noble Lord, if that would be helpful.
Lord Underhill: Obviously the Government have their view on this matter. We think that it is a wrong view, but we shall not press the amendment to a Division. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.50 p.m.
Lord Underhill Lord Underhill moved Amendment No. 10:
Page 2, line 26, at end insert—
("( ) In this section the term "subsidiary" shall not apply to the British Rail Property Board.").
The noble Lord said: This amendment deals with the question of the British Rail Property Board and here I hope that I can appeal to those noble Lords who have far greater knowledge than I have of businesses. I think that it would be a bad business deal to take away the Property Board from British Rail. It is not a subsidiary that is in dire financial straits. In fact, it is a very healthy going concern. In 1980 there was a net surplus of no less than £34 million on all the operations of the Rail Property Board—22 per cent. above the previous year. Gross income from its lettings of both operational and non-operational property increased by 19 per cent. to £49 million. The property operations all told make a valuable contribution to the British Rail corporate finances. In 1980 £67 million was provided from the operations of the Property Board, and over the past four years no less
1388
than £155 million has been contributed to British Rail finances from these property operations.
I do not want to weary the Committee, but in order to show that this is an efficient organisation, which should be kept as it is, I wish to refer to a few items from the British Rail annual report for 1980. According to the report, two developments funded and managed by the Property Board were completed during the last year—one involving a 28,000 square feet development in Bristol, the other involving a 34,000 square feet industrial estate in Glasgow. Most schemes of the board have been progressed in partnership with private developers—I emphasise the involvement of private developers—and 2¾ million square feet of industrial, commercial and retail accommodation were completed on land owned by the board during the year. The developments included a quarter of a million square feet shopping centre in Walsall, a 70,000 square feet cash and carry centre at Gateshead, and a 39,000 square feet industrial estate at Kirkby-in-Ashfield. That was a very interesting and novel development, because it was undertaken jointly by British Rail and Nottinghamshire County Council. Twenty-three other schemes were started, including a major road/rail freight complex in Leeds, a rail-link warehouse in Perth, 10 industrial units in Harrow, and a shopping centre in Liverpool on the site of the old Central Station.
I mention those examples because they all indicate a sound management capability and one well experienced in property operations. I should like to repeat a statement which I quoted on Second Reading. It was a statement by Sir Robert Lawrence, chairman of the Property Board, who on 7th April stated:
"But it should not be forgotten that once land is sold its income or its potential income is lost to the railways forever. We have sold property which in a different climate we might have retained for its growth potential".
Surely it is common sense to leave this potential with British Rail, to give it the opportunity itself to derive all the surplus from any additional value that might be created in land and other property in years to come.
The Government apparently see the issue differently, for Mr. Kenneth Clarke said on 10th February that if the present policy of selling land for development continued, the proceeds would go through the chain of companies to the British Rail Board. He went on to argue that the sale of a majority controlling interest would result in a flow of funds to the Rail Board and a substantial stake which the board would retain in the subsidiary would ensure proceeds of development flowing back to British Rail. Nobody has mentioned anything about the substantial stake; it could be only 25 or 20 per cent., or even lower. The attitude reflected by Mr. Kenneth Clarke ignores two aspects. First, Ministers of State have stated that the receipts from the capital sale will affect the board's future external financing limit. Secondly, it would surely be more sensible to retain the entire property portfolio with British Rail, and continue the very successful policy which the Property Board (by the examples that I have given) has been carrying on. Surely this is one of the subsidiaries which it would be really foolish, not from a political point of view, but from a business point of view, to take away from British Rail. I beg to move.
Lord Bellwin: First, I should like to concentrate on the figures that the noble Lord mentioned and which seemed to form the basis of his argument for the amendment. I think I should state the following facts. There are two points to make on the matter of the figures. The first is that the great bulk of the board's net rental income from property is derived from operational property, which, it should be said at once, is only marginally affected by the present policy. A limited number of buildings classified as "operational" but in fact no longer needed for running the railway are to be included under the new policy. Rental income from operational property was £25.3 million in 1980 (£87.6 million over the last five years); whereas income from non-operational property—I want to stress this—which makes up the great bulk of the portfolio which the Government now wish to get into the private sector, was £8.5 million in that year, and £36 million over the last five years.
The second point to note is that much of the board's property income is in fact from disposals—£32 million in 1980 and £66 million in the last five years. That is income of course, but it is once-off income when a disposal is made. The board has always disposed of surplus property in order to meet its cash needs. There is nothing wrong in that. But in assessing the trading position one must bear in mind the difference, and in the present policy we are concerned with no more than a continuation, albeit on a larger scale, of what has been a trend.
On the previous occasions when the plans for getting private capital into the British Rail subsidiary businesses have been considered in your Lordships' House there have been confused references to property and to the British Rail Property Board. Although it will not surprise the noble Lord, Lord Mishcon, to learn that I cannot accept this amendment, it gives me an opportunity which I should take to explain a little more clearly what is the policy of the board and the Government on this matter.
If I may first deal briefly with the amendment itself, I am afraid that it is based on a fundamental misconception about the nature of the Property Board in the way that I have just tried to explain. The fact is that, although we are apt to refer loosely to the Property Board as a subsidiary activity of British Rail, it is not a subsidiary in any formal or legal sense. Unlike the other businesses with which we are dealing, it is not a Companies Act company. It has no separate legal status and is merely an internal division of the Railways Board. The key point is that the assets which it manages are owned by the board. Therefore, it will be seen that the amendment does not have meaning.
Turning to our policy towards the board's property holdings, I should explain that the board has a large and varied portfolio of non-operational property. Its net book value in December 1980 was about £170 million and it produced a net rental income for the board in that year of £8·5 million. This property has ceased to have any connection with the railway and is surplus to its needs. Some of it is of good quality, but much of it is low value. As a whole the portfolio is underdeveloped and produces a low income in relation to its potential. The board has always made disposals from this portfolio to the extent that I
1390
have just mentioned. In the present difficult financial circumstances I should have thought it quite reasonable to expect the board to realise some of its assets in this way, especially under-used assets. All that the board is doing is to realise the capital value of assets unwanted now in order to help with current cash difficulties, rather than to keep the assets in order to enjoy future rental income.
What the board now propose is that all the non-operational portfolio, together with a limited number of properties—mainly office buildings occupied by private tenants—which are classified as operational but which no longer have any connection with the running of the railway, should be transferred to the ownership of British Rail Investments Limited. British Rail Investments Limited is expected to continue the existing sales policy, but also to look for more radical ways of getting in private investment through joint ventures or through the sale of one or more property companies. What the board and the Government are looking for is a more rapid development of the portfolio than would be possible under the existing approach.
I have perhaps gone into more detail than might have been necessary but I believe it is important to answer the points made by the noble Lord, Lord Underhill, which, on the face of them, have appeared quite valid in themselves but when set in the context of what it is that we are setting out to do really do not give cause for the kind of concern which the noble Lord expressed.
Lord Beswiek: I do not think there is any misconception. Here is a case where valuable assets now owned by British Rail will have to be sold by them under duress, which otherwise they could exploit by rental or by sale at an appropriate time. British Rail are having to dispose of profitable assets. What I find absolutely intolerable is when one noble Lord stands at the Dispatch Box and justifies the sale of profitable elements in British Rail when, an hour or two earlier, we had to listen to his colleague, the noble Lord the Minister of State at the Treasury, who spoke in the picturesque language which he always employs about the losses made by British Rail. May I beg the noble Lord, Lord Bellwin, to speak to his noble collegaue? The noble Lord would find it much easier to get this Bill through if he prevents his noble friend Lord Cockfield from lecturing us about the losses made by British Rail when it is simply a question of compelling British Rail to run unprofitable and unsocial services while at the same time compelling British Rail to sell those services which it is now running at a profit.
Lord Bellwin: It is not for me to tell my noble friend Lord Cockfield how to express himself; he has no difficulty in doing that. I am sorry if my noble friend Lord Cockfield's remarks did not appeal to the noble Lord, Lord Beswick, but certainly they appealed to many Members of your Lordships' House. As to the point that was made about compulsion to sell under duress, when the noble Lord, Lord Beswick, reads what I said in the Official Report—and I am not going to repeat my remarks or over-emphasise certain points of my speech again—I think that on reflection he will

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accept the validity of what I have said about the effect of doing that in relation to this amendment.
Lord Donaldson of Kingsbridge: Could the noble Lord, Lord Bellwin, repeat what I believe he said—that this is not a matter of selling assets under duress? If it were I should agree with the noble Lord, Lord Beswick; but if the Railways Board is selling off property which it does not any longer wish to use for one reason or another, that would be perfectly acceptable. Always, behind all this, there remains the feeling that there is no guarantee that if the Railways Board sells valuable property the money will be used by the board for development. The noble Lord, Lord Bellwin, gave a reply of the same kind which Lord Cockfield gave when talking about the Treasury, when he said that the Railways Board will have the money but that it will be taken into consideration in any future estimates that are made. What this really means is that the Railways Board will not have the money. In that case I cannot really understand why the Railways Board is prepared to sell off any assets at all, except under duress.
Lord Bellwin: It has always been the case that when assets are sold off by public bodies the test should be, what is done with the money received? By selling, one converts a fixed asset into a liquid asset. It is how one applies the money that should really be the criterion and the justification for having made the sale in the first place, if we are talking purely economics. Often there exist other factors as well. For instance, if a local authority sells some land, one can certainly decide whether the local authority does with the money that which ought to be done; but one could also bring in all sorts of other arguments about what goes on to the land once it is no longer in the local authority's ownership and so on.
The first test has to be, does the sale need to be made? I said earlier that when times are hard and funds are needed a perfectly legitimate way of raising funds is by disposing of the assets. Then one can apply my second criterion, what is done with the money? I do not believe the noble Lord would quarrel with that point. As to duress, circumstances create duress—not the Government saying to British Rail that it must do this or it must do that. The whole of this Bill is about trying to get away from the position whereby public bodies are in a straitjacket. We want to get assets into the private sector so that they can be better deployed to everyone's advantage.
Viscount Simon: I feel about this amendment as I did about the previous amendment and lean towards the views that have been expressed by the noble Lord, Lord Bellwin. I would lean more firmly towards the noble Lord's views if it was made quite clear that the decision to sell an asset or an investment was one made by the British Railways Board, which would take into account all the things that have been mentioned. The one point that I keep coming back to in my mind is this wretched Clause 3, which states that the Secretary of State can instruct the British Railways Board to sell this, that or the other, and the terms on which such a sale is made. If we could get rid of that then I would
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have no doubt at all that these questions about whether or not shares in Sealink or in other properties are disposed of could be left to the British Railways Board. With respect, I would suggest that there is nobody in your Lordships' House who is competent to give a decision on such a matter. I believe we are entitled to say that any such decision should be the decision of the British Railways Board. I was going to raise this particular issue on Clause 1 stand part, and if your Lordships will forgive me I would rather wait because the argument I have in mind does not relate to this particular amendment.
6.8 p.m.
Lord Underhill: Needless to say the arguments made by the noble Lord, Lord Bellwin, in putting the Government's case did not satisfy me in terms of the information which I gave to your Lordships. The noble Lord argues that this is a decision taken freely by the Railways Board. It has been suggested that such decisions will not be entirely free decisions, and that in any case there will be a certain amount of arm-twisting because of the external financing limits position, which affects the whole position of British Rail. While immediate cash may be helpful, we are looking at the long-term business view; that on retaining profitable property, British Rail itself can obtain the benefit of appreciating values as the years go by and this seems to be a sensible business attitude to adopt. I cannot imagine that British Rail too would not have seen it that way. The noble Lord, Lord Bellwin, also said it was a question of what British Rail does with the money. Are the Government implying that British Rail has wasted the money that has been transferred from property dealings?
Lord Bellwin: No.
Lord Underhill: The noble Lord says, "No". I am pleased to hear it, because of course British Rail is using the money to cover the deficit on its general rail operations. We know why British Rail has a deficit on its general rail operations—it is because investment is badly needed. Investment in development is badly needed, but I will not go into that at this stage. The statement made by Sir Robert Lawrence from which I quoted suggests that if British Rail could have held on to the property in question it would have much preferred to do so, and would have much preferred to hold on to the land as well. I was a little concerned when the noble Lord commented that operational property is not involved but only some operational property which incorporates such facilities as offices. This is just the sort of property I should like to see BR hold on to, because these are the profitable parts of property. But the Government are adamant and I will not weary the Committee with another Division. Our view has been made quite clear in debate and I still believe that our attitude is right. I beg leave to withdraw the amendment.
Viscount Simon: Before the noble Lord withdraws his amendment, may I be permitted to ask one more question of the noble Lord, Lord Bellwin? He said in the course of his remarks that, technically, the

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Property Board was not in fact a subsidiary of the Railways Board. Looking at the Bill quickly, I was wondering what the Bill has to do with selling the property in that case.
Lord Beswick: May I also pose another question? If it be the fact, as the noble Lord has said to us, that British Rail now dispose of their property—if they have that power—what is the reason for putting this provision into the Bill?
Lord Bellwin: Perhaps I may just say simply that I confirm that the British Rail Property Board is not a subsidiary of the company of BR. It is in fact merely a management division of the board, and it does not itself own any of the property which it manages on the board's behalf. I fear that in bringing forward the amendment the noble Lord, Lord Underhill, may have fallen into the trap of assuming that the Property board has a separate legal status, which I say again it does not in fact possess; and, if that is not so, then there is no problem between us. I hope that that clarifies the point raised by the noble Viscount, Lord Simon.
Viscount Simon: Actually, my point was better put, I think, by the noble Lord, Lord Beswick. If in fact these are assets belonging to the board and not to any subsidiary, and the board can already dispose of them, because apparently it may have done so, then how do they come into this Bill at all?
Lord Bellwin: I think we get these things within the Bill because we are trying here to point a direction to the board as a whole, and the fact that its activities are run by a management company (I suppose one could call it that) I do not think makes any difference to the policy of disposals. It is the main board, if you like. It is like a company which has a management division within a main board. If the management division takes decisions, then it does so certainly on behalf of the parent, in this case British Rail itself.
Viscount Simon: I do not want to prolong this discussion, but perhaps I may leave this thought with the noble Lord and he can look at it between now and the next stage of the Bill. If he looks at subsection (3) of Clause 1 he will see that it begins:
"For the purpose of facilitiating the eventual disposal…of any part of their undertaking",
the board may establish subsidiaries, and once it has established subsidiaries then this Bill can be used to dispose of any of the subsidiaries. There does not seem to be any provision in this Bill for disposing of the assets of the board as they are.
Lord Bellwin: My information is that it is the intention of the board to create a subsidiary with which to, if you like, part with the property, and such a company could then presumably be sold.
Lord Beswick: Am I to understand that the noble Lord has answered my question?
Lord Bellwin: If the noble Lord, Lord Beswick, feels that I have not, then I will look very carefully at
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what he has said and if I myself come to that conclusion I will write to him. If he feels I have not, then no doubt he will write to me.
Amendment, by leave, withdrawn.
6.15 p.m.
Lord Underhill Lord Underhill moved amendment No. 11:
Page 2, line 26, at end insert—
("( ) In this section the term "subsidiary" shall apply only to Sealink UK Ltd., British Transport Hotels Ltd., BR Hovercraft Ltd., and the British Rail Property Board.").
The noble Lord said: We now come to the situation where your Lordships have accepted the position of the Government that the four subsidiaries which are named in our amendment should be the ones that are dealt with in Clause 1. The fact that I have not referred to British Rail Hovercraft does not mean that we do not regard British Rail Hovercraft as being important. In fact, the only thing I would say on British Rail Hovercraft is that, but for the work of the National Research Development Corporation and British Rail in developing hovercraft, the hovercraft might never have been developed to the extent that it has been. I make that comment in passing, so that your Lordships will know that we are not ignoring British Rail Hovercraft.
When the Secretary of State made his statement on 14th July 1980, with regard to the future of British Rail's subsidiaries he stated that the only businesses involved were the four referred to in the amendment that I am moving. I have the statement repeated in this House on behalf of his noble friend by the noble Lord, Lord Mowbray and Stourton, which shows that what I am saying is absolutely correct. What the amendment seeks to do is limit the effect of the disposal of shares and the disposal of the whole or a part of a subsidiary to just these four subsidiaries. It was made clear from these Benches that we would wish that none of the four was being disposed of. However, in view of the decisions taken and the attitude of the Government we now want to urge that in accordance with the ministerial statement the powers in Clause 1 shall be confined to these four subsidiaries.
Perhaps I may add that all the publicity issued by the Ministry has referred only to these four subsidiaries. I shall not weary your Lordships by going into the other subsidiaries, the main subsidiaries, which are held by British Rail, except to remind noble Lords which they are. First, there is British Rail Engineering Limited. That will be the subject of a further amendment, assuming that the one I am now moving is not agreed to. This particular subsidiary constructs and maintains all BR rolling stock and equipment. No one could say that this is not part of British Rail activity. It is essential to British Rail activity, and this one, surely, should stay with British Rail. But, if necessary, that will be elaborated upon in a subsequent amendment.
Then we have the subsidiary Transmark—Transportation Systems and Market Research Limited. The British Rail Report for 1980 refers to this subsidiary and states:
"Transmark's award-winning team of consultants trebled profits to over £½ million in 1980 and raised the fee income by 49 per cent. whilst extending their range of activities to 94 projects in 31 countries".

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It is made clear that this excellent result in development has been achieved by marketing skill together with British Rail's technical skill, which enjoys a very high reputation round the world. This subsidiary relies upon British Rail's technical skill. That, therefore, must be associated with British Rail and should be left where it is.
British Rail Advertising speaks for itself. The surplus which they made over last year of £4.4 million, which is 27 per cent. over 1979, shows why that should be left with British Rail. Lastly, there is Freightliners Limited. This subsidiary operates the container movements of British Rail. It is developing well and winning new customers. The gross revenue of this subsidiary has increased steadily over each of the last four years. It cannot be argued that Freightliners is not connected with British Rail. Therefore, that one should be left. I stress this because the argument about the other four subsidiaries has been that they have no connection with British Rail and therefore they should not be held by British Rail. All the four to which I have referred have direct British Rail activities, and I therefore hope your Lordships will agree to this amendment, which provides that the provisions of Clause 1 of this Bill should relate only to the four subsidiaries which were named originally in the Ministry Statement and which are named in this amendment.
Lord Bellwin: From the outset the Government have made it clear that in carrying forward their policy they wish to proceed in agreement with the British Railways Board. The agreement reached between the Government and the board last summer covered the four businesses referred to in this amendment. It is on these four businesses that the board are at present concentrating, and where we hope to see early progress. If we succeed in achieving the fundamental change in the status of these businesses which both the board and the Government regard as necessary, that will be a major step forward. But it will not exhaust the possibilities. I think the board and the Government will want to take the policy further.
If these first initiatives are successful, we shall want to consider whether the same principles can be applied to other parts of the board's undertaking. This does not mean that we are harbouring plans to sell off parts of the railway system, as was perhaps mentioned in connection with earlier amendments. This policy is not about the railway. But from the time of our first Statement last July we have made no secret of the fact that we wish to explore—and that is the operative word—with the broad the possibility of introducing private capital into British Rail Engineering Limited; and there may be other parts of the board's undertaking which could also benefit from private investment.
Your Lordships may ask why we have not brought forward proposals for BREL at the same time as those for the other businesses. The answer is quite simple. It is clear that this policy will result in extensive changes in the organisation of the Railways Board and its implementation will impose a heavy load on the board's senior management. To have attempted at this stage to include BREL in our proposals would have greatly added to the stresses which the board are facing.
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I think that this would have been too ambitious. We therefore want to look at BREL over a slightly longer time-scale. We shall want to discuss with the board whether private capital has a role to play in BREL, what methods might be appropriate and how the best interests of the railway can be served. We recognise that BREL is a very different animal from the other businesses with which we have been dealing so far, and that a different approach may be needed. When, in due course, we reach conclusions, we shall inform the House.
Noble Lords have criticised the powers in Clause 1 on the grounds that they are open-ended. It is true that their scope is not closely confined. That is because we want the powers to be available to the board to implement our policy as it develops in close consultation with them. It would be a pity if, by drawing the powers too narrowly at this stage, we were to miss opportunities to secure the advantages of private investment for other parts of the board's undertaking that may arise later on. I can reassure the noble Lord, Lord Underhill, on two important points. First, the Government have no intention of using the powers in this Bill to cut across the board's statutory duty to provide railway services; and, secondly, we shall inform the House of any substantial development of the policy.
I should just mention in passing that the drafting of this amendment is somewhat unsatisfactory and that, as it stands, it would have a much more limiting effect than the noble Lord probably intended. For this, and for the wider reasons which I have given, I hope that he will agree to withdraw it.
Lord Underhill: It is strange how the Government change their argument when confronted with a particular argument. I can recall the statement by the noble Lord, Lord Bellwin, on Second Reading, a rather humorous statement, about the other four subsidiaries having nothing to do with British Rail. Why, then, should they run the hotels and why handle shipping? Here we are proving conclusively that the other subsidiaries are closely linked with British Rail. When we come to the next amendment, we prove that British Rail needs the subsidiary. One cannot follow an argument which changes according to the particular words in a particular amendment. I agree with the noble Viscount, Lord Simon, that at the end of the day all these are linked with what may happen under Clause 3. When we get to that, perhaps we may have a detailed discussion on the powers of the Secretary of State. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6.23 p.m.
Lord Underhill Lord Underhill moved Amendment No. 12:
Page 2, line 26, at end insert—
("( ) In this section the term "subsidiary" shall not apply to British Rail Engineering Ltd.").
The noble Lord said: This requires me to elaborate a little on British Rail Engineering. If we are going to have a situation where other subsidiaries can be looked at, then we should look carefully at the question of British Rail Engineering. I gave brief details previously. It operates with 13 workshops which con-

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struct and maintain British Rail rolling stock and equipment. During 1980 productivity went up by 5·7 per cent. again, showing a not exactly inefficient organisation. This was achieved by investment in new plant by British Rail and cuts in administration costs. Output reached a new record level, says the British Rail report of 1980. Despite the general recession in engineering, BREL maintained a substantial intake of apprentices, thus helping the country's engineering training. No less than £220 million was spent by BREL on outside supplies from private sector firms which rely on the work given to them by BREL. Although, primarily, the work is for British Rail, the subsidiary had sales of £40 million to outside customers during the last year, of which £34 million was for exports. Exports have grown steadily over each year of the past four years.
Mr. Kenneth Clarke said on 29th January (in col. 65):
"There is no rush to take the policy into BREL. We are no doubt a year or two away from that: we are looking into it and shall see how the policy gets on elsewhere".
We are dealing here with something totally different from, the other subsidiaries. These are essential workshops. I am certain that any businessman listening will think it foolish to take away an efficient enterprise which British Rail relies upon for its manufacturing work. This is one that we should declare quite definitely should not be affected by the powers in this Bill.
Lord Bellwin: There is nothing sinister in the potentially wide application of the powers in Clause 1, or of the Secretary of State's equivalent powers of direction in Clause 3. This policy is about the subsidiaries, not about the railway. Moreover, the keystone of the Government's policy is our desire to proceed in agreement with the board. It is the board, operating through their holding company, British Rail investments Limited, who are taking the lead in making proposals and in carrying them through. We expect their proposals to take many forms, and we certainly do not want to constrain their opportunities to improve the performance of any part of industry with which their interests involve them. This applies in particular to British Rail Engineering Limited.
BREL is a very large business indeed. It has 13 works scattered round the country, employing over 35,000 staff. In 1980, its turnover was £434 million. The vast bulk of its workload is for the Railways Board, but there is also some work for overseas railways. Its workload is of two main kinds: new construction of locomotives, of rolling stock and of other railway equipment using a significant proportion of bought-in parts; and, second, heavy maintenance of locomotives and rolling stock. BREL is unique among Western European railway equipment manufacturers in having a near-monopoly of supply to its national railway. It is perfectly reasonable for the Government to want to take a fundamental look at this arrangement, in association with the Railways Board, to see whether the present organisation of the industry can be improved and made more cost-effective. There is not only British Rail's interest in an efficient service; there is also the need to strengthen the position of the United Kingdom railway equipment manufacturing industry in bidding for export orders. The potential in the export field is enormous, but without a strong and competitive
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home market, United Kingdom manufacturers will continue to be at a disadvantage in an international market which is fiercely competitive. The opportunities for larger earnings and wider employment must not be overlooked.
These are important issues. Clearly, they will require a lot of thought. The Government will want to look at ways of improving the opportunities for the whole railway equipment industry, BREL and the private sector manufacturers together to compete in both the home and the overseas markets. For the board itself there could be advantages in an arrangement which effectively gave them alternative sources of supply between which they could choose the best buy. There could be questions about the structure and the funding of at least parts of BREL, and this is where the powers in the Bill might come in. All these are matters on which we shall need to exchange views with the board. There is no question of having reached conclusions except about our objective, which is clear: to produce a stronger, more efficient, more prosperous industry with a larger effective market round the world, to the benefit both of the Railways Board and of Britain's export performance. I hope that the noble Lord will realise that it would be folly to close off powers which could in some circumstances help towards securing that objective. This amendment would have that unfortunate result; and I therefore hope that he will withdraw it.
6.30 p.m.
Lord Underhill: The noble Lord, Lord Bellwin, referred to the monopoly supply. When one keeps in mind the figures I mentioned, £220 million obtained from outside suppliers is a big figure. He also referred to British Rail being able to get the best buy. Presumably that is what British Rail do now. In their placing of £220 million with outside suppliers they are obviously looking for the best buy. There is clearly a difference in outlook in this issue between the Government and those on these Benches. There appears to be no immediate developments likely to take place. We shall therefore watch the situation very carefully. Perhaps before any developments take place there will be a change in positions in the House. I shall read carefully in the Official Report what the Minister has said to see whether or not we should come back on this matter. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 1 shall stand part of the Bill?
Viscount Simon: Before we agree Clause 1, I should like to go back to the problem of how the proceeds of any sale get through to British Rail and what they can do with them. The Minister put it very succinctly during his winding-up speech on Second Reading. I will read his words, if I may, which are at column 282 of Hansard for 7th May:
"The fact is that the proceeds of sales made by the Railways Board using its powers in Clause 1 of the Bill will go to British Rail Investments Limited as owners of the businesses and hence to the Railways Board. Those proceeds will be included by the board in the financial forecasts that it submits to the Government and will be taken into account along with all the other relevant factors in fixing the board's external finance limit each year".

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Then, after one further sentence, he continues:
"The precise effect on the board's EFL is therefore undecided at this stage. As the Government have said in another place, they do not intend simply to reduce the board's EFL by the amount of any sales proceeds".
So far, so good. But I cannot see why EFL should be affected at all by the proceeds which are not external but internal finance. May I put the position in this way. After listening to the noble Lord, Lord Cockfield, earlier I thought that I understood something about EFL, but I am now sure that I do, not. Let us suppose that discussions take place and, in the light of all the circumstances, it is agreed that next year's EFL for the Railways Board will be £X million. Before the year starts the board succeed in selling 50 per cent., 70 per cent. or whatever of one of their subsidiaries and they get £Y million for that. The Government have said that they will not automatically deduct £Y million from £X million. Why should they deduct any part of it? This £Y million, as the noble Lord, Lord Bellwin, said, is simply resulting from converting an asset into cash. It is not external finance, it is internal finance. I cannot see why they should not be allowed to use that internally obtained finance in addition to anything that has already been thought, as a result of discussion, to be the right figure for that external finance limit for the year. It really is as simple as that.
If that is not done, then the effect is that to the extent that their external finance limit is reduced they actually lose the benefit of the sale they have made. They lose not only the benefit of the sale in cash but, having disposed of the asset, they lose the profit they were getting on it. So they are actually worse off than they would otherwise be. I cannot see how that is going to encourage the British Railways Board to dispose of their subsidiaries.
The noble Lord, Lord Bellwin, has reminded us, quite correctly, that this scheme has been worked out in consultation with British Rail and has implied that they are quite satisfied with it. I receive notes from time to time—as other noble Lords may do—circulated by British Rail under the heading "Rail Talk". In the notes which they circulated in March of this year they discussed this very problem. It is interesting to see that some of the words used in the notes are exactly the same as the words used by the Minister. I suspect that they are drawn from some Government document.
However, are the Railways Board satisfied that this is all right? They end up by saying that the board certainly hope that the net result will be to provide more money for the main railway business activities. If this were not to happen they would be very disappointed and would undoubtedly make strong representations to the Secretary of State. This is an official document issued by the Railways Board and it is clear that they are by no means certain that they are going to get the money when they sell interests in their subsidiaries. I wonder whether the Minister can add to or develop what he said in the winding-up speech on Second Reading.
Lord Donaldson of Kingsbridge: May I add one word in support of what the noble Viscount has said?
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He and I have raised this matter strongly on several occasions. The truth is that in all deficit financing the persons providing the deficit want to give as little as possible. If an asset is sold intermediately they immediately say, whether it is your mother or somebody else who is giving you the necessary money to do something: "You do not need that, dear, because you have sold your car and that was worth £700 towards the £2,000 you are asking for and so I shall give you £1,300."
This is exactly the case which the noble Viscount is putting up. It is exactly the case which lost the noble Viscount, Lord Eccles, his case for museum charges; and it is exactly the case which every Minister has to deal with when anything is sold by anybody. It is quite impossible for the Minister to put our minds at ease because we know that, whatever he may say, part of this is what will happen. If British Railways sell a very expensive asset extremely successfully then the Treasury will think that in order to finance the very large electrification scheme they can give them a bit less. Nothing that the noble Minister says will convince me otherwise.
I want him to give us a promise that at least some of the assets realised will be over and above any agreement already made between British Railways and the Government to finance their major plans. That is the minimum that we want. If we could get that, we would say that we know the Government will get most of it but at least British Rail will get some. This is far the most important aspect in the whole Bill. I do not know whether the noble Lord can say anything that is in the least reassuring. I doubt that, but I ask him to do so.
Lord Bellwin: Well, I do not know how one follows that. I hope that noble Lords will agree with me on at least one aspect; namely, if the board or any other operation raises money by selling some of its assets, it does not have to borrow that amount of money. That is a very important point because we must move more and more to the stage where one can do things without always having to borrow. When one borrows, in the end, somewhere down the line, it costs; you have to pay the cost of borrowing. It is not just about the availability of money; it is about the cost of that money when you have it. I hope that both noble Lords will at least be with me on that point.
The noble Lord, Lord Donaldson, speaks with much experience—and I gather much feeling—when referring to the attitude which Treasuries take about use of monies. I fear I am not going to be drawn into that because I cannot add to what he already knows about it. I am sure he would agree, as would the noble Viscount, Lord Simon, that at the end of the day it has to be Governments who make a judgment on what the external financial limits can be. Nevertheless, I do assure him that his point is taken.
Perhaps I should say just a word on another point which was mentioned by the noble Viscount. He talked of his concern about the board acting under duress. Another speaker (I believe it was the noble Lord, Lord Donaldson) also expressed the same concern. I should like to say that the Government's policy for subsidiaries is one which has in fact been agreed with the Railways Board and I say now on the

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record that the board has not entered into this agreement under duress. I could go on to elaborate on that, as some notes in front of me do, but I do not think I ought to do that because unless one has oneself actually sat in on meetings and knows the situation, one is simply passing on at second hand. However, I am so assured, and I take the assurance as it is given in the form in which it is given.
I think it might also be helpful to the noble Lord, Lord Underhill, if, instead of writing to him, I were to answer now his point regarding keeping Sealink together as a single company—he asked whether the position applied also to shipping and harbours. The answer is, Yes, it does. I could go on at considerable length about the principle of this clause but it only reiterates, perhaps in more detail, what may have come out in the discussions so far. I suspect that we all know where we stand respectively on this, and therefore, with the agreement of the Committee, I will leave it at that for the time being.
Clause 1 agreed to.
Clause 2 [The new harbours company]:
6.42 p.m.
Lord Mottistone Lord Mottistone moved amendment No. 13:
Page 3, line 4, at end insert—
("(2A) At the harbours listed in subsection (2) above, Sealink shall pay due regard to local interests. Representatives of local district or parish councils as appropriate shall be co-opted on to relevant Sealink Harbour operating bodies.
(2B) The local representatives referred to in subsection (2A) shall number not less than 3 and not more than 5 as appropriate to the size of the harbour.").
The noble Lord said: It is a pleasure to get away from the rapacious Treasury and Lord Donaldson's rapacious mother and come on to a matter which is essentially one of human relations with a seafaring flavour! There is a problem and my amendment seeks to give some sort of clue towards putting it right. Perhaps I should start by saying that regarding the harbours mentioned in Clause 2(2) I have visited or been through them all, but I have a particular affinity with the Isle of Wight, and it is my experience with the harbours there that I am concerned with—both those which are operated with Sealink, and others. I should also like to say that I have nothing but the highest regard for Sealink from the nautical point of view, as really expert ship operators with first-class crews and with very skilful captains. It is a good opportunity to be able to say that. Indeed, the harbour-operating people, just as much as the crews, are a pleasure to work with, to pass through and to be passed through by.
Having said all that, however, there is a problem that when Sealink wishes to develop its resources in any way whatsoever it comes up against the local interests. From the point of view of the local people, Sealink, is a vast organisation. They see it as an offshoot of British Rail and they see British Rail as a huge nationalised industry with immense power and resources. To put it mildly, if Sealink appears to act in a heavy-handed way it can strike a measure of fear into the local populace that perhaps their interests are not being given quite the regard they would be if they were dealing with a relatively small operating
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company. So that is sometimes how Sealink is seen by local interests.
Looking at it from the other point of view—and I see Sealink's problems just as much—it finds it has an excellent new plan for working more efficiently in bringing people from one place to another, but finds itself obstructed by people who are very much looking after their own parochial interests—and I mean parochial interests—sometimes with great concern. If you extend the facilities for removing a lot of motorcars from a terminal, you may have a serious effect on the values of houses fronting on roads that such cars have to traverse. So from Sealink's point of view, it finds perhaps that local people have a narrow-minded viewpoint and cannot always understand the great benefits of allowing Sealink the better to develop its valuable and great resources. At the same time, the local people feel that they cannot always get there with Sealink and they fight back, and battles arise; there is bad temper on both sides. That situation has arisen recently in the Isle of Wight, and I suspect that it applies equally at times to all the other harbours which are mentioned in this part of the Bill.
Therefore, what my amendment seeks to do is to provide some way of suggesting that Sealink should, as a statutoryduty, co-opt people from the local district or parish council, depending on the size of the harbour, so that perhaps some of these battles need not take place since there are people there who can immediately say to the operating authorities at the working level: "Don't press us there; we are not ready for it", or "Could you not do it another way?"
At the same time, Sealink itself could be explaining why a certain course would not be quite so bad as those concerned think it will be. While this is done, the message does not always seem to get through and then you get great battles. I am sure all your Lordships have had experience of this in other spheres where local interests come up against what they see as huge and all-powerful bodies with lots of expertise and resources at their disposal. This amendment is an attempt to build a bridge within the terms of this Bill so as to try to avoid such situations. I beg to move.
Lord Bellwin: I am grateful to my noble friend Lord Mottistone for tabling these amendments. It seems to me that his interests are infinite. They stretch to so many matters that I can only wonder in amazement at his great knowledge of such a wide range of subjects. But I am grateful to him for tabling these amendments and giving us an opportunity briefly to discuss how Sealink will operate when it is in the private sector. Sealink is at present, and will continue to be, a Companies Act company. The harbour subsidiary that it is to form will also be a Companies Act company. It will have a board of directors appointed by the shareholders, who for the harbour company will be Sealink, and Sealink will include the British Railways Board and all those who acquire shares when the board dispose of part of their interest.
My noble friend's amendment speaks of "relevant Sealink Harbour operating bodies". I fear I have to tell him that such bodies, each managing a different Sealink port, do not exist. There is one body responsible for managing all Sealink's harbours at present and that is the Sealink board of directors. When Sealink's

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harbour subsidiary has been set up, responsibility will rest with the board of directors for that company. The conduct of a board of directors is usually regulated by the articles of association for the company. To provide by statute, as my noble friend is in effect seeking to do, for the composition of the board, would tend to change the harbours company subsidiary from a Companies Act company into a statutory one. This is not the policy which the Government wish to pursue for Sealink and its subsidiary. We want them to be normal, privately-owned, commercially-run Companies Act companies, fully responsible to their shareholders and subject only to those statutory controls that apply to all shipping and harbour operators. Investors in the company should choose its board of directors and not find them forced on them by statute.
I hope I have made clear to my noble friend why I respectfully submit that his amendment would not work. The fact is that arrangements of the kind he proposes would be suitable for a harbour managed by harbour commissioners whose activities were governed entirely by statute, but that is quite a different animal from a Companies Act harbour company governed partly by its articles of association, and partly by its statutory obligations as a harbour authority.
My noble friend mentioned circumstances where he feels that Sealink might not always have been seen to be paying due attention to local interests. I am assured that Sealink are happy to meet any local body which feels that local interests have not been sufficiently taken into account. They regularly have meetings with county councils, who are, of course, local transport authorities, and such meetings will often also be attended by representatives of district and parish councils. I hope your Lordships will agree with me that it would be wrong to contemplate imposing on Sealink, alone of Companies Act harbour companies, a new statutory framework of consultation with local interests, when the existing voluntary framework appears, in general, to work well.
In conclusion, therefore, since Sealink have a good record of consultation with local councils for the many harbours that they operate, I hope I have persuaded my noble friend that it would be inappropriate to seek to impose on them new statutory duties of consultation—duties which, I may say again, are not imposed on any other privately-owned shipping and harbour operator and which, in the terms of the amendment, would be incompatible with the normal management of a Companies Act company. I hope that with that explanation my noble friend may feel able to withdraw his amendment.
Lord Mottistone: I thank my noble friend very much for that very full explanation and, of course, I admit that I did not expect that my amendment would fall precisely into the necessary pattern. But what my noble friend said threw up one question for me. Am I to understand that Sealink will form a subsidiary to run all the harbours listed in subsection (2), and that, in effect, there will be no local operating body, because Sealink itself will have a local manager running the ships? But how about the harbours? Will they be run only by the company based in say London, Liverpool, or wherever it is, which looks after all the
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other harbours? Will there not be a kind of local harbour operating unit with a local harbour manager? How will that part of it work?
My noble friend may not be able to answer me at this stage, but it would be interesting to know how Sealink are proposing to run their harbours. I understand that, at the moment, the harbours are run jointly with the ships that run from the harbours, and this seems to be creating a new picture where the harbours are under a kind of umbrella private company, which is a wholly-owned subsidiary of Sealink.
Lord Bellwin: As I understand it, the set-up will be as described by my noble friend and, as at present, each harbour will have a harbour manager. If it would be helpful, I should be glad to give a more detailed written answer to my noble friend. I suspect that that would be helpful to him and I gladly undertake to do so.
Lord Mottistone: That is extremely kind of my noble friend. With that reassurance, I am happy to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 14 and 15 not moved.]
On Question, Whether Clause 2 shall stand part of the Bill?
Lord Underhill: In the light of the assurance by the noble Lord, Lord Bellwin, that the Sealink shipping company and the Sealink harbour company will be kept together, I have not moved Amendments Nos. 14 and 15, but I should like to ask the noble Lord some questions. If that is the position, why go to all the trouble of setting up a separate harbours company as suggested in this clause? If the ships and harbours are still to be kept together under Sealink, why have a separate harbours company? It seems to me a totally unnecessary piece of bureaucratic machinery, which the Government are always accusing those on this side of the House of trying to encourage.
Secondly, would it be possible, under the proposals in Clause 4 and in the Bill generally, for any one harbour to be sold off separately from the harbours company? Do the Government have it at all in mind—I am not saying that this should be done and am simply asking a question—for the harbours, which are now to be put into a separate company owned by Sealink, to be attached to the new Associated British Ports?
Lord Bellwin: Once again, I do not wish to make a long speech on this clause stand part point, and I am glad that I was able to satisfy the noble Lord on the point of the splitting up. I would only say that, in considering the whole future of Sealink, we have recognised from the outset that the special position of the harbours needed to be taken into account. The reason is that, in order to operate a harbour in this country, it is usually necessary to take statutory powers in a private or local Bill, and in giving such powers Parliament has generally also imposed certain statutory obligations on harbour undertakers in order to ensure that rights of navigation are protected, structures affecting navigation are properly maintained and so on. Sealink's harbours are no exception to

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this general rule, because most of them are operated under a wide range of local enactments. I understand that there are over 100 altogether, dating from the beginning of the last century and corning up to the present day.
The noble Lord, Lord Underhill, asked: Why go about this whole process at all? I would only say to him, without repeating the arguments and discussions we had in talking to the amendments, that there are legal advantages in setting up a new company. There are also commercial benefits of the type that I described before. It is common practice in the private sector for companies to organise their various activities in separate subsidiaries. The Railways Board itself has found it convenient to set up subsidiaries for its non-mainstream activities in recent years. The establishment of the harbours as a separate company will formalise the relationship which already exists within Sealink between the two parts of its business. By establishing the company in this Bill we shall be relieving Sealink of the need to promote a private Bill to achieve this, when it is a private sector company.
Those are some of the reasons for setting up the harbours company and hence the justification for Clause 2. In conclusion, I suggest that Clause 2 contains convenient and sensible proposals for putting Sealink's harbours into a state in which they can most smoothly enter majority private sector ownership, and I urge the Committee to accept that this clause should stand part of the Bill.
Clause 2 agreed to.
Clause 3 [Power of Secretary of State to give directions]:
6.59 p.m.
Lord Underhill Lord Underhill moved Amendment No. 16:
Page 3, line 33, leave out paragraph (b).
The noble Lord said: This is the controversial clause over which a lot of concern has already been expressed. At the outset, I should say that, along with the noble Viscount, Lord Simon, I am opposed to the entire clause, which gives arbitrary powers to the Secretary of State to give instructions—because that is what the word "directions" means—to British Rail to carry out disposals under Clause 1 and also to establish subsidiaries. But in the amendment I am asking only for the deletion of paragraph (b) of subsection (1), which gives authority to the Secretary of State to direct British Rail to establish a subsidiary.
We know all the arguments which have been used this afternoon for the purpose of establishing subsidiaries with a view to their eventual disposal. In other words, the instruction to establish a subsidiary is very important. I know that Ministers have said time and again that this is only a reserve power. The same has been said when other Bills have been discussed. If something is to be only a reserve power, I wish it could be spelled out in the Bill and that some criteria could be given for the use of that reserve power. Once we put an arbitrary power into the Bill to be used by a Secretary of State, it is there. It may be that the present Secretary of State is a thoroughly nice chap who would never use this power unfairly, but there are Secretaries of State and Secretaries of State. The fact
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is that once we put such a provision into the Bill and provide no criteria whatsoever for using it, it can be used to instruct British Rail.
If it is to be a reserve power, can the Minister tell me under what circumstances it would be used? It would be useful to know the answer to that question. Presumably it would be used only when British Rail refused to do something that the Secretary of State wanted them to do. In other words, in certain circumstances their commercial freedom would be lost. Although the Secretary of State has to give any directions after consultation with the British Railways Board, the Bill does not say that this must be done with the agreement of the board. There could, therefore, be circumstances in which there was disagreement and yet the Secretary of State could give instructions to British Rail. As I have said, there are no criteria. The Secretary of State could direct that a subsidiary should be established just as he thought fit.
When dealing with the powers of disposal to be given to the British Railways Board under Clause 1, Mr. Kenneth Clarke, the Parliamentary Secretary, said on 10th February, at col. 156:
"Management will no longer be subject to all the statutory controls to which it has been subject: all the public sector disciplines, the risk of political interference in management decisions and other inhibitions that affect the management and work force of any nationalised corporation".
All these constraints will be taken off and replaced by a statutory power to be given to the Secretary of State to instruct the board to act, when he thinks fit, by the discipline of the Secretary of State—for the board has to carry out his instruction—and by the risk of political interference by the Secretary of State. I cannot see that this is any different from the constraints which the Secretary of State is talking about. The amendment seeks to avoid all this interference with British Rail in its commercial decisions.
Subsection (2) of the clause provides that the British Railways Board shall carry out any direction given by the Secretary of State, notwithstanding any duty imposed on the board under the Transport Act 1962. This means that, if the Secretary of State were so disposed, he could instruct British Rail to do certain things which are outside the powers laid down for British Rail under the 1962 Act. These are sweeping and arbitrary powers. I think that noble Lords in all parts of the Committee will believe that they are far too sweeping and that if there is to be any interference by the Secretary of State the criteria for this so-called reserve power ought to be included in the Bill. I beg to move.
Viscount Simon: I support entirely what the noble Lord, Lord Underhill, has said. I think he has been very modest in asking only for the removal of paragraph (b). I should prefer the whole clause to be removed.
Lord Bellwin: Of course I understand why the amendment has been put down and the situation which noble Lords opposite are trying to avoid. I am sure they will not be surprised to hear me say again that I do not think they need fear that the Government would use the powers of direction which they are trying to delete from the Bill in an irresponsible or sinister way. I hope that after the few remarks I want to make they will feel able to withdraw the amendment.

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First, the Government hope very much to proceed in agreement with the British Railways Board in this policy. We have so far been able to develop our plans on the basis of methods and objectives to which both the board and the Government can subscribe. I say again that I hope very much that this will continue and I have no reason to doubt that it will. We do not expect or wish to use the powers in Clause 3 but we feel it is essential that the Government have the right to protect their position and to have these powers. I have said that several times before today but it is so important that it ought to be repeated at the start of our discussions on this clause.
The intention, presumably, is to prevent the Secretary of State from giving the board a direction to create a new subsidiary and to transfer to it part of their main railway activity with a view to subsequent disposal. But this is not in fact the purpose of this provision of Clause 3. The situation which we had in mind in putting forward this proposed power was where the Secretary of State wished to direct the board to put part of its property portfolio into a new company for subsequent sale, bearing in mind that all the board's property belongs to the board itself and that the British Rail Property Board is not a subsidiary. Alternatively, the Secretary of State might wish the board to reorganise an existing subsidiary into separate companies for disposal. For instance, it might prove impracticable to dispose of part of the board's interest in British Transport Holdings as a whole. So the hotels would need to be treated in separate groupings. We do not intend to use this power to direct the board to put parts of the railway into subsidiaries.
I hope the noble Lord, Lord Underhill, might agree that, accepting that we do not expect to have to use these powers, if this does prove necessary it is reasonable that the Secretary of State should have the power in subsection (1)(b) and should use it in the ways which I have described to carry through the agreed policy. It is certainly not the intention, I say again, to use it to direct the board to put parts of the railway into subsidiaries for disposal. That is no part of the Government's policy and I hope that the noble Lord will accept my assurance on that point.
The noble Lord is concerned about the powers of the board to establish subsidiaries. There is no specific power in the Transport Act 1962 for the board to establish subsidiaries, but there is an implied power for them to do so as part of their general power to organise their business as they think fit. The power to establish subsidiaries is implied because, as the Committee will see if they look at Section 25 of the 1962 Act, there are provisions there requiring the board to exercise control over their subsidiaries in a certain manner. The board are in no doubt as to their implied powers and have used them on several occasions without legal challenge. The other relevant section is Section 50(8) of the Transport Act 1968.
With these assurances and explanations, I hope that the noble Lord, if not completely satisfied, as I am sure he will not be, will at least feel that his concern has been reasonably assuaged.
Lord Mishcon: I wonder whether the noble Lord could help some of us who are very worried about this
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provision and about the directive power which is given to the Minister without any qualification. In view of his previous statements, which obviously moved us considerably as to his faith in the wisdom of the board—his faith in their power to observe what is a sensible investment and what is sensible to take by way of a shareholding when a disposal takes place—may I ask him whether he has not sufficient faith in the board to realise that they will see the reasonableness of a Minister's request to form a subsidiary? Does this power only arise when the Minister has asked for the formation of a subsidiary and the board has said that it will not form one? If not, since the board obviously have the power on their own to form a subsidiary, what does this power imply? Does it not imply a complete lack of confidence in the board, should this situation arise?
Would not the Minister at least consider taking back this clause with a view to putting in its place a provision stating that only when the board act unreasonably and the Minister takes the view that their refusal is unreasonable on certain grounds (and the grounds are set out in the clause) will this power be used? Otherwise, is this not an offensive power in the eyes of those in whom the Minister has such touching faith?
Viscount Simon: May I suggest a slightly different approach from that of the noble Lord, Lord Mishcon? Would it not be possible to include in this clause something to the effect that if there is disagreement between the Secretary of State and the board the matter should be the subject of an inquiry or the subject of arbitration; some opportunity should then be provided for the matter to be discussed impartially if there is a disagreement between the board and the Secretary of State.
7.10 p.m.
Lord Mottistone: I find the remarks, delicately and splendidly put, of both the noble Lord, Lord Mishcon, and the noble Lord, Lord Underhill, quite odd because I remember so well some five years ago sitting on the Benches opposite and hearing it being put across from this side of the House by the then Labour Government how important it was to have all sorts of safeguards of the Secretary of State's control over the companies which at that stage were going to be nationalised. They were so keen to make sure that the companies were really under their thumb, and we kept on saying to them: "Don't you trust them? You are nationalising them, why don't you trust them?"; and they said, "Yes, of course we trust them, but we still think we should have this small power". In the end one had to accept it and one understood it. If the noble Viscount, Lord Simon, makes those remarks, one sympathises and understands because he has been neutral in these battles both times and is sitting on the same Benches, but for it to come from the Labour Party that they think it is unreasonable to have an underpinning in a Bill for the Secretary of State to have last resort powers of whatever sort, seems to me to be not really compatible with what they have done in their own time.
Lord Mishcon: The noble Lord, Lord Mottistone, made his remarks in his usual charming way immedi-

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ately after I had spoken, and I can assure him that I cannot recall—and I should be delighted if he could remind me—any power that was demanded by this side when in Government, for the Minister to decide about the sale of the assets of a nationalised industry into private hands, which is what we are dealing with now. I am sure that with his terrific memory the noble Lord, Lord Mottistone, will be able immediately to pluck out an example and give it to me, to my eternal shame.
Let us remember that we are dealing here with the creation of subsidiaries. Not every time will this happen but, as the noble Lord, Lord Underhill, said, the whole purpose of the creation of subsidiaries is to exercise the power to dispose of assets. That was the point with which we were dealing, very definitely. I follow the noble Viscount, Lord Simon, as I always do if it looks as though he is supporting a point of view that I am trying to put forward, but if I may say so with respect, I feel that arbitration or an inquiry on a matter of this kind may be difficult. All that I was asking for, and I hope to be able to persuade the Government that this is reasonable—but of course it is for the noble Lord, Lord Underhill, to say whether this suggestion commends itself to him—is that the Minister should take this back with a view at least to setting out in this clause what are the considerations which would make the Minister direct an unwilling British Railways Board to form a subsidiary. It seems in these circumstances a reasonable thing to do, despite the way in which the noble Lord, Lord Mottistone, delved into his memories.
Lord Bellwin: It is interesting to listen to the discussion and I will only say that if I were called upon to quote precedents of what happened in Leeds City Council over previous years I should be very happy to trot them out, with no difficulty at all, but I should have more difficulty in trying to think about what might have been said in your Lordships' House when, as your Lordships know, I have been here for so short a time. So I cannot help either side on that. Also, I am not sure that it would be well to try to think of a series of hypothetical situations which might arise where the power would be needed. I can think of one or two, but quite clearly it would be better to look closely at that matter.
I cannot give the kind of undertakings that I think would satisfy noble Lords opposite and I will only say, as I have done in the past when dealing with other Bills, that I should want to read and to think carefully about what has been said; and I assure noble Lords opposite that if they should decide at some future stage to raise this matter again—which I hope they will not—I shall come forearmed with a much more impressive list of situations than I am now able to give. However, I hope that will not be necessary because I do give an undertaking to look at this and, if there should be any room for manoeuvre, we may well do so, but more than that I cannot do, as noble Lords opposite know.
Lord Underhill: That statement by the Minister would satisfy me at this present stage. If the Minister undertakes to take a careful look at this, that will satisfy me at the moment, because I am not saying—
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and I do not think anyone who spoke in support of this amendment is saying—that there should not be, if necessary, a fallback. I think the noble Lord, Lord Mottistone, said that there must surely be a last resort power. Very well, then let the Minister have a look to see whether something can be put in here which makes it appear as something like a last resort power. This is so sweeping that it could not be left as it is now.
I readily seek leave to withdraw the amendment on the assurance given by the Minister. He has given us no promise that there will be a change, but we shall have an opportunity at the Report stage to move the deletion of the entire clause, which frankly, on reflection, I think might be the best thing to do if we do not get a satisfactory move from the Government.
Before I sit down, I should like the Minister to look carefully at the Official Report as to what he said about subsection (2) of the clause, because the meaning of this must be made clear to me and it is not clear at the moment:
"It shall be the duty of the Board (notwithstanding any duty imposed on them by Section 3(1) of the Transport Act 1962) to give effect to any directions given under this section".
I will not weary the Committee by reading Section 3(1) of the 1962 Act, which lays down the duties placed upon the board to carry out its railway purposes. Therefore that must mean that even as a last resort the Minister could instruct the board to do things against the powers given them in the 1962 Act. So I hope the Minister will look at that matter as well and, with the assurance he has already given, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
Clause 4 agreed to.
Lord Lyell: I think it might be convenient if we resume the House now to take other business. I understand that the target which has been agreed through the usual channels is eight o'clock. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Fisheries Bill
7.19 p.m.
The Earl of Mansfield: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a—(The Earl of Mansfield.)
Lord Bishopston: My Lords, as the Minister said on Second Reading, this is an important and major piece of legislation for the British fishing industry, and I am sure we are all pleased with the progress that has been made here and in the other place and which has now resulted in our considering the Bill on Third Reading. I noted at an earlier stage that the Minister said that a culmination of events, none of them connected with party politics, created the position in which the industry had to go through a number of painful

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transitions and substantial losses in its fishing capabilities. I find those comforting words because I was a fisheries Minister with my noble friend Lord Peart for some of that time when we enjoyed the support of the main parties and of the fishing industry. The loss of distant water grounds was a severe blow, and problems connected with the CFP, and of course the soaring costs of fuel, have been factors threatening the viability of the industry, combined with the significant changes in the basic structure of the industry.
We certainly welcome the creation of the Sea Fish Industry Authority, taking the place, as it does, of the White Fish Authority and the Herring Industry Board, following discussions initiated, I think, in my days, or at least some time ago. We hope the new authority will have the significant support of the fishing industry and when occasion merits of the Government itself. I would pay tribute to the work of both these authorities over many years, for their co-operation, which has helped to sustain the industry during a most difficult period.
There is need I think for improved marketing of fish and to boost the consumption of it, although of course consumers will enjoy much more the fish caught by our own fishermen, and not imported, and certainly not imported fish caught illegally by foreign or even EEC vessels in our 200-mile limit. Perhaps I may be criticised for talking about "our" limit, because I understand our 200-mile limit is now EEC waters, but we still feel, and I think with some justification, that we have a special interest. Indeed, the future of the industry depends upon the considerations which are accorded to us in the future. I mention this because I think many people are still unaware that about 60 per cent. of all the fish caught in Community waters are caught in what I might term the United Kingdom 200-mile limit. I think that should be a factor to be borne in mind when it is sometimes alleged by our EEC partners that United Kingdom Ministers are being unreasonable in their demands in respect of revision of the CFP. I do not think we can stress enough that when we have to share the fishing considerations with other countries inside the Community it is often at the expense of British fishermen whose viability has already been threatened over a period of some time.
It is because of the United Kingdom's major interest in the fishing industry that we are among the leaders with regard to research, and I am aware, of course, of the interests of other countries in wanting advice and technical aid and assistance with regard to the way they can pursue their own fisheries policies. I would certainly pay tribute to the work of the Ministry establishments, and others, which has been so vital to the wellbeing of our industry, or at least to its survival. Their advice on conservation and the renewal of fish stocks is important to the size and variety of future catches. I hope the Community and the EEC countries will honour the regulations concerning conservation measures, and indeed quotas, and I hope the Minister will be firm in getting their observance and in ensuring compliance by the vessels of all countries.
I want to pose one or two brief quesions to the Minister which I think he may be able to answer. Among the aspects which concern us is the need for
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there to be adequate regard to the interests of those employed in the industry, and I want to raise this question in regard to the Bill at this stage because this is important, not only to the indutry but to those who represent those employed in the industry, the trade unions, because the conditions and the safeguards have been far from satisfactory. I believe this is an occasion when those employed in the industry have a right to expect a better future than they have had in the past, albeit that one recognises that the problems facing the industry at the present time make it very difficult to give them the kind of security which they, and indeed others, have a right to expect. Further, will the Minister, even in these times of restrictions on public spending, recognise the special needs of the fishing industry, even though I must say in fairness that we appreciate the recent measures of financial and other support which have been accorded by the Government.
I want to raise this next matter because I think it is a more recent one. I believe the Minister of State in another place has strongly criticised the Commission for its failure to act quickly in respect of stemming the flow of significant imports to this country from EEC countries, at prices below the effective minimum import price, or perhaps the term might be "the reference price levels". I believe he is most concerned about that. Of course we accept that this is unfair because some of the foreign fishermen get fuel and other subsidies and aid which is not available to us. I would certainly like the Minister to comment on the prospects of getting quick action from the Commission to protect the British fishing industry in that respect. What is obvious is that whatever is in this commendable Bill will matter less if we are subject to violations through lack of Commission action on such occasions. We all know, of course, that much depends not only on action by the Community but on the will of national Governments. May I bring my comments to a close on this important point. Perhaps the most important question is whether the Minister can offer any hope in respect of getting satisfactory progress in the review of the CFP.
Just to summarise the four questions I have posed, one concerns the conditions of those employed in the industry; one is concerned with adequate finance being available to deal with the special problems of the industry; one is concerned with the immediate problems of undercutting by imports; and, finally, and possibly the most important, is concerning the progress towards getting a satisfactory review of the CFP. We have been on this now for some years, as we all know. All parties in the House, as well as the industry outside, have been demanding that we have a satisfactory and quick settlement of the outstanding questions regarding the common fisheries policy, and I think, particularly as our industry has a major interest in the CFP area, that we must obtain a satisfactory conclusion as soon as possible.
I would wind up by saying how much we support the intentions of the Bill and we hope it will be effective as soon as possible in the interests of the viability of our fishing industry.
The Earl of Mansfield: My Lords, I am not sure whether I am in order in welcoming the noble Lord, Lord Bishopston, to the Dispatch Box; whether I am

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or not, I do so, because it is the first time I have faced him across it. At a time of intense controversy in political matters and a great deal of dispute, we have a Bill such as this which is really not the subject of party controversy, and indeed, save in matters of detail and certainly not in respect of matters of principle, was not the subject of heated dispute in the other place.
The noble Lord raised a number of points. Although he did not perhaps give it the prominence which he might have intended to give it, certainly what looms as importantly as anything else in the Government's mind is the need for improved marketing of fish. During the two years that the Government have been in office I think that it has struck all of use that, whatever we do to get the fish out of the sea, and whatever aid we can give to encourage the fishermen to do so, without in-marketing of their eventual product, their efforts certainly will not avail and they will not live, as it were, the prosperous life which we should all like. To that extent, the new Sea Fish Industry Authority will play a crucial role. I have no doubt that one of its first duties after it has been constituted following Royal Assent to this Bill, will be to take heed of the "wise men", as they seem to be called—and I have no doubt quite rightly—that my right honourable friend the Minister of Agriculture invited to go into marketing so far as fishery matters are concerned in the same way as they have investigated other areas of agriculture. That will, no doubt, be reflected in their endeavours immediately afterwards.
The noble Lord turned his attention, quite rightly of course, to the percentage of fish which come from British waters. Perhaps I may combine that point with his question about the common fisheries policy. In fact, all these matters—that is to say access, quotas, and above all conservation—play a part in the common fisheries policy negotiations which have been dragging on for so long. We as a Government have made it plain that, so far as we are concerned, there must be totality of agreement, there must be a policy worked out which is fair and just to our fishermen, particularly having regard to the fact that many of them come—and I speak for a moment as a Scottish Minister—from communities which are peculiarly dependent on fishing. Indeed, the Scottish inshore fishery is extremely important in the economic life of Scotland and, moreover, is extremely important in some of the rural areas which are what I might call economically precarious.
So we have throughout the period that the Government have been in office placed the greatest importance on the need to negotiate a common fisheries policy which is fair and just. In spite of all the aggravating circumstances which have arisen—which include other countries having elections just when we think that we are getting somewhere near an agreement and the whole process having to be put into cold storage—and in spite of all the difficulties, we are continuing to negotiate. I have no doubt that before very long, the common fisheries policy will emerge and will be complete. That will give a great deal of confidence as well as relief to the industry.
I should like to say by way of parenthesis that it is no use having a conservation policy as part of the common fisheries policy if there are not adequate safeguards to ensure that fishermen observe the
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regulations and their quotas and any restrictions which may be placed on fishing effort and in effect to sum up—do not cheat. It is for that reason, that we place the very highest emphasis on the fact that it will be for the Commission by one means or another to take responsibility for the enforcement of conservation as well, of course, as each country enforcing the régime in its own waters.
The noble Lord asked a number of questions relating to the industry. He asked, in effect, how the conditions of work of employed fishermen might be ameliorated and, indeed, improved in the future. Of course, the new authority has the authority and the duty to give advice on any matter relating to the fishing industry. In the first place, as in any other industry, conditions of work are a matter of negotiation between employer and employee, but I very much hope that the new authority will go much further than that. I am sure that it will do so and that it will, in fact, give advice and generally help to improve the lot of the employed fishermen.
Finally, the noble Lord, Lord Bishopston, asked about the flow of imports from third countries. As he will know, the Government were instrumental in persuading the Commission to raise reference prices earlier this year. It is a matter of the greatest concern that there has been a flow of imports, as he quite rightly said, below reference prices. This is something on which the Government have placed the greatest importance and my honourable friend the Minister of State in the Ministry of Agriculture in the other place has, as the noble Lord rightly said, been in the forefront of the Government's loud and sustained complaints to the Commission that these are very unsatisfactory methods of trading and that we expect the Commission to take their duty seriously and, as the noble Lord said, control what has become an intolerable flood. We shall continue, I have no doubt, to make representations until the Commission do take the matter up and until the situation is more satisfactory.
I am very glad that the noble Lord was able—even though he came into its consideration at a comparatively late stage—to give the Bill his blessing, because he has great knowledge and experience of fishery matters. I am sure that I speak for my noble friend Lord Ferrers, who is actually engaged in the Ministry of Agriculture, when I say that we look forward with the greatest interest to the noble Lord taking part in our future debates on agricultural matters.
On Question, Bill read 3a with the amendments.
7.36 p.m.
The Earl of Mansfield: My Lords, I beg to move that the Bill do now pass.
Moved, That the Bill do now pass—(The Earl of Mansfield.)
Lord Ferrier: My Lords, I should like to support my noble friend in his welcome to the noble Lord, Lord Bishopston, and the noble Lord's contribution to this debate. At the moment I am in the middle of reading Sir Arthur Bryant's book on the Elizabethan Deliverance. Hearing the noble Lord speak, I thought of the impact which Lord Burleigh made on the economy of the country as regards the fishing industry in those

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days. It was very important as training ground for recruits for the navy. I think that this point was made in the other place and in this House too. However, this is an opportunity for me to support my noble friend in recommending the Bill to the House and to point out the importance of the fishing communities as training ground for the men who are to man our navy—however large it may be in the future.
On Question, Bill passed, and returned to the Commons.
Lord Lyell: My Lords, I beg to move that the House do now adjourn during pleasure, until 8 o'clock.
Moved accordingly, and, on Question, Motion agreed to.
[House adjourned during pleasure from 7.38 p.m. until 8 p.m.]

Transport Bill
House again in Committee.
Schedule 1 [Provisions supplementing ss. 1 to 3]:
Lord Mishcon Lord Mishcon moved Amendment No. 17:
Page 26, line 5, leave out ("may") and insert ("shall").
The noble Lord said: The Committee now moves from the transfer of assets from public into private hands to the transfer of human beings from public into private hands. Whereas the minds of the Committee may well have been affected by all the arguments that have taken place in regard to the first part of the Bill, I hope that the hearts of the Committee, too, will be moved in regard to this part of the Bill.
It is well known that employees in the transport industry—and certainly this is applicable to British Rail—chose what they thought to be secure employment; employment which in many ways did not have much of the excitement and which also in many ways had none of the gilded profits of other sections of the business which the subsidiaries of British Rail carried on. They chose to be employees of British Rail—and many of them have been very loyal and long-term employees—because of the conditions of service, which they found attractive and secure. Now we are faced with measures which will mean that some of those subsidiaries will go out of public hands into private hands.
We should consider for a moment the nature of the businesses carried on by at least some of the subsidiaries, and I hope that your Lordships will find it convenient that in this connection I should speak to amendments Nos. 17, 18 and 19. For example, one of those subsidiaries is the hotel side of British Rail. Outside British Rail the hotel industry is an industry which has floating employment; even in times of good employment, as is very well known, many of its employees are immigrants; many of them change their employment, for one reason or another, very rapidly. The hotel industry, as such, is not organised at all from a union point of view. It is because of reasons such as those that I have just given that many of its employees are not within unions, and unions have not had a great success in getting them to become members.
Therefore, it is of great importance that we should be considering the welfare of those who may find that their subsidiary company has been taken over by private hoteliers or people who have decided, together with British Rail, that it is proper to merge with British Rail, which would not then have a controlling interest.
I am not just talking in generalities without the support of some up-to-date evidence as to the state of much of the hotel industry in this country. Indeed, only in this morning's Times there is a headline of:
"Quarters for hotel staff called cockroach city".
With the Committee's permission I shall read from that article. It commences as follows:
"A hostel for staff at a British hotel was described as "cockroach city" by a safety representative of the Hotel and Catering Workers' Union yesterday. The union has launched a campaign against unhygienic and dangerous conditions endured by many of its members.
The union is not naming the hotel. It said that while some hotels had made improvements, others had a long way to go to improve—
and I quote in particular these words:
""lousy conditions" below stairs, which could threaten the health of customers and cost them more".
Later on the article says:
"The safety representative at one hostel said at a press conference: "In the staff rooms in the basement it is like a whole cockroach city. They tour around sometimes, like any human being. One day they will raid us"."
I am not suggesting for one moment that a subsidiary will find itself in private hands where conditions of this sort apply. I am merely saying that all of us ought to be conscious, certainly in regard to one of the subsidiaries about which we are talking, that in private hands there are many hotels—and there are many very good hotel companies—and many hotel employers who, as regards their employees, are not observing conditions which we would regard as being satisfactory. Therefore, we must exercise the greatest of care as to the rights of those who were employed by British Rail in one of the subsidiaries, who may now be taken over by private control. It is strictly in connection with pension rights that I make this observation.
If your Lordships would be good enough to refer to Schedule 1, you will see that in paragraph 1(1) there is a provision that:
"The Secretary of State may make such orders under Section 74 of the Transport Act 1962"—
and there is a general description of what that section provides, in the following words:
"(power to make provision about pensions in the nationalised transport industry)"—
and then it says:
"in relation to related companies as he could make if those companies were subsidiaries of the Railways Board".
A reference to Section 74 of the Transport Act provides for the Minister's power to make orders about pensions, and they were orders in the nationalised industries, and I quote from subsection (3)(e) of that section:
"for enabling all or any of the participants in a pension scheme to become instead participants in another pension scheme"

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Subsection (6)(a) of that section says:
"Orders under this section shall be so framed as to secure that no person other than the Boards, the Holding Company and any subsidiary of any Board, or of the Holding Company, is placed in any worse position by reason of the order".
Another paragraph follows upon that which one would have hoped, in regard to the inelegance of its language, would have died, having been put in the Transport Act 1962 and not resurrected in this Bill. Unfortunately, that is not so but because we shall look at it hereafter, I shall read the inelegant language of a triple negative in subsection (6)(b). With some embarrassment I read it to your Lordships:
"An order shall not be invalid by reason that in fact it does nor have the result of securing that all such persons are not placed in any worse position by reason of the provisions of the order, but if the Minister is satisfied or is determined as hereinafter mentioned that any such order has failed to secure that result, the Minister shall as soon as may be make the necessary amending order".
I say in passing that one wonders why somebody drafting this provision did not say that an order shall not be invalid by reason that in fact it has the result that all, or some, of such persons are placed in a worse position by reason of the provisions of the order. But the draftsmen decided that the complicated language was the better, and there it was in this 1962 Act.
Your Lordships will have observed that the discretion is given under the wording of this schedule to the Secretary of State to make such an order as is provided for under Section 74 of the Transport Act, and to make it in regard to the new company that will be taking over the subsidiary as though it were one of the nationalised companies that was dealt with under the 1962 Act. The purpose of this amendment is to say that the Secretary of State shall make such an order so that provision can properly be made to see that the pensions of the employees of a subsidiary of British Rail shall, in fact, be in no worse position in regard to their pension rights than they would have been if they had remained employees of a subsidiary of British Rail.
I am not going to weary your Lordships with a long speech in this connection, and I shall try to make some short remarks in regard to the various amendments that follow and make my main speech now. If I may, I am just going to quote from the Committee stage in another place when these provisions were dealt with, and when the Minister spoke about the Government's policy in regard to these very important pension rights. I do not think that I can do better than quote him in order to see how necessary it is for us to be awfully careful about these pension rights for these employees. This I quote from col. 1029 of Hansard of the Standing Committee E deliberations of 17th March 1981. The Minister said:
"The Government's intention is that the new subsidiaries will be private sector companies. We expect—we cannot guarantee it but in the real world it is overwhelmingly likely—that the companies will wish to have occupational pension schemes for their employees. That will be a matter for negotiation between them and their trade unions, as the right honourable Gentleman has said".
I pause there in the quotation because I have already referred your Lordships to the situation that in the hotel industry there are not strong unions who are able to negotiate with private hotel companies. This is a very much under-unionised industry. The quotation continues:
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"As far as possible in practice the new private sector companies will have pension rights for their employees in the same way as any other Companies Act company and will be reasonably unfettered by any particular statutory provisions. Where does that leave those who are now either receiving pensions from British Rail funds or are working for subsidiaries but are likely to be transferred in that way? At present they have rights under the rules of the British Rail pension funds which cannot, and should not in any circumstances, be taken away from them".
I pause there to wonder at the generosity of the Minister in saying that those pension rights that have been earned up to date shall indeed be received by the employees! As a generous reaction it did not strike me as being overwhelming. To continue:
"I should first make clear"—
I am leaving a little out—
"that pensions in payment of Sealink, British Transport and hotels and so on cannot be affected by what we are doing. They will carry on receiving pensions. We then look at the position"—
and he then goes on to talk about those employees who have already finished their employment and who are therefore in receipt of pensions, and says that they will not be affected.
What we are considering of course are those who have not yet reached pensionable age and will be going over into private employment. The purpose of this amendment is to ensure that the Minister will as quickly as possible make an order to ensure that these rights are safeguarded. I said that he would have to do this as soon as possible, because your Lordships might have seen that in the succeeding provisions in the schedule there is a completely unprecedented right given to the private sector; namely, that if the Minister does not make the order by the appointed day, then the private company concerned can get his order revoked if they manage to show that the order affects them in an unsatisfactory way.
Indeed, I ought possibly to quote precisely what paragraph (2) of Section 1 of the schedule says:
"Except on the application of a related company which is not a subsidiary of the Board, no order shall be made by virtue of this paragraph which has the effect of placing the company or any of its subsidiaries in any worse position; but for this purpose a related company or a subsidiary shall not be regarded as being placed in a worse position because an order provides that any changes in a pension scheme are not to be effected without the consent of the Secretary of State".
Then (3):
"An order such as is mentioned in sub-paragraph (2) which is made without the application of the related company shall not be invalid"—
and then we go on with the words which I thought were so inelegant and which are a repetition of Section 74(6) of the Transport Act 1962.
The simple point—but it is such an important point for the employees concerned—is that we wish to safeguard the employees in order to make absolutely sure that they are not in any worse position in regard to their pension rights when a subsidiary company of British Rail now goes over to private control. That is the purpose of the amendment. It is to make something mandatory and not permissive. I beg to move.
8.18 p.m.
The Earl of Avon: These amendments Nos. 17, 18, and 19, and in fact the following four, all relate to pensions, which is a notoriously complex field. I think that the whole Committee will be grateful to

1419
the noble Lord, Lord Mishcon, for taking us through it in such a clear and concise way. There is a common theme in these three amendments, in fact all the amendments relating to pensions, and that is whether there should be a statutory requirement that existing pension benefits should be maintained once the subsidiaries of the British Railways Board have moved into the private sector.
I must make it clear at the outset that the Government do not feel able to accept these amendments. There is a straightforward difference of opinion between Government and Opposition, which I shall try to explain, though of course, as the Committee would expect, in no way to excuse. The reason for resisting these amendments is that it is wholly contrary to the philosophy underlying this legislation to impose constraints on the organisation into which private capital is to be introduced—our intention is quite the opposite, in fact. But the amendments, taken as a whole, would place a statutory requirement on the private sector employer to maintain existing pension entitlements, whether he is able to do so or not. It is no part of this Government's intention to place such stringent confinements on private employers.
That is not to say that I foresee early and radical changes in employees' pension arrangements. Naturally an employer will think long and hard before making changes that do not have the willing agreement of his employees. But the Government are determined that the companies, when in the private sector, should, as far as possible, be in the same position as any other private sector employer, no more and no less. They will need to observe all the existing employment protection legislation, but they should not face any more rigid constraints. These are matters which should be settled in negotiations between employers and the trades unions concerned.
The noble Lord, Lord Mishcon, painted a picture of the hotel industry. I gather that under-unionisation is not a feature of the hotel industry, and I expect the NUR, or other railway unions as appropriate, will continue to represent staff. I could not help wondering, as the noble Lord painted that picture, whether to a large degree everything he was suggesting was not already covered in the hotel industry by present legislation. For example, the cockroaches should not be there now if the health inspector was doing his duty. I have suffered in the catering industry from the inspections by health inspectors. I assure the Committee that they are extremely rigid, to the extent that they even force one to put up banisters so that employees will not fall down staircases. I cannot believe, therefore, that the legislation we now have would not easily cover the cases the noble Lord raised concerning the hotel trade.
I come back to the question of pension schemes and I wish to emphasise that, in the Government's view, the best prospects for pension benefits, and all other terms and conditions of service, lie in a prosperous, flourishing industry. The Government are sure that this is most likely to be achieved by the policy of introducing private capital and not by a web of legislative constraints. I must also stress that the Railways Board, as good employers, are anxious to look after the interests of their staff. For the past service, as
1420
employees of British Rail I expect that staff will be able to choose, if they wish, to leave a preserved accrued entitlement in their British Rail pension scheme.
With that outline of the Government's philosophy, I will deal with the amendments in a little detail. First, I come down from the level of philosophy to those excellent words "may" and "shall", which is really the crux of the argument. Amendment No. 17 at once indicates how noble Lords opposite envisage statutory compulsion entering into the area of pensions. But this paragraph of Schedule 1 as drafted deliberately leaves the options open. It is for the board in the first instance to prepare proposals on pensions as part of their preparations for the introduction of private capital. I can readily envisage circumstances in which perfectly satisfactory arrangements—satisfactory to all parts of the Committee—could be established without the need for an order by the Secretary of State. It is necessary for the Secretary of State to have an order-making power just in case he can assist; I have in mind the complex legislative history of transport industry pensions. But the Secretary of State does not intend to take statutory action unless he is convinced it is necessary and in the best interests of all concerned.
Concerning Amendment No. 18, all that the clause as drafted means is that the Secretary of State should have a power as if the related companies were subsidiaries. Even if the first amendment were agreed, "could" is, as far as I can see, all we need here; there is no reason why the Secretary of State should have to make orders about subsidiaries.
As for Amendment No. 19, I have already explained why the Government cannot agree to the proposed addition. Again, we see plainly the intention to provide a statutory pensions obligation. This seems to me to be a quite unjustified constraint. It would inhibit commercial flexibility and it might even, I suggest, not be in the best interests of staff, who might prefer to be free to negotiate their preferred balance between benefits and the contributions they pay for them.
The noble Lord, Lord Mishcon, also touched on the worsening situation and quoted from the 1962 Act, which probably comes under Amendment No. 22. I would draw the attention of noble Lords to the fact that the orders we are discussing would all be made under Section 74 of the Transport Act 1962; as far as I can see, Section 74(6)(b) of that Act already contains a provision whose wording is very close to that of this amendment. I therefore suggest that the amendment's purpose is already achieved. But we come back in the end to "may" and "shall", and on that we must agree to differ. With that explanation, I hope the noble Lord will not press the Amendment.
Viscount Simon: I was rather shocked to hear the noble Earl's remarks on this issue. I am no lawyer and the noble Lord, Lord Mishcon, will correct me, but I thought that if a company had a pension fund, the employees of the company were entitled—that they had an implied contract with the pension fund—to get their pension, and should new shareholders come along and buy the company, that did not bring the pension fund to an end. They buy the company with the pension fund, do they not? I am surprised that

1421
this question arises at all and perhaps the Minister will explain the position. Why should a pension fund come to an end merely because there are new shareholders in the company?
The Earl of Avon: There are difficulties involved in splitting amendments when they might be considered together. Be that as it may, the point which the noble Viscount, Lord Simon, is raising would be true if a subsidiary were taken over as a whole subsidiary, but we have been talking of, for example, the Gleneagles Hotel, which would have an entirely different aspect which one would not expect a whole subsidiary to have, and one of the problems is trying to cope with all the situations that can be envisaged.
Lord Mishcon: The Minister has, as one would expect, given a correct explanation. Indeed, I imagine it would be most unusual for an acquirer of a subsidiary company to do anything other than vest his new subsidiary in his own concern, for example, when one is thinking in terms of the hotel industry. Secondly, as I am sure the noble Viscount knows, the Revenue would not permit one to go on with the pension rights of a previous employer; to be admitted for Revenue purposes it would have to be the present employer's scheme. Thirdly, I think I am right in saying that all the employees of subsidiaries would be members of the main British Rail pension fund and there would not necessarily be separate pension funds for each subsidiary. I imagine that is the position.
On the basis that nobody else wishes to contribute to this enlightening debate—I imagine because it has succeeded the interval between 7 and 8 o'clock—I will briefly answer what the Minister said. The noble Viscount, Lord Simon, said he was rather shocked at some of the noble Earl's remarks. The Minister makes them with such charm that it is difficult to be shocked; one can only be pained, and that certainly was my reaction. To say that it is for these people, these old employees, to fight their own battles with their new employers—one can assume that the new employers in these days of full employment will be only too anxious to satisfy the employees of British Rail if they wish to come into their orbit—is really saying something which I am perfectly sure most members of the Committee find hard to accept.
The hotel industry, in which are engaged companies that are most reputable, has a glut of employees at the moment in various parts of the country, and the employees of the hotel subsidiary of British Rail will not be in a terribly strong competitive position. I have already dealt with the question of the unionising, or under-unionising, of this industry.
I do not want to go on repeating the arguments, but I must say that I felt that due to the very language that he used, the noble Earl made out the case for some form of mandatory protection for these employees. His language showed that unless we do as we propose, we shall be throwing the employees into the position where they might have to say, "The conditions of employment as offered to us are so unsatisfactory that we have to elect to be redundant"—which of course is their right. But I should have thought it quite dreadful in this day and age to throw more people on to the redundancy heap. So I press the amendment, but I
1422
hope that if there is not to be a Division, the noble Earl will at least tell the Committee that sufficient has been said today—I wish I could say "on all sides of the Committee", but that would not be quite truthful; at least it has been said on two sides of the Committee—to make him feel that he ought to take away the amendment and consider whether there should not be greater protection than is afforded by the mere permissive use of the word "may".
8.32 p.m.
On Question, Whether the said Amendment (No. 17) shall be agreed to?
Their Lordships divided: Contents, 29; Not-Contents, 57.

CONTENTS

Auckland, L.

Milner of Leeds, L.

Bishopston, L.

Mishcon, L.

Boston of Faversham, L.

Phillips, B.

Collison, L.

Pitt of Hampstead, L.

David, B. [Teller.]

Ross of Marnock, L.

Galpern, L.

Simon, V.

Hanworth, V.

Stewart of Alvechurch, B.

Houghton of Sowerby, L.

Stewart of Fulham, L.

Howie of Troon, L.

Stone, L.

Irving of Dartford, L.

Strauss, L.

Jeger, B.

Underhill, L.

Jenkins of Putney, L.

Whaddon, L.

Kilmarnock, L.

White, B.

Llewelyn-Davies, L.

Wigoder, L.

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

NOT-CONTENTS

Airey of Abingdon, B.

Macleod of Borve, B.

Avon, E.

Mansfield, E.

Bellwin, L.

Massereene and Ferrard, V.

Belstead, L.

Middleton, L.

Benson, L.

Monk Bretton, L.

Brabazon of Tara, L.

Mottistone, L.

Brougham and Vaux, L.

Mountgarret, V.

Cockfield, L.

Murton of Lindisfarne, L.

Colville of Culross, V.

Newall, L.

Cork and Orrery, E.

Nugent of Guildford, L.

Cullen of Ashbourne, L.

Onslow, E.

de Clifford, L.

Portland, D.

De La Warr, E.

Rochdale, V.

Denham, L. [Teller.]

St. Aldwyn, E.

Drumalbyn, L.

Sandys, L. [Teller.]

Dundee, E.

Savile, L.

Eccles, V.

Sharples, B.

Ellenborough, L.

Skelmersdale, L.

Elliot of Harwood, B.

Stamp, L.

Ferrier, L.

Stradbroke, E.

Gainford, L.

Strathcarron, L.

Gowrie, E.

Strathclyde, L.

Greenway, L.

Sudeley, L.

Grimston of Westbury, L.

Swinton, E.

Henley, L.

Teviot, L.

Home of the Hirsel, L.

Trumpington, B.

Kemsley, V.

Vaux of Harrowden, L.

Lucas of Chilworth, L.

Vivian, L.

Lyell, L.

Resolved in the negative, and amendment disagreed to accordingly.
[Amendments Nos. 18 and 19 not moved.]
8.39 p.m.
Lord Mishcon Lord Mishcon moved amendment No. 20:
Page 26, line 9, at end insert—
("( ) Where by virtue of the size and nature of the Pension Scheme provided by a Company securing control or ownership of a related company it is not possible for the employees of the related company to receive from that Company's pension scheme a pension which did not involve a diminution of pension rights held in their British Rail Subsidiary Scheme, the Minister shall make an order to secure by means of a facsimile scheme pension rights for those employed in the subsidiary Company immediately prior to its becoming a related Company from the time it becomes a related company.
( ) The facsimile scheme shall provide identical pension rights to its members as those which they held as employees of a British Rail subsidiary in respect of benefits and contributions.
( ) Where funding by the British Railways Board is required to secure for the employees of a subsidiary a facsimile pension scheme under the provisions of this Schedule, this funding shall be paid for from the first sale of securities in the subsidiary. No initial sale of securities in a subsidiary covered by this provision shall take place if it does not provide sufficient to pay for the funding required.").
The noble Lord said: I must apologise to the Committee for what must be my failing eyesight, due no doubt to the advent of old age. I must confess that I had not realised that there were some 80 noble Lords in the Chamber listening to the argument that I put forward on the last amendment. I must apologise for not seeing many of the 50 or so noble Lords who I noticed voted against the amendment. I apologise to them most profusely, and perhaps if I do not force a Division on this amendment I shall not see them again.
I now wish to turn to Amendment No. 20 and to deal with it with some brevity, since my main argument was advanced on Amendment No. 17. This amendment deals with a related company—that is to say, a company that comes in and acquires a controlling interest in a subsidiary—and with the situation where it is not possible for the related company to provide a pension scheme save one that inovlves a diminution of pension rights. The Minister is to make an order to secure by means of a facsimile scheme pension rights for those employed immediately prior to the company becoming a related company from the time it becomes a related company. With the exception of the funding provision which occurs in the fourth paragraph, that is really the essence of the amendment. When this was discussed in Committee in another place the Minister was good enough to say that he could quite see that in many cases a facsimile scheme could be an appropriate way of dealing with the matter. Indeed this has a precedent; it was done in the case of Thomas Cook. When that company went into private hands, so far as I can remember, a facsimile scheme was prepared and an order was made which actually made use of the wording in the facsimile scheme, and it ensured that there was no diminution of pension rights.
We are now dealing with a situation in which the noble Earl, Lord Avon, said he thought would be a very unlikely one; where one has a company in private hands taking over a subsidiary and unable to provide as good a pension scheme to the employees. This is one of those minority cases, and in my humble submission to the Committee, this amendment provides the protection which ought to be given to the loyal employees of British Rail's subsidiaries.
The Earl of Avon: The noble Lord, Lord Mishcon, made a remark about the supporters behind me but I cannot quite see the supporters behind him either. If I may say so, Amendment No. 20 produces an interesting proposal but for the same reasons as before I should like to advise your Lordships not to accept the amendment. The first reason is one of principle. Here again the noble Lords opposite are seeking to impose a statutory pension straitjacket on private sector companies, and this is not something that the Government can support. The second reason is one of practicality. The amendment tries to lay down a single pension solution for each and every one of the Railway Board's subsidiaries into which private capital is to be introduced. We are not prepared to do that because this legislation would have to cover a number of different subsidiaries whose individual circumstances will be different.
For example, we do not know how many employees will be involved. Numbers are important when deciding whether or not a new pension scheme is viable or what the wishes of the staff themselves may be. Schedule 1 of the Bill as drafted leaves the options open and that, I am sure, is the right course. To take just one example, it may be that it will seem best to split existing pension funds, and sub-paragraph 6 of Schedule 1 provides for that. Other solutions might seem better not only to the board but also to the staff themselves as well as to the new employer. I should like to make it clear—and I hope that this will be of some comfort to noble Lords who do not agree with me—that it may very well be that an arrangement along the lines of the amendment will be adopted in some or even most cases. I acknowledge that a new pension scheme for a subsidiary with the same rules and benefits as the existing British Rail scheme may be the ideal solution for some subsidiaries, and I know that the Railways Board is looking at that idea most carefully. I expect it will also be possible for staff, if they wish, to keep their past service entitlements in a British Rail scheme after they themselves have moved to the private sector. I do not say that in principle the arrangements outlined by the amendment are unworkable; I merely say that the Government are not prepared to lay down an iron law making such arrangements compulsory in every case, and we are not persuaded that this would be to everybody's real benefit.
The noble Lord, Lord Mishcon, did mention the case of Thomas Cook, which is in some respects a parallel between the two cases. A great deal of time has passed since the earlier example to which the noble Lord referred and attitudes and policies have changed and developed. The Government's present policy towards privatisation is reflected not only in this Bill but also in other items of legislation such as the provision of privatisation in the National Freight Corporation which we discussed last year. Of course the Secretary of State and the Railways Board are aware of the need to make proper provision for pensions and the provisions of Schedule 1 are designed to make this possible. I am firmly of the view that it is not appropriate to impose statutory requirements which go far beyond those applying to employers generally, and it is for that reason that I cannot accept the noble Lord's amendment.
Lord Mishcon: As the Committee will have anticipated, it is with some sorrow that I see the intransigence

1425
of the noble Earl, Lord Avon, which is so different from the smile which he always proffers at the same time that he issues his denials of consideration to anything said by anyone on these Benches. Would the noble Earl at least consider whether some announcement about pension rights could be made by the Government, to give a little more confidence to the employees of these subsidiaries? The one he has given is merely that the Government will take into account employees' rights and hope that those who take over subsidiaries will have the means, the ability and the will to provide for at least equal pension rights. If the noble Lord would only say that he will consider making a statement which will carry that further assurance then I shall be only too pleased to withdraw my amendment rather than proceed with any other course. But to be left with a negative would be to abandon the protection which my noble friends and I are trying hard to give the employees concerned.
The Earl of Avon: I am slightly surprised that the noble Lord finds me intransigent because, having read, as he has, the Committee stage proceedings in another place, I know that the argument has been thoroughly gone through. I believe that the Government spokesman at Committee stage in another place was quite as firm as I have been today. However, so far as employees' protection is concerned. of course the Government are aware of this point and I was under the impression that I had given an indication that both the Government and the British Railways Board will do their utmost to protect employees' pension rights and will ensure that the employee is protected in any prospectus. I shall certainly have a word with my Secretary of State and establish whether he feels there is any need to make a special statement about the protection of employees at, shall we say, the end of the Committee stage.
Lord Mishcon: I am much obliged for those comforting words—if that is the appropriate term with which to describe them. With great respect to the noble Earl, I will just say that part of my affection for this Chamber is that it is supposed to be a revising Chamber. Therefore, one hopes that more wisdom may prevail here than prevails elsewhere. One does not necessarily anticipate precisely the same replies here as Ministers give in another place. At least something has been said today which possibly brings a little comfort and I shall await the further outcome of the noble Earl's promised consideration before deciding what I shall do at another stage. At this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mishcon Lord Mishcon moved Amendment No. 21:
Page 26, line 17, at end insert ("or maintains existing pension rights of former employees of British Railways Board.").
The noble Lord said: With a promise to be equally brief, though I hope there will not be a promise from the noble Earl to be equally intransigent, I move to Amendment No. 21, which refers to page 26, line 17, of the Bill. This is a provision to which I referred earlier, that after the appointed day—that being governed by sub-paragraph (4)—no order is to be made by the Secretary of State which has the effect
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of placing the company or any of its subsidiaries in any worse position. That, obviously, is in relation to pension rights. It goes on to say that the company or subsidiary will not be regarded as being placed in a worse position because an order provides that any changes in a pension scheme are not to be effected without the consent of the Secretary of State. This amendment simply wishes to tack on to that the provision that it equally will not be deemed to be an invalid order if, in addition to that, it maintains the existing pension rights of former employees of the British Railways Board. I beg to move.
The Earl of Avon: The addition of this amendment really once more highlights the thinking of the Opposition. They want private companies to be placed under a pensions obligation, and they want a piece of what I should like to call legislative make-believe saying that that obligation does not make the company worse off. Let me emphasise that we do not resist such an amendment because we envisage employees having their pension rights attacked. In truth, the employees, through their unions, are already equipped to look after themselves. I could go on longer, but I think I should end by saying that we merely want to leave employers in the same position as any other private sector company. That really sums up the thinking from this side of the Committee.
Lord Mishcon: I can only hope that the same consideration of what has been said in regard to this amendment will be given by the noble Earl as he promised he might do in the case of the last amendment. In that hope I ask the Committee's leave to withdraw this amendment.
Amendment, by leave, withdrawn.
Lord Mishcon Lord Mishcon moved Amendment No. 22:
Page 26, line 36, at end insert—
("( ) Notwithstanding anything in the foregoing provisions of this section an order shall not be invalid by reason that in fact it does not have the result of securing that all employees concerned are not placed in any worse position by reason of the provisions of the order, but if the Secretary of State is satisfied or it is determined that any such order has failed to secure that result, the Secretary of State shall as soon as may be make the necessary amending order.").
The noble Lord said: With equal brevity may I remind your Lordships of what I said about the copied language of subsection (6) of the 1962 Act, in Section 74, I think it was. Your Lordships will not wish to be entertained at this hour with any dissertation upon the use of the English language in legislation, although I am perfectly sure that the very live and lively spirit of the noble Lord, Lord Renton, hovers over the Committee at this stage. Unfortunately, he is not in his seat, which is why I had to refer to his spirit hovering, but that, I can assure your Lordships, is a reference to a gentleman who we all pray is in extremely good health. There is this provision in the 1962 Act which seeks to say that nothing shall be done which puts the company, the associated company, the new company, in any worse position. In exactly the same way we ask for this provision to read that this applies equally to employees, that they shall not be placed in a worse position.
I think, even before I sit down, that I can anticipate, as your Lordships can, that as I have been making rather similar remarks so will the noble Earl have to make similar remarks in reply to this. Again, I am hoping—and I think this is the shortest, simplest and clearest way of putting it—that the noble Earl will consider the whole matter of the security of employees and their pension rights in the light of the discussion that we have had this evening. In that hope, even before he rises, I ask your Lordships' leave to withdraw the amendment.
The Earl of Avon: I am not quite sure whether I am allowed to speak on this amendment as it has already been withdrawn, but perhaps on this amendment I might be slightly more forthcoming. I think I drew the noble Lord's attention to this one earlier. It is my belief that the orders we are discussing would all be made under Section 74 of the Transport Act 1962, and so far as I can see Section 74(6)(b) of that Act already contains a provision the wording of which is very close to that of this amendment. I venture to suggest, therefore, that the purpose of the amendment is already achieved. Having so said, may I please have a look at this and make sure that I am right, and obviously I will consider what the noble Lord has himself said.
Lord Mishcon: I am obviously most grateful to the noble Earl for those words.
Amendment, by leave, withdrawn.
8.56 p.m.
Lord Mishcon Lord Mishcon moved Amendment No. 23:
Page 27, line 10, at end insert ("notwithstanding anything in this section, in the event of a subsidiary being removed from the control of the British Railways Board, the Secretary of State shall make an order to provide that there shall be no diminution of the pension rights of the employees concerned.").
The noble Lord said: Again, the spirit of this amendment is precisely the same as that which I have tried to bring to the Committee's attention. I do not know whether the noble Earl has anything more reassuring to utter than he has already done, and on the basis that he has not except, again, after consideration of what has been said today, I shall ask your Lordships' leave to withdraw.
Amendment, by leave, withdrawn.
Lord Underhill Lord Underhill moved Amendment No. 24:
Page 27, line 22, leave out ("may") and insert ("shall").
The noble Lord said: This is a fairly simple amendment. I am certain all your Lordships will understand this far more than one or two noble Lords did on the pensions amendments. It deals with the question of the British Transport police. Sealink now has powers to use the services of the British Transport police, and paragraph 2 of Schedule 1, with which we are now dealing, provides that the Railways Board may make an agreement with Sealink, or a new harbours company to be set up, for the purpose of making the services of the transport police available. The British Transport police has considerable experience in policing harbours and docks, and this should be continued in the public interest as well as in the interests of the new concerns to be established.
But the Schedule makes this power only permissible, and if the transport police are not to be used the alternative would be to use one of the private security organisations—and that, I would suggest to your Lordships, is absolutely undesirable. Therefore, it should be made mandatory on the Railways Board to make the necessary agreements, so that the services of the British Transport police shall continue. That is all the amendment seeks to do—to substitute "shall" for "may". In this, there is some very influential support in the form of Mr. Kenneth Clarke, the Parliamentary Secretary for Transport, who, when the British Rail (No. 2) Bill was before the other place on 10th March, said this:
"I hope I shall be able to assure Members serving on the Standing Committee on the Transport Bill that we are not paving the way for private police forces; that we are merely preserving the existing transport police in docks and we shall look at the implications of denationalisation upon them".
The Under-Secretary of State, in other words, believes that the British Transport police should be the body to deal with the policing of harbours and docks under the new set-up. With that influential support, I am sure that the Government will accept my amendment.
Lord Mottistone: This amendment worries me. In the Isle of Wight where we have part of the Sealink services and the harbours to which the noble Lord, Lord Underhill, has referred, we have never had British Rail police and would never expect to have them. If his "shall" is turned into "must" that might mean that they have to be inflicted upon us. It could be that we have what are called the ordinary police because of some association with the fact that we have vast prisons in the Isle of Wight, and this is something which it would not be fair to put upon the railway police. But whatever the situation may be, it is not an open-and-shut situation that the railway police look after all the harbours of Sealink. Therefore, turning this into an obligatory commitment, as opposed to "shall", would probably be unwise.
Lord Underhill: If I may intervene after the remarks of the noble Lord, Lord Mottistone, I may say that that will not affect my amendment at all. All that the schedule says is:
"The Railways Board may make an agreement with Sealink or the harbours company for making available the services of the British Transport Police Force…".
I want an agreement that they shall make an agreement. That could cover exceptions where it is necessary for the ordinary police to carry out the duties.
The Earl of Avon: I apologise for replying in the place of my noble friend Lord Bellwin. The noble Lord, Lord Underhill, will know I am very intransigent this evening! This amendment relates to the British Transport police force, a private force employed by the Railways Board to provide a service to them and their subsidiaries, and to the British Transport Docks Board and London Transport. At present Sealink, as a subsidiary of the Board, have the right to use the services of these men for policing their harbours; but when they cease to be a subsidiary they will not have that right unless provision is made in the Bill. That

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is what paragraph 2 of the first Schedule seeks to do. It provides enabling powers for the board and Sealink to enter into an agreement for the continued use of the British Transport police by Sealink; and in that event gives the British Transport police suitable powers in relation to Sealink properties and activities.
While I am unable to answer for my honourable and learned friend Mr. Kenneth Clarke, as he has been piloting this through the other place I am sure he feels that this is a more than adequate power to carry forward.
The power to enter into an agreement is an enabling power; but Sealink have already said that it is their intention to do so, although naturally nothing is likely to be finalised until the change in Sealink's status is imminent. I hope the noble Lord will find that declared intention reassuring.
We have not made it a requirement that Sealink and the board should enter into such an agreement, as the amendment proposes, because it would not be appropriate to tie the hands of both parties in this way. It is not part of our philosophy to place new statutory duties on Sealink; rather it is our intention that Sealink should be subject to all the statutory requirements and should benefit from all the freedoms that affect other private sector shipping and harbour companies—no more, no less. This amendment, if accepted, would make Sealink the only harbour company in the country under an obligation to use the British Transport police. Not even the British Transport Docks Board are similarly bound. Earlier harbours legislation has contained similar enabling powers, but there is no precedent that we can find for this sort of obligation on a harbour company.
I hope the noble Lord will accept my assurance that it is Sealink's firm intention to enter into the sort of agreement referred to in the legislation and that therefore he will decide not to press his amendment.
Lord Underhill: I accept the assurance that the noble Earl has given. There is one problem. We have in mind that the Sealink which may give the assurance now may not be the Sealink of the future because of the policy measures being taken by the Government and their use of the wicked word "privatisation". Therefore, it may not be the same concern. I presume that the Secretary of State will endeavour to carry out his assurance with the new company as for the present one. Therefore, I am prepared to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Avon The Earl of Avon moved Amendment No. 25:
Page 29, line 7, at end insert—
("This paragraph applies equally where the lease and sub-lease were granted after, but in pursuance of an agreement entered into before, the commencement of this Part.").
The noble Lord said: Even though I am moving it, this is a straightforward and, I hope, uncontroversial amendment designed to overcome a potential problem which has arisen since the Bill was originally introduced. Sealink has three large new ships which are leased by the Railways Board from private sector banks and subleased to Sealink. A fourth ship is under construction at Harland and Wolff's yard in Belfast and will be the subject of similar leasing arrangements. At present,
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the board has a contractual agreement to lease that ship when it is complete. These leasing arrangements will need to continue once Sealink is in the private sector; the board have considered whether they might be renegotiated but have ruled this out. We recognised however that when Sealink ceases to be a subsidiary of the board, and as a consequence the Secretary of State repeals by order the board's shipping powers under paragraph 7(1) of the schedule, the board would have no power to continue the leases. So we have provided in Paragraph 6 a saving provision to ensure that these particular leases and sub-leases can continue as if the Railway Shipping Acts were not repealed.
The problem is that delivery of the ship being built by Harland and Wolff, the "St. David", is overdue and may be delayed until after this Bill has been enacted. If that happens, the lease and sub-lease on the ship will not have begun when the Bill comes into effect and will not be covered by the saving in Paragraph 6. So in due course the lease and sub-lease could become ultra vires the board. Clearly we have to guard against that possibility and therefore we have tabled this amendment. It provides that a lease or sub-lease of a vessel granted after the commencement of Part I of the Bill as the result of an existing agreement shall continue to have effect notwithstanding anything in the Bill. I beg to move.
Lord Mishcon: In order to show how different is the Front Bench on this side, we have no objection to this amendment.
On Question, amendment agreed to.
Schedule 1, as amended, agreed to.
Clause 5 [Associated British Ports and its Holding Company]:
9.6 p.m.
Lord Underhill Lord Underhill moved Amendment No. 26:
Page 4, line 34, at end insert—
("(3) The Holding Company shall consist of a chairman and not more than 12 and not less than 6 other members. The chairman and other members shall be appointed by the Secretary of State".).
The noble Lord said: Clause 5 provides that the present British Transport Docks Board shall be known in future as the Associated British Ports, which is to be a wholly-owned subsidiary of a holding company. The clause also makes provision for the setting up of the holding company. Later in the Bill we find, in Clause 7 and in Schedule 2, that there is provision for the appointment of a number of directors for the new Associated British Ports Company and that these directors will be appointed by the holding company. But, so far as I can see, there is no reference in the Bill to the appointment of directors for the holding company. Yet we find in subsection (10) of Clause 6 that there is a reference to the first report of the directors of the holding company. Therefore, I must ask who will be the directors who will give this first report and how they will be appointed. There is no reference at all in the Bill to directors for the holding company.
All the amendment provides is that the holding company shall consist of a chairman and a number of

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other members, all appointed by the Secretary of State. Therefore this seems to me to be a reasonable amendment. If the noble Lord thinks that the figures that I have given of the number of members are wrong, I shall willingly withdraw and the Government can bring forward their own amendment. If the directors have to give a report—and this is according to the Bill—there ought to be some provision in the Act for the appointment of such directors. I beg to move.
Lord Bellwin: I can quickly dispose of the problem that concerns the noble Lord on this matter. During the transitional period between the appointed day and the setting up of the two-tier organisation, the Secretary of State will, of course, appoint the directors of the holding company. We have already announced that the intention is to appoint those who are members of BTDB as the first directors of the holding company; and paragraph 10(1) of Schedule 4 provides that the members of BTDB before the appointed day will also be the first directors of Associated British Ports. This will ensure continuity of management during the transitional period and keep disruption to a minimum. But after flotation, control of the holding company, including the power to appoint and dismiss directors, must pass to the private sector if the aim of our proposals is to be achieved.
Lord Underhill: There is nothing in the Bill about the present directors of the BTDB being directors of the holding company. It says in the Bill that there directors shall be the same directors as for the Associated British Ports Company when it is formed. But the other is not there. Apparently the Government have decided to appoint provisional directors to the holding company, but I can see no reference to that in the Bill.
Lord Bellwin: We consider that it will be in the best interests of the company if the management and workforce are made responsible for their own future. We have said that. That is why the Government do not intend to appoint directors to the holding company either by taking specific powers in legislation or by using their majority shareholding so to do. The appointment of directors to the holding company is a matter for the shareholders, and by this we mean the private sector shareholders who will control the company and who have a very real financial stake in its success. The Government accept that they have a responsibility as a prudent shareholder to protect the public's asset. We do not think it necessary to appoint directors to control the company to achieve this objective. The taxpayers' interests should be perfectly well protected by the directors appointed by the private shareholders who control the business and who will pursue its best commercial interests. As to the transitional period, as I have said, the directors will be those who are members of the BTDB. They will be the first directors of the holding company.
Lord Underhill: I am still not happy but I shall read what the noble Lord has said in the Official Report. I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 5 shall stand part of the Bill?
9.13 p.m.
Lord Underhill: May I raise a few points because reference has been made to there being a two-tier structure. I should like clarification as to whether or not it should be a three-tier structure. First, there is the holding company which is to act as a private company under the Companies Act. Secondly, the new company, Associated British Ports, which is going to assume the position of the present Transport Docks Board, and that is to be a private company but also to be the statutory undertaking which has responsibilities of the statutory docks body. Will there also still be the separate harbour authorities of the separate harbours which come under Associated British Ports?
What is to be gained by this elaborate structure? The present Transport Docks Board operates some ten ports which handle 20 per cent. of the country's seaborne trade. This is not a badly run undertaking. It is good management—so good that the Secretary of State has said that over the past few years the financial and managerial performance has been very satisfactory. If my memory serves me correct, that viewpoint was echoed by the noble Lord, Lord Bellwin, during the Second Reading.
I find that an article in the January-February issue of the journal Transport, Mr. J. K. Stewart, vice-chairman and managing director of the British Transport Docks Board, sets out the problems of the docks industry in this country. He illustrates the progress of the board and outlines that in 1962 the Docks Board was in a very sorry state, both financially and physically. There was a substantial capital debt and reserves were nil. He explains that by 1980 reserves had been built up to £84 million. Ten years ago the return on capital was 3·5 per cent. and in 1979 this had been developed to 15·1 per cent. Most private sector companies would like to be in that situation. Despite the recession during 1980, which caused a drop of nearly 13 per cent. in the tonnage handled, the return on capital was 9·9 per cent. So really we must ask (although the Transport Docks Board is not above criticism, everyone admits that it is an efficient undertaking and has carried out its job correctly) why we are having this complicated Bill and this complicated structure—as I say, either a two-tier or a three-tier structure—and why should we interfere with what is generally regarded as an efficient and properly managed undertaking?
Viscount Simon: Before the Minister replies perhaps I could raise one other point on this clause. As your Lordships know, in the original Bill it was proposed that the operating company, the successor to the British Transport Docks Board, should be called British Ports. Objection was raised to that by a number of port authorities in the country who felt it would be misleading to the public generally, and so it was agreed that the body should be called "Associated British Ports".
I am bound to say I think that is a very unfortunate choice because we now have two bodies, Associated British Ports, the successor to the British Transport Docks Board, and the British Ports Association, which is in fact a trade association of port authorities of which

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Associated British Ports would be a member. I think this is bound to lead to confusion, and indeed in the Second Reading debate I made a remark at column 237 about the British Ports Association. I do not think I made a mistake because I understand these bodies fairly well, but the Hansard reporters thought I had spoken of Associated British Ports.
I think the noble Baroness, Lady Stedman, fell into a rather similar trap when she referred, if I have got the right place, to the British Ports authority. There is no such thing. She asked whether the British Ports Authority was eventually going to take over the ports of London and Merseyside. I think probably she meant, not the British Ports association but Associated British Ports. It is extraordinarily confusing and I just wondered whether, between now and the next stage of the Bill, the Minister would like to have further consultations with those concerned with this matter. I do not think it is for us in this Chamber to suggest what the right answer is; it is a matter for the people concerned. But I should have thought that instead of having two bodies like this with such similar names, but with different ports associated with them, and with different objects, it would be simpler if the names were changed to something a little less alike. It was pointed out to me, and I have just been to an international ports conference, that if these titles were translated into the French language both would be exactly the same; one could not express them differently. So may I leave that thought with the Minister, to see whether something could perhaps be considered?
Lord Bellwin: My information is that in another place this matter of the name was debated for six hours; that shows that we are able to make some advance on that. I think it may be fair to say that, if indeed Parliament had discussed it for six hours in that way, I must confess to being a little hesitant at reopening the matter, though I do know of the concern of the noble Viscount, Lord Simon, since he has expressed it to me privately. I would have to say that the department in fact has received no representation against the name Associated British Ports since it was adopted. I should have thought it unlikely that many people would confuse that with the British Ports Association. Indeed, I understand that the chairman of BPA welcomed the adoption of the name "Associated British Ports", and suggested the new name should prove a satisfactory compromise all round. However, I have not talked to my colleagues about it; I will do so and see what they have to say.
So far as the clause setting up two or three tiers is concerned, I would say to the noble Lord, Lord Underhill, that Associated British Ports will be the same corporate body as the BTDB, in fact under another name, and Associated British Ports will therefore continue to be the harbour authority for all the BTDB ports. Therefore we are back, for good or ill, to the two tiers.
May I say on that that the clause sets up this structure which is to be a successor to the BTDB, and is therefore, I submit, fundamental to Part II of the Bill. The top tier will be a company formed and registered under the Companies Act, which will have conferred on it by the Bill power to control the lower tier—that is, the reconstituted BTDB, which is to be
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known as Associated British Ports—corresponding to the powers of a holding company over a wholly-owned subsidiary. This two-tier arrangement ensures that the BTDB's docks business continues within its statutory framework, while also giving the new organisation maximum freedom to respond to changing circumstances and to take advantage of wider opportunities through the top tier company.
The continued existence of BTDB as the same entity, albeit reconstituted and with a new name, will ensure the minimum disruption to the board's business. Indeed, the retention of the BTDB's undertaking as a single management unit should be seen as a central part of the Government's approach to the privatisation of BTDB. It will allow the maximum benefit to be drawn from the happy mix of ports, good management and generally sound industrial relations which have contributed so much to the success of the board's undertaking over the last few years. I do not share the concern of the noble Lord, Lord Underhill, on this matter. The clause is basic to what we are setting out to do and, therefore, I hope that it will meet with the approval of the Committee.
Clause 5 agreed to.
Clause 6 [The financial structure]:
9.22 p.m.
Lord Underhill Lord Underhill moved Amendment No. 27:
Page 6, line 2, at end insert ("save that any such directions shall provide that the Secretary of State shall retain at least 51 per cent. of the shares of the Holding Company").
The noble Lord said: I shall be very brief in speaking to this amendment. It is similar to that proposed by my noble friend Lord Mishcon in dealing with the British Rail subsidiaries. But in this case there is one considerable difference, because the Government should find it possible to accept this argument. Over and over again, Ministers have made it absolutely clear that it is the firm intention of the Government to retain a 51 per cent. stake in the new set-up, which will be the holding company for the new Associated British Ports.
I know that the Government have said that they have no intention of exercising any control over policy by virtue of their majority holding. We consider that that is to be regretted, but that is not the issue with which we are concerned here. All we are concerned with is that the Government's firm intention, which has been reiterated time and time again, that they intend to have a 51 per cent. stake in the holding company, should be written into the Bill. I see no reason at all why the Government should be at all coy about doing so, because Minister after Minister has repeated that this is firmly the Government's intention. I beg to move.
Lord Bellwin: I must say that if we were to accept this amendment it would prove to be a hindrance rather than a help to our proposals, for reasons which I can explain. But it may be helpful if I first explain why we propose to take a 51 per cent. shareholding in the business when shares are sold to investors. It is basically because we want to demonstrate our confidence in the future of the business to all concerned,

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including the unions and the workforce who attach importance to that expression of confidence on the business's move into the private sector. We have promised to keep our 51 per cent. shareholding for the foreseeable future, but we have never proposed to write this figure into the Bill.
I believe this to be right for a number of reasons. The figure of 51 per cent. is not strictly related in practice to the question of control of the company. Control of the holding company will rest firmly in the private sector, through the directors appointed by private investors at the annual general meeting. In fact, if we were seeking to control the new company, we would not need to hold 51 per cent. of the shares. A much lower figure would be adequate, depending on the distribution of the remaining shareholdings.
We do not believe it necessary or desirable to bind for all time this Government, and future Governments, to a level of holding of 51 per cent. or more. To do so would create serious doubts about the Government's intention not to interfere in the management of the business and not to seek to control it in any way. Our policy is that, while there may conceivably be circumstances in which it may prove necessary for the Government to exercise their shareholding if a serious issue involving the national interest were to arise, it is not feasible for such hypothetical circumstances to be spelt out or to become the subject of specific guarantees provided in this legislation. We believe it would be wrong to fix the level of the Government's shareholding and thereby impose inflexibility which might be entirely inappropriate to circumstances facing a future Government.
It is difficult to envisage such circumstances but one possibility must be a situation in which the holding company wishes to make a rights issue in order to raise additional cash to fund port expansion and development. Naturally the Government would then have to consider at the time whether to subscribe their rights, although I think it most likely that the Government would not want to subscribe and would expect the holding company to look instead to the private sector for all its financial requirements.
We have made our position absolutely clear. We have said that we will take a 51 per cent. stake in the holding company when shares are sold to private investors and that we will retain those shares for the foreseeable future. We will confirm this intention when shares are offered to the public. I believe that to go further is unnecessary and that it would be wrong to bind future Governments. I appreciate why the noble Lord has moved this amendment, but in the light of what I have said I hope he will not feel that he must press it further.
Lord Underhill: Although I shall not press it further, naturally I am not satisfied with the position which the Government are taking. The view has been expressed by the noble Lord, Lord Bellwin, that the fact that 51 per cent. is held by the Government would develop confidence in the workforce and in investors. I should have thought that that confidence would be more firmly expressed if it were written into the Bill and if everybody could see it there in firm print.
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The noble Lord says that we cannot bind future Governments. Of course we cannot bind future Governments to the whole of the legislation in the Transport Bill which we are discussing tonight. When we want to do something which the Government do not want us to do it is strange that we are told that their view is that one ought not to interfere in any way in the management of the new concern, yet we had a long discussion on Clause 3 under which the Government intend to interfere with the general position of British Rail.
It should have been possible for the Government as they look to the foreseeable future, even if they did not wish to take a position, to consider that there might need to be primary legislation to change me situation. It should be possible for the percentage to be changed by regulation, subject to a resolution of both Houses. However, in view of what the Minister has said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Underhill Lord Underhill moved Amendment No. 28:
Page 6, line 2, at end insert—
("( ) In the event of the Holding Company proposing to dispose of a majority holding in any part of Associated British Ports, details of the proposal shall be sent to each port user, trade union or local authority affected by such proposal, who may make representations to the Secretary of State during the fourteen days following the day on which the proposal was sent. The Secretary of State shall make a decision on such representations within a period of twenty-eight days from the date such representations were received.").
The noble Lord said: I hope that this amendment will be seen to contain so much common sense and to be so practicable that the Government will accept it. It is a very straightforward amendment. When the noble Lord replies, it may be that I shall find that the amendment is completely unnecessary because this is never going to happen.
The purpose of the amendment is to make provision for representations to be made to the Secretary of State in the event of any proposal coming forward to dispose of a majority interest in any part of the new company, Associated British Ports. Possibly the Bill contains something that I have not seen which makes this impossible. However, it appears to me that if Associated British Ports wished to dispose of any part of its structure it could do so.
The Government may argue that the intention is to retain the existing Docks Board as a complete, integral unit. However, that is not in the Bill. As I have said so frequently during the course of the proceedings, we can only deal with what is in the Bill. We cannot deal with hypothetical matters. So far as I can see, it would be possible for Associated British Ports, with the approval of the holding company, to dispose of any part of its undertaking. All the amendment says is that in that event there should be an opportunity for any port user, for any trade union with labour involved in that particular port, or for a local authority which may be affected by the change to make representations to the Secretary of State. The amendment goes no further than that the authority for considering such representations would rest with the Secretary of State. This seems to be such a reasonable and equitable amendment that I hope the Government will feel that they can accept it. I beg to move.
Lord Mottistone: If I may intervene before my noble friend speaks, I am absolutely astonished at the noble Lord, Lord Underhill, saying that this is reasonable. I cannot understand why those intelligent noble Lords opposite do not seem to understand the fundamentals and the benefits of private enterprise. All this grabbing to try to keep control and to give everybody a chance to talk—do not let them be free, they say. That is what this amendment says, and I think that it is absolute nonsense.
Lord Bellwin: I trust that the noble Lord, Lord Underhill, will have gathered that my noble friend does not agree with him. While endeavouring to be brief, I am trying at the same time to give as much explanation as I can and as I think I ought to do, on some of these points and not simply to dismiss them, even though we do not agree with them.
The reference in this amendment is to the disposal of "parts of Associated British Ports". I take that reference to be to the formation of subsidiaries by ABP to manage parts of its business, and I shall deal with that point in a moment. It is also possible, however, that the noble Lord has in mind the disposal of part of Associated British Ports itself and I should like to make clear that this is simply not possible under the provisions of the Bill. ABP is a statutory corporation which is controlled by the holding company as if it were a wholly owned subsidiary, but that control is not by virtue of share ownership, it is by virtue of the statutory provisions of the Bill, including Clause 7(4) which provides for the holding company to appoint ABP's directors. Associated British Ports does not have a share capital. The provisions of the Bill place it under the control of the holding company and only future legislation could alter this relationship. Clause 13 of the Bill provides for control of the holding company to be transferred to an intermediary holding company, but only if such a holding company remains wholly owned by the original holding company so that the statutory link remains. I know that that is hard to follow, but I hope it will read clearly enough. With regard to subsidiaries, the concern of the noble Lord is perhaps more readily understood. I believe that what the noble Lord may have in mind is that the Associated British Ports undertaking could be broken up by the formation of subsidiary businesses in which a majority of the shares are then sold, and so thereby transferring the business to a new operator. To believe that such a move could be used to transfer a significant part of BTDB's ports business is to misunderstand the nature of that business.
The individual harbours and docks that make up BTBD's business at its 19 ports are, as I am sure noble Lords will be aware, all subject to individual statutory powers and duties which cannot be transferred to another owner or operator except by legislation. The most usual form of this would be a Private Bill where there would be, as noble Lords will realise, a full opportunity for local interests and others involved to make representations. The Government's proposals that underlie the provisions of Part II of the Bill, for introduction of private capital into BTDB's undertaking, have consistently made clear that a central feature of those proposals is that BTDB's existing business will not be broken up. If in the future
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Associated British Ports should wish to alter or reduce the scope of its statutory ports business, it would be necessary for it to come to Parliament in order to be able so to do.
The Government believe that the machinery proposed in the amendment for making representations to the Secretary of State on the disposal of a majority holding in such subsidiaries would be out of keeping with the private sector status of the new organisation and the Government's undertaking not to interfere in its management and commercial decision making. In view of the safeguards I have mentioned that govern the operation of statutory port facilities, I hope that the noble Lord will be less concerned than he was on this matter.
Lord Underhill: I am grateful to the noble Lord for that detailed explanation. I think he will readily understand if I say that it is such a complicated business that I would prefer to read in the Official Report what he said and decide what course of action to take. I am very pleased that he is not adopting the same view as his noble friend Lord Mottistone. Strangely enough, although the noble Lord, Lord Mottistone, makes an attack on the case we have put up for representation, only a few moments ago he was pressing for local representation on harbour authorities. I should have thought he would have supported the proposals I am putting forward. Whether it is a private sector company or a public sector company, where the occasion arises surely there must be a democratic right for people concerned to make representations to the Secretary of State. I am very pleased that that attitude was not taken by the noble Lord, Lord Bellwin. I shall read carefully what he has said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6 agreed to.
Clause 7 agreed to.
Schedule 2 agreed to.
Clause 8 agreed to.
Schedule 3 [Powers of Associated British Ports]:
9.37 p.m.
Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 29:
Page 32, leave out lines 14 and 15.
The noble Lord said: This amendment seeks primarily to elicit information. In asking for the removal of these two lines, I question the connection between this activity, carrying goods by road on behalf of other persons to or from its harbours, and the principle activity of Associated British Ports, which is, after all, that of operating and managing harbours and ports. I do not wish to be protectionist for the haulage industry; but it is certainly big enough to look after anything that can be envisaged. Indeed it has been the prime mover of goods both domestically and internationally for some years, and under this new rearrangement I cannot see the necessity for change. Certainly there have been no complaints with regard to the arrangements of the British Transport Docks Board and the private haulier.
Even if it were thought that my attitude might be protectionist and not acceptable, one is left with the thought that were Associated British Ports to enter into the haulage industry the personnel engaged would in all probability be those currently in employment within the dock industry. Not to put too fine a point on it, if one takes Southampton, there have arisen over the years a number of restrictive practices. Your Lordships may well remember that I spoke quite briefly at Second Reading of the dockers' proposal for a drivers' registration scheme in that dock. Were Associated British Ports to enter into the haulage industry, it would seem to me a probability that the ordinary haulier would be precluded from operating in and out of some harbours and some ports. This would be against the spirit of the free enterprise we are looking for in the Bill. I would go further and suggest that were this so it would be difficult to attract private investment money into an organisation one section of whose activities was not controllable in any way at all because of the protection that dockwork labour enjoys. Those are the reasons for tabling the amendment and I should be interested, obviously, to hear what my noble friend the Minister has to say in response. I beg to move.
Lord Bellwin: In replying I should like to speak also to Amendment No. 30.
Lord Mottistone: I was about to leap to my feet to say that I should prefer it if my noble friend would not do that, as I wish to raise my point separately.
Lord Bellwin: The point is taken, but I cannot promise my noble friend that he will get a very lengthy answer. However, I shall do my best. The reason that I suggested that we might take the two amendments together was that these powers are both new powers not available to BTDB and I thought that it would be helpful if we discussed them at the same time. We have heard that ships' agents have a long and independent history in which they are called—
Lord Mottistone: I hesitate to intervene, but I would very much like to make a speech in support of my noble friend. However, I do want to advance my own argument for my own amendment. I am extremely sorry for my noble friend on the Front Bench, but please would he leave me alone until I come to my amendment?
Lord Bellwin: I promise not to touch my noble friend. Perhaps I can proceed by saying that we have heard that ships' agents have a long and independent history in which they are called to act on behalf of shipowners in a wide variety of situations. The great number of agents who carry on this business in United Kingdom ports are concerned that their work may be seriously at risk if port authorities such as Associated British Ports are to provide this service themselves.
I should like to reassure those who express these fears by setting out in more detail—and I think that I owe it to my noble friends to do this—why it is the Government's policy to grant these powers to Associated British Ports. I hope also—briefly if I can, but in
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detail—to indicate, so far as it is possible at this stage, how the power of ships' agency is likely to be used.
Noble Lords will appreciate that Associated British Ports is a statutory corporation and that its activities are therefore limited to the extent of its statutory powers. In considering what powers it is approprate for ABP to have, it is necessary to consider the likely scope and development of its business. As I have previously explained, Associated British Ports will inherit in general the existing statutory powers and duties of BTDB, but the nationalised industry controls to which BTDB was subject under certain provisions of the Transport Acts 1962 and 1968 will be removed in view of the private sector control of the new organisation. At the same time the Government believe that it is appropriate to make a small number of limited extensions to BTDB's existing statutory powers, and these include the power to carry goods by road and to carry on the activities of a ship's agent.
The Government believe these to be sensible, logical extensions of BTDB's existing powers. They are intended to enable Associated British Ports, if they wish, to develop ancillary activities which are complementary to their main business of operating harbours and providing ports facilities and which can be carried on profitably and efficiently in conjunction with this business. Similar powers are already enjoyed by other port authorities in various forms. In particular, several harbour authorities have specific powers to carry goods by road.
The extent to which Associated British Ports will use these new powers will of course depend upon their commercial judgement, and they have commented that they will continue to regard the efficient provision of port facilities as their primary objective. I can assure my noble friends that the British Transport Docks Board are well aware of the concern felt by ships' agents as to the future role of ABP in this area and the board have been anxious to emphasise that they do not intend to engage in any of these new activities unless the circumstances fully justify it.
As far as ships' agency is concerned, BTDB are fully aware of the independent status of ships' agents and of their close links with shipowners; and they have no intention of imposing any particular agency on customers or of acting against the longer term interests of the port by alienating ships' agents or discrimination against particular port users. There could, however, be circumstances in which there was a gap in the existing services of a particular port which Associated British Ports might usefully fill.
I believe that this undertaking given by the board should go a long way to reassure those who are concerned by this provision in the Bill, that what is involved is not a major new business initiative in this area but the ability to support their existing ports business by offering a fuller range of services where some of those services are not at present available. There is no question of a shipowner being unable, as a consequence of this provision, to exercise the choice he has at present of placing his business in the hands of a ship's agent who may act as intermediary with all third parties, including the port authority.
I hope that these comments will meet the fears expressed by my noble friend. I understand why he raises the point as he does, and there is no doubt that

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my noble friend Lord Mottistone will also raise it. But it is a matter that has also concerned us, not least in the light of the representations made and the observations heard. We were, and are, anxious about the matter and do not want to treat it lightly. However, I feel confident that in the light of what I have said there need not be the kind of difficulty to which my noble friend's fear could give rise.
Lord Brougham and Vaux: I am an importer and exporter for a major international company using ships' agents and haulage agents separately but which also work together. I have received representations and seen a copy of representations which a certain company sent to the Minister in another place. I am not too happy with the reply of my noble friend and I should like to hear what my noble friend Lord Mottistone will say on the next amendment. So far as I am concerned as an importer and exporter using ships' agents and haulage agents, both amendments tie together.
Lord Mottistone: I should like to support my noble friend Lord Lucas and to reserve all my comments on what my noble friend on the Front Bench has said in relation to ships' agents. I noted much of what he said. Indeed, I may have to ask him to repeat it because it is most confusing to have one's amendment answered, in the main, by the reply to someone else's amendment. I tried to point this out to my noble friend. I believe that my normally very courteous friend on the Front Bench has made it extraordinarily difficult for me to tackle my amendment when I come to it.
In the meantime, I think that the principle—and this is where it is similar—of the transport argument of my noble friend and the principle of the ships' agents argument are very similar in the sense that Associated British Ports is asking for special legislative backing for an activity which, for an ordinary private enterprise operation, would be taken as it came and would not have to have special rights. That is as much as I will say at this stage. However, I hope that my noble friend will forgive me if I return to the full argument at a later stage when my own amendment is called.
Lord Lucas of Chilworth: I thank my noble friend for his answer. I am sorry that he chose to respond to the two amendments because I do not believe that that reply has given sufficient weight to the real problem, which I attempted to explain—that involving the haulage aspect. Frankly, in a Bill which is attempting to free a particular activity, I can see no justification for concentrating the main effort in particular directions where an additional power is now granted. It may look very well on paper and it may sound very well in this chamber this evening, but those of your Lordships who have business in the docks—and my noble friend Lord Brougham has explained this—will know that on balance it is working reasonably well for somebody who is typically employing haulage services.
Southampton docks is very nearly strangling itself with restrictive practices. Many of the business houses, many of the cross-Channel operators, are moving down the road to Portsmouth where there is a much freer activity. I have said, and I repeat, that we
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know Southampton wishes to impose restrictions on haulage, on the private haulier. Here is a way in which they will be able to do it without let or hindrance.
Lord Brougham and Vaux: May I just interrupt my noble friend? I just had a recent case of exporting some goods, agricultural supplies, from this country to the Far East and we were late in shipping. I nearly had to ask for an amendment to my letter of credit because of what was happening in Southampton. If we go to the smaller ports we find we get much better service and much quicker service.
Lord Lucas of Chilworth: I am grateful to my noble friend for his support of the general argument. I was saying really that if we allow this power in the Bill, I can see a strangulation. Were I a potential investor in Associated British Ports at some time, there is no way that I am going to put my money into a company one-nineteenth of which might strangle itself, because I reckon that is one-nineteenth of my share that has gone. I do not want to delay the Committee. Time is getting on. I am not too happy about the answer we have heard, and I should like to consider this point rather more carefully and may wish to return to it at a later stage. Meanwhile, unless my noble friend can help me further—
Lord Bellwin: May I say first that there is no question of this Bill in fact preventing road haulage business continuing to operate into and out of BTB harbours. Several major harbour authorities, as I am sure he knows, already have power to carry out road haulage. These are, for example, the Clyde Port Authority, the Tees and Hartlepool Authority, and the Medway Ports Authority. I am sure my noble friend knows of this, but I thought it might be helpful if I just made the point.
Lord Lucas of Chilworth: I am grateful for that further explanation. All I can say is that I do not suppose for a moment that the Government, or indeed anybody concerned with this Bill, is wishing at this time to deny free access by all people properly engaged in using harbour and port facilities. However, it may not be in our hands when restrictions apply. I am looking perhaps on the dark side. I should like to think hard upon what my noble friend has said. If he will permit me, I shall perhaps return to the subject at a later stage. With that, I beg leave to withdraw this amendment.
Amendment, by leave, withdrawn.
9.45 p.m.
Lord Mottistone Lord Mottistone moved amendment No. 30:
Page 32, line 17, leave out paragraph 4.
The noble Lord said: At last we can come to my amendment in its own right. I will not, as I threatened, ask my noble friend to repeat all his argument, the points of which I took, though it was confused. To be quite honest, it made it difficult for all of us that the two were muddled up as being one thing. They were put down as separate amendments deliberately. It is an awful pity that my noble friend's advisers did not see that that was probably done on purpose.
This paragraph 4 that we want to get rid of is a

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puzzle, because the rights which have been sought for Associated British Ports so far as is known have not existed before. The British Transport Docks Board do not have these rights, so far as we know, in any ports. There is a clear lack of understanding as to what a ship's agent really is. Are we talking about a chartering agent, a ship's agent or a qualified chartered ship broker? If we are talking about the latter, then we are talking about a professional person and not someone who can be appointed overnight by Associated British Ports.
There are all sorts of problems over this, and the most important one is that it seems that paragraph 4 has been slipped in somehow to present a new thing for ABP which no other ports have had before. If it is argued that this is an aim to try to make ABP more equal in order to be a free enterprise company, then I must say that free eneterprise companies do not have this right written in by legislation. And what is the advantage of it? A ship's agent operates widely over many ports; we do not on the whole want a particular local one.
Whatever the Minister does about the transport side, for which there is precedent, I noticed in his composite reply that he said there were powers already "for goods by road", but he did not say "and for ships' agents". He quoted to my noble friend some of the ports where the power already existed for goods by road, but in his opening statement he did not say that it extended also to ships' agents. I rather think therefore that this has been slipped in under the carpet in some funny way.
If the Minister would undertake to have a good look at the matter, I should be happy to accept that answer. If he cannot say that, then this is so clearly an introduction of something new, with so much power being involved, with possibly the exclusion of expert knowledge, that I might have to persist with it. I therefore hope my noble friend will have a special look at the question of ships' agents; the transport aspect is another issue.
Lord Bellwin: I am sorry if my noble friend Lord Mottistone feels it essential that the two amendments should have been taken separately. On reflection, he is probably right, and I apologise to him. Indeed, my noble friend Lord Lucas would probably say, "The same applies to me", so I gladly apologise to him as well.
Clearly, this matter is giving cause for concern, although I do not think it is quite so worrying as my noble friend Lord Motitstone makes out in the sense that if a power of this kind were not given to ABP, it would be open to the holding company to set up a further subsidiary to provide those services without any further powers; perhaps that would be a satisfactory way of going about it to my noble friend. What I said to my noble friend Lord Lucas I feel obliged to say to my noble friend Lord Mottistone,
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but I shall want to read carefully what he said. While he knows I can give no undertakings as to what we might or might not do, I suspect we shall come back with the argument set out in more detail, yet presenting the same case.
However, not least because of the confusion, I think I owe it to my noble friends to say that we will look at the matter carefully again to make sure that we are absolutely right on it. I suspect we are, but, even so, I should undertake to look at the matter again, and that I gladly do.
Lord Brougham and Vaux: I want to echo something that was said about the chartering aspect of this matter. There is a tremendous difference between chartering a 300 tonner coaster plying across the North Sea from the Wash to Holland, carrying scrap iron or clay, and the carrying of 30,000 tonnes of fertiliser or whatever it is to India. There is a tremendous difference not only in the chartering aspect, but also in regard to the contracts, demurrage and everything else. The noble Lord has said that he is to look into the matter, and I think that it must be looked into seriously.
Lord Mottistone: I thank my noble friend for apologising for taking my amendment with the amendment of my noble friend. I think we both feel that it was a pity, because neither of us has been able to deploy our arguments, and of course the Report stage is another stage. In view of the complications that have arisen, and bearing in mind the possible tone of slight irritation on my part, I hope that when my noble friend looks at the matter again (as he has very kindly said he will) he does so from a standpoint not of trying to put up barriers to prove the point that the paragraph should remain in the Bill—which I could well understand him and his advisers wanting to do—but of asking whether the paragraph is really necessary. What will Associated British Ports lose by not having this particular provision written into the legislation? If it is omitted, chartered ship brokers will be able to operate in the ports, as they now do in 90 per cent. of the ports of the world, and there will be nothing to stop Associated British Ports appointing their own agent, because there is no law against doing that. The point is that there is no need to include this in the form of a statutory permission.
However, if it is included statutorily, for whatever reason—and I suggest that there is no reason—people might be tempted to take advantage of that particular piece of legislation, to no purpose, to create a situation that is not necessary. Therefore, I wish to suggest to my noble friend that the real answer to the problem here is to leave out the paragraph. Perhaps at Report stage he might care to table an amendment not very dissimilar from the one that we are now discussing, and that would solve the problem. At this stage I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
10.3 p.m.
Lord Underhill Lord Underhill moved Amendment No. 31:
Page 32, leave out lines 33 to 35.
The noble Lord said: This amendment relates to paragraph 6 of Schedule 3 and to the powers to be given to Associated British Ports for the development of land. In view of the discussions on the last two amendments, perhaps I should say in passing that under the Bill as drafted ABP has been given powers extending far beyond those of the British Transport Docks Board. When I saw this provision regarding development of land it seemed to me to be quite useful, at least until I looked at it more closely. Sub-paragraph (2) will enable Associated British Ports to develop land belonging to it, either for the use of other persons, or partly for its own use, combined with use by other persons. That seemed to be a sensible provision. Then in lines 33 to 35 I found provision that such development of land shall be—and I shall now quote from the schedule:
"with a view to the disposal of any right or interest in the land or, as the case may be, the buildings or any part of the buildings, after the development is carried out".
In other words, the Government are proposing that Associated British Ports may develop the land in the way that is mentioned, but only with a view to disposing of the development.
To me that seems a crazy way to go about things from a business point of view, and I should like to know what is the reasoning behind the provision. I hope that we shall not again be accused of having a doctrinaire view on this matter, since we are talking about Associated British Ports, which will be the subsidiary of a private sector company, albeit one in which the Government will have a 51 per cent. Holding—which is the assurance we have been given by the noble Lord, Lord Bellwin. I wonder for what reason they have this power of development, when having completed a development they must get rid of it. One would have thought it was business sense for ABP to retain the development for future earnings.
Lord Bellwin: I was going to quote exactly that part of the schedule which was quoted by the noble Lord, Lord Underhill. I will not do that but will move on to say that of the section which was quoted, it is the latter words which noble Lords opposite wish to delete. In practice, the effect of such deletion would be very little. It would not give ABP the significantly wider scope which I believe the noble Lord, Lord Underhill, intended. All the amendment would achieve would be to make the powers of Associated British Ports less clear. The deletion of the requirement on ABP to dispose of developments would not enable Associated British Ports to retain new developments, for example to run hotels, because ABP do not have the power to operate hotels.
I appreciate how difficult it is sometimes for noble Lords without the support of Government resources to draft legally effective amendments. I will therefore address myself towards what I think were the noble Lord's objectives in putting down his amendment—to give ABP wider powers in respect of land development. The statutory powers of all significant port authorities are restricted in scope to those necessary for the authorities to carry on their business as port
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operators, together with certain powers which enable a port authority to carry on activities ancillary to its main line of operation. Thus, it would be most unusual to allow a port authority to branch out into more wide-scale land development than the Bill allows.
However, this is not to say that the Government have any inhibitions about land development. The holding company controlling Associated British Ports will have its Memorandum and Articles of Association drawn in the wide manner that is customary among Companies Act companies. Therefore there will be nothing to prevent the holding company developing land anywhere it sees fit—or developing any of a multiplicity of other lines of possible business activity if it so wishes. Such diversification would, of course, be at the discretion of the directors of the holding company and the Government would not use their 51 per cent. shareholding either to encourage diversification or to prevent it—whether it be into property development and ownership or into other, different activities.
The two-tier structure for which the Bill provides enables BTDB's present framework of statutory powers and duties to continue undisturbed while enabling investors to put their money into a Companies Act company with a broad range of powers and familiar administrative arrangements. Thus, ABP's dock business includes some of the country's major ports and conservancies operated under public general statutes, as well as some 300 local statutes which relate to the BTDB's 19 harbours. These statutes provide a statutory framework for the control of public navigation, the making of by-laws which carry criminal sanctions and the compulsory purchase powers which are essential in the running of ABP's business. Such a statutory framework is not an inappropriate one for the expansion of ABP's powers to develop land; such diversification, if it takes place, should occur in the holding company. I hope, having given that amount of detail, that the noble Lord, Lord Underhill, will consider that my explanation is a satisfactory one.
Lord Underhill: I am grateful to the noble Lord, Lord Bellwin, for his explanation. I shall consider what he has said and I will do a little more homework on reading the harbour Acts. What the noble Lord has said seems to have clarified the position, but I will read what he has said in the Official Report. I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
Lord Middleton Lord Middleton moved Amendment No. 32:
Page 34, leave out lines 21 to 23 and insert—
("13.—(1) British Ports may dispose of any part of its undertaking, property, obligations or rights for any consideration which British Ports may see fit to accept, subject to the provisions of the Dock Labour Scheme administered by the National Dock or Labour Board.").
The noble Lord said: I hasten to relieve noble Lords opposite of any responsibility for this amendment. It seems that the printing has gone a little astray. This is a probing amendment, the intention of which is to elicit from the Government the general effect of the wording of paragraph 13 of Schedule 3 in certain circumstances, and in particular the effect of the words "for the purposes of its business". I am prompted to ask

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my noble friend for clarification of the wording of this paragraph by the anxiety which is felt in the City of Hull about the future of its role as a fishing port.
The recession has hit all Hull's industries, and that, coupled with other factors which are known to your Lordships, has had a very depressing, if not ruinous, effect upon Hull's fishing industry. There are no politics in this; it is an economic fact, acknowledged and deplored by everyone in the industry, management and unions alike, and by representatives of all parties. Many Hull jobs depend upon the continuance of the fish landing facilities, and these jobs are, it is felt locally, now at risk. As I understand it, paragraph 13 sets out Associated British Ports' power to dispose of its assets, and this power will be similar to that given to the British Transport Docks Board by the 1962 Transport Act. I am also fairly clear in my mind that no disposal would be possible where docks are subject to statutory powers and duties without some kind of parliamentary measure.
Where I am not clear, however, is in this respect. Under certain circumstances it might be to the advantage of the prosperity of Hull, and also to Associated British Ports, if they were, with the consent of Parliament, to enter into an agreement for the transfer of Hull fish docks to a new owner. The question which I would ask my noble friend is therefore this. Would Associated British Ports be prevented from selling or transferring a dock even if it wanted to because the words "for the purpose of its business" in paragraph 13 might be construed as inhibiting the sale of any asset which a competitor or potential competitor might use for the same purpose as Associated British Ports had used it? I beg to move.
Lord Bellwin: I think my noble friend and, indeed, your Lordships may find it helpful if I outline very quickly the Government's attitude towards recent developments at Hull before I come to the amendment itself. The Government believe that the British Transport Docks Board are in the best position to run their own business effectively. No useful objective would be served by the Government dictating their commercial policies or intervening in their commercial decisions. The possibility of a sale of the fish docks is in our view entirely a matter for commercial negotiation between BTDB and any interested purchaser. While the Department of Transport would welcome the retention of a viable fish landing facility at Hull, the department is not in a position to offer assistance or to ask BTDB to act against its commercial interests.
The Transport Bill will leave Associated British Ports in the same position as BTDB are in now in respect of the disposal of parts of its business. Indeed, the wording of paragraph 13(1) of Schedule 3 follows that of Section 14(1)(e) of the Transport Act 1962 very closely. Thus, the sale of a port or part of a port governed by statutory powers and duties will require, as now, the promotion of private legislation or a harbour revision order under the Harbours Act 1964. In these circumstances the sale of a docks complex like the Water Docks, where the fish landing facility at Hull is situated, would almost certainly require private legislation. This is what the Government have always intended. For us to have done
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otherwise and provided ABP with general powers to sell statutorily operated ports or parts of ports, as the amendment moved by my noble friend Lord Middleton is intended to allow, would not only have been completely unprecedented and have raised difficult issues of principle, but would have run contrary to the assurances which the Government have given that they would keep the BTDB's successful business together as a single management unit.
I has been suggested that the drafting of paragraph 13 of Schedule 3 and, in particular, the phrase "for the purpose of its business" could be interpreted in such a way as to prevent ABP selling one of its docks even if appropriate private legislation were promoted. The suggestion is that the words "for the purposes of its business" could be construed as underwriting the sale of any asset which a competitor or potential competitor might use for the same purpose as ABP had used it. I can assure noble Lords that paragraph 13 would not in fact have the effect feared, and I confirm to my noble friend Lord Middleton that there is nothing in the Transport Bill or currently in the Transport Acts which would prevent the promotion of a Private Bill or a habour revision order, or, in appropriate circumstances, a harbour reorganisation scheme to transfer one of BTDB's harbours or docks to another person or body. There are, in fact, examples of former BTDB harbours which have been transferred in the manner I have just described; namely, the former BTDB harbours which were transferred to other bodies by the Forth Harbour Reorganisation Scheme 1966 and the Tees and Hartlepool Port Authority Act 1966.
The Government cannot accept this amendment. If, in fact, it achieved the result of enabling ABP to transfer docks managed under statutory powers without recourse to Parliament, that would be unacceptable for the reasons I have mentioned. If, as I think more likely, it did not achieve that result, it would, for practical purposes, add little to the provisions of the Bill as they stand in relation to disposals by ABP.
Perhaps it is the Government's emphasis on keeping the BTDB undertakings intact and not breaking it up that has led to the fears that the Bill could make a transfer of this type more difficult. There is nothing in the Bill which would make the possible transfer of Hull fish docks easier or more difficult. I am glad to confirm to my noble friend and to others who are interested that it would have no adverse effect on any negotiations or move to obtain the necessary powers to achieve the transfer of the docks concerned. I hope that I have been able to deal with the fears which led my noble friend Lord Middleton to put down his amendment and that he may now feel disposed to withdraw it.
Lord Middleton: I understand very well why the actual wording of this amendment is not acceptable. I am grateful to my noble friend for what he has said by way of clarification of this paragraph. I shall study carefully the assurances that he has given, which will, I think, give grounds for confidence where it is much needed. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 33 and 34 not moved.]
Schedule 3 agreed to.
[Amendment No. 35 not moved.]
Schedule 4 agreed to.
Clause 15 [Dissolution of National Ports Council]:
10.19 p.m.
Lord Underhill Lord Underhill moved Amendment No. 36:
Page 12, line 18, leave out ("and") and insert—
("( ) The powers and duties of the Council as defined in the Harbours Act 1964 shall pass to a National Ports Authority which shall be established and shall also keep under review the suitability and adequacy, in relation to the trade of Great Britain, of the ports of Great Britain; review the discharge of their functions by the various ports authorities; consider how any port should be improved and what services and facilities should be provided at any port, and, as requested by the Secretary of State advise him, and at any time make recommendations to him, on any matter affecting the suitability, adequacy and efficiency of the ports.
() In accordance with the provisions of subsection (1) above").
The noble Lord said: I am sorry—and I am certain that noble Lords will be sorry—that we have reached this important amendment at this stage this evening; but, to do justice to it, I must explain precisely why the amendment is being moved; and I regret that it cannot be done in a minute or two. Clause 15 makes provision for the Government decision to abolish the National Ports Council. During the Second Reading debate on the Bill, I referred to the 1979 report of the National Ports Council which, I said, gave an indication of the wide scope of the work of the council which has been of immense value to successive Governments and to the ports industry since its inception in 1964. Since that debate, the 1980 report of the National Ports Council has become available and a number of appendices in that report set out the full work carried out by the council.
In one section of the report the council officers state that the adequate performance of various functions, in view of the abolition of the Ports Council, is likely to require an addition to the department's staff, whether in the ports directorate or elsewhere, of perhaps up to 20 people, and an increase in the staff of the British Ports Association of at least another 20 people. But the numbers will depend on which functions are located with Government and which with the industry.
During the Second Reading debate the noble Lord, Lord Bellwin, explained the reason for the Government's decision to abolish the Ports Council and he said the Government's view is that the National Ports Council has played an important role in bringing about a major improvement in the organisation and efficiency of the port industry since 1964. But he went on to say that he believed that the time was now right for responsibility for the future development of the ports to be placed firmly on the industry itself. Replying to the Second Reading debate, the noble Lord said that the Government could not see the need for a central body to oversee the organisation and operation of the ports industry.
I suggest that that is a very short-sighted and complacent attitude being adopted by the Government.
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It ignores the present situation in the docks industry. There seems to be general agreement that at the present time there is some two-thirds surplus capacity in the docks in the United Kingdom.
Noble Lords will recall that recently we had before the House the Ports (Financial Assistance) Bill which provides further financial help to the Port of London Authority and the Mersey Docks and Harbour Company which are in dire financial straits. In the Second Reading I suggested there are other ports in difficulties but the noble Lord, Lord Bellwin, said this was not so except for the Bristol authority. However, this is not the view of the managing director of the British Transport Docks Board.
In the same article to which I have already referred, Mr. Stewart, the managing director, states that several of the major ports and port authorities are in deep financial and commercial trouble. He stated also that there could be no doubt that the port industry in the United Kingdom is operating against deep-seated structural, historical and commercial disadvantages. He said that all ports were subject to those disadvantages though some more than others.
Faced with this situation, the abolition of the National Ports Council seems a senseless move. The separation of the harbours of Sealink into a separate company and the change of structure of the British Transport Docks Board into Associated British Ports are not really relevant to this particular current situation. It is generally appreciated that the ports industry is a service industry. Only to a small degree can the ports create trade. Ports are dependent upon producer and manufacturing industries to supply the trade which the various ports are competing to handle.
The last major inquiry into the ports industry was that of the committee which carried out an intensive inquiry into the then 15 major ports. The chairman was noble Viscount, Lord Rochdale (who I am pleased to see in his place tonight) and the report was published in 1962. That report made some important recommendations, a number of which have been carried out. However, one major recommendation was not carried out. Paragraph 140 of the report stated:
"We have become increasingly aware in the course of our inquiries that a fundamental defect in the organisation of ports in this country is the lack of any central planning".
The Rochdale Report included in its recommendations a strong recommendation for the establishment of a national ports authority. The report listed 12 proposed powers for the authority, most of which would be very pertinent today. Incidentally, the Central Ports Advisory Council was advocated as far back as 1948 by the Docks and Harbours Authorities' Association. There seem to be strong grounds for thinking that now the Government are abolishing the National Ports Council they are removing an independent body which has given excellent advice to the Minister and the industry over a number of years.
I hope noble Lords will feel that this is a very sensible amendment. If they look at the wording they will see it is not proposing an executive authority. The body will assume the powers and duties of the present National Ports Council and also give to the Secretary of State, as he may require it, advice on the various

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points listed in the amendment and at any time the authority thinks timely itself to make recommendations to the Secretary of State. Therefore we are not proposing a bureaucratic executive authority but a body which would appear to be much needed to deal with the situation in the ports industry, particularly in view of the Government's decision to abolish the National Ports Council. I beg to move.
Lord Bellwin: I welcome the opportunity, even at this hour, which these amendments provide to explain the Government's ports policy and why they have decided to abolish the National Ports Council. The amendment to establish a national ports authority illustrates the basic divergence of views between the Government and the Opposition on ports policy. The Opposition genuinely believe that the future success of the industry depends upon the creation of a strong, centralised national ports authority, as the noble Lord, Lord Underhill, said, with overall responsibility for planning the future development of the ports and for advising on the provision of services and facilities at individual harbours.
The existence of such an authority would take away from the very people who should be directly responsible for their own affairs (the port authorities themselves) all major decisions determining their future. In particular, the creation of a national ports plan, inherent in the idea of a national ports authority, would seriously distort the ability of ports to operate in commercial competition with each other. Indeed, experience has proved that such a plan would not work in practice. Ports, being a service industry, must be able to act flexibly and quickly in regard to changing commercial circumstances. This would be prevented by a national plan which would simply promote development at some ports while preventing it at others. That surely is no way for a commercial industry to operate. On the other hand, the Government are firmly of the view that the future health of the industry depends upon the industry itself taking as much responsibility as possible for its own affairs.
We acknowledge that in the past there has been a need for the National Ports Council. Indeed, as the noble Lord, Lord Underhill, so rightly said, the council has a great deal to its credit. In particular it has formulated and, in co-operation with the industry, has promoted estuarial amalgamations and a major programme of reconstituting harbour boards; it has encouraged ports to adopt a more commercial approach to port charging, and it has assisted the industry by providing comprehensive statistics and forecasts and by carrying out research and training. Consequently, the industry is generally in a much healthier position than when the council was set up, and it has much to be thankful to the council for. But most of the recommendations of the Rochdale Committee have been successfully implemented and we consider that the council has largely discharged its role. This is, indeed, a measure of its success.
There are, of course, areas where improvements are still required, notably in reducing surplus manpower, in improving productivity and efficiency and in developing facilities to take advantage of technological developments and to meet the changing requirements of
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trade. But there are now strong and competitive ports in this country which, if they take up the task, are capable of dealing with these problems themselves. They have indicated that they are both willing and able to do this. But first they must be given responsibility for their own affairs. This is why we are abolishing the council. There is, of course, a challenge facing the industry, but the British Ports Association has been enlarging and strengthening its organisation to meet this challenge and it is currently discussing with the Freight Transport Association and the General Council of British Shipping proposals for a port users consultative committee.
I hope that I have adequately explained why we are abolishing the council. The merits of what we are trying to achieve are clear—placing in the hands of those who manage the industry responsibility for their own affairs—and I hope that your Lordships will recognise that, in the current position and mood of the industry, the creation of a national ports authority is not in the best interests of the ports industry.
When I began, I said that I was grateful for the opportunity of explaining the Government's ports policy. I could go on at greater length, but I hope I have done that to your Lordships' satisfaction and have explained why the Government do not believe that the amendments are in the best interests of the ports industry.
10.31 p.m.
Viscount Rochdale: As the report produced by the committee over which I had the privilege to preside in the early 1960s has been referred to, perhaps I might be allowed to make one or two observations. If the noble Lord, Lord Underhill, had moved his amendment 16 or 17 years ago, I can assure him that I would have jumped at it at once, received it with open arms and supported him in any Division Lobby. But as my noble friend Lord Bellwin has said, a great deal has happened in the last 16 or 17 years.
If one looks at some of the main tasks that the council has been given—namely, the preparation and establishment of estuarial port authorities, the reconstitution of many ports where the old constitutions were very difficult and complex and a very considerable amount of port investment—one sees that the first two of those have been largely completed. As regards investment, a very considerable amount of investment was carried out in the early years and, with the present changes in technology on the one hand, and being in an era of contraction on the other, it does not look as though the degree of investment now required is likely to be anything like so great as it was in those days. Therefore, on those scores, one can see that there is not the need for a ports authority that we wanted—we did not want the ports council; we wanted the ports authority—or for a body like a national ports authority, as there was distinctly at that time.
There are, of course, today other continuing functions that have to be carried out. Let me take just two—the question of continuing research, which is most important, and continuing training throughout the industry, which is equally important. I take the view that in any industry, as a whole, these are generally functions that ought to be carried out by those responsible for the industry, as my noble friend has said. Whether

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Associated British Ports carries them out as efficiently as I believe the National Ports Council has carried them out in the past, remains to be seen. I certainly would not wish to prejudge that issue. Confronted with that responsibility, I hope they will carry them out very well.
In passing, there is just one point that I would add on that. I hope that, just as the National Ports Council has had the co-operation and assistance of trade union members, so that work will also be carried out with trade union members in the future. Having said that, I am sure there is not a need for a national ports authority now—I could not support that—and it remains to be seen whether there is a need for any central body at all. One thing I am certain of is that the Secretary of State will not, as suggested in the Explanatory Memorandum, find that his involvement is any less. I think that his involvement will probably be just as much, if not more, and of course he will not have the advice of the National Ports Council to rely on. Therefore, I should like to ask my noble friend whether he intends to recruit into the ports division of the department any of the expertise which has up to now been working in the council. This is very important because I doubt whether the same degree of expertise exists in the Ports Directorate.
Having said that, I must say to the noble Lord, Lord Underhill, that I cannot support him on the authority.I hope—I shall not be more definite than this—that the Government have made a wise decision. Whether they have or not remains to be seen. However, as the noble Lord himself said, with all the changing techniques and needs of the shipping industry it is vitally important that the ports industry goes ahead, is perhaps a step ahead of the requirements of the shipping industry and is as alive as ever.
Lord Bellwin: I am deeply grateful to my noble friend for what he has said. His opinion is of great value. We shall certainly want to think very carefully about the points which he has made—certainly those which I did not cover. I know that my right honourable friend will also be very grateful to him for what he has said.
Lord Underhill: I am sure noble Lords will be very grateful to the noble Viscount, Lord Rochdale, for his intervention. He has great experience of the ports industry. As the noble Lord, Lord Bellwin, has said, many of the Rochdale Committee's recommendations have been carried out. I would never set myself up as knowing more about the docks industry than the noble Viscount. However, it is generally admitted that today there are problems in the ports industry. It is no good suggesting that there are not. Perhaps another Rochdale Committee is needed to look at just where we are. One cannot be so complacent as to say that one can leave the problems to the industry itself when there is general agreement that a two-thirds surplus capacity exists.
There are to be three separate structures. There will be the Sealink harbours which are to be formed into a separate company. There will be Associated British Ports. Then there are the independent ports authorities which will still exist.
I believe that it is necessary to have somebody
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advising the Minister over and above those who are engaged in the industry. Other people are to be considered as well as those who are operating the harbour authorities. The noble Lord, Lord Bellwin, spoke about this authority having a national plan. With respect, I suggest that he reads the amendment. What it suggests is that a national ports authority shall be established and shall
"keep under review the suitability and adequacy, in relation to the trade of Great Britain, of the ports of Great Britain; review the discharge of their functions by the various ports authorities; consider how any port should be improved and what services and facilities should be provided at any port, and, as requested by the Secretary of State, advise him, and at any time make recommendations to him…".
There is nothing in the amendment about the establishment of an all-powerful national ports authority which is going to run the industry.
I think the noble Viscount, Lord Rochdale, will agree that the authority we are suggesting will have nowhere near the powers which his report recommended that such an authority should have. It is reduced mainly to reviewing, considering and advising the Minister, both when the Minister requests it and also when the authority wants to make recommendations to him. To wipe away a suggestion of this kind is inadequate. However, in view of the late hour it would be pointless of me to divide the Committee. Therefore, I shall read carefully what has been said, including what was said by the noble Viscount, and see what action we may have to take at Report stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 37 not moved.]
Clause 15 agreed to.
Clauses 16 and 17 agreed to.
Schedule 5 [Provisions supplementing ss. 15 to 17]:
Lord Bellwin Lord Bellwin moved Amendment No. 37A:
Page 49, line 29, leave out ("continued").
On Question, amendment agreed to.
Schedule 5, as amended, agreed to.
Clause 18 agreed to.
Schedule 6 [Amendments of the Harbours Act 1964]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 38:
Page 55, line 16, leave out ("an order which is opposed") and insert—
("—

(a) a harbour revision order relating to a harbour in England or Wales; or

(b) a harbour empowerment order relating to a harbour or to works to be carried out in England or Wales,

and, in either case, the order is opposed.").
The noble Lord said: With the agreement of the Committee I should like to speak also to Amendments Nos. 40, 41 and 43. I shall not be able to do it quite as quickly as the last amendment but I shall do my best. It is a rather complicated subject.
Paragraph 4 of Schedule 6, to which these four amendments refer, amends the Harbours Act 1964 to provide that a harbour revision or empowerment order

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is not to be subject to special parliamentary procedure unless an objection which is outstanding when the order is made is renewed by the objector. But it has become clear that the amendments are defective in relation to Scottish orders, and the effect of the Bill in relation to Scotland is uncertain.
The original intention was to treat Scottish orders in as similar as possible a way to English or Welsh orders, while taking account of the fact that special parliamentary procedure applies to Scottish orders before they are made and that this produces differences in the statutory procedure governing the consideration of orders at draft stage. Having identified the defect in the Bill the options were to introduce amendments to achieve the original intention, or to leave the existing law on Scottish harbour revision and empowerment orders unchanged. We have decided, therefore, to leave the existing law unchanged, and these four amendments are concerned with the exclusion of orders relating to Scotland from the changes made by paragraph 4 of Schedule 6.
I appreciate that it is very late at night. I could go on at length on this rather complicated subject but I hope perhaps I have said enough. I beg to move.
On Question, amendment agreed to.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 39:
Page 55, line 35, leave out from ("shall") to the end of line 37 and insert (", subject to sub-paragraph (4) below, become operative on the expiration of 28 days from the date of the notice given (or last given) tinder this sub-paragraph or on such later date as the Secretary of State may appoint.").
The noble Lord said: Again with the permission of the Committee, I should like to speak also to Amendment No. 42. These two amendments make a very minor clarification of the date on which certain English and Welsh orders become operative. If a harbour revision or empowerment order relating to England or Wales is opposed at draft stage, the Secretary of State will have to give notice when the order is made to all those who opposed it and give them 28 days in which to indicate whether they wish to maintain their opposition. If they do not maintain their opposition the order will not be subject to special parliamentary procedure. These amendments make more specific provision than the Bill already does about the date on which an order which was opposed when it was made will come into operation in a case where no objection is renewed and the order does not therefore become subject to special parliamentary procedure I beg to move.
On Question, amendment agreed to.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 40:
Page 55, leave out lines 43 to 47 and insert—
("4B. A harbour revision order relating to a harbour in Scotland and a harbour empowerment order relating to a harbour or to works to be carried out in Scotland shall in every case be subject to special parliamentary procedure.").
On Question, amendment agreed to.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 41:
Page 56, line 19, leave out ("an order which is opposed") and insert—
("—

(a) a harbour revision order relating to a harbour in England or Wales; or

(b) a harbour empowerment order relating to a harbour or to works to be carried out in England or Wales,

and, in either case, the order is opposed.").
On Question, amendment agreed to.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 42:
Page 56, line 38, leave out from ("shall") to the end of line 40 and insert (", subject to sub-paragraph (4) below, become operative on the expiration of 28 days from the date of the notice given (or last given) under this sub-paragraph or on such later date as the Secretary of State may appoint.").
On Question, amendment agreed to.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 43:
Page 56, leave out lines 46 to 50 and insert—
("8B. A harbour revision order relating to a harbour in Scotland and a harbour empowerment order relating to a harbour or to works to be carried out in Scotland shall in every case be subject to special parliamentary procedure.").
On Question, amendment agreed to.
Lord Denham: I think we have probably reached the stage where we should adjourn the Committee, as the next two amendments are to be taken separately. Unless any noble Lord particularly objects, perhaps I might move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Sion College Bill [H.L.]
Returned from the Commons agreed to with an amendment; the said amendment considered and agreed to.
House adjourned at fourteen minutes before eleven o'clock.