ECC 37th Report: Employee Consultation

HL Deb 21 October 1981 vol 424 cc757-99

2.54 p.m.

Lord Wolfenden rose to move, That this House takes note of the report of the European Communities Committee on employee consultation (37th Report, H.L. 250).

The noble Lord said: My Lords, I rise to move the Motion standing in my name on the Order Paper. This report deals with complicated and often controversial issues and I should like to express the committee's thanks to those who have guided us through them. First, our specialist adviser, Dr. Frank Heller, who has kept us informed about practice in other member states as well as enlightening us about our own country. Secondly, I would pay tribute to Mr. John Turnbull, Clerk to Sub-Committee C, whose habitual calm was never ruffled by tantalising telephone conversations throughout Europe or complicated arrangements for the attendance of elusive witnesses. Thirdly, it is right that I should acknowledge the help and information which were given to us by the British Embassies in three of the countries concerned.

But they could not have helped us as they did if the committee had not had the advantage of written and oral evidence from many quarters, including the Departments of Employment and of Industry, the TUC, the CBI, the Institute of Directors, the European Trade Union Confederation, and the Industrial Society. Especially we valued visits from members of the European Parliament, Mr. Roland Boyes, Mr. Amédée Turner, QC, and Mr. Aart Geurtsen, and we had the benefit of informal discussions with Mr. Grennan of the Commission. The evidence submitted to us will be found in the appendices to the report, and those of your Lordships who can find time to read it will, (a) learn a great deal, and (b) see how deeply the committee is indebted to them all.

Before I proceed to a detailed examination of the committee's report, I hope that perhaps I may have your Lordships indulgence if I mention, very briefly, another issue, slightly different but highly relevant. Almost simultaneously with their consideration of the proposal on employee information and consultation the committee had before them a separate, but obviously related, draft directive from Brussels on employee participation in asset formation. The main tenor of this document was the desirability of enabling employees to participate in the fortunes of companies, their own or others, through ownership of shares in them. This might well be considered as a special case of the general subject of employee consultation and participation. After some discussion the committee decided that, although the two issues were closely related and it might seem artificial to separate them, they should nevertheless examine them separately, since there were two separate initiatives from the Commission. Accordingly, the committee has reported separately on asset formation and on employee consultation, and it is to its report on the latter that I now turn.

My Lords, I have hinted already that we are here concerned with complicated and often controversial issues. The document with which the report deals is entitled: Proposal for a directive on procedures for informing and consulting the employees of undertakings with complex structures, in particular transnational undertakings". So we are not dealing with a directive or even a draft directive but with a proposal for a directive.

There is, of course, one great advantage in having the document submitted at what I may perhaps call its embryonic stage, namely, that there is the opportunity to make comments that will be taken into account at the next stage of policy making and drafting. It sometimes happens that draft directives come before your Lordships' House at too late a stage for comments and criticisms to be able to have much effect. That is not so in the present case, where we are dealing with a proposal of great importance at a very early stage. We have reason, indeed, to believe that amendments have already been proposed in the European Parliament.

Further, there is also reason to believe that before its submission the document had already been amended in one important respect. It was originally intended that it should apply only to transnational undertakings. But it was pointed out that this would be discriminatory in relation to undertakings which were not transnational, and that the same rules must apply to all complex structures, whether transnational or confined to one member state. Hence the wording of the title, which is clearly intended to be universal in its application, with what is almost a postscript saying, "in particular, transnational undertakings". It may be that the balance of the proposal has been jeopardised by this change. Certainly that change introduced the vexatious issue of the Community trying to legislate outwith the Community.

I am deeply aware that there are a great many of your Lordships who are infinitely more knowledgeable in this field of industrial relations than I can ever hope to be and I hope that they will forgive me if, by contrast with their lifelong experience and accumulated wisdom, what I have to say seems naive and jejune. What I propose to do is simply to concentrate on the five headings of the summary of the committee's conclusions and expand briefly on each.

The first statement is that: There is a need to improve information and consultation procedures". Naturally, the committee heard a good deal of evidence on this point from both sides of industry. I wish, incidentally, that we could stop thinking and talking about "sides" with the inevitable suggestions of opposition and conflict. But I think it would be artificial for me to import some newfangled neologism into the accepted vocabulary. Naturally, the views expressed were very diverse, ranging from a belief that everything in the garden is lovely to the complete opposite. But those extremes were rare, and as our discussions proceeded the armies embattled in their fortresses in the hills came down into the plain to talk with each other amicably and constructively. Far more frequent and authoritative were opinions that things were not all that bad but there was plenty of room for improvement and that, in so far as this might require a change of approach by employers, it need not unduly embarrass them.

The crucial questions, of course, are: What sort of improvement and how do we bring it about? Here the committee found helpful the distinctions which the Industrial Society drew in their evidence to us between briefing, consultation and negotiation. One of our witnesses reckoned that 50 per cent. of what goes wrong in industry is due to misunderstanding. So these distinctions are not merely semantic, but represent a positive analysis with a view to greater clarity in policy-making and in practice.

"Briefing" is downward communication through the management chain, including supervisors; "consultation" provides formal channels of two-way communication through representatives elected by employees: and "negotiation" is the trade union/ management procedure through which the two parties jointly agree on a course of action. Of course, those distinctions and definitions do not solve the problems, but the observance of them might lead to far less misunderstanding and therefore to greater mutual trust and increased efficiency.

Three important questions arise here. First, how much in real life do employees want to know? Obviously they want briefing and consultations about matters which affect their own business and bosoms, projected closures, plant reorganisations, working conditions and so on. But are they really interested in receiving information about far-flung subsidiaries in other countries of the Community, often concerned with products and fields of operation totally different from their own?

Secondly, do they want the information relevant to their own jobs to come down the line until it reaches them individually, or do they want it to be conveyed to them only by their elected representatives? Thirdly, on either route, what guarantees can be required or given about the confidentiality of information the disclosure of which might be of value to a rival firm? On those points there were marked differences of opinion among our witnesses.

That leads me to the second of the committee's conclusions: that the proposed directive, as at present drafted, is too detailed and too doctrinaire. Documents from Brussels are sometimes criticised as opaque, ambiguous, tortuous or, more succinctly, "wet". None of those adjectives could be applied to the present one. The trouble is rather the opposite: that it is too sweeping, too detailed in what it tries to cover and too rigid in its approach. The doctrinaire goal of complete harmonisation is pursued with little regard for the widely differing histories, traditions, practices and procedures which exist in member states in this highly sensitive field of industrial relations. The attempt to impose a black and white uniformity is likely to produce more problems than it solves.

Nevertheless—and this is the committee's third conclusion—things cannot be left as they are. Without going the whole hog of imposing uniform mandatory requirements throughout the Community there is a fairly general recognition that voluntary arrangements, often made piecemeal and ad hoc, are not enough. The Committee recognise that many companies do have excellent information and consultation arrangements; but unfortunately there still occur examples of poor or almost non-existent consultation on matters which may involve very serious consequences for employees. There are confusions, inconsistencies, sometimes contradictions; and there is often a reasonable complaint that, "We don't know where we stand". It is also the case, according to evidence received, that in the area of communication and consultation formal legal backing for procedures is less extensive in the United Kingdom than in other member states. What, then, can or should be done?

In its fourth conclusion the committee makes a suggestion for consideration by your Lordships' House and, it may be hoped, by the Commission. It is that instead of a detailed and all-embracing directive there should be a framework directive, supported by an agreed body of guidelines. The directive would set out clear objectives and minimum standards to be observed throughout the Community and guaranteed by legislation throughout the member states. It would be what I think is sometimes called the "rock-base".

The practical steps by which these standards should be attained would be taken in accordance with the guidelines, and would doubtless differ from one country to another in the light of its presently existing position and procedures and its legislative practices. There were, indeed, those among our witnesses who held that the existing OECD guidelines and the ILO tripartite declaration were of themselves sufficient, without legal underpinning. But the committee decided—some of its members with some reluctance—that a basic minimum of mandatory authority was necessary.

It would be easy to dismiss this suggestion as "a typical British compromise" or even as a piece of mugwumpery. I think that that would be unjust. If the present position is recognised as unsatisfactory, and if the root and branch approach of the Commission is recognised as insensitive, what is wrong with proposing a solution which tries to combine the advantages of each with avoidance of the disadvantages of both?

Therefore, I come to the committee's final conclusion. This, not unexpectedly, is that the Commission should pursue further consultations and arrive at a redraft which will be more acceptable to the social partners; and there are indications that the Commission itself now considers that this is necessary. Apart altogether from national Governments and legislatures, the European Parliament and the Economic and Social Committee are known to have views, some of which, I have reason to believe, are being put forward in Strasbourg at this very moment. As I have already said, there is general agreement that something positive should be done in this extremely important field, where attitudes have perhaps become unnecessarily polarised. The question is, What? I hope that this report and your Lordships' observations on it today may play some part in answering that question in a positive and fruitful way. My Lords, I beg to move.

Moved, That this House takes note of the report of the European Communities Committee on employee consultation (37th Report, H.L. 250).—(Lord Wolfenden.)

3.12 p.m.

Lord McCarthy

My Lords, I should like to begin by apologising to the House in general and to the noble Lord, Lord Wolfenden, in particular, if this debate goes on beyond six o'clock, because I am afraid that at that stage I have to leave to fulfil another engagement. Perhaps it will not, and I hope that it will not; in that context I shall try to be as brief as I can. As regards my own remarks, I should like to do four things. First, I should like to congratulate the noble Lord on another valuable report, one of many valuable reports that he has produced over the years.

Secondly, I should like to say something about the nature and significance of the draft directive as I see it today, because I do not totally agree with his view and his committee's view on the significance of the draft directive. Thirdly, I should like to say a little about the arguments of the opponents, and in particular the opponents as they are represented by the CBI and by the Government. Finally, I should like to pose one or two questions to him as a representative, if he is, of the committee's general views.

First, of course, it is an admirable summary of the position, and in general terms I think that I would agree with four out of five of his conclusions. I cannot agree—and I want to say why subsequently—that this is a too detailed and doctrinaire directive. I think that on the whole it is a rather general and modest directive, but I shall come to that later. Nevertheless, it is an admirable report; not least is it an admirable report in the evidence which it put in and in the very useful summary of the state of research in this subject, which is contained in the report as a part of the appendices. Indeed, I make no bones about the fact that I am always on the lookout for examination cribs, and those parts of the report will make an excellent examination crib; indeed; so far as I am concerned, that is what they will be used for. Therefore, in general terms it is an excellent report and I am sure that we should all like to thank the noble Lord and the members of the committee for producing it for us.

Secondly, on the nature and significance of this report, I should like to say that I regard it as a modest, flexible and more than justified series of proposals. It is a modest series of proposals for a number of reasons, some of which, in fact, the noble Lord mentioned. The first is the scope of what is suggested. As he rightly said, we are taking the breakdown of the industrial society; we are talking about consultation, about the passage of information, about briefing people. We are not talking about the nasty, dirty business of negotiation and collective bargaining. As a result of this draft set of proposals, nobody will be forced to agree, negotiate or bargain with any dirty trade unions. It is not that kind of thing at all; it is much more elevated, modest and moderate. So it is modest in its scope.

However, if you look at the subjects which are listed, you will see that they are relatively modest and noncontroversial. Employees are to be told about the economic and financial situation in their organisations; they are to be told about their employment prospects, about any rationalisation plans, about closures and the consequences of closures for them. So in terms of the subjects listed I would say that this is a modest and non-controversial list and that any decent employer would want to tell his employees about matters of this kind.

However, it is also modest in the details of what you need to be told under these subject headings. For example, you have to be given the reasons why the employer intends to do things. You have to be told about the impact on the workforce of these various decisions; for example, in particular, closures or partial closures. In both these respects, I would say that this is a modest, reasonable set of proposals and, as I say, it has nothing to do with collective bargaining. If anyone says that it is unusual, that, of course, cannot be sustained because in both these respects, as regards the subject matter and what needs to be told under the various headings, the Commission is following the actual model which was found to be acceptable by all member countries in the case of the draft statute for the proposed European company. There were no great outcries when these lists were put forward for the proposed European company statute, and in broad terms Article 5 and Article 6 follow those words.

Therefore, in these respects I would say that this is very modest, and it is very reasonable in respect of what is provided for the protection of confidentiality. Once again, the models here are previous EEC models. I challenge anyone to say that the proposals for confidentiality and the protection of confidentiality in this draft draft directive would rule out of account, for example, the kind of generally satisfactory proposals —which have caused employers very few difficulties—which we have in the Employment Protection Act at the moment. No one would suggest, for example, in the disclosure provisions that the kind of protections for confidentiality—which under the Employment Protection Act have been administered by the CAC and by Professor Woods as chairman of the CAC—would not hurt a fly. Yet these are the kind of protections which, I would suggest, could be perfectly easily encountered under Article 15 of this draft draft directive.

Finally, on grounds of modesty, the sanctions which are to be imposed, if the employer does not carry out the provisions of this draft draft directive, are also reasonable. Indeed, they are left to the country concerned. Once again, in this draft directive there is no reason why we should not have the kind of sanctions which we have at the moment for the disclosure provisions under the Employment Protection Act. No one would suggest that they are unfair, invidious or impose great fines and penalties upon employers.

Therefore, I would say, first, that this is a modest set of proposals. Secondly, undoubtedly it is flexible. I do not see how anyone can say that it is rigid and doctrinaire. It is extremely flexible. For example, there is no insistence on a particular model of consultation on the workers' side. Nobody is saying that we must have statutory works councils, as for example they have in most countries in the Common Market and on the mainland of Europe. Nobody is saying conversely, as was said for example in the majority report of the Bullock Committee, that we must have joint shop stewards' committees. You can have what you like. It is quite open. No one is insisting that these procedures of consultation should be dominated by trade unions, or that non-unionists should be excluded. All this is left to the country concerned and the way in which a particular Government might want to do this.

There is specifically stated in the draft draft directive that there should be a respect for existing practice. As I have said, you can do what you like on the question of sanctions. In any case, as the noble Lord, Lord Wolfenden, has rightly said, we are at a very early stage in this draft draft directive. All we are really being asked to do at this stage is to say whether we agree with the general approach; that there should be this general set of subjects with this general requirement to consult, the institutions to be worked out subsequently; and whether at the end of the day there should be some legal underpinning of this system. This is all we are really being asked to say at this stage.

We know that this will not yet appear before the European Parliament or its Economic and Social Committee. We know in fact that we shall be extremely lucky if this draft directive becomes a directive by the end of 1983, so no one can say that we are being rushed. The only firm commitment, I put it to the House, in this directive from which there is no real escape is that there must be a consultative committee, an information giving committee, at the level of the central authority of the enterprise. If the central authority of the enterprise is outside the European Economic Community, then there must be a consultative committee of some kind in the largest subsidiary of that organisation in the EEC. This is the one firm commitment in Article 7.

Again I would say that that is an eminently reasonable proposal, and anybody who does not agree with this is really not arguing in favour of the development of consultation in this country at this point of time. Therefore, for this reason I would say that the proposal is eminently justified, especially in the United Kingdom, for several reasons. First, as the noble Lord has said, the research evidence collected by the committee shows that we are in fact in a relatively poor position so far as consultation is concerned in this country as compared with our European friends, especially above the level of the plant.

There are virtually no procedures for consultation in the large private sector conglomerates in this country. No negotiation. No consultation. Most interaction between the representatives of employees and the representatives of management takes place at plant level and below. All the research indicates this, and therefore for these reasons this proposal is eminently justified, particularly in this country. But in general terms, as the noble Lord has said, we have done less than any other country in Europe to improve this situation by legislation. Indeed, very large parts of this directive are already in operation over large parts of private and public sector industry in Germany, France, Belgium, and other EEC countries.

In this country we have virtually no legislative support for consultation outside the area of redundancy and disclosure. Whereas most other countries in the EEC have some form of worker participation at board level, we no longer talk in any way about the implementation of the fifth directive. At least during the period of the previous Conservative Government from 1971 to 1974, somewhere in the basement of No. 8, St. James's Square an assistant secretary toiled away trying to produce a draft White Paper or Green Paper on industrial democracy. Now we do not hear about that any more. Nothing whatever is being done to extend consultation, or information processes, by legislation or legal support by this Government in this country.

In all these ways we contrast very sharply with virtually all other European countries. Yet the curious thing is that we prate more than almost anyone else about the virtues of consultation. We prate about our conflict ridden system of collective bargaining dominated as it is, we say, by the confrontational element of trade union and employer wage bargaining. Yet we know that this is partly at least, not entirely, the historical result of the fact that the British system of industrial relations gives great power and great influence at the bottom where the considerations on the workers' side are always sectional, always short term, and bound to be narrow in their incidence. Whereas we have virtually no dialogue going on at all at the level of the company, or the corporation, in large parts of British industry. So that all the British worker can do about a closure when he learns about it is to strike, or conduct a sit-in. So for all these reasons I would say that this is a modest, reasonable, flexible, justifiable set of proposals.

So I come to my third point, which is the opposition. I should like to take first the opposition of the employers, and in particular the opposition of the CBI. As I understand the evidence which the CBI gave to the Select Committee, they said that the draft draft directive was a dangerous affair because of three things. First of all, they said it would lead to conflict and litigation. A strange thing for the CBI at this moment in time to be worried about. There you are—it would lead to conflict and litigation. They said it would lead to a situation in which workers were showered with unnecessary information; and they said it would undermine local management initiatives.

One could spend a lot of time going into the reasons why the employers say these things. In some ways it is quite natural that an employers' association should say these things. There are two answers to them. The first short answer is that, of course, so far as this country is concerned they said similar things about the Employment Protection Act, the Equal Pay Act, the Redundancy Payments Act, and about every attempt to introduce positive employment rights from the beginning of the Factory Acts. The second thing to say about them of course is, as our friends in the European TUC said to the committee, they are not alone, because all European employers' associations said much the same thing; in particular in Germany at each stage of the co-determination experiment since the war. They all said it would lead to conflict and litigation. They all said it would do no use to give workers this unnecessary information, and they all said it would undermine management initiative. Nowadays we know of course that you cannot move for distinguished employers from continental countries in Europe coming to seminars in this country to explain how their system of co-determination is the main reason why they are so much more productive than we are.

In fact, the central problem in consultation and information is completely the reverse. It is not that it leads to litigation. It is not that it showers workers with useless information. It is not that it undermines the employers' authority. It is that you have great difficulty in getting the workers, and even the representatives of the workers, to read what they should read—or what you think they should read—about the actual day-to-day problems of the company, and to ask the right questions about how they can make their contribution to overcoming those problems. Without the correct framework—and as the continental countries have found, without, if necessary, the correct framework underpinned by legislative provision—you cannot get the kind of information flow and the kind of dialogue at the right level in the organisation at which this whole process can begin.

Now a few words about the attitude of the Government, and it was an amazing position which was advanced to the committee by the luckless Mr. Galbraith, who I may say, I do not blame; he had his brief and he followed it through. He was asked the things we ask our civil servants to do; he was asked to advance two mutually contradictory, fallacious arguments: first, that employee involvement is essential but that it is possible only on a voluntary basis; as he put it: where managements themselves want such improvements and employees are willing to respond". That was the first proposition. The second was that, given the widely different circumstances which operate in particular companies—I ask noble Lords to pass over why that is so—it would mean that, the imposition by law of a single inflexible system would cause serious problems and undermine useful voluntary initiatives which are already taking place". I ask the House to set aside the fallacy within a fallacy, to set aside the fact that this comes from the spokesman of a Government prepared to impose any inflexible system you like in relation to a whole range of EEC regulations which have affected a large area of British economic life, from settling the fate of the British kipper to the reform of British companies.

On this analysis, there could be no basis for the Factory Acts, for health and safety legislation, for race discrimination legislation and even for wages councils, because, of course, all these pieces of legislation were created in circumstances where either management or employees, and sometimes both, failed to see the need for such things. And they all created some form of legal system which the opponents of legislation at that time said was an inflexible system which prevented voluntary initiative. As I say, on this argument, the whole range of positive labour law could have been resisted, and maybe the Government will go on, on this basis, to repeal it all.

But it is not only positive labour law which would fall under this two-headed monster which the luckless Mr. Galbraith has been asked to put forward. On this basis, what becomes of the Employment Act 1980? Surely the exclusion of trade union membership, the legislation on secondary picketing and the provisions on the closed shop were all denounced by the trade unions because they said they undermined useful voluntary initiatives. And certainly we did not have a situation in which both management themselves wanted such so-called improvements and employees and trade unions were willing to respond. I leave aside what the consequences would be for what we shall no doubt in the coming months come to call Tebbit's Folly—all the proposals in the next Industrial Relations Bill for destroying the immunity of trade unions and the protection of their funds, for abolishing all forms of secondary picketing and for abolishing the present parity of compensation in respect of unfair dismissal. No doubt those will be opposed by one or other of the parties, who will say that they destroy voluntary reform and regulation. I venture to say, however, that the Government will nevertheless turn a deaf ear to those arguments on that occasion, although they would not expect us not to remind them on that occasion of the arguments they are using on this occasion.

The truth of course is that, from the mouth of the Government, talk of voluntarism in this area is like patriotism, the last refuge of the scoundrel. In fact, voluntarism in industrial relations is a name given by an academic, Professor Otto Kahn Freund, to the agreement in the 1950s of both parties, employers and trade unions, with the present state of labour law, both positive and collective labour law. On the whole, in the 1950s, and even in the early 1960s, the parties defended the status quo, and it was defence of and satisfaction with the status quo which was what volun- tarism meant. The fact is that we no longer have any agreement on the status quo. Developments in Europe in positive labour law, the actions of the judges in undermining the 1906 settlement and the counterattack of employers and Conservative lawyers on trade union rights have destroyed agreement about the status quo and all meaning of the word "voluntarism". A defence in terms of voluntarism means, "I don't want it" or, "My side won't have it".

The sensible man, if he wishes to criticise any set of arguments for extending the area of legal regulation, will not talk about voluntarism; he will ask, "What is the balance of rights here?", "Whose rights should and could be advanced by law?", "What is the utility, the use, of what is being suggested and will it help the progress of good industrial relations?", "What do they do in other countries?", "Is what we are doing rather insular, or can we show that in other countries things like this have been happening for some time and in fact they have had beneficial effects?" If, in terms of the balance of rights, the utility and the comparative position, he comes out in favour of an argument which supports a particular set of proposals—as I think these arguments support this set of proposals —then he will argue in favour of them and not fall back on talk about voluntarism.

Therefore, my final point to the committee is to ask the noble Lord, Lord Wolfenden, whether he will say what it is about this draft directive which his committee regarded as too detailed and doctrinaire. I cannot see it. Other than that, I wish to thank him once again for initiating this debate and for summarising, in the extremely valuable way he did, his report. Mr. Justice Wills once said to F.E. after a very long exposition of his case: If that is your argument, Mr. Smith, I am no wiser". To that, F.E. replied: No, my Lord, but perhaps rather better informed". I suggest that in this debate today, because of this report on employee consultation, we have been made both wiser and better informed.

3.38 p.m.

Lord Rochester

My Lords, from these Benches wish to join in thanking the noble Lord, Lord Wolfenden, for the clear way in which he introduced the debate and, for my part, to say how grateful I am to him and the members of his committee for allowing me to join in the discussions on this crucial matter. I am glad also to associate myself, subject to one important qualification to which I shall return, with the conclusions reached by the committee and expressed in the final paragraphs of the report.

It is plain that employers are at variance with trade unions on this proposed directive. I am therefore glad that the Commission are now contemplating a redrafted directive, for, in this matter of employee consultation in the Community, I am convinced that it is best to seek the widest possible support through international consensus. It follows, in my view, that the use of the law should be limited at this stage to certain clearly defined minimum standards, supported by a code of practice which recognises the complex differences between the social, legal and industrial systems in the various countries that comprise the Community.

Let me now get out of the way as quickly as I can the more negative parts of what I have to say. Unlike the noble Lord, Lord McCarthy—and he made a number of points with which I disagree, but I shall not spend such time as is available to me in crossing swords with him—I subscribe to the general view of the committee, expressed in paragraph 67 of the report, that as at present drafted the proposed directive is indeed too detailed and too doctrinaire, and 1 shall endeavour briefly to take up the challenge of the noble Lord, Lord McCarthy, in saying why I think so.

From Articles 4 and 5, for example, it is clear that existing national legislation would need to be supplemented in order to ensure that employees receive such additional information as would enable them to obtain a full and comprehensive picture of the activities and the results of the undertaking as a whole in the various countries in which it operated. But as one of the papers received by the committee put it, the emphasis should surely be on quality of information, rather than on quantity, and in my experience employees' representatives are normally satisfied to have that information which affects those whom they represent or is relevant to their activities.

Then again Article 5 makes it plain that if national management is unable to supply the information required, employees' representatives will be able to-request it directly from the management of the dominant undertaking, even though the headquarters of the undertaking is located in another country. But that might enable employees' representatives to seek information from the management of the dominant undertaking without first notifying the management of the subsidiary of their intention, and that it seems to me would be altogether at variance with normal consultative procedures as I have experienced them in this country.

Then in Article 6 there is a reference to employees' representatives being authorised to open consultations with central management through what are called authorised delegates. But surely, under whatever conditions consultations with central management may be opened, at the very least it should be a requirement that those undertaking that task should be elected on a democratic basis. In the same article it is not, in my view, made sufficiently clear that, although the expressed aim of such consultations is to reach agreement, the exercise would remain one of consultation rather than of decision-making. Moreover, as to the substance of the information to be provided, although I can understand, and even sympathise with, the concept that employee representatives, and for that matter employees themselves, should have rights to as much information as shareholders, I cannot for the life of me see why they should have more information.

Lastly on this aspect of the matter, there is the now notorious so-called "hostage provision" in Article 8, under which in the case of firms whose decision-making centre is located outside the Community, the management of the subsidiary employing the largest number of people in the Community may be held responsible for fulfilling the obligations imposed on the management of the whole undertaking. That criterion could lead to legal responsibility falling upon a company in a Community country other than that in which the offence against the directive has taken place. It might be that the subsidiary thus arbitrarily selected was excellently managed, but because it operated in a field of production different from that of the transgressor, it would not have the particular knowledge needed to obtain the appropriate response from the headquarters of the undertaking in another continent. Surely there must be some more rational means than those which could be used to deal with such a situation.

I have mentioned those points to indicate my agreement with the committee's view that the proposed directive needs extensive revision before it can be accepted. But having got all that off my chest, so to speak—and I do not doubt that other noble Lords will wish to elaborate further on some of those points—I should like now to draw on my experience in industry by making as constructive an approach as I can to some of the basic questions that the proposed directive raises.

I should perhaps first remind the House that in the view of my party British companies of the kind that we are discussing should have supervisory boards of directors and that in them employees should have equal rights with shareholders in electing to such boards directors who would thus be representative of both groups rather than of one or the other. That course is surely much to be preferred to other arrangements that have been canvassed in recent years for so-called worker-directors. However, that is a matter that has to do more with the fifth directive than with this one, and it is concerned with co-determination rather than with consultation.

In Western Germany there are already supervisory boards on which representatives of the employees sit. Indeed, the German subsidiary of the great international company for which I used to work is run in that way. My own feeling, for what it is worth, is that if the attempt were to be made immediately to transplant any such arrangement into this country, our existing culture could not tolerate the shock; and that is not to say that it is an unworthy objective at which to aim. But in my view employee participation will flourish here only through organic growth, which starts at the bottom and works upwards, rather than the other way round. Everywhere, however, the seed should surely be sown.

I am firmly of the belief that it should now be made a statutory requirement for all undertakings employing more than a certain number of people to set up consultative committees. Before decisions are taken on specified items that directly affect employees, such as investments and plant closures, in my view it should be made obligatory for management to discuss those matters with employee representatives.

And here I come to the qualification that I mentioned at the beginning of what 1 have to say. This is, I realise, to go a little farther than is envisaged in paragraph 69 of the report before us, in which it is suggested that a code of practice embodying guidelines should require organisations to set up consultative committees. But, in my view, as I endeavoured to make plain in the committee, by definition guidelines cannot have mandatory effect, and it follows that this particular requirement should form part of a revised directive, rather than merely be incorporated in a code of practice. Such a step would be timely because, as I see it, it would simply be a matter of building on the present practice of the most successful undertakings in the Community, including companies in the United Kingdom. For the rest I am content for the time being that guidelines concerning procedures for consulting and providing information should be put in the suggested code of practice, and of special importance, as the report recognises, is the point that such procedures should clearly be distinguished from collective bargaining.

The organic growth of which I have spoken has certainly worked well in my old company, for in this country it has had works councils since its inception 65 years ago, and there are now integrated consultative committees at divisional and company level, capped at the top by a representative central business and investment committee.

Paragraphs 24 and 25 of this report note the view of the European employers' organisation (I really dare not pronounce it by its French title) that where this proposed directive, draws on the legal requirement to inform and consult which already applies in some member countries, it overlooks an important factor. In those countries the law 'also defines the duties of the employee representatives'. It stipulates or implies that the Works Council's function is to' aim at co-operation between the employee representative and management in the interest of the efficient running of the enterprise'.". The British Bankers' Association, in their evidence, argued that the proposed directive, is heavily influenced by the practices of countries that have 'a Works Council structure divorced from trade union machinery'. This is not the case in the United Kingdom". To that, I think I would have to say: So what? We have to deal with the situation as it is, and not as we might like it to be. In a unionised company in the United Kingdom employee representatives will by definition be union members, often shop stewards, being consulted at one time and negotiating at another. But we cannot, on that account, get off the world.

Paragraph 66 of this report says: The Committee believe that employee demands are not likely to go away". Just so. Faced with increasing demands from an educated workforce to be more fully informed and to exercise more influence in the making of decisions that affect them, we must make a positive response. The president of the CBI, Sir Ray Pennock, recognised this need long ago. If we simply stand still British employers will find, eventually, that regulations are imposed on them which are far more stringent and less acceptable than those we are now discussing. Of course, all this places a tremendous additional burden on management in this country to achieve with their employees a shared understanding of business realities, but it is only by providing relevant information and adequate facilities for consultation that that will happen.

There is one more thing that I want to say about the provision of information, and it is in strong support of the evidence given by the Industrial Society to the committee, to which the noble Lord, Lord Wolfenden, referred in introducing this debate. Providing information to the representatives of employees is not nearly as important, in my experience, as that management and supervisors should regularly tell employees themselves, in small groups, face to face, what is happening and why, and how what is going on in a particular department affects or is affected by happenings up or down the line. As Mr. John Garnett, a director of the society, stressed to the committee, it is no use looking to employee representatives to pass down word from management. That is not just because the message will become distorted in the telling but because employee representatives are elected to represent the views of their constituents to management and not the other way round by doing the job of management for it, and if that principle is not observed employee representatives will fall flat on their face, they will be dubbed "bosses' men" and they will simply cease to hold office. In conclusion, I would simply say that although this draft directive is not in my view acceptable in its present form it has performed a useful service in reminding us of the needs of British industry in this vital matter of employee participation.

Lord McCarthy

My Lords, before the noble Lord sits down I wonder whether he could reassure me in what I seem to see as a conflict in the direction of his criticisms. Is it not true that most of the suggestions he proposes want to make the directive more vague and imprecise—for example, what he says about Article 5—but that one or two seem to want it to be more specific? For example, in Article 8 he wants to specify a way of making external organisations responsible; and, most particularly, in Article 6, as I understand him, he wants to insist that the representatives should be democratically elected. This would make it much more precise, and surely that is in conflict with the other things he says.

Lord Rochester

My Lords, I am glad to have this opportunity to make it plain to the noble Lord, Lord McCarthy, that the whole tenor of my remarks was intended to be directed to the proposition that the law should play as little a part in all this as possible. I hoped I had made it plain that there was one exception to this, in my view; namely, that the time had now come when consultative committees should be set up in companies over and above a certain size, and that the employee representatives on those committees should have the right to be consulted about certain specified matters.

3.56 p.m.

Lord Redesdale

My Lords, may I first apologise to the House that I may have to leave before the end of this debate, and hope that your Lordships will not consider this discourteous. I am afraid, however, there is a flight that I must catch tonight, and it is the last one. I should also like, right at the outset, to thank and congratulate the noble Lord, Lord Wolfenden, on introducing this debate and in putting forward his views so clearly; and I would also congratulate his committee on preparing such an excellent report on the draft directive, which one knows so much better as the Vredeling proposal.

My Lords, I have to declare an interest in that I work for an American multinational bank. However, this puts me in an excellent position to know how multinational corporations actually work, which is very different in fact from the way the proposers of the draft directive believe these operations function. These misconceptions are a very serious flaw in the drafting of the proposal as it stands. However, the proposer obviously started out with the very best of intentions to produce legislation that, through greater disclosure of information, would result in greater security of employment and improved industrial relations. Let me state here and now that I know that most multinational corporations fervently wish to improve industrial relations, and also believe that good communications result in a better informed workforce that overall works to everyone's advantage.

However, what is really necessary information is the crucial point in this directive, and it would seem that Mr. Vredeling and his supporters have become somewhat over-enthusiastic as to the degree of disclosure that they require. This would result, not only in a flood of useless information but also in the disclosure of trade secrets and other sensitive information that would put companies operating within the EEC at a very dramatic disadvantage in relation to those operating outside the area. In fact, this disadvantage would be so severe that it is not an understatement to describe the directive as it stands as a recipe for European industrial disaster.

The conditions laid down in its present form (I stress "its present form") are so rigid that their imposition, when developed even further and applied by the draft directive to industries, would inevitably produce an enormous and pointless bureaucracy that would soon stifle even the strongest companies that are already having a hard time in maintaining their position in the highly competitive markets of today. The inevitable delays in decision-making, reduced competitiveness and inefficient working could regretfully result in forced closures with huge job losses. This is just the opposite of what the directive sets out to achieve.

Let us just see how tough and significant is the nut which apparently requires such a massive legal sledgehammer to crack. It would seem that the proposers believe that telegram closures of plants by multinationals are an everyday occurrence and have to be stopped whatever the cost to the rest of industry. In fact, the actual number of instances of bad industrial relations is infinitesimal when compared with the great benefits to the community that these organisations have brought. The present Commissioner, Ivor Richard, cites as the most blatant example the closure by our own nationalised British Leyland of their Belgian plant. Regrettably competitive markets sometimes do become totally uncompetitive, but most multinationals have gone to enormous trouble either to transfer work or, in the end, to ease the closure as much as possible.

The record of the multinationals overall has been excellent and, when it comes to the American multinationals, their record is particularly good. Many subscribe to the OECD guidelines and have an excellent record of industrial relations. They have invested more, contributed more to the economies of their host countries, pay higher average wages, have higher productivity rates and do their best to observe all the laws and regulations of the countries in which they operate, because they wish to go on operating there and, if possible, to expand; and this, in turn, necessitates good relations with national Governments and labour.

So, my Lords, a lot more could be lost by rigid disclosure legislation than could be gained. A wide range of companies and trade associations have spent a considerable amount of time looking at the draft directive and consider that it would reduce the competitiveness of EEC industry and result in a deterioration in industrial relations because of four main issues.

First, there is a requirement of the draft directive that forward plans should be disclosed in a number of areas that would normally include sensitive information valuable to competitors and therefore dangerous for an organisation to allow to become public. This sort of disclosure could well reduce the profitability of the company and consequently adversely affect employment prospects for the whole workforce. Even with the very best will in the world, the more people who know a secret the less secure it becomes. Of course not all the information that has to be disclosed is particularly sensitive, and there are very good industrial relations reasons for keeping the workforce well informed. But there is a world of difference in degree between sufficient information and total disclosure. Disclosure and consultation is much better handled by national laws that are consistent with local practice.

Secondly, over-regulation of business leads directly to inefficiency. The draft directive would certainly result in an organisation having to create a structure of information disclosure and consultation that would be extremely inefficient and costly, and that would delay decision-making and thus reduce the competitiveness of the companies. The directive requires the disclosure of so much information about other subsidiaries that much of it would be of no interest to the employees of the one subsidiary concerned. In fact, it would be vastly time-consuming and counterproductive. The OECD guidelines should be enough to provide the indisputably necessary information. As far as consultation is concerned, there the law should cover only those areas of job security such as major redundancies or plant closure. It should be specific and apply at local level, leaving all other consultation on a voluntary basis.

Thirdly, the draft directive establishes significant rights for employee representatives. This means that all workers must be represented. This is no problem in Germany or Holland but it is a problem here, where employee representation is voluntary and normally through the trades unions. Consequently, this either totally enfranchises the unions or requires a different form of representation, as in Germany.

Fourthly, the proposal diminishes local management authority by giving employee representatives the right, at their own discretion, to go over the heads of local management to a higher level for additional information and consultation. This is contrary to the OECD guidelines as well as going against national laws which are there to ensure that local management has full and proper authority to act according to the rules and regulations of the country. Everything prior to the directive was moving in the direction that good industrial relations require discussion and consultation at a local level. By encouraging employees to go over the heads of local management, the latter's authority is diminished, with a resultant increase in conflict between the employees' representatives and local management.

My Lords, I would respectfully point out that multinational corporations decentralise much authority to local management so that decisions can be made more quickly and can take into account local conditions. Nearly any decision affecting a subsidiary is either made locally or, if at a higher level, only after taking into account the recommendations of local management.

The directive relies primarily and very heavily on German and Dutch law, which is very, very different from that of this country. To a layman, German law seems to be based on the principle that an action has to be proved legal, whereas in the United Kingdom that action is legal unless it is actually prohibited. In Germany, for instance, you are not allowed to use your lawnmower unless you use it at certain specified times and below a certain stipulated level of noise.

But, my Lords, these rigid conditions are taken a great deal further in the directive. The evidence in the report shows that much of the proposed law is of a very innovative nature. Also, it relies heavily on other draft directives that are so controversial that they will certainly be very considerably modified before they ever take the force of law. So it seems somewhat ridiculous to stipulate and enforce such concepts as employee representatives when the proposals for revising company structure are still under discussion. It would seem that this legal egg should come after the proposed legislative chicken.

Going on from here, the way in which the employee representatives would have the right to veto any decision unless they were totally satisfied with not only the information but also the outcome of the consultation would put companies in a totally one-down position. The definition of consultation with a view to reaching agreement is itself so unclear that it could be interpreted in many different ways. In fact, it could be interpreted in any way the employees' representatives wish, producing the ultimate "Catch 22" situation.

Because of my involvement with banking I paid particular attention to the evidence submitted by the British Banks' Association, which is very clear and spells out the special dangers and problems that the directive raises in the form of total disclosure for financial institutions which are obviously dependent on confidentiality. I should like to draw your attention to page 125 of the report, in which their evidence shows the example of a US listed company being placed in the position that it might have to divulge information to its employees in Europe before it could notify the Stock Exchange in New York and thus might be deeming itself guilty of manipulation of the securities market under US law.

My Lords, I shall not weary you further with some of the other very considerable problems such as the hostage provisions or the tribunal procedures in Article 15. The draft directive has been forced through in its present very unsatisfactory state, presumably in the hope that by making it wide enough, part of it will become legislation in the end. This is not a happy state of affairs because, although the intentions are good, the effect would be catastrophic. The point that alarms me most is that yesterday in Brussels the Legislative Affairs Committee met and, as I understand it, the committee put through the draft directive with very minor amendments. Therefore, it goes through in an almost unchanged state. Much of the evidence put forward in this excellent report shows that it needs dramatic changes. If it goes through and is passed by the European Parliament, it will have to be vetoed by the Council of Ministers. Then the best thing is that it should be sent back to the Commission and discussed again from scratch with all the interested parties so that a more satisfactory and workable form of legislation is produced.

4.10 p.m.

Lord Seebohm

My Lords, the noble Lord, Lord Wolfenden, has explained in his normal skilful way the feelings and findings of the committee and I do not think it is necessary for me to make a long speech. I should also like to take this opportunity of congratulating the noble Lord on the skilful and charming way in which he handled our witnesses during the process of our examination. It was extremely well done and he managed to extract from these distinguished people all the information that he required.

In view of the fact that there are almost certain to be major alterations to the draft proposals that we have been studying, it may be felt that this debate is somewhat unnecessary. In fact, I believe that the opposite is the case. I understand that the Commission, and people in Brussels, pay very great attention to the reports of Select Committees of your Lordships' House and also what is said in these debates. So it is incumbent upon us to make what contribution we can from here. As has already been pointed out, the pressure for the proposed legislation has come from the trade union side and is not only concerned with the clarification of employees' rights in a capitalist society, but also to increase trade union power and influence over management decisions. As a result, there has been an almost unanimous opposition from employers and employers' associations.

Some of the main objections from the employers have already been touched upon: that the implementation of the proposals is impractical; secondly, that the importance of confidentiality has been played down far too much; thirdly, that the proposal that employees' committees should be empowered to obtain information from holding companies over the heads of the subsidiary's management is quite unacceptable—as has already been mentioned by other speakers—and in any case if the headquarters is situated outside the EEC I do not believe that it is enforceable.

While I have considerable sympathy with these views, I must admit that some clarification of the rights of employees to relevant information is desirable and I believe also that too much emphasis on the importance of confidentiality is being expressed by employers. Nevertheless, I am in considerable doubt whether any detailed legislation will have the desired effect, and the suggestion that there should be a much more modest approach accompanied by codes of practice seems to me to be the right solution.

There is another aspect of the problem which I hope will be seriously considered and borne in mind by those composing the redraft of the proposals. That is that one of the foremost objectives of such legislation must be to improve industrial relations and not make them more difficult. You cannot make people either love or respect each other by legislation. A successful business will not survive unless, in the long run, the workforce has confidence in the integrity and ability of the management. Nor will the management be able to entrust the consultative committees or works councils with full and meaningful information unless these bodies are democratically elected and fully representative of the workforce as a whole. The composition and method of election of these bodies seems to me absolutely vital. Furthermore, as has already been pointed out, their role must be made clear; that is, whether they are consultative or decision-making; whether they are to come to agreement or agree to differ.

In business there are great varieties of management styles. No one method of personnel management, or any other part of management for that matter, is applicable to all companies. To start with there are fundamental differences between the management of service and commercial industries as opposed to manufacturing industries. Any attempt to bring in detailed regulations applicable to all these is just not on. Then there is the question of size. The present draft brings in all companies or firms that employ 100 or more people. In my experience, very few units with 500 or fewer employees need much guidance of this matter. In one factory I visited which had some 200 to 300 employees the managing director walked round the works every day when he was available, and nearly all problems were solved on the spot. In cases like this, which must be normal for the small business, legislation could only depersonalise the management/employee relationships if it was followed to the letter, which of course it would not be.

In my own case—if I may refer to a personal experience—my first senior appointment was in charge of an area of 180 staff. I found that in a comparatively short time I was able to get acquainted with all of them individually and in those days I never had a problem. My second appointment was over a staff of 400 and it was slightly more difficult and it took rather longer to get to know people well. Nevertheless, I found the same methods I had employed with the previous management had the same effect. The next move found me in charge of 1,000 people. At that point I found my normal informal methods broke down. I had to have various forms of consultation and representative meetings. I will not go into the other forms of management that I had to develop in that situation.

My points are that size and the type of business will affect management styles and management methods which can only be covered by legislation in the very broadest sense. It is perhaps worth making the point that in the end I came to disregard confidentiality almost totally and found that what I used to term "calculated indiscretion" was the best form of lubrication for good relations that I could discover. I think in fact it is worth repeating that when I developed that theme—admittedly I had a larger command—not only did results in staff relations improve remarkably but performance improved dramatically. I do not believe that we are going to legislate in sufficient detail to get the relationship that we require in industry: "The letter killeth; but the spirit giveth life".

Finally, I want to stress one more fact: that is, if we are going to have different legislation for companies which happen to be subsidiaries of holding companies and for those which otherwise are completely parallel in their function and possibly what they manufacture, it is going to be a nonsense. I strongly recommend the report.

4.18 p.m.

Lord Plant

My Lords, I too wish to thank the noble Lord, Lord Wolfenden, for chairing this committee and for the report. I also want to thank Mr. Vredeling, for when he was industrial commissioner he took the initiative in creating this first draft. He has been criticised; but, none the less, I for one support his draft. The EEC is taking the issues a great deal further and in greater detail then the tripartite declaration of the International Labour Organisation on Multinational Concerns and the guidelines of the OECD —which of course is not tripartite, but the ILO is.

I am aware how slowly the employers have moved on these issues. I understand their difficulties, but we have to search for a means of bridging the gap between employers and trade unions. We must be able to equalise opportunities for meaningful consultations. Arguments will continue whether the EEC directive should have legal backing and whether there should be some form of sanctions for those corporations which flagrantly disregard moral and legal agreements.

It is not unknown for concerns in Europe to receive telephone calls from the headquarters in the United States to say that they will close immediately. That attitude, of course, is stupid but it has occurred; and we must find ways of avoiding this in the future. Mr. Vredeling told employers at the Economic and Social Committee in Brussels last September to look a little beyond their noses and take more of a long look at the issues at stake, because there is a choice, and the choice is between consultation and confrontation. Mr. Vredeling went on to counsel against confrontation on the grounds that social unrest is lowest in those countries where the best solutions to this problem have been found—Germany, Netherlands and Denmark—and highest where the worst solutions have been found. He went on to say: This serves as a guide for the people who oppose the EEC's sensible proposals so ferociously ". The European TUC and the British TUC maintain that employers' organisations are wrong to say that the EEC proposals interfere with existing and well-tried communication arrangements. Transnationally, these arrangements are woefully inadequate. The TUC will continue to extend the influence of the ILO, OECD and the United Nations on the behaviour of multinationals. For the EEC not to have brought forward this draft directive would have been a grave dereliction of their responsibility to the Community.

Your committee recognise there is more work to be done to achieve an acceptable draft: issues such as confidentiality, legal provisions and sanctions, specific guidelines and codes of practice must be spelt out. I am sure that the report now before us, and this debate, will be of great value to the EEC in preparing a final draft after wide consultations with Governments, employers and trade unions.

What my noble friend Lord McCarthy has said indicates the urgency of finding an acceptable draft. I personally would not move greatly from the Vredeling draft. We cannot overlook the fact that 50 per cent. of transnationals are controlled from the United States, and the OECD guidelines, to which the United States subscribes, are important. The United States had withdrawn from the ILO at the time of adoption of the ILO's declaration on multinationals. That was on 16th November 1977 and it was indeed my last ILO governing body meeting. They had been represented when the committee was set up in 1973 and I understand that they have, since their return to the ILO, subscribed to the ILO declaration.

The Research and Planning Division of the Department of Employment have for some time been monitoring industrial relations and consultation at the workplace. In fact, it was started when my noble friend Lord McCarthy was research director for the Donovan Commission. I understand there is now considerable activity to obtain up-to-date figures as to the extent of genuine consultation arrangements and company-wide committees. I hope the department will make an early report to us.

I support the observations of the noble Lord, Lord Rochester on workers' consultative committees. There is a difference between bread and butter negotiations and strategic policy consultation. We must urge all speed to find a solution to the problems before us. If we do not, the future is black. I was nurtured on the Whitley Council principle. It is not without significance that the Civil Service has dropped that title, and, I think, with unfortunate results. The noble Lord, Lord Wolfenden, said there should not be two sides in consultation. I agree; but first we must create or recreate confidence and trust. Then there will be real consultation, which is in the great interest of all concerned.

I do not disagree with the principles outlined by my noble friend Lord McCarthy, but I am sure he recognises that the trade unions themselves cannot draft the document: there has to be agreement. I want the greatest common factor, and if we are in too much of a hurry we may get the least common factor. This discussion will have done much to influence the thinking of the Government, of employers and of Brussels. I fully support the evidence we received from the TUC and the European TUC. I will conclude by quoting the last paragraph of that evidence: The EEC proposal is clearly subject to amendment on particular points. The TUC and the ETUC would like to sec a strengthening in some respects. But the important point is that the strategic purpose should be clearly understood and supported as being of great creative significance for the future of the advanced industrial democracies working in a world competitive market environment". I hope that the document the committee has presented to your Lordships' House, and this debate, will carry this discussion further in Brussels and among Governments, employers and trade unions, with some positive results.

4.26 p.m.

Lord Plowden

My Lords, first, I want to congratulate the noble Lord, Lord Wolfenden, and his committee on having produced this admirable report, which brings into the open much about this subject of consultation, much of it contradictory. I speak as someone who believes strongly—I might almost say passionately—in the development of consultation and discussion in industry, because without this positive development and extension we shall not get the regeneration of British industry for which we all wish. But when one turns and looks at the proposals of the Vredeling directive, it seems to me they were drawn up by people who had very little or no experience of how British enterprise is managed; nor indeed of what it is that people on the shop floor really want to know.

I do not intend to list the numbers of things that the parent company of a group would have to provide twice yearly to its subsidiary companies—noble Lords will have read that in the proposals of the draft directive—but they are really quite enormous. The company of which I was chairman until a few years ago has in this country over 100 subsidiaries or sites where more than 100 people are employed, and we would have to provide this information to those sites twice a year.

Much of the information called for is not held centrally in a group such as the one with which I was associated, and in order to provide it a new bureaucracy would have to be set up. Indeed it would, I think, go directly contrary to the policies which all enlightened management is endeavouring to follow: namely, to pass decision-making down the line as far as it can. This would force decision-making up towards the centre. The noble Lord, Lord McCarthy, I think said it would weaken local management. The very fact that representatives could appeal over their head to senior management undoubtedly would weaken the position of local management.

But is what is proposed really what the man and woman on the shop floor really want to know? My experience in industry is that people want to know what is happening and what is going to happen to the site or the company in which they work. In my company, most people seemed to me to feel that they were working for Accles and Pollock or Tubes Limited, or the Churchill Machine Tool Company—not for Tube Investments. Their loyalties were to the local establishment.

If I may reminisce, when I worked on the shop floor nearly 50 years ago for a British subsidiary of an American multinational company, I am quite sure that what I and my mates wanted was to know what was going on in our company, not what Colonel Sosthenese Behn was intriguing about in Washington, or what was happening to the subsidiaries in Germany, Hungary or South America. I may say that no one told us anything about Colonel Sosthenese Behn, the other subsidiaries or ourselves.

The committee say they consider that any attempt to create the right climate and organisation by mandatory procedures would do great damage. But, on reflection, they say that they reluctantly come to the conclusion that some legislation is necessary. When I first read the report I, too, reluctantly accepted that some directive was expedient, but since then I have had very considerable misgivings. How would one frame a directive which took account of the great diversity of businesses in this country, let alone in all the countries of the Community? It would introduce great rigidity and frustration and would hinder the development of different ways of communication suited to individual groups, and to the distinctive industrial relations climate and differing political, social and cultural structures of the various countries of the community.

Like the committee, I attached great importance to the evidence given by Mr. Garnett of the Industrial Society—someone for whom personally, and for his work, I have great regard. Mr. Garnett said—referring to industrial relations: Once it falls into the hands of judges and courts all is lost". Later he went on to say, So I think it is worth laying down one or two minimum standards, just to edge things along a bit in a common sense way". That is a general remark with which I think we would all agree. Then he said: I am sure that the most valuable document would be a code of practice". And, again The mistake is to try to use the law to make social progress, to try to develop things that people have not actually ever done". Despite the reluctance which I understand the committee felt—a reluctance which I share—they have suggested that a possible compromise is to be found in the suggestion made by Mr. Michael Shanks of a "framework directive", leaving considerable latitude to local legislation. If that means that we should have a law in this country that says that consultation is a good thing, coupled with a code of practice developed to suit United Kingdom conditions, that sounds simple. But I find myself in agreement with the noble Lord, Lord Rochester. I do not know how you would combine the law with a code of practice. In passing, I should like to remind noble Lords that we already have a law to require companies to give employees information—all the information they require— for collective bargaining, which is very wide. To introduce another law covering, perhaps, some of the same ground might cause confusion.

Like the committee, I reject absolutely the directive in its present form as likely to do great damage. But, unlike the committee, I have reluctantly come to the conclusion that to introduce law in this field now will hamper rather than promote good industrial relations. What I really fear is that it would reduce arrangements for consultation to the lowest common denominator and inhibit the innovation that is so desperately needed in British industrial relations. Consultation through representative systems is, of course, an essential component in employee involvement, but it has obvious limitations.

Recently, progressive firms have made major efforts to promote direct communication and rapport between managers, supervisors and those on the shop floor who are working directly to them. The key to real employee involvement lies in management attitudes, style and motivation. These imponderables are exceedingly difficult to monitor and assess, even within a company, and are no less difficult to describe and present in public debate about the merits and achievements of voluntary effort. This probably accounts for the preoccupation of politicians and bureaucrats—I myself used to be a bureaucrat and I blame myself—with the more tangible mechanics of consultative structures and systems, whose value is often more cosmetic than real.

I should like to come back to the evidence of Mr. Garnett of the Industrial Society. In brief, he seemed to be saying that the law is a good thing when it confirms practices in social matters which are already established. He went on to say: Before you discover where you are, and that is the history of the law of both parties in the 1970s, the law actually often works in the opposite direction from what the deeply sincere people who suggested it intended". I thought that that, coming from such a wise and experienced man, was extremely pertinent.

As a sincere advocate of consultation and discussion —and I mean this—I believe that to introduce the law at this stage will set back rather than promote what we want to achieve. I say this, knowing that there are many companies in this country that pay little more than lip service to the need for consultation. This is a matter for judgment and experience and my judgment, after very careful consideration, is that we should not yet legislate until we have discussed in much more detail among ourselves what kind of legislation we should want, that will not inhibit but will promote better industrial relations.

4.38 p.m.

Lord Oram

My Lords, like other speakers, I very much welcome this report and in particular, as others have said, I welcome the attractive and helpful speech with which the noble Lord, Lord Wolfenden, introduced the debate. I welcome especially the general conclusion which his committee reached, that provision of proper consultative arrangements in industry needs to be very much improved. On the question to which several speakers have referred, of whether there is need for statutory provision or whether it is sufficient to rely on voluntarism, I believe that the conclusion of the committee could be fairly stated as being that, while any progress on a voluntary basis is to be welcomed, nevertheless a statutory provision, as in most other member states, is required in order to encourage progress on a voluntary basis.

I believe the committee concluded that there is a relationship between the two principles. These conclusions are, I suggest, of particular importance in this country—as, indeed, the committee suggested—because of the way in which Britain has been lagging behind other member states in this matter. The committee does not claim to have been dealing with the general malaise of British industry but in fact I believe that the problem that it was asked to deal with is right at the heart of that malaise. What is wrong with British industry—more clearly than anything else, in my view—is that antagonism rather than co-operation between the two sides of industry is all too evident. The "us" and "them" conflict must be eliminated if we are to move forward out of our present desperate industrial situation.

In the industrial relations field we have had only this last week two contrasting examples of major industries which surely point to the truth of what I have just said. One of them, British Leyland, shows the wrong way of going about it. The other, British Rail, promises to reveal the sound way of establishing a proper relationship. In the case of BL, an official strike seems now to be the inevitable consequence of the irresponsible diktat from Sir Michael Edwardes. In the case of BR, a strike was avoided because both sides got together and agreed on an improvement in communication. There are now to be further talks in a much better atmosphere about the future of the industry. I heard Mr. Ray Buckton of the train drivers' union say on radio that what was perhaps more important than the actual issue in dispute was the need for good communication between the two sides and that he now looked forward to the union playing a constructive role in the decision-making of the industry.

What I have referred to as the bad case, the bad case of BL, scarcely needs detailing in view of all that we have read, but I very much agree with the views of the Conservative Member of Parliament, Mr. Beaumont-Dark, who has many car workers in his Selly Oak constituency. He said: This is not the way to deal with very worried people: to say 'If you do not do what I say we are going to destroy everything'. The workers want to feel that they are helping to build a new BL and not just helping to be caretakers while it is destroyed". He said it was important to get over to the workers what the productivity agreement meant and what their future was in BL. In other words, he was saying that there had been a serious failure of communication, a serious failure of the briefing to which the report and Lord Wolfenden have referred.

Of course, it is true that bad industrial relations in British society are attributable to faults on both sides of industry. I believe we can all agree with that. But I am glad that the committee has not fallen into the trap, as some people do, of believing that the real villains of the piece are militant trade unionists bent on pursuing the dictates of their greed. The committee recognises the value of the evidence that was submitted to it by the TUC. Among the members of the committee are two eminent trade unionists—I refer to my noble friend Lord Collison and my noble friend Lord Plant—whose very personalities, I suggest, belie the suggestion of irresponsibility in the trade union movement. Therefore, so far from trying to ascribe blame to one side of industry or the other, we should, I suggest, concentrate our minds on the benefits which good employee consultation can bestow on both sides of industry.

If good communications can be achieved, there are undoubted advantages to employers and employees alike. The employers surely stand to gain if there are fewer strikes, lower labour turnover, less absenteeism and fewer restrictive practices. All those, I believe, would flow from a better system of consultation. And all these advantages lead to higher productivity, which surely is the objective not only of the employers but of us all. But the advantages of good relationships to employees are no less significant.

Collective bargaining is, of course, a separate process. That is made clear in the report, and Lord Wolfenden also made it clear. We are talking about two separate concepts. If, however, better communication between the two sides is established, it is undoubtedly the case that collective bargaining can be made smoother and more effective. Moreover, if the atmosphere is good and if ideas are shared between the two sides, the decisions which are taken are better decisions. And more often than not the consequent working conditions of workers are superior.

Perhaps most important of all, however, from the workers' point of view is that their whole status in their working lives can be transformed. If a man feels that he has played a part in discussions, in consultation, in determining the shape of his working day, his sense of human dignity is greatly enhanced by comparison with the situation in which he feels himself a nonentity, a small cog in a vast wheel, and if he feels himself unable, through any process or any machinery, to help to determine the nature of his working life. Therefore, if I am right in suggesting that there are obvious advantages both to employers and to employees, surely immense efforts must be made to put this matter right. I believe that the recommendations indicated in this committee's report are admirable as a guide—only as a beginning, as has been recognised—to that end.

The report and the evidence that was given to the committee set out the arguments on both sides. It seems to me that the objections which the employers' organisations advance against the proposed directive are not really substantial. And that indeed seems to have been the conclusion of the committee itself. The employers say that the arrangements should be purely voluntary: that proposals in the proposed directive would interfere with existing arrangements and that they would undermine the authority of local managements. They raise the objection, too, that there is a security risk and that the leaking of secrets would affect the competitiveness of their undertakings. I think the committee chaired by Lord Wolfenden was right, particularly on the evidence given by the trade unionist who came from Germany, to regard these arguments as not being supported by any sufficiently hard evidence.

I am glad to see that the committee supports the opposite point of view: that particularly in relation to Britain—because, as I have said, we seriously lag behind other countries—the need for the rapid development of proper facilities is great and that because reliance on the voluntary principle has in the past proved inadequate, to say the least, it is necessary to have a legislative framework. I do not agree with the noble Lord, Lord Plowden, that it would be difficult to accommodate the variety of circumstances. I believe it would be possible to find a sufficiently flexible legislative framework which could comprehend the different national needs but at the same time would be firm enough to ensure that real progress is made in this matter and that that progress is made as soon as may be.

4.50 p.m.

The Duke of Portland

My Lords, having served on company boards in the United Kingdom, Belgium, France and Germany, I have come to the conclusion that there is much to be said for the German system of workers' and office staff representation on the supervisory boards of companies. I have had some 28 years' experience as chairman, deputy chairman and member of supervisory boards in Germany. Before the law for the representation of workers and office staff on supervisory boards was introduced in Germany in 1952, I had participated in lobbying against this measure on behalf of foreign industrial investors in Germany. However, experience has taught me that this is a most helpful means of informing the workforce and also of learning the reasons governing their reactions.

I shall give your Lordships the following example. When the management of the chemical company Bayer, who own the photographic company Agfa, decided to merge the latter with the Belgian Gevaert company in order to be in a better position to compete with Kodak, the board of management—that is to say, the executive directors of Bayer—asked for the approval of the supervisory board where, for some years, I was one of the two deputy chairmen. Our colleagues representing the office staff and workforce raised a number of questions regarding redundancy, prospects of promotion, pension rights, et cetera, to which satisfying replies were returned and the proposed merger was approved. The representatives of the workforce then forthwith informed the works council, explaining to them how the merger would be to their advantage, thus averting the spread of mischievous rumours.

The presence of their own representatives on the board gives a workforce the feeling that they have an effective, albeit minority, voice in the direction of the company. From my experience, I am certain that this assists in producing a better understanding and in lessening the feeling of "them" and "us" between the board and the workforce. However, I fear that this proposal will not please the Confederation of British Industry nor the Institute of Directors nor the TUC. Some years ago, I spoke about this to one of the leading members of the TUC and met with the reply "If this does not give power, I am not interested". I agree that it provides for only a minority voice, but it is still a voice and it enables the workforce to obtain an insight into the position of the company and to understand the motives of the management.

I am not advocating a system of two-tier boards, which in my opinion is rather a nonsense. There is very little difference between a full board meeting of an important United Kingdom company and a meeting of a supervisory board and board of management in Germany. In the United Kingdom, executive directors have regular meetings among themselves without their non-executive colleagues and in Germany the board of management meets, as a rule, weekly and perhaps only four times a year together with the supervisory board.

The interests of the shareholders and of the employees could be safeguarded by an article in the company's statutes that the consent of a majority of the non-executive directors would be required for all decisions relating to the following: the closure or transfer of the undertaking or parts thereof; substantial curtailment of its activities; substantial organisational changes; the establishment or termination of long-term co-operation with other undertakings. In this connection, I would refer your Lordships to paragraph 14 of the committee's report.

My Lords, the German system is not a panacea for all ills, but in my now rather long experience—and incidentally I am still on the supervisory board of a German company—it improves mutual understanding and thus furthers good feeling.

4.55 p.m.

Lord Underhill

My Lords, this is the first occasion on which I have entered into a debate on an EEC report and in this capacity today I may possibly describe myself as putting forward the viewpoint of the common man—if such a person exists. I should also like to express appreciation of the excellent manner in which the noble Lord, Lord Wolfenden, introduced this report. Anyone who may not have read the report will have had a very good summary from that introduction. Also, I should like to express appreciation to the committee because the range of evidence and the questioning of the members of the committee were extremely useful and the report is valuable for that reason alone. By and large, I accept the conclusions arrived at by the committee.

Although the report covers a somewhat limited sphere of information and consultation procedures, this is an important step towards industrial democracy. A number of noble Lords have stressed the fact that in the United Kingdom we are behind many other countries in this respect. The report gives evidence from three countries, and there is no evidence to suggest that the experience in those countries has brought some of the problems on which some noble Lords have expressed fears. I was delighted to hear what the noble Duke, the Duke of Portland, said about his experience in Germany, which I hope noble Lords will have noted.

Despite the differences, so clearly shown in the report, between the Government and the employers on the one side (because the Government seem to have taken the same view as the employers) and the employees, all are agreed that the involvement of employees in the communication and consultation procedures is an essential part of improving industrial relations. In view of some of the apprehensions about legislation, we must point out that both the Employment Protection Act and the Industry Act contain very limited provisions, but the provisions are there for the supply of information to trade unions. The proposed directive goes far beyond the supply of information and it links this with prior consultation on all major decisions affecting the employees' interests. As one of the Trade Union Congress representatives said: It is not the least bit of good supplying even a pantechnicon of information unless at the end of the day there is consultation upon it". The TUC also said, "We are in the business of linking planning with industrial democracy and any consultative committees that might be set up must not be limited to teas and towels, as happens in a number of businesses".

The operations and strategic decisions of undertakings are not the concern solely of the owners of the business, and we must also keep in mind that today a very high and ever-increasing proportion of investment in this country is now in pension funds. The last figure I saw as being involved was some £55 billion. The interest of the employees is sometimes greater than that of the investors, because the employee's particular job is usually his only source of income and when that goes there is tragedy for the whole of his family.

This position is backed up by Paragraph 15 of the report, which refers to a Green Paper issued previously by the Commission and quotes the following extract: Those who will be substantially affected by decisions made by social and political institutions must be involved in the making of those decisions. In particular, employees are increasingly seen to have interests in the functioning of enterprises which can be as substantial as those of the shareholders and sometimes more so". That was in a Commission Green Paper. For that reason I was, therefore, surprised at part of the evidence of the chairman of the National Consumers Council, which is set out on page 103 of the report: This Directive … could shift the balance of power in multinational companies away from management in favour of the workforce. It would make it more difficult … to rationalise operations between countries by closing down the least efficient operations". I am certain that the suggestion that this proposed directive is making this shift of power is grossly exaggerated. The other point I would make is this: is it being suggested by this particular person who gave evidence that the employees are to have no voice whatever in the transfer of operations? I am sorry, therefore, that apparently it was not possible for Mr. Michael Shanks, the chairman of that council, to be interviewed, because his replies to any questions might have been very illuminating.

Week by week we have reports of closures, and often a plant is closed without adequate consultation. Too often there are lay-offs and redundancies without consultation until the actual decisions are taken and then there are consultations to deal with a crisis situation. We have protests, which we read about repeatedly. I would suggest that surely the workers must have a right to information on the progress, problems and proposed plans before a crisis occurs, and that does not appear to be the situation in many instances today. Multinationals must obviously be brought within this procedure. To me it seems that a body such as the EEC is a body which can deal with the multinational position, which could not be dealt with on a purely national basis.

Of course, we must remember that the proposed directive deals with not only multinationals—we have apparently a new name now, "transnationals"—but also complex undertakings in this country. The TUC suggest that there should be consultation at various levels, and in view of what has been said by one or two noble Lords, unless there is consultation at the top level of a multinational I cannot see how the employees' representatives are going to get a complete picture in order to give guidance to the particular bodies with which they are concerned.

The CBI state that a majority of employers make efforts to inform employees of the economic facts of life in their business. I wonder what the CBI have in mind when they say this? It might be suggested by Sir Michael Edwardes that he has done just that. Surely that is insufficient; surely it cannot just mean giving the limited facts of the financial position which may affect collective bargaining. That is far too limited an approach, and the proposed Directive goes far beyond that, as do the conclusions of your Lordship's committee.

The CBI also argued that no case is made out for a directive. They believe that the OECD guidelines and the ILO declaration are sufficient. I would suggest that if one looks carefully at both the OECD guidelines and the ILO declaration, those are woefully inadequate. They stress voluntarism, which your committee say regrettably is not sufficient in this case. Also there is no sound provision in either of those documents for consultation on the lines suggested in the proposed directive. The TUC disagrees with the view of the CBI on those issues and argues that in general multinationals do not voluntarily provide information which is essential to employees. If I may quote one part of the TUC's memorandum: The heart of the problem is that carefully formulated information and consultation arrangements within the enterprise are the more necessary the more complex the enterprise, but they are at the same time far more difficult to establish". I was pleased that the Committee endeavoured to find out what was taking place. In view of the complacency, if I may say so with respect, of some noble Lords who have referred to the present situation, I would refer to paragraph 51, which deals with the Department of Employment survey of 1979. It was made quite clear that this was a limited survey of 300 manufacturing companies, and excluding what in their own words they call old established trouble-prone industries. However, the survey makes clear that the situation is far from satisfactory. That is also the view reflected by the Anglo-German Foundation survey dealt with in paragraph 53 of the report. Paragraph 66 sets out the conclusion of your committee that in at least half of the organisations that would be covered by a directive the procedures are inadequate, and that employees are very dissatisfied with the information and consultation procedures in a large number of undertakings. That would seem to justify action on the lines of the proposed directive.

The Industrial Society suggest in their evidence that what goes wrong in industry is 50 per cent. due to misunderstandings and the rest to straightforward conflict. We will not argue about the percentages, but roughly I think we would agree. The provision of information and development of consultation procedures as proposed in the draft directive would, in my view, help to remove considerable misunderstandings. The avoidance of straightforward conflict will depend, of course, on other factors, but where consultation develops towards sharing in decision-making I believe that can make a great contribution to avoiding conflict.

Far from being radical—I agree with my noble friend Lord McCarthy—I believe that the proposals in the draft directive are modest. The Commission apparently are to review the draft directive with a view to endeavouring to reduce the differences that are shown up in this report. I notice these words—"but without losing sight of the major goals". I think all of us would agree that agreement is desirable, but this must not be at the cost of producing a directive which may be of little value; in other words, in my view it is pointless leaning over backwards to produce an agreed directive which at the end of the day will produce few or no results. I believe the work of your Lordships' committee and the conclusions are basically ones which we can support, and I hope your Lordships agree.

5.8 p.m.

Lord Mottistone

My Lords, I should like to thank the noble Lord, Lord Wolfenden, for the way in which he produced this report and for his kindness in asking me to join Sub-Committee C for the consideration of this draft directive. Perhaps I may open by reflecting a little on the general subject rather than the particular, where I see the particular conundrum being created. It seems to me that there is no doubt whatsoever that employees in companies are increasingly wanting more and more information. I think everybody recognises that. Some companies are better than others, and some examples have been given. It may be that some companies, perhaps not very successful companies, do not do even as much as a small amount. But we are moving in that direction. Attitudes are changing, and it is really quite remarkable how much they have changed in the last 15 years or so in all sorts of areas, including this one. I think we must not be in too much of a hurry to try to push things along at a rate which is faster than the attitudes are changing. By all means let us keep it going and let us keep the momentum up, but not go too far too quickly.

Another factor concerns the notion of what sort of information needs to be released to people. This seems to vary with the types of people who are being briefed, to use Mr. Garnett's phrase. It would seem to me from my experience that the ordinary workforce in an ordinary company or ordinary factory requires as much information as it can get about the facts which affect it on a day-to-day basis, and that, of course, would include something catastrophic like closing the factory. It would need to know all about what was going on which affected it, but it is not desperately concerned, on the whole, with what is going on in the rest of the company—of course there are a few people who are concerned about that, but on the whole that is not what the demand is for. On the other hand, at what one might describe as the trade union official level there is a very sensible perception that, for there to be meaningful negotiation, the information given needs to be much more fundamental than the type which I have just been describing. That is where the difficulty arises.

Fundamental company information, whether in a multinational company or an ordinary national one, if it is meaningful needs to be safeguarded from competitors. Moreover—and I shall be coming back to this point—sometimes, more importantly, it needs to be flexible so that the optimum moment for going "firm" on a particular plan or solution can be chosen. To that extent one has to be particularly careful—and I am not casting aspersions against any particular sort of person—as regards how much this information is spread around before the right moment arises.

It is important to recollect that the purpose of development plans for companies is always to try to improve the companies' competitive position. Possibly more importantly in modern times, it is important to recollect that the benefit of the majority of employees is best served by a company's improved trading. With all companies, including multinational companies, benefits from improved trading may not necessarily come to all employees all the time although the trade union officials, quite naturally, would like them so to do. Sometimes some employees may lose out to the benefit of the majority, but—and this is important—most, if not all, company managements also wish their companies to be so successful that none of their employees ever suffers. Thus I suggest to your Lordships that their aims are really much closer to those of the trade union officials, and, indeed, to those of noble Lords opposite who have been speaking this afternoon, than might normally be thought to be the case. The aim is, in fact, the same.

I think that it was the noble Lord, Lord Wolfenden, who said that the "we" and "they" must be done away with. We all agree with that, but I think that a lot of it—and this was mentioned earlier—is a misconception, and an assumption about people's aims and objectives which assumes a conflict where one does not exist. I suggest that in this whole area we need forever to search for where there is not a conflict rather than seeking to search for where there is one. I should have thought that we could tackle this type of problem much better on that basis.

If plans are disclosed prematurely to outside persons, that is, to people not directly employed by the company like trade union officials; and even if, as they usually do, they respect confidentiality absolutely—and the committee was reassured on this point—the essential feature of flexibility (I call it "flexibility" although I think it was the noble Lord, Lord Seebohm, who talked about "efficiency") may be lost. I think that it was either the noble Lord, Lord Seebohm, or perhaps the noble Lord, Lord Plowden,—I hope that your Lordships will forgive me if I am wrong—who pointed out that if an outsider is taken into the confidence of the top management, then the local management will see itself bypassed. One of the biggest lessons of the last five or 10 years has been that a great deal of harm has been done to company management at the working level—the works managers and people like that—in a terrible period when the shop stewards had the greater "ear" of the company chairman than did the works manager. That was not only bad for morale, which was serious enough in this area, but also very bad for efficiency. While accepting the fact that something must be done, we must be very careful as regards whatever we devise that we make sure that the particular point about bypassing the local management is not created by whatever is built up.

Therefore, how do we view the directive under consideration? I was going to say that it is happily under reconsideration by the Commission. Indeed, paragraph 10 of the report says so and the committee was so advised. However, perhaps your Lordships may have noticed that my noble friend Lord Redesdale—who has apologised for having to leave early—made the point that he had up-to-date information that some committee, which he tried to whisper to me when I was trying to listen to the noble Lord, Lord Underhill, had made a decision yesterday which implied that the directive was not going to be revised. I find that hard to believe, but I think that it is worth us looking into it and making quite certain that the Commission is not going off at half cock, as we might say in naval terms. I shall, therefore, assume that the directive is under reconsideration by the Commission and that there is room and time for change.

I should also like to say at this stage that I think that the committee—although I was a member of it—made some excellent comments on how the directive might be modified and put into effect. Personally, I particularly liked the code of practice viewpoint although many noble Lords find that it is not tough enough. Your Lordships will realise from what I said earlier that I find that toughness is not the right approach at this time.

I should also like to mention to the noble Duke, the Duke of Portland, whose speech I personally found most interesting, that the CBI have just distributed within the last week or so a copy of a memorandum from their German opposite numbers, who are criticising this directive seriously in saying that the law relating to the constitution of enterprises, which I think is what the noble Duke was talking about, would be drastically affected by the directive if it were enacted in its present form. So in effect they are saying that they do not like the directive but they do like their constitution of enterprises, as indeed does the noble Duke. Therefore, it is perhaps worth noting that the Germans are not in favour of the directive in its present form.

Personally—and I speak personally now and not as a member of the committee—and because I hope that I appreciate the conflicting arguments that I have outlined, I suggest that the Commission produces another draft for the Community to consider, but that it hesitates long and hard before reaching a conclusion. There is a need for much more attitudechanging before the force of law is imposed in this area. In that respect I very much agree with the noble Lord, Lord Plowden. If the Commission needs to go through six drafts, as I have recently done in another context in another job, over a period of several years, for the Community to consider, no crystallising harm will have been done. As the report says, the subject will not go away and repeated drafts will serve to keep us all studying this very real problem. But early finalisation of this directive is almost bound to force a situation which could be disastrous for company flexibility and efficiency throughout the Community. In this day and age we must give the right priority to company efficiency, because on the success of these companies depends the wellbeing of us all, whatever side of the House or whatever position in industry we may occupy.

I beg your Lordships to accept that to have something on the table which is perpetually being updated is very much better than to have something pushed into law which, at a later stage, has to be enacted in some barbarous way in this country. I hope that your Lordships will accord with this viewpoint.

5.21 p.m.

Lord Campbell of Alloway

My Lords, anyone rising to speak in this important debate would wish to congratulate the noble Lord, Lord Wolfenden, on this useful, comprehensive and very brief report. In opening, I would wish to associate myself wholly with everything that has been said by my noble friend the Duke of Portland and the noble Lord, Lord Underhill, because everything that those noble Lords have said I most thoroughly endorse. Of course, having said that, it goes without saying that I welcome this report and find its conclusions wholly acceptable.

A framework directive with guidelines would not induce some sort of state of shock or terror such as was adverted to by the noble Lord, Lord Rochester. With respect, as I see it, the implementation of these proposals could only be conducive to the better ordering ofindustrial relations; and I, with other noble Lords, reject the objections, in particular those raised by the CBI. In this, I in no way wish to reflect the somewhat antipathetic attitude to the CBI evinced by the noble Lord, Lord McCarthy.

In passing, and with respect, may I say that a red herring seems to have been introduced into this otherwise constructive debate by the noble Lord, Lord McCarthy. He used this occasion to launch what I understand to be his ritualistic attack upon Her Majesty's judges, the attitude of Her Majesty's Government to statutory immunities and the Society of Conservative Lawyers, of which I happen to be a member. But is not all this wide of the mark? —because here we are not concerned with statutory immunities, secondary action or the other matters to which the noble Lord adverted; we are concerned with the obligation to supply information irrespective of the statutory régime in force at the time.

In times of inflation—and these indeed are such times—when wages are paid in paper or coin of no intrinsic worth, your Lordships may think that wage predictability lies at the heart of investment, commercial confidence and, indeed, forward industrial planning. In order to secure this recovery, I agree with the noble Lord, Lord Wolfenden, that it would be preferable to discard, and to discard once and for all, such concepts as taking sides in industry, with the TUC as some sort of designated giant for the one side and with the CBI, in league with Her Majesty's Government (I think that those were the words used by one noble Lord)—a curious concept perhaps—as the designated giant on the other side, adopting warlike postures. I apologise for it, but that is my edition.

However, this is a non-constructive nonsense. Trade union bargaining, whether nice or nasty, is very much in point and whether it is nice or nasty is, I would suggest to your Lordships, wholly irrelevant. What is relevant is that it is necessary. I adopt the view expressed by the noble Lord, Lord Oram, in this regard, that collective bargaining—trade union bargaining—is relevant to the topic under consideration and fuller information can only help to remove misunderstandings. Whatever the percentage may be—whether it is 60 per cent., or more or less—is again irrelevant, because fuller information will help to remove misunderstandings and assist in achieving realistic settlements, not only as to wages but as to closures, and in this way will greatly curtail the possible areas of industrial unrest.

I agree with another noble Lord—I hope that he will forgive me but I cannot remember his name—who stressed the force of the concept of communication as affording the key, as operating to effect the transformation of status in relation to the dignity of man, which is so important to all your Lordships. Of course, harmonisation is not appropriate. We have our own traditions; we have our own trade union structures; we have our own heritage, and we do not need member states to tell us much about that. But a framework directive wide enough to cater for each member state, with guidelines which would supersede not only the existing statutory provisions but existing codes of practice, could only assist in the better ordering of industrial relations and would in no way impede this.

With respect, it is for these reasons that I support the conclusions in this report, although I am uneasy about what I heard from the noble Lord, Lord Mottistone, about the goings-on at Brussels.

Lord McCarthy

My Lords, before the noble Lord sits down, will he not agree that I made no attack upon Her Majesty's judges and no attack upon Conservative lawyers, but merely described their point of view? My attack was on Her Majesty's Government. Will he not agree that it was because of what Her Majesty's Government said, or what their representatives said, before this committee?—which was that they could not agree with the committee, first, because there was no agreement on both sides to do anything and, secondly, because this would impose a single, inflexible system. All I said was that, if that was their view, I wished that they had taken that view on the Employment Act.

Lord Campbell of Alloway

My Lords, if I have misunderstood what the noble Lord, Lord McCarthy, said, I withdraw my remarks unreservedly. It was my understanding of what he said that led me to say what I said. But, if I am wrong about it, I withdraw my remarks unreservedly.

5.30 p.m.

Lord Soames

My Lords, I hope your Lordships will forgive me if I enter into this debate in spite of the fact that I was not present throughout it. I have listened with much interest to recent speeches made by your Lordships. I must say that I have been goaded into entering into the debate by what has been said, particularly by the noble Lords, Lord Oram and Lord Underhill, with particular reference to British Leyland and the name of Sir Michael Edwardes, its chairman.

I do not go along with my noble friend Lord Campbell, the last speaker. The inference he gave was, "Everything is rosy in our garden. We have got our own garden, and we have not got all that much we can learn from other people's gardens in the EEC". I disagree profoundly with that. We have all a good deal to learn from each other. If we ever could arrive at the optimum basis for consultation, then that would be lovely. I would go along with what the noble Lord, Lord Plowden, and my noble friend Lord Mottistone said, but I think we have a long way to go in all countries of the Community in changing attitudes, both from the point of view of the trade unions' side and from the point of view of the employers' side, before we can aspire to such a Utopian perfectionist position.

Consultation is all a matter of degree, is it not? Of course, everybody would like to see in industry the greatest degree of consultation. But, surely, consultation presupposes a high degree of responsibility on both sides. From the point of view of management it presupposes a degree of responsibility towards employees in realising where their interests lie, and having regard to their interests in taking the major decisions within the company. Where the employee is concerned it involves a highly developed degree of responsibility not just towards the interests of the employees themselves alone but towards the firm and the interests of management and the shareholders.

Until you get that degree of sense of responsibility it is just not going to be possible—it is not possible—to enter into a satisfactory degree of consultation. Some, of course, yes. I had a bit of it last year. Goodness knows! I did my best to consult—and consult, and consult—but certain things were written in the stars and events followed inexorably one after the other. I do not think it was because I failed in consultation. At least, I like to think it was not. I do not think it is for Sir Michael Edwardes, either.

This is where I want to come to what the noble Lord, Lord Oram, said. I thought that the noble Lord, Lord Underhill, was not entirely fair to him when he said, "Of course, you cannot call it consultation when someone writes a letter round to everybody saying either you must agree or else the carpet is going to be pulled out". Because that was not the beginning of it. It may be the end of it; I do not know.

But I noticed what Mr. Duffy said to the press recently. He reported the figures of production per man in British Leyland five years ago and today. I have not got the figures in my head but he reported the progress that had been made. All I can say is that it shows it was very bad indeed five years back. It shows that it is getting better, but it also shows that there is a long way yet to go. Do any of us really believe that the trouble in British Leyland has been because of lack of consultation? Is that really the key to the problem in British Leyland?

Of course, in many areas of British industry consultation has improved enormously, and the effects are there for all of us to see of employees and employers making sacrifices in order to keep alive in difficult times. This is where consultation really comes in and is effective. But, as I said, it presupposes a sense of responsibility on both sides to keep alive. While in British Leyland every employee knows that every car that comes off the end of the production line is costing the taxpayer money, and at the same time they are putting in a demand for an increase in wages which they know perfectly well the company cannot afford, which is only going to have the effect of increasing the burden on the taxpayer for every car produced, is that the interest of the firm? Is that the interest of British Leyland? Is that the interest of the shareholders, who are the taxpayers?

No, we have got to be a bit careful before we blame Sir Michael Edwardes for lack of consultation in the present situation. I hope very much indeed that the employees in British Leyland will think twice before they choose to start playing a game of bluff and hoping that they will get away with it now as they have got away with it often in the past. There must be a limit to how much Her Majesty's Government can feel it right to prop up an industry unless they are convinced that the employees have the interest of that firm at heart as well as the management.

5.36 p.m.

The Lord Advocate (Lord Mackay of Clashfern)

My Lords, first of all on behalf of Her Majesty's Government I should like to thank the noble Lord, Lord Wolfenden, very much indeed for introducing this debate to us and for the manner in which he has done it. I should also like to join with all the others who have thanked Sub-Committee C for their careful, wideranging and even-handed consideration of the many issues which arise from the document which is the subject of this report. I should also like to join with Lord Wolfenden in thanking those whom he thanked at the beginning of his speech for the work they did which enabled the Sub-Committee to do for us the work that it has done for us.

I should also like to thank all of your Lordships who have participated in this debate this afternoon for the valuable contributions that have been made in a very constructive way, from a great variety of different experiences, to the matters which are of great importance to all of us, as my noble friend Lord Soames has just made so clear in a speech which I was very glad to hear him make. If later in my remarks a difference in emphasis is detected with the conclusions which the committee have drawn from the evidence put before them, then it springs from a desire to achieve the most effective approach to these most important issues which the Committee have so competently drawn to the attention of the House.

This proposal for a draft directive is somewhat unusual in a number of respects. First, the proposal was adopted by the Commission without even the barest minimum of consultation which might be expected when wide-ranging measures of this kind are being proposed. When the draft directive was first mooted it was aimed only at information and consultation procedures in multi- or trans-nationals.

At a meeting of officials from member states which took place in June 1980 it was pointed out that this would be discriminatory. The Commission's response was to extend the proposals to cover all undertakings of a complex structure without considering the very wide implications of an extension of this kind, and indeed without providing any evidence that such initiative warranted priority consideration in the Community institutions.

This lack of prior consultation was perhaps particularly unfortunate in view of the second unusual feature, which is that the proposals are considerably different in nature from previous action taken successfully in the Community in the field of industrial relations The two previous directives are limited in scope and application and deal with specific situations, and contain relatively straightforward requirements. They are the directive which lays down requirements about the provision of information and consultation when collective redundancies occur, to which Parliament gave effect in the Employment Protection Act 1975 in the provisions which have been referred to; and, the second, the Acquired Rights Directive, which safeguards the employment rights of individuals in the event of businesses, or parts of businesses, being transferred, and again contains specific provisions about information provision and consultation. This new directive draft, on the other hand, is seeking to prescribe a rigid system which would cut across the totality of information provision and consultation within all the undertakings which fall within its definition.

The third point I wish to make is that the present proposals are frequently obscure, both in their underlying intention and in the detail of the requirements. I wish to mention just two of the many examples. It is unclear whether, in Articles 7 and 13, an all-embracing consultative committee established at the level of the parent company and covering all subsidiaries and individual plants and establishments, in fact fulfils the information and consultation requirements in those places, or whether it is intended that if such a committee at the top level is established, then it must receive all the information which is sent to the subsidiaries and establishments and be involved in any consultations undertaken at local level. I understood from the way in which the noble Lord, Lord McCarthy, approached this that he took it that the central committee would, as it were, replace and obviate the necessity of transmission of the information to plant level. I submit that it is not at all clear that that is what the Commission had in mind. It is not clear whether the Commission is seeking to promote the establishment of consultation arrangements at the European level or indeed worldwide, which could have the effect of disrupting relationships at local level, or alternatively believes it necessary that a large employer should duplicate his arrangements at each level. That is to say, from the text and the explanations provided, it is not possible to decide.

On a related point, as drafted, the information which has to be provided must give a clear picture of the activities of the concern taken as a whole. It must also include information about such matters as structure and manning, rationalisation, manufacturing and working methods and all plans and all procedures liable to have a substantial effect on employees, which can meaningfully be expressed only in terms of the situation in particular subsidiaries. That is a point to which the noble Lord, Lord Rochester, referred, and again I suggest there is confusion about the objectives. Having said that, I agree with the noble Lord, Lord Wolfenden, that it is a great advantage to have an opportunity of considering the proposal at a comparatively early stage.

The three points I have mentioned are in themselves ample explanation of the controversy which this draft directive has already provoked. It also helps to explain why it appears from paragraph 10 of the report that the committee was informed that the Commission may have in mind to reformulate the proposals to take account of the views it has also received from employers and employees, even though the Economic and Social Committee, which is the official Community institution on which sit employer and employee representatives, and the European Parliament itself, have as yet to deliver their opinions on the current proposals.

Against that background, I fully understand why the committee has chosen to examine the broad issues involved in employee consultation rather than concentrate on the details of this particular proposal, including such related matters as whether it does indeed have a direct effect on the establishment or functioning of the Common Market and so has a proper legal basis under Article 100 of the treaty, and whether, under international law, it is in fact possible to impose sanctions on those enterprises with head offices outside the Community and so ensure equality of treatment for EC and non-EC based transnationals.

The evidence which the report has summarised for us and the views expressed by your Lordships in this debate show an encouraging degree of unanimity about the importance of involving employees and their representatives in policies and decisions which affect their working lives. I use the word "involving"; a number of words and phrases could be used in this context. The essential idea is that those who work in an enterprise should be informed of and consulted about decisions taken which may affect them at their place of work. The object should be to underline the unity of interest which all concerned have in the enterprise.

The report makes clear that both the CBI and TUC agree with the broad principle of communicating information to employees as well as the desirability of having effective consultative arrangements. The Government have also consistently stressed that effective employee involvement is an essential part of improving industrial relations in the United Kingdom and have urged continuing progress in all types of enterprise. These days employees are better educated and therefore less willing to accept the old authoritarianism and the "them and us" approach, to which the noble Lord, Lord Oram, and others referred. If they are treated as responsible individuals who have as much of an interest in the prosperity of the business as the top man, they will respond in terms of both productivity and contribution of ideas. They will accept more readily the trauma of technological change, the need for it and how best to implement it. A natural two-way communication of ideas can sometimes avoid the charged atmosphere of the negotiating room. It can be used as a valuable preliminary to collective bargaining, to identify the issues where there is a genuine difference from those where there is nothing to bargain about, thus reducing or eliminating damaging conflict of an adversarial kind.

However, the Government have taken the view that employee involvement is best developed voluntarily and not imposed by legislation. As the noble Lord, Lord Underhill, and my noble friend Lord Soames said, the essential idea is consultation. The giving of information is, in a sense, preliminary; the really essential matter is consultation. True consultation involves a degree of genuineness and open-mindedness which is very difficult to achieve by compulsion. You cannot by legislation, or indeed any form of compulsion, force a manager to think in a certain way, and how he thinks is all important to real consultation. As the noble Lord, Lord Seebohm, put it, you cannot bring a person to love or respect you by legislation. Equally, I submit, you cannot bring a person genuinely to consult with another person by legislation, unless he wishes to do so.

That is the distinction between legislation trying to enforce obligations of consultation and legislation such as the noble Lord, Lord McCarthy, mentioned—the Factories Act legislation and so on—in that while you can set up a standard suggesting a certain degree of safety at a place of work and enforce that, and while you can enforce provisions about the dissemination of information, the argument the Government have on this matter is quite different from the argument that would arise in spheres such as those. Incidentally—and the noble Lord explained to me that he would have to leave before the end of the debate—he went on to give us glimpses of a coming Bill. Whether his forecast is right or not we shall have to wait and see, but I was interested to see that he had to complete that forecast by suggesting that patriotism was the last refuge of the scoundrel. I felt that a very difficult proposition with which to agree.

The Government therefore believe that the right way to make progress is by persuasion and exhortation. Increasing efforts have been put into this policy over the past two years by the various organisations concerned, including for example, the CBI, the Industrial Society, the Institute of Personnel Management, the Industrial Participation Association and the British Institute of Management. There is now a wide range of guidance and example available to organisations which either lack knowledge of what is needed or doubt its value. The services of the Advisory, Conciliation and Arbitration Service are also available. The Government have made it abundantly clear that they strongly support these efforts. It is difficult to see that a governmental code of practice could add anything to all this advice.

My noble friend Lord Mottistone said that much had changed in this field, and it is perhaps worth reminding ourselves of what was said in the Donovan Report, which was not all that long ago, based on the research done for it by Dr. McCarthy, as he then was, in which it was concluded: joint consultative committees in the strict sense cannot survive the development of collective shop floor organisation. Either they must change their character and become essentially negotiating committees carrying out functions indistinguishable from collective bargaining or … fall into disuse". That was not long ago. What a tremendous change has taken place even since then. That I think makes it possible to point out that the evidence on which the committee relied particularly for its findings on the stage which matters have reached in this country included the report of 1979 from the department, to which the noble Lord, Lord Underhill, referred. I think it worth pointing out that that report, though published in 1979, was the result of work done in 1976, and therefore there is considerable reason to question whether it represents the position at the present day.

In seeking to sum up the situation, I would say that I believe that the debate we have had today is not about objectives, but about methods. All appear to be very much agreed about the objectives. Accordingly, we feel that the position that the Government should take up at this stage is that the case has not yet been made out for any form of legal compulsion. So far as information and consultation procedures in multinational companies are concerned, as has already been said, there are in existence international voluntary guidelines which appear to be working well and which have not so far produced any evidence that legislation at the European level would be justified, and the committee has accepted that any attempt to impose a uniform pattern across national boundaries would be doomed to failure.

Our debate has therefore primarily been concerned with whether or not minimum standards should be applied in all companies above a certain size. In this connection I note that there has been no suggestion that large single-plant companies or headquarters staff of complex undertakings should be exempt which is of course the position under the present draft directive. In this connection I would respectfully endorse the very persuasive observations of the noble Lord, Lord Plowden, on the inappropriateness of legislation in this area, even of a code of practice backed by legislation. As I have already said, it is the attitude of managements which counts.

Once the present directive is reformulated, if that happens, the future of the draft European Community Fifth Directive in the company law harmonisation programme will become highly relevant. This draft directive, which was introduced in 1972 and is still being considered within the European Parliament, originally sought to acheive employee participation through the imposition of worker-directors. However, I understand that certainly in the discussions which have taken place within the committees of the European Parliament, it is now felt that this should be only one of a number of options designed to compel improved information dissemination and consultation procedure at company level. The interrelation and overlap between the draft Fifth Directive and the directive concerned with complex undertakings would therefore become much greater if the Commission accepted the recommendations of the committee's report. We understand that the opinions of the European Parliament on these draft directives might be available in the New Year. It would then be for the Commission to decide upon the proposals which it wished to put to the Council of Ministers.

It is also right to mention, as the noble Lord, Lord Plant, mentioned in the course of his speech, that the Department of Employment is presently conducting a workplace industrial relations survey, and the results of that, which should be fairly up-to-date so far as reflecting the present position is concerned, are expected early next year.

Against that background the Government believe that they must await any proposals for further action which may emerge from within the Community and consider at that time whether they are appropriate for the particular circumstances in the United Kingdom. Our primary concern will be to determine whether detailed proposals will improve the conduct of our industrial relations, or disrupt existing arrangements, and so cause unnecessary conflict. It would be quite wrong to attempt to anticipate whether that criterion would be met by any future initiative, although I foresee the greatest difficulty in any attempt at legal compulsion, for the reasons that I have sought to outline. Thus, on behalf of the Government, I join with the noble Lord, Lord Wolfenden, and other speakers in commending this report to your Lordships' House and to the Commission, but with one reservation: by the time we come to debate this matter again, I hope that voluntary efforts by management will remove any need in the United Kingdom for the suggestion that such a directive is necessary.

5.55 p.m.

Lord Wolfenden

My Lords, may I be allowed just a word or two of very sincere thanks, first to the noble and learned Lord the Minister for giving us a glimpse of the Government's present feeling on this matter. Whether that feeling will be altered by changes in the proposals that we have been considering remains to be seen. I should also like to be allowed to thank the noble Lords who have taken part in the debate, both colleagues of mine on the relevant sub-committee and others, and I would especially thank those noble Lords who were so generous in their references to the report itself. Finally, I should like to thank everybody who has contributed to this lively, wide-ranging and constructive, as I believe it has been, debate. Right at the beginning, I said that I was deeply aware that there are many of your Lordships who are infinitely more knowledgeable than I could ever hope to be in this field of industrial relations, and I think that that statement has been vindicated by the contributions made this afternoon.

I was particularly glad that the comments were not unanimously on one side, because the whole point of the debate, as I have understood it, as of the report itself, is that there should be opportunities for discussion for different points of view to be put in the hope, if I may presume to say so, that both Her Majesty's Government and even the Commission in Brussels might take some notice of what those of us who have been battling with this subject have presumed to say. Thank you very much indeed, my Lords; I am very happy that the debate has taken place.

On Question, Motion agreed to.