HL Deb 14 May 1981 vol 420 cc635-47

3.55 p.m.

Lord Lyell

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 Lyell.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clauses 1 to 13 agreed to.

Lord Jacques moved Amendment No. 1: After Clause 13 insert the following new clause:

("Requirements to inform the Actuary and obtain his report.

.After section 22A of the Insurance Companies Act 1974 there shall be inserted—

"22B.—(1) An authorised insurance company shall at all times provide the person who for the time being is its actuary under section 15(1) above or section 3(5) of the Insurance Companies Amendment Act 1973 with—

  1. (a) such information as that actuary has informed the company that he reasonably requires in order that he would be able to carry out an investigation under section 14 above at any time; and
  2. (b) information about intended changes in the financial conduct of its long term business of a kind which that actuary has informed the company would in his opinion significantly affect the result of an investigation made under section 14 above.

(2) An authorised insurance company shall not make changes in the financial conduct of its long term business of a kind referred to in subsection (1)(b) above without first obtaining a report from the actuary referred to in subsection (1) above.".").

Lord Jacques

This amendment is identical to one that was submitted on Report stage in another place. I introduce it to the Committee on this occasion for two reasons. First, because it raises a very important issue—namely, that post facto reporting, that is reporting after the damage is done, is not sufficient to safeguard policy holders. It is also necessary to have measures of prevention and this amendment is concerned with a measure of prevention. The second reason why I bring forward this amendment is that when it was debated at Report stage in another place much play was made of the fact that there had been little time for consideration and consultation. A month has elapsed since then, and so there has now been more time.

In 1974 two life assurance companies failed, causing considerable hardship to thousands of policyholders. One of those companies failed because it had issued a large number of policies on the basis of a single premium which were unsound. The other company failed because it had invested too much of its life policy funds in speculative property investments. The 1974 legislation, and subsequent legislation, has tried to prevent that kind of thing happening. An insurance company which carries out long-term business—that is, life insurance—must have an actuary by law, and one of the duties of the actuary is to report on the solvency of the life fund. The actuary usually does that once a year. Unfortunately, the actuary's report can be made out-of-date overnight by the company simply issuing the new policies on different terms and conditions or by changing its investment policies.

The 1974 Act provided for substantial and detailed annual returns, but this is still post facto reporting, and however elaborate these returns will not prevent company failures. What we need is preventive action. The Institute and the Faculty of Actuaries issue guidelines to their members who are employed in life assurance offices. One of the guidelines is that the actuary should keep in touch with changes in the terms and conditions of new policies issued and with any changes of policy in regard to investments. By way of this guideline there is an obligation on the actuary to keep in touch, but there is no obligation upon the insurance company to keep the actuary informed. The purpose of this amendment is to place that obligation on the insurance company.

At the Committee stage in the other place there was an amendment which had a very similar purpose to that which I am now moving, but it was more elaborate and was eventually withdrawn. It dealt with the same subject-matter. The Institute of Actuaries sent a letter to the Deparment of Trade and a copy of that letter was circulated to each member of the Committee in another place. I quote from that letter: If, however, it is felt that the legislation should be more specific about the company's responsibility vis-à-vis its appointed actuary a practical approach might be to study the possibility of placing a duty on a company to provide the appointed actuary regularly with such information as he may reasonably require about the financial conduct of its long-term business and to obtain a report from him before making significant changes in that conduct". The whole purpose of the amendment is to put into the statute this opinion, as expressed by the Institute of Actuaries. I am not contending that this amendment is supported by the institute or, indeed, by the Faculty of Actuaries, but I am saying that the opinion stated here is reflected in the amendment, which I believe is especially necessary for policyholders because it would introduce preventive action rather than ex post facto reporting after the damage has been done. I beg to move.

4.1 p.m.

Lord Lyell

The Committee will have listened with attention to the detailed way in which the noble Lord, Lord Jacques, proposed his amendments. The noble Lord has pointed out that the subject of these amendments was discussed in another place about a month or six weeks ago.

I am sure that both the Committee and the noble Lord, Lord Jacques, would accept that the new clauses have the limited objective of placing an obligation upon companies to keep their appointed actuary informed of matters which might imperil their solvency. I accept that the new clauses do not place new and impracticable statutory obligations on the actuary—we would not want that—but they would make a failure by a company to keep their actuary informed in the prescribed manner a criminal offence.

The Government have no quarrel with the noble Lord, Lord Jacques, about the aims which underlie the amendments. If the actuary who is appointed by the company is to fulfil his role in an insurance company he needs, and I am sure he will receive, all the relevant information to make up his mind when he is preparing his report. The noble Lord, Lord Jacques, referred to ex post facto reporting. This proposal would mean that the actuary would be making up his mind prior to presenting his report. Certainly, this would be an earlier safeguard.

I believe the question is whether or not this or any other details of the relationship between a company and its appointed actuary ought to be the subject of statutory regulation. As a general rule, we do not believe that it is desirable to legislate for the way in which a company organises its internal affairs. These are, of course, internal affairs. This is completely different from the way in which other professions tend to organise their affairs. The noble Lord, Lord Bruce of Donington, and I know that the accountancy profession tends to work outwith the company, whereas actuaries work within the company. For that reason, we believe that these are the internal affairs of a company.

I think the Committee will accept that it is not only the Government which view the changes envisaged by the amendments as unnecessary and undesirable. In fact, the noble Lord, Lord Jacques, pointed out that both the Institute of Actuaries and the Faculty of Actuaries, as well as representatives of the insurance companies, do not necessarily see any need for such statutory provisions to be written into the legislation.

The amendments were considered in another place, where reference was made to the guidance for actuaries which the Institute of Actuaries and the Faculty of Actuaries issued in May 1975 as a result of the case which was mentioned by the noble Lord, Lord Jacques, at the start of his remarks; namely, the big problems which arose in 1974.

I make no apology for referring again to that guidance note. Among the matters which are referred to in that note is a stipulation that the actuary must have all the relevant information at his disposal to enable him to be satisfied as to the financial status of the company. We think that this is a matter which is best covered by a professional guidance note so that both the Institute of Actuaries and the Faculty of Actuaries north of the Border may be able to issue guidance notes and general lines of conduct to those of their members who are within companies. Then members of the profession will be able to consult their professional institute and carry out their duties as they see fit. To place the exact nature of these duties in a statute is, we think, unnecessary. I hope that the noble Lord, Lord Jacques, will agree.

Lord Bruce of Donington

We on this side of the Committee would like to associate ourselves with the thrust of the amendments which have been proposed by my noble friend Lord Jacques. As he indicated during the course of his speech, the transactions of a life assurance company are, broadly speaking, of two kinds.

First, there is the contract which the life assurance company has with the policyholder, which affects the whole content of that policy. My noble friend Lord Jacques gave the example of an insurance company which had issued a series of policies on terms that were manifestly unsound. That is something which any actuary should be able to pick up within a matter of minutes, if not within a matter of hours. It would be manifestly unsound for a company to be involved in the type of failure to which my noble friend Lord Jacques referred.

The other type of transaction is the investment of the funds which the insurance company receives. The policies of insurance companies in regard to investment vary. The particular case which my noble friend Lord Jacques mentioned was the investment by a company in certain property transactions. Again, this is very difficult. Who can cross their heart and say that in certain years which have not passed too recently investment in property was not considered to be the last possible word in favour of one's policyholders? The collapse of the property market, although it was predicted by some of us who will remain modestly anonymous for the moment, was not universally predicted at that time.

It has to be considered whether any actuary, taking for guidance even the Financial Times or the Economist, could be quite sure that if he put in an adverse opinion about a different line of investment he might not be laughed out of court by his company. Indeed, your Lordships will note that once again there is now a move to invest funds in property—with what results, of course, only future years will show. The difficulty here concerns the obligation of the company, with its own actuaries and indeed with its own auditors. It seeks to lay a responsibility on the company to provide day to day information. In so far as the first category of the transactions between the life assurance company and the policyholder is concerned, I do not see much difficulty, but I do see some difficulty in regard to the investment policies that are adopted by assurance companies. It could be said—and indeed I have ventured to say so myself—that if one examines the investment record of assurance companies over a period of years, or perhaps even months, one can discern a pattern in that investment. It is for consideration whether it would be desirable for immediate steps to be taken if a particular assurance company intends to rupture that pattern by investing in something which might possibly be regarded in some quarters as questionable.

What my noble friend is trying to do—and we on this side of the Committee are sympathetic towards it—is to ensure that there is a greater flow of day to day information between the company and the experts who are concerned. We in the accountancy profession know this particularly well, because at one time we were regarded as industrial archaeologists: in other words, we exposed the position only a long time after the events had taken place. But that of course has now changed and it is the tendency in my profession to be involved intimately in the day to day transactions of the company and its managerial policies.

I have no constructive suggestion to make as to how the Government can go about this. It is a very difficult field and I am quite sure that my noble friend Lord Jacques appreciates that. Therefore, what we would like the Government to do, is to take an even closer look at this to see whether there is some possibility of an amendment—not necessarily in the same words as the amendment moved by my noble friend, which carry some small definition difficulties in regard to financial conduct, which is notoriously a very difficult thing to put into the interpretation section of any Bill. If the noble Lord would undertake to have another look at this, with a view to coming back with some more constructive ideas on the subject, we on this side of the Committee would be greatly obliged to him and indeed we are greatly obliged to my noble friend Lord Jacques for having raised this important question in such a constructive manner.

4.12 p.m.

Lord Banks

I should like to add briefly to what has been said by the noble Lord, Lord Bruce of Donington, in order to endorse his final plea to the Government to look at this matter again. When it was discussed at the Report stage in another place, it was clear that there was a closer approach to agreement than there had been at the Committee stage, and the Minister indicated that he was prepared to consider any proposals that might be brought forward to try to deal with this particular problem. One is aware of the objections which have been raised by the noble Lord, but, if he would undertake to have a further look at this, I, for my part, would welcome it.

Lord Jacques

I should like to reply to two points raised by the noble Lord, Lord Lyell. First, he thought this was a matter for professional guidelines. But we already have the professional guidelines—the Institute and Faculty of Architects have issued their guidelines to the actuaries employed in life assurance companies. What is absent is an obligation on the part of the company to supply the information, and I am trying to fill that gap.

The second point on which I should like to comment is that the Minister thought that this was an internal matter between the company and its actuary. It is not; it is more than that. The question at stake here is the solvency of the life assurance fund—that is to say, the monies contributed by the life policyholders. Therefore, it is a question of protecting the life policyholders as well as the company and consequently it is not purely an internal matter.

I join with my noble friends on this side of the Committee, in that I would be happy if the Government would have another look at this and try to come forward with some acceptable amendment at the Report stage. Further, I would be content—and I think my colleagues would be content—if it were an amendment which gave enabling powers; that is to say enabled the Secretary of State to make regulations covering the points raised in the amendment, so that such regulations could be made if and when the Secretary of State thought it necessary.

I could hardly be more accommodating than that, and I hope that the noble Lord, Lord Lyell, will be able to say that he will come back with something solid at the next stage of the Bill.

Lord Lyell

I am very grateful to all three noble Lords who have spoken. Perhaps I may first take up a particular point which was raised by the noble Lord, Lord Bruce. He mentioned two major aspects of the work of life assurance companies and he particularly referred to the investment policy. I think that what the noble Lord, Lord Bruce, was suggesting was that the actuary would carry out his duties in studying the solvency of the company, and I agree with the noble Lord that the actuary can only work along his own professional guidelines. Indeed, as the noble Lord has pointed out, accountants were referred to as "archaeologists". Certainly the Government would not want actuaries to carry out work in such a way as to be considered students of the crystal ball and to be involved in soothsaying and foretelling the future. I believe that the actuary's duty is fairly broad and well laid down by the guidelines issued by the professional institutions, and we consider that this should be dealt with between the actuaries and the professional institutions. It is certainly for the actuaries to act, if they are dissatisfied with the flow of information coming from the company, either in a particular case or in general. We believe that it is a matter for the profession to regulate for itself.

The noble Lord, Lord Jacques, felt that the protection of policyholders' funds was not entirely an internal matter. What is an internal matter, we believe, is the provision of information from the company to the actuary, who is of course an employee of the company. That was the point that I sought to make.

Lord Jacques

If the Minister will give way, would he not agree that, when the protection of policyholders is involved, it is not just a matter between the company and the actuary; it is a question of the policyholders' interests and is a matter in which the Government of the day should have an interest?

Lord Lyell

The noble Lord's amendment may deal on a very broad scale with the protection of policyholders, but the actual thrust of the amendment is entirely on what information should be disclosed and should be demanded by the actuary from the company. I think that is a little narrower than the entire field of the protection of policyholders.

It was pointed out by the Government in another place that if the actuary or the profession or indeed the insurance companies or anybody else—the noble Lord or any of your Lordships—wanted to bring forward concrete proposals, the department would consider them most carefully. The amendment that has been proposed by the noble Lord, we believe, is not strictly necessary, but I would give the undertaking that if the noble Lord wished to come and have further consultations between now and another stage I am sure we could reach some understanding over that. I cannot go further than that. I do not think the Government would bring forward proposals of their own.

Lord Jacques

As I understand it, the Minister is saying, "I cannot undertake that the Government will bring forward proposals of their own, but on the other hand if the noble Lord, Lord Jaques cares to come to consult with me to see if we can get an agreement, I would be happy to do that". Is that the position?

Lord Lyell

Yes, as always.

Lord Jacques

I thank the Minister, and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 2 not moved.]

Clauses 14 to 30 agreed to.

Clause 31 [Lloyd's underwriters—financial resources]:

4.22 p.m.

Lord Lyell moved Amendment No. 3: Page 23, line 30, after ("Act") insert ("and to any determination made by the Secretary of State in accordance with such regulations").

The noble Lord said: I come before the Committee today in a slightly penitent tone because the need for this amendment, which is somewhat technical, only came to light when the Government were preparing the regulations which will be made under Clause 31. This amendment, No. 3, is designed to avoid what is known as "double delegation".

As the Committee will see, Clause 31 regulations will reproduce much of the existing Lloyd's (General Business) Regulations 1979, and these apply the general business solvency margin which is required of United Kingdom companies to Lloyd's. Of course, the Bill revokes those regulations along with the others which were made to implement the non-life directives which are listed in Part II of Schedule 5. The new regulations will also provide for the calculation of the life solvency margin where the same issue arises for the mixed contracts dealt with in Clause 1(3).

Certain modifications to the general business solvency margin requirements had to be made to adapt them to Lloyd's circumstances. In particular, the calculation of the margin for companies is based on gross premium income. In the case of Lloyd's, however, Lloyd's brokers deduct their commission before passing the premium to the underwriter. Lloyd's premium income is, therefore, generally known only net of broker's commission. To restore comparability with the requirements for insurance companies, Lloyd's total net annual premium must for the purpose of the calculation of the solvency margin be scaled up by a flat rate percentage which reflects the latest data on commissions paid. That scaling up factor is determined by the Secretary of State.

Because the existing regulations are made under the European Communities Act 1972 and are tantamount to primary legislation, it is proper for them to provide for the Secretary of State to determine this scaling up factor. If he were to make the determination under Clause 31 as before us today, it would be improper, because the primary legislation did not expressly confer the power to do this. The amendment therefore allows him to continue to make the necessary determination for the purposes of the new regulations. There will in practice be no change in the arrangements which obtain at present. Perhaps I should add that Lloyd's fully understand and accept the need for the amendment. I beg to move.

On Question, amendment agreed to.

Clause 31, as amended, agreed to.

Clauses 32 and 33 agreed to.

Clause 34 [Insurance business.]

Lord Banks moved Amendment No. 4: Page 24, line 44, leave out ("solely").

The noble Lord said: I beg to move Amendment No. 4 and to speak also to Amendment No. 5, since the two are related. I must begin by declaring an interest, as I am a director of a firm of insurance brokers. However, these amendments deal with a problem which has more been of concern to insurance companies than to insurance brokers.

One of the objects of the Bill, as the Committee is well aware, is to implement the 1979 EEC directive on life assurance. The directive is concerned, among other things, with the definition of "insurance business". It war found necessary to deal with a number of commercial activities regarded as insurance business in some countries but not in others. In order to maintain the status quo in individual member states the directive incorporated a saving provision stipulating that the specified commercial activities in question were only to be regarded as insurance business—and I quote— in so far as they are subject to supervision by the administrative authorities responsible for the supervision of private insurance and are authorised in the country concerned". The United Kingdom, where discussions on the directive were going on, asked for the management by an insurance company of the investments of an outside client's pension funds—"managed funds", as they are known—be included, in order to ensure the right for life insurance companies in this country to continue this type of business. This type of business was already supervised by the insurance division of the Department of Trade.

That supervision did not apply to the management of internal pension funds for the employees of individual insurance companies. If applied to funds administered by insurance companies for their clients, but it did not apply to the pension funds run for the benefit of the employees of the companies. And it did not apply where one insurance company in a group managed pension schemes within the group. In other words, it did not apply to these non-commercial activities, activities which were not being carried out for profit. It was made clear by the Department of Trade that it was not intended that these non-commercial schemes should be brought under supervision. They would, of course, be subject to the United Kingdom legislation affecting occupational schemes, but they were not to be brought under this supervision.

However, it became clear when the Bill was published that pension schemes for the staffs of insurance groups would be caught and would be made subject to supervision. Amendments to the Bill which have been passed in another place have improved the position, but insurance companies are not yet in the same position as industrial or commercial companies. The present wording of Clause 34 (c) (ii) would not exclude separate pension schemes for employees of one company in a group managed by an insurance company also a member of the group on a non-commercial basis. If a group scheme administered by an insurance company within the group covered all employees in the group it would be excluded. But where the individual companies in the group have separate schemes administered by an insurance company in the group on the same basis, non-commercially, they would not be excluded.

The effect of this amendment is to extend the exclusion to cover separate schemes within the group administered by an insurance company within that group. All that is sought is to put insurance companies in the same position as industrial or commercial companies, insurance groups in the same position as industrial and commercial groups. I beg to move.

Lord Lyell

The Committee will be very grateful to the noble Lord, Lord Banks, for speaking to his two amendments, which, as he pointed out, are technical. I hope that the Committee will bear with me because they are very complicated and somewhat difficult to understand, although I think that they fall into the Bill in a fairly logical form.

The noble Lord, Lord Banks, mentioned two particular clauses, but certainly amendments were made to Clause 15 and also to Clause 34 of the Bill in another place. Those two amendments made it possible for an insurance company to manage the investments of a pension fund of which its own employees—the employees of that particular insurance company—are beneficiaries, either alone or together with the employees of another company within the same group. They would be allowed to do that without requiring an authorisation to carry on long-term business under, what we find in Schedule 1 of the Bill to be, Class VII pension fund management business. That concession was particularly beneficial to general business companies which can no longer carry on authorised business as long-term business because of the ban which we find in Clause 6 on new composites—those are composite companies.

That change was only made after the most careful consideration. Pension fund management by an insurance company has to be treated as "insurance business", because if it were not, insurance companies would be debarred from carrying it out by Clause 15 of the Bill which implements another obligation of the directive that insurance companies must not carry out non-insurance business. Nevertheless, the Government did conclude that insurance companies should be free to manage the investments of pension funds of which their own employees are beneficiaries without an authorisation under Class VII of Schedule 1. The necessary amendments to both Clauses 15 and 34 were therefore made and we believe that these amendments can be defended as being within the spirit of both directives.

However, the amendment which we have before us today goes considerably further and covers the case where none of the insurance company's own employees is a beneficiary of the pension fund. We believe that that is indeed Class VII business. The fact that the pension fund relates to employees of another company within the group is not enough, because once there is no direct link between the insurance company, its own employees, and on the third side, the pension fund whose assets are being managed, we believe that there is no case for regarding the activity as anything other than Class VII business which, as your Lordships will see from the schedule, requires authorisation and supervision.

I point out that the only issue is the source of the investment advice which is sought by the trustees to the pension fund. The terms of the pension scheme and its organisation are in no way affected. But what might have to change in one or two groups is the source of the investment advice which is received by the pension fund trustees if at present that advice is supplied by an insurance company which is authorised to carry on only general business—that is as distinct from long-term business.

There are various options that companies can find to try and cover that particular point. One option is to continue the present arrangements on a non-contractual basis, since it seems that only contracts to manage investments are affected. Another option is for the trustees to seek the advice from another company within the group which is either not an insurance company at all or which is an insurance company already carrying on long term business: that company will already have the necessary Class VII authorisation once the Bill comes into operation. Finally, the third option is that the trustees could seek the advice on what investment policy they should carry out from outside the group altogether. Of course, such advice is readily available from a wide variety of sources and the interests of the beneficiaries of the fund do not demand that the investment advice comes from within the group. We accept that it would be more convenient for the very few companies who are affected if the amendment which is before us today were to be accepted. But we believe that arrangements within the terms of the clause can be set up without any undue or grave difficulty, and certainly there is no question of the Government making life impossible for pension fund trustees.

The conclusion that we come to is that the intention underlying the amendment which has been proposed by the noble Lord, Lord Banks, simply cannot be reconciled with the life establishment directive. However, I would assure the Committee that this particular intention has been very carefully considered on a number of occasions, but I am afraid that we could not properly go beyond the changes that have already been made to Clauses 15 and 34 in another place. I hope that that goes some way towards explaining the Government's reply to the very complicated amendments which have been so ably proposed by the noble Lord, Lord Banks.

Lord Bruce of Donington

I am in some difficulty about the purport of this amendment and also the general sense of the noble Lord's reply, clearly and skilfully though he may have presented it, as indeed, I am sure he has. I have been in communication with the Life Offices Association and the British Insurance Association who are more particularly concerned with the changes that are proposed by the noble Lord, Lord Banks. They, of course, fully support the amendments which he has put forward. It occurs to me that it may be possible that, if those two particular associations had had the advantage, which your Lordships have had this afternoon, of listening to the long, very detailed and clear exposition that the noble Lord has presented, they may possibly have thought differently.

Therefore, the way in which I should like to leave the matter would be to afford those associations the opportunity of examining in detail what the noble Lord has said this afternoon with a view to seeing whether they have any further observations to offer about it or whether they are fully satisfied with the very detailed assurances that the noble Lord has been good enough to give. Therefore, so far as we are concerned on this side of the Committee, we would like to leave the matter in abeyance with the possibility of returning to it again on Report when there has been further opportunity to study the matter.

Lord O'Neill of the Maine

I should like to support what the noble Lord, Lord Banks, has said and also to declare an interest. I think that the feeling in the insurance industry is that it is not being treated in the same way as other companies. As I understand it, the banks were originally in the same position as the insurance industries now find themselves in and they, in fact, have had their situation straightened out. Therefore, I should like to support what the noble Lord has just said. Can the noble Lord the Minister give us an assurance that he would be willing to have yet further discussions with the BIA to see if something could not be hammered out before the Report stage?

Lord Lyell

I should like to attempt to reply to the noble Lords who have spoken in the order in which they spoke. I should like to attempt to reply very briefly first, to the noble Lord, Lord Bruce of Donington. The noble Lord informed the Committee that he had been in touch with the Life Offices' Association and the British Insurance Association and he said that they had indicated their full support for these amendments. The information that I had was that the opposition was not so total as in such a letter as the noble Lord, Lord Bruce, might have, but that there were one or at the most two companies, which still found some difficulty in this matter. I think that this matter is very germane to the point raised by my noble friend Lord O'Neill.

My noble friend mentioned that banks were treated differently. I hope that my noble friend would accept that there is no question at all of the Government seeking to discriminate against insurance companies which are giving or which may wish to give investment advice to trustees of pension comanies. After all, this advice could be, and often is, proferred by merchant banks, financial institutions and other similar bodies which are not insurance companies.

The main problem that the Government have with this Bill is to fulfill our obligations under the two directives which are particularly relevant to insurance companies. I hope that my noble friend Lord O'Neill might follow the advice and possibly the views of the noble Lord, Lord Bruce of Donington, that perhaps the explanation that I have tried to give could be studied; the department is always at the behest of your Lordships, and, if it were deemed necessary, I am sure that we could have some further consultations.

Lord Banks

I should like to thank the noble Lord, Lord Lyell, for his reply, although he will not be surprised to know that I consider it rather disappointing. On the options which he mentioned, I do not think that they are extremely attractive, but nevertheless I should like to consider them a little further. It seems very unsatisfactory that no distinction can be made between commercial activity on the part of insurance companies within the group and non-commercial activity. Why should this particular type of non-commercial activity be open to commercial and industrial companies and not to insurance companies? To say that is to emphasise the point which was made by the noble Lord, Lord O'Neill of the Maine. Nevertheless I should like to consider this further and pursue the suggestions made by the noble Lord just now in his second reply. That being so, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.]

[Amendment No. 5 not moved.]

Clause 34 agreed to.

Clause 35 [Interpretation]:

On Question, Whether Clause 35 shall stand part of the Bill?

Lord Bruce of Donington

With the leave of the Committee, and as the noble Lord has on various occasions in Committee referred to EEC Directive Nos. 1 and 2, may I ask him whether he has any further news about the progress of the Second Directive, which went to the Council in 1975 and which I understand has recently been the subject of negotiations at Council of Ministers' level? Perhaps I may draw his attention to the fact that under Article 18 of the draft Second Directive a provision is made for its provisions to come into operation two years after it has been ratified. Even on the assumption that the EEC directive was approved this autumn, it would be a number of years before it could be enacted in this country, and that would be 10 years of filibustering within the EEC.

Lord Lyell

Of course, the whole Committee will never be surprised to hear the robust comments of the noble Lord, Lord Bruce, with his great knowledge of the affairs of the European Parliament and, indeed, European institutions. I am not entirely sure to which directive the noble Lord refers, but if it is the one which the noble Lord normally raises on these occasions—we might call it Bruce's hobbyhorse—I am given to understand that this particular animal has made certain strides forward. Perhaps I may consider what the noble Lord has said and write to him a little more expeditiously than I did following the last occasion on which I promised to write to him and, indeed, the noble Lord, Lord Banks.

Clause 35 agreed to.

Clauses 36 to 38 agreed to.

Schedules 1 to 5 agreed to.

House resumed: Bill reported with an amendment.