Lords Sitting of 7 December 1982

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Portsmouth.

Engineering Education in Schools
Lord Beloff: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what efforts are being made to encourage more schoolboys and schoolgirls to engage in studies leading to careers in engineering.
The Earl of Swinton: My Lords, the Government recognise that the encouragement of young people into the engineering professions depends crucially on what schools can do to arouse pupils' interests and ambitions, and to equip them with the right range of knowledge, skills and attitudes. Direct responsibility for this rests, in England and Wales, with individual schools and their local education authorities. Nevertheless, in their guidance document, The School Curriculum, published jointly in March 1982, my right honourable friends the Secretaries of State for Education and Science and for Wales stressed the need for all pupils to study both mathematics and science throughout their years of compulsory schooling, and emphasised the value of studies in craft, design and technology. They also emphasised the importance of better and more systematic careers education and guidance for all pupils, with particular reference to their subject choices. More recently, the Government have announced a new technical and vocational education initiative, which will encourage and support studies in engineering and related areas.
Lord Beloff: My Lords, I thank my noble friend the Minister for having, on his first appearance in this capacity, made so lengthy and illuminating an answer. May I ask him whether he agrees that the teaching of English, particularly the writing of prose and the presentation of matter in English, is equally important for budding engineers?
The Earl of Swinton: My Lords, I thank my noble friend for the kind remarks which he has made. I think it is one of the main objectives of the Government in the field of education to improve standards in all subjects, and English must be one of those.
Lord Blyton: My Lords, after training these engineers, can the noble Earl the Minister say where we will get the jobs for them, with 4½ million unemployed?
The Earl of Swinton: My Lords, I think that that is somewhat wide of the subject. But the better trained and educated they are, the more chance they will have of finding the jobs that are available.
Lord Glenamara: My Lords, while agreeing with all that the Minister said—up to the last sentence, anyhow—and, also, with all that the noble Lord, Lord Beloff, said, may I ask the Minister whether he will be very dubious about vocational training courses in schools? Does he not think that 16 is early enough to do the job that young people are going to do for the next 50 years? Is it not more important in schools to let them browse in the fields of learning, rather than gorge at the trough?
The Earl of Swinton: My Lords, this, obviously, crosses the line between where education finishes and training begins; but I would not agree entirely with what the noble Lord has said. It is important to have a good grounding, especially in view of what the noble Lord said about there being fewer and fewer jobs.
Lord Lee of Newton: My Lords, would the noble Earl agree that there is a great deal of snobbery-attached to the teaching profession, and that many teachers are giving the impression that to go and work with your hands is proof that you are a failure?
The Earl of Swinton: My Lords, this is one of the problems that we need to get over. Up to now, an education in technology and in industry has not, perhaps, been considered as much a status symbol as education in some of the social services, in the law or in medicine. This is something which the Government are trying to get over with their various initiatives.
Baroness David: My Lords, may I also congratulate the Minister on his first appearance at the Dispatch Box, particularly as I understand that he is "undertaking education"? Is he aware of a paper from the Director-General of the National Economic Development Council on education in industry, where he is highly critical of the training given in schools as being inadequate for industry and engineering? He comments particularly unfavourably on the examination system, with its academic orientation, and also on teachers' inexperience of industry. Will any note be taken of this, particularly in regard to the examination system? I understand that decisions are still to be taken about that.
The Earl of Swinton: My Lords, I thank the noble Baroness very much for her kind words. I am glad she agrees with me that I am definitely in need of some education, and I hope that I may get it at the DES. As I am sure the noble Baroness is aware, the Government issued a Statement in May, 1982, on the new 17-plus examination. This is intended primarily for those young people who wish to continue their full-time education in school or in further education, and who have set their sights on employment rather than higher education, but have not yet decided on a particular job. It is very important that the arrangements for

111
these examinations should be acceptable to all concerned, and the Government are in consultation with these bodies to that end. Turning to teachers, the Government are aware that some of them have themselves left school, gone to college and then gone into teaching. They therefore do not know a lot about the outside world, especially industry. Action is being taken in order to encourage teachers to take in-service training with the help of industry itself, which is helping them over this difficulty.
Baroness David: My Lords, is the Minister aware that the paper by the Director-General to which I referred appeared only in November, and that he particularly referred to the 16-plus examinations?
The Earl of Swinton: My Lords, I was not aware of that.

Local Authority Capital Expenditure
2.43 p.m.
Baroness Elliot of Harwood: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they are taking to persuade local authorities to increase their spending on capital projects.
The Earl of Avon: My Lords, at the end of October we wrote to all local authorities in England offering to make additional expenditure allocations where these would enable additional work to be undertaken this financial year. By inviting applications, we hoped to secure better use of resources, following a forecast of a substantial underspend on capital investment by English local authorities in the current year. I am pleased to say that many authorities have seized the opportunity to identify and press ahead with projects, and as a result we expect a considerable amount of extra capital investment to be achieved.
Baroness Elliot of Harwood: My Lords, I thank the Minister very much for his most encouraging Answer. I hope that every possible opportunity will be taken to urge capital expenditure in the areas where much still needs to be done and can be done. I understand that both the labour and materials are there. What is required is a certain amount of drive. I hope that the Government will put that drive behind their policy.
The Earl of Avon: My Lords, I am grateful for my noble friend's response. That is the sort of drive we are trying to put in.
Lord Beswick: My Lords, I wonder whether the noble Earl could give to the House the approximate date within the Government's lifetime when it ceased to be an intolerable burden on the taxpayer for local authorities to spend money and became a welcome addition to their economic enterprise?
The Earl of Avon: My Lords, I hope that the policies now coming to fruition are doing exactly what the noble Lord says.
The Earl of Lauderdale: My Lords, can my noble friend say whether the action to which he referred includes Scotland? He referred only to England and Wales.
The Earl of Avon: My Lords, I did indeed refer only to England, in spite of the fact that my noble friend Lady Elliot of Harwood asked the Question. The position in Scotland is rather different. The capital control system in Scotland is not statutory and there is less of a problem about underspending. A few additional allocations are, however, being made and extra spending upon improvement grants is being authorised.
Lord Molloy: My Lords, is the noble Lord aware that what made a massive contribution to overcoming the slump of the 1930s and getting the unemployed employed was the building of technical colleges, schools and hospitals by local authorities, and that many of our most famous town halls were built during that period? This made a massive contribution to overcoming the slump which we were then enduring. Would it therefore not be prudent for the Government to increase what they are doing and to give even more encouragement to local authorities to spend and prosper?
The Earl of Avon: My Lords, I am grateful to the noble Lord for bringing me back to the time of my birth. The very policies which we are putting forward at the moment are offering greater freedom to local authorities. I am glad to be able to say that, of the recent extra allocation, £60 million has been given to such projects.
Lord Kaldor: My Lords, is the noble Earl aware that in the 1930s when these highly desirable events took place the Bank Rate was 2 per cent. and that the Government converted the largest long term War Loan from 5 per cent. to 3½ per cent.? They brought down the whole structure of long term interest rates. Would the noble Earl agree that the reduction of interest rates may be the most efficacious method of increasing desirable capital investment?
The Earl of Avon: My Lords, I am grateful to the noble Lord for underlining what the noble Lord, Lord Molloy, said about the 1930s and for giving me that interesting lesson. I agree that the reduction of interest rates is of vital importance.
Lord Evans of Claughton: My Lords, while welcoming the increased expenditure on capital projects, would not the noble Earl the Minister agree that one of the problems about encouraging capital expenditure is that often there are revenue implications and that many local authorities are discouraged from going in for capital expenditure because of the extremely heavy controls which central Government have imposed on local authority independence?
The Earl of Avon: My Lords, the answer is to tackle the real problems relating to revenue expenditure. It would just be pretending to say that some of the items do not count. There is an overriding need to achieve real cuts in total levels of local authority revenue expenditure. There is still scope for restraining wasteful recurrent expenditure, thus leaving room for revenue consequences on capital projects.
Baroness Fisher of Rednal: My Lords, would not the Minister agree that local authority building and housing programmes take longer than a few months to plan and implement? May I also ask the Minister whether he realises that the Government's policy of cut and spend makes it almost impossible for local authorities to plan ahead on capital programmes with any degree of certainty?
The Earl of Avon: My Lords, we are aware of the problems to which the noble Baroness has referred, and we are working towards their end. We hope, as I said in an earlier reply, that the greater freedom we have given to local authorities to use all resources, including capital receipts, will encourage local authorities to go ahead and use this added freedom.
Baroness Trumpington: My Lords, would my noble friend the Minister agree that any decent local authority automatically plans ahead its capital expenditure? It is when local authorities have the capital that they can implement their plans.
The Earl of Avon: My Lords, I am grateful to my noble friend for that additional question.
Lord Beswick: My Lords, can the noble Earl say whether this U-turn on local authority expenditure on capital projects is now to be applied to public corporations?
The Earl of Avon: My Lords, I do not think that this really is a U-turn. It is as a result of the 1980 Act, which came into effect in 1981, the consequences of which we are now seeing.
Lord Leatherland: My Lords, when the Minister spoke of councils spending money on what he called "wasteful projects", what exactly did he have in mind?
The Earl of Avon: My Lords, that is an excellent question. I shall try to find some examples for the noble Lord.
Lord Leatherland: My Lords, may I ask the Minister to do that within the lifetime of the present Parliament?
The Earl of Avon: My Lords, I shall be happy to write tomorrow to the noble Lord with some examples.

Enterprise Zones: New Jobs
2.49 p.m.
Lord Sandys: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what additional employment has been created so far in established enterprise zones.
The Earl of Avon: My Lords, our estimate is that by 31st May this year some 3,000 jobs had been provided in the 11 enterprise zones designated across the United Kingdom by firms new to the zones.
Lord Sandys: My Lords, I thank my noble friend for that very encouraging Answer. Can he say whether any lessons have been learned in the established enterprise zones which will be applied to the newly allocated zones which were announced only a short time ago?
The Earl of Avon: My Lords, the consultants' report which was produced was called a Year 1 report and, basically, it looked at the areas of the zones prior to designation. This report was published earlier this year and any lessons learnt from it will be taken into account. I understand that the consultants will be submitting their Year 2 report to the department very soon—and again, any lessons learnt from that report will be taken into account.
Lord Leatherland: My Lords, while the noble Earl claims credit for the 3,000 extra jobs which have been created, do the Government also claim credit for the scores of thousands of people who have been thrown out of work during recent months?
The Earl of Avon: No, my Lords. As we have discussed in this House for a long time, nobody enjoys the unemployment which there is, but we believe that what we are doing with enterprise zones is something of great benefit to these areas and to the people there.
Lord Cledwyn of Penrhos: My Lords, in so far as this is possible, can the Government ensure that firms which move to these enterprise zones are not ones that move for the sake of the grants alone, thereby depriving other deserving areas of jobs? Can the Government also ensure that the type of firm is such that it alleviates severe unemployment, rather than be of a type which is not labour intensive but which may also use a great deal of land and thereby derive substantial rate concessions from being in an enterprise zone?
The Earl of Avon: My Lords, the noble Lord, Lord Cledwyn of Penrhos, has indeed put his finger on one of the problems of this particular project. We do not know the precise number of jobs arising from firms moving into an enterprise zone, but we believe it is a reasonable assumption that these firms are generally committed to moving into a new location anyway. In setting up new premises—especially in an enterprise zone, with its attendant benefits—they have an opportunity to expand both their operations and their workforce. Even now, these are fairly early days to get full facts and figures from these zones, but we are monitoring the kind of question which the noble Lord asked—and there are some very good stories to tell.
Lord Boyd-Carpenter: My Lords, is not one of the attractions of these zones that they are also local authority enterprise zones?
The Earl of Avon: Yes, my Lords, most of them are owned by local authorities.
Lord Glenamara: My Lords, is the noble Earl aware that in County Durham there are at least 12 areas where unemployment is more than 20 per cent.? In the town of Consett, about which I have spoken to your Lordships before—as the noble Earl, Lord Ferrers, will tell your Lordships—unemployment is around the 30 per cent. mark. It will now be around 30 per cent. in Redcar, with the latest redundancies at British Steel. What plans do the Government have to introduce more of these zones?
The Earl of Avon: My Lords, as the noble Lord, Lord Glenamara, will be aware, we have just announced that we are introducing 13 additional zones, which I believe is a fairly good response after the original zones were introduced some two years ago.
Lord Ross of Marnock: My Lords, can the noble Earl tell us what the cost of these 3,000 new jobs will be? While we are grateful for anything that is done, does he appreciate that at Clydebank in Scotland, which was the first enterprise zone, we lost more than 3,000 jobs—which is the number of jobs the noble Earl boasted about as having been created for the whole of the country?
The Earl of Avon: My Lords, if I may take the last point first, I understand that as a result of the enterprise zone at Clydebank, some 822 jobs were created. Again, this is a beginning because factories are still being built, and so there is more to come. In replying to the noble Lord, Lord Ross of Marnock, I would like to make three points. First, less than 18 months after the first zone was designated, it is still too early to assess all the costs. Secondly, much of the cost of initial development in the zone will support activity over a number of years. Thirdly, the success of the enterprise zone initiative should be measured not only in terms of jobs provided in the zones but also in the spill-over benefit of increased demand. At the moment, we believe that the cost will be about £10 million.
Lord Molloy: My Lords, is there not a serious threat to the Government's good intentions; namely, that if we do not save British Steel, then the enterprise zones and indeed the engineering trades covered in the first Question this afternoon will all come to nought; and the Government's policy will simply end up in robbing Peter to cheat Paul?
The Earl of Avon: My Lords, I feel that a comment on steel when we are discussing the enterprise zones is a little wide of the Question.
Viscount St. Davids: My Lords, does the noble Earl not agree that what is important is to support successful new industries in high technology areas, rather than lose hundreds of millions of pounds in trying to
116
support aged, dying industries or in deluding the workers by trying to support co-operatives for them which are simply made out of the small, dying bits of dead ducks?
The Earl of Avon: My Lords, I hope that the noble Viscount will visit some enterprise zones. I feel that he is totally awry in his comments. There are no delusions and there are no dying industries; these are new places which are being developed for new jobs for people in a creative atmosphere.
Lord Leatherland: My Lords, will the noble Earl remind the noble Viscount, Lord St. Davids, who spoke of "dying bits of dead ducks", that when ducks are dead, they can no longer be dying?
Lord Tordoff: My Lords—
Lord Denham: My Lords, we have now spent 19 minutes on three Questions and quite a long time on this Question, and I wonder whether we should not perhaps move on to the next Question.
Several noble Lords: Hear, hear!

Criminal Injuries Compensation Board: 18th Report
2.56 p.m.
Baroness Phillips: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they propose to take following the 18th Report of the Criminal Injuries Compensation Board (Cmnd. 8752).
The Parliamentary Under-Secretary of State, Home Office (Lord Elton): My Lords, if the noble Baroness's concern is, as I suppose, with sentencing practice, I can tell her that Her Majesty's Government acknowledge the public concern that can arise from some sentences which appear excessively lenient. It is for courts alone, however, to determine the proper sentence in individual cases within the limits set by Parliament and under the guidance given on appeals.
Baroness Phillips: My Lords, I would like to thank the noble Lord the Minister for that reply. He was correct in assuming that this was the angle of the report which concerned me. Bearing in mind that his right honourable friend in another place occasionally makes suggestions to magistrates (I will say no more than that), would the noble Lord be agreeable to asking his right honourable friend to put to magistrates and judges the proposition that people are concerned about the lenient sentences which are at the moment dealt out to people who commit violent crimes?
Lord Elton: My Lords, I will of course ask my right honourable friend to read the remarks which the noble Baroness has made, which may attract some sympathy. I would like to emphasise that in this

117
country we do not have political courts, and politicians do not tell the courts what sentences to pass. The proper sentence is the sentence chosen by the court, which has heard both the evidence and any statement in mitigation—and the advice of the Lord Chief Justice. That advice was that for most robberies and offences involving serious violence, medium and long-term custodial sentences were the most appropriate. I believe that chimes in with what the noble Baroness, Lady Phillips, would wish my right honourable friend to say.
Lord Elwyn-Jones: My Lords, is it not the case that the guidance which the noble Lord the Minister said was given by the Lord Chief Justice is in fact being followed by the courts, and that the usual sentence in mugging cases—or "glassing" cases, which I believe is the fashionable term for public house offences—now tends to be between 18 months and three years? Is the noble Lord aware that in a recent case the Court of Appeal upheld a sentence of two and a half years passed on a girl mugger who was 20 or 21 years of age?
Lord Elton: My Lords, the noble and learned Lord, Lord Elwyn-Jones, is right in that the generality of sentences do not attract public concern. It is only occasional cases, in which very often the public is not aware of all the facts, on which public concern is concentrated.
Lord Hooson: My Lords, is it any part of the remit of the Criminal Injuries Compensation Board to pass comments on the sentencing practice in this country? Do the Government invite these comments to be passed? Is it right that these comments should be passed in a report in a generalised way, without the precise circumstances of the cases to which they refer being known?
Lord Elton: My Lords, in that the board is the only body which has a purview of all the cases in the whole of Great Britain, its view must be of interest, and I believe that the board should be allowed to express it.
Lord Paget of Northampton: My Lords, is it not a problem that the present accommodation is wholly inadequate even to deal with the number of prisoners resulting from this so-called lenient policy, and accommodation is simply not available for any heavy stepping up of sentences, even if it was desirable?
Lord Elton: My Lords, it is the desire of the Government, which I have often voiced during the debates on what is now the Criminal Justice Act, that sentences should be appropriate to cases. I think there is no difference between us that some people should have long sentences; there are others who should have shorter sentences, and by providing alternatives to custody we make more room for those who ought to be in prison.

Business
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend the Leader of the House will, with the leave of the House, repeat a
118
Statement that is to be made in another place on the European Council Meeting in Copenhagen.
This will be followed by my noble friend Lord Gowrie who, again with the leave of the House, will repeat a Statement on the bombing at Ballykelly in Londonderry. I think I should say, for the convenience of the House, that as the noble Earl is at present en route from the Province, his Statement may not follow immediately after the first Statement.
Lord Shinwell: My Lords, may I ask the Government Chief Whip a question on this matter of Statements. Are we likely to receive a Statement from another place, or arrange a Statement in your Lordships' House, which would enable us collectively to express our condemnation of the recent deplorable and horrible event that has taken place in Northern Ireland?
Lord Denham: My Lords, that is the second Statement—the one that is going to be made by my noble friend Lord Gowrie later on this afternoon.

Health and Social Services and Social Security Adjudications Bill [H.L.]
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That it be an Instruction to the Committee of the Whole House to whom the Health and Social Services and Social Security Adjudications Bill has been committed that they consider the Bill in the following order—

Clauses 1 to 5,

Schedule 1,

Clause 6,

Schedule 2,

Clause 7,

Schedule 3,

Clause 8,

Schedule 4,

Clause 9,

Schedule 5,

Clauses 10 and 11,

Schedules 6 and 7,

Clauses 12 to 19,

Schedule 8,

Clauses 20 to 22,

Schedule 9,

Clause 23,

Schedule 10,

Clauses 24 to 26.

—(Lord Trefgarne.)
On Question, Motion agreed to.

Writers to the Signet Dependants' Annuity Fund Order Confirmation Bill
Lord Lyell: My Lords, on behalf of my noble friend Lord Mansfield, I beg to move that this Bill be now considered on Report.
Moved, That the Bill be now considered on Report.—(Lord Lyell.)
On Question, Bill considered on Report.

Highland Region (Banavie Level Crossing) Order Confirmation Bill
Lord Lyell: My Lords, on behalf of my noble friend Lord Mansfield, I beg to move that this Bill be now considered on Report.
Moved, That the Bill be now considered on Report.—(Lord Lyell.)
On Question, Bill considered on Report.

Mental Health (Amendment) (Scotland) Bill [H.L.]
3.2 p.m.
The Minister of State, Scottish Office (The Earl of Mansfield): My Lords, I beg to move that this Bill be now read a second time. If I may begin on a personal note, it gives me pleasure to recall that some 22 years ago my father rose in his place in your Lordships' House to speak in support of what was to become the Mental Health (Scotland) Act 1960. He spoke with some authority, having been for many years chairman of the board of management of a large mental hospital. The confidence with which I recommend this Bill to your Lordships is enhanced by the knowledge that it would have met with his wholehearted approval.
The 1960 Act was, and will long remain, the most important single measure in the history of Scottish mental health legislation. It replaced a labyrinth of earlier lunacy and mental deficiency legislation, some of which dated back to 1857. It established the important principle that a mentally disordered person should have the same right to seek treatment voluntarily as any person suffering from any other illness. A corollary to this is the principle that powers to compel a mentally disordered person to remain in hospital for treatment should be used only where there is no acceptable alternative. The Bill before your Lordships does not seek to alter either the framework or the main thrust of the 1960 Act; but it makes a number of improvements so that the intention of that Act may be more effectively realised in practice. In order to clarify the aims of the Bill, we have circulated a memorandum which I hope will be found to be a useful aid to understanding. This sets out in some detail our proposals for amending the existing Scottish legislation in the light of the comments we have received on the consultative paper circulated earlier this year, which we have tried to accommodate as far as possible.
Your Lordships will, of course, recollect that an Act has recently been passed to amend the English Mental Health Act 1959. Although the Scottish legislation has its own distinctive features, it is desirable that the law on both sides of the Border should have the same effect where it applies to identical circumstances. The Bill, therefore, seeks to give effect to a number of provisions now in the Mental Health (Amendment) Act 1982 which should be reflected in the Scottish legislation.
The first five clauses relate to the Mental Welfare Commission for Scotland. It is a testimony to the value of the commission that one of the major reforms in the recent legislation for England and Wales provides for the establishment of a similar body.
120
Mentally ill and mentally handicapped people are vulnerable to neglect, abuse or exploitation, and it is essential that their interests should be protected in every possible way. The Mental Welfare Commission is an independent, impartial body with wide powers to undertake these important functions.
Clauses 1 and 5 affect the way in which the commission is administered. The commission will be given greater control over the management of their financial affairs and the recruitment of their staff. Clause 2 adds to the commission's duty to visit detained patients a specific requirement that each such patient must be visited at least once every three years. Although there is provision elsewhere to safeguard against unnecessarily prolonged detention, it is desirable that there should also be an automatic, independent review at longer intervals as an extra safeguard.
The commission's power to discharge patients does not extend to those who are subject to special restrictions—the 250 or so "state patients". Clause 3, however, provides for the commission to make a recommendation to the Secretary of State where they consider that such a patient ought to be discharged.
Clause 4, and, to take it out of sequence, Clause 28 are designed to overcome certain difficulties which the commission have experienced in the past. Clause 4 will enable them to appoint a legally qualified person to carry out an inquiry on their behalf. This will ensure that such inquiries can be put in hand expeditiously on occasions when no legally qualified commissioner is available to conduct the proceedings. Clause 28 will enable the commission to take direct action where necessary to secure the appointment of a curator bonis in any case where they consider that a patient's affairs should be managed on his behalf by a disinterested party. Broadly speaking, the changes which these clauses will make are intended to give greater independence to the commission and to assist them in the discharge of their present functions.
Clause 6 removes the term "mental deficiency" from the legislation, and replaces it by the term "mental handicap". This change was demanded by the overwhelming majority of those who responded to the consultative document.
Clause 7 makes a number of amendments affecting the appointment and functions of mental health officers. Since the 1960 Act was passed, social workers have become an integral part of the professional team whose various skills are devoted to the care of mental patients. We must ensure that they are trained accordingly and that their duties are more clearly specified. The 1960 Act was not specific as to who should be appointed as a mental health officer, and some local authorities now designate virtually all their social workers as such. There is also some doubt as to the powers and duties of such officers. Clause 7 is intended to remedy this unsatisfactory state of affairs by requiring local authorities to appoint suitably qualified social workers as mental health officers. A Scottish Office Working Party, with representation from the Association of Directors of Social Work, the British Association of Social Workers and the Central Council for the Education and Training of Social Workers, is at present considering the way in which the new provisions would be implemented.

121
Clause 8 amends the grounds for compulsory admission to hospital or reception into guardianship. The grounds for admission to hospital are presently to be found partly in Section 23 of the 1960 Act and partly in Section 24. One effect of the provisions of Clause 8 will be to list these grounds more conveniently in a single subsection. A more important effect will be to remove the age limits which at present restrict the admission of mentally handicapped persons and those suffering from personality disorders. When the 1960 Act was passed it was thought that such patients would be unlikely to benefit from treatment once they were beyond their early twenties. A different view is taken now, and the new criteria accordingly focus directly on the question of "treatability". Thus, whatever his age, a person who is suffering from a personality disorder or from mental impairment will not be subject to detention in hospital unless medical treatment is likely to alleviate or prevent a deterioration of his condition.
An important change is made also in the grounds for reception into guardianship. Over the past 20 years the number of persons under guardianship has declined and very few new guardianship orders have been made. There is however considerable potential value in the system of guardianship for patients who can live successfully in the community provided someone is able to exercise a degree of supervision. The amended grounds for reception into guardianship therefore refer to the interests of the welfare of the patient rather than the more narrow interests of his health or safety. The more limited powers which are to be available to guardians are set out in Clause 11.
I come now to the important group of amendments affecting the procedures for compulsory admission to hospital and the duration of periods of detention. There has been a good deal of criticism about the way in which the existing legislation has been applied and particularly about the use of Section 31 which provides for a patient who has been admitted in an emergency to be detained for a period of seven days. This was intended to allow time for a formal application under Section 24 to be completed and submitted to the sheriff for his approval. Experience has shown that most patients who are admitted in an emergency respond to treatment fairly quickly so that within two or three weeks there is no longer any need for them to be detained.
The new provisions tighten up the emergency admission procedure in two directions. First, Clause 12 reduces to 72 hours the period for which a patient may be detained after he has been admitted under Section 31. Secondly, Clause 14 introduces a new procedure for short term detention following emergency admission. If by the end of the 72 hours a psychiatrist has confirmed the diagnosis of the doctor who signed the emergency recommendation, the patient may then be detained for up to 28 days without formal application to the sheriff, though the patient can appeal to the sheriff against his detention if he wishes.
For patients who are detained for a longer term, Clause 16 will have the effect of halving the intervals at which the authority for detention must be reviewed. At present, renewal is necessary at the end of the first
122
and second years, and at two-year intervals thereafter. Once the proposed amendment comes into effect, there will be a statutory review at the end of the first six months, and the authority for detention will have to be renewed at the end of each year. As a result, patients will be able to appeal to the sheriff for discharge once within the second six months of detention and once in each year thereafter—that is, twice as often as at present.
Clause 21 introduces into the principal Act a series of new sections, the effect of which will be to enable state patients to appeal to the courts for their discharge. At present, these patients, of whom there are some 250 subject to special restrictions set out in Section 60 of the Act, may be discharged, transferred or given leave of absence at the sole discretion of the Secretary of State. This provision is intended to bring the Scottish legislation into line with a recent judgment by the European Court of Human Rights which ruled that they should have a right of appeal to a court. This will give state patients the same opportunities to appeal to the courts as are available to all other detained patients.
Clause 29 introduces a set of provisions which are intended to remove uncertainty about forms of medical treatment for mental disorder which require consent and a second medical opinion. Certain forms of treatment, which are to be specified in regulations, will be subject to independent confirmation that the patient has knowingly consented and that the treatment is likely to be beneficial. The new provisions will also allow treatment within these categories to be given without consent under closely defined conditions. They will also deal with such matters as withdrawal of consent and the independent review of courses of treatment. A number of other changes are proposed affecting such matters as the rights of patients and their relatives to be kept informed, powers to intercept patients' correspondence and, in general, the way in which patients are treated while they are detained.
I have tried to be brief in describing the main provisions of the Bill—indeed, I think I have succeeded—in order not to detain the House with a long speech. I have therefore only attempted to outline the main provisions; but I shall be happy to answer any questions which noble Lords put to me in the course of their speeches, either at the conclusion of the debate or by correspondence. In any event, we shall be able to examine the Bill in detail when it comes before your Lordships' House in Committee. I beg to move.
Moved, That this Bill be now read a second time.—(The Earl of Mansfield.)
3.15 p.m.
Lord Mackie of Benshie: My Lords, this subject is not my particular field, but it is a subject on which every thinking person has considerable views and considerable fears. The Bill brings forward a liberal outlook and brings forward more safeguards against the fears that everyone has, and which we read about from time to time, of someone who has been confined for years and should have been released many years earlier. The Bill is certainly an advance in this direction. In Scotland the appeal to the sheriff every

123
year is clearly something which will allay people's fears on this score.
On the question of treatment which is dealt with in Clause 29 of the Bill, the Government have, in line with the English Bill, produced considerable amendments and safeguards which I think were the result of an amendment moved in the English Bill by my noble friends Lord Winstanley and Lord Hooson, and the noble Lord, Lord Kilmarnock. They are to be congratulated on the work that they have done to deal with this very vexed question of treatment, and the consent therefor, and to lay down the rules covering people who are in care.
May I ask the Minister whether relations are consulted at any time as regards consent? I see nothing about that in the Bill. It may be irrelevant, but perhaps the Minister will be good enough to tell me whether that is so. The other feature that is much to be welcomed is the fact that the commission is obliged to visit and review each case every three years. Again, that must be a valuable safeguard against the fears to which I have referred. Taken all in all, I believe our friends and our experts regard the Bill as a great step forward. I welcome it.
3.19 p.m.
Lord Campbell of Croy: My Lords, I thank my noble friend Lord Mansfield for having introduced the Bill so clearly. I welcome legislation to bring the 1960 Act up to date. I remember the Act well. I was a Member of Parliament when the Bill was passing through another place. Now we should be seeking improvements to obtain the best possible balance between personal liberty and the need for medical care and treatment.
As regards liberty, I do not suggest that in this country there could be the direction of people to mental institutions—a method which we know Communist states use for dealing with dissidents. That is a sinister reminder of how procedures can be abused. No, I am making this suggestion because the freedom of an individual can be affected by the dilatory handling of cases, overlooking improvements or not reporting or noticing recovery. This can happen simply due to overwork when there are more cases than can be dealt with by the number of staff, and particularly qualified staff. There are also cases where members of an individual's family find it exceedingly difficult to cope with someone who is highly eccentric and think that that person should be detained in a mental hospital. Those are the types of cases which have to be considered carefully from the point of view of the rights of the individual.
The 1960 Act established the Mental Welfare Commission in Scotland. For England and Wales a similar commission is now being created, 22 years later. I think that that is in itself a good reflection upon the role that the Scottish commission has played since the 1960 Act. I know that there has been some criticism, but I stick to the view which I expressed in the Second Reading debate on the Bill for England and Wales some months ago, that the commission in Scotland has in general been successful and has done a good job. This Bill continues the commission, giving it some additional powers and duties. I applaud in
124
particular the duty which will now be imposed upon it, if the Bill is passed, to visit every detained patient in Scotland at least once every three years.
Since 1960 there have been considerable advances in medicine, in the treatment of mental illness. Over the past 20 or 30 years those advances have transformed the type of existence which sufferers can lead. I am glad to say that it is now possible for a large proportion of those who would previously have had to be locked up to circulate in the community. This can be done by a prescribed regime of drugs or other treatment, without unacceptable risk to the person concerned or to others. Close or distant supervision may be needed. Such a regime is invariably better for the mentally disabled person than being institutionalised. It also relieves pressure on scarce mental nursing resources. This is a welcome trend and we owe it to the success of medical research. However, it does require a matching increase in knowledge and understanding of mental illness by the general public.
When more people with mental illnesses are in circulation, there must be provisions for a sudden relapse or for the failure to continue with a régime of drugs. This can happen and can leave the mentally ill person in a very difficult state outside hospital. In considering, therefore, the new arrangements being proposed in the Bill for detention, treatment and rights of appeal, we should bear those matters in mind. I hope that there will in future be a larger proportion of those with mental disorders who can circulate safely outside hospitals or institutions.
I now come to Clause 13, which I know is controversial. This clause seeks to give a new power in Scotland to a nurse to detain in hospital for up to six hours a patient whom the nurse considers would be a danger either to himself or to others if released at that moment. The six hours is simply to cover the period before a medical practitioner is available to give an opinion. This matter was discussed during the past year as regards the Bill for England and Wales, and the period of six hours has been accepted in that case. I believe that it is right. It is important in the kind of situation that I have described that a nurse should be able to stop someone who looks as though he may go out and try to commit suicide, from going out for this limited period until a doctor can give his opinion. We are fortunate in having nurses trained in mental illness who work with patience and dedication, in Scotland as elsewhere in our country. They do important and essential work. Their contribution is an especially valuable one. However, their numbers are limited and we must make sure that they are able to apply their experience and knowledge to the important areas of this problem.
I now turn to what are called "state patients". Under Section 60 of the 1969 Act, these are the patients whose movements and detention have to be approved by the Secretary of State. In Scotland. Carstairs—the state hospital where those who are considered dangerous are usually detained—is the equivalent of Broadmoor. I recall, when I was Secretary of State for Scotland, having to deal personally with the cases of men in Carstairs who were being considered for release for short periods, for long periods or for transfer elsewhere. The noble Lord, Lord Ross of Marnock,

125
will I am sure remember doing the same when he was Secretary of State. The first matter of importance in this connection must be the safety of the public. Noble Lords will remember the case of the poisoner who left Broadmoor and then quietly tried to poison people. After that, an inquiry was set up into the whole system. In Scotland there have been former inmates who have run amok and caused serious injuries after being in Carstairs. So I reiterate that the safety of the public must come first when state patients who are known to be dangerous are being considered.
There are of course anxieties in general about the recommendations of psychiatrists—anxieties in both directions. To the lay observer, psychiatry is by no means an exact science. Some—after incidents of violence of the kind I have just described—consider that psychiatrists are too prone to recommend letting people out. Others, such as those in some civil rights groups, are worried by a contrary theory, that psychiatrists are liable to detain patients unnecessarily. In this context, I am glad to note that Clause 21 of the Bill introduces an appeals procedure for those patients who are under special restrictions—that is to say, those whose movements require the approval of the Secretary of State for Scotland. I suggest that the Bill should provide a framework of provisions for dealing with every kind of case on its merits in the conditions of today and of the foreseeable future.
3.29 p.m.
Lord Taylor of Gryfe: My Lords, I should like to measure this Bill against the problem, as I see it, in Scotland, and to quote one or two figures in connection with mental health. In 1979, the admissions to Scottish psychiatric hospitals were 24,526. First admissions were 9,956, but readmissions numbered 13,927. That indicates that the problem is not being tackled effectively, since the readmissions were of people who had been mentally ill and who had got into the "revolving door" principle of being out for a brief period and back in again for treatment. It is a very serious problem in Scotland and a very serious problem nationally. The cost of in-patient care for the mentally disordered in the National Health Service in 1979 was no less than £96 million. The number of beds occupied in Scotland by the mentally ill was something like 45 per cent. of all beds available in Scottish hospitals. This indicates the size of the problem with which this Bill is designed to deal.
I must say that although there are elements in the Bill which are attractive and necessary, I think that an opportunity has been missed. Instead of amending existing legislation, we should be introducing a new Bill which would be a much more comprehensive Bill, because when you amend an existing Act it is obviously limited in its scope. The noble Lord, Lord Campbell of Croy, stated that in this field we have been pioneers in a number of directions and it is a great pity that the Government are not grasping this opportunity for pioneering in new legislation which would be more comprehensive and more effective.
The Bill before us amending the 1960 Act should achieve certain objectives. It should provide a framework which will stimulate and sustain a comprehensive mental health care service, and it is by that
126
standard that it will be judged. It should, in fact, encourage the provision of a comprehensive framework which will stimulate and sustain a mental health care service. Another objective should be the improvement of primary and secondary safeguards of individual's rights in detention, treatment, care and information. The Bill goes some way to meeting that. A clarification of the roles of different disciplines has to be better set out, because throughout the Bill there is not the clear distinction between two distinct problems—the problem of mental illness and the problem of the mentally handicapped. They are two entirely different areas dealt with in the same Act and they ought to have separate treatment.
As I say, it would have been very welcome in this House if the Government had allowed a broad debate in Scotland on the requirements of this service and had introduced a new Bill. In fact, in looking at the English Bill, there was much more consultation—there was a report and a Green Paper—before the English Bill emerged. I do not think it is desirable that the Scottish Bill should be almost a copy of the English Bill when there are opportunities to do a little bit of pioneering, as we have done in other areas of the law in Scotland. I think it is necessary that we should be quite specific about the mandatory requirements of local authorities to provide community care parallel to institutional care. If there is anything wrong with the present system it is that it leans too heavily on institutional care and not enough on community care, and that ought to be rectified.
With regard to the Mental Welfare Commission, we, of course, welcome the powers of that commission, but we think that it ought to report annually and that it ought to have a much broader and wider membership than is provided for in the Bill. There is no reason why a former patient should not be on this Mental Welfare Commission, or why social workers who are involved in community care should not be more adequately represented in the Mental Welfare Commission. It should have a wider membership and it should be seen to be representative of a wider range of interests. I think, too, that the Mental Welfare Commission's responsibility for the mentally ill should be spelt out not simply as in relation to institutional care but also in relation to community care. The commission should not be looking only at individual cases, but should have a responsibility for looking at the broad policy and broad strategy of dealing with this problem. On occasion, it should also be permitted to challenge matters of clinical judgment. I should like to see an upgrading of the powers and authority of the Mental Welfare Commission. The proposed amendments relating to the Mental Welfare Commission are generally acceptable, but in my view they fall short in the categories which I have mentioned.
Once again, it is a fundamental weakness of the Bill that it does not distinguish the two forms of mental disorder, as I indicated earlier, and this causes great public confusion as to people who are mentally ill and those who are mentally handicapped. I think that something should be introduced in the Bill in order to make that matter more explicit.
With regard to the code of practice which will guide the mental health officer, when people emerge from

127
institutional care there should be provision for aftercare by trained social workers in this field. When we release prisoners we invariably provide for a social worker to be attached to the ex-prisoner who is released so that he can find his way back into the community. The case of the mentally ill is even more difficult than that of the prisoner because there is the stigma that that man has been in a mental hospital. In the present climate it is extremely difficult to find employment, housing or opportunities for mentally ill people in order to help them find their way back into the community, and it is that which is at the root of the revolving door principle to which I referred earlier.
The changes in relation to emergency admission and the introduction of short-term detention are generally welcome. The power to detain patients already in hospital which is given to nurses in Clause 32(2), in the view of the practitioners in this field is quite unacceptable. While the requirement of recording and notifying the Mental Welfare Commission would constitute some element of safeguard, it is felt that the extension of the rights might undermine the therapeutic relationship between the nurse and the person who is under care. In our view, it is important that compulsory detention be regularly and frequently reviewed in order to ensure that it remains necessary. At the appropriate stage we shall introduce amendments to the Bill in order to establish some of the points that I have tried to make on Second Reading.
I do not think that this is a bad Bill and I welcome many of its provisions, but we have an opportunity to do something better than that for which the Bill provides, and I hope that we shall do so by appropriate amendment.

European Council Meeting, Copenhagen
3.39 p.m.
The Lord Privy Seal (Baroness Young): My Lords, with the leave of the House, I should like to repeat a Statement being made in another place by my right honourable friend the Prime Minister. The Statement is as follows:
"With permission, Mr. Speaker, I will make a Statement on the European Council in Copenhagen on 3rd and 4th December, which I attended accompanied by my right honourable friend the Foreign and Commonwealth Secretary.
"At the end of the meetings the Danish Prime Minister issued to the press his summary of the Council's conclusions. I have arranged for a copy of this document to be placed in the Library.
"In its discussion of the economic and social situations, the European Council agreed upon a number of priority goals including the re-establishment of economic stability; the continued reduction of interest rates as a means of encouraging productive activity; the creation of more employment opportunities and professional training for young people; and increased international co-operation in monetary and trade policy.
128
"A work programme was approved on four specific matters: namely, measures to reinforce the internal market; proposals in the field of research, innovation and energy; a new instalment of the New Community Instrument amounting to some £1¾ billion; and urgent consideration to be given to proposals for training young people and reorganising working time.
"The Council reaffirmed its political commitment to the enlargement of the Community by the accession of Spain and Portugal and asked the Foreign Affairs Council and the Agriculture Council to press ahead with the necessary preparatory work. I stressed that the Community must take quick and effective action to ensure more equal access in our trade with Spain.
"There was some discussion about the implications of enlargement for the ceiling on own resources. We take the view that the Community's present own resources should be sufficient. The essential requirement is effective control over the rate of growth of agricultural expenditure.
"The Council expressed its determination to pursue a constructive dialogue with the United States. It noted with satisfaction the agreement reached on steel and the United States' President's decision to lift the sanctions imposed in connection with the Siberian pipeline.
"The Council asked the Foreign Affairs Council at its next session in December to take decisions on the various ways and means of improving commercial relations between Japan and the Community.
"On fish, it was confirmed that nine member states were prepared to accept the Commission's proposals for a revised common fisheries policy. Denmark was not yet able to do so. The Danish Prime Minister said that he needed some further clarification which I understood to refer to matters outside the package now proposed. It is my hope and expectation that agreement will be reached at the next meeting of the Fisheries Council on 21st December.
"The Council was informed that the Foreign Affairs Council had set work in hand on the Commission's recent communication about the solution to the British budget problem for 1983 and later. I emphasised that unless a decision was reached before March I should have to raise the matter at the next European Council.
"As is usual, the European Council also considered international political questions.
"The Council agreed that the basis for our relations with the Soviet Union should continue to be firmness and dialogue. We stated our readiness to respond positively to any constructive moves which the new leadership in Moscow may make, and we looked for these in particular at the Madrid Conference on Security and Co-operation in Europe and in relation to Afghanistan.
"The Council agreed to keep developments in Poland under careful scrutiny so as to be able to judge the real significance of the measures which appear to be under consideration in Warsaw.

129
"On the Middle East, the Council called upon the parties to seize the political opportunity created in September by President Reagan's initiative and the Arab Summit in Fez, and urged that all Israeli and other foreign forces be withdrawn from Lebanon without further delay.
"On international economic matters, the Council stressed that the overriding priority for the Community's economic and commercial relations with other industrialised countries is a strengthening of international co-operation in all major areas to counteract recession, with particular emphasis on a return to a stable monetary, financial and trade situation.
"In this connection the Council stated the readiness of member states to work for a substantial increase of IMF quotas and their determination to contribute to an early decision to this effect".
My Lords, that concludes the Statement.
3.44 p.m.
Lord Cledwyn of Penrhos: My Lords, we are grateful to the noble Baroness for repeating the Statement. We welcome the apparently high degree of agreement which appears to have been achieved in Copenhagen. On the economic side the position clearly remains grave, but we appreciate the attention which was paid to the unemployment problem in the Community, with 11 million people out of work, and especially the training of young people, although we appreciate that what is needed is permanent work for those who are trained. Can the Minister tell us a little more about the action which is proposed following the meeting? For example, how will the proposed loan facility—I understand 2,000 million dollars have been set aside—benefit the United Kingdom in terms of investment, and how soon, and what would our share of this normally be?
Again, to what extent will the proposed plan for co-operation in technical research, energy, and industrial intervention affect our North Sea oil resources, if at all? Would the noble Baroness agree that this summit marked a move towards protectionism by the Community? Perhaps she could state Her Majesty's Government's attitude towards this and towards imports into the Community, and what specific measures are proposed in relation to Japan? Was any progress made with regard to the United Kingdom's future budgetary contribution? I note some vague reference to next March, but the noble Baroness will recall that this question was to have been discussed in Copenhagen. Are we to understand now that it was raised but that no progress was made on it? Is there now a firm commitment for next year? The impression given by the Statement is that there is no firm commitment, and this is bound to be disappointing.
On steel, where reference is made to an agreement, could the noble Baroness confirm that Britain's share of any future cut will take account of the enormous sacrifice that the British steel industry has already made by comparison with our partners in the Community? Then, the Prime Minister says that she is confident that agreement on a common fisheries policy can be achieved before 21 st December. We are
130
extremely glad to hear this. It would be interesting to know what grounds the Prime Minister has for this hope and expectation in view of the apparent obduracy of the Danish Government on the subject; and, given that two-thirds of the fish are in British waters, can she indicate what allocation we are likely to get under the quota?
We generally welcome that part of the communiqué which deals with foreign relations, particularly the CSE conference in Madrid. On the Middle East, is there any further development with regard to a British contribution to the peace-keeping force in the Lebanon? With regard to the accession of Spain, can the noble Baroness say whether there is now a better prospect for implementing the 1980 Lisbon agreement? On the question of the sufficiency of the Government's own resources to which the Statement refers, will not the accession of two new countries exacerbate our budgetary position in the longer term?
Lord Banks: My Lords, I should like to join in thanking the noble Baroness the Leader of the House for repeating the Statement made in another place by the Prime Minister. The European Council has clearly discussed many important aspects of world affairs. Like the noble Lord, Lord Cledwyn, and the Government themselves, we on these Benches hope that the Danish Government will, before long, accept the Commission's proposals for a revised common fisheries policy.
With regard to the accession of Spain and Portugal, I wonder whether the noble Baroness could say what are now the likely accession dates? The Statement mentioned the Middle East, and the noble Lord, Lord Cledwyn, referred to that. Is it the Government's opinion, in view of matters reported in the press today, that in no circumstances can the PLO be included on the Arab side in discussions of the Reagan plan?
In the discussion on unemployment, to which the Statement refers and to which the noble Lord, Lord Cledwyn, referred, was there any general acceptance of the need to take measures to stimulate the European economy at a European level in order to have some modified expansion of the European economy? Is not the recession a cause of the increasing protectionism, and is there not a danger that this protectionism will be the major response of Governments to the recession? While acknowledging that special measures are necessary in the case of certain crisis industries, such as steel and textiles, I would ask the noble Baroness whether there is not a danger of a general slide into bilateral deals with particular countries outside the GATT, with unhappy consequences for world trade? Is it correct to say that the EEC is moving towards a freer internal market, which is welcome, and a less free or more managed external market, which is not welcome?
The Government say in the Statement that the present resources of the EEC should be sufficient. We on these Benches find it difficult to accept that there can be a long-term solution to the British contribution problem without a considerably increased Community budget from which this country would benefit more than it does from the common agricultural policy.
3.50 p.m.
Baroness Young: My Lords, I thank both noble Lords, Lord Cledwyn and Lord Banks, for their response to this important Statement. Both raised the question of the economy and attached particular importance to what the Statement said about the problem of unemployment and training. One of the conclusions of the Summit conference was the concern expressed about the depth and length of the recession and the difficulty of finding enough lasting jobs, particularly for young people. It was important that there was a welcome degree of agreement that the only way to tackle these problems is to get inflation and interest rates down and, in addition, a sensible package of measures to ease the social and economic difficulties which this structural adjustment is causing, and both noble Lords commented on the fact that training measures are proposed.
I was asked about any particular action that was proposed. The new Community instrument enables it to borrow on the markets and on-lend to industry for energy and infrastructure projects. It was expanded by about £600 million earlier this year and the commission has now proposed another approximately £1½ billion. Finance ministers will, of course, have to study the implications of this for the financial markets—the level of demand for these loans and the timing and so on—but we have agreed that they should take a decision on these matters by March.
Both noble Lords asked about the accession of Spain and the enlargement of the Community. Once again, the council has re-affirmed its commitment, which was necessary to reassure both Spain and Portugal, and believes that progress in accession negotiations must be made so that both countries can join the Community at an early date. Negotiations with both countries are proceeding separately but in parallel. Both we and the applicants hoped that they could join on 1 st January 1984, but this is now widely recognised to be an unrealistic date.
I was also asked, following on the important point about the economy, about the whole question of free trade and its effect. As noble Lords will recall from the Statement we had following the GATT meeting, the ministerial meetings demonstrated a collective determination to maintain the GATT system, despite the strains imposed by the world recession, and established a substantial work programme for the future covering important issues like services and trade barriers maintained by newly industrialising countries. The European Council has confirmed that this is something to which the Community will make a constructive contribution.
I was also asked about the Middle East and our attitude to representatives of the PLO. I confirm that my right honourable friend the Prime Minister has made it clear that neither she nor the Foreign Secretary receives representatives of the PLO, which is a terrorist organisation.
Lord Kennet: My Lords, we on these Benches are grateful to the Lord Privy Seal for repeating that Statement, and I have just one question to ask. The Statement contains 13 separate points, all of them extremely general in the way they are phrased. It is not
132
only a motherhood Statement but a Statement in favour of motherhood, fatherhood, brotherhood, sisterhood, cousinhood and kindness to animals. My question is simply whether the Government are sure that the supreme authority of the European Community is not considering too many things which should be considered in sectoral councils, and deciding too few?
Baroness Young: I agree with the noble Lord, Lord Kennet, my Lords, that the Statement covers a great many issues; but when heads of state meet together it is an opportunity to review policies on a great number of important and urgent matters which are concerning the world. I would have hoped that, having read the Statement, he would have agreed that it has a number of very positive things to say on the economy, where most countries are now accepting a need for more restrained economic policies. It suggests, I think accurately, that relations with the United States are better; it describes the problems of trade with Japan and the Far East; and it has something positive to say about the common fisheries policy. I accept, as the noble Lord said, that these are all very big issues and that each one would be the subject of a major debate. Nevertheless, it is encouraging that these issues should be discussed in Europe and that we can, in that forum, play a major part in the outcome of it.
Lord Mackie of Benshie: My Lords, will the Nine Governments, if there is a failure of Denmark to agree to the fishing agreement, remain determined to implement national measures which will bring an agreement into being?
Baroness Young: My Lords, I do not think I can go further than what I have said in the Statement. We hope the Danish Government will indicate at the next fisheries council, which will take place on 21st December, their acceptance of the package of measures. If not—and one does not wish to pursue this further—the Nine would then expect to decide on national measures in consultation with the Commission.
Lord Mayhew: My Lords, may I ask the noble Baroness to give the reasons for the shift in the Government's attitude on the Palestine problem, which was evident at Copenhagen, and for the hardening of the Government's line on the subject of Palestinian representations, which led to the cancelling by the Government of the visit to this country of King Hassan of Morocco and his delegation, which has given grave offence to a number of moderate Arab leaders?
Baroness Young: My Lords, I have given the reason, which was well expressed by my right honourable friend the Prime Minister at her press conference following the European Summit. She has said, and she confirmed, that she does not feel it would be right to receive representatives of an organisation which has not denounced terrorism.
Viscount Eccles: My Lords, is it right to conclude from the Statement that the willingness of the Governments of the Community to co-operate on economic

133
and financial matters took a marked step forward? It appears to me that their willingness to face the recession not separately but as a group is now very much more marked. In particular, was there any talk of sterling joining the EMS, as there was some reference to monetary and exchange affairs?
Baroness Young: My Lords, I thank my noble friend for that supplementary question. It is true to say that the countries of Europe are coming increasingly to recognise that there is no easy way out of the recession for any country, and that many of the policies which we in this country have been pursuing over the past few years are indeed policies that they, too, will have to pursue. I think it is encouraging that there is this measure of agreement. As I understand it, the whole question of joining the EMS was not one that was discussed in Copenhagen. But I believe that, arising from the Statement and the results of the conference, there are areas where there has been a positive move on co-operation, and that must be good.
Lord Taylor of Gryfe: My Lords, is the Minister aware that the final paragraph of the Statement, which refers to increasing the quotas to the International Monetary Fund, will be greatly welcomed, and has had today an immediate response from the United States, in so far as it, too, has indicated that it is prepared to increase quotas to the IMF; and that this should lead to a greater degree of financial stability in international banking affairs, and encourage world trade?
Baroness Young: My Lords, I thank the noble Lord, Lord Taylor, for that question. I think that that is another piece of good news that is included in the Statement.

Mental Health (Amendment) (Scotland) Bill [H.L.]
4.1 p.m.
Second Reading debate resumed.
Baroness Elliot of Harwood: My Lords, I think the moment has come when we may perhaps return to the question of the Scottish mental health Bill. I have listened with great interest to the speeches that have been made, and I shall speak for only a very short time. I should like to congratulate the Minister on the way in which he introduced the Bill, and to say that the principle on which it is based—namely, that people suffering from mental disorder should have the same protection and rights under this legislation as they would have if they were suffering from physical illness—is one with which I entirely agree. The fact that certain conditions of mental illness are different from physical handicap and require different treatment only makes it more important that such treatment should be very carefully planned and administered—and that the Bill is designed to do.
I also believe that we in Scotland are sometimes ahead of England in legislation such as this, and indeed in regard to other social legislation. The noble Lord, Lord Campbell of Croy, stressed that point in his
134
speech today. I remember that when I was chairman of the probation committee of my county council, as well as the social work committee, there was some anxiety and criticism when we adopted the system of children's panels to deal with delinquency. The system has been a great success, and has been followed in other places. I think that our mental health provision has been good, but, like everything else, it can be improved.
The proposals for the alterations in the administration of the Mental Welfare Commission so that it can employ its own staff should enable it to be very closely in touch with the patients for which it is responsible; and the commission will be encouraged to visit detained patients more frequently, which I think is excellent. But further to that, as the interest of the general public in mental health is growing, it would be good if the commission published an annual report, rather than the occasional reports that are now published, and I am sure that an annual report would be very widely read.
I believe that it is important that in any given area the social workers who are responsible for families in difficult cases should work more closely with the commission and with the hospitals, with which their responsibilities for family care are closely linked. That leads to the close association that there should be between mental health officers and social workers in any given area. The proposal that, prior to an application for a patient to be admitted to a hospital, the mental health officer must interview the patient and inform the social worker would, I believe, make for better co-operation between these two important people. It would help the effectiveness of the commission if its membership was arranged on a wider basis, to include some of the voluntary organisations that are helping in the field; and the delegation of duties in appropriate circumstances would help to speed up things. That can be copied from the success of the children's panels, to which I previously referred, where close co-operation between the voluntary and statutory representatives works extremely well.
I rather regret that the Bill does not make a clear distinction between mentally handicapped people and mentally ill people. Mentally ill people require treatment different from that given to mentally handicapped people, and this point is universally accepted.
I agree with the proposals for guardianship to be organised outside the hospital but within the community. This should help the rehabilitation of the patient and would enable the guardian to see that any medical treatment or occupation training or education was continued in a limited way. It would keep the patient in the community, rather than in the hospital. I hope that in Scotland there will be a statutory duty to ensure that any patient discharged from hospital will be under the supervision and care of a social worker, or someone designated from the hospital for the purpose. That will be difficult to organise unless there is help from the voluntary organisations, and that is why I am so keen to bring in a combination of statutory and voluntary care which would make the problems easier to handle, and which would, I believe, prove effective.

135
Statistics provided by the Scottish Office show that there is a marked decrease in relation to guardianship. This might be because for the mentally ill the system does not work as well as we had hoped, but I have known of voluntary organisations that have worked very closely with the statutory bodies, and that has generally improved the provision and has been a great asset to the patient. To sum up, I believe the Bill to be a very useful one, and, with amendments in Committee, it could help to make the Mental Welfare Commission that we have in Scotland even better than it is today.
4.7 p.m.
Lord Ross of Marnock: My Lords, the noble Earl the Minister referred to the fact that his father had spoken on the original Bill, now the 1960 Act, the main Act. The noble Lord, Lord Campbell of Croy, referred to the speeches that he had made on it. Need I say that I remember very well the 1960 Bill going through the Scottish Committee, and I believe that one or two speeches were made by myself at that time? The interesting thing is that that Bill was regarded as representing quite a radical change, and indeed itself it marked a radical change in the attitude of the public to mental illness. For the first time it was considered that mental illness was just as likely to afflict anyone as was bodily illness, and the stigma—which I am sorry to say someone spoke about today; I think that it was the noble Lord, Lord Taylor of Gryfe—was removed by the Bill. It was seen to be natural that people might become mentally ill, and it was right that that fact should be marked by a new attitude in legislation. It was a great step forward. Bearing in mind that the old board of control that had existed was wiped out and was replaced by a Mental Welfare Commission 22 years before the English got round to it, it was a very important development.
So I am sad to say—and this point was evident in at least the speech of the noble Lord, Lord Taylor of Gryfe—that in Scotland considerable disappointment has been felt by the directors of social work, the British Association of Social Workers and the Scottish Association of Mental Health, that the Bill now before us, though an important one, and in most cases welcome, is only a small Bill compared with what they had expected. They had thought that there would be another leap forward. Well, I am afraid that they did not read the Government's consultation paper very carefully; otherwise they would have appreciated that there was nothing on the way in the form of a revolutionary step forward. We must remember that the Green Paper—I have a copy here—was given away for nothing. It was well worth the price. It was issued on 29th April, a Friday, so that anyone receiving it by post would not have it until the month of May. The replies to the request for consultation had to be there before 30th July; and the fact that we received the proposals for the amendment of the Mental Health (Scotland) Act along with the consideration of the consultations in November shows that there was very little time given for the consultations, though it is fair to say that people made the effort, and I gather that about 100 organisations submitted suggestions. I think it was the Scottish Association of Mental Health which
136
organised a conference, and in a short time they had more than 100 people concerned and provided very valuable reading—that is, to anyone interested in the subject.
May I submit from my own knowledge of the Scottish Office what really has happened here? When the Mental Health Bill for England and Wales was going through, important changes were made that really had to be made on a United Kingdom basis; a draft Bill was prepared for Scotland, and it was only changes made to that draft Bill at the last minute, or some of them, which led to the speed with which things developed. I have never known a Bill go to the draftsman and, at the same time, for consultations to be going on and decisions to be made by the Government—and all done in a short time.
The Government had already made up their mind what they were going to do. It was going to be limited; and we had only to read the first page of the introduction to realise that everyone was being warned off in relation to hopes that there was going to be a new, comprehensive regime for mental health. I am perfectly sure Lord Taylor of Gryfe will have noticed that the legislation is primarily concerned with conditions in relation to mentally disordered people and their liberty, and the safeguards which are necessary to ensure rights and interests, and that the whole question of local authority services had nothing to do with the Bill.
One of the important things about the original Act, the 1960 Act, is Section 7, which dealt with general provisions in relation to local authority services and said:
"In relation to persons who are or have been suffering from mental disorder, the purposes for which arrangements are authorised or may be required to be made by a local health authority",
are—and then there are paragraphs (a), (b), (c), (d), (e), and (f). They deal with the provision, equipment and maintenance of residential accommodation, and the care of persons for the time being resident; the appointment of officers to act as mental health officers—we hear plenty about that, but nothing about the rest—the exercise of guardianship, et cetera, and the provision of ancillary or supplementary services. All these things have no place in the Bill for the simple reason—and this has been already referred to in the introduction—that to tackle these things, and to make them mandatory as some people would like them to be, would have resource implications, and, frankly, we cannot afford the money. That is really what it comes down to, and why we have this limitation within the Bill.
Of course, we had to have a Bill. We should have had such a Bill a long time ago. In 1960 there were certain references to hospitals. The hospitals have been reorganised since 1960. We no longer have the importance of the boards of management of hospitals. We have area health authorities, which deal comprehensively with the health services within an area. The local health authorities are not the kind of authorities that they were in 1960, because local government was reorganised in 1970. There was a time when the medical officers of health in the boroughs and in the counties were the great medical panjandrums.
There is something hanging over here. The Government admitted in their own paper that there are some

137
phrases which have not got the meaning that they had, but they are keeping them in because they have redefined them in another Act to include so and so, and so and so. It is a very indigestible piece of legislation, and I congratulate the Minister on the way he got through it. His was a very carefully read speech, and I am sure his father would have been proud of it. Mind you, how his father would have reacted if he had been on the Back-Benches is a very different matter, because I can remember his explosive temper. He and I used to go to address the Police Federation, which usually held its conference in Perth. He would address them on a Thursday in favour of certain aspects of penal law and I would have to go on the Friday to quieten them down after his address. The noble Earl will know what I am referring to. But there you are; these aspects of prevention of illness, care and after-care, are in different hands now from those in which they were in 1960. In 1968 social work came along. Later on, of course, that was reorganised and given to the regions, but there is no mention of regions or anything else here.
I gather that in the English Bill there is a statutory provision for aftercare. There is not in the case of Scotland, and this is something which I think the Mental Welfare Commission have been concerned about. This is where things get lost. Our provision in Scotland in relation to social work embraced after-care, and it embraced the probation service, the children's service and the welfare services. They were all taken together, very sensibly. But now we have something that is specialised, that was in this Act of Parliament, and that is the mental health officer. If you use the phrase "mental health officer", what do you immediately think of? I am perfectly sure that noble Lords would not immediately think of a social worker. In the English Bill the phrase is "approved social worker". I do not think that meets the Bill either. What I fear—and I want the Government to consider this—is that there is a difficult position in relation to this mental health officer because he is one of the people who, whether or not he likes it in particular cases, and even though he objects to it, must make the application for someone to be admitted to hospital under duress. I do not think they will welcome this. Indeed, I think I have seen something suggesting that this is a matter for the medical profession rather than for the social work aspect.
So I think there are some things which have not yet been fully thought through in relation to this Bill, and it may well be that we shall have an interesting Committee stage. But let us not belittle the Bill, because in belittling the Bill we belittle the problem, and the problem is serious from the point of view of anyone who has had to be concerned about it, either as one of a family or as an individual—and we welcome the changed attitude.
The noble Lord, Lord Taylor of Gryfe, referred to the number of readmissions, and thought this was something terrible. It is not, really. The whole change that took place from 1960 was about a liberalisation in relation to a much greater freedom; about allowing people to leave hospital and then allowing them to come back. They readmitted themselves in most cases, and this was encouraging. I want to say that some of the statistics that we have been given are very
138
misleading indeed; and we have not been given the full explanation.
I want to start with the Mental Welfare Commission. I think it is comprised of nine to 11 members, one of whom must be a woman. I think three must be medical practitioners, and one must be a lawyer, advocate or solicitor, and then there are the rest. How many have been appointed? Can we be told that? It may well be that there is scope for amendment here to bring in people from outside these professions, people with a considerable interest in mental health. Voluntary organisations in relation to mental health have been growing up in various parts of Scotland and I am sure that there is knowledge, as indeed there is ability there, and these people should be used. What is the position at the moment? Has the Mental Welfare Commission any staff at all?—because they already have corporate status, and they are going to be given permission in relation to headquarters and taking on staff. Have they any staff at all at the moment? Or is all the staff provided by the Scottish Office?
This may be one of the roots of the problem at the moment where people feel that the Mental Welfare Commission is remote, that it is too passive, that it is not sufficiently active, and that it should have a greater role. Once again, let us remember the menace of that phrase, "resource consequences". This is why I am sure that we are not going to have any great change in relation to the Mental Welfare Commission. But let us be fair to it. It has been there; it has done a very good job and could do a better job if it had more people to do it. The only thing I see here is that it now has power to appoint somebody outside the commission so that it can undertake certain formal inquiries; but that someone, again, has to be a lawyer; and that may not please everybody who has been concerned about the Mental Welfare Commission.
From that particular point of view, it has been given far more work to do because, rightly, it has been brought in to have to be informed in relation to treatment, in relation to detention, in relation to emergency detention; and it has a very much more important job to do. I think that the Scottish Council of Civil Liberties suggested that we should have virtually local mental welfare commissions, but I think that that is taking it far too far in relation to the problem. But it must be opened up a bit more; it must be seen to be opened up a bit more, and certainly the visit once every three years is important.
One thing to which the Mental Welfare Commission itself drew attention was the number of mentally handicapped people in the community who receive no visits from anybody. There may well be a gap there as to whether or not people suffering from mental illness or mental handicap are getting the kind of attention they need. Again, we come down to resources. We have not had the expansion of local government services to the extent that we need. Would it be a good idea to ask the Mental Welfare Commission to make an assessment and to draw up for the benefit of the House, for the benefit of Parliament, for the benefit of the Scottish Office, just exactly what is the layout of services within the community? I do not suggest that they should have a right to determine what they should be, but they could advise the Government what the services are and where the gaps are, and certainly that

139
would help us decide how we next proceed in making improvements in relation to the Bill.
On the question of the state prisoners, I, like the noble Lord, Lord Campbell of Croy, used to sit and wonder whether I should agree to a certain person being discharged or transferred. This is not an easy one. Not all the people concerned are right. And here you are dealing probably with the most dangerous of all the people who are in detention. The noble Lord mentioned some particular cases which are clear in my mind. I remember what happened on one occasion when some people within that prison decided to break out; another prisoner tried to stop them and he was immediately killed. Others were killed as well. As I recollect it, if we had graded all these people in terms of their degree of danger we would not have got it right in relation to what actually happened. This is one of the difficulties about it.
However, if we are giving—and I am glad that we are giving—to people who have been detained more rights of appeal to the sheriff, then it is right that advances should be made thereto; so that, from that point of view, I have no complaint about it. As to the safety of the public, I am perfectly sure that that aspect will be safe in the hands of the sheriffs and the courts as well as the Secretary of State in their handling of these particular cases. The matter of treatment is one of the other aspects that have changed over the years. Not all the treatments that were hailed as great miracle cures 10 years ago are still considered so today. There are considerable dangers and difficulties in respect of treatment of mental health patients. As I understand it, these treatments are now being graded. Certain treatments cannot be given. Treatments which affect or damage the brain tissue cannot be given without the consent of the patient. That is absolutely clear. And then there are to be two practitioners from a panel to be appointed by the Mental Welfare Commission. This is a new task for the Mental Welfare Commission. And there are another two people, one of whom could be a nurse. But one of them could be neither a nurse nor a medical practitioner but someone who has something to do with the treatment that is given. Who does the Government have in mind in respect of that? Frankly, I myself cannot foresee the kind of person to be involved here.
There are other cases of a less degree of danger in which the difficulty about getting the patient's consent is recognised and where treatment can proceed without the consent of the patient. But, once again, the Mental Welfare Commission is brought in. They have got to know about it. Of all the statistics that I have seen, one of the most disturbing relates to emergency provisions. Whereas we expected that all the protections of Section 24 were to be invoked—those concerning medical practitioners, outside practitioners, the Mental Welfare Commission and the rest—before a person could be detained, it was sad to discover that 95 per cent. of the people in our mental hospitals were detained under emergency provisions, provisions which were supposed to be imposed only when absolutely necessary and to avoid the delays of the longer procedures. I have seen that figure of 95 per cent.
140
That means that what we expected to happen has not happened. These people can be detained for seven days, but there is nothing to prevent a further emergency provision for another seven days and yet another seven days, and another. I do not say that there has been abuse but there could have been abuse, and certainly the figures are such that emergencies have been happening far too often compared with the regular form of detention. Now we have a new procedure. The Mental Welfare Commission has been brought in and there is, too, the question of the 28 days, the shorter period, with a review, with checks and balances along the line. I think it is far better, far safer, than the procedure we have had hitherto. The point that was mentioned by the noble Lord, Lord Campbell of Croy, but not mentioned at all by the Government, although it was debated on the English Bill, was the right of a nurse—not any nurse but a nurse with specified qualifications, although we do not yet know what they are because we have not been given that information—to detain a patient for six hours until a doctor can be brought to the patient. Where in Scotland is there a mental hospital where no doctor is available before six hours have passed?
From the point of view of the protection of the nurse as well as from the point of view of the protection of the patient, we could give a little more consideration to this matter; and let us not put it into a Scottish Bill simply because it is in an English Bill. I do not remember anybody writing to me about the need for this change in legislation. I hope the Government will be able to justify this with Scottish examples rather than say in effect: "It is an English Bill and we had better have it for ourselves as well."
The important aspect which has come through to me in reading the various papers that were sent to the Government in respect of changes in mental health was the ignorance not only on the part of the public as to all the safeguards that were there—what could be done, the rights of the patients and the relatives, the rights and ability of the Mental Welfare Commission—but the ignorance seemed to lie also in social work departments. So that with these new safeguards and new appeal provisions in relation to treatment, detention and the like, I am very glad that we are now going to have a code of practice. It was introduced into the English Bill and I am glad that it has to come before this House so that we shall then have the opportunity to see whether or not the new spirit that we want to see in relation to mental health—be it the attitude of the Welfare Commission, or of the social workers of the local authorities and the hospitals themselves—is carried through.
It is an important Bill. It could have been a much more important Bill by introducing much more radical changes. Let us not be frightened of that. The changes we made in 1960 were very important and worthwhile. It may well be that now, if only we had the resources or if the Government would unlock the Treasury to the spread of those resources, we could have back-up services worthy of the kind of mental hospital services that we now have, but I am afraid it is going to take some time. In the meantime, I think there is a need for a closer working together of the medical services within the hospital and outside it, the general practitioner service and the social work

141
services. The will to improve our services will require a very considerable push from us on the Government to see that they make the effort.
4.33 p.m.
The Earl of Mansfield: My Lords, I should like to thank all noble Lords who have spoken in this debate.If I may say so, I think there has generally been a welcome for the Bill. I was particularly struck—
Lord Harris of Greenwich: My Lords, I do apologise for interrupting the noble Earl so early, and this is not in fact addressed to him: I am really addressing his noble friend through him. A number of us are waiting to hear the important Statement to be made by the noble Earl, Lord Gowrie. We have already had to cancel a number of appointments this afternoon. It would be helpful if at the end of this debate we had a clear indication as to when we are going to have the Statement.
The Earl of Mansfield: My Lords, I am grateful to the noble Lord at least for interrupting me before I had really got started and I shall cause inquiries to be made. I anticipate that with Smithfield just along the road and with Christmas shopping in progress it may be that my noble friend is finding it not altogether easy to attend the House.
As I was saying, there is a general welcome for this Bill. I was particularly interested at the attempt of the noble Lord, Lord Ross, to peer into the mind of the Government and the timing that has elapsed since we issued our consultation paper and what he thought was in the Government's mind which caused the Bill to be, dare I say? drafted really before anyone had time to reply to the consultation paper. In fact he is quite wrong about that. The instructions went to the draftsmen only in September of this year and the noble Lord really must understand that since his days at the Scottish Office things have improved. Under the more enlightened rule of my right honourable friend, this Administration does conduct its business with a good deal more expedition than heretofore. Secondly, may I say that I think it is a tribute to our institutions and the continuance of all that we hold dear in this country that son can follow father to pull the noble Lord, Lord Ross's leg, which I think is something the House will give thanks for.
Lord Ross of Marnock: My Lords, may I tell the noble Lord that I followed his father and I did not pull his leg?
The Earl of Mansfield: My Lords, turning to the noble Lord, Lord Mackie, I think he had one particular query (if that is the word) in relation to Clause 29; that is to say, the possible consultation before consent is given to treatment. The noble Lord is quite right. There is no express provision for relatives to be consulted, but I can assure the noble Lord that in practice it would be customary for the doctors treating a patient to consult his or her relatives where they are known to the doctor and where they are obviously concerned for the care and welfare of their relative. Of course, it does not always happen.
142
My noble friend Lord Campbell of Croy gave a very welcome pat on the back to the Government, if I may use the phrase, in welcoming this Bill. I am particularly happy that he agrees with the provisions of Clause 13 because I know doubts have been expressed, particularly by those concerned with civil rights. The noble Lord, Lord Taylor of Gryfe, really produced what could be described as the most opposition to this Bill. It was not really sustained opposition but it was a series of doubts expressed about it. His first complaint was that here was an opportunity for pioneering new legislation which had been lost, not least because there was not an adequate space for consultation and cogitation following the publication of the consultation paper in April of this year.
Your Lordships should realise there was indeed full consultation on the proposals to change the existing law and any body, individual or indeed representative organisation, who wanted to suggest changes, was given ample opportunity to make such suggestions. Indeed, the Bill takes full account of the views which were expressed. In fact, as the noble Lord, Lord Ross, himself said, the 1960 Act is widely regarded as an excellent piece of legislation. It has stood the test of time and it does not require to be completely replaced. The great leap forward—if I may use the Chinese terminology—which the English have made in their Act, really did not require to be made so far as Scotland was concerned.
Then, I think the noble Lord was asking: why not make another great leap forward, using this Bill so to do? As the consultation paper and indeed the memorandum which was issued last month made plain, the 1960 Act is primarily concerned with the conditions under which mentally disordered people may be deprived of their liberty and with the protection of the rights and interests of such people. I know that that is a view which has not met with universal favour; and I think the noble Lord was saying that parents' rights ought, for instance, to include the right to specific services according to need.
It is true that one could have considered this and similar provisions to do with the development of services. But, as the noble Lord, Lord Ross, himself said, the fact of the matter is that that would have required a totally different and a very large Bill indeed, which would have needed considerable parliamentary time. It would have required the devotion of a great deal of resources and, moreover, it would have impinged directly onto the rights and statutory duties of, for instance, the local authorities and the health authorities. That was not a matter which the Government considered essential at this particular moment of time.
On a rather more detailed matter, the noble Lord then asked about the membership of the Mental Welfare Commission. The Mental Welfare Commission already have among their number representatives who come from a number of different interests and backgrounds; but I say at once that we are willing to consider any suggestions that may be put forward as to how their base might be broadened. My noble friend Lady Elliot, in her helpful intervention, suggested that the Mental Welfare Commission should make a report on an annual basis, rather than on the present ad hoc basis. I regard that as a very helpful suggestion, and I

143
am sure that the Mental Welfare Commission will take note of it. Whether it is, in fact, necessary to include it in this Bill is, perhaps, a matter of doubt.
I come now to the noble Lord, Lord Ross. I hope that I have answered his point as to the composition of the various provisions of the Bill. He made the point as to the staff of the Mental Welfare Commission and, as he himself will know very well, at the moment the staff are, in effect, loaned to the commission by the Scottish Office. But under Clause 5 the commission will be enabled to recruit their own staff according to their assessment of their requirements, and if the commission are given additional tasks, as the noble Lord suggests, then there will be staffing implications which must be recognised.
Finally, the noble Lord, Lord Ross, asked me about Clause 29. I am afraid that, at this moment, I have no suggestions as to who this somewhat mysterious person could be, but I shall find out and let the noble Lord have some suggestions before the next stage. I see the familiar face of my noble friend Lord Gowrie on my left, so with that I commend this Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Ballykelly, Co. Londonderry: Bombing
4.45 p.m.
The Minister of State, Northern Ireland Office (The Earl of Gowrie): My Lords, it might be for the convenience of the House if, at this point, I repeated a Statement which has been made in another place by my honourable friend the Parliamentary Under-Secretary of State for Northern Ireland about the bombing at Ballykelly, Co. Londonderry. My honourable friend's Statement reads as follows:
"With permission, Mr. Speaker, I should like to make a Statement on yesterday's bombing at Ballykelly. Co. Londonderry. At a quarter past 11 yesterday evening, a bomb exploded in the Droppin Well Inn at Ballykelly, Co. Londonderry. No warning was given and the inn was crowded at the time with soldiers from the nearby army camp and civilians from the locality. The walls of the building were badly damaged and the roof collapsed. So far 16 people have died, 11 of them soldiers and five civilians. Four of the civilians were women. In addition, 66 people have been injured, 23 of them seriously. The injured are now being treated in hospitals in the immediate area and in Belfast. The Irish National Liberation Army have claimed responsibility.
"I know the whole House will join me in condemning this massacre, and in expressing our sympathy to the injured and to the relatives of all those who have been killed or hurt. Let nobody pretend that this is anything other than ruthless mass murder. May this atrocity bring home to people, wherever they may be, and if they need any reminder, the true consequences of offering support of any kind to the terrorists. Support for terrorists inevitably and invariably means support for what they do. The RUC will pursue relentlessly their
144
search for the criminals responsible and in this task they will have the unreserved backing of the Government and this House."
My Lords, that ends my honourable friend's Statement.
Lord Elwyn-Jones: My Lords, the House will be grateful to the noble Earl, Lord Gowrie, for repeating the sombre Statement made in another place on behalf of the Secretary of State for Northern Ireland. The House can well understand the reason for the Statement having been read rather later than usual, and we are grateful to the noble Earl for the speed with which he has endeavoured to return from Belfast to read the Statement to the House.
May I, first, on behalf of my noble friends—and, I venture to think, in accord with the wishes of the whole House—express our sympathy, too, with the relatives and friends of those who were killed and with those who were injured, during what was meant to be a brief period of relaxation for them from their task of protecting the people of Northern Ireland from the bombs and bullets of the terrorists. May we assume that the victims and their families will receive treatment, financial and otherwise, on a level fitting for those who are killed or injured in the service of their country?
Secondly, may I join in the condemnation of the fiendish actions of the terrorists who perpetrated yesterday's butchery. It was cowardly, it was without warning, it was, as has been rightly said, mass murder of civilians as well as of soldiers. Your Lordships may think it is right that the Secretary of State should remind everyone, whether in Ireland, in the North or in the Republic, whether in this country or whether in the United States, of the true consequences of supporting the terrorists.
Will inquiry be made into the security aspects of this tragedy? It appears that the disco, in a hostelry known to be patronised by the army, was a regular weekly event. Are not those who follow a known pattern of behaviour like this liable to be easy victims of the watching terrorists? If a regular gathering of soldiers outside barracks takes place, should there not be special security arrangements to protect them? Was that done in this case? Were any particular security arrangements made for the protection of the soldiers and civilians?
Lord Hampton: My Lords, I, too, should like to thank the noble Earl the Minister for repeating the Statement about the vicious bomb outrage at Ballykelly yesterday. When I spoke at the time of the London bombings last summer, I said that I felt sure the whole House must have reacted with a sense of shock, horror and sorrow. Those attacks were nearer home, but I am sure that the feelings of the House must be just the same today: shock that such a thing has happened; horror at the mutilations, the suffering and the agony which has been caused: horror that people can so treat their fellow men; sorrow—and, I repeat, profound sorrow—for all those whose lives will never be the same again, to whom we send sincere sympathy at this time.
It is possible to argue that we are getting nowhere and that, this is just another instance of an atrocity

145
which could have been avoided if we had withdrawn from taking any part in the affairs of Northern Ireland. That, I believe, would be a devastatingly misguided policy, although clearly this is not the time to go once again over the reasons. I believe that we must, in all humility but with all determination and courage, remind ourselves of those often quoted words of Arthur Hugh Clough:
"Say not the struggle naught availeth, The labour and the wounds are vain".
It is our task to see that the forces for good, which are very much at work in Northern Ireland today, are helped to overcome the forces for evil which, alas! are also much in evidence.
Perhaps I may just refer to Mr. Ken Livingstone's invitation to Gerry Adams and Danny Morrison to visit London next week as the guests of some Labour members of the Greater London Council. It must be widely held that, following this latest outrage, this is a quite exceptionally inappropriate time to allow such a visit to proceed, even if it were in any way the business of the Greater London Council. I suggest that Mr. Livingstone would be insulting those who have lost life or limb or loved ones if he proceeded without the most unlikely statement from the two visitors that they wholeheartedly deplore the appalling suffering that has been caused. I unhesitatingly endorse the closing comment of the Statement, that support for terrorists inevitably and necessarily means support for what they do.
I can think of no further question with regard to security at the present time that is unlikely already to have occurred to the Government. Our policy on these Benches is constructively to support the Government in every way we can in their search for an end to the sufferings of the people of the Province, inflicted, as has often been said, by small but vicious minorities. We sincerely hope that the Government of the Republic will work with this country, where relevant, to this end.
The Earl of Gowrie: My Lords, to both the noble and learned Lord, Lord Elwyn-Jones, and the noble Lord, Lord Hampton, may I say that the Government are grateful for the spirit in which they have received this very sad Statement? The noble and learned Lord pointed out that I come here from Belfast. I should like to confirm that, and also to say that my right honourable friend the Secretary of State has come direct from the scene of the crime. I do of course take the point made by the noble and learned Lord about the favourable treatment which must be given to those who are killed or maimed in the service of their country and countrymen.
As to the reminders which are needed overseas—and one must confirm that they are sometimes needed—my honourable friend the Parliamentary Under-Secretary of State for Northern Ireland, Mr. Scott, is in America at the moment. One of us is nearly always there. I know that my honourable friend will take this sad opportunity to underscore the message that we are constantly trying to give, that aid and comfort to terrorists is aid and comfort to people with no regard for the life of bystanders, civilians and people who, according to their own definition, are purely Irish.
146
As to the question offered me by the noble and learned Lord as to whether any particular security arrangements were made, the area was considered secure. It is difficult to guarantee absolute security if hard-pressed men are to have any normal life at all. The matter is primarily the concern of the GOC and my right honourable friend the Secretary of State for Defence, but I shall of course bring to their attention the concern of the noble and learned Lord.
The noble Lord, Lord Hampton, mentioned an issue which must now be in our minds, if it had not been already; namely, the Greater London Council invitation. I really do beg the Labour members of that body to consider what they are doing at this time. I know that all other parties represented in the Greater London Council and the vast majority of voters would be appalled if this visit went ahead. I think that they should reconsider, and I am sure that your Lordships' view should also be taken into account.
Lord Donaldson of Kingsbridge: My Lords, may I associate my colleagues on this Bench—
Lord Shinwell: My Lords,—
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, it is for the Social Democratic Party to speak now.
Lord Shinwell: My Lords, am I to understand that we are not all equal in this place? I raised the matter earlier in the day.
Earl Ferrers: My Lords, the convention is that the Opposition and the Liberal Party make their contribution and that then there is a contribution from the Social Democratic Party. Other noble Lords, including the noble Lord, Lord Shinwell, will then have an opportunity to take part.
Lord Donaldson of Kingsbridge: My Lords, if the noble Lord, Lord Shinwell, would be happier to speak in front of me, I have no objection. It is a convention which is constantly broken by those opposite, and I do not wish to be awkward to one of the oldest Members of the House. If he wishes to speak now I am only too happy to hear what he has to say. I accept his wave with gratitude.
I want to associate my colleagues with what has been said: the fury we all feel about this disgusting incident and the compassion we all feel for those who have been killed, and their relatives, and for those who have been injured. One very pertinent question is the extent to which the Irish National Liberation Army overlaps with the IRA and whether it can really be regarded as in any way separate from the IRA.
Secondly, if there is any doubt about this, as the Sinn Feiners are a political party with political safety to say what they like and as they have always made it perfectly clear that they are in favour of IRA actions and violence, has not the time come when their freedom to support violence should be reconsidered? The Statement speaks about "the true consequences of offering support of any kind to the terrorists". I have never met a Sinn Fein member—I have not met very many but I have met a certain number—who was not

147
perfectly frank in his view that there has got to be a violent wing to deal with the violence of our troops. That argument is entirely spurious. Does not the noble Earl think that the time has come to think about this again so that the really dreadful suggestion of Mr. Livingstone could never in future be made?
The Earl of Gowrie: My Lords, the only distinction that can exist in our minds concerning the INLA and the IRA is that both organisations are illegal and that both are prepared to pursue political ends by violent means. We have made it clear that the legitimacy of political aims and aspirations is unconditional in a democratic society. But the means are conditioned by the law under which we are all equal, so we should not bother about the differences between two such organisations. The issue of the political party of Sinn Fein is, as the noble Lord with his experience as a Northern Ireland Minister will know, somewhat more complex. We have made it clear that for so long as the legitimate political party of Sinn Fein does not condemn violence absolutely, we can have no dealings with it on a political level.
5 p.m.
Lord Shinwell: My Lords, earlier today when the noble Lord, Lord Denham, informed us that a Statement would be made by the noble Earl, Lord Gowrie, on the disgraceful events in Northern Ireland yesterday, I accepted it although I felt very strongly about it at the time. If I may intervene now in what might be regarded as the Irish problem, may I first ask the noble Earl whether he is aware that I have been associated with the Irish problem since before the First World War, when I happened to be associated with the seafaring community and paid frequent visits to Dublin, Cork and often to Northern Ireland? I was associated with the Irish problem when Lloyd George endeavoured, with a divided Liberal Cabinet, to revive the subject of home rule. I should like to ask the noble Earl also whether he is aware that on the question of Irish policy of this Government and other Governments, that there have been three reasons why we have failed to create a united Ireland, which although politically unacceptable to large sections of the community both in this country and in Ireland is nevertheless the only solution possible?
The reason why home rule was not acceptable at that time was because, first of all, your Lordships' House was opposed to any change in the situation. The second reason was the amorous activities of Parnell with Kitty O'Shea. It was also because 70 nationalist Irish MPs decided to abstain and failed to come to the House of Commons when they had an opportunity of a majority in favour of home rule.
The events of yesterday, whether one likes it or not, have revived the whole question of the future of Ireland—unless we are prepared to accept another 10, 15 or 20 years of terrorism. Let me make it plain beyond peradventure that along with others, including my noble and learned friend Lord Elwyn-Jones and the noble Lord, Lord Donaldson, I condemn with all the strength at my command, and with all my passion, the events and disgrace of yesterday. There can be no stronger condemnation. But I am not satisfied with
148
this condemnation; it is not enough. What I have in mind is something of the nature of a joint meeting of Members of your Lordships' House and of another place when, in a debate, we can present the reason for our condemnation and can gather mighty support from Members of both Houses—and can also seek mighty support from the people of the United Kingdom. That is the way to tackle it.
The time has come for something like that to be done. Otherwise, what are we going to do? Are we to accept terrorism? Terrorism is no solution to the problem. If I may say so with great respect to Mr. Prior, when he presented his proposals for another Assembly—and Hansard proves what I am about to say—I objected to them on the grounds that every new Minister who goes to Ireland always has a new device or a new gimmick—but everyone of them has failed. I do not believe that what they have tried to do in Ireland now will be any more of a success than those attempts made previously. Nevertheless, we have to face the question, "What is to be the future of Ireland?"
I want to make it quite clear that, so far as I am concerned, the only possible solution is a united Ireland. I know that is unacceptable for various reasons—both military and otherwise. I know that we cannot have a united Ireland under threat of aggression from some aggressor—I know that we cannot have that, and I am aware of that possibility. Nevertheless, the only possible solution is a united Ireland, and sooner or later the Government must address themselves to the possibility of some convention of eminence in Ireland, of both sides in Ireland and of this country in order to provide some way out of the impasse which exists at the present time.
I know that Back-Benchers are not allowed to make speeches and are prevented from doing more than asking questions—which is what I am doing, by the way. I want to ask the noble Earl the most important question of all in my judgment: Can we have a debate on this subject so that Members of this House can express themselves and so that we can gather a mighty and momentous vote in favour of condemnation of the terrorists and of those associated with them? I do not want to mention names, but some names are appearing in the press. That is the first thing to do; to have a collective debate with Members of the other House and a mighty effort on the part of the people of the United Kingdom warning the terrorists that we are not prepared to accept what they are doing, that we condemn what they are doing, and that we denounce what they are doing. At the same time, we must seek measures which will help us to find a way out of this difficulty.
The Earl of Gowrie: My Lords, I certainly agree with the noble Lord, Lord Shinwell (and I acknowledge his experience of the issues throughout the century) that there must be political means and political ways of trying to lessen political tensions within the Province, or tensions between the Province and the Republic of Ireland, or tensions between the United Kingdom as a whole and the Irish Republic. But I do not believe that this is relevant, if I may respectfully say so, to the events of yesterday, which were nothing less than

149
dastardly crimes and which are unequivocally condemned by all right-thinking people everywhere, including this morning, in no uncertain terms, by nearly all the political leaders of consequence in the Irish Republic—as we would only expect. I must remind the House that the Republic is very proximately terrorised and threatened by terrorism as we ourselves are.
I must also say to the noble Lord, Lord Shinwell, that I cannot see an attempt to get some political movement within the Province and some focus on political activity there as a gimmick or device. It would seem to me that not to make such attempts would be to surrender to the violence of men who look for political solutions by violent means rather than by political means. I do not believe that any of us would want to do that. I will of course pass on to my noble friends, through the usual channels, the suggestion for a debate on these issues; but that is all I can say about the noble Lord's suggestion at this point.
5.8 p.m.
Lord Blease: My Lords, I believe it would be wrong of me, coming as I do from Northern Ireland, to sit here and not voice my support for the Statement, and also to express along with other noble Lords the sympathy which I know this House and others feel for those who were sadly injured or bereaved in this recent atrocity. Perhaps more than most in this House over the past 14 years, I have taken part in compiling statements of sympathy or condemnation of the horror. I do not know how one can get through to these persons whose evil minds construe such atrocities, but I do know of the terrible suffering of the innocents and of those left behind, and of those associated with them.
The point I should like to follow up was that made by my noble and learned friend Lord Elwyn-Jones when he said that we ought to draw the attention of everyone, wherever they are, to the need to exercise the utmost vigilance and co-operation with the security forces who are acting on our behalf. I wish to say that I was horrified and disturbed last Wednesday on entering the Palace of Westminster, after we had had a series of letter bombs, when I witnessed a couple of Members of this Parliament who were not co-operating with the security forces, who were exercising their normal duty, by not presenting themselves and their passes in the way the security forces require. I understand no representations were made on behalf of the persons who resisted this. I think this co-operation must apply to everyone who enters Westminster; everyone should co-operate. That goes, of course, for co-operation at airports and everywhere else. By giving help to the persons who are in place to protect us we can in the long run help to overcome this terrible problem. Your Lordships know the terrible problems of the Province and nothing is to be gained by a whole post-mortem on the situation at this time, so I will leave your Lordships with those few remarks.
The Earl of Gowrie: My Lords, I wholeheartedly agree with what the noble Lord, Lord Blease, has said. I would underscore it by begging all your Lordships to be extremely careful. We have reduced the overall capacity of terrorists to wreak mayhem both in this country and outside. We have not reduced it nearly
150
enough. I hope all noble Lords will use their influence to urge people to be most attentive at this time.
Lord Harris of Greenwich: My Lords, may I ask the noble Earl a question relating to the question put to him a moment ago by the noble Lord, Lord Hampton? I think many of us increasingly recognise the need for self-publicity of the present leader of the Greater London Council, but does the noble Earl not agree that in the light of the outrage perpetrated in Ballykelly last night it would be something approaching a national scandal if this visit to London of a group of terrorists and the public relations officers of terrorists took place? Can I ask him whether he would not agree that nothing, except perhaps a further intervention of the Leader of the Opposition in another place, can possibly stop this disgraceful episode from taking place? Can I ask also whether the noble Earl would not recognise that there are real risks as far as public order in London is concerned when this visit occurs? Lastly, may I put this to him? He will be aware, as I am, of the provisions of the Prevention of Terrorism (Temporary Provisions) Act; as it is quite clear that a number of the people who are going to embark on this journey are clearly covered by the provisions of this Act, would it not be desirable to make it quite clear that this Act will be implemented if they arrive in this country?
The Earl of Gowrie: My Lords, as I said in answer to the noble Lord, Lord Hampton, it seems to me inconceivable at the moment that the invitation should continue to be issued, but I think we must wait a little on events in regard to that.
Lord Elwyn-Jones: My Lords, is the noble Earl aware, in relation to the invitation by certain members of the Labour Party in the GLC to the two members of Sinn Fein, that Mr. Michael Foot on behalf of the Labour Party strongly condemned the invitation being sent and has asked that it should be withdrawn, and that in so speaking he was speaking of the condemnation of the whole Labour movement against the terrorism with which Sinn Fein is associated?
The Earl of Gowrie: My Lords, I for one certainly would not want to make any party capital over what seems to me a totally deranged invitation, deranged at best. I would, of course, acquit the noble and learned Lord and his noble and right honourable friends of any complicity in it.
Lord Mishcon: My Lords, may I—
Earl Ferrers: My Lords, I hesitate to interrupt because I realise that the substance of this is a matter of great concern to all noble Lords, but I think we may be in danger of turning this into a debate. We have had half an hour on this Statement. If your Lordships felt it was appropriate, possibly after the noble Lord, Lord Mishcon, has put his question we should move on to the other business.
Lord Mishcon: My Lords, I intended to detain your Lordships for only one minute in support of what the noble and learned Lord has just said, and as someone who proudly sat in County Hall for over 20 years. May I say, and may it go out from this House, that when

151
national Government interfere with the work of local government, local government is right to protest. Similarly, when local government tries to interfere with the work of national Government, national Government protests.
The Earl of Gowrie: My Lords, I agree with the sentiment so clearly expressed by the noble Lord, Lord Mishcon. I know he will not take it amiss from me in any way if I say that I wish he still were at County Hall.

ECC 18th Report: Group Accounts
5.16 p.m.
Lord Plowden Lord Plowden rose to ask Her Majesty's Government whether they agree with the conclusions of the Report of the European Communities Committee on Group Accounts (18th Report, 1981–82, H.L. 215) and what has been the progress made in the Council of Ministers.
The noble Lord said: My Lords, I beg to ask the Question standing in my name on the Order Paper. This is the second report from the Select Committee on the subject of the proposed Seventh Company Law Directive on Group Accounts. The previous report appeared in 1977 and since then the draft directive has been much revised, and in the view of the Select Committee for the better. The report which we are discussing comments on the draft directive as it now stands. The basic objective of the draft directive is to lay down the framework for the preparation and publication of consolidated accounts which present a true and fair view of the business of groups of undertakings within the Community. Progress within the Community has been slow. Outside the Community general agreement has been reached on the method of presenting group accounts. Agreement has been reached in the United States, Canada, a number of Commonwealth countries and the United Kingdom. It is most desirable that harmonisation within the Community should be broadly in line with the wider international agreements already reached. Further, it is most desirable that swifter progress be made within the Community.
The draft directive first appeared in June 1976. The elimination of non-tariff barriers, of which differences in national company law requirements are an example, is an important and essential step in operating a single or a common market. The need for this draft directive stems from this basic objective of creating a unified or common market throughout the Community, something which is much in the interests of this country.
An essential part of the draft directive is the definition of a group. The definition originally proposed by the Commission, which had an economic basis, would have introduced a fundamentally new concept into United Kingdom law. It was based on questions of fact which would have been matters of subjective judgment, and this without doubt would have led to great uncertainty. It was, therefore, contentious. The previous report said:
"Economic definition is undoubtedly the most contentious issue in the draft directive".
The revised directive has now adopted a legal basis for defining a group, and this legal basis is similar to that used in this country for defining a group. It is indeed a most welcome improvement.
The revised directive contains six definitions of a group. Four of them are to be compulsory and two are to be optional. The Select Committee examined these various definitions. The compulsory definitions are, first, control of a majority of the voting power; second, membership of the undertaking plus control of the board's composition; third, acceptance by a dependent company of management by the controlling enterprise—that is, controlled contracts as are found in West Germany; and, fourth, control of 20 per cent. of the voting rights plus de facto appointment of the board.
The committee believes that the first two definitions are satisfactory and in some respects improve on the law of this country. It believes that the "controlled contract" definition is almost certainly too wide and likely to lead to confusion. It should either be deleted or at least made optional. The committee considers that the definition based on control of 20 per cent. of the voting rights plus de facto appointment of the board is unacceptable. The way to deal with this is by equity accounting.
The directive has a large number of optional provisions, only some of which, in the view of the committee, are necessary and useful. If individual member states are permitted to adopt alternative definitions or concepts it will defeat the purpose of the draft directive. In particular, multinational organisations would be faced with great difficulty in conforming to the different requirements of the national laws implementing the directive. But there is one useful optional provision, which is to permit member states to limit the scope of the term "parent undertaking" to limited companies. At present the scope of the draft directive is not confined to limited companies. Indeed, it is arguable whether the scope is such even to extend to a single trader or individual carrying on business. The committee's view is that the scope should not be so extensive as to require consolidated accounts of groups headed by undertakings other than limited companies.
Sub-Committee A was most fortunate in having the noble Lord, Lord Benson, as a member. He probably knows as much about group accounts as almost anyone in this country, or more. He will be able to speak with much better authority than I can on this draft directive. I therefore end by repeating that speedy agreement on the lines proposed by the committee is of great importance to the business community of this country.
5.23 p.m.
Lord Benson: My Lords, this is a dull technical subject. It is, nevertheless, of great importance to the industrial and commercial community and to anyone who is connected with the investment of funds.
In 1978 Brussels issued the Fourth Directive. That was concerned only with the way accounts of individual companies should be prepared. But every business of any size usually has one or more subsidiary companies to carry on different parts of the business.

153
Sometimes the subsidiary companies are numbered in single figures, sometimes in scores and often in hundreds. The purpose of consolidated or group accounts—the term is interchangeable—is to present the accounts of the whole enterprise as though it was a single undertaking. Only in that way is it possible to comprehend the financial position of the group. The Fourth Directive did not go into the question of consolidated or group accounts at all, and the Seventh Directive now before us, which has undergone many changes, now seeks to do so.
Since the Companies Act 1948 this country has produced consolidated accounts and the same practice has been adopted, as the noble Lord, Lord Plowden, pointed out, in America, Canada and many other countries. What is of crucial importance—and it is strongly emphasised in the report—is that the provisions of the Seventh Directive should not be far out of line with what has already been adopted in this country and elsewhere for so many years, otherwise Europe will find itself, so to speak, in the position of being the only man in the battalion who is out of step.
The Seventh Directive has already undergone a number of changes, but, if the provisions of the report are acceptable to your Lordships and to Brussels, it will comply in broad outline with the arrangements which have existed for so many years, here and elsewhere.
The Committee's conclusions are given at the end of the report, and it may be helpful to the House if I summarise in non-technical language what they comprise. There are eight in number. The first is the question of what is a group and how it is to be defined. As the noble Lord, Lord Plowden, pointed out, we have come down firmly in favour of the proposal that it should be defined by legal control. That is to say, where a company has a shareholding in another company which gives it more than 50 per cent. of the voting power, or where a company has a shareholding in another company with power to appoint the majority of the board, in those cases consolidation should be compulsory. All other definitions should, in the opinion of the Committee, be abandoned, or made optional only in a particular member state. I shall come back to the question of options later.
The second proposal relates to the parent concern at the top. Every group has to have a parent concern at the top, and the report's proposal is that compulsory consolidation should be necessary only where the parent concern at the top is a limited company. In other words, there will be no need to produce consolidated accounts if the concern at the top is a private individual or a private partnership firm.
The third recommendation relates to size. The Committee believes that in all cases consolidation should take place except in those limited cases where the size of the concern is so small as to be unimportant. There has been much debate as to what the threshold should be, but the Committee believes that the right threshold is the small company definition already enshrined in the Fourth Directive.
The fourth recommendation proposes that in each member state consolidated accounts should be produced where there is a parent company and subsidiaries, and that this should take place even
154
though the parent company in a member state is the subsidiary of a company outside the member state. There is only one condition, or reservation, to that proposal. If the parent company in a member state has children and grandchildren companies, provided the children companies are wholly owned by the parent they need not produce consolidated accounts. In short, intermediate consolidations within a member state are unnecessary.
The fifth recommendation relates to options. The Seventh Directive is sprinkled all over with options. In effect, the committee proposes that options should not be granted; they should be abandoned in all possible ways. The reason for that is fairly obvious, but if it is necessary to produce consolidated accounts by compulsion in all member states it means that every member state that wishes to take advantage of an option will have to produce an additional set of accounts for each option it exercises. This will be extremely confusing to the business community. I repeat, for that reason the committee urges that options should be done away with.
The sixth recommendation is to ensure that, if certain companies are excluded from consolidation—and there are valid reasons sometimes, though on rare occasions, when companies should be excluded from consolidation—there should be full and proper disclosure about all the companies excluded. The object of that is to prevent misrepresentation and distortion in the group accounts which are published.
The seventh recommendation is to suggest that certain techniques which have been forged by hard experience all over the world where consolidated accounts are produced, should be followed in the Seventh Directive. These are of a highly technical character, mostly concerned with the way in which assets and liabilities are valued. I do not think that it is necessary to trouble the House with the detailed specifications of those technical items. I think it is enough to leave it there and merely to say that we recommend that hard experience should be incorporated in the Seventh Directive.
The eighth and final recommendation of any importance relates to what are called "associated companies". If a parent company holds a substantial shareholding in another company, not making it a subsidiary but nevertheless holding a substantial shareholding—let us say, for example 20 per cent.—and the parent company exercises influence on the financial and operating policies of that associated company, then it is proposed, as happens all over the world at present, that that associated company should be dealt with for the purpose of consolidated accounts by the system of what is called "equity" accounting. That is merely a technical term, but what it provides is that the net assets and the net profits and losses of those associated companies shall be individually disclosed in the consolidated accounts so that everybody knows what is happening.
In short, that is what the report is all about. We have had great support from the department of Government concerned, from the accountancy profession and from many others. I hope that your Lordships will be willing to smile upon the proposals, because they will be a good step forward in the accounting arrangements in the Common Market.
5.35 p.m.
Lord Hirshfield: My Lords, at the best of times it is a challenging experience for me to follow two such eminent noble Lords as the noble Lord, Lord Plowden, and the noble Lord, Lord Benson, more especially since both of them have been leading members of the Select Committee which has produced this report, and therefore must know a great deal more about it than I can hope to know at short notice.
I believe it is appropriate at the outset of my contribution to this discussion in your Lordships' House upon the Unstarred Question placed on the Order Paper by the noble Lord, Lord Plowden, that I declare a professional interest in the subject of group accounts. I happen to be president and chief executive officer of Horwath & Horwath International, a world-wide organisation of nationally independent accounting and consulting firms practising in nearly 70 countries around the world. It is thought now to be among the world's largest accounting groups.
Last July the international accounting and auditing committee of my organisation issued a press release in which it urged the world-wide membership to intervene with local accounting standards-setting bodies to encourage a more realistic and simpler approach to financial reporting. The release covered two subjects: current cost accounting, and what has become known as "accounting standards overload". The first subject is unconnected with the Question of the noble Lord, Lord Plowden, but the release asserted that the accounting standards overload has created a cause for national concern by both large and small companies. I hope your Lordships will allow me to quote somewhat briefly from the press release to which I have referred. It said:
"Dissatisfaction resulting from the problem (the accounting standards overload) permeates the entire business and financial community, creating disillusionment, a diminution in support for standards-setting bodies and an increase in failures to comply with generally accepted accounting principles.
The financial statements of a small or closely held business, like its big counterparts, should present its financial position and results of operations on a meaningful and fair basis that will satisfy the needs of the users of such financial statements. It is universally acknowledged, however, that two criteria should be paramount in the standards-setting process: relevance, as measured by the needs of the statement users, and cost-benefit considerations in the development of the information. The small and medium-sized companies operate in an entirely different environment from large public and multinational companies.
It should be acknowledged internationally, and by the accounting profession in particular, that generally accepted accounting principles do not necessarily have to be applied uniformly by all businesses. Differences in required principles for small enterprises, arising from considerations of relevance and cost-effectiveness, should be recognised and implemented. Appropriately selected, these differences would not adversely affect the usefulness of the resulting financial presentations.
The committee believes that one broad set of accounting principles with selected exemptions for small or closely held businesses can solve these growing and increasingly expensive problems of business and the accounting profession".
Before addressing your Lordships' House, I have consulted the chairman of the committee that issued the release from which I have been quoting. He is David Cairns, a partner in Stoy Hayward & Co., the United Kingdom partner firm in the international organisation to which I have referred. He is also a joint editor of two important Financial Times surveys of the
156
reports and accounts of the major European and international companies.
I congratulate the Select Committee upon carrying out the very considerable and detailed deliberations which were necessary for producing the report on group accounts. But I should now like to concentrate on one aspect of the EEC's Seventh Draft Company Law Directive on Group Accounts. Article 6 empowers member states to grant complete exemption from the application of the directive to small groups. I believe that this is entirely desirable. I am, therefore, concerned that the Select Committee appears reluctant to accept exemptions. In paragraph 12 of the report it urges that exemption limits be kept low so as to ensure that shareholders and creditors concerned with smaller groups are kept informed and protected.
In my judgment, the Select Committee has failed to realise that in many small companies the owners—that is, the shareholders—and the management are the same group of people. They are all aware, from their involvement in the day-to-day running of the business, of the company's fortunes and prospects. They do not need accountants charging expensive fees to produce information that they know they do not need but which the bureaucrats of Brussels and Whitehall think they do. Let us stand up for the small businessman and allow him if he wishes to take advantage of the maximum possible exemptions from requirements which give him no benefit.
In this country, in my submission, we have already made a big mistake in requiring all companies to comply with the detailed requirements of the Fourth Directive dealing with the layout, accounting rules and contents of the annual report and accounts, which were later embodied in the Companies Act 1981. We had the opportunity to reduce the legislative burden by exempting medium and small businesses from preparing extensive sets of accounts and a directors' report. The only exemption we gave them was in filing the information with the Registrar of Companies. That achieved nothing. All the information has to be prepared in the proper form and audited, and only then can it be edited for sending to the Registrar.
A number of practising accountants have expressed to me the opinion that the Fourth Directive requirements contained in the Companies Act 1981 are a farce. They are required to prepare for their clients masses of information which their clients do not want, the Registrar does not want, the Inland Revenue does not need, and very few loan creditors want. Why do they have to do it? It is because the Government decided that their clients—the owners and managers of these small and medium sized businesses—might suffer if they did not have it.
The Select Committee's report is pushing in the same direction on the Seventh Directive. It is saying that exemptions should be restricted so far as possible; it is telling the owners and managers of medium and small businesses that they need this information for their own good; it is ignoring their pleas that they do not need it, and that it is of no use to them in running their businesses. I believe that we should seek the maximum possible exemptions for these owner-managed businesses. We should ensure that the

157
Seventh Directive permits it, and we should amend the Companies Act 1981 to put right the wrongs that we have already done.
5.45 p.m.
Lord O'Brien of Lothbury: My Lords, the noble Lord, Lord Benson, has said that this is a dull and technical subject, as indeed is the case. Nevertheless, company accounts and group accounts enshrine some of the great dramas of human existence—the success or failure of commercial and industrial enterprise. They are, therefore, exceedingly important. In my lifetime I have come across companies—large and small—many of which have produced admirable products, but because the financial side did not add up, they have run into trouble. Therefore, company accounts and what they reveal are important not only to those who prepare them, but to their shareholders and, indeed, to the rest of us.
I am sorry that the noble Lord, Lord Hirshfield, thinks that the Select Committee, in being rather strict about the exemptions from the requirements of the Seventh Directive, has made a mistake. I wonder whether smaller businessmen always know what is good for them, and I think that keeping accounts under strict provisions is probably good rather than bad.
As a Member of Sub-Committee A, I felt it incumbent upon myself to give support to the noble Lords, Lord Plowden and Lord Benson, on whom the great burden of the work has largely fallen, in commending this report to your Lordships. I did so in the certain knowledge that I would be speaking after them in this debate and that therefore they would have said all that I could possibly say on the subject. I should only like to say that I believe it is important that the Seventh Directive should soon come into being. Its gestation has taken place over many years. It is true that in that long period opportunities have been taken to correct misconceptions at the beginning, so that the directive now in draft is certainly very much better than it was when it started. I believe that it will be still further improved if account is taken of the recommendations made in the Select Committee's report. I also believe that it is to everyone's advantage that practice within the Community, which falls rather short of that in the United Kingdom and in a number of countries outside the Community, should be harmonised with those countries where the better practice exists. Therefore, I hope I may ask that your Lordships will accept this report.
5.48 p.m.
Lord Chorley: My Lords, I am sure that all sides of the House will welcome the Report of the Select Committee on Group Accounts, and the United Kingdom legislature is, indeed, fortunate in being able to bring such really expert authority to its scrutiny of technical and complex proposals, such as the proposed Seventh Directive. I know, too, that the accountancy profession in this country will welcome the conclusions reached by the Committee.
At the same time, I should like to recognise and commend the work of our officials and of my fellows in the accountancy profession—and I have in mind
158
here particularly the members of the Company Law Sub-committee of the CCAB—and those in Brussels in their efforts to harmonise Community company law and, in the process, to upgrade the law in member states. Their task is a particularly thankless and tedious one requiring, I should imagine, a considerable exercise of persuasion and also of patience.
If one compares the draft of the directive, which was examined by the Committee, with the original proposals, it is evident that considerable progress has been made. It may have taken many years to get to where we are, but at least we have a document which now makes much better sense. As several noble Lords have said, this is pretty arid stuff, but it is still of the utmost importance. Apart from anything else, I do not believe that the Fourth Directive would be particularly effective if the Seventh Directive does not proceed.
Company law on group accounts in a number of member states, as has been pointed out, is most unsatisfactory. According to my reckoning in five member states there is no requirement for consolidated accounts while in one member state only domestic operations require to be consolidated. A few years ago the Financial Times carried out a survey, and while that showed that the majority of the largest companies in the Community published consolidated accounts of their operations, there were certainly some significant companies which did not. Beyond that there must be hundreds, if not thousands, of companies in respect of whom there must be an even larger number of investors and creditors who have to rely on unconsolidated statements.
In short, the law in parts of the Community lags far behind its economic and commercial development, and lags far behind the development in not just other Western countries such as the USA, Canada, and the Commonwealth countries that have been referred to, and not just Japan, which I believe has now gone over to consolidated accounts, but also many less developed countries. It would be an appropriate moment here to record the lead given by my old friend the noble Lord, Lord Benson, in the formation of the International Accounting Standards Committee 10 years ago.
I think that most of the points have already been made. I should just like to touch on one or two. As the noble Lord, Lord Plowden, reminded us, the draft is now largely based on legal definitions rather than economic definitions, but elsewhere, as is described in paragraphs 7 and 8 of the report, and as the noble Lord, Lord Benson, reminded us, additional definitions which are economic definitions have crept in as optional alternatives. These, in my view, are unsatisfactory because they are out of line with the wider generally accepted principles. They are unsatisfactory because, far from providing a framework for a common approach, they serve to perpetuate existing differences; and they are unsatisfactory because they will end up in a confusion of both legal and economic definitions.
One can understand that some member states may wish to maintain their existing approach. But in that case the remedy is simple: two sets of consolidated accounts, as explained in paragraph 16 of the report. It is difficult to see how a member state could object to

159
this simple but important suggestion. The noble Lord, Lord Plowden, dealt with the unsatisfactory features of the quasi associated company compulsory definition of Article 6(1) (d) and I do not propose to go any further on that. As the report says, the right way is by equity accounting.
My third point—and here I disagree with the noble Lord, Lord Hirshfield, on the question of size—is that I have always regarded limited liability as being a privilege. If creditors can be obscured—that is to say, creditors are unable to find the position about what is a single undertaking because subsidiary unconsolidated accounts are dotted around—that is a bad thing. Personally I should prefer to have gone the whole hog and had compulsory consolidation right down to the bottom, but I recognise the practicalities of the situation, and I think therefore that what the Committee has suggested makes sense.
My fourth point—again I am rather repeating the noble Lord, Lord Benson, but I do so rather deliberately—is on the question of the techniques of consolidation which are referred to in paragraph 18. There is perhaps a danger that we may lose sight of these important points in discussing the rather wider issues of definitions of what is a group and what is not. If the draft, as I understand it, goes ahead, it would appear to mean that techniques which are commercially important in this country might be prohibited. That would be rather serious.
The particular points that I have mentioned are ones of detail, and in some cases of essential detail, and a few amendments will put the directive right. I very much hope therefore that 1983 will see the conclusion of this understandably long, drawn-out process, and then the directive will have made a major step forward. But there is one further reason for wishing to finalise the directive in that it will enable us in the United Kingdom to move on to the drafting of consolidated companies' legislation. That, in my opinion, is now becoming increasingly urgent.
5.57 p.m.
Lord Seebohm: My Lords, as the evening goes on there is less and less for me to say. I should like first to express my thanks to the noble Lord, Lord Benson, not only for having explained so clearly to your Lordships' House what the main points of the directive are, but also for the part he took in the final drafting of the report itself. I find that it is now actually comprehensible. As has been said, the object of group accounts is to give creditors, shareholders and employees as reasonable a picture as possible of the financial state and profitability of the undertaking. This is where I cross swords with the noble Lord, Lord Hirshfield, who seemed to think that the shareholders were the only people interested, whereas as an ex-banker I would say that the creditors and the employees are equally important. As a banker, I would say that the creditors are the most important.
I use the word "reasonable" because I have found that it is difficult to give valuations that are not of a subjective nature to a great number of the assets of any group. Having been chairman for some years of a group that has about 16 subsidiary and associated
160
companies, I think perhaps I may just spend a couple of minutes describing some of the difficulties that I have encountered. As most of the companies were overseas there were difficulties in different accountancy practices and also in balance sheet dates. This latter problem was quite serious as much could happen in three to six months which could alter the picture. In theory a balance sheet is a "still". Everything should be valued and profits settled on that particular date. But in dealing with companies with different balance sheet dates this can only be partially true. This can normally be put right with subsidiary companies, and a lot of things can be put right either in notes or in the chairman's statement, if necessary. This is what I think used to happen.
A further complication arose in deciding how much weight one ought to give to such things as exchange controls and dividend limitation. Should one, for instance, exclude from the balance sheet profits and current reserves which one knows could not be remitted? Rhodesia during the UDI period was an example, and so was Ghana when the balance of payments position and an unrealistic exchange rate made the figures highly dubious.
My real worry however has always been, and still is now, how to deal with associated companies where one may have de facto management control but not de jure control. Your Lordships will be aware that in the latter case assets may be moved from one company to another at will, and therefore the line-by-line system of drawing up the accounts is quite appropriate. In all other cases it is certainly not appropriate and is often actually misleading. Most companies to this day show in their profit and loss account the full proportion of the associated companies' profits although they have no control over their distribution.
I therefore strongly support the move to equity accounting, as recommended in the report, for any so-called subsidiary that is not a de jure subsidiary, and would go further and insist that the profit and loss account and statement of earnings per share should include only dividends actually remitted. My responsibility was to ensure that any dividend declared by the group was well covered by cash actually received, even though they were available in the currency of the country of origin. This form of equity accounting, which places the associated company in virtually the same category as a portfolio investment, gives the interested parties a much more accurate idea of the true liquidity of the holding company.
To turn to other matters, I strongly hope that no articles in the directive will disturb the general agreement that has been reached, after a tremendous effort, with the United States. Canada and the Commonwealth countries. This has been a major achievement and must not be upset. I also believe that small companies, who certainly need some exemptions, should be defined as in the Fourth Directive; different definitions in different parts of EEC legislation would be chaotic. Finally, I hope the Government will press hard for the committee's recommendations to be accepted.
6.1 p.m.
Lord Diamond: My Lords, I apologise for the fact that my name does not appear among the list of

161
speakers. It was omitted through a mistake for which I offer the House my apologies. I am anxious to speak, albeit briefly at this stage of the debate, because, while I was not a member of the committee, I feel it right that non-members of the committee should express their views of the committee's work. I wish to express my wholehearted congratulations on the work of the committee and on the way in which the noble Lord, Lord Plowden, introduced his report.
It is an excellent report, which I have read with care and interest, and I hope I have digested it fully. It is a great improvement on the previous suggestions which were made and, in my view, it is not a technical matter at all. It is, indeed, a most important part of the harmonisation which is an essential element in creating what is the main purpose of the EEC, a common market. Without group accounts, you cannot move satisfactorily towards a real common market, and I am anxious to speak on the subject in purely non-technical terms.
I support it and hope that it will soon find agreement in the Community and become effective, having regard to the time that has already elapsed. I endorse practically every conclusion reached by the committee, and shortly I shall comment on the remarks of the noble Lord, Lord Hirshfield, with a slight difference of emphasis. I listened carefully to the remarks of the noble Lord, Lord Benson, who is a world authority on this matter. I had previously taken the view that options should not merely be discouraged but eliminated, and I was glad to hear Lord Benson making comments very much towards that end. I therefore could not understand completely—no doubt the fault is mine—why, in one conclusion, the committee considered that,
"either a certain provision ought to be deleted or at least made optional".
I do not feel that the making of one option is an appropriate way of dealing with an attempt to get group accounts which will be really meaningful and on which all can satisfactorily depend; and, if I may say so, to introduce a discordant note is to make the whole thing discordant. Therefore, I should want to see as far as possible that all were acting under the same clear definitions so that one could compare like with like by seeing one set of group accounts and comparing it with another set.
This is clearly going contrary to the line which the noble Lord, Lord Hirshfield, was taking. He speaks with great authority on the subject, as he explained, but I was not able completely to follow him in his defence of the small man. Of course we all want to help the small man and we do not want to subject him to unnecessary accountancy charges, especially as it is a long time since I ceased to practise as an accountant. But the real difficulty I have with the remarks of the noble Lord, Lord Hirshfield, is to understand how a man who wants to run his own show nevertheless wants a structure which consists not only of one company but of a group of companies, parent and subsidiary companies and so on. How small a man can he be that he should find it necessary to adopt a structure of that kind? I should find it very difficult indeed to imagine the kind of small man, small business—which we all want to help and rid of difficulties—carrying on under such a structure,
162
whereas for the middle man—the man who finds it necessary to have a structure of that kind—it would be healthy for him, for his creditors and for his bankers, from whom, no doubt, he would want to get facilities and for whom he would have to produce group accounts.
That is all I have to say on the matter. Everything has been said, and well said, and I wish all speed—the Minister who is to reply is an expert on speed; the noble Lord, Lord Lyell, is one of the fastest people I have ever come across going downhill—to the conclusion of agreement on this directive.
6.6 p.m.
Lord Bruce of Donington: My Lords, the House will be grateful to the noble Lord, Lord Plowden, for initiating the debate and will be grateful once again to Sub-Committee A for having drawn up such an excellent report. The report must, of course, be taken as a sequel to Report No. 118, printed on 23rd March 1977, the 25th Report on Group Accounts.
It is perhaps necessary to say in this day and age that the Select Committee entrusted with the task has done your Lordships' House a great service. It is not generally realised outside the Palace of Westminster what detailed work goes into the preparation of these documents and how much time the members of such a committee spend reading very complicated documents—most EEC directives are complicated, anyway—and examining witnesses who appear before them, and the time they give to formulating the whole body of the report in conjunction with their chairman and the committee clerk and his staff. The world outside this place does not always know that, and the valuable function performed for the whole of the body politic by the activities of committees of your Lordships' House cannot be too strongly emphasised. This one is no exception, and I endorse in every way the remarks of the noble Lord, Lord Plowden, on the matter.
I would draw your Lordships' attention to Article 26 of the draft directive, which says:
"Member States shall, within 18 months of notification of this Directive, make all the amendments to their laws, regulations and administrative provisions necessary to comply with the provisions of this Directive, and shall forthwith inform the Commission thereof. They shall bring such amendments into force within 30 months of the notification of this Directive".
In the light of that article, I was particularly struck by the contribution of the noble Lord, Lord Chorley, who very rightly drew your Lordships' attention to the necessity for speedy consolidation of the various Companies Acts, including two that have passed through your Lordships' House during the current Parliament. One question that I have to ask the noble Lord, Lord Lyell—who I am pleased to see is to reply to the debate—is how long does he think it will take for the necessary legislation to be brought before your Lordships' House, and is it the intention to postpone consolidation until after the legislation which requires us to comply with the Seventh Directive comes into operation? Timing now becomes important, and I venture to suggest to the noble Lord—though I would not commit him to anything that I would say—that, if the Seventh Directive is to take a long time to be enacted in detail in the British Parliament, it would be

163
preferable to press ahead with consolidation without further delay. But opinions on that might differ.
It will not be necessary for me to go through any of the parts of the committee's report that have been dealt with by the noble Lord, Lord Benson. I find myself in complete agreement with him, which is not unusual when matters of accounts are concerned. He has been truly described as a world authority on the subject—I indeed am not—and I am only happy to say that I agree entirely with his approach to it.
I think that the noble Lord must have been reassured by the fact—though, somewhat modestly, he did not mention it—that at last in an EEC directive there appear the words "true and fair". On the continent of Europe the "true and fair view" has been very difficult to establish. It has taken years for the Continental accounting profession, and indeed the EEC itself, to accept the full rigours of what over the last 100 years or more we in this country have emphasised: the necessity for accounts to show a true and fair view. In general terms, and without becoming at all technical, I would say that this is really what the proposals for the consolidation of group accounts are for. They are intended to provide that, when companies have subsidiary or associated companies, or have other companies under their control, an account should be prepared in consolidation showing a true and fair view of the activities of the group as a whole.
That information is necessary not only from the point of view of the shareholders of the company, and in particular the shareholders of the parent company, if it is a public company; it is vital for those who advance money to the group or its subsidiaries. We are living in an era—I shall not expatiate on any of the political overtones of it, because this is not the time to do so—when large sections of industry, not only in this country but elsewhere, are in very heavy debt to the banks. I can quite understand the observations of the noble Lord, Lord O'Brien of Lothbury, when he spoke as a banker; it is necessary that the advancers of money to companies shall be able to obtain correct and balanced accounting information that complies not only with the Companies Act 1948, but also with a standard method of group accounting consolidation.
I, too, found myself in some slight disagreement with my colleague, the noble Lord, Lord Hirshfield. I hope that I have not misunderstood him, and I should be the last person to seek to misrepresent him, but he seemed to ask for even greater exemptions for small and medium-size businesses. I hope that I am not being unfair to the noble Lord, but at one point I wondered whether he really thought that companies ought to keep books at all. The whole purpose of keeping books, and of complying with the sections of the Companies Act 1948 that prescribe the particulars that shall be entered in the books of accounts, is precisely to ensure that the state of affairs of the company shall be established—and not only for tax purposes; though, in the case of a small or medium-size business, that is of consuming importance to the owners, in particular if the company is a small, private company. The purpose is also to enable the management of the company itself to know the aggregate result of the various revenue and capital transactions
164
so as to be able to form an objective view of what the future cash flow is likely to be. Further, the purpose is to enable the management to peer more into the future, to enable it to have a more accurate assessment of costs, and to see how costs can be saved.
I should not want to tax the House too much with my own personal experience of these matters as a practising accountant, but I am bound to say in reply to the noble Lord, Lord Hirshfield, that with a very large proportion of the small and medium-sized companies that go into liquidation, or fail the test, one of the main causes of failure has been the fact that the accounts have not been kept up to date and a correct picture has not been presented to the owners. So, although I am in very considerable sympathy with exempting small companies from unduly onerous requirements which could perhaps legitimately be said to be a mere bureaucratic interference, I for one should not wish to lower the accounting standards of small and medium-sized businesses. In fact I should seek to ensure that the standards are improved, because I am quite sure that the possession by the owners of small firms of accurate accounting information is a very substantial ingredient towards in some cases their survival, but in all cases their continued success.
I envisage some difficulty in translating the Seventh Directive into British law. I seek your Lordships' indulgence by asking you to think back to the experiences that we had when dealing with the 1981 Companies Bill and seeking to translate the Fourth Directive into legislation. At the time it was the Government's view that the whole matter was comparatively simple. Indeed, the advice that the noble Lord and his noble friend were receiving from the Box behind them—presumably at the behest of parliamentary counsel—was that the first draft of the Companies Bill 1981 was more or less inviolable and could not be improved upon. In fact, your Lordships will remember the very strenuous efforts that were made to interpret and to improve the Bill, and which were, I am afraid, to a large extent resisted by the Government.
I therefore hope that when this legislation in support of the directive comes before your Lordships' House we may perhaps be met by a slightly more open mind this time, so that when suggestions and amendments come from all sides of your Lordships' Committee—from industrialists, accountants and lawyers of very considerable experience—the Government will perhaps pay a little more attention to them than was paid in the case of the 1981 Bill. Because the noble Lord is himself a distinguished accountant, he must know that the view of the 1981 Act which is held in the profession—and not only in the accountancy profession—tends to give it the "thumbs down" rather than enthusiastic support.
I will not detain the House any longer except to thank, on behalf of the Opposition, all those noble Lords who have taken part in this debate. We are very much indebted to all the members of Standing Committee A; and we look forward to answers to the questions—and they are a very limited number—which I have ventured to address to the noble Lord opposite.
6.21 p.m.
Lord Lyell: My Lords, I think your Lordships would wish me to begin by congratulating the noble Lord, Lord Plowden, and his entire committee on the quality, and indeed the timeliness, of their report which we are debating this evening. As your Lordships will be aware, there are other directives which are considered by the European Communities Committees which sit upstairs, but we have heard from all round the House tonight that this particular directive is more than a little technical and complicated. Indeed, like the other directives which are issued under the European Communities' company law harmonisation programme, we find that the subject matter of this directive is certainly neither easy nor of obvious political significance. However, there are Members of your Lordships' House who I think can be classified as veterans of the passage of the two Companies Acts of 1980 and 1981, and all of us who sat through the heat, dust and toil of those battles know that in due course we shall have to embody an adopted directive in our domestic law, and that therefore the directive's terms need to be analysed closely in the course of negotiations when there is still some opportunity to influence the outcome.
I should like to take this early opportunity to echo the words of the noble Lord, Lord Chorley, in commending members of the Consultative Committee of Accountancy Bodies, and indeed of the other bodies, for the advice and very valuable help that all of them gave to the Government in the course of these somewhat protracted negotiations.
Before I turn to the substantive and rather varied questions raised by the report, I hope your Lordships will bear with me if I say a few words about the timetable. Although it is over five years since the Select Committee first reported on the original draft directive, negotiations did not begin in earnest until after the Fourth Directive on individual accounts had been adopted in July 1978. These negotiations have thus been in train for over four years, but I am afraid I would be guilty of over-confidence if I said that the end was yet in sight.
However, what we can say definitely is that the outstanding issues are slowly being whittled away. For the whole of this year the Committee of Permanent Representatives, and on two occasions the Council of Ministers, have been considering Articles 6 to 10A—and, of course, as your Lordships will be aware, they are the articles dealing primarily with the scope of the directive. We understand that the Danish presidency considers that progress on those articles has been carried as far as it can be at this stage, and that negotiations will now move on to Articles 11 to 27. Those of your Lordships who have studied the directive, and I am sure all Members of your Lordships' committee, will be aware that Articles 11 to 27 deal with the technique of consolidation and with such varied questions as audit and publication. For that reason, any estimate that I gave at this stage of a likely date of adoption would, I am afraid, be purely speculative.
The Question tabled by the noble Lord, Lord Plowden, this evening asks the Government whether they agree with the conclusions of the Select Commit-
166
tee's report, and indeed what progress has been made in the Council of Ministers. I would propose, therefore, to run briefly through the main issues which are identified in the report, and to indicate the Government's views and where matters stand. In the interests of brevity, I would propose to assume some detailed familiarity with the report of your Lordships' committee and with the issues which are under consideration, but I shall certainly try to provide further clarification and amplification if your Lordships would wish it, and I hope that my replies will cover most of the points which have been raised.
First of all, we come to the definition of what is known as a vertical group. That is found in Article 6.1(a). It will be easily seen that the committee noted that the emphasis has moved from the de facto to the de jure approach, which is in line with United Kingdom practice. The Government agree that Articles 6.1(a) and 6.1(b) are satisfactory, but we also share the concern of the committee about Article 6.1(c) which is the inclusion of control contracts. I did not find it in the report, but I had it in my background note that, in German, this fascinating term is Beherrschungsvertrag. At least, I think that is what it is; I will look it up later. But I will forbear to go into that complicated German legal definition at this stage, but if any noble Lord would wish for further elucidation I have no doubt we can find it, either in German or indeed in our mother tongue.
We do not believe that there would be a majority for complete deletion of the provision, but we have some support in seeking to make it applicable only to member states which expressly provide in their law for control contracts. It is certainly essential that the provision should be of the most limited application in this country.
Of more concern to us is Article 6.1(d), which at present envisages mandatory consolidation of minority holdings. We agree that the appropriate treatment of such holdings is by equity accounting under Article 17, and we have strong support for our insistence that Article 6.1(d) should be an optional provision if it is to remain in the directive at all.
We sympathise with the distaste of the committee for the optional provisions in Article 6.1 (a), but I have to advise your Lordships' House that there is no prospect that they might be deleted from the directive and we do not consider that it would contribute to the achievement of our remaining objectives to press for their deletion. They represent the de facto approach, which is alien to practice in this country. But without the retention of such provisions on an optional basis I do not believe that we would have achieved a consensus in favour of de jure principles as the basis for mandatory consolidation. So far as horizontal consolidation is concerned, I would confirm that Article 7—and this deals with so-called real horizontal groups—seems certain to be another optional provision, and I am pleased to say that it now seems very likely that Article 7a, which deals with artificial horizontal groups, will disappear altogether.
The Government sympathise with the committee's general concern about the number of optional provisions. For example, the inclusion of optional provisions in the definition of a group is bound to

167
mean that there will be different definitions of a group in different member states. Some will apply Articles 6.1 (a) and 7, some will not. This will not be conducive to the greater comparability of accounts which is one of the directive's objectives. We agree that it would be better to have a core of mandatory definitions with member states free to require separate consolidated accounts on different bases if they so wished. But I come back to the point that directives are negotiated, and that, particularly in a field such as this, which is new territory for a number of member states, a negotiated directive is almost bound to involve compromises. In this case the compromise is likely to involve some recognition in the directive, but on an optional basis, of the concepts of de facto and horizontal consolidation. From the Government's point of view, the prime objective must be that we should not have to recognise those concepts in our own law.
I accept what has been said by the noble Lords, Lord Plowden and Lord Benson, about the particular problems that member state options will cause for multinational companies. All I would say is that such companies are already subject to very different legal requirements in each member state and it is difficult to believe that their position will not be better after than before the directive. Moreover, the directive is unlikely to be the final word on group accounts.
Still considering the matter of scope, I move on to the question of the legal form of the parent undertaking. On this matter, the committee favoured the so-called third solution which would enable member states to apply the directive only to groups headed by a limited company. I am pleased to inform the House that there is now a very large majority in favour of that provision combined with a proviso, which causes us no difficulty, that its application should be reviewed five years after the directive has been applied by companies. There is very little that I can say about the thresholds for exempting from the directive groups below a certain size, except that we agree with the committee that the thresholds should be low. There is a wide spectrum of views among member states, and there has been little discussion pending resolution of the form of the directive. I suspect that this matter will be left for resolution at the very end of the negotiations.
Turning to the question of exemption from sub-consolidation, we share the Committee's objections to a mandatory exemption for subsidiaries of European Community parent companies. We are prepared to contemplate the extension of the present exemption in United Kingdom law for wholly-owned subsidiaries of United Kingdom parent companies to wholly-owned subsidiaries of European Community parent companies, but mandatory exemption for all subsidiaries of European Community parent companies would result in too great a loss of information to interested parties in this country. So far as subsidiaries of non-European Community parent companies are concerned, we do not fully share the committee's reservations about Article 6b as drafted, which is now virtually agreed. This is not an option of which we are likely to take advantage, but we would regard the concept of equivalence as difficult but not impossible to apply.
168
I am happy to report that the suggestion that so-called voluntary consolidations would have to be prepared in accordance with the directive has now been dropped. The Government have noted the committee's recommendation for safeguards in Article 10 where subsidiaries are omitted from consolidation. Although Article 10 is broadly agreed, the related Article 10a is not and we shall be considering whether to seek to enhance the disclosure obligations in the direction suggested by the committee. Like the Select Committee, I propose to forbear from detailed comment on the remaining, more technical, articles of the directive. We shall keep in close touch with the accountancy profession on such articles as Article 12, on merger accounting, on which we accept that there is considerable further work to be done if the directive is to reflect more closely existing law and practice in this country.
The noble Lord, Lord Hirshfield, mentioned in the course of his remarks, which I found very interesting, the interesting concept of what we have come to think of as the accounting standards overload. All of us listened with great interest to the comments of the noble Lord about this particular concept. In so far as he referred to accounting standards, this is a matter for the Accounting Standards Committee whom I know are giving special consideration at present to the position of small companies. I do not think that this is the occasion to rehearse the arguments for the Government's implementation of the Fourth Directive; but many considered that the Government achieved a remarkable balance between the conflicting interests.
So far as the Seventh Directive is concerned, I can understand the noble Lord's viewpoint. But it is the Government's view that, on the whole, group accounts are necessary to give shareholders, potential investors and, as we have heard creditors, a true appreciation of the assets and liabilities of the company and of the performance of the holding company. I go on to say that, all in all, I hope that I have demonstrated that there is little, if anything, of significance between your Lordships' Committee and the Government and we think that there is a reasonable chance of achieving a directive that will be consistent with United Kingdom accounting practices and those principles. The noble Lords, Lord Chorley and Lord Bruce, had a word in my ear about consolidation of the Companies Acts. I know that that has always been, even in 1981, a very strong point. It was put in his usual robust fashion by the noble Lord, Lord Bruce. I am able to tell the noble Lord and the noble Lord, Lord Chorley, that work is in hand and that the Government hope—that is all I will say—to bring a consolidating measure forward in the 1983–84 Session. In this matter we express a hope; but the noble Lord's points are certainly under consideration.
The text quoted by the noble Lord, Lord Bruce, when he was dealing with Article 26 included certain timetables for implementation. I would say to him and to Members of the committee that these timetables are not finally determined and that they will be considered at the end of the negotiations. How quickly the United Kingdom will be able to implement will depend on the scale and nature of the changes required. Only in the light of knowledge of them and of the state of the

169
programme for consolidation will we be able to decide which should come first.
I referred in my opening remarks to the uncertainty on the timetable for the adoption of the directive. I should like to come towards my concluding remarks by referring to a further uncertainty; namely, the mode of implementation. We have seen reports that it has already been decided to implement the directive by secondary legislation. We have yet to take any decision on this matter. How we implement depends very largely on what the directive requires of us. This is certainly a matter on which we shall consult, when we are ready to consult, on the changes required by the directive.
If I can very briefly go through the minor points that were raised by Members of your Lordships' House who have spoken this evening, I am sure that your Lordships will bear with me if I reiterate the thanks of the whole House to the noble Lord, Lord Plowden, for chairing and leading the committee and for leading in the debate this evening. Indeed, the noble Lord, Lord Plowden, led in a great expert in accountancy matters, the noble Lord, Lord Benson. I had to take issue with him—even from a sitting position—when he mentioned that accounts were a dull subject.
I am sure your Lordships would agree that I say from this Dispatch Box that when the noble Lord, Lord Benson, is speaking of accounts, a matter on which he has such tremendous knowledge, accounts and accountancy procedures are never dull. Above all, with the speech made this evening by the noble Lord, with his legendary clarity and authority, it was most enlightening and most encouraging. We were also very grateful for the forceful encouragement from the noble Lord, Lord Benson, about the European Communities Committee in this House, and this particular one that has reported this evening, and of the favourable comments that have gone to Brussels.
The noble Lord, Lord Hirshfield, raised the question of size and exemption for the small man. The matter was put by several noble Lords as to the purpose of accounts. I am sure that the noble Lord, Lord Hirshfield, would agree that the main purpose of accounts is to reassure creditors, lenders, debenture holders, employees and everybody else who has a legitimate interest in the performance of a company.
The noble Lord, Lord O'Brien, made a traditional clear and concise speech and I believe he made one of the most relevant comments in the debate. He pointed out that if any company looks after its finances it has at least a chance of prospering. Coming from the noble Lord, with his experience, we are very grateful for being reminded constantly of that point.
I would once again wish to thank the noble Lord, Lord Chorley, for his very valuable support this evening, and indeed I am sure the CCAB would be most grateful for his forthright support for all their efforts in helping the Government to see their way through these rather complicated details. The noble Lord, Lord Seebohm, reiterated exactly what I would
170
stress about creditors and also employees, who deserve information regarding a company on which they have staked their livelihood.
The noble Lord, Lord Diamond, was particularly kind in his various comments about me. He and your Lordships will note that "The Money Programme", which should concern many of us here this evening, precedes "Ski Sunday" of a winter afternoon; so no doubt if the noble Lord is available to stay indoors to look at "The Money Programme" he may see skiers, but not of the calibre of the Lords and Commons Ski Club, proceeding down the slopes of a Sunday afternoon. Certainly we go ski-ing in Switzerland, which might be allied to the subjects we are discussing this evening. But I would thank the noble Lord, Lord Diamond, for his comment about the work done by the committee, and I agree with him very much that harmonisation will lead, we hope, to a Common Market in goods and services.
The noble Lord, Lord Bruce of Donington, wound up from the Opposition Front Bench and did so in his traditionally robust way. The noble Lord is always vigilant on consolidation, and I hope I have been able to give him some hope, at least, for the next Session. The noble Lord referred to the advice that comes from the Box. I would say to him that advice on accountancy matters that comes from the Box is in true accountancy style: it is without fear or favour. Indeed, it upholds the motto of my great institute in Scotland: the Latin maxim is Quaere Verum, or "seek the truth".
I hope we have sought after the truth in the debate we have had this evening. Once again, I should like to echo, I believe on behalf of the entire House, the Government's thanks for the very valuable work that has been done by the noble Lord, Lord Plowden, and his committee. And, indeed, we would like to thank everybody who has taken part in the debate this evening.
House adjourned at sixteen minutes before seven o'clock.