Lords Sitting of 4 May 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.
The Lord St. Helens—Sat first in Parliament after the death of his father.

Defence Spares: Sales to Argentina
Lord Jenkins of Putney: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether the Defence Sales Organisation queried an urgent request for spares from Argentina ten days before the Falklands invasion and whether they received ministerial instructions to fulfil the order.
The Minister of State for Defence Procurement (Viscount Trenchard): My Lords, under the licensing arrangements in operation prior to the invasion, spares ordered direct from industry would not be monitored by the Ministry of Defence. Routine releases of naval spares were made from RN store depots on 19th February and 22nd March in accordance with long-standing arrangements in support of contracts concluded many years ago. These totalled only £1,500 in total value. On 30th March, a request by the Argentine authorities to expedite delivery of further naval spares already on order was declined at official level.
Lord Jenkins of Putney: My Lords, is the Minister aware that by sinking the cruiser of our recent customer, the Government have committed mass murder on the high seas?
Several noble Lords: Shame, shame!
Lord Jenkins of Putney: My Lords, are the Government further aware that this action has caused a massive swing of world sympathy towards Argentina and, in order to prevent further loss of life, will the Government call for an unconditional cease-fire without delay?
Viscount Trenchard: My Lords, I think that the noble Lord's supplementary question has nothing whatever to do with the Question that he tabled.
Baroness Trumpington: My Lords, would my noble friend agree that at the moment the important thing is to keep the families and friends of those involved in the Falkland Islands from feeling bewildered and alarmed? Would not remarks such as that which has just been made be best told to the marines?
Viscount Trenchard: My Lords, I agree with my noble friend's sentiments on this issue. As a result of
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Statements this afternoon, we shall have an opportunity to raise the more general points in relation to the current emergency.
Lord Brockway: My Lords, is it not an appalling situation that, within a few days of the Argentine's occupation of the Falkland Islands, this country should have been providing weapons to Argentina which will be used in this conflict against our own soldiers?
Viscount Trenchard: My Lords, I have already made clear the extent of the supply of spares. Over past years the list of weapons sold to the Argentine has been evenly spread between Administrations, including those of which the noble Lord has been a supporter; certainly in the past his party has, in this world as it is, agreed to supply certain arms under the usual criteria.

Kidney Failure: NHS Treatment
2.39 p.m.
Lord Molloy: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they noted allegations made by specialists at the conference on renal failure at the University of East Anglia on 5th-6th April 1982, that 1,700 people die of kidney failure each year because the National Health Service has not enough money to treat them, and that patients are turned away not for medical reasons but because of age, poverty and social and linguistic conditions; and what they propose to do to remedy this situation.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne): My Lords, I am aware of the proceedings of this conference. While facilities for treatment of chronic renal failure have been expanding steadily, the Government recognise that they are still insufficient to meet all the estimated needs. We are taking various steps to encourage the improvement of these services, particularly the supply of kidneys for transplantation, but the rate at which they can be further expanded will depend mainly on the priority which health authorities find it possible to give them against the other claims on their resources.
Lord Molloy: My Lords, I thank the noble Lord the Minister for that reply. Is he aware that, by its nature, the transplant side of the policy must be very hit or miss? Is he not aware that that cannot be good for all those involved; the relatives of those who require treatment of this kind, who believe that someone will die, or the consultants, who believe that they could stop the death? Would the noble Lord be prepared to have another look at the problems raised in the Question, for which I think he would receive the thanks of all involved?
Lord Trefgarne: My Lords, I certainly would not describe the transplant procedure as hit or miss, as I think the noble Lord did. It is in fact by far the best treatment for this kind of illness and is only inhibited from expanding further because of the shortage of kidneys available for transplant purposes. It is unfortunately the case that last year the supply of kidneys declined somewhat and therefore the number of transplant operations was fewer last year. But there are encouraging signs this year that the number is picking up again.
Lord Molloy: My Lords, is the noble Lord aware that that is precisely what I meant when I said that it must be hit or miss? The medical profession and those involved cannot give an absolute assurance that they will get a kidney to transplant, but they could give an absolute assurance that they will involve themselves in all that is concerned in the renal application in order to try to save lives.
Lord Trefgarne: My Lords, as the noble Lord rightly pointed out, the number of kidneys is limited, and that certainly restricts the number of patients who can be treated in this way. The other types of treatment—for example, dialysis of two or three different kinds—is certainly an alternative, but it is less satisfactory both in terms of cost and from the patient's own point of view.
Lord Brockway: My Lords, will the Minister encourage individuals to carry on themselves indications that they would be prepared for their kidneys to be used for this operation, as I do?—though I am not sure that my kidneys would be of much value.
Lord Trefgarne: My Lords, I would certainly agree with the noble Lord that this should be done. The kidney donor card is a red card like this. I understand that supplies are available in your Lordships' Library, so those of your Lordships who do not carry such a card, and who would like to, can do so if you wish.
Lord Parry: My Lords, is anyone prepared to accept applications for the noble Lord's kidneys?
Lord Trefgarne: No, my Lords, only his heart.
Lord Molloy: My Lords, may I briefly ask the noble Lord a further question? The noble Lord should be thanked for having read the terms of the conference and what went on there, but may I ask whether he will be sending an acknowledgement saying that he appreciates all that was conveyed during that conference and the apprehensions of the people involved?
Lord Trefgarne: My Lords, I certainly acknowledge the apprehensions of the people involved, as the noble Lord said. The conference was I think in fact conducted by a commercial organisation, and the Government did not therefore participate in the conference, although we had an observer present.

Shooting Gallery Rifles: Control
2.44 p.m.
Baroness Wootton of Abinger: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether rifles may be used with live anmmuition in fairground shooting galleries without any person holding a licence to possess them; and, if so, whether they will put an end to this dangerous exemption from the laws relating to firearms.
The Parliamentary Under-Secretary of State, Home Office (Lord Elton): My Lords, Section 11(4) of the Firearms Act 1968 permits a person conducting or carrying on a shooting gallery at which only air weapons or miniature rifles not exceeding ·23 calibre are used, to acquire and possess such rifles and their ammunition, without holding a firearm certificate. It is not necessary to hold a certificate to use an exempted rifle at a shooting gallery. We are not persuaded that the removal of this exemption would be justified at present, but the position will be kept under review.
Baroness Wootton of Abinger: My Lords, while thanking the noble Lord the Minister for his reassurance, might I ask him whether there is not a danger that some of these weapons, which may be lethal, will eventually find their way into the hands of persons who want to use them for criminal purposes?
Lord Elton: My Lords, our experience in recent years is that this rarely, if ever, happens. I would remind the noble Baroness that the weapon we are discussing is not really suitable to the sort of purposes for which the normal criminal wants to use such a weapon. I accept that one might expect them to be a source of illicit weapons, but on the other hand they are the livelihood of their owners and their owners therefore keep considerable care of them.
Lord Gisborough: My Lords, would my noble friend agree that there is no control over the sale of these weapons when the fair owners decide to modernise?
Lord Elton: My Lords, the exemption extends only to weapons of what we would call ·22 calibre—that is, below ·23. The Home Office recommendation is that only short ammunition should be used, which has approximately half the carrying range of the long ·22, which I do not doubt my noble friend uses from time to time at home. As to the sale, the purchaser has to prove his eligibility for the exemption, usually by showing that he is a member of the Showmen's Guild. Nobody else is likely therefore to profit from that exemption.
Lord Swansea: My Lords, is it not the case that at the shooting galleries the rifles are normally chained to the counter so that they cannot easily be removed, and that given proper supervision by the proprietor there is little likelihood of their being stolen? Although the proprietor does not need to have a certificate to

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possess such weapons, are the serial numbers of the rifles concerned registered with the police as a matter of routine?
Lord Elton: My Lords, as to the registration of numbers I regret I shall have to write to my noble friend. As to restraints on the weapons, typically, yes, they are restrained. Their use is also regulated by local authority legislation and is subject to Home Office guidance published in 1976. The effect of this is that in almost every case there is protection for the public at every point in front of the firing position, and it is impossible to swing the weapon behind it.
Baroness Wootton of Abinger: My Lords, is the Minister satisfied that there is sufficient protection after sale, and that the conditions of sale are sufficiently strict? Even if there is no serious danger of accidents during the use of the weapons for the purpose for which they are issued, would the noble Lord confirm that there is strict supervision of the persons who may purchase them eventually?
Lord Elton: My Lords, the exemption extends, as I have said, only to bona fide operators of shooting galleries at fairs. Our experience at present leads us to suppose that this is not a means by which criminals improperly acquire weapons either from the original supplier or from the fairground operators. We have made inquiries to that effect. I am reassured, but, as I have said, this is a delicate matter which we shall keep under review.

The Royal Navy and Naval Dockyards
2.48 p.m.
Lord Boothby: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in view of the present world crisis, they will take immediate steps to increase the strength of the Royal Navy, and reverse the decision to close the naval dockyard at Chatham and Gibraltar.
Viscount Trenchard: My Lords, the strength of the Royal Navy is currently evident. Its power has grown since this Government came to office. Under the Government's current defence policy further new ships will come into service and our Navy will remain very strong.
Lord Boothby: My Lords, arising out of that Answer may I ask one or two very brief supplementary questions of the Minister? First of all, is he aware that a nuclear deterrent is necessary in order to prevent the wholesale use of nuclear missiles which could destroy the world, but for no other purpose? The security of this country has always depended on sea power, and always will. Is he aware that it was the loss of sea power that brought us nearest to defeat in two world wars?
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I should like further to ask him whether he realises that the closure of the Chatham and Gibraltar dockyards will involve massive unemployment and a great weakening of the Fleet at home and total loss of sea power by this country in the Mediterranean, with the consequent dangers to our obligations to NATO? Finally, would the Minister agree that the present rundown of the Royal Navy, and the fact that the spearhead of the Falklands task force, the"Invincible", has already been sold, constitute a mortal threat to the security, indeed the survival, of Britain?
Viscount Trenchard: My Lords, the noble Lord has asked four supplementaries, although perhaps the first was a comment. Of course, we share his view that there is a need for a nuclear deterrent, and the House is well aware of the very limited proportion of our defence budget which is spent on nuclear weapons. Certainly the Government agree on the importance of sea power, but I do not think I could sensibly add to the many commentaries and histories as to the parts played by all three Services in the last two wars. In relation to the dockyards, there is no question but that the existence of all the dockyards which we had provided an administrative cost and tail which was limiting our ability to buy modern ships with extremely expensive modern weapons. There will always be a change of emphasis and modernisation. At present, we have started on a dockyard reorganisation. When that is complete, both the dockyards and the Royal Navy will be, as I said the other day, in a very strong position, should a call be made on them, to rise to any emergency, such as the emergency facing us today.
Lord Peart: My Lords, the Minister will be aware that we supported the view of the noble Lord, Lord Boothby, when we had our previous defence debate, and I congratulate him on raising the matter now. We should like to know when it will be possible to have what will be an important defence debate—I do not mean now; perhaps within the next two or three days—in view of other events. May I have an assurance that there will be one?
Viscount Trenchard: I understand that that will be dealt with through the usual channels, my Lords. I would just comment to the noble Lord, Lord Peart, as I have commented before, that in reviewing comparative strengths at one time and then at a later time, one must take account of all classes of ships, including submarines, and all weapons, including things like modern torpedoes, and we shall be spending £2 billion on modernising our torpedoes.
Lord Hankey: My Lords, in supporting the remarks of my noble friend Lord Boothby, may I ask if the Government will keep a somewhat open mind on the question of dockyards until this important affair in the Falklands has been settled and until we can see what the future shape of naval requirements is likely to be? Is it not a fact, following the thought of my noble friend, that if we had only one or two dockyards, one atom bomb on one of them might gravely maim the Navy, which would create a disastrous situation? Is it not also true that in this affair, the incredible efficiency and speed with which the Navy got into

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motion depended on the use of Chatham, which is due to be suppressed; Portsmouth, which is due to be reduced; and Gibraltar, which is due to be phased out? Would the noble Viscount agree therefore that it would be desirable to keep an open mind in relation to dockyards, at least until the end of this affair?
Viscount Trenchard: My Lords, I suggest that the first part of that supplementary would best be raised in a future debate. Concerning the noble Lord's question about Chatham and Portsmouth in relation to the current emergency, I have said before that in such an emergency we clearly need to use everything we have—both those weapons and support facilities which are being phased out and those, if we can bring them in more quickly, which are coming in. But that does not really have any bearing on the question whether the plan to base ourselves on two dockyards—not one—for the kind of force we shall have in future is or is not the best use of resources. Certainly at the time we did the review we felt it was, and we must remember that we face a number of potential threats, which have very different challenges, and not just one at the extreme south of the South Atlantic.

The Falkland Islands: Business
2.55 p.m.
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon, my noble friend Lord Belstead will, with the leave of the House, repeat a Statement which is to be made in another place on the Falkland Islands. That will he followed by my noble friend Lord Trenchard repeating a second Statement on the Falkland Islands.
It may also be for the convenience of the House if I announce that dinner will be available this evening at the usual time. Subject to the progress of business, the Committee stage of the Oil and Gas (Enterprise) Bill will be adjourned at about 7 p.m. for approximately one hour, and during that adjournment the Report stage of the Administration of Justice Bill will be taken.

Food and Drugs (Amendment) Bill
The Bill, having been brought from the Commons on Friday last and printed pursuant to Standing Order 47, was read a first time.

Statutory Instruments
The Deputy Chairman of Committees (The Earl of Listowel): My Lords, on behalf of my noble friend the Chairman of Committees, I beg to move the Motion standing in his name on the Order Paper.
Moved, That the Lord Darling of Hillsborough be appointed a member of the Joint Committee in place of the Lord Segal.—(The Earl of Listowel.)
On Question, Motion agreed to.

Copyright Act 1956 (Amendment) Bill [H.L.]
2.57 p.m.
Read a third time.
Clause 1 [Amendment of section 21 of 1956 c. 74]:
Lord Fletcher Lord Fletcher moved Amendment No. 1:
Page 1, line 5, leave out ("(1)").
The noble Lord said: My Lords, I think it would be convenient if I spoke at the same time to the three amendments which stand in my name on the Marshalled List. The first is purely drafting. The second requires a word of explanation in that it arises from advice I have received, since the Committee was discharged, in that I am told that, with the amendment, the Bill will be acceptable to the Minister. The object of the amendment is to reduce the scope of the Bill and to make precise the infringing material the possession of which is to be an offence.
In due course I understand there will be a comprehensive Government Bill to amend the law of copyright, but that may take several years. This Bill in its amended form will, hopefully, cure the mischief of the piracy of sound recordings and cinematograph films which is now assuming alarming proportions. If the amendment is made and it becomes unnecessary to recommit the Bill, I understand the Bill will have a greater chance of success in another place.
Lord Lyell: My Lords, the Government would not wish to oppose the amendments standing in the name of the noble Lord, Lord Fletcher. The amended Bill is, however, seen solely as an effort to deal with the growing problem of copyright piracy. The Government are not in general willing to short-circuit the consultative process following the publication of the Green Paper on copyright, or indeed to enter into piecemeal copyright legislation.
Lord Fletcher: I am not sure what the effect of the Minister's comment is, my Lords, but I am hoping it means he will allow the Bill to proceed in this House.
On Question, amendment agreed to.
Lord Fletcher Lord Fletcher moved Amendment No. 2:
Page 1, line 7, leave out from ("copyright)") to end of line 8 and insert ("after subsection (4) there shall be inserted the following new subsection—
"(4A) Any person who, at a time when copyright subsists in a sound recording or in a cinematograph film, by way of trade has in his possession any article which he knows to be an infringing copy of the sound recording or cinematograph film, as the case may be, shall be guilty of an offence under this subsection.";
and in subsection (7) the word "or" where it first occurs shall be omitted and the words "or subsection (4A)"shall be added after the words "subsection (2)".").
On Question, amendment agreed to.
Lord Fletcher Lord Fletcher moved Amendment No. 3:
In the Title, line 3, leave out ("in the course") and insert ("of a sound recording or cinematograph film by way").
On Question, amendment agreed to.
Lord Fletcher: My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(Lord Fletcher.)
On Question, Bill passed, and sent to the Commons.

Oil and Gas (Enterprise) Bill
3 p.m.
The Minister of State, Scottish Office (The Earl of Mansfield): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(The Earl of Mansfield.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF LISTOWEL in the Chair.]
Clause 1 [Oil Corporation's powers of disposal]:
Lord Bishopston Lord Bishopston moved Amendment No. 1:
Page 2, line 2, after ("shares") insert ("not exceeding in value 49 per cent. of the total").
The noble Lord said: I beg to move the amendment standing in my name and in the names of my noble friend and the noble Lord, Lord Tanlaw. This is a very important and controversial Bill and is the legislative background for the privatisation of much of the BNOC and some of the British Gas Corporation. The oil-producing business of BNOC is to be transferred to a subsidiary called Britoil, and 51 per cent. of the shares are to be sold to the public. The Bill is an important one because it concerns a very significant aspect of our national resources—energy assets—and the Committee will want to proceed responsibly and constructively to look at some of the provisions within it.
In some ways Amendments Nos. 1 to 5 are all very much concerned with the control of the assets, with whether they shall be in the hands of the nation, as we believe they must be, or whether they shall be privatised and fragmented. This is an important measure, but in some respects it has little, or very little, to do with the enhancing of Britain's fuel and power policy, as one will conclude from the Minister's Second Reading speech. I believe that this is another Treasury Bill first and foremost, and it is designed to raise several thousands of millions of pounds to finance the PSBR. Having looked in detail at the clauses, one is bound to consider that any policy in relation to energy and power is a by-product of that particular aim, and this is of course a most disgraceful state of affairs.
In this regard it is like several other measures which have come before your Lordships in recent times. I have in mind the Forestry Bill, the aim of which was to enable the Chancellor of the Exchequer to take some money from the Forestry Commission's till when he needs some cash in order to cut taxation in other directions. The three objectives which the Minister mentioned on Second Reading made it clear that the Government wanted to cut down the public sector.
With the present international situation, which will of course make increasing demands on the Treasury, the
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Government might say that this measure is now even more important, but surely it is foolish to sell off capital assets at this time. The Government have given several reasons for their folly. As the Minister said on Second Reading, the Bill will be a major step forward in reducing the size of the public sector. The Minister said that the Bill's provisions concern the future wellbeing and development of vital energy resources. How true that is. But I am not sure that that is the main feature or object of the Bill itself. I noticed that the Minister said—and I quote—that the Bill's provisions "concern" the wellbeing of resources, and that can anticipate the effect being good or otherwise; the Minister did not say that the Bill was essential to the development of our energy resources.
I believe that the timing is bad. With our country involved in conflict, there has never been a time in recent years when we have had greater need of a comprehensive fuel and power policy, under national control. One may well ask: Is this the time to fragment this great industry, so essential in times of war and peace, and to let it go out of public control and into private hands? Many of us would say that in a time of emergency it should be accepted that the national interest justifies the overriding of private interest and makes essential the co-ordination of our resources, including vital oil and energy resources. Today we are beginning to discuss the fragmentation of vital national resources, and we are considering how they can be split, disposed of, and handed over with few conditions or restrictions, to the private sector for purposes of private profitability, at public expense.
In the measure the Secretary of State, whose name appears countless times on every page, is given draconian powers, many of them unspecified. It is the intention of some of the amendments tabled by my noble friends, myself and other noble Lords to probe the Government on these aspects, to find out what they have in mind, and to see whether the Secretary of State's powers can be restricted and, most importantly, to ensure that the Secretary of State should be answerable to Parliament for the powers that he wants under the Bill.
I am surprised that at the beginning of the Committee proceedings the Minister did not rise to state that in view of the emergency situation, when all our vital resources must be under public control, the Government are prepared to withdraw the Bill. That would be logical at a time when we are commandeering ships such as the "Canberra" and the "Queen Elizabeth" and other transport facilities and resources.
There seems to be very little justification, or indeed enthusiasm, for this measure. However, it is before the Committee, and the amendment that I am moving is of great importance because it involves a deciding factor as to who shall have control of this resource and how the control shall be exercised. As I say, our energy resources are vital in time of war, but are no less vital in time of peace, and we just do not know what the future holds. The Government are to sell off a majority interest in oil; not just a minor part of it. Indeed, disposals of up to 100 per cent. have been mentioned from time to time. Through the amendment the Committee will have the opportunity to say that if the Government must sell, if they are so determined to go ahead, the minor part of the shareholding

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shall be sold, and overall public control shall be retained. That is so vital to the public interest at this particular time.
The Government might reply that in a matter of control they can take a majority shareholding. Much has been made of this point as a means of enabling the Secretary of State to fly in and rescue the undertaking if the Government feel, or he feels, that things are not what they ought to be. One wonders whether the proposal to take this magic shareholding will meet with the Stock Exchange rules, and whether, despite the assurances given by Her Majesty's Government, the shareholding which the Minister may use is adequate to do what is required in every situation.
Indeed, the Minister said on Second Reading:
"Once 51 per cent. of the shares have been sold, Britoil will become a normal private sector company. The residual Government shareholding will not be used by Government to intervene in the company's commercial decisions".—[Official Report, 20/4/82; col. 468.]
The Minister went on to say that there were safeguards against unacceptable changes in control. He said that they had been carefully drawn up "as reserved powers only"; and, of course, this is another factor which makes one doubt whether the Minister has adequate powers in any situation. He said that otherwise they would remain dormant. So this magic share may not be quite as powerful as one would hope.
On Second Reading in another place on 19th January, the Secretary of State said (col. 169):
"No industrial corporation should be owned and controlled by the State unless there is a positive and specific reason for such an arrangement. That is manifestly not so here".
We are not talking about a small undertaking of a minor or peripheral nature, but about one of the nation's major resources. The case for public ownership is not a doctrinaire one. Indeed, as my noble friend Lord Beswick pointed out in his detailed and convincing speech in the debate on The Public Sector: Privatisation and Efficiency in your Lordships' House on 21st April, public ownership has been advocated and carried through by leading Conservatives, and I do not need to remind your Lordships of who they were—BOAC, by Sir Kingsley Wood; the gas undertakings, championed by Geoffrey Heyworth, chairman of Unilever; coal, 32 years after Bonar Law urged that it be done; and, of course, Rolls-Royce aero engines and British Leyland were failing the nation not as public enterprises but as private enterprises, which made their public control essential in the national interest. So all Governments have recognised the importance of control of these great national assets.
Now the Government state time after time that private enterprise spells efficiency and profits while public ownership means inefficiency and losses. One can ask: is the case for the Government's policy based on such a claim? The answer clearly is "No", because, on Second Reading and on other occasions during debates in the other place, the Ministers have claimed that there has been a considerable success with the opening of new oilfields and with the workings of the corporation. Indeed, the Minister says that there was a considerable achievement in developing vital oil and gas resources.
The announcement was made by the Secretary of State for Energy on 19th October last year that 51
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per cent. of the shares in oil production and the exploration side were to be sold to private interests, and one would have thought that, instead of there having been a considerable achievement, as the Minister put it recently, the publicly-owned oil and gas assets had failed the nation, that enormous losses had been made and that production had fallen, and, instead of being self-sufficient in oil, we were having to buy on world markets. Of course, we all know that that is far from being the case. BNOC's oil interests are thought to be worth over £12,000 million and rank only after Shell, Esso and BP in the list of companies operating in the North Sea; and in 1980 the pre-tax profits were over.£300 million.
The Secretary of State and the Minister of State in your Lordships' House have given no adequate assurances about the Government's ability to safeguard the public interest when selling off the majority of shares, and, in moving this amendment, I urge noble Lords to support us because this is a matter of great national importance. With a Government holding of, say, 10 per cent.—there could be any small figure you can think of—it means that the company and, of course, the Government themselves have no control of this asset. As I say, the Bill gives the Secretary of State massive powers without recourse to Parliament, and, unless there are safeguards written into the Bill that no more than 49 per cent. is to be sold, then Parliament has no control of an asset at a time when we should be seeing how we can tighten up in the national interest instead of allowing the industry to be fragmented in the private interest, whatever the public interest may be.
There are of course a number of other amendments on the Marshalled List which we shall be moving in order to deal with the sale of foreign assets and the size of assets which may be sold to particular people and companies, but I believe that this amendment, which is aimed to restrict the power of the private sector and to ensure that the public sector has the power, is absolutely essential in a Bill such as this, whatever views one may take as to whether the industry should be kept under public ownership or privatised. I beg to move.
Lord Tanlaw: In supporting the noble Lord, Lord Bishopston, in this amendment I should like to begin by saying that, as the noble Earl the Minister is aware, there was no Liberal representation during the Committee stage in another place. Therefore, I thought it would be for the convenience of those taking part in the Committee stage in your Lordships' House that I should add my name to a number of the amendments set down by the noble Lord, Lord Bishopston, and that that would assist in terms of efficiency of business. I hope that that will be appreciated.
Our support of this amendment is based not so much on concern over the possible takeover of Britoil as expressed by the noble Lord, Lord Bishopston. We on these Benches are fairly satisfied, as I said on Second Reading, that the golden shareholding, so called, is quite an efficient although quite an original blocking device, and can protect Britoil from any unwelcome predators or, indeed, unsuitable directors. But the reason for putting this amendment down is

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one which I do not think was discussed at all during the Committee stage in another place. The concern that we have is: what is the Government's intention by way of the future policy of Britoil? As has been said by the noble Lord, Lord Bishopston, the primary objective of Her Majesty's Government is to raise capital, and in principle we see no particular objection to that side. But, if the Government are not to retain a 49 per cent. holding and not to retain two directors on the board, as they have indicated so far, then they are saying, as I understand it, that the Britoil board is perfectly free to carry out any policy that it wishes.
I think that that perhaps may need a bit of explanation, because, if it is the intention of the Government to sell off the 49 per cent., which they have every right to do under the Bill as it will stand if this amendment is not accepted, that therefore means that the national element—that is, the Government's shareholding—will be gone, and the company will be free to carry on like any other multinational oil company. Therefore, the question I ask is: is it the intention of Britoil to be a national or a multinational oil company? I believe that this point has not been made clear, because we have not seen—I certainly have not seen—the prospectus of Britoil, and we do not know what are its aims and objectives. I believe that the future shareholders of Britoil will support it, perhaps mainly for patriotic reasons, others for purely fiscal reasons, but on the basis that Britoil is to be a national oil company. They have plenty of choice of other multinational oil companies which are already on the stock market—such as BP and Shell—in whom they perhaps already have shareholdings.
The importance of the 49 per cent. is directly linked to how the Government intend to use their directors to represent this 49 per cent. on the board. If they are merely to sit there—as I, perhaps unfairly, indicated during my intervention in the Second Reading debate—then I do not think they should be there at all. If they are there to take part in future policy-making, then it is important that the Government explain to the Committee and to future shareholders exactly where the company is going. I think that it is fair to mention a statement made by the current chairman of BNOC about the future of Britoil. He saw it as expanding in a global manner, becoming a global oil company with investments abroad. He made also a criticism of the taxation of British oil companies operating out of Britain.
If it is the intention to reinvest the profits overseas and become a multinational oil company, then I believe that this is rather against what was the intention of the Government in floating it. I see the 49 per cent. shareholding as a vital one to ensure for all shareholders and all taxpayers that Britoil looks after developing and exploiting British assets and resources in the North Sea first and foremost. At Second Reading, I said that there are commercial and political risks of taking shareholders' money abroad under a British national oil company and investing it in somebody else's national oil company or helping somebody else's national oil company exploit their resources. There may be commercial arguments and fair commercial risks in this and there may be greater rewards. But those Governments or the host Governments under
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which Britoil may be operating overseas might fall, might change their policy or might confiscate or acquire. Those are straightforward commercial risks; I do not pretend otherwise. But is this the role for Britoil? BP and Shell and other multinationals take these sort of risks every day. They put their money abroad and take the profits and losses. But is this going to be the future role of Britoil? I think that a lot of people will wonder about this before putting their money into it.
The Government shareholding of 49 per cent. is not there to be kept as a sort of piggy bank for the Treasury, or to be sold off in perhaps two or three years' time as another means to raise another tranche of capital. We see it as a vital part in protecting the Britishness of Britoil. I believe that this is the main function of the Government directors and that that is the main importance of the 49 per cent. which the noble Lord, Lord Bishopston, in his and my amendment is asking the Government to reconsider. I have looked through the stacks of papers on the Committee stage of this Bill in the other place and it is difficult to sift the dross from the chaff and to appreciate what is being said in this area.
I stand to be corrected, but I think that there is nothing said of what will be the future policy of the Government. Who will devise it? If the Government answer is that it is a public company, it is like any other oil company and can decide policies which best suits it or what it believes to be its shareholders, in terms of investment and of purchasing equipment from abroad or from British companies. It is fair enough to say that, but I ask: What is this 49 per cent. there for? Is it just to sit there and watch the company become non-British, or is it there to protect the Britishness of Britoil? That is what I believe most people imagine Britoil to be as a company; and they will put their money in it on that basis.
I want to put three main questions. Are the Government directors of Britoil going to give clear guidance in future investment policy to maximise the exploration and exploitation of British oil assets in the North Sea? Will they encourage Britoil to support British industry and purchase British equipment? Will they ensure that the head office, the registered office, of Britoil remains in Glasgow? I add that last point because if the role of Britoil becomes more multinational than national, the temptation will be to move the office to London where all the multinationals have their offices, in order to keep in touch with the rest of the world—something which they should be doing, anyway.
There is a further point. If the profits from Britoil from overseas investment exceed those from the United Kingdom, there will be a further temptation, if we can take at its face value the chairman's recent statement, to increase the return for shareholders; and they might even be able to move the head office offshore and it will become a non-British company, just as any other company can be entitled to do. And many other oil companies are known for this fact because of taxation problems in their host countries. What I said at Second Reading was that if the privatisation of BNOC is to mean foreignisation—and foreignisation in this case would not mean take-over by some sheik's Government but will mean investment

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overseas and turn Britoil from a national oil company into a multinational oil company—then I hope the Government will consider this point and expand on it in their reply, in order that we make a very clear decision about where the future of Britoil is to go based on the terms of this amendment.
Lord Underhill: For the reasons given by the last two speakers, I support the amendment moved by my noble friend. Reference has been made to the Government's retaining of 49 per cent. of the shares. The clause as drafted makes clear that the Government would have power to dispose of 100 per cent. of the shareholding. Admittedly, the Secretary of State has stated that there is no intention at present of going beyond 51 per cent.; but the power is there to dispose of the complete 100 per cent. shareholding; and as we have said so often in this House, what is important is not what is said about a Bill but what is written in the Bill. The power is there.
I think that the noble Lord, Lord Tanlaw, put some pertinent questions to the Minister. I would repeat what I said on Second Reading. Why should Britain of all countries be the one industrialised country that considers it unnecessary to have a state-held oil company? Again, on the Second Reading debate and during the debate on the Government's public ownership policy, it was said on this issue that there is nothing in the Conservative Party election address that gives them a mandate to dispose of the holding in our national oil company. I wonder what the electors would feel if they believed when they voted at the last election that they were in effect voting to dispose of this valuable asset which, for the reasons given by the two noble Lords, is essential to this country.
Looking through the Committee stage in another place, points were raised about the possibility of a controlling interest being sold to one or two individuals, and also to the question of shares being sold overseas. The Government, I understand, made it clear that the minority of shares that they held could be put into the position of having a majority decision. I must come back to what I said at the outset. Apart from the peculiar nature of that statement, the Government would have power to dispose of 100 per cent. How then would the Government be able to influence any decision by a minority holding from carrying the effect of a majority holding decision? They would have no holding at all if they decided, as the Bill provides, to get rid of the whole 100 per cent. Even if they held 20 per cent. or 15 per cent. the same position would obtain. Therefore, I believe that the Government have explanations and answers to give to the important questions which have been raised.
They should also refer to this very important issue that, notwithstanding what the Minister has said about disposing of only 51 per cent.—which we oppose in any case—there is provision in the Bill enabling the Government to dispose of 100 per cent. of the shares unless there is an amendment. The amendment is not proposing that we should limit the Government to a minority shareholding, but they should retain at least 51 per cent. for all the important national reasons which have been given.
Lord Davies of Leek: I want to take this opportunity briefly to support completely both the speakers. The reason is now more obvious than ever: by doing this the nation is selling its inheritance and no party, whatever its politics, should have the right to pass this oil so insecurely to other nations. The British public and the British nation must not think that it will be above sanctions. I can visualise, if we go on as we are going, that sanctions could be applied against this nation. If that oil is in the hands of other nationals, then the very oil that is ours in the North Sea could not reach this country when sanctions are applied. It is no good anybody laughing about it; we already have a relevant situation as a result of the Argentinian battleship having gone down.
In history we had exactly the same situation. In Palmerstonian days, in 1872 the "Alabama" was a naval vessel which was attacked. America afterwards brought this matter to international law. We lost the case in jurisprudence and had to compensate the American nation. That was in the days of Palmerston. Whether the modern lady who is ruling thinks she is Palmerston, I do not know; but I am pointing out that a nation without vision perishes. The party opposite, having done this to the oil industry, itself lacks vision and I hope that noble Lords on the other side, if this amendment is taken to a vote, will have the courage patriotically to see that the oil is kept British.
3.33 p.m.
The Earl of Mansfield: The noble Lord, Lord Bishopston, and indeed the noble Lord, Lord Tanlaw, carried out a review of the Bill which goes considerably further than the amendment. I do not blame either of them for that because it is quite a good idea to get some of these matters out of the way for the consideration of the Bill later on. When the noble Lord, Lord Bishopston, suggested that the Bill might be withdrawn because of the state which obtains in the South Atlantic, I was a little troubled, but luckily he caught my eye and he gave a great grin as he was saying it. I realised that obviously he was meant to be taken seriously, but not too seriously.
May I say to him and the noble Lord, Lord Davies of Leek, that the powers available to deal with emergency situations in relation to fuel supplies in this country are in no way affected by this Bill. It has absolutely nothing to do with it. Even if it did, we are not at war with Argentina. The operations which have been conducted in the South Atlantic are based on our own right to defend our own people in that part of the world, and Article 51 of the United Nations Charter covers that. I reject that if that is meant to be a serious criticism of this Bill and the Government's conduct.
Lord Balogh: Does the noble Lord the Minister realise that this precise point arose under Mr. Heath's Government? The instructions of the Government to the oil companies were completely disregarded.
The Earl of Mansfield: I have great respect for the noble Lord, Lord Balogh. I am sure that he will agree, on reading through the Bill, that it has absolutely nothing to do with emergency powers. The cleavage between this side of the Committee and those opposite

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is complete because on this side we believe, as I said on Second Reading, that there are compulsive arguments in favour of denationalisation in the interests of the country, in the interests of the oil industry, in the interests of this company and of those who work in it.
I am not going to weary the Committee with a restatement of all the arguments for denationalisation which have been put forward in this Bill, and in relation to other Bills. We have also had the familiar argument which I encountered in the Forestry Bill: that this is a rape of the nation's assets. I see the noble Baroness, Lady Jeger, is in her place. I am not going to go down that road again. There is a fundamental difference of view between the two sides of the Committee and I hope that each side will respect the view of the other. I realise that those opposite would prefer us not to sell any shares in this particular corporation or, failing that, they would like the new company—that is to say, Britoil—to be kept under public sector control. I have to state that this is not the view of the Government. Unless there are powerful and indeed compelling arguments to the contrary, we believe that industry should be free to develop in the natural environment of the market place. We believe that such competition leads to efficiency and innovation, and enterprise leads to success. There is nothing squalid about this at all. It is a view which we happen to take of how the economy can be best advanced.
I think I should come now perhaps a little nearer to the amendment. If it were accepted, it would be a major constraint on the Government's powers to sell Britoil, the subsidiary which is to be set up to take over the corporation's oil producing business. If the amendment were accepted, we would be unable to achieve our objective of selling 51 per cent. of the shares in the company.
May I say for the benefit of the noble Lord, Lord Underhill, that he is quite right, the Bill is silent as to proportions of shares which can be sold. But I hope to show that, whatever decision is taken by this or subsequent Governments, the consideration which really the Committee should consider in this matter—that is to say, the future wellbeing of the national interest, the company's interest, and the supply of oilcan be perfectly well safeguarded under the Bill as it now stands. It does not need this kind of slightly simplistic amendment—and I hope I am not being offensive in so describing it—to preserve the position.
A majority shareholding, that is to say a holding of 51 per cent., is not needed to ensure the continued independence of Britoil. Some members of the Committee may have seen the draft articles of the company which are available. They have been available for some weeks. They contain certain safeguards which can be used to secure it against unacceptable changes in control, whether these take the form of attempts to control its board or the composition of the board or to take over a majority of the voting shares in the company.
These are very important safeguards. They are attached to a single special share which will be held by the Government. I can assure the Committee that we have every intention of retaining this share. Indeed, I cannot conceive of any Government ever contemplating getting rid of it. Therefore, on the
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narrow ground of wishing to preserve Britoil's independence, there is really no case for this amendment.
Then one turns to the single large shareholder argument, which was mentioned by the noble Lord, Lord Tanlaw, in his interesting speech on Second Reading. We do not see that this amendment is necessary to protect the company against such a shareholder. Ownership is of course closely related to control, and this is a point which I think will possibly arise in subsequent amendments, so it may be helpful if I set out the arguments at this stage. I anticipate that we shall go rather further into the articles of association later.
The first point is that for anyone who wishes to build up a large shareholding in Britoil it would entail a major exercise involving an enormous investment of capital. Obviously I cannot put a figure on it, but it would involve hundreds of millions of pounds. That would be the sum involved, not to try to take control but simply to build up a large shareholding.
Secondly, it is hard to conceive of any shareholder embarking on such a project without wishing to have some say in the running of the company and becoming involved in an attempt to control the board and indeed its composition. That would trigger the safeguards in the articles, and we believe that those safeguards will act as a powerful deterrent. The noble Lord, Lord Bishopston—I am sure he will not mind my saying this—was slightly dismissive of what he called "only reserve powers"; but he should not be misled by that phrase. The safeguards would be triggered if there was an attempt to control the board or its composition, and therefore there is no question about their adequacy.
Apart from that, there are other ordinary provisions which anybody trying to build up a large shareholding would come up against; and I can mention three. First, there are the powers of the Government to make a reference to the Monopolies and Mergers Commission under the Fair Trading Act 1973. There are provisions in the code which would be triggered if any shareholder or shareholders acting together obtained more than 30 per cent. of the voting shares in Britoil. There are the conditions attached to petroleum production licences, which contain important provisions dealing with changes in control of a licensee. These may be brought into play where a party gains control of 33⅓ per cent. of the shares of a licensee. Quite apart from the safeguards in the articles, one is therefore driven to the position that anybody who wanted to set up a large shareholding in this company would face formidable obstacles and that would be made all the more difficult by the Government's declared intention of achieving a wide spread of ownership. So I think that one must retain a sense of perspective. No other privatisation measure passed by this Parliament has contained any such restrictions as are proposed in this amendment.
I have been asked a number of questions. I think the basic misunderstanding on the part of the noble Lord, Lord Tanlaw, if I can say this nicely to him, is that he fails to appreciate that when the Government say they are going to put Britoil in the same position as any other company of a similar standing in the private sector, the Government mean precisely what they say. Therefore, the future policy of the company will vest in the shareholders and in its board. If a

1061
course to invest in this or that undertaking commends itself to the board, then the board will be free to pursue its objectives just as the board of any other company. There is nothing mysterious, as I said to the noble Lord, Lord Underhill, about the 49 per cent.—
Lord Tanlaw: I am grateful to the noble Earl for giving way. If, in any other company on the Stock Exchange, a block shareholding of 49 per cent. is represented by two directors on the board, those two directors are expected to take part in the policy of the company. Is the noble Earl saying that this is the case with the Government's 49 per cent. of the shareholding, or is he not?
The Earl of Mansfield: I tried to say to the noble Lord earlier that there is nothing sacred about the 49 per cent. to start with. Any director will naturally take part in the deliberations and affairs of the board in precisely the same way as any other director. They are not going to be bound by some unspoken policy or indeed by a policy that is laid down. I think that is the answer to his question.
The noble Lord asked me about the head office and whether it is likely to stay in Glasgow. I can see no reason why the head office should not remain in Scotland. Before I entered the Government, I was a director of a very large insurance company which has stoutly maintained its head office in Scotland although—here I do not suppose I am releasing any confidences —two-thirds of its profits are in fact generated outside the United Kingdom and only a very small proportion in Scotland.
Then I was asked by the noble Lord, Lord Underhill, really going to the question of continuity of supplies of oil, why it is not necessary—I will put the question in this way—for this country, as compared with others, to have a state oil company with all that that implies. I must remind him of the various checks and balances in the issuing of licences and in the participation agreements which are made and have been made up to now in each round of licensing. There is no question of this country, as it were, being cut off because of a national emergency or at any other time from its supply of oil at proper prices. I hope that will also go some way towards assuaging the feelings of the noble Lord, Lord Davies of Leek. The Government have made their objectives perfectly plain. They have made clear their intention of acting responsibly in relation to Britoil and the continuing shareholding in the company. I am sure that it will not come as a surprise to the noble Lord, Lord Bishopston, who moved this amendment, and indeed to his noble friends opposite, that I cannot recommend the Committee to accept it.
Lord Beswick: I listened very carefully to what the noble Earl had to say, and I did not hear him say anything at all about the effect of this Bill, without any limitation such as is proposed in the clause, on those people who work for the corporation. What feeling are they going to have if they work a little harder, if their decisions are a little cleverer and if their success is that much greater, for are we not going to have the situation where the corporation is told to sell off even more?
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There is known in industry the state where men have the feeling of working themselves out of a job. Here we are going to have exactly that feeling. The better they administer the company, the more certain it is that parts will be sold off, unless there is some limitation. Could the noble Earl please tell us whether any consideration at all was given to the feelings of those people who work in the corporation when they decided not to place a limit on the shares that could be sold? May I ask the noble Earl whether he is going to answer the question?
The Earl of Mansfield: I do not know whether the noble Lord, Lord Beswick, was in his place, but at the beginning of my remarks I said that the Government were quite convinced that this measure would enhance the interests of those who work in the corporation, and I stand by that. I do not see, merely because the ownership of the shares—or a proportion of them—is transferred from the public sector to shareholders, that the company is not given, as we say, every opportunity to expand, to maximise its profits, to pay the greatest salaries that it can and, generally, to have regard for the wellbeing and prosperity of its employees, in exactly the same way as I have no doubt it will for its shareholders.
Lord Balogh: Distributing the shares among small shareholders will not secure democratic control. On the contrary, it will be an oligarchy controlled by nobody.
Lord Bishopston: I believe that the Committee has listened carefully to the reply of the Minister on this very important amendment, which is on one of the most important matters that we shall be discussing during the passage of this Bill. I was serious when I said at the start of my speech that, in view of the international situation, I thought the Government might have been considering whether this was the time to fragment and hand out to private control vital national assets, which, in the public interest, should be under public control. I listened fairly, as I hope one always does, to see whether the Minister could assure the Committee that in the Bill, or in the articles of association, there was anything which would give the kind of guarantees and assurances which the Committee has been seeking this afternoon. But the noble Earl was unable to convince the Committee on this matter, which is of great national interest.
It is not a question of whether the Committee or individual noble Lords agree with public enterprise or private enterprise. The Government have chosen this particular time, when events internationally are what they are, to say that this is a matter which should still go ahead. There are other amendments down about assets falling under the control of foreign powers, and other important amendments, too. I am sure that the Minister has not convinced the Committee on this matter, and I urge my noble friends, and others who care for the national interest, to press this matter in view of the lack of assurances.
3.53 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 84; Not-Contents, 125.

DIVISION NO. 1

CONTENTS

Airedale, L.

Jenkins of Putney, L.

Amherst, E.

John-Mackie, L.

Amulree, L.

Kennet, L.

Ardwick, L.

Kilmarnock, L.

Aylestone, L.

Leatherland, L.

Baker, L.

Lee of Newton, L.

Balogh, L.

Listowel, E.

Banks, L.

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

Barrington, V.

Beaumont of Whitley, L.

McNair, L.

Beswick, L.

Mishcon, L.

Bishopston, L.

Molloy, L.

Blyton, L.

Northfield, L.

Boston of Faversham, L.

Oram, L.

Bowden, L.

Paget of Northampton, L.

Brockway, L.

Parry, L.

Brooks of Tremorfa, L.

Peart, L.

Bruce of Donington, L.

Ponsonby of Shulbrede, L.—[Teller.]

Byers, L.

Caradon, L.

Reilly, L.

Cledwyn of Penrhos, L.

Sainsbury, L.

Collison, L.

Sefton of Garston, L.

Cooper of Stockton Heath, L.

Shackleton, L.

David, B.

Shinwell, L.

Davies of Leek, L.

Simon, V.

Davies of Penrhys, L.

Stedman, B.

Elwyn-Jones, L.

Stewart of Alvechurch, B.

Ewart-Biggs, B.

Stewart of Fulham, L.

Fisher of Rednal, B.

Stone, L.

Gaitskell, B.

Strabolgi, L.

George-Brown, L.

Tanlaw, L.

Gladwyn, L.

Taylor of Gryfe, L.

Glenamara, L.

Taylor of Mansfield, L.

Gosford, E.

Tordoff, L.

Gregson, L.

Underhill, L.

Grey, E.

Walston, L.

Hampton, L.

Wedderburn of Charlton, L.

Hanworth, V.

Wells-Pestell, L.

Harris of Greenwich, L.

Whaddon, L.

Houghton of Sowerby, L.

Wigoder, L.

Hunt, L.

Willis, L.

Irving of Dartford, L.

Wilson of Langside, L.

Jeger, B.

Wootton of Abinger, B.

NOT-CONTENTS

Airey of Abingdon, B.

Dilhorne, V.

Alexander of Tunis, E.

Drumalbyn, L.

Alport, L.

Dudley, B.

Ampthill, L.

Dudley, E.

Annan, L.

Dundee, E.

Auckland, L.

Eccles, V.

Avon, E.

Effingham, E.

Balfour of Inchrye, L.

Ellenborough, L.

Belhaven and Stenton, L.

Elliot of Harwood, B.

Bellwin, L.

Elton, L.

Beloff, L.

Ely, M.

Belstead, L.

Faithfull, B.

Bessborough, E.

Ferrers, E.

Boardman, L.

Ferrier, L.

Bolton, L.

Forester, L.

Buxton of Alsa, L.

Fortescue, E.

Caccia, L.

Fraser of Kilmorack, L.

Campbell of Alloway, L.

Gardner of Parkes, B.

Chelwood, L.

Gisborough, L.

Clitheroe, L.

Glenkinglas, L.

Cork and Orrery, E.

Gormanston, V.

Cottesloe, L.

Gridley, L.

Cromartie, E.

Grimston of Westbury, L.

Cullen of Ashbourne, L.

Hailsham of Saint Marylebone, L.

Daventry, V.

Davidson, V.

Halsbury, E.

De Freyne, L.

Hampden, V.

De La Warr, E.

Hankey, L.

Denham, L.—[Teller.]

Hawke, L.

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Hayter, L.

Portland, D.

Hill of Luton, L.

Radnor, E.

Hill-Norton, L.

Renton, L.

Hives, L.

Robbins, L.

Home of the Hirsel, L.

Romney, E.

Hylton-Foster, B.

Rugby, L.

Ilchester, E.

St. Aldwyn, E.

Killearn, L.

St. Davids, V.

Kinnaird, L.

St. Helens, L.

Lane-Fox, B.

Sandford, L.

Lloyd-George of Dwyfor, E.

Sandys, L.—[Teller.]

Seebohm, L.

Long, V.

Selborne, E.

Lothian, M.

Sherfield, L.

Loudoun, C.

Sidmouth, V.

Lyell, L.

Skelmersdale, L.

McFadzean, L.

Smith, L.

Mackay of Clashfern, L.

Somers, L.

Macleod of Borve, B.

Spens, L.

Mancroft, L.

Stodart of Leaston, L.

Mansfield, E.

Strathspey, L.

Mar, C.

Swansea, L.

Margadale, L.

Terrington, L.

Marley, L.

Tranmire, L.

Massereene and Ferrard, V.

Trefgarne, L.

Melville, V.

Trenchard, V.

Merrivale, L.

Trumpington, B.

Mersey, V.

Tryon, L.

Milverton, L.

Vaux of Harrowden, L.

Morris, L.

Vivian, L.

Mowbray and Stourton, L.

Ward of Witley, V.

Murton of Lindisfarne, L.

Westbury, L.

Newall, L.

Windlesham, L.

Orr-Ewing, L.

Young, B.

Porritt, L.

Resolved in the negative, and amendment disagreed to accordingly.
Lord Skelmersdale: I think that this might be an appropriate time to take the Statements. I therefore beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

The Falkland Islands
4 p.m.
The Minister of State, Foreign and Commonwealth Office (Lord Belstead): My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs. The Statement is as follows:
"Since we debated the Falklands crisis last Thursday, there have been some notable military achievements. My right honourable friend will report on these in a few minutes. Meanwhile, I wish to pay tribute to the efficiency and courage of our forces. Our relief that British lives have not been lost is inevitably tempered by our deep regret at Argentine casualties. I know the whole House would wish to be associated with these sentiments.
"These military achievements have been in support of our overall strategy; they have not been and will not become a substitute for it. As the House knows, we are maintaining the maximum pressure on Argentina in the diplomatic, economic and military fields with the objective of securing Argentine withdrawal at the earliest possible moment in compliance

1065
with the mandatory resolution of the United Nations Security Council.
"The military pressure we have exercised has been challenged despite our clear warnings and our desire to use the minimum force. Our response in the circumstances was as inevitable as it was right. But I can assure the House that what we are seeking is not the military humiliation of Argentina but a victory for the rule of law in international affairs.
"Since the House last met, I have visited Washington and New York to reinforce our diplomatic efforts to achieve a negotiated settlement as soon as possible. I had extensive talks with Secretary Haig. These covered the diplomatic, economic and military dimensions of the crisis.
"On the diplomatic side, Mr. Haig made it clear that, just as we have not abandoned our diplomatic endeavours following Argentina's rejection of the earlier American proposals, nor has he. We discussed a range of ideas for a settlement. We are continuing our work with all urgency.
"As the House will be aware, other Governments have also been active in promoting a settlement. We welcome this and are in close touch with them.
"We are therefore working actively on various ideas, including those put forward by the President of Peru. I can assure the House that we are losing no time in developing our thoughts about them and communicating our own constructive views to those concerned. The framework for a settlement remains as I have outlined it to the House.
"Proposals are needed which cover the essential elements of Resolution 502—withdrawal, and negotiations on the future, unprejudiced in any way. They must also address the interim arrangements and guarantees required.
"On the economic front, Mr. Haig described the measures which the United States have recently announced. They are a tangible sign of American support for our cause. I know that the Americans have not closed their mind to additional steps.
"On the military front, Mr. Haig and Mr. Weinberger confirmed that they are ready to provide material support for our forces and I welcomed this. We are following it up in detail, and urgently.
"In New York I discussed diplomatic possibilities with the Secretary-General of the United Nations and with the President of the Security Council. I made it clear to them that our immediate concern is the implementation of Security Council Resolution 502; and that we are open to any ideas which would achieve this on a satisfactory basis, namely, an Argentine withdrawal followed by negotiations on the longer-term solution without prejudice to basic principles.
"We were able to consider together the various possible ways of involving the United Nations. We recognised that a solution will require not only the right ideas but the right timing and the right sequence of events. I know that the Secretary-General is in touch with the Argentine Government. The burden of compliance with what has already been decided of course rests squarely with them.
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"It must not be forgotten that we remain the victims of a totally unprovoked act of aggression in defiance of the United Nations Charter. We are seeking to ensure that Argentina does not profit from aggression and to uphold the rule of law in international affairs. This is an interest which all members of the United Nations must share. Our resolve should not be doubted. Neither should our readiness to talk and our will for peace."
My Lords, that concludes the Statement.
4.8 p.m.
Lord Stewart of Fulham: My Lords, we are all grateful to the noble Lord for repeating this Statement to us, and I believe that we shall all want to be associated with what was said early in the Statement about the efficiency and courage of our forces, our relief that there were no casualties among them and our deep regret at the Argentine casualties. I do not wish to press any further questions about those military aspects, because I think they will arise more properly on the next Statement, except for this: It has been reported in some quarters of the press that the action taken with regard to the cruiser "General Belgrano" is losing us support in the United States and in the European Community. I should be grateful if the noble Lord could make any comment which is possible about the truth of reports of that kind.
He will realise that we are all glad to notice the repeated stress that was laid in the Statement on the search for a negotiated settlement, a phrase that General Haig himself has stressed. It was mentioned that we are examining ideas from many sources, including those from the President of Peru. Is it possible for the House to be told a little more about the nature of those proposals—and possibly some of the others which the Government are considering? I think it would be generally agreed that Parliament is in something of a difficulty in having to discuss this whole matter without very precise knowledge, or very full knowledge, of what possibilities are open to the Government.
There is one other diplomatic move I should like to ask about. It is possible for the Secretary-General of the United Nations to work by using his good offices if both the parties to a dispute ask him to do so. It is reported that the Argentinian Foreign Minister has asked him to do so. May I ask whether our Foreign Secretary has made a similar approach to the Secretary-General? Finally, I notice that the Statement ended with the words:
"Our resolve should not be doubted. Neither should our readiness to talk and our will for peace".
Will the noble Lord and the Government accept that the prospect of having a united nation with them on this matter does depend on their following out both clauses of that final statement to the full?
Lord Gladwyn: My Lords, I should like first of all to associate myself and my colleagues on these Benches with the tribute that was paid to the great efficiency and courage of our forces on the spot by the noble Lord, Lord Stewart of Fulham. I thank the noble Lord the Minister of State for repeating the Statement. There has been very little time to consult my colleagues and

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therefore what I have to say during the course of my few short remarks should not necessarily be taken as the considered policy of the Liberal Party. Subject to that, I should like to make two brief points.
My first point is that I believe the possibility of an early agreement on any long term solution, or indeed on any solution of a United Nations character, would be very difficult for various reasons—whether it took the form of some suggestions for a force or for a trusteeship arrangement, or whatever. Indeed, it would be impossible to arrive at in the comparatively near future, or at any rate during such time as the task force may be expected to remain in the Roaring Forties. I agree, however, that there may well be some role for the Secretary-General, if both sides wish it, as some form of mediator as soon as negotiations start.
The second point I should like to make is perhaps more controversial. I think we all agree that the more lives which are lost—and I believe this was a point touched upon by the noble Lord, Lord Stewart of Fulham—in settling this dispute, the more unpopular, rightly or wrongly, we shall become with large sections of public opinion both here and abroad. This may be unjust and it may even be illogical, I agree. But it is, I fear, a fact. So, in these circumstances, must we still insist on what might be called the unconditional surrender of the Argentinian troops on the islands and thus of the Argentinian Government? Or should we rather be concerned, while of course ensuring a victory for the rule of law, as was said in the Statement, with the possibility of in some way saving the face of the Argentinian junta?
As we all know, there is in existence what might be called, and has been called, the "Haig Plan" for a peaceful settlement of the dispute which at least the United States Government itself apparently regards as reasonable. We all know that this has been turned down by the Argentinian Government. I am not sure whether it was turned down by us, but we certainly did not regard it with any great favour. Supposing this plan was submitted to the Security Council and the Security Council passed a resolution recommending it, or even insisting upon its adoption, should we necessarily veto it on the grounds that it offended against first principles? Should we, in other words, continue to insist on unconditional surrender even if such a resolution of the Security Council was reluctantly accepted by the Argentinian Government?
4.13 p.m.
Lord Belstead: My Lords, if I may, I shall reply to both noble Lords, for whose response to my right honourable friend's Statement I am grateful. The noble Lord, Lord Stewart of Fulham, asked about the reaction in the United States and the European Community to the latest events since your Lordships' House last met. First of all, I will record that we have the full support of the United States Government in our objective of undoing the Argentinians' aggression. The Americans entirely agree with the importance of our maintaining pressure, including by military means, on the Argentinians. At the same time, they share our belief that we must induce the Argentinians to return as soon as possible to the negotiating table to work out
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a solution to the crisis. I say that in the light of the discussions which my right honourable friend had in the United States over the weekend.
So far as the European Community is concerned, the import ban operated by the European Community expires on 16th May. If there is no negotiated solution before then, it would be natural for the European Community to renew that ban.
The noble Lord, Lord Stewart of Fulham, asked me about the nature of the proposals from the President of Peru. I regret as much as anyone that at the moment it really is not possible to be able to reveal those proposals. I am sure that the noble Lord, Lord Stewart of Fulham, who has given very wise advice throughout this very difficult crisis, will be the first to understand the difficulty which we feel there would be if the nature of any of these proposals was revealed at the present time.
The noble Lords, Lord Stewart of Fulham and Lord Gladwyn, both referred to the United Nations. The position so far as the United Nations is concerned (which of course formed a most important part of my right honourable friend's visit to the United States) is that both my right honourable friend and the Secretary-General agreed that there could be an important role for the United Nations and they both intended to maintain the closest possible contact. Indeed, our permanent representative Sir Anthony Parsons is already in daily touch with the Secretary-General.
In answer to the direct question I was asked by the noble Lord, Lord Gladwyn—do we insist on the terms we have been putting forward as a necessary precondition for a solution of this matter?—so far as the Haig Plan was concerned, the Argentinians simply did not accept those terms. We said in Statements made in both Houses that we saw difficulties with those terms but we never got so far as giving an official and direct reply because the Argentinians refused to do so. We still see as being two absolutely necessary preconditions for a settlement, Argentinian withdrawal and self-determination.
Lord Aylestone: My Lords, in view of press reports which are currently appearing on the tape, will the noble Lord ask his right honourable friend, the Foreign and Commonwealth Secretary, to continue to reiterate the basic statement of facts, especially to our European partners, who the press suggests, are moving their ground slightly? The basic fact is that the Argentinian Government were the aggressors in occupying our territory with forces which were vastly superior to the number of occupants of British nationality on the islands, and that they were overwhelmingly condemned by the United Nations for so doing.
Lord Belstead: My Lords, I am grateful to the noble Lord, Lord Aylestone, and indeed we will continue to do everything we can in this respect. I think there will be important points in this respect, so far as the military situation is concerned, when my noble friend Lord Trenchard comes to make his Statement.
Lord George-Brown: My Lords, the noble Lord used two quite different phrases, one at the beginning and one at the end of his remarks, in his references to our devotion to a negotiated settlement. The earlier

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phrase that he used, and I think I quote him exactly, referred to seeking a settlement,
"unfettered in any way".
The later phrase that he used towards the end of his Statement was, and again I believe that I quote his words exactly,
"without prejudice to basic principles".
May I ask the Minister how this applies, first, to sovereignty and, secondly and much more importantly, to the repeated statements by the Prime Minister about the paramountcy of the islanders' view? If the negotiated settlement we are seeking is to be "unfettered in any way", does that mean that it is to be unfettered by any claim to paramountcy of the islanders' view? If it is without prejudice to basic principles, does that mean that we are not seeking to raise the issue of claiming sovereignty ourselves? It seems to me, if I may say so—taking, as I do, basically the unpopular view—very important that we should be very clear. If we mean we are seeking a negotiated settlement unfettered in any way, we should leave our Continental partners in no doubt, the Americans in no doubt, and if we are seeking it without prejudice to basic principles we should spell out precisely what we mean by that.
Lord Belstead: My Lords, I would only repeat what I said a little while ago in answer to the noble Lords, Lord Stewart and Lord Gladwyn, that the two prime requirements for a settlement are withdrawal of the Argentinian forces and then the assurance that the wishes and interests of the islanders should be taken fully into account in any final settlement because of the importance of the principle of self-determination. I put it in a slightly different way in answer to my noble friend Lord Balfour of Inchrye when we debated the matter last Thursday, when I said in effect that we must surely do everything in our power to apply the principle of self-determination here.
Lord Home of the Hirsel: My Lords, the situation in the South Atlantic is bound to change from week to week and day to day; certain things will happen from time to time which will be unsettling to public opinion and the public may well be confused. Therefore, I welcome very much the statements constantly made by the Foreign Secretary, and repeated in the Statement today, of the position in international law. There are three matters which seem to me to be constant as of today; that the Argentinian occupation of the Falkland Islands is illegal and people should understand that; that they have been ordered to withdraw from the islands by the Security Council, which is the world authority; that they have not done so, and that as long as they have not done so the British Government are entitled to try in any way they can to see that the people of the Falkland Islands are released from this occupation. I think if we can remember those three things all through this very unsettling period in which we are going to be, then we shall be steadfast and we shall be able to judge the day-to-day events in proper perspective. We shall go on in a moment—I am afraid I have to leave—talking about the casualties, but I think it is worth
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remembering in this respect that the Argentinians can end that situation tomorrow by withdrawing.
Lord Belstead: My Lords, I am grateful to my noble friend Lord Home for reminding us of the basic principles upon which we are resolved to follow this matter through to a just and peaceful solution.
Lord Brockway: My Lords, may I ask the Minister three questions. First, in view of the very welcome emphasis on the statement that we are active in diplomatic negotiations, would he correct the statement on BBC yesterday and in the press this morning that the Foreign Secretary urged that United Nations activity should be postponed in order that we might take military action? Secondly, may I ask the noble Lord this: in the discussions with the Secretary-General, did the Foreign Secretary discuss with the United Nations its plan for a settlement of this problem? And did that plan include, one, United Nations presence in the Falkland Islands possibly leading to United Nations' peace-keeping forces, two, United Nations supervision of a referendum of the view of the islanders, and, three, leading to, as Resolution 502 required, direct negotiations between this country and Argentina? Thirdly, may I ask this; is it not the case that our European partners, West Germany, Italy, Ireland, Spain, have all expressed disappointment that this country has not carried out the order of Resolution 502, that there should be a cessation of hostilities, and is it not likely now that they will modify their sanctions against Argentina in consequence?
Lord Belstead: My Lords, the noble Lord asked me to correct a report which the noble Lord said was on the BBC and in the press, that my right honourable friend the Foreign and Commonwealth Secretary had urged that United Nations activity should be postponed so that this country could take military action. I am not aware of any such urging, and I am not aware that such statements, which I have not in fact seen, are accurate. But I think it is right for me to repeat that bit of my right honourable friend's Statement which said—and my right honourable friend was referring to himself and the Secretary-General and also to the President of the Security Council—
"We recognise that a solution will require not only the right ideas but the right timing and the right sequence of events".
That means that both in the United Nations and so far as my right honourable friend is concerned there was an agreement that these things have to come in the right order and have to be dealt with sensitively. In trying to deal with these things sensitively, I am sure your Lordships would not expect me to answer the second question which the noble Lord, Lord Brockway, put, which asked for various details of any plans put forward by the United Nations. I mean no discourtesy to the noble Lord. The talks which my right honourable friend had with the United Nations Secretary-General were extremely valuable, but I am not at liberty to reveal any of the details. So far as the attitude of our European partners is concerned, I have already replied to that.
Lord Shinwell: My Lords, in the light of that reply, may I ask one question. When are we likely to reach

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the conclusion that we have exhausted every possibility of a negotiated settlement? Are we fixing any time? Is it to be weeks, or months? Or are we to depend on what is described as world opinion? Or are we to depend on the inactivity and possibly the inability of the United Nations? When are we going to come to a conclusion that having exhausted every possibility of a settlement through the United States and the United Nations we have to take military action?
Lord Belstead: My Lords, I absolutely understand why the noble Lord asks this question, because I feel that the noble Lord, Lord Shinwell, has in mind not only the interests of this country but also the conditions which our men are facing in the task force in the South Atlantic. So I absolutely take the point which the noble Lord puts. The end of my right honourable friend's Statement said that our readiness to talk and our will for peace should not be doubted. Bearing in mind that this is still going to lay upon us further burdens, in trying to see that this matter is resolved properly, the Statement also said that our resolve should not be doubted.
Lord Balfour of Inchrye: My Lords, may I please ask the Government one question. I ask the question on the assumption that the Government accept that propaganda is a weapon of modern warfare. Propaganda can be truth and can do good. Propaganda can be complete fabrication and can be wrong, but nevertheless may help those whom we are up against. At the moment I fear that the Argentine propaganda is extraordinarily powerful within its own boundaries and possibly spreading outside them to other countries which are sympathetic, to various degrees, to its cause, to its beliefs. Is it possible for Her Majesty's Government to develop this propaganda weapon to a greater degree than at present, on our side? I believe that the BBC service to the Argentine has ceased, or anyhow it is being jammed. But there must be other centres of dissemination of information. There are our friends in other parts of the world—
The Lord Privy Seal (Baroness Young): My Lords, I am sorry to interrupt my noble friend. However, I wonder if he would be good enough to ask a question because a number of noble Lords want to get in?
Lord Balfour of Inchrye: My Lords, we have friends in other parts of the world who have radio centres. Could we not approach our friends in America and in other parts of the world to be hospitable to our propaganda to a greater degree than at present?
Lord Belstead: My Lords, my noble friend Lord Balfour of Inchrye is right in the underlying apprehension in his question, in that there is jamming of BBC broadcasts to Latin America. As I understand it, the jamming is of the broadcasts in Spanish to Latin America and since this clearly contravenes the International Telecommunications Union Convention we are lodging a strong protest with the Argentine authorities through the Brazilian Embassy in London and asking the Swiss Government to do the same through their Embassy in Buenos Aires. I should add that we have no reports of interference with the BBC
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World Service in English. Meanwhile, as my noble friend probably knows, we have stepped up our broadcasts to the Falklands which are being received direct because the relay station there, of course, has also been cut off. May I add to what I have said that, although I understand my noble friend's apprehension, let us just take heart from what has, in fact, happened. I think that our case has gone across. All the developed countries of the Western world have supported us and now we have alongside us the United States and we also have Japan taking economic sanctions against the Argentine, a country which until this particular moment had not, in fact, taken that move.
Lord Jenkins of Putney: My Lords, would not the noble Lord accept that the worst possible propaganda for us at this time is excessive loss of life even if, up to this moment, that loss of life has been Argentinian rather than our own? Will the noble Lord he good enough to answer a question which his noble friend felt was inappropriate on an earlier occasion—and that is, will the Government, in order to prevent further loss of life, now propose an immediate ceasefire?
Lord Belstead: My Lords, the answer to the first of the noble Lord's questions is that I repeat that the Government deeply regret the loss of life which has been incurred. The answer to the second question of the noble Lord is, No.
Lord Molloy: My Lords, is the noble Lord aware that the occupation of these British islands was very carefully planned by the Argentine dictators and that what has proceeded from there is very much their responsibility? Therefore, would not Her Majesty's Government accept that any future interim arrangements for discussions must not endanger in any way the lives of British servicemen which then, in turn, could endanger the lives of Argentinian servicemen as well, and make the situation even worse? There is another serious question which I believe has not been asked yet. Can the noble Lord say what arrangements are being made for British people in the Argentine to represent to Her Majesty's Government any difficulties that they might incur and who is looking after their interests on our behalf?
Lord Belstead: My Lords, as regards the first question of the noble Lord, Lord Molloy, we have made clear all along, and I repeat it now again, that we are very ready and, indeed, anxious to enter into interim discussions leading towards final negotiations as has been required by mandatory Resolution 502 of the Security Council of the United Nations. But, first, and in line with Resolution 502, there must be withdrawal of the Argentine forces. So far as the interests of the British people in the Argentine are concerned, they are being looked after by the Swiss Embassy in Buenos Aires.
Lord Renton: My Lords, is my noble friend aware that the people on the Falkland Islands, our own British people, must be longing to be rescued? Will he give an undertaking that no desire for peace and no process of negotiation will delay the happy day when eventually they are relieved from Argentine rule?
Lord Belstead: My Lords, we are bending every effort towards that end.
4.35 p.m.
Viscount Trenchard: My Lords, with the permission of the House I should like to repeat a Statement which has been made in another place by my right honourable friend the Secretary of State for Defence. The Statement reads as follows:
"With permission, Mr. Speaker, I shall make a Statement about recent naval engagements in the South Atlantic, following the successful operation conducted by our forces to repossess the British sovereign territory of South Georgia.
"In this House on 7th April, I announced that our first naval action would be to deny the Argentine forces on the Falklands the means of sea reinforcement and resupply from the mainland. British submarines have achieved that objective.
"With the arrival of our task force on 30th April our next move was to stop reinforcement and resupply from the air, as well as by sea. Since the passing of Resolution 502, the Argentinians instead of withdrawing, had continuously reinforced the islands. We gave two days' warning to the Argentine Government of the imposition of this total exclusion zone, and our task force is now enforcing it.
"Mr. Speaker—The task force was despatched to the South Atlantic with the support of this House and, I believe, of the country. Since its arrival in these waters our overriding duty has been to protect our task force against attack by Argentine forces.
"We made it very clear to the Argentine Government and to the UN more than a week ago, on 23rd April, that the Government would exercise their rights of self-defence to the full, including the use of force under Article 51 of the UN charter, if this proved necessary to protect our fleet.
"I will now describe the military sequence of events. Air attacks by Vulcan and Sea Harrier aircraft against Port Stanley airfield were launched early on 1st May. The runway was cratered and rendered unuseable by transport aircraft from the Argentine mainland. A further sortie was made today to render the airstrip unusable for light supply, communications and ground attack aircraft operating within the Falkland Islands themselves. The other main airfield on East Falkland at Goose Green has also effectively been put out of action.
"On 1st May the Argentines launched attacks on our ships, during most of the daylight hours; these attacks by Argentine Mirage and Canberra aircraft operating from the mainland were repulsed by British Sea Harriers. Had our Sea Harriers failed to repulse these attacks on the task force, our ships could have been severely damaged or sunk. In fact one Argentine Canberra and one Mirage were shot down, and others were damaged. We believe another Mirage was brought down by Argentine anti-aricraft fire. One of our frigates suffered splinter damage as a result of these air attacks and there was one British casualty whose condition is now satisfactory. All our aircraft returned safely.
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"On the same day our forces located and attacked what was believed to be an Argentine submarine which was clearly in a position to torpedo our ships. It is not known if the submarine was hit.
"The prolonged air attack on our ships, the presence of an Argentine submarine close by, and all other information available to us, left us in no doubt of the dangers to our task force from hostile action.
"The next day on 2nd May, at 8 p.m. London time, one of our submarines detected the Argentine cruiser, "General Belgrano", escorted by two destroyers. This heavily armed surface attack group was close to the total exclusion zone and was closing on elements of our task force, which was only hours away.
"We knew that the cruiser itself had substantial fire power provided by 15 six inch guns (with a range of 13 miles) and Seacat anti-aircraft missiles. Together with its escorting destroyers which we believe were equipped with Exocet anti-ship missiles with a range of over 20 miles, the threat to the task forces was such that the task force commander could ignore it only at his peril.
"The House will know that the attack by our submarine involved the capital ship only and not its escorting destroyers so that they would have been able to go to the assistance of the damaged cruiser. We do not know whether they did so—but, in so doing, they would not have been engaged.
On 3rd May, at about 4 a.m. London time, a Sea King helicopter keeping watch against submarine attack around the task force was fired on by an Argentine ocean-going patrol craft. This vessel was then attacked and sunk by a Lynx helicopter, and a second Lynx then came under attack from another Argentine vessel which was itself attacked and damaged.
Mr. Speaker, it must be a matter of deep concern to the House at the loss of life from these engagements including the sinking of the 'General Belgrano' But our first duty must be the protection of our own ships and men. There may be further attacks on our forces—and they must be allowed to act in self-defence. We cannot deny them that right.
Nor must we forget that military action began by an attack on British marines and the forcible seizure of British territory. The way of stopping the fighting forthwith is for the Argentines to withdraw their garrison from the Falkland Islands in compliance with United Nations, Resolution 502".
My Lords, that concludes the Statement.
4.42 p.m.
Lord Peart: My Lords, I should like to thank the noble Lord, Lord Belstead, and the noble Viscount, Lord Trenchard, for the Statements that they have made today. I believe it is important that we should be careful about life being lost; on the other hand, at different times on own naval and army personnel will be subject to terrific danger and we must bear this in mind. I hope that nothing said in this House will endanger them, Naturally, there will be a desire to act in self-defence.

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The Mirages which were being engaged were brought down by Argentine anti-aircraft fire. There was only one British casualty, who is now in a serious but not critical condition. This is repeated over and over again. That is why we must be careful. The Argentine cruiser, "General Belgrano", escorted by two destroyers, has come under attack and has been sunk, and there is now a controversy going on. I believe that our Navy has acted correctly and I am certain that no one in this House would seek to do otherwise than admit that they are playing a major part in this area, and we stand by them.
Lord Banks: My Lords, I should like to join in thanking noble Viscount, Lord Trenchard, for repeating the Statement made in another place. We on these Benches are glad that our forces have been successful in these engagements and that there has been only the one casualty to which reference has been made; we are glad to hear that he is in a satisfactory condition.
However, the possible loss of 600 Argentine lives underlines the extreme gravity of events now taking place in the South Atlantic. Nevertheless, we support the maintenance of the 200-mile zone and we support resistance to any direct threat to it or to the task force. We hope that the Argentine Government will realise that their aggression in the Falklands will not ultimately succeed and that in order to minimise casualties and loss of life they should now negotiate a settlement based on that fact, as the noble Lord, Lord Home of the Hirsel, emphasised a few minutes ago.
As we understand it, the Argentine cruiser was just outside the zone, and I wonder how far beyond the zone the Government are prepared to use force. It would seem possible to interpret a potential threat fairly widely. Is it correct to say—I believe that it is correct to say—that the Argentine cruiser had not actually fired? Finally, has there been any further attack on our force today, as some of the reports which we have seen have suggested?
Viscount Trenchard: My Lords, I thank the noble Lords, Lord Peart and Lord Banks, for their general support for my right honourable friend's Statement. They have echoed sentiments which I think both the Statements of my right honourable friends clearly show, and I shall not repeat them. Just to correct the noble Lord, Lord Peart, the latest information—which I included in my Statement—is that the one British casualty is in a satisfactory condition (rather than the words which were in an earlier draft, which I know that the noble Lord has seen).
With regard to the queries of the noble Lord, Lord Banks, about the "General Belgrano"—and I am grateful to the noble Lord, Lord Peart, for his support in relation to that threat—we have made clear in successive announcements in declaring these exclusion zones (which I do not think the noble Lord would want me to quote but I can do so) that the declaring of the zones was without prejudice to the right of the United Kingdom to take whatever additional measures might be needed in the exercise of its right of self-defence, and also to interpret that to apply to any threat that the commander of our task force might see arising to his task force.
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In addition to the words which my right honourable friend has already used, I should like to say that, against the background of the actions of 1st May and against the position and the direction of the attack task group, none of us at the Ministry of Defence has any doubt that a threat was posed and that the commander of the force had no alternative but to react to that threat. I believe that the answer to the noble Lord's specific question is that the submarine did fire first, but that there was no doubt about the threat posed by the position and movement of this attack group with the weaponry that I have described.
Lord Kennet: My Lords, we lament the dead now that they are Argentinian only just as we shall lament them if and when there are British dead as well as Argentinian. We praise the efficacity of our forces in carrying out the task that they have been given. Will the Government take care that the facts they have given this House today—that is, the detailed military history and the detailed justification for each step taken—are laid in as much detail before the leaders of our Western European allies, in the hope that they may fend off a possible change of view in those countries, bearing in mind that those countries backed us first and have undertaken visible economic sacrifice in so doing?
Viscount Trenchard: My Lords, the answer to Lord Kennet's question is, Yes, we are doing just that and will continue to do it. We will continue to make clear to the rest of the world the facts as they become available to us, and we will continue to press them to support our resistance to Argentine aggression, and our pressure for a withdrawal of the Argentine troops.
Viscount Massereene and Ferrard: My Lords, may I ask my noble friend whether, if the commander of our submarine HMS "Conqueror" had wanted to be 100 per cent. sure of sinking the cruiser "Belgrano", he could not have used more powerful torpedoes, which I understand was a possibility? Was the reason for using less powerful torpedoes not necessarily to sink the cruiser but to cripple her for several months, and thereby save many lives? If we are engaged in a war—which this is—is it not dangerous to our own soldiers and sailors to fight it with kid gloves on?
Viscount Trenchard: My Lords, my noble friend is clearly an expert on torpedoes. I believe the torpedoes used were those with which our submarine force is equipped for this purpose. We shall not use more force than is necesssary to put aggressive Argentine forces out of action. Having said that, I also endorse my noble friend's sentiment that it is the duty of the commander to make sure that that force is adequate so that British service lives are not risked.
Lord Mishcon: My Lords, can the House be assured that, while all tactical decisions from moment to moment must obviously be taken by the commander on the spot, strategic decisions are still under political control?
Viscount Trenchard: My Lords, of course that is so. The commander has to have his rules of engagement which put him in a position to protect his task force

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and carry out his objectives. The objectives and the rules for engagement are laid down by the Prime Minister after consultation with her Cabinet, and will continue so to be. We shall continue at all stages to look for the possibility of returning to a peaceful settlement of this dispute.
Lord Hill-Norton: My Lords, would the noble Viscount confirm to the House, and if possible to the public, that a great change has taken place in maritime warfare since it last took place, to the extent that modern weapons are of very much longer range and very much shorter time of flight, whether they be in or over the sea? Therefore, any task force commander, or any task unit commander, cannot hang about while he evaluates a potential enemy's intentions. Going with that, will he confirm, in view of the last question, that the task force commander's tactical decision that the General Belgrano" was a threat to his force is warmly underwritten by the Government?
Viscount Trenchard: My Lords, I am grateful to the noble and gallant Lord, Lord Hill-Norton, for those questions, and his credentials for making this point are clear to the House. Certainly we shall try to do so well beyond this House, and I hope his questions today will be reported. He is absolutely right that, in this modern, highly sophisticated age of very dangerous weaponry of great range, a commander cannot afford to take chances. I also confirm that the answer to his second question is in the affirmative, too.
Lord Shackleton: My Lords, the one piece of news that the noble Viscount gave us was that a further sortie was made today to render the airstrip unusable for light supply, communications and ground attack aircraft. Does he mean that there has been another attack on Port Stanley airfield? I stress "airfield" after the "black" put up by his defence spokesman the other day. Is it being actively used? Are there any results from this? This is the sort of information that we really ought to be given.
I should like to ask a further question in support of the noble and gallant Lord who has just spoken. May I ask the noble Viscount whether he is aware that there is much more information that could be given? We have, I think, on the whole supported the Government pretty strongly in not embarrassing them on this matter. But, as the noble Lord, Lord Balfour of Inchrye, said, could we not have a military spokesman who answers some of the questions? If one looks at the "Belgrano" question it is quite clear that the "Belgrano", described as a capital ship—I do not know whether a light cruiser can be a capital ship; I suppose it can be—was in fact able to provide the air defence to the destroyers with Exocet.
I am 40 years out-of-date on war-making. It is no use me trying to understand these tactical issues, but they could be explained. They could help to alleviate some of the anxiety that this was a piece of almost bloody-mindedness. I think the noble Viscount has already agreed with the noble and gallant Lord, because it is quite clear that the commander in the field must have complete control over the protection and defence of his forces. May I therefore ask the noble
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Viscount whether there is more information? Was this, in the judgment of the commander, part of a determined task force going to attack our fleet? This information could reasonably be speculated upon.
Could it also be pointed out that the "Belgrano" and her ships were only an hour and a half's steaming from the zone? Ought the Government actually to have proclaimed a wider zone? There are so many questions which I believe could be answered if the Government would show a little more courage. We do not want them to give away secrets, but some of these answers could be given and could relieve some of the anxieties. As noble Lords have said, the noble Viscount must be aware that the sinking of the "Belgrano" has been damaging to our relations with the United States and in Europe, and this could be met by a fuller explanation. It really would be better if we were given this information than that the Defence Secretary should quote Nelson in rather inappropriate circumstances.
I have one final question. Would it be possible for some consideration to be given to joint air/sea rescue operations? This is exceedingly difficult. It was difficult in the last war. Air/sea rescue launches were sometimes attacked, but sometimes they were not, and perhaps some consideration might be given to that matter,
Viscount Trenchard: My Lords, I take note of the noble Lord's views in relation to information and to putting over very clearly the facts of the military situation as far as we can. I must tell him that large numbers of informed members of the public and others—and he will have seen it in the press—have pressed us to have a more secret operation, and believe that we may already have given too much information to the enemy. The balance between these two views is a difficult one. I do not think the noble Lord would want us to move in any way towards what I would call the Argentinian position. I think most noble Lords would agree that we want to be extremely accurate and extremely careful in what we say; and we certainly do not want in any way to give away information, by inference or in any other way, which may be of value to the Argentines.
I take note of what the noble Lord says about our military spokesman. I do not know whether the noble Lord has read the Guardian this morning, which has given that military spokesman a very good press and very much support, which we welcome.
I am glad the noble Lord stressed the air defence potential of the Argentine cruiser, protected, as it was, by the two destroyers with Exocet. That indeed was a very real factor and no doubt was part of the threat which that attack force clearly posed and which was identified by the British commander. So far as a wider zone is concerned, I think our intentions have been made entirely clear, on two occasions within the zone and on more than one occasion in relation to the protection of the task force itself. I doubt whether definitions of wider zones are appropriate. I certainly take his point on air/sea rescue and will pass it on to my right honourable friend.
Lord Beswick: My Lords, may I ask the noble Viscount to answer the question about the further

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attack on the airfield? When did it take place? Was it another of those most remarkable sorties from the Ascension Islands? What damage was done, and were there any casualties?
Viscount Trenchard: I apologise for not answering that, my Lords, but I do not think I can add to what is included in my right honourable friend's Statement. The first attack on Port Stanley airfield left it unusable by transport aircraft from the Argentine mainland. There clearly was some small doubt that for light supply, communications and ground attack aircraft it could perhaps in the future have been used, and the further sortie this morning, about which I am not in a position to give details, was to ensure that its use for those purposes would also be denied.
Lord Paget of Northampton: My Lords, may I ask the Minister to clarify one point which seemed to me to be of the utmost importance? Were the destroyers carrying ship-to-ship guided missiles, and was the cruiser there as an escort to guard them against interference from the air? If so, obviously we had to take action, and it puts a totally different complexion on what happened. We have been suffering from propaganda—the gratuitous sinking of an old truck with a lot of men in it—but it is a totally different picture otherwise, one we have not heard before, and surely that should be brought home in our propaganda.
Viscount Trenchard: My Lords, when the noble Lord comes to read the Statement he will see that it makes clear that the cruiser itself had 15 six-inch guns with a range of 13 miles and Seacat anti-aircraft missiles. Its escorting destroyers were, we believe, equipped with Exocet anti-ship missiles with a range of over 20 miles. That was in the Statement, and was part of the supporting Statement of my right honourable friend, to indicate that there was no question but that the attack group posed a serious threat to our task force.
Lord Paget of Northampton: It does not want to be just in the Statement, my Lords; it needs to be explained and put over because it is vitally important. I certainly did not spot it in the Statement until it was drawn to my attention, and I do not think that 90 per cent. of noble Lords here did either, let alone the public.
Lord Molloy: My Lords, is the noble Viscount aware that, in so far as the Argentine military junta have no parliament to answer to, if things get difficult they might indulge in a recklessness which could compel us to take equal action, not in a reckless way but to safeguard the British troops in the area? Would it be wise, therefore, for the Government to consider, if it is at all feasible and possible—bearing in mind that we have reporters and television crews on the "Hermes" sending back news—inviting United Nations military and technical observers to join our task force and report to the world what is going on?
Viscount Trenchard: I take the noble Lord's suggestion, my Lords, but frankly I believe it must have
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some problems to conduct hostilities with even a wide range of one's own journalists and representatives of the media present. I believe the truth will get through. The truth must be becoming more and more apparent to the Argentine troops on the Falklands now, and that is important because I hope they will soon begin to see that there is no alternative to withdrawal. I believe the same truth will gradually get through to the Argentine. I take the points made by all noble Lords in relation to the Statement; namely, that the Government need to consider and consider again how to get the truth through, bearing in mind the dictatorship that exists in the Argentine.

Oil and Gas (Enterprise) Bill
House again in Committee on Clause 1.
5.7 p.m.
Lord Bishopston Lord Bishopston moved Amendment No. 2:
Page 2, line 3, at end insert ("other than one which holds any interest in any licence granted under the 5th and 6th Rounds").
The noble Lord said: It may be for the convenience of the Committee if I speak to Amendment No. 4 at the same time. We have decided on a vote not to amend the Bill to require that no more than 49 per cent. of the shares of BNOC are sold, and that is a setback for public control. As I said earlier, this measure is concerned with privatisation, but, regardless of whether one believes in public ownership or in passing on our oil and gas assets to the private sector, if we are to privatise those assets, there should be adequate safeguards to ensure that the public interest prevails.
As Amendment No. 1 is not to be written into the Bill, it makes it even more essential that the safeguards of these amendments are included. We are concerned here with the fifth and sixth rounds and the participation agreements. The amendments have been tabled to ensure greater control of our national oil supplies, because the Bill weakens control of the participation oil. The Secretary of State said in another place on 19th January in his Second Reading speech that participation rights were unassailable, yet, without the control which we seek, we cannot be assured of that in every licence and every field.
In the first to fourth rounds there is a 51 per cent. participation right, and despite variations on licensing and sell-back, there was assurance of the right of public control. But what will happen when the public oil rights are privatised? Unless the Government insist, as our amendment seeks, that the new Britoil company signs a 100 per cent. participation agreement covering that aspect of the oil, there will be loss of control for BNOC.
There is another aspect, in that private companies which are British may be taken over, as in the case of the Brae field, where I understand Marathon has been taken over by United States Steel, a company which I also understand has made no contribution to North Sea oil development. This situation can apply when shares fall into foreign hands. It is a matter of other countries gaining not merely the benefit of our national oil supply, but also the control that they buy with it.
Participation rights were part of an agreement after negotiations in the 1970s. The two parts were, the right to control 51 per cent. of the oil and, secondly, rights governing information from the oil fields, voting representation, and so on. In the first four rounds there is in most cases, such as BP, Esso and Shell, a majority participation right with, in some instances, the right of sell-back. There is, I know, concern about what happens to the agreements on privatisation of equity interest. It has been estimated that as a result of participation agreements (described by the Secretary of State on Second Reading) regarding the 1st to 4th round licensing arrangements, 65,000 barrels a day will be lost, with the possibility of a large daily barrelage being lost due to the issue of the discount and credit arrangements relating to the licences for the earlier rounds.
The Secretary of State says that the Government would protect participation rights, but I should like to ask how they intend to do so with the 5th and 6th round licences. Such rights are underpinned not by participation, but by equity, it seems, as BNOC has a minimum of 51 per cent. equity holding in all the 5th round licences. Can the Minister tell us how, if the 51 per cent. equity interest in the 5th and 6th round licences is privatised, control of the oil associated with those equity interests will be assured?
Finally, will the Government say what arrangements have been made for the 5th and 6th round licences? Are they to switch from royalty in kind to royalty in cash? Will Britoil use oil as a part of our nation's oil supply, or will it be mainly a matter of commercial consideration being put first? I believe that these matters are of great importance in this measure, and it would be useful to know a little more about the Government's thinking in these respects. I beg to move.
Lord Tanlaw: From these Benches we wish to add our support to the noble Lord, Lord Bishopston. We do not wish to add any further questions to the rather long list that the noble Lord has put forward, since those questions cover the questions which we wish to ask. In particular, we are interested in the mechanism which the Government are to use for the participation agreements, and I hope the Government will explain whether in this instance there is to be used a different mechanism that has not been used previously'
5.14 p.m.
The Earl of Mansfield: The Government see no reason to exclude BNOC's 5th and 6th round licences, which are part of its upstream business, from the provisions of the Bill, for reasons that I shall come to in a few moments. The Government's intention is to retain participation trading wholly in the public sector under the experienced management of the corporation's trading arm; that is of course BNOC. Participation trading makes an important contribution to the security of our oil supplies and it is therefore entirely appropriate that it should remain a wholly public sector activity.
The participation agreements with other companies will remain with the trading arm of the corporation, untouched by the scheme, which is designed to split the corporation's assets, and therefore it will be unaffected by the disposal of Britoil. So those participation oil
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rights—which I should perhaps remind the noble Lord, Lord Bishopston, are quite different from royalties—will remain in place and will be unaffected by the Bill, and no new participation agreements with other companies are required to secure them.
I come now to the 5th and 6th rounds, bearing in mind that the object of the exercise is to leave the public sector neither better off, nor worse off, than it would have been had participation been operated for the 5th and 6th rounds in the same way as it has been for the first four rounds. I shall not go through the mechanism of those rounds unless the Committee wishes me to do so. My right honourable friend has determined that there is to be required a participation agreement as between Britoil and BNOC, and the terms of the agreement will be settled before the sale of shares in Britoil. So putting it in another way, it is the Government's intention that the agreement will be in place before Britoil is floated, and therefore there really is not any necessity for the amendment. I should perhaps say that the summary of the participation agreement will, in the usual way, be placed in the Libraries of both Houses. The agreement will not be unfair to Britoil, nor will it affect its profitability in any adverse way. In common with all other participation agreements, BNOC will have to purchase Britoil's participation oil at full market price.
The noble Lord, Lord Bishopston, made a comment on the Marathon takeover. He was not quite correct. United States Steel took over the parent of the Marathon companies which have interests in the Brae field. It was a US takeover of a US company. The participation agreement with Marathon subsidiaries is not affected. I have spoken fairly briefly on the amendment, which relates to an important matter, but I hope that what I have said will go some way towards reassuring the noble Lord. I can go into very considerable details about the security of oil supply, if I am asked about it, but so far as the argument has been developed to date, I hope that the noble Lord will be reassured and will see fit to withdraw the amendment.
Lord Bishopston: Before the noble Earl sits down—I do not want him to go into too much detail—but I should like to ask him whether he would be kind enough to say a little more about the security of oil supply.
The Earl of Mansfield: Yes, of course, I am pleased to do so. The case for the Government is that our supply arrangements will not be adversely affected by our plans to dispose of BNOC's oil-producing business. I say that for a variety of reasons. First, there is BNOC's access, under participation agreements, to up to 51 per cent. of current North Sea production. As I have said, participation oil makes an important contribution to United Kingdom security, and obviously we wish to see it continue. It is for that reason that the trading arm of BNOC and the participation agreements will remain in the public sector under state control and these arrangements will not be affected by privatisation.
Secondly, there is BNOC's ability, given time, to redirect to Britain some of the oil that it exports in normal times. But it should be remembered that in practice not all of BNOC's oil can be added immediately

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to our supplies in a time of sub-crisis. BNOC itself has to dispose of its availabilities on the best terms possible in normal market conditions, and that requires a future commitment of supplies. Naturally we have enjoined BNOC to remain as flexible as conditions permit, but if a crisis suddenly appeared—as we all know it could—BNOC would require time to disengage from its commitments so as to free oil for use at home.
Lord Balogh: Does the Minister realise that there is not a market for oil in the sense that he is speaking about markets? These are monopoly and oligopoly situations, and, of course, can be influenced now without any active role on the part of the producer. BNOC will be hanging in the air, not knowing what the situation is in fact, neither the cost situation nor the price situation. Therefore, we shall be exposed to great losses in capital.
The Earl of Mansfield: With respect, I do not think the noble Lord has addressed himself to the point I am trying to make, which is to answer the noble Lord, Lord Bishopston, when he asked me about security of supply. What I was trying to say was that in certain circumstances BNOC, given time, could redirect supplies if for some critical reason it was necessary to do so. If I may go on, it should also be remembered that—
Lord Molloy: On that point of supply, what is distressing many people is that the price which is being offered in privatisation is roughly 20 years' supply at a rate of two years; in other words, the Government intend to sell off over two years the total amount of oil that it would take BNOC and the gas side of it 20 years to produce.
The Earl of Mansfield: I think we must distinguish between the supply of oil and the participation agreements which will ensure, as I have tried to say, that it remains under public sector control. This is the physical aspect of the matter. The price at which the oil will be bought by BNOC is in no way going to change as a result of this Bill. Its duty, so to speak, and its liabilities will not change at all. The price of the shares in Britoil is a matter to which the Committee has not yet addressed itself. This is an entirely different matter, and has nothing to do with participation agreements and, as I have said, the actual supply of oil.
Lord Balogh: Surely the Minister completely forgets what I have said before, if he ever understood it; and that is that there is no market in the sense in which we were talking about markets, in the neo-classical school, and as there is no market—or, rather, there are many markets—we have seen this ludicrous situation at the petrol pumps. First it went down and then it went up. What certainty can come from that kind of signalling? It seems to me that the Government have completely misjudged the situation which is actually present in the market for oil.
The Earl of Mansfield: I am well aware that at the moment oil is apparently in over-supply, but the
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situation could very well change. Then, as I am trying to explain to the Committee, I do not believe that the matters to which the noble Lord has addressed himself are in fact the conditions which would apply in the state of some critical shortage, which I have been trying to illustrate; but perhaps I can get on.
The effect of this is that BNOC could not supply oil products direct to the United Kingdom consumers. What it can do is to make more UKCS crude available to United Kingdom refiners. For instance, during the shortage of 1978–79, BNOC was able to add to Britain's supplies only in so far as these refiners responded by increasing deliveries to United Kingdom consumers. They did not all do this. In some instances the extra oil from BNOC appears to have been merely added to a company's pool of oil and to have been shared between the various national affiliates of that company on a basis of "equal misery". The extra crude then made little, if any, contribution to United Kingdom availability. This experience indicated that further arrangements needed to be made to ensure that UKCS licensees took fully into account the legitimate interests of the United Kingdom as an oil producer and, indeed, as a net oil exporter.
Things have changed so far as this objective is concerned; and matters, I think the Committee would agree, have changed markedly for the better since the Government took office. Many refiners and producers have offered helpful contributions, recognising their special obligations to the United Kingdom market in supply difficulties which do not trigger our international obligations under the IEA sharing scheme.
To sum up the answer to the question asked by the noble Lord, Lord Bishopston, the security of oil supply is based on what I might call a tripod. Most directly relevant are the assurances which we have received from refiners who directly supply the British market using both North Sea and imported crude. Then there is the matter I have related of BNOC's ability to repatriate to Britain some of the oil it exports in normal times, although it is not possible for it to cover all our requirements. Finally, there is a welcome recognition among a number of producing companies with no direct refining interests in the United Kingdom of our special position as a major producer of crude oil.
Lord Bruce of Donington: I wonder whether the the noble Earl would be kind enough to clarify one point. He will observe that in Amendment No. 4, which my noble friend suggested should be taken together with Amendment No. 2, it is proposed that at the end of line 3 there should be inserted the words:
"The Oil Corporation shall not and shall secure that each other member of the group does not dispose of any shares of an equity oil subsidiary before participation agreements have been signed establishing all existing participation oil rights and the products from licences secured from the Corporation".
As I understood the noble Earl, he sought to reassure the Committee that it was the intention of the Government to do exactly that thing, and that therefore the words were unnecessary.
In many ways this is a remarkable Bill. The rights that the Minister is given under the Bill are very detailed and specific, but the obligations that he has, the constraints within which he may operate, are not dealt with so comprehensively. If it is the Government's intention to do this, then what harm is there in

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having it enshrined in the Bill? There can be no harm. The noble Earl may say that under the arrangement which I take it has been agreed with the Stock Exchange (because it will perform a very useful function in normal commerce and flotation where we have this single special share provision) powers are given to the Secretary of State to do a whole series of things. I will not enlarge upon those at the moment because they do not arise directly under this clause, but he may do certain things.
In fact, in certain circumstances which are defined in the articles of association of Britoil he can vote, and his votes automatically add up to one more than all the other votes cast. That, presumably, is put in as some kind of assurance that the Secretary of State's power is absolute. But there is nothing in the Bill, and indeed nothing in the articles, which requires the Secretary of State or the special shareholder to in fact assert those rights—nothing at all. The right is there, but the obligation is not there.
It seems to me that we must have a little more assurance than that, more particularly in view of the fact that Amendment No. 1 as moved by my noble friend Lord Bishopston—the 49 per cent, one—was defeated. In that, it emerged that there is no particular reason why the Government should stand on any particular percentage of a state holding. They can alter that if they wish. This leaves the Committee in a most unsatisfactory position. True enough, we cannot secure the re-argument of Amendment No. 1, but if it be true that the Government intend to comply with the requirement set out in Amendment No. 4, then I think that most of your Lordships would agree that it ought to be enshrined in the Bill.
The Earl of Mansfield: I think that one must distinguish between the articles of association of the company, which give the Secretary of State very wide powers in the event of certain things happening—and we shall come to that, as the noble Lord has indicated, and will discuss those things in due course—and these safeguards written into the articles and the question of participation agreements and the supply of oil under them which I think is rather a different matter. What I have sought to do is to show the Committee that, as far as rounds 1 to 4 are concerned, there will be no difference as far as BNOC's participation oil is concerned; that is to say, the participation agreements will be totally unaffected.
We come therefore to rounds 5 and 6. What I told the Committee was, first, that there is to be a participation agreement between BNOC and Britoil which will be similar to other participation agreements between BNOC and the other licensee companies. Secondly, I said that the terms of the participation agreement will be settled before the sale of shares, that the agreement will be in place before Britoil is floated off and that a summary will be published and put in the Libraries of both Houses so that there can be scrutiny by Members of both Houses. Given that situation, one must ask oneself what would be the advantage of Amendment No. 4 to which the noble Lord, Lord Bruce of Doning on, addressed himself. Given what I have related to the Committee, I cannot see that there will be any advantage in it at all. There is no reason to bring up the existing participation oil agree-
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ments once more and renegotiate them and, as I have said, the position in rounds 5 and 6 will be fully protected.
Lord Bruce of Donington: May I press the noble Earl further on that? He said that the agreements would be prepared and would be placed in the Libraries for scrutiny. Scrutiny is a fine thing. What would happen if noble Lords dissented from the agreements that are going to be put into the Library? It is all very well to be informed after the event. We are concerned with establishing the position before the events occur. What does the noble Earl say to that?
The Earl of Mansfield: To that, I say pretty well what I have said before: that all this will happen before Britoil is floated off, and therefore there will be adequate time to look at the participation agreement between BNOC and Britoil and to take any action which commends itself to the noble Lord or to anybody else.
Lord Bishopston: I am grateful to the noble Earl for his partial clarification. I think this is a matter of some importance which has not been adequately satisfied. I think it would be useful if the Committee were to return to this matter at a later stage. With those comments, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.35 p.m.
Lord Bishopston Lord Bishopston moved Amendment No. 3:
Page 2, line 3, at end insert ("(otherwise than to a non-EEC purchaser)").
The noble Lord said: This amendment is an important one because it is concerned with the area to which the sale of licences may go. Here, again, the defeat of Amendment No. 1 (which meant that the public sector aspect is now not ensured) make this amendment more necessary because we are concerned not only about the sale of oil assets but about who may purchase them and whether we can keep control either through keeping a majority shareholding (and, as I say, that has not been accepted) or through shares being held in Britain. The Government have said that they aim to give British people and employees of the undertakings a chance to own shares. The Government made great play of this and said this is a form of public ownership in the best sense of the phrase. The British people can buy the shares and the employees themselves can have some shareholding.
If that is so, the Government should first ensure that the shares and control do not fall into foreign hands. My noble friends and I feel that to say that shares shall not be sold to foreigners generally may be held to be discriminating against the EEC. Hence the amendment is tabled in terms which take account of that. But I am sure that the Committee and the country would agree that it is essential to ensure that British North Sea oil does not fall into the hands of the Community, much less foreign powers. The Community has an interest in oil, and particularly in the oil supplies which are so abundant in our waters, and, at the same time, regardless of our partnership in the Community I feel that many British people will

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be saying, "This is our oil and we should keep it". However, having accepted that it may be discriminatory to say that sales shall not be made to foreigners, including the EEC, the amendment is phrased to take account of that. At this time of international uncertainty, it is unthinkable that a great British asset so vital to our wellbeing in peace and other times should be lost from British public control. The present international situation surely must be heeded and the safeguards of this amendment should be written into the Bill. A few moments ago the Minister clarified a point that I made about the Marathon Company; but I am sure that this does not change the situation; for whoever owned the company, whether the company was British or not at the start, there is nothing within the measure to stop shares from being transferred to foreign powers.
This is an aspect where clarification is sought not only by the Committee but by the country if we are to ensure that our great assets remain within our control. I should certainly like the Minister to clarify much more some of these points because they are of great importance. Whether or not the articles of association cover this point is something which he might detail in his reply. With those words, I beg to move Amendment No. 3.
Lord Tanlaw: I wish to expand on what I said in my Second Reading intervention in support of the noble Lord, Lord Bishopston. I gave an example of possible Middle Eastern investment interests having adequate funds to purchase the complete 49 per cent. from the Government holding. Some noble Lords expressed surprise that this was possible. But it is possible in two contexts: one is that there may be a desire through political or social unrest in the Middle East to diversify the energy investments held by companies and individuals in that area. Furthermore, exactly the same reason could be given for the United States to diversify or secure its overseas oil sources by making a large investment of this kind.
The noble Earl may say that this is a totally unreal and theoretical situation. But may I put it to him that the Government shareholder is different from any other shareholder whom we normally meet on the Stock Exchange—that is, an individual shareholder or an investment trust. For instance, if an investment trust wishes to make a large purchase or makes a placing of some sort, it is fairly limited in the kind of deal which it can secure between purchaser and seller. When the Government are the shareholders not only do normal financial dealing arrangements apply but there are other agreements that could be made which could be extremely beneficial to both parties to which a normal shareholder would not have access. I wish to make this distinction throughout.
The Government as directors and the Government as shareholders are different. They are more powerful and they have different objectives in some cases than normal shareholders and directors in companies quoted on the Stock Exchange. Therefore, if I may extend this theoretical concept of the foreign purchaser a little further: suppose the Government wished to sell their 49 per cent. shareholding—and it is clearly indicated that they have the right and may wish to do that—the
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purchaser may wish to buy it and it may be part of some other arms deal. It may be part of some other inter-government deal that is amenable to fitting into the Government's foreign policy or overseas trading policy.
Therefore, I believe that it is not unreal to say that the Government, to give an example, if they wished to raise cash from the United States to pay for some of the assistance that they are getting at this time, might do a deal with the Americans of the kind which I have described. That may be suitable. In that case, the Government shareholding is acting over and beyond what a normal shareholder—even an institutional shareholder—would be able to do.
All that I am really asking the noble Earl to do is to give an assurance that the Government, when acting in their 49 per cent. shareholding capacity, will first of all say that they will not sell to any non-EEC company, individual or any other interest, as this amendment provides. In that case, I hope the Government will accept it. Alternatively, if the Government will not accept the amendment, will they give an undertaking that they will act as any other institutional shareholder will act in this way, and act responsibly in the sense that this is a national oil company and they will not sell their very large holding to any other national interest or any other overseas financial interest for any reason whatsoever?
5.45 p.m.
The Earl of Mansfield: This is another amendment which seeks to put a fetter on the way in which the shares of Britoil are sold. The noble Lord, Lord Bishopston, in the first breath when he came to move the amendment talked about the sale of licences. I am sure that that was a slip of the tongue. What we are talking about is the sale of shares effectively in Britoil once it is floated off.
I am bound to say—and I am not being facetious about this—that it is difficult to see the logic and rationale behind this amendment. If I may be facetious for a moment, it seems to say that some foreigners are beastly, but that some are more beastly than others. In other words, if this amendment were accepted it would be perfectly acceptable to sell the shares to the Italians—and indeed to the Spaniards if they have joined the EEC by then—but not apparently to the Americans, who some people would regard as our staunchest ally in a sea of troubles. I do not see the logic of this. I suspect that the reason for framing the amendment in this way is that the noble Lord and his colleagues know very well that if they had banned the sale of shares to all foreigners, one could have said immediately that that was totally contrary to the Treaty of Rome.
Having said that, I must return to the more serious side of this matter. We are determined to sell the shares. The reasons why the Government have made their mind up in this way are now well known. If one wanted to accept this amendment—if one were minded to accept it—in other words, if there was anything in preventing non-EEC nationals or companies from obtaining shares, then this amendment certainly would not achieve that because the non-EEC national or company could easily set up a company within the EEC to purchase Britoil shares. They could arrange for nominees who were EEC citizens to purchase and

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hold the Britoil shares on their behalf. They could invite or ask EEC nationals to buy the shares and then after that initial purchase dispose of their shares to non-EEC purchasers, in turn. Therefore, not only is the amendment impossible to police but it would be quite ineffective to try to achieve the objective which the noble Lord has put forward, even if such an objective were in any way advantageous.
There are also the questions of possible repercussions. Supposing an amendment like this were written into the Bill. Do noble Lords opposite really believe that non-EEC countries would sit back quietly while their citizens were prevented from, as it were, buying shares in the United Kingdom company and continue to let the United Kingdom residents and companies buy shares in their companies? We would be inviting retaliatory action by non-EEC Governments which could involve discrimination against the United Kingdom citizens in their own stock markets; or such retaliatory action could focus on Britoil which might find itself faced with hostile foreign governments right from the earliest days of its existence. For a nation which earns its money by international trading I suggest that this would be a very sorry way indeed for Britoil to start as a trading entity.
What I am saying amounts to this: control of the company and what it does is one thing and the Government's power to regulate the North Sea and the oil supplies is another thing; but ownership of shares is a third. In my remarks to the Committee on the first amendment I touched on the way in which the Government will be able to stop any move either adversely to affect the board and its policy or to prevent a takeover taking place. Of course, ownership is important and the Government are not unconcerned about it. That is why we want to achieve as wide a spread of ownership as possible, and I hope and believe that a large number of British people will participate as owners of shares in Britoil. That is one reason why we are examining the most effective way of achieving the very wide spread of ownership that we want. But the safeguards against control and anything untoward happening so far as company policy is concerned are covered in the articles of association, as I have illustrated to the Committee.
I should like to say a word about the assurances which the noble Lords, Lord Bishopston and Lord Tanlaw, have sought. So far as the North Sea is concerned, the Secretary of State for Energy has a wide regulatory power over the development of the North Sea. That is contained in legislation and in the petroleum licences. These remain wholly untouched by the privatisation of BNOC or the British Gas Corporation's oil assets. He has power to ensure that all developments are carried out in accordance with good oilfield practice, that the recovery of oil and gas is maximised and that wasteful or inefficient development is avoided. He can set production limits for oil and gas in accordance with the national interest.
No submarine pipelines may be laid in United Kingdom territorial waters or in designated areas without his authorisation. No drilling of exploration or development wells can take place without his approval; no development work may be carried out and no petroleum may be produced except with his
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consent or in accordance with a development programme which he has approved. All petroleum produced from offshore fields must be landed in the United Kingdom unless the Secretary of State permits otherwise, and there can be no gas flaring without his consent. So I hope the Committee will agree, from the safeguards I have just recited, that there is a régime, so far as the regulation of the North Sea and the oil underneath it is concerned, which is wholly independent of the ownership of the oil-producing business of BNOC and the future ownership of shares in Britoil. I suggest that, far from being inadequate, it is more than adequate to protect our vital national and strategic interests.
The noble Lord, Lord Tanlaw, in effect claimed that the Government is different from other shareholders and if there were to be a second-stage sale in the Government's minority share of 49 per cent. of Britoil, he made a number of suggestions as to what he would like to see happen. My right honourable friend has made it clear that the Government do not intend to control the company or to use their rights as a minority shareholder to intervene or influence the company's commercial decisions. As I said earlier, it is intended that this company shall behave in all respects as any other public company in the private sector. There are these two points then: first, the control of the company and its affairs; and, secondly, the control of the petroleum underneath the sea. I hope I have shown that there are perfectly adequate safeguards—in fact more than adequate safeguards—so far as the protection of both is concerned.
Lord Wynne-Jones: I wonder whether the noble Earl can help me a little. I realise, of course, that like most people who have to speak from his Bench on energy matters he is not himself specifically concerned with energy. In other words, it has to be taken up on the side, and we have noticed frequently that because of this the Government have been at a certain disadvantage in dealing with energy matters. But a general problem arises here, which is not just an energy problem. The noble Earl has been explaining that it is the intention of the Government in this Bill to make the actual working of the new company as private as possible, exactly like that of any other company—I think those are almost the words he used. At the same time, he is in a somewhat difficult position because he tries also to explain that the Government will have complete control, will be able to do everything they have done in the past, and that consequently the company cannot be a completely free company. In fact, it would be a very dangerous thing for a government of this country to set up such an entirely free and independent company by devolving the rights of the government and of the country itself.
So the noble Earl is in the very awkward position that, on the one hand, he has to explain the great advantages of this completely private and independent control—a control which the Government have no way of influencing, and should not have—while at the same time, mysteriously, the Government are able to control it. The Government have full control. What is the noble Earl trying to say? What is he trying to kid us in this Committee that we are doing? Is he trying to pretend to us that on the one hand we are

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setting up one of these wonderful examples of public enterprise made private, or something which will be so superior, and at the same time there will be full control over it by the Government?
Something is wrong in that argument. Where indeed is the nigger, if I may so put it, in this woodpile? What is he trying to tell us? Is he trying to say that actually national interests would not matter, or is he trying to tell us that a private company defends national interests rather better than at least this Government do? What is he trying to say? I find his arguments completely unconvincing, and they bear no relationship at all to the world in which we live. He is talking about things which are the pure fantasy of those minds which are determined at all costs to put private profit before everything else.
Lord Ross of Marnock: I wonder whether I can just say a word. It surprises me that the Government want to control or to have any participation at all in any of these oil companies, because, having got it—and this is one of the things that were supposed to satisfy us and still our fears—the Government go on to say (and I am quoting the actual words of the Minister) that they:
"do not intend to control the company at all".
Then why not dispose of the whole lot? If he is satisfied with the safeguards that he has for the carrying out of the exploration and exploitation of the oil, in the rate of supply and the rest of it, that is surely the implication.
The one statement which the Minister made that was absolutely clear was, "We are determined to sell the shares". But then he is caught up with something else. Among the public at large there is a feeling that these shares and these companies are of some importance, because of the wealth produced. Other countries, which have recently participated in the North Sea, have made no bones at all about nationalisation. After all, it was a Tory Government which nationalised the bed of the North Sea, but they shirked the business of going on with the exploitation of the wealth there. They said, "It does not matter about that. "But to allay the feelings of the people, they said, "We will make as wide a spread of ownership as possible."
But the Minister proved that he cannot, as things stand, safeguard that position. We do not need even his word. All we have to do is to look and see what has happened to the disposals in other interests that have been made. They did not get a widespread take-up of shares, but within a few days there was a concentration of ownership, and the same will apply here. Why do they do it?
The great weakness of the Government's case is their desire to get widespread ownership. It is not at all like any other company. This is considered by the people of this country to be a considerable ownership of wealth by the nation. That is the widest spread of ownership you can possibly get, and it is being undercut by the Government's determination to sell the shares. That is where it begins and that is where it ends.
The Earl of Mansfield: The noble Lord, Lord Wynne-Jones, said that he was going to ask me a question. Eventually, it seemed to come down to where in the
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pile of wood is what, when I was at the Bar, used to be called the man of colour. I am not sure whether he really expects an answer, because the matters which he has raised in this debate go back to the ideological differences between one side of the House and the other. The noble Lord and his colleagues opposite do not want these shares to be sold, they do not believe in privatisation and they cannot accept that the company, Britoil, when it is floated and its shares are sold, will get on better and in a more effective way than heretofore. Therefore, nothing that I have said—and it matters not at all, so far as the geographical location of my ministerial office is concerned—will convince him one whit. Incidentally, may I greet the noble Lord, Lord Ross, on a non-Scottish Bill. What I have tried to do—
Lord Ross of Marnock: If the Minister will allow me to intervene, this is not a non-Scottish Bill. BNOC is sited in Scotland. It is very much a Scottish Bill, and his department has a lot to do with the whole organisation and with getting it going. The noble Earl knows that better than anybody else.
The Earl of Mansfield: Methinks that the noble Lord doth protest too much. The Bill did not go into the Scottish Standing Committee in another place, and the noble Lord knows that as well as I do. As I have tried to say, we have to distinguish between the shares and the oil which is produced, and which will be produced in the future. What I have tried to do is to show the formidable battery of means which the Secretary of State for Energy has at his disposal to see to it that nothing untoward happens, so far as the disposal of shares in Britoil and the future policy of the board thereafter are concerned. He has certain reserve powers, if there should be a takeover bid, or a bid for a block of shares which he thinks should be investigated and, possibly, blocked in the public interest. That is something which is contained in the articles of association and, no doubt, we shall come to it in considerable detail.
I have also tried to relate, comparatively shortly, in regard to the claims which have been made by opponents of this Bill that, in some way, by privatising BNOC the Government are prejudicing the supply of oil to this country or the destination of such oil, that all the checks and balances which exist at the moment will still be there. It is, I suggest, a formidable array and that taken with the special share which I have already discussed, should provide all the safeguards which Amendment No. 3 seeks to write into the Bill. The noble Lord, Lord Ross, asked: Why not sell all the shares at once"—
Lord Ross of Marnock: I did not say "at once".
The Earl of Mansfield: The noble Lord implied it. The sale of shares will proceed in an orderly manner and the amount of money raised will be consistent with the value of the assets which, in effect, are being sold. That is one reason why the Committee may agree that this method which has been adopted by the Government in respect of privatisation of this part of the public sector, is one which will achieve just that.
Lord Bishopston: We have had a useful debate on this amendment and the Minister has been pressed to clarify the situation. I am afraid that, in many ways, his reply did not come up to the expectations of the Committee, especially as the Government originally suggested—I made this point earlier—that the Bill gives opportunities for wider share ownership among the public and the employees. Some of the points made in the debate are of very great importance, particularly concerning the need to ensure that these assets are retained in British hands and under public control.
This is a matter to which the Committee may care to return at a later stage, but much will depend upon the Government's response to succeeding amendments, particularly the next amendment which I shall have pleasure in moving in a few moments, and which concerns the powers of the Secretary of State. Of course, in that respect the opportunity which both Houses may take could make it possible to put in some of the safeguards which were detailed in this amendment. As I said, this is a matter which should be returned to at a later stage but, in the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 4 not moved.]
6.9 p.m.
Lord Bishopston Lord Bishopston moved Amendment No. 5:
Page 2, line 10, at end insert ("and pursuant to an affirmative resolution of each House of Parliament").
The noble Lord said: This amendment is of very great importance and, judging by the amount of feeling in the other place and, indeed, in the country among many organisations, there is real concern about the lack of accountability of the Secretary of State. I have refrained from repeating many of the arguments which were used in the earlier stage of the Bill and I do not intend to go into too much detail on this occasion, but that should not hide the importance which I attach to this amendment. It relates to Clause 1, page 2, line 10, and inserts the words on the Marshalled List.
It is important to look at Clause 1(2) which we seek to amend. Clause 1 relates to the oil corporation's powers of disposal. Subsection (2) says:
"The Oil Corporation shall not, and shall secure that each other member of the group does not, dispose of any shares of an equity oil subsidiary except with the consent of the Secretary of State and in accordance with any conditions specified in the instrument signifying his consent; and the Secretary of State shall not give any such consent except with the approval of the Treasury".
The words of Amendment No. 5 which I am now seeking to insert would add the words "and pursuant to an affirmative resolution of each House of Parliament". This is of very great importance.
In Clause 1(2), reference is made to the Secretary of State giving consent with the approval of the Treasury. The words "the Secretary of State" appear many times throughout the Bill. During the recent weekend I had hoped to go through the Bill to detail exactly how many times the words "the Secretary of State" "are mentioned. If one looks at Clause 3, subsection (1) says:
"The Secretary of State may, after consultation with the Oil Corporation, give directions to the Corporation requiring it to exercise its powers …".
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Subsection (2) says:
"For the purpose of facilitating a disposal … the Secretary of State may by Order provide that, in its application to any equity oil subsidiary specified in the order,…".
Subsection (3) says:
"Except in so far as the Secretary of State, after consultation with the Oil Corporation, otherwise directs …".
Subsection (4) says:
"The Secretary of State may by order transfer to himself or a nominee of his any shares of a company…".
And subsection (5) again mentions the Secretary of State. Although we are not debating Clause 31, this is a clause under which the Secretary of State can use extraordinary powers. Clause 31 says:
"… it shall be the duty of that Corporation (notwithstanding any duty imposed on it by or under any enactment) to comply with the directions"
of the Secretary of State. In other words, the Secretary of State can overrule powers being exercised by the BNOC in keeping with Parliament's demands. So the Secretary of State has power over Parliament. I am sure that Members of both Houses are extremely jealous of their powers and about the need for Ministers to come back to the House to say how they want to exercise the powers bestowed upon them by Parliament.
This amendment therefore concerns the vital aspect of accountability. That is what it is all about. In the last hour, we have had two Statements about the Falkland Islands. The Ministers have had to come back to both Houses and account for the stewardship of the powers vested in them. Here is an undertaking which, for various reasons, is being handed over to private enterprise, which is outside public control. The only link we shall have with the changed situation will be the one whereby the Secretary of State can intervene in any way he wishes—if he wishes to do so. I believe very strongly, and I am sure noble Lords will agree with me, that this is hardly good enough when you are talking not about something of a minor nature or of minor value but about something which, as I have said, is a great national asset upon which the industrial and domestic life and, indeed, the security of our country depends.
The amendment requires the Secretary of State to be accountable in the case of Clause 1, which covers the oil corporation's powers of disposal. It requires an affirmative resolution, not a negative resolution or, as the Bill puts it, no resolution whatsoever. The Secretary of State needs only to consult the Treasury. And that is the Government. It is the Secretary of State's fellow Minister, the Chancellor of the Exchequer. I am not sure that even that is involved. It refers to "the Treasury" which, apparently, means officials, unless the Chancellor or the Treasury Ministers wish to be involved. So the Secretary of State has a free hand.
The House has already agreed that it does not wish to put any limitations on the Minister regarding the majority shareholding to be held in the national interest. We have just debated an amendment concerning the sale, or non-sale, to non-EEC countries whereby some power can be taken away from the national scene. Under this clause, BNOC's trading corporation will presumably submit reports to Parliament, but I do not think that the clause says so. Even

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if it submits reports to Parliament, there is no assurance that those reports will be drawn to the attention of the House by means of debate. We all know that many public corporations and other bodies have, quite rightly, to submit reports to Parliament, but the pressures on Parliament are often such that there is no detailed look at the reports to see whether Parliament wishes to express any point of view whatsoever. So once the Bill is passed and becomes an Act of Parliament, we may hear no more about some of the matters which are concerning us today and which will be concerning us during the future stages of the Bill.
When control through privatisation is lost, many noble Lords on both sides will, I think, agree that it is even more essential that the Secretary of State should come to the House with his proposals for positive vetting and discussion and ascertain the views of the Members of both Houses. This is the minimum which we should require. The Bill gives to the Secretary of State massive powers, including the power to exercise them in any way which he thinks fit. Yet, this vitally concerns our national interest, especially in the case of this great resource. I believe it is essential that the Secretary of State should have to seek the approval not only of the Treasury but also of both Houses of Parliament in an affirmative resolution.
It might be said that a negative resolution would be good enough—in other words, that we may need only to debate it if we feel that it is necessary to do so. But we all know that hundreds of negative instruments are tabled throughout the year in both Houses. Many of them are unknown to the Members of both Houses. Very few of them are debated because of the pressure of time. We believe that this is a matter so important that the Secretary of State should have to come to both Houses and submit his recommendations, or his requests for power concerning policies he wishes to implement, in order that we can be aware of what is happening in these important circumstances.
Although the Minister has made play already on the articles of association—undoubtedly in the future we shall hear very much more about them—I wonder what the status of these articles happen to be, because they are not part of the Bill. Although the articles set out in very great detail how the British National Oil Corporation, the British Gas Corporation and others concerned with it, and indeed the Secretary of State himself, shall behave, they are not of any legislative value, apart from the legal requirements, such as they are in these circumstances.
I believe there is concern, and more than that, anger, among the public about the disposal of our assets. We had the case of Amersham International. I do not want to go into that case now because it may arise on a later amendment, but here was a case where the Government took action on the disposal of assets—not only of a very successful nationalised concern which has been leading the way with biotechnology, science and other technological advances, but one which has done so profitably as well. Amersham International was not only sold off—it was sold off in a way which caused the gravest concern and disquiet throughout the country. One has only to read the financial press and other newspapers to learn how those who have supported the Government on many of their policies
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have expressed their concern.
This situation could be repeated, not only with this particular measure but with other measures as well. In this amendment to Clause 1, we are saying that it is essential that both Houses of Parliament shall be aware of what is going on and that some of the concern and anxiety which we have expressed already might be lessened to some extent if we were sure that the Minister will come and tell us what he wants and why he wants it, and obtains the approval of both Houses. This is a most important amendment, and I believe it commands the support of Members on both sides of the House who believe in the essence of Parliament—which is, accountability.
6.23 p.m.
Lord Tanlaw: I entirely agree with the noble Lord, Lord Bishopston, that this amendment goes somewhat beyond this particular Bill to matters of principle about where the House should stand in relation to powers given to the Secretary of State. It is certainly the view on these Benches that the Secretary of State has in this instance over-armed himself with almost too many powers in some areas where it is quite unnecessary to do so. Yet he seems to have under-equipped himself in those areas in which, in the previous amendments, we believe protection is necessary.
The noble Earl said earlier that he was being facetious. I hope he will not think that I am being facetious as well when I ask him, what is the relationship between the Secretary of State and the Treasury? I ask him this because the present Secretary of State the right honourable gentleman in another place, came from the Treasury. This is basically a money Bill and the question one asks oneself is, who actually wrote this Bill? Did this Bill emanate from the Treasury or did it come from the Department of Energy?—because almost every clause is there to raise money; not to reorganise and restructure either the oil industry or the gas industry. This is one of our objections to this Bill. Will the noble Earl explain in more detail the relationship between the Secretary of State for Energy and the Treasury in respect of this particular Bill which is so special that it requires these extra powers? If these powers are not necessary, surely the noble Earl will find it quite easy to ask for matters to be brought back to Parliament for an Affirmative Resolution?
It is a very reasonable amendment requiring that the checks and balances about which the noble Earl has been speaking should come back to both Houses. After all, this company was given birth to by both Houses of Parliament and so why should it not return to Parliament when it reaches certain stages? Britoil would not exist were it not for the Houses of Parliament; it is not quite like any other ordinary company. Before we give this company its complete freedom—which it is empowered to have by selling off at what is called the Stage 2 sale of the balance of 49 per cent. of the shares—it should come back to Parliament.
The noble Earl's statement was extremely helpful in the way that he split up the different sections of the Bill. Just talking of the shares, the noble Earl said that the Stage 2 sale of 49 per cent. of the shares would not take place now, immediately, but after, one imagines a passage of time. This is a passage of time whereby Britoil would be in being with its new board and with

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its new shareholders. We will have had some time to see how it interprets its terms of reference and how it gets on as a commercial company.
The noble Earl was also very helpful in explaining that the two directors appointed by the Government are no more than "sleeping partners". He said, if I understood him correctly, that they would take no part in the executive decisions of this Bill. So will he please confirm that they will be non-executive directors and will therefore take no part in the policy of the company? I presume also that they will only be paid as non-exeucutive directors in this case.
When the time comes for the Stage 2 sale, suppose that people are not satisfied with the way the company is going. Suppose that it has become too "foreignised". Is it not right and proper that it should come back to Parliament to ask to sell the balance of 49 per cent., or indeed for Parliament to ask those directors to give an account of themselves as to how they have taken on the trusteeship of the taxpayers' shareholding during the passage of time during which the company has been in operation? Bearing in mind that Parliament gave birth to this company, I believe that when it reaches adolescence—to continue the analogy—and is selling off the 49 per cent. shareholding and becomes completely privately owned like any other company quoted on The Stock Exchange, then I do not see any harm in having it come back to Parliament. I am certain and would like to think that the company will have done very well and that it will get an Affirmative Resolution and consent—but why prevent that from happening?
I do not see any point in giving this power to the Secretary of State. This is one of many examples of the Secretary of State retaining this power. It implies that we are not allowed to have a look at how things are going or to decide what the next stage of the Government's capital-raising will be. I would like the noble Earl to explain very clearly the relationship between the Secretary of State and the Treasury and what in his view gives the Treasury greater power than either House of Parliament in how the second stage of this company, Britoil, should develop.
6.28 p.m.
Lord Ross of Marnock: I do not doubt that the noble Earl the Minister will reply that this is no way to run a company; that a company cannot wait to get the approval of Parliament every time it wants to sell shares, and that the whole operation has to be run like a normal company. My answer to that is that it is not the company that has to sell the shares but it is the British National Oil Corporation. Indeed, Parliament is being very generous in Clause 1(1) where it says in the Bill that the oil corporation shall
"have power to provide for the disposal, in such manner as it thinks fit, of any shares of an equity oil subsidiary".
Then there were second thoughts about that and it was said that it was not as the oil corporation thought fit at all. In fact, if we really believe in this kind of legislation we should have taken those words out. It would have been more honest if we had taken those words out because it is not a matter of "if the corporation thinks fit" but as the Minister, with the approval of the Treasury, thinks fit. Who is going to get the blame if anything goes wrong? Are BNOC selling as they think fit?
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It is not only the newspapers talking about how things have gone wrong in the disposal of shares; we have the Public Accounts Committee in the other place telling us what a mess they have made of it. The reason for this amendment is because we just do not trust the Government or the Secretary of State; they have made such a mess of it in the past that we say they should bring the thing here, I know it will come from the Minister that this could not be done.
A noble Lord: He is not listening.
Lord Ross of Marnock: Oh yes he is listening, do not worry. He is probably going to be listening for the whole of this Session judging by what is coming up from another place in the way of Scottish legislation. In any case, there we have the Lord Advocate listening to every word that falls from my lips. I know that he has probably got to leave us to look after the Moderator when it comes to the General Assembly of the Church of Scotland, but while we have him here we want him to bring his mind to this.
How can we trust a Government that says it is giving power to BNOC to do as they think fit and then in the next sentence says, "You will only do it with my consent and in giving my consent I can put in any direction, any conditions that I like". Parliament has no say in the matter. It may well be that the way this is drawn up could be impractical, but at any rate we want to know the principles on which they work. We may want to know from company to company how they are going to dispose of certain blocks of shares at one time or another. Parliament has a right to know. We have been told very little so far. Of course, we are only at the fifth amendment, and in pleading the fifth amendment I want to ask for more information. The best way to get it is through an instruction which is part of an order that has come to Parliament. Then we shall be able to discuss it. Then, if they get the approval of Parlaiment, they can do what they cannot do at the moment, they can blame Parliament. If they get the approval of Parliament it is far better than the approval of the Treasury. Although the Treasury is mentioned last in this subject, I can assure your Lordships that they will be the first, they will be the people doing the prodding and the Minister will have to follow their dictates. Then BNOC, which is of course in Glasgow, will have to do as it is told by its new masters, the Treasury and the Minister.
Lord Underhill: Although we are dealing with Clause 1, reference must be made to Clause 31, which provides that, wherever there is provision for an order under the Bill, it shall be by negative procedure—that is, for all the powers given to the Secretary of State. And the same clause makes clear that, where the Secretary of State gives a direction to both the oil and gas corporations, those directions must be carried out—no dubiety about it. Undoubtedly we shall be told by the noble Earl that Ministers will, of course, act reasonably. But, as we have said on other Bills, no matter how we might trust the present Secretary of State the power is there for any Secretary of State to give directions. If power for disposal is taken under Clause 2, which carries out the provision of Clause 1, and the BNOC decides on a scheme for disposal and the Secretary of

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State gives his consent, as needed, I understand that there will not be even a negative order. Therefore, Parliament will not have the opportunity under that provision to debate the matter at all.
I understand, reading the report of the Committee stage in another place, that the Minister concerned agreed that action under Clause 1 does not require a negative order. The amazing justification for that was because the other place had agreed on Second Reading to the principle of the Bill and therefore there is no need for the matter to be discussed again by Parliament. That seems to me a most amazing statement, and I do hope the noble Earl will not give that justification. As my noble friend Lord Bishopston has said, we shall undoubtedly be dealing with Amersham International later on, and not only Amersham International but Cable and Wireless and British Aerospace. When we realise what happened within a few days to those shares—and this will be coming up on a later amendment—then obviously not only Parliament but the ordinary man in the street will want to know the details of a scheme before it is actually introduced.
The last point I make is that the noble Earl did say that details of participation agreements would be made known before shares were sold. He said that details will be in the Library and will be able to be scrutinised. But, if the Minister agrees to the scheme that BNOC proposes, there is no negative instrument, and therefore there is no procedure to be discussed; although you can scrutinise them, you cannot discuss the matter. I hope the noble Earl will clear up that matter also.
Lord Beswick: I wonder whether I may ask the noble Earl whether he has read a letter in today's Times from Sir John Wood about the principles and the reasoning behind the reorganisation of British Airways. Would the noble Earl tell me whether he has read that letter; would he tell me if he understands what that letter says; and would he confirm to me that the essence of that letter is that one must define responsibility, that one must get in any industrial organisation a clear understanding as to where responsibility lies? I found that letter from Sir John Wood a very compelling and very persuasive letter. I do hope that if the noble Earl has not read it he will promise me that he will go and read it. Then I would ask him how can he reconcile what is being done in British Airways, aimed at establishing responsibility, with the wording of this Bill?
I agree absolutely with what has been said by my noble friend beside me. The corporation shall have power to provide for the disposal in,
"such manner as it thinks fit",
but in the very next clause it can only do this if it has the consent of the Secretary of State; then two lines further down there are the words,
"except with the approval of the Treasury".
Where is responsibility going to be in the administration of this organisation? Can the noble Earl really reconcile what is being done here with the principles being established in British Airways?
The Earl of Mansfield: May I deal first with the
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noble Lord, Lord Beswick? I am afraid I have not yet got beyond the Scotsman today, which is my first reading, but I will look at The Times, and, if I may, come back to the noble Lord, formally or informally, at a later stage of the Bill. The next matter which I must clear up is this: I think there is perhaps a misunderstanding, which became plain when the noble Lord, Lord Bishopston, and some other noble Lords started going down what I night call the Amersham International path, to which no doubt we shall return at a later stage. What we are here discussing in Clause 1(2). But I should tell the Committee that this is not the route which the Government are going to go down when it comes to privatising Britoil. The intention is that the shares in Britoil should first of all be transferred to the Secretary of State, using the powers in Clause 3(4), and then the Secretary of State will sell 51 per cent. of those shares to the public. We can discuss the motivation and the reasoning behind that on a later amendment, perhaps Amendment No. 7. Therefore, if the noble Lord thinks, even if this were written into the Bill, that he is going necessarily to have the supervision that he wants, I have to tell him that that is not the way in which the privatisation is going to take place. What the noble Lord and others want to do is to impose another layer of parliamentary control over the privatisation process. I think that that is really what he wants to do.
The noble Lord, Lord Tanlaw—to dispose of this preliminary point—I think made an allegation that there was an almost incestuous relationship between the Department of Energy and the Treasury over this matter, because he said in effect that my right honourable friend had been in the Treasury before he became Secretary of State for Energy. The original Bill which received a First Reading in the other place had the name of my right honourable friend Mr. David Howell on the back of it. It is a small point, but in fact the authorship is not quite what the noble Lord implied. Any noble Lord who has served in Government will know of the all-pervasive presence of the Treasury when it comes to all matters of finance, and that particularly includes departments such as the Department of Energy, and indeed my own. There is nothing in any way sinister about this.
The next point is that it follows from what I have said that, if and when—and I make no prognostication about this—there comes a time when any further sale of shares takes place, it would take place in the same way as this sale of shares is going to. That is to say, it will be a sale of shares which have been transferred to the Secretary of State. It will take place by that method. Therefore, one has to ask oneself what are the objectives that this amendment would try to achieve, whether the amendment is necessary or desirable and, indeed, whether it would achieve those objectives.
I have to say that the Government have gone to very considerable lengths to explain the way in which they intend to use the powers which are given to them in the Bill. That took place in the other place at very considerable length; we had a Second Reading debate in your Lordships' House which was reasonably full, and we are considering the Bill now, quite properly, at fair length.
The noble Lord, Lord Underhill, then said that there

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was the amazing statement that the Government said in effect in another place that the Bill had received the blessing of Parliament, that it had received, as it were, authorisation for what is intended to be done and, in effect, that there must be some sort of balance between executive action and parliamentary control and that, therefore, the Government must have the discretion to implement policies which have been debated and approved in Parliament. I suggest that that is a quite unremarkable statement. Yes, of course, if one is going to give directions to a corporation, as is contemplated in Clause 31, or if one is going to issue or make subsidiary legislation, then it has to receive the blessing and control of Parliament which is envisaged by Clause 31. However, Clause 31 is quite different from the particular clause that we are discussing in that it bears no relationship to it.
There is nothing extraordinary about this. If the noble Lord, Lord Underhill, looks at Section 16(2) of the 1975 Act, he will find there a similar duty to comply with the directions laid on BNOC. That Act was passed by the last Labour Government and there is no question of Affirmative Resolution for directions there. So this is not really the constitutional outrage which perhaps it is alleged to be. Of course, I stood at that Dispatch Box for a number of weary years when I came back from the European Parliament and made precisely this attack. I do not say this in any cynical way—or not too cynical a way—but it is the practice of all Oppositions to say that there must be super parliamentary control and it is the habit and practice of all Government's to say that there has to come a time when executive action has to take place without any further fetters.
I have made reference to the Petroleum and Submarine Pipe-Lines Act 1975. That established BNOC in the first place and gave the corporation wide-ranging powers. It was a major piece of legislation. There is no provision at all in Part I for references back to Parliament, with the single exception of the power to alter the corporation's borrowing limits where the Affirmative Resolution procedure was adopted, as it also will apply under this Bill.
Under the 1975 Act, the last Government acquired in 1976 the North Sea interests of Burmah and conveyed them to BNOC. This was a major acquisition instituted by Government. No reference back to Parliament took place in that event. So I have no doubt that, if the Government of the day had thought that Parliament should debate this matter, they would have provided time; but they did not think that it was right and did not do so. Then, in 1977 the last Government disposed, by sale, of 17 per cent. of the shares in BP to the private sector, which was an important disposal. There was no question of seeking prior parliamentary approval of the sale. The Government made all the arrangements and Parliament was informed when the sale went ahead. Again, there was no question of any resolution—let alone an Affirmative Resolution. I do not criticise the Government concerned; I merely use these illustrations by way of seeking to claim that there is nothing unusual or constitutionally improper about what it is that the Government seek to do.
If the powers in Clause 1 were to be exercised at some distant time in the future, then I think that the noble Lord, Lord Bishopston, and his amendment
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would have perhaps greater justification. But, as has been said on frequent occasions both in another place and in your Lordships' House, we are ready to press on with the sale of Britoil, or rather its shares, and the hope is that the shares will be sold by the end of the year. Therefore, what we are seeking to do in this Bill is nothing new. It has been done recently. There has been full parliamentary debate on Clause 1 and, as I tried to say, there has to come a time when Parliament has given its blessing to what it is that the Government seek to do and the executive thereafter must get on and do it as it thinks best. In that particular context, I must say to the Committee that I do not advise that this particular amendment should be accepted because, as I have said, it is unnecessary and I think undesirable.
Lord Beswick: Will the noble Earl help me on one point? I am trying very hard to understand the contradictions in the Bill. The noble Earl said that my noble friend Lord Underhill was wrong in thinking that Clause 31 has anything to do with the clause that we are now discussing. But Clause 31 says:
"it shall be the duty of that Corporation (notwithstanding any duty imposed on it by or under any enactment) to comply with the directions".
Does that not mean that there is some overriding power in Clause 31 to do anything they choose as regards anything that is done under Clause 1?
The Earl of Mansfield: We shall come to it, but Clause 31 does not apply to this particular clause of the Bill.
Lord Bruce of Donington: I should like to ask the noble Earl just to clarify that point a little. Subsection (2) of the clause which we are discussing at line 8 says:
"… in the instrument signifying his consent".
What instrument is this?—because, of course, Clause 31 says:
"(1) Any power conferred by this Act …shall be exercisable by statutory instrument".
Clause 31(2) says, "Any statutory instrument" What kind of instrument is this which is provided for at line 8 in Clause 1(2)? Is it a statutory instrument? What kind of instrument is it that makes the noble Earl say that it is not covered by the provisions of Clause 31?
The Earl of Mansfield: This is a technical phrase to mean a piece of paper upon which the Secretary of State has signified his consent in writing.
Lord Underhill: In order to clairfy the matter, when I referred to Clause 31 I was not saying that it applied to Clause 1. I quoted Clause 31 as stating quite clearly that wherever an order is to be made under the Bill it shall be by the negative procedure. That is what I was emphasising. Then I went on to say that the Minister had made it quite clear that a negative order did not apply to Clause 1. It was that about which I was protesting; first, that all orders under the Bill are by negative procedure, which I thought was wrong—I thought that there should be a

1103
provision for affirmative resolutions; and, secondly, that it did not apply to Clause 1. I am not the brightest of individuals by any means; I was about to add that I was the poor lad who only left school at 14.
Lord Ross of Marnock: You were lucky!
Lord Underhill: The Minister explained that Clause 1 deals with the transfer of the shares from BNOC to the Secretary of State. That may be covered by later clauses, but I should be greatly obliged if the noble Earl would point out to me the actual words in Clause 1 which deal with what he says. Subsection (2) makes it quite clear that:
"The Oil Corporation shall not, and shall secure that each other member of the group does not, dispose of any shares of an equity oil subsidiary except with the consent…".
It does not say "to the Secretary of State". Therefore, it may be dealt with in a subsequent clause. However, if my noble friend's amendment is carried, would that not help to achieve what many noble Lords in this Committee want to achieve?
The Earl of Mansfield: I think not, because Clause 1(2) stands on its own. As I tried to say, it is not the means by which we shall dispose of the shares in Britoil once they are floated off. That is what I have been trying to say to the Committee; that the amendment which has been proposed by the noble Lord, Lord Bishopston, would not achieve what he seeks to achieve—or at least I think what he seeks to achieve—particularly when he uses Amersham International to illustrate the point he is making, that there should have been greater control over the shares of that company.
Lord Bishopston: The Committee has shown its concern tonight for the need for greater accountability. There is nothing in Clause 1—certainly not in subsection (2)—which will satisfy us that there is due parliamentary accountability. The Minister has obviously given us plenty of information regarding other aspects, but the questions which concern the Committee tonight, and my noble friends in particular, certainly have not been answered. Unless the Government are prepared to say that they will look at this again at a later stage, I am afraid that I shall have to invite my friends to join me in the Lobby.
6.54 p.m.
On Question, Whether the said amendment (No. 5) shall be agreed to?
Their Lordships divided: Contents, 62; Not-Contents, 75.

DIVISION NO. 2

CONTENTS

Airedale, L.

Brookes of Tremorfa, L.

Ardwick, L.

Bruce of Donington, L.

Aylestone, L.

Cledwyn of Penrhos, L.

Baker, L.

Collison, L.

Balogh, L.

David, B.

Bernstein, L.

Davies of Leek, L.

Beswick, L.

Davies of Penrhys, L.

Bishopston, L.

Elwyn-Jones, L.

Bowden, L.

Ewart-Biggs, B.

1104

Fisher of Rednal, B.

Mishcon, L.

Foot, L.

Molloy, L.

Gaitskell, B.

Noel-Baker, L.

Gladwyn, L.

Oram, L.

Glenamara, L.

Peart, L.

Gosford, E.

Pitt of Hampstead, L.

Hampton, L.

Plant, L.

Harris of Greenwich, L.

Ross of Marnock, L.

Hooson, L.

Shannon, E.

Howie of Troon, L.

Stone, L.

Hunt, L.

Strabolgi, L.

Jeger, B.[Teller]

Tanlaw, L.

John-Mackie, L.

Taylor of Mansfield, L.

Kilmarnock, L.

Underhill, L.

Lawrence, L.

Walston, L.

Lee of Newton, L.

Wells-Pestell, L.

Llewelyn-Davies of Hastoe, B. [Teller]

Whaddon, L.

White, B.

Lloyd of Kilgerran, L.

Wigoder, L.

Loudoun, C.

Winstanley, L.

McCarthy, L.

Wootton of Abinger, B.

McNair, L.

Wynne-Jones, L.

Milner of Leeds, L.

NOT-CONTENTS

Airey of Abingdon, B.

Lucas of Chilworth, L.

Allerton, L.

Lyell, L.

Alport, L.

McFadzean, L.

Avon, E.

Mackay of Clashfern, L.

Bellwin, L.

Macleod of Borve, B.

Beloff, L.

Mancroft, L.

Belstead, L.

Mansfield, E.

Bessborough, E.

Margadale, L.

Brougham and Vaux, L.

Marley, L.

Campbell of Alloway, L.

Marshall of Leeds, L.

Colville of Culross, V.

Mersey, V.

Cork and Orrery, E.

Morris, L.

Cullen of Ashbourne, L.

Mottistone, L.

Daventry, V.

Murton of Lindisfarne, L.

Davidson, V.

Northchurch, B.

Denham, L.

Nugent of Guildford, L.

Dilhorne, V.

O'Neill of the Maine, L.

Drumalbyn, L.

Onslow, E.

Elliot of Harwood, B.

Orkney, E.

Elton, L.

Orr-Ewing, L.

Faithfull, B.

Plummer of St Marylebone, L.

Ferrers, E.

Portland, D.

Ferrier, L.

Reigate, L.

Forester, L.

Renton, L.

Fortescue, E.

Romney, E.

Gisborough, L.

St. Davids, V.

Glenarthur, L.

Sandys, L. [Teller]

Gormanston, V.

Selborne, E.

Grimston of Westbury, L.

Skelmersdale, L.

Hailsham of Saint Marylebone, L.

Stanley of Alderley, L.

Stodart of Leaston, L.

Harmar-Nicholls, L.

Thomas of Swynnerton, L.

Henley, L.

Trefgarne, L.

Hives, L.

Trumpington, B.

Hornsby-Smith, B.

Vaux of Harroden, L.

Inglewood, L.

Vivian, L.

Lane-Fox, B.

Ward of Witley, V.

Long, V. [Teller]

Windlesham, L.

Resolved in the negative and amendment disagreed to accordingly.
Lord Denham: I think this is probably a convenient moment to break this Committee stage for dinner, and we shall resume this Bill at approximately a quarter past eight. I beg to move the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Administration of Justice Bill [H.L.]
Report received.
Clause 3 [Amendments of Fatal Accidents Act 1976]:
7.3 p.m.
The Lord Chancellor (Lord Hailsham of Saint Marylebone)The Lord Chancellor (Lord Hailsham of Saint Marylebone) moved Amendment No. 1:
Page 3, line 7, at end insert—
("(aa) any person who—

(i) was living with the deceased in the same household immediately before the date of the death; and

(ii) had been living with the deceased in the same household for at least two years before that date; and

(iii) was living during the whole of that period as the husband or wife of the deceased;").

The noble and learned Lord said: My Lords, this is the question of the common law wife with which the House will be familiar after our discussions on Second Reading and later, in Committee. I should like to explain what I have now done and why I have done it. I was, of course, impressed at both stages of the debate on this thorny subject that there was a considerable body of opinion both inside the House and outside it in favour of doing something about damages under the Fatal Accidents Act for the common law wife, whoever, like Sylvia, she may be.
As I explained, I was more preoccupied than was my noble and learned friend Lord Rawlinson with the speeches that were made, and particularly, if it is not invidious to say so, by the speech made from the Cross-Benches by the noble and learned Lord, Lord Edmund-Davies. But my difficulty was, and remains, the difficulty of definition inherent in the status of something which has no legal existence except in the rather esoteric sense which was explained by the noble and learned Lord, Lord Simon of Glaisdale.
I took a lot of soundings between the Committee stage and this stage. I consulted the Bar, the Law Society, the Trades Union Congress, the Confederation of British Industry, the British Insurance Association, and of course the Criminal Injuries Board which has a direct interest in this matter because many criminal injuries result in death and they are governed by the same rules, although they proceed in a different manner.
Most of those that I have mentioned were broadly in favour of something being done or else indifferent to whether it was done or not, but also offered very little assistance in what you might call the draftsmanship of it. The Criminal Injuries Board was concerned, as indeed I am, with the problem of potentially fraudulent or fraudulently exaggerated claims. I think this is a real problem. I also attach a certain amount of importance to what my noble and learned friend Lord Rawlinson said on the Committee stage.
At any rate, the net result of what I have done is to try to apply a number of criteria to the conception, to give it a more or less firm statutory definition, and to give the claim some effective limits so far as is possible. In the first place, the surviving partner has to have been living in the same household immediately before the date of death. That is to stay, the advantage of this clause if it is passed, will not enure to the benefit of the mere kept woman.
Then there must, I think, be some degree of permanence about the relationship. The weight of the speeches made on Committee, especially Lord Edmund-Davies's speech, related to these enduring relationships in which the actual status of marriage had not been achieved but much else that is part and parcel of a marriage had been, and I have put in a specific period of years. Thirdly, the couple must have been living together during the required period as husband and wife. This deals with the point put on behalf of those who wished to see an amendment proposed by, I think, the noble Lord, Lord Mishcon, at an earlier stage; they must be living together as husband and wife.
I have also put in—and I think this is a fairly necessary protection against exaggerated claims—that in arriving at the degree of dependency, and therefore the amount of damages, the court should take into account, in contrast with what I might call the legitimate spouse, the fact that there is no security of tenure in the relationship in this particular case. I have tried, in this series of amendments, to give effect to these considerations which I think broadly reflect, so far as one can obtain a consensus, the feeling in the House and outside it about this particular problem.
I note, and perhaps I may add a word about it, that the noble and learned Lord, Lord Elwyn-Jones, and the noble Lord, Lord Mishcon, have put down an alternative amendment that clearly is intended to give effect to the feeling of the Committee in the same sense that mine has. I hope the noble and learned Lord will agree that I have done my best in this amendment—with which are associated Nos. 4 and 5 and the Northern Irish part of the schedule—to give effect to the feeling of the Committee without straying too far in the direction of laxity. I beg to move.
Lord Elwyn-Jones: My Lords, this matter was raised by my noble friends Lord Mishcon and Lord Elystan-Morgan on Second Reading and was then taken further at subsequent stages of the Bill. We feel that, as there are in this country today hundreds of thousands of men and women living together over the years in a settled, permanent relationship as reputed spouses, in the event of the man—or possibly in some cases the woman—being deprived of the person on whom there was dependency, it would be proper that he or she should be embraced in the provisions of the Bill to deal with dependency when the person dependent has suffered loss through the negligence of a third party causing even the death of one of the reputed spouses concerned. I recall recollecting how, in our constituency surgeries, we came across that sort of tragic situation—of a sudden catastrophe happening—of, say, the husband being killed by a negligent driver with nothing left for the so-called common law wife.
The noble and learned Lord the Lord Chancellor moved from detachment to support. He was invited to apply ingenuity and compassion to the scene, and he has done both, and we are grateful to him, certainly for the first amendment. That gives practical effect, and is more acceptable as the language, to provide a statutory right than the rather looser language of the amendment we had in mind, No. 2, although, save for the period of time in Amendment No. 1, it embodies the same sort of ideas. We are, therefore,

1107
content with Amendment No. 1. There is room for argument about the period chosen, of two years, but that seems to me to be a long enough testing period to point to the durability of the relationship.
We are a little troubled, however—we shall come to it when we reach it—about the provisions of Amendment No. 5 and what the implications are of the proposed provision that,
"where there fall to be assessed damages payable to a person who is a dependant by virtue of section 1(3)(aa) above in respect of the death of the person with whom the dependant was living as husband or wife there shall be taken into account the fact that the dependant had no enforceable right to financial support by the deceased as a result of their living together.").
Frankly, what we are afraid of is that the identification of that as almost the most important factor in considering the damages that should flow from the dependency might be treated by the judge trying the case as being met by a mere token award, and not by a serious consideration of the damages that should flow to the dependent person. Whether or not we should introduce other factors to be taken into account—for instance, the period during which the relationship has existed or any special circumstances which may fall for consideration by the judge—it seems to us that all that the learned judge has his attention drawn to is that he should take account of the fact that the common law wife had no enforceable right to financial support from the deceased as a result of their living together.
As a matter of law, that is right—that is the case—but, if the statute identifies that as a principal factor, almost the only factor, that should be taken into account, what we have in mind to achieve, and what I am sure the noble and learned Lord has achieved, will be frustrated. Therefore it will be necessary for us to consider that. I say now that I do not intend to call a Division on Amendment No. 5 and I hope I shall be forgiven for having wandered on to that amendment, as the Lord Chancellor himself did. I say that in indicating that we accept Amendment No. 1 with enthusiasm but, when we get to Amendment No. 5, we shall try to persuade the noble and learned Lord to produce a basis for the award of damages less restrictive and more enabling the judge to do justice to the circumstances of the case.
Lord Renton: My Lords, those who took part in the Committee stage should be grateful to my noble and learned friend, though it would seem that under the Bill as it will stand if the amendment is made, we could have two claims. One would be what I would call the genuine widow—the lawful wife who has been living apart from the husband, prehaps for some years, perhaps under a deed of separation, and receiving maintenance from him under that deed—and the other the woman with whom, since that separation, he went to live, but there has been no divorce. It would seem that each of those ladies would have a right of action under the Bill as it will stand when amended. If so, it will presumably be a matter for the discretion of the courts as to how it shall be sorted out between the two of them, but any word of clarification which my noble and learned friend can give might be of great help.
The Lord Chancellor: My Lords, I am grateful to the noble and learned Lord and my noble friend for what they said. Perhaps it was not so much an indiscretion as an intention on my part that we should discuss Amendment No. 5, at any rate to some extent, along with No. 1. In some ways, both my noble friend Lord Renton and the noble and learned Lord have illustrated, by their diverse and rather divergent comments, what I was trying to achieve by Amendment No. 5. All Lord Campbell's Act cases depend, so far as regards quantum at least, on the fact of dependency; that is, you find out how much the dependent, if he is coming within the class entitled to compensation, was in fact dependent financially on the deceased at the time of his death. The noble and learned Lord and my noble friend as well as the noble Lord, Lord Mishcon, are very familiar with such cases; we must have done, in the course of our miserable lives, some hundreds of them. Having ascertained the degree of dependency as at the moment of death, one then achieves as it were a multiplicand. One then applies a multiplicator by way of the number of years that the dependency would be likely to endure, as a matter of fact, not as a matter of law. It is a matter of how long, and to what degree, the dependency would be likely to endure.
As regards what my noble friend Lord Renton said, it seems to me that if the amendment is carried, one does not need to sort out the matter between both parties because each will have a separate cause of action, and each will have to establish the multiplicand applicable to himself or herself. Then each will have to apply to that multiplicand—which might be unequal or equal, or be in greater or lesser degree—the multiplicator, the number of years that the dependency was likely to endure, simply as a matter of realism.
What I was trying to achieve by Amendment No. 5, and what I shall in due course promise to refer back to the parliamentary draftsman, on whose expertise I have been relying, though the idea was mine, was that in the nature of things a lawful wife who is dependent has a larger multiplicator, as a matter of fact, than has a person who may be living at the time with the deceased but who does not have the same expectation—a different expectation—in point of fact, not in point of law, of the relationship enduring. I was not seeking to make it the only factor, or even the principal factor, which the court ought to take into account, because all the other factors common to all the fatal accident cases that we have dealt with must automatically be taken into account, whether or not my amendment is passed. What I wanted to make clear to the court was that one of the factors which it ought to take into account in applying the durability test, in applying the multiplicator, was that the relationship was one which could be determined by the will of either party without legal proceedings and without giving rise to an obligation on the part of the other. In other words, it was intended as a piece of realism, and was not intended to be restrictive in the sense that the noble and learned Lord was putting it.
That being so, when I come to move Amendment No. 5—or perhaps I may do so now—I shall give an undertaking to ask the parliamentary draftsman to consider whether I have achieved my object, and to

1109
what extent I have achieved something which I did not intend, or to what extent I have achieved something more than I intended, since the noble and learned Lord has obviously thought that I have done so. This is not a matter about which I would care to dogmatise. It concerns a factor in the case that I should like Parliament to lay down as relevant to the court's consideration, but not as determinative or restrictive. I want the court to take a realistic view of the degree of dependency and the time that it is likely to endure, having regard to the relevant factors.
Lord Elwyn-Jones: My Lords, if I may speak for a second time on the amendment, I would say that I am most grateful to the noble and learned Lord the Lord Chancellor. If there are used words such as,
"There shall among other matters be taken into account the fact"
so and so, they might provide a covering. It might be that some brilliant advice has already come if not from on high, then from the right flank, to deal with the situation; I know not; sometimes it does, sometimes it does not. However, in view of what the noble and learned Lord has said, my noble friends and I are very happy—and I think that the noble Lord opposite will be of the same mind—to accept Amendment No. 1 with gratitude, and perhaps to hear more about the matter when we come to consider Amendment No. 5.
On Question, amendment agreed to.
[Amendment No. 2 not moved.]
7.24 p.m.
Lord Mishcon Lord Mishcon moved Amendment No. 3:
Page 3, line 44, after ("husband") insert ("or unmarried minor child").
The noble Lord said: My Lords, the House will remember that previously the case of a bereavement claim was very fully discussed by the Committee. It was a claim which the noble and learned Lord said he introduced into the Bill with something of a heavy heart, only because in his view—and obviously there is a substantial body of opinion that might well agree with him—it is almost an insult to talk in terms of money covering bereavement in a fatal accident claim. However the matter is in the Bill, and there are several categories of people who are entitled in regard to the bereavement claim but, as I tried to submit on a previous occasion, the one obvious claimant has been omitted. It is the unmarried minor child, who one thinks is possibly the person who will the most miss the parent from the point of view of actual loss, only in the sense, as I previously said, sometimes a surviving spouse can find some kind of relief, contentment, and indeed happiness, in a remarriage, whereas a child can never regain a parent who has been lost.
The only argument that had been advanced against this point is that of the difficulty of tracing a child in some instances. I do not know whether that can possibly be a very real difficulty in the case of a minor unmarried child. It was previously said that children might wander abroad, but I do not think that that is an argument that will commend itself to the House. The real, substantial argument was that the minor unmarried child would in any event most likely benefit
1110
under what we have always called Lord Campbell's Act; as a dependant. On a previous occasion I ventured to say—and I repeat it briefly now—that there are so many cases which we can all envisage where that just would not happen. The obvious case would be where a mother who was not the bread winner is killed and so there is no question of dependency. Another case is where a father who had suffered some disability is killed, and therefore the mother had had to earn a livelihood for the family.
I do not think that I improve a case by battering away at the objections that have been made to it. I leave it on the basis that this was an argument that commended itself to your Lordships on a previous occasion. If I remember aright, it was not carried to a Division. I very much hope that after considering the speeches that were made on a previous occasion, the noble and learned Lord can find it in him to accept this amendment with the same degree of mercy and generosity with which he accepted the previous proposal with regard to the common law spouse. I beg to move.
The Lord Chancellor: My Lords, I should very much have liked to do more for the noble Lord, Lord Mishcon, than I am going to do, but the more that I think about this matter, the more I feel that my instincts about it were originally right. I have to go back to first principles. Lord Campbell's Act—and the law remains as it was under that Act—quite definitely confined a right of action for damages by a deceased's relative to cases of actual financial loss. That was done for a very good reason; namely, that it is, I suppose, degrading to human nature in some senses to try to turn the grief that one feels at bereavement into money. The noble Lord, Lord Foot, was kind enough to agree with a number of rhetorical questions that I put at an earlier stage—the kind of questions which one would have to go into if this matter were to be taken into account at all. The Scots have gone down that road, but I and the Government have deliberately not done so. The extreme view, which I privately hold, was expressed in the earlier debates by my noble and learned friend Lord Rawlinson, who took very strongly the view which I have put and said, "Nothing at all for grief". I thought that, and I have made that plain throughout.
On the other hand, the road down which I have gone is that of the Law Commission and of the Pearson Commission, who, with different degress of unanimity and with slightly different formulae of ascertainment, have suggested a compromise based on a conventional figure. The Law Commission (I think it was the Law Commission) decided on the figure of what was then £1,000, I updated it because of the decline in the value of money, and that is the one I selected. The Pearson Commission decided on a formula based on the average weekly earner's earnings over a year, so that the rich man would get the same as the poor man, and so on. But the factor which they both had in common was the conventional figure in place of either the unlimited solatium of Scotland or the other, sterner view.
Incidentally, I do not think it is a question of compassion. I do not think it has anything to do with compassion, and I do not think it has anything to do with generosity. It is not our own money we are

1111
talking about; and it is a matter about which sensitive people can take very different views, and obviously have. I think I am right in saying that the discomfort of arguing these things as Lord Chancellor without a table in front of one is something which will be known only too well by the noble and learned Lord on the Front Bench of the Opposition. What I have really said is, "Yes, a spouse can have it and a parent can have it, but not a minor child".
At first sight, of course, that sounds very harsh on the minor child, but I think that the House will want to look at the clause rather carefully because, looking at it, your Lordships will see that where both parents have lost a child the conventional sum has been deliberately divided into two equal portions, one for each parent. That, again, is arbitrary. It must be arbitrary, because who is to say that either the mother or the father will miss the child the most? But it is divided arbitrarily into two. I would say to the noble Lord, Lord Mishcon, that I asked the parliamentary draftsman today what would be the effect on the award if the amendment proposed by the noble Lord, Lord Mishcon, were carried. Supposing there were ten minor children, would the total awards amount to £35,000 or would each get £350? "It is not clear", said the parliamentary draftsman, "which of the two things the noble Lord, Lord Mishcon, really intends". I think it is doubtful, too, but I do not think this is a mere drafting point. If I thought it was a mere drafting point, I would probably write to the noble Lord, but I think it is a mark of the fundamental confusion of thought underlying this line of country.
Now I should like, if I may, to remind the House that at least two members of the Pearson Commission—one Mr. Norman Marsh, who has almost a double weight in this matter because he had previously been a Law Commissioner, and one other—were determined that there should be no damages for bereavement at all, and the Pearson Commission, by that majority, thought only an unmarried minor child should be so entitled. So there is almost every degree of difference of opinion about this. I think the confusion of thought can be illustrated by the following considerations. I lost my own mother when I was of the age of 17, and I was at the time absolutely desolate. Suppose I had been not 17 years old but a baby of three months. Would my grief have been more or less, or equal; or is it a question without meaning, as I suspect? Is it right that the baby of three months should have it on the same level, or as more or less, than the boy of 17? I do not know. I think in the end it is a meaningless question. So the grief the child feels can be no argument at all since it is a purely conventional award.
Another factor which I think you have to take into account which illustrates the difficulty and, I think, the confusion of thought underlying this amendment, is the fact that damages, when they enure to a child, will only be dispensed to the child much later after the award. If you are going in for damages for bereavement on a conventional figure, obviously grief at its most acute is felt at the time the loss is suffered; but the distribution will take place, if the child is a minor, years later, when it comes of age, I suppose, and only the money will be dispensed which depends upon actual financial loss, when the grief will, if not have disappeared at any
1112
rate in its most poignant form have been overcome.
I regard this as a matter of great difficulty. I have never pretended anything else, and I hope I have been absolutely candid with the House about this. But I think that if you go down the road which quite deliberately I have gone down, which is the road prescribed in one way or another by the majority of Pearson and by the Law Commission, in favour of a conventional award—that is to say, rejecting both the Scottish road of solatium and what I might call the Rawlinson road or the privately-held Hailsham road of no damages for grief at all—the difficulty of awarding it to a minor child becomes absolutely insuperable, and the questions to which it gives rise unanswerable, because they are non-questions—and yet they would have to be answered by the tribunal.
Again, I do not wish to appear unsympathetic or ungenerous, or anything of the kind. I think this is a very difficult problem. I have done my best to apply my mind to it, and I am sorry to say that in this case I am of the same opinion still.
Lord Mishcon: If I may speak very shortly for a seond time with the leave of the House, as the noble and learned Lord has been candid enough to admit this is a very difficult problem. We faced a very difficult problem with a common law spouse; the noble and learned Lord, with his breadth of mind and his endeavours to be so fair in this legislation, as in all other legislation, gave further thought to the matter, and in the end came to an opinion which obviously delighted us. I live in hope that some further consideration between now and the next stage of the Bill will enable the noble and learned Lord to come round to the point of view that it is wrong to exclude the unmarried minor child. Having said that, I think that is where I ought to leave it at this moment.
Amendment, by leave, withdrawn.
7.39 p.m.
The Lord Chancellor The Lord Chancellor moved Amendment No. 4:
Page 5, line 7, leave out from beginning to ("there") in line 9 and insert—
("(3) In an action under this Act where there fall to be assessed damages payable to a widow in respect of the death of her husband.").
The noble and learned Lord said: My Lords, Amendment No. 4 is consequential upon Amendment No. 1. I beg to move.
On Question, amendment agreed to.
The Lord Chancellor The Lord Chancellor moved Amendment No. 5:
Page 5, line 11, at end insert—
("(3A) In an action under this Act where there fall to be assessed damages payable to a person who is a dependant by virtue of section 1(3)(aa) above in respect of the death of the person with whom the dependant was living as husband or wife there shall be taken into account the fact that the dependant had no enforceable right to financial support by the deceased as a result of their living together.").
The noble and learned Lord said: My Lords, Amendment No. 5, which I now beg to move, has been partly discussed under Amendment No. 1, but I can see that the noble and learned Lord has something more to say, and we shall be glad to hear him, so I beg to move.
Lord Elwyn-Jones: My Lords, reverting to Amendment No. 4, the only matter that concerned me—if I have permission to raise it—is that I doubt whether Amendment No. 4 flows from Amendment No. 1, Amendment No. 4 deals with the assessment of a widow's award.
The Lord Chancellor: My Lords, I noted that, to my alarm and despondency. All my briefs say that it is to be taken with Amendment No. 1. I am rather shocked, but I do see the point raised by the noble and learned Lord.
Lord Renton: My Lords, if I may presume to help—and when two noble and learned Lords are in doubt, it seems presumptious that I should say a word—it seems to me from the reference to Section 1(3)(aa) in Amendment No. 5 which refers specifically back to Amendment No. 1 that it must at least be connected and, I should have thought, flows directly. I hope that I may be in order now in thanking my noble and learned friend the Lord Chancellor for the explanation he gave to the point that I raised on Amendment No. 1.
The Lord Chancellor: My Lords, I think that I may now be in a position, having stalled, and visibly so, to solve the conundrum which puzzled my noble and learned friend and, for the moment, floored me. Amendment No. 4 is paving for Amendment No. 5.
Lord Elwyn-Jones: My Lords, reverting to Amendment No. 5, the noble and learned Lord was good enough to say that he would give further thought to the suggestions that emerged in the course of the discussion. I am content to leave the matter there at this stage.
On Question, amendment agreed to.
7.43 p.m.
Lord Foot Lord Foot moved Amendment No. 6:
After Clause 5, insert the following new clause:
("Recovery of expenditure from public funds.
.—(1) Where a person has suffered personal injuries resulting in the expenditure of public funds on his behalf which are—

(a) wholly or partly attributable to the maintenance of the injured person in a hospital, nursing home or other institution; or

(b) attributable to the provision of medical treatment or attention to the injured person; or

(c) attributable to the provision of any vehicle, special clothing, appliance or other item to the injured person rendered necessary by reason of his injuries; or

(d) paid to the injured person in respect of an industrial injury benefit or industrial disablement benefit or sickness or invalidity benefit,

the amount thereof shall (subject to subsection (3) below) be recoverable by the person, institution or body expending such public funds from the person (other than the injured person) responsible for the act or omission which resulted in the said injury and such right of recovery shall survive the injured person's death irrespective of whether the death was a result of the injuries so suffered.
(2) Upon the injured person or other person on his behalf making a claim for damages in respect of his injuries that person shall be required—

(a) to give notice in writing within seven days of a claim having been made to the person, institution or body which has expended public funds to or for the benefit of the
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injured person under subsection (1) above that a claim has been made and against whom and to provide the said person, institution or body with such further details of the claim as may reasonably be required to ascertain the amount so expended on the injured person's behalf; and

(b) to include in his claim (unless the said person, institution or body shall have already made a claim under subsection (1) above) a claim for the amounts expended out of public funds to or for the benefit of the injured person and (subject to subsection (3) below) to pay to the person, institution or body concerned such amounts as are recovered by him by way of damages in respect of such expenditure.

(3) The amounts recoverable under subsections (1) and (2) above from the person against whom the claim is made shall be—

(a) in the event of his being wholly liable for the injuries and consequential loss, the whole of such expenditure, or

(b) in the event of his being only partly so liable, that part of such expenditure as is proportionate to his partial liability.

(4) It shall be the duty of any person who is required by statute to insure against third party risks in the event of the death or bodily injury to a third party to effect such additional insurance as shall be necessary to cover the risk of a liability under this section.
(5) The amount of the expenditure of public funds under subsection (1)(a) and (b) of this section shall be ascertained by order made by statutory instrument by the Secretary of State for Social Services in exercise of his powers under section 5 of and Schedule 3 to the Public Expenditure and Receipts Act 1948 and all other powers enabling him in that behalf.
(6) The amount of the expenditure of public funds under subsection (1)(c) of this section shall be ascertained by reference to the actual cost to the Area Health Authority or hospital by which the injured person receives the provision of the items therein specified.
(7) The amount of expenditure of public funds under subsection (1)(d) of this section shall be ascertained by reference to the actual amounts paid to the injured person by way of any or all such benefits therein described from the Department of Health and Social Security for a maximum period of five years commencing with the date of the first payment to the injured person.").
The noble Lord said: My Lords, this is a matter which I raised at the Committee stage. I have been encouraged to raise it again at Report because on that occasion the noble and learned Lord the Lord Chancellor thought that it contained an interesting and important point and went so far as to invite me to raise it at Report. He may be thinking better of that now. He said that he would either write me a letter or else I should raise it on Report. I have not had a letter. Not receiving letters from the noble and learned Lord is one of the grave disappointments in life that one must sustain with as much fortitude as one can muster. Nevertheless, in view of that encouragement I take leave to raise it again. I recognise that we are short of time and I do not want to occupy the time of the House more than is necessary. May I say in two sentences what is the present state of the law on the matter which I am raising in this amendment and what the state of the law will be when this Bill becomes law.
Under the present state of the law, where a person suffers personal injury as a result of the wrongdoing of somebody else he is entitled to claim as a general rule against the wrongdoer the damage that he suffered and the disability and the rest. So far as he can be compensated in money, he is entitled, if the tortfeasor was wholly responsible, to recover the full damages which flow, not too remotely, from the wrongdoing.

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Also, under the present state of the law, when he is assessing his losses he is not entitled to make any claim with regard to any free treatment or attention that he has received under the National Health Service, and he is only able to recover in part the benefits that he has received by way of disability benefit or something of that kind in relation to his loss of earnings. The two most important examples of that are, first, that the claimant cannot make a claim in respect of the expenses incurred by the state in treating him under the National Health Service and he cannot make any claim (or only a partial one) in regard to any expenditure by the State by way of disability benefit or sickness benefit or the like.
That, I think, is perfectly fair and proper as between the claimant, the injured person, and the tortfeasor; because it would be quite wrong if a person was able to gain an advantage to be over-compensated for the injury which has been done to him. When it comes to the situation between the state and the tortfeasor, I suggest that it is really not fair and proper, because the expenditure incurred, for example, by a hospital in treating a person injured in a road accident is an expenditure for which the tortfeasor is just as much responsible as he is for the damage suffered by the injured person himself. As things stand at the moment, with some limited exceptions with which I will not bother the House, the state is unable to recoup from the wrongdoer all the expense to which it is put in these different ways in looking after the interests of the injured person.
My amendment is an attempt to remedy what I hope the House will think is a very unsatisfactory state of affairs. The importance of this matter in financial terms—and I will not say that it could not be exaggerated—is certainly very substantial. The Pearson Commission looked at this matter and came to the conclusion that, taking road accidents alone, injuries caused by road accidents—and this was in 1976, quite a long time ago—were such that they calculated that they cost the National Health Service close on £50 million a year. I imagine that the figure now, with the decline in the value of money, must be much greater. They came to the conclusion that less than 5 per cent. of the expenditure is ever recovered by the state under the limited provisions of the Road Traffic Act.
I think it follows from that, that if you try to calculate what are the losses to the state, to society, from injuries of all kinds—industrial injuries, Road Traffic Act injuries, and so on—you are talking about a figure which (as I suggested in Committee) may run to not less than several hundred millions per annum. If that haemorrhage could be staunched, it would be of enormous advantage to the National Health Service, which is short of money on every account, and would be a very important contribution to the social welfare arrangements in the society in which we live.
I do not disguise that there are great difficulties in "clawing back"—the words used by the noble and learned Lord on the last occasion—the money which the state expends as a result of injuries of that kind. The first question which arises is whether it might be possible for the State to recover some part of the money simply by giving the State or the institution concerned, the hospital and so on, the right itself to bring an action
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against the tortfeasor. But as soon as one contemplates that one realises that the practical difficulties are insuperable. Our hospitals and doctors and so on are ill-equipped to investigate the circumstances of every case that comes into their casualty departments, to try to find out who was responsible and pursue an action against that person. That is the difficulty which has faced everybody I know who has considered this matter.
The solution—and I hope it is something of a solution—which is offered by my amendment is simply this. It is to allow and require an injured person who puts forward a claim for damages on his own account for personal injuries to include in his own claim the claim of the state for the money that it has expended on his behalf. In other words—to put it in untechnical language—if a person puts forward a claim on his own behalf, he should be obliged to act as the agent of the state in recovering for the state the money paid out on his behalf.
May I now go through this amendment and give the effect of the different subsections? The first simply declares that, where a person has suffered personal injuries resulting in the expenditure of public funds of various kinds, then the state has a right to recover that expenditure from the offending party. It is purely declaratory. If left there that would not solve the problem at all, for there would be the practical difficulties of the state pursuing claims of its own on its own.
The next subsection is the heart of the matter. Under it, a person claiming damages against another for personal injuries would be required first of all to notify the National Health Service, the hospital or whoever it may be, that he has put forward a claim. Next, he would be required to provide to that institution, hospital or whatever it might be, information that he had made the claim and to give them such details as might be necessary in order for them to estimate what expenditure they had gone to or would go to on his behalf.
The third requirement is that that person, when he came to put forward his claim, should include in his own claim the claim of the state. There are precedents for that. If, for example, today a person is injured at work and his employers make up his wages to him during the time that he is incapacitated, he is entitled in his own action to sue for the full loss of earnings disregarding the amount paid by his employers. If he recovers that from the offending party, he is obliged to pay that money to his employers—to pay back to them what he has received. That is perfectly practical and goes on every day of the week. The fourth requirement is that monies recovered on behalf of the state should in due course be passed over to the institute concerned.
Subsection (3) is simply to ensure that, where for example there has been contributory negligence on the part of the injured person, the money recovered by the state does not exceed the proportion in which the tortfeasor is liable. If the tortfeasor was not a tortfeasor at all, and was not responsible for the accident, then of course the state would have no claim against him at all.
Subsection (4) is of little consequence. It merely requires that where today a person is obliged to take

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out insurance against third party risks, he shall additionally take out insurance to cover these liabilities which are dealt within the amendment. Subsections (5), (6) and (7) are concerned with how the various kinds of expenditure set out in subsection (1) are to be assessed and by whom.
The overall effect of this amendment, I hope, is this: it means first of all—and this is the vital aspect—that the public institution which spends the money will be concerned only to calculate the amount of money which has been or will be expended. That will be the limit of their obligation. That I suggest ought really to be a simple operation.
May I now make some general observations. The question of how one can recover these monies from the state without involving an enormous administrative cost and very complicated procedures has been the bugbear in this problem for a very long time. The noble and learned Lord on the last occasion made some reference to this in a slightly different connection. He said that he was advised that the administrative costs —and, with his usual modesty, he said he was moving again well outside the field in which he was entitled to step with confidence—of any clawback scheme would be huge and would probably outweigh any repayment that the relevant public authorities would receive. I hope that it is not going too far to say that, so far as I can see, under the proposals which I have made those administrative costs would he negligible. The costs in which the state departments would be concerned would be those in calculating the amount of the various benefits which they had expended for the benefit of the injured person.
I received considerable encouragement to pursue this matter as a result of something which happened after the last Committee stage. It was brought to my attention that the Secretary of State for Social Services, Mr. Fowler, had made a speech in Birmingham in which he had been talking about the various Rayner-type scrutinies which were to be carried out inside the National Health Service. He said this, among other things:
"One subject has already been chosen: a study of the collection of the charges due to health authorities where treatment is given following road traffic accidents. At present the administrative arrangements are such that we may be collecting from insurance companies only a small percentage of what is due. The scrutiny will look critically at these arrangements and consider how within present policy we can recover more in a cost-effective way".
It is encouraging to me that the noble and learned Lord's right honourable friend should be most actively considering this matter at the moment. If anything that I have said about it commends itself to the noble and learned Lord as being sensible, he might possibly be willing to make some communication to his right honourable friend as to how the problem that he foresees might be met.
The noble and learned Lord, on Second Reading, at the very beginning of these proceedings, drew attention to the fact that it would not be possible, because of the exigencies of parliamentary time, if this measure is to get on to the statute book (and I am sure we all want it to do so) to take on board any controversial matter—even a meritorious matter—because that might mean losing the Bill altogether. I think I understand that and I think I understand the noble and learned Lord's difficulty. Therefore, it is
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beyond my reasonable expectations that he would be able to say today that this amendment was acceptable. So what I am doing today is continuing the dialogue into which I entered with the noble and learned Lord on the last occasion. Perhaps the most I can hope for is that he may be able to say that he thinks there is some small virtue in my proposal. I beg to move.
8.1 p.m.
The Lord Chancellor: My Lords, I am sure the entire House is very grateful to the noble Lord, Lord Foot, for raising again this important matter, and especially for his having taken so much trouble to spell out what he wished to enact in the terms of a concrete amendment which could generate a discussion, however brief. I think I can comfort him in one respect. He was not correct in saying that I had not written a letter to him. I did write him a letter on the 30th April and I have just put a copy of it into the hands of his noble friend Lord Wigoder so he will have the opportunity of reading it. Evidently the original miscarried and what he is now going to read is a carbon; but it was a reasonably encouraging reply and I do not think he need be ashamed of having taken this trouble, because it enables one to say several things.
He is of course perfectly correct in saying that there are extraordinary anomalies in accident cases surrounding this question of benefits received during disability and also the cost to the state of providing treatment. He is also perfectly correct in thinking that his remarks will receive a warm welcome in principle, without necessarily endorsing his particular proposal, from my colleague, to whose speech, I think in Birmingham, he has just referred. But there are difficulties which I do not think this amendment will solve. First, we must realise what a complicated system he is setting up. He is saying that there should be a legal obligation on the injured party who is the plaintiff in the proceedings against the tortfeasor, to include in his claim the amount notified to him as the appropriate amount by the relevant public body. I do not know how that is to be enforced but that is what he says. He then says that the injured party is under a legal obligation to notify and to include in his claim the amount which is claimed by the appropriate public body. Again, I am not quite sure how that is to he done or enforced.
Thirdly, he is saying that the amount expended on the plaintiff, the injured party, would be calculated in the case of hospital medical costs by statutory instrument by the Secretary of State for Social Services and in the case of special vehicles or clothing—we all know in substance what that means—by asking the relevant district health authority and, lastly, in the case of industrial and sickness benefits by asking the Department of Health and Social Security as is done at present for the purpose of the half offset allowed under the existing law. Ministers are inclined to agree—certainly my colleague would wholeheartedly agree—with the noble Lord, Lord Foot, that the tortfeasor should not be able to gain a benefit at the expense of the state as a result of his wrongdoing in respect of the money which the state has expended upon the injured person. That, obviously, as a statement of principle has great merit. Equally, we think, and I have always thought myself, that the victim

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himself should not benefit twice, as he does at the moment in respect of half the benefits he receives.
I recollect that when I challenged this, I think in 1948, Sir Hartley Shawcross, as he then was, the Attorney-General, defended it and was only able to defend it on the basis that it was a typical British compromise—which is what is always said when you are doing something which is utterly unjustifiable. At any rate, so far I think we are ad idem but the noble Lord, Lord Foot, underestimates the fact that there is no sanction to enforce any of the proposals he puts forward in his amendment, and I do not know how one can be provided. I think he overlooks the fact that the great majority of personal injury claims are settled out of court before coming to a judgment.
Here, of course, the injured party would be in something of a dilemma. He is being compelled to put in his claim amounts which are not owed to him at all but owed to the state. In the course of the compromise which he then has to negotiate with the insurance company or the defendant, he has to ask how much of his own legitimate claim he will abate in order to achieve the 100 per cent. which he will have to account for to the state. It reminds me particularly of the late Mr. Martin O'Connor, who was a well-known counsel in my youth and called the same day as my father, who was said to indulge in speculative practices. He said on one occasion when his client resisted a reasonable offer by the defendant, "This is the last time I will risk my fee in the interests of my client". I am not at all sure how the injured party will manage to negotiate a settlement when he is partly acting as a state agent.
Then, of course, the question is how the state is going to get it back from the injured party, because there may very well be a second set of litigation to deal with that. There is also the fact that Lord Pearson's Commission recommended that the half recovery of social security benefit should be abolished and that all social security benefits should be offset. I think that is something which the Government is still considering with a good deal of sympathy.
Perhaps the noble Lord, Lord Foot, underestimates the actual cost, which he thought would be nil or very small. I am advised, though again without undue modesty—at any rate I have plenty to be modest about —that the scheme would require a complex and expensive recording and accounting system to back it up. Hospitals would have to be prepared for any case of injury to be the subject of subsequent proceedings. Therefore, every case would have to be documented in a way which would allow an accurate assessment of costs to be made at a later date.
Lastly—and perhaps this is the point at which the noble Lord, Lord Foot, and I can become ad idem again—we have this scrutiny under Sir Derek Rayner currently being carried out on the collection of charges due to health authorities when treatment is given following road traffic accidents under Sections 154 and 155 of the Road Traffic Act 1972. At present it is estimated that hospitals receive a small proportion of the money that may be due to them under this scheme, and the scrutiny is intended to consider how the recovery of their costs may be made more cost-effective.
What I would rather suggest to the noble Lord, Lord
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Foot, who I think has performed a notable public service by using this debate as the occasion for ventilating this question, is that perhaps it would be wise to leave it there for the moment. Perhaps he would care to read my letter at his leisure and I hope the original will actually arrive ultimately. I cannot in the meantime accept this particular amendment, for the reasons I have given.
Lord Foot: My Lords, I am not sure whether I need the leave of the House to reply, but may I first of all apologise profoundly to the noble and learned Lord for not having read his letter until now. If there is any greater disaster in life than not hearing from the noble and learned Lord, it is to get a letter from him and then for it to go astray. I should like to apologise on my own behalf and on behalf of the Post Office.
The noble and learned Lord has spoken of the difficulties that are in the way of my proposal and, of course, I well understand them. It is a most difficult matter to know how to make the thing work. But with regard to the two points which the noble and learned Lord made, about how you were to get the claimant to put forward a claim on behalf of the state, and how you were to ensure that the monies received by the claimant in that way passed back to the public institution that paid, it has been suggested to me that there are two ways, in particular, of getting round that.
One of them would be to make sure that no insurance company would get a receipt in full and final settlement of somebody's claim, unless they had made the relevant payment to the state in respect of the state's claim. That would mean that no insurance company could ever write the thing off, unless they had met the state's claim at the time. The other suggestion, about the difficulty of getting a claimant to pass over the money which he recovers from the insurance company to the hospital or whoever it may be, might be met by giving the hospital or institution a charge over any damages recovered by the claimant, in much the same way as the Law Society, for example, have a charge upon any property recovered by a legally aided person to cover the monies which they have expended on his behalf by way of legal aid.
I shall not pursue either of those now, but I want to know whether the noble and learned Lord, in advancing these difficulties, is advancing them as difficulties to be overcome, or as difficulties which present an insuperable obstacle. I hope that he may be able to take the view that they are difficulties which it should not be found beyond the wit of man to overcome. The last thing I ought to say is that I very much appreciate the reference of the noble and learned Lord to what I have had to say on this matter. But it would be quite wrong of me to pretend that I am the sole begetter of this amendment. I am not putting it forward on behalf of any interested party, but the real work has been done by somebody else who is here in the House tonight. Mrs. Judith Preston-Rouse, who is a fellow solicitor—
Several Noble Lords: Order!
Lord Foot: My Lords, is that not in order? I will withdraw that. I am sorry, if I have offended against

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the rules of the House. But I should like to make it plain that this is a proposal which is not my own work, and that I am very much indebted to that person for the assistance which she has been able to give to me. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Denham: My Lords, I beg to move that further consideration on Report be now adjourned.
Moved accordingly, and, on Question, Motion agreed to.

Oil and Gas (Enterprise) Bill
8.14 p.m.
House again in Committee on Clause 1.
[Amendment No. 6 not moved]:
Lord Bishopston Lord Bishopston moved Amendment No. 7:
Page 2, line 10, at end insert—
("( ) The Secretary of State shall not give consent pursuant to subsection (2) above until the Comptroller and Auditor General has prepared a valuation of the shares of which disposal is to be made and has submitted to Parliament a report of such valuation,").
The noble Lord said: As the House knows, Clause 1 deals with the oil corporation's powers of disposal, and with this amendment I should like to speak to Amendment No. 8 which is associated with it. That amendment requires that in the exercise of powers under subsection (1), the oil corporation shall not dispose of more than 1 per cent. of the shares in any equity oil subsidiary to any one purchaser and so on.
I shall be as brief as I can on this amendment. However, it is an important one, because, as I and other noble Lords have said, after the Amersham International situation there has been an increasing need in the minds of many for accountability to Parliament. There is a need for Parliament and the country to know what the Government propose in regard to the disposal of these valuable assets, and this amendment will give the Minister an opportunity of saying what the Government have in mind in relation to the disposal of the BNOC assets.
As we know, the Amersham sale was undervalued and over-subscribed, and the undervaluation was said to be in the region of 30 per cent. It caused a great deal of concern, if not anger, about the meaning of disposal and we are anxious to know what the Government have in mind in relation to BNOC, because this is not only a great national asset but also national money.
In the Bill, the Government seek enabling powers. There was no prior debate on the value of Amersham International, or on the best methods of disposal, and this issue is one of great importance to a range of other disposals as well. This amendment is not a party one of whether or not to dispose of BNOC, but is a matter of how the Government are going to do it, which must be of concern to every noble Lord. The undervaluing of assets is a very bad thing, but it is made worse when people make money through advising on and conducting sales, and when the advice is not
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always as good as it might be. In addition, purchasers, including some speculators, also make fat profits.
There is concern when other people, many on very low income levels, get money to which they are not entitled, but it is possible for richer people to get even richer by methods such as the purchase of shares put on the market by the Government, as in the case of Amersham International. I am sure that the Committee is very anxious that this should not be repeated in the case of the matter about which we are now concerned. Parliament ought not to have to read in the public press, as it did in the latter case, with full page adverts, about the Government's intentions. We believe that the time has come for Parliament to be let into the thinking of the Government as to how disposals shall be made and Amendments Nos. 7 and 8 help towards this end.
Amendment No. 7 requires that,
"The Secretary of State shall not give consent pursuant to subsection (2) above until the Comptroller and Auditor General has prepared a valuation of the shares of which disposal is to be made and has submitted to Parliament a report of such valuation".
I also commend Amendment No. 8 to your Lordships, because it requires that,
"In exercising the power under subsection (1) above the Oil Corporation shall not dispose of more than one per cent. of the shares in any equity oil subsidiary to any one purchaser and shall not dispose of any such shares to any company which is the holder of any interest in any licence granted on the North Sea, or to any company which is a subsidiary of any such company".
We believe that in view of the Government's declared policy of wanting the ownership of shares to be spread over a wide range of people, this second amendment has its justification. With those comments, I beg to move Amendment No. 7, with which I have spoken to Amendment No. 8.
8.20 p.m.
Lord Tanlaw: In supporting this amendment, put forward in my name as well as in the name of the noble Lord, Lord Bishopston, may I raise again the timing of this issue. Perhaps the noble Earl in his reply to this amendment—which does not specify this—will reassure the Committee that the Government will take into consideration market conditions at the time, which this amendment is about. I support entirely the noble Lord, Lord Bishopston, in Amendment No. 7: that the Comptroller and Auditor-General should look at the valuation of the shares and give a second opinion, apart from those who are the merchant banking advisers of the Government. This would give some reassurance that there will not be a repeat of what happened before.
However, these matters can never be judged to a nicety, as anybody who has any experience in the City is fully aware. Nevertheless, in the case of the Amersham International issue the Government were overcautious in their determination to make a success of it. They used a belt-and-braces approach by undervaluing and at the same time underwriting it, just in case nobody took it up. I see some reason for this because this was a new venture for the Government. But experience has now been gained and the Government have had a success, in one sense (though a failure in another) with Amersham International. That is why we do not disagree with privatisation. It

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gives wider share ownership, and the emphasis is on wider share ownership. I hope that the lesson of Amersham International has been learned. We do not worry if the Government have an occasional success. Good luck to them. But what we were annoyed about in the case of the Amersham issue was that the small shareholder, as was mentioned by the noble Lord, Lord Bishopston, did not get a proper chance.
I hope that whatever method is used—and I believe that the tender method has been considered—will mean that the small shareholder, somebody who wants to put £50 of his savings into a national oil company, on the basis that the price of oil will go up and that the company has a good future, will get a fair chance to invest. There are great administrative costs. The small shareholder applications are very numerous and very difficult to sift and it will take time and money to make sure that this is right. In his reply the noble Earl should tell the Committee that the Government are prepared to bear this extra expense in order to substantiate the principle of wider share ownership, which I believe they want just as much as we on these Benches want it. It would certainly be most helpful.
In the same way, I suppose one could say that if the Government go ahead, regardless of the price of oil on world markets because they say that it is irrelevant, this will give considerable bargains to investors. I suppose one could also say that if that is the way they want to present it, the investors should be told. If, on the other hand, the Treasury is behind this Bill, as I suspect it is, the Government may listen to the Treasury who say that they want to maximise the capital benefits to the public sector borrowing requirement and that therefore they should delay the Bill.
Some guidance in tins area would be helpful, as would the method of issue of Britoil shares. Whatever method is used, I hope that there will be a very clear explanation for people who have not had previous experience of owning shares, if they want to invest, of how to invest—perhaps through the Post Office. Many people who may want to invest in Britoil may not have a bank account. It may also require explanation in very simple terms. Working people do not have stockbrokers. Although it is assumed that everybody has a stockbroker, this is not the case. I hope more money will be spent upon advertisements in order to assist the small shareholder and the principle of wider share ownership.
Lord Underhill: As the noble Lord, Lord Bishopston and the noble Lord, Lord Tanlaw, have said, to a great extent additional importance has been laid on this amendment because of the experience of Amersham International. I link with it the experience of Cable and Wireless and British Aerospace. Reference has been made to the desire for widespread ownership, but there has been so much public concern, particularly in the financial columns of the newspapers, about the report of the Public Accounts Committee in the other place that it is worthwhile recounting some of the details which have been brought out and the behaviour of some of the small shareholders.
In the case of British Aerospace, I understand that soon after the flotation there were something like
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158,000 shareholders. However, 11 months later that number had shrunk to 27,000. The numbers holding 1 million, plus, shares rose from one at the original flotation to 13, while those holding fewer than 100 shares sank from 44,000 to 3,300. So far as the widespread ownership of shares is concerned, there was a cashing in because, two months after the flotation, I understand that the trading price was 47 per cent. above the flotation price. In the case of Cable and Wireless, we were told that it was five times over-subscribed; that 150,000 successfully applied at the outset but that two months later the number of shareholders on the register had fallen to 27,000. And it is still falling. In the case of Amersham International, we were told that 10 weeks ago 65,000 applied successfully, but nearly half of the shares—25 million—had changed hands by last Friday. And the register showed there were only 10,000 shareholders compared with the 65,000 who successfully applied. Again the initial dealings were 32 per cent. above the original price. Obviously people were cashing in very quickly after the flotation of these three companies, which was well under the actual value. Originally, therefore, there was a desire for widespread shareholdings, but the shareholders sold out pretty quickly and we are left with the large institutions. A large sum of money is involved in this flotation. If the story is repeated, the bulk of the shares will eventually be in the hands of the major institutions—unless, as the noble Lord, Lord Tanlaw, has said, the Government can devise a different way of ensuring that the position is handled differently.
The Secretary of State has said that he hopes this flotation will be completed by the end of the year. There are two problems, one of which has been mentioned already: whether the present position on oil prices is commensurate with a flotation before the end of the year. Secondly, so many parts of national assets are being sold that they will all be competing with each other on the market at the same time. That problem also needs to be considered. This is an important issue, and the terms of my noble friend's amendment are such that the Committee ought readily to agree that the details should be before Parliament so that the matter can be fully considered.
The Earl of Mansfield: The noble Lord, Lord Bishopston, moved both of these amendments, Nos. 7 and 8, together, which is probably helpful from the time point of view, but he does, I know, appreciate that the two amendments do relate to two rather different subjects. Amendment No. 7 relates to the valuation of the shares and to the role, if there is to be one, of the Comptroller and Auditor General and the submission of his report to Parliament. Those are three distinct issues. Amendment No. 8 deals with what I might call the spread of ownership of shares. That raises rather different considerations—so I shall have to deal with both amendments together. I hope that the Committee will bear with me, although I get the impression that these are in the nature of probing amendments which seek to make plain the attitude of the Government so far as it has not been made plain up till now.
Amendment No. 7 relates to Clause 1. As I have already said to the Committee, the intention is that the shares of Britoil should be first of all transferred

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to the Secretary of State under Clause 3(4) of the Bill, and that the Secretary of State should then sell 51 per cent. of those shares to the public. In other words, Clause I would not be the vehicle of sale. It follows from what I have said that the Secretary of State will have direct responsibility for the disposal of the shares and will be closely concerned in respect of pricing decisions, and will be in a position to engage professional advisers and to accept their advice and assistance.
The amendment seeks to bring the Comptroller and Auditor General into this role so far as that arrangement is concerned. There are a number of drawbacks to that proposal. I say that in the light of the report of the Public Accounts Committee which was published last week. That Committee came to a number of conclusions, having examined certain previous privatisation exercises. The Government will, of course, be studying the report of the committee with great care, but it should be noted that the committee has not made any suggestion that the Comptroller and Auditor General should be given the task of valuing the shares of a company in future privatisations. Having said that, I should also say that the sale of shares in Britoil and the way in which that is handled by the Government will be subject to examination by the Comptroller and Auditor General just as in any examination he may make of any other operation which has major implications for Government revenues. The Comptroller and Auditor General will have access to departmental papers in the normal way. But, as I said when we considered and discussed the last amendment, the actual disposal of these shares is a matter for executive action—in other words, for decision by the Government—to be carried out within the statutory powers which this Bill is intended to provide.
Any student if not expert of the stock market will appreciate that a valuation which would be consequent to the writing in of this amendment to the Bill could he very harmful to the success of the flotation. The offer price published in the prospectus can only be decided by the Government in consultation with its professional advisers. They have to assess as best they can the market conditions at the time of the offer. I suggest that it would be quite wrong to anticipate the prospectus by publishing a valuation of the company in advance. Indeed, this could have the effect of misleading future shareholders and prejudicing the propects of a successful sale.
I just put this forward. If you are going to bring the Comptroller and Auditor General into this and he is to make a valuation, and that valuation is to be published and laid before Parliament, it follows that Parliament must be given the opportunity of at least discussing and commenting upon whatever it is that the Comptroller and Auditor General publishes by way of a report. If one considers the long parliamentary recess in the summer, one could go for longer than three months with a valuation having been published, and at the same time market conditions changing, and yet the whole operation having to hang fire while some form of parliamentary scrutiny took place so far as the Comptroller and Auditor General's report was concerned.
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The methods of sale in previous privatisation exercises and the fact that the shares of companies have been traded above the price at which they were originally offered has excited a great deal of comment and debate, both in the media and in another place. One has to say that it is very easy on these occasions to be wise after the event. Nevertheless, the Government are by no means complacent. We are giving serious consideration to various methods of sale for the Britoil shares and are considering which of these various methods might be appropriate. A number of suggestions have been put forward in the light of the recent report from the Public Accounts Committee. These suggestions include ways in which the problems of stagging and multiple applications might be addressed, and of making the shares more accessible to small investors. Obviously, I cannot tell the Committee what the result of the Government's cogitation is going to be, but I can say that we have not closed our minds to any possibility which may be available.
The overriding consideration on the part of the Government is to see that the taxpayer receives a fair price for the shares of Britoil. We shall, as I have said, be subject to examination by the Public Accounts Committee and we will give their deliberations very careful study. Having said that, I reject the notion that the Comptroller and Auditor General should be asked to take on the role of valuing Britoil in advance of the offer for sale. I have touched upon the disadvantages which that course could entail.
The flotation of a major company such as Britoil is an exercise which requires a number of decisions, which have to he taken quite near to the time of sale. As I have said, if the procedures in Amendment No. 7 were adopted, there may be a prejudicial effect which could damage the taxpayers' interest by deflating what would be regarded as a fair price for Britoil shares. I am quite sure that that is the last thing the noble Lord opposite would want to achieve.
The question which remains is, how will the Government put into effect the lessons which have been learned from British Aerospace, Cable and Wireless, and Amersham International—if indeed there are lessons to be learnt? I say that purely from the point of view that, as I have said, it is very easy to be wise after the event. The price of these shares has to be pitched at a level which ensures a good return, and an equitable return to the taxpayer, but which is at the same time a level at which the shares will be acceptable to the market. I am not, unless I am urged, going into details tonight on the valuation of, for example, Amersham International and how many times the price achieved was above the price earnings ratio—but it was very high.
In any major public offering, some margin is allowed between the offer price and the price at which the shares are expected to trade in the market following the issue. This is necessary because to ensure the success of the offer the issue price has to be attractive enough to sell a larger volume of shares than are normally traded in individual transactions on the exchange. As I have said, in the case of Amersham International—but it applies equally to British Aerospace and to Cable and Wireless—the fact that the shares have been traded above the issue price does not show necessarily that the issues were under-priced, but

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one obviously has to keep the margin within reasonable limits. We have not yet taken any decisions on how the sale of Britoil shares will be handled, but I have no doubt that we shall be able to obtain a fair price.
Perhaps I may now turn to Amendment No. 8. The point of the noble Lord's amendment is to try to obtain a wide spread of ownership in the shares of Britoil. That is an entirely laudable ambition, which the Government share. The interests of small investors are something to which any Government, and this Government particularly, are pledged to have regard. My right honourable friend in another place pointed out on more than one occasion that one of the reasons for privatising the oil-producing side of BNOC's business is to give ordinary people the opportunity to share more directly in the oil wealth of the country. I do take issue with the noble Lord, Lord Underhill, when he implies—and I say no more than that—that the ownership of shares by the financial institutions of this country is in some way inimical to the public interest. If one appreciates that a very large amount of this money is in fact owned by the pension funds, which represent, after all, the accumulated pension rights of people who are employed in industry and suchlike, it seems to me that there is nothing against the public interest in the shares of what one is quite sure will be a successful and prosperous enterprise such as Britoil in fact being owned by pension funds and institutions, which will use the profits to spread the benefits among their policyholders and pension funds.
Lord Underhill: I am grateful to the noble Earl for giving way. He infers, although he says it very nicely, that I was critical of ownership by the large institutions. Let me assure him that I was not. The purpose of my comment was because both the noble Earl and others had referred to the desire to have the widest spread of shareholders. I was pointing out that within a very short space of time the bulk of the small holders of shares had disposed of their shares and we found the bulk of them in the hands of the major institutions. Of course I am not opposed to pension funds, because I have an idea that part of my superannuation comes from the same source.
The Earl of Mansfield: The trouble is, and it has frequently become apparent with employee share arrangements, that if the employees and small shareholders see the opportunity of a quick profit they are more concerned to take it than to wait for the long-term advantages which will accrue if they hang on to the shares. That is human nature and not the fault of the system, if I may say so. If small shareholders avail themselves of the shares, and they are at a fair price, and the shares subsequently appreciate, I am afraid nothing that any of us can do will compel them to retain their shares if they happen to want to realise their capital gain and have some useful purpose to which to devote the money. Obviously, as I have said, we want to pay particular heed to the interests of small shareholders and above all to give them the opportunity to acquire shares in Britoil.
One still has to have as much flexibility as one can for a successful flotation. I do not believe that an amendment such as this is going to help flexibility at
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all. Nor do I think that it is going to help keep the shares in the hands of small investors. As I have said, pension funds and institutions will have a legitimate role to play, and, as I think the noble Lord, Lord Underhill, would agree, such institutions can ensure that the earnings of Britoil, through its dividends, can be widely distributed to the people of this country. I see no justification for depriving the institutions of the opportunity to purchase Britoil shares on flotation above an artificial ceiling of 1 per cent. of the issued share capital.
To, as it were, carry out the policy which would be laid down by this amendment, it would be necessary to scrutinise share purchases not only on flotation but always thereafter, and it would be a very difficult matter to police. It would involve regular checking of the register of shareholders, a complicated system of tracing back beneficial ownership of Britoil shares, and, moreover, some sort of procedure to divest the rights of shareholders who had exceeded the 1 per cent. limit. The operation of a ceiling as low as 1 per cent. would be complex and expensive to administer.
There are over 250 companies which hold an interest in a licence granted on the United Kingdom continental shelf. We have debated foreign ownership of the shares in Britoil and the provisions of the articles which can safeguard the company against any unacceptable change of control, although we have not as yet gone into the details of the articles. But I do not believe that those considerations justify the exclusion of companies which have interests in the North Sea from buying Britoil shares on flotation in whatever quantity they are prepared to pay for, within the limits of whatever system of allocation is used. These companies have made an outstanding contribution to the development of the North Sea and they have made substantial long-term investments in the effort to recover these valuable resources.
The noble Lord, Lord Underhill, quoted from the Public Accounts Committee report so far as British Aerospace shares are concerned. So far as I know, those are the only shareholdings which have in fact been published as yet. In fact I am told that the Amersham register has not yet been published, whatever may have been read by the noble Lord, Lord Underhill, or anybody else in the press. Nevertheless, the Government will pay heed to the fact, and I think it is generally agreed, that the number of shareholders has gone down since the original flotation. These anxieties, if there are such, have been ventilated in the Public Accounts Committee, which in its report makes a number of recommendations which we shall have to consider very carefully. And we will, of course, reply formally to the Public Accounts Committee's report in due course.
By way of summary on Amendment No. 8, we are considering very carefully how it would be most appropriate for the shares of Britoil to be offered for sale to the public. We shall use the experience which has been gained from the previous privatisation exercises, and this will, I think, be relevant to the way in which we set about our task. We intend to concern ourselves with the genuine small investors and how they can be encouraged. We also intend to address ourselves to the problems of stagging and of multiple applications. I cannot at this stage announce how the offer for sale

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will be managed because final decisions will have to be taken nearer the time of flotation. But I assure the Committee that the lessons which are there to be learnt from past history will be taken very carefully into account.
Lord Bishopston: I think that we have had a helpful reply from the Minister who seems to have taken into account the merits of the two amendments which we have been discussing. Of course the fact remains that, if we privatise any public undertaking, and we say, "You must sell", we are saying, "You must sell at any cost or regardless of price", because that is the condition. We are not deciding whether or not to sell; we are selling regardless of the return. In those circumstances the price will not always represent the best or the most adequate return.
As the Minister says, timing and method are all important. The two amendments are related in so far as one concerns the method of sale and the other expresses concern that the small investor should have adequate opportunity of partaking in the purchase of shares, and that would obviously have its effect upon the method to be employed. The Minister says quite rightly, of course, that we are all wise after the event. This is a situation where we hope that we are wise after the event and take into account the lessons which have been learnt from Amersham and, as my noble friend Lord Underhill has said, from other occasions.
There was naturally concern not only by Members of the Opposition but by Government Ministers themselves about the unseemly scrimmage on the Stock Exchange floor and about the fact, as the Financial Times put it, that short-term traders had been handed a paper profit of over £20 million at the expense of the taxpayer. Now that the British National Oil Corporation assets are to be sold, it is probably appropriate to say that we are anxious to know what plans the Government have in the pipeline for such a sale. The Minister seems to have taken note of the anxiety of those noble Lords of the Committee who have expressed views on this matter. As the Minister has said, the Public Accounts Committee has been looking into the matter and has made observations and the Government are considering what conclusions they may reach in the light of the views of the committee and, undoubtedly, of its recommendations.
I think that it may be untimely to press the matter at this moment and that it would be wise, in the light of what we may learn at a later date, to return to the matter at a later stage. With those comments I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 8 and 9 not moved.]
8.54 p.m.
Lord Tanlaw Lord Tanlaw moved Amendment No. 10:
Page 2, line 15, at end insert ("and once implemented would require representation by not more than one director elected by the said employees.").
The noble Lord said: I beg to move Amendment No. 10. I move this amendment partly to welcome the stance which the Government have taken on employees' shareholding. Secondly, it is to take one stage further the whole question of employee representation
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on the board which was raised by my right honourable friend Mr. Jo Grimond in another place. He received a reply from the Secretary of State who said that he would look into this matter. It is my hope that, in the intervening period, he has looked into the matter, possibly favourably, and therefore that, although perhaps the wording may not be perfect, the principle at least will be accepted by Her Majesty's Government that the employees will have a director on the board.
I have also asked the noble Earl, in earlier amendments that have been moved, about the function of the two Government directors. With respect to the noble Earl, the more I ask about them the less of a function they appear to have. I fully accept the fact that there should obviously be one director to represent the Secretary of State and the so-called "golden shareholding". I think that that is most important. But what does the other director do? We are told by the noble Earl that he does not have any function in policy making and that he does not want to interfere with the running of the company. I do not want to use the term "stooge directors" again, but it seems to me that that is what the other director is at the moment without this further job description. Therefore, it would seem to me that this is a perfect opportunity to have the second director, who appears to be functionless in the company, to represent the employee shareholding. The Government, who have taken some very original steps in the Bill, could possibly do something original by accepting this principle and making this Bill and this company, Britoil, the right one to have an employee director of this kind.
There is another reason for it. If the employees had a director chosen by the Secretary of State—we have no objection to that—even if the Government sold their 49 per cent. of the shares, at least the employees would still have a say on the board and they may have a director who may possibly have an influence on the policy of Britoil against what I call the worry of "foreignisation" which we have already discussed and which I shall not raise again.
Therefore, I see this as a constructive amendment in principle. If the wording is not entirely correct, I am sure that it can be put right. This is a matter of principle to us on these Benches. We want to see it accepted not only in Britoil but accepted as a normal working principle, as it is in other countries, that the employees may have a director representing them on the main board. Without anymore ado, I cannot wait to hear the Government's reaction to this amendment because I think it has important implications that go beyond the Bill. I beg to move.
Lord Mottistone: I should like to ask the noble Lord, Lord Tanlaw, a couple of questions. First—and this relates to wording—is it really necessary to have the words, "not more than"? If we had:
"not more than two directors",
it would make sense because it could mean one or two. But if it is, "not more than one" it might be simpler to say, "by one director".
Secondly, what sort of a director? Where is he coming from? Is he one of the employees? Is he somebody chosen out of the air? How does somebody put himself up for election by the employees? What sort of person has the noble Lord in mind?
Lord Beswick: I should also like to ask a question on the same point and it might be convenient for the noble Lord, Lord Tanlaw, to answer it when he answers the noble Lord, Lord Mottistone. I am bound to say that I find it rather strange that there should be in this Liberal amendment:
"not more than one director".
I could have understood it if it had said:
"not less than one director".
That would make sense. But as it is drafted at the moment it looks to me like a Liberal amendment. I also thought I heard the noble Lord say that he might be elected or chosen by the Minister although in the words of the amendment it says:
"elected by the said employees".
I hope that the noble Lord will clarify his mind and the thinking a little more than that.
Leaving aside those vagaries in the wording and what the noble Lord said in moving the amendment, let me say that I support him in the principle. It always seemed to me that here we had a hopeful development in what I do not regard as being a very hopeful policy of privatisation. In the case of one company that I happen to know quite well it was hoped that possibly 2 per cent. of the total shareholding would be owned by the employees—perhaps 21/2 per cent. That is quite a considerable block of shares. It would not be unusual for a shareholder of that size to have a nomination on the board—it would not be unusual at all.
However, as I see it, the advantage is this. We have been told and we have seen examples of how shares have been allocated to employees and then, when the opportunity has arisen, they make a quick profit and sell them. I should like to think that a shareholding could be much more constructive and much more purposeful than that; that it is not just a question of share dealing or quick profits, but a way of having a say in the policy-making of the company for which the said employee works. This is something that could be developed. I argued very strongly in one case that there should be something in the relevant legislation which would make it possible for the employees to elect someone to a particular position on the board.
The question has been raised as to how such an employee would be chosen, how he would be elected by the employees. In many companies—and I know for certain and in detail one of them—the pension fund has a trustee committee and the members of that committee are elected by voting among the employees. There are constituencies and they have proper elections. There is a very useful line of communication through the trustee committee. I can see that such machinery could be adapted for the purpose of electing someone to sit on the board.
I think that the principle of this amendment has some merit and I wonder what further thinking the Government have given to this problem since it first became an issue. As to the actual wording of the amendment, I agree that the phrase "not more than one" is probably not apposite.
Lord Mottistone: I wonder whether I might have an answer to my question.
Lord Tanlaw: The noble Lord asked me two questions. I have said that the wording is not perfect. The point is that the Government have two director appointees on the board, and only one of them should be elected and appointed by the employees. I think that there may have been a slip of the tongue; the noble Lord is quite right. I think that it is "with the consent of the Secretary of State", if I said "would be appointed by the Secretary of State", my intention was to imply that the directors were already appointed by the Secretary of State and it was one of his appointee directors who should be elected by the employees.
Lord Mottistone: Where does he come from? I had not finished my contribution when the noble Lord, Lord Beswick, intervened. What puzzles me is what sort of person are we talking about, because we want to understand what the noble Lord has in mind.
Lord Tanlaw: I particularly left this point open. He need not necessarily be an employee. I do not see why it should be restricted to an employee, provided that he is elected by the employees. I would hope that he might be an employee; in fact, perhaps he should be. But I do not necessarily see why he has to be an employee, as long as the employees can choose a director, with the consent of the Secretary of State, to represent them on the board of the company.
Lord Mottistone: So they would have to choose from at least two people in order to have a choice. I can see all sorts of difficulties arising here. The pension funds are one thing, but the directors of a major company are another. However, I think that I shall leave the matter at this stage.
Lord Wynne-Jones: We have here a fascinating example of the problems which arise when one tries to deal with private enterprise with a capitalist organisation and one tries to control it, modify it and bring it under some sort of sensible control by the workers themselves. The Government keep on saying that they are trying to put the ownership of all these industries, which have been in national control, into the hands of the people. But who are the people about whom they are talking? It becomes perfectly clear that they do not mean the people working in the industry. It becomes equally clear that they do not want to put the ownership in the hands of the people as a whole, because it is the exact opposite at which they aim. So when they talk about this they really want to be a little honest with us. They want to tell us what they are really aiming at. This, of course, they do not like to do. It is very much better that they should keep their aims hidden and publish only the gloss which they like to put on them.
But what has been suggested in this amendment, if the Government are serious, is perfectly sensible. If the Government are serious in saying that they want to put the ownership of the industry in the hands of the people of the country and they believe that the proper thing to do is to sell shares to all and sundry—let us assume that all and sundry can buy these shares—then must they not also put the control in the hands of

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the people who buy the shares? Must they not also say that if the workers in the industry are having shares, they will also have some say in the direction of that industry? I do not believe that in the past we—and, by "we", I am referring specifically to my side of the House—have done all that we should have done in ensuring that the workers in industry do have a proper say and control inside the industry. We should have gone a lot further.
However, what is being said now is that an offer is being made to the people of the country, the individual people of the country, and to the individual workers in the industry to have shares in the industry. All right, then let them also have a share in running the industry. Let them have the right to have at least one director. It is a very slight favour. I would go further than that, but let them have at least one director. If the Government are not prepared to accept this, then it is pure humbug that they are trying to impose upon the country. They are coming to this House and telling this House a set of absolute untruths. They are trying to persuade this House to accept something which has no meaning at all in terms of what the Government themselves say they want to do. In their own interests, if the Government are going to be able to look people in the face and say, "We are honest. We are trying to do something", they must accept at least this amendment.
9.10 p.m.
The Earl of Mansfield: There is no doubt that Lord Tanlaw's amendment has prompted an interesting debate which came to a fiery conclusion—up until now, at any rate—with the noble Lord, Lord Wynne-Jones. May I just say that the Government are not saying anything except that they wish to put Britoil on exactly the same footing as any other company in the private sector? The matters which have been raised by this amendment go very wide indeed. We get to all sorts of questions to which the last Government addressed themselves. The European Parliament, when I was in it, if I may reminisce on a personal basis for a little, for over two years in the Legal Affairs Committee addressed themselves to this question, and they have never come to any conclusion at all. The difficulties of definition, apart from anything else—what is, and what is not, an employee—are quite bad enough, without trying to legislate for representation.
I can only restate what the Government's policy is so far as labour relations are concerned and then try to put that into the general context of what this will be—an ordinary public company. The Government are firmly committed to the principle of management informing and consulting employees at all levels about matters which affect them. We have tried to urge, and indeed have urged, companies to develop procedures of consultation with their staff which are appropriate to their particular circumstances. Above all, there must be a flexible approach to industrial relations, which includes procedures which can be formal and indeed informal. But we are opposed to the introduction of a rigid requirement for any form of employee involvement because we think that good industrial relations depend on co-operation and understanding as between management and employees,
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and that is not something which can be legislated for.
It would be quite inappropriate for a new company such as Britoil to be made the vehicle for an experiment of this nature. We want Britoil to be established as a normal Companies Act company. It should be free to develop its own policy and its own strategy after privatisation, and one therefore asks why should it be singled out in an unprecedented manner by having a legislative requirement such as this imposed on it.
Lord Beswick: Will the noble Earl allow me? When he said that they want this company to be the same as any other normal privately owned company, would he say that it was normal to have employees' share schemes in the normal private company?
The Earl of Mansfield: Share schemes, which are not the subject of this amendment, are coming more and more into private industry, and of course the Government have given their blessing to that. What I am talking about is what, on the Continent, is referred to as worker directors. I am saying that it is inappropriate for such a framework to be imposed on Britoil at its inception.
Lord Beswick: But the noble Earl is imposing something new; provision is being made for employees' share schemes. Is that not a new departure, something which many Ministers have said is part of the privatisation scheme?
The Earl of Mansfield: I fully accept that, but it is quite a different consideration from what is being suggested in the amendment. I do not see anything inconsistent between what I have been saying and what the noble Lord is saying.
Lord Mottistone: Perhaps my noble friend will allow me to assist. I think it is fair to say that the selling of shares to employees is, if not as extensive as it should be, an established fact; it is in existence in private enterprise. On the other hand, shareholders voted for by the employees is not a practice in private enterprise.
Lord Beswick: I quite understand what the Minister is saying—namely, one reason why the Government cannot accept the amendment is that it is something different. I am saying that we are already dealing with something different. The whole context here and the whole privatisation policy is designed to embody something different. Ministers have said that they are trying to do something different and are trying to incorporate the concept of employees' shareholdings, something quite separate and different from the way in which that has been developed in normal industry outside. Although I accept that the amendment suggests that even further steps should be taken, may I ask the Minister whether he thinks he is justified in saying he cannot accept it because it is something different, when the Government are already doing something different in the Bill?
The Earl of Mansfield: I am grateful to my noble friend Lord Mottistone for coming to my aid, though I scarcely think that was necessary. The noble Lord,

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Lord Beswick, raises a thoroughly tautologous point. Subsection (3) gives a permissive power to the corporation to have an employees' share scheme, but they have been going for years; the corporation which employed me before I came into Government had been running such a scheme. There is all the difference in the world between that and imposing ab initio on the company some form of representation by worker directors. There must be a difference.
Lord Wynne-Jones: Does the noble Earl recollect that, when we were discussing the aircraft industry and the question of bringing it back into private ownership, this same question was raised, so it is not a new question at all? If every time it is raised we are told it is not being done anywhere else, we must reply that it is not being done anywhere else because the present Government refuse to allow it to be discussed.
The Earl of Mansfield: There is no question of the Government refusing to allow anything to be discussed. I am saying it is undesirable in the context of the Bill to impose that sort of framework by statute. There is absolutely nothing to stop the company, if it so wishes, from taking a course parallel with or similar to that which is promoted by the noble Lord, Lord Tanlaw. I am saying it is inappropriate in a Bill such as this to try to impose something which is difficult and complex on a company such as Britoil.
Lord Bishopston: There is a great deal of support for the principle of the amendment. I would refer the Minister to the Second Reading debate, when the Secretary of State said:
"I hope to see ownership of the shares in the new company spread as widely as possible. I also hope that the management will take advantage of the special provisions for employees' share schemes in the Bill".
It would be helpful if the Minister would tell us a little more about what the Secretary of State called,
"special provisions for employees' share schemes in the Bill".— [Official Report, Commons, 19/1/82; col. 170].
We go along with the noble Earl about the need for more industrial democracy, but it would be helpful if, either now or at a later stage, we were told what those special provisions are, and that may satisfy some of the doubts which have been raised.
The Earl of Mansfield: The noble Lord, Lord Bishopston, is going very wide of the amendment.
Noble Lords: No.
The Earl of Mansfield: Share schemes are catered for in Clause 1(3) and that is quite different from imposing on the company a framework of worker directors or employee representative directors.
I did not, when we considered the last amendment, pay sufficient heed to the points which were raised by the noble Lord, Lord Tanlaw, in relation to Government directors, and of course he was referring to Article 85. It is, I believe, appropriate that the Government, who will have a large residual shareholding in Britoil, should be represented, and should make
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provision to be represented, by directors on the board. Those directors would, I expect, be in a somewhat similar position to those on the BP board. They would have the same duties and the same obligations as the other Britoil directors, but they would be in a position to keep the Government informed. They would be under the same fiduciary obligations and they would have the same statutory responsibility as any other company director, and in particular the other directors on the board of Britoil.
However having said that, having said in effect that the Government directors will be playing the same role as any other non-executive director on the board of Britoil, I want to emphasise to the noble Lord that it is not the purpose of the Government to intervene in the commercial affairs of the company. As I have said, what is envisaged is that the directors on the board representing, as it were, the Secretary of State and the Government will play a full part in discussions and will keep the Government informed of the affairs of the company.
I have, I think, said that the Government do not regard it as desirable to use the Bill to impose on the company some kind of worker directorship scheme, and above all we do not think that it would be right to use the Britoil flotation as a vehicle for some form of experimentation by legislation when such experiment would not have been properly thought out or indeed considered. So I cannot invite the Committee to accept the amendment.
Lord Tanlaw: I am somewhat disappointed by the noble Earl's response. First, I must apologise to the Committee for what is perhaps rather poor wording in the amendment, but I do not think that that in any way takes away the principle which lay behind my moving it. Judging from the support received from other sections of the Committee, it is quite clear that many noble Lords consider that there is here an opportunity for the Government to take. The noble Lord, Lord Beswick, was absolutely correct. How many prospectuses of new companies contain an insistence that the employees must have a proportion of the equity, or the capital?— none that I can think of.
This is a new departure. It is no good the noble Earl saying that this is a run-of-the-mill oil company going on to the market, without anything special attached to it. I do not accept that argument against the amendment; nor do I accept the view that that is how it should remain. I say that because when launching the Bill the Secretary of State himself said that it was one of the most important Bills ever to come to either House of Parliament, it was revolutionary, it was going to change the world, and so on. Bearing in mind that introduction, I feel that the Bill contains many highly original and dramatic provisions in all its clauses. So why not bring in the employee-directors?
A noble Lord opposite asked what kind of director I had in mind. I would say that I had in mind quite simply a director similar to a trustee of an employees' pension fund. Such people are sometimes directors of the company concerned, or sometimes directors or representatives of an insurance company. The employees feel quite happy at having their choice of person as their trustee. So in this instance I see the director

1137
in a trustee role; I do not in any way see him in a union role, undertaking representation in industrial disputes and so on. I see the director as a kind of trustee, and it is on those lines that I put forward the amendment to the Committee. Since the noble Earl has not said that he will take away the amendment and consider it, as I believe the Secretary of State said to my right honourable friend Mr. Grimond, I wish to test the opinion of the Committee on the amendment in the Lobbies.
9.25 p.m.
On Question, Whether the said amendment (No. 10) shall be agreed to?
Their Lordships divided: Contents, 24; Not-Contents, 52.

DIVISION. NO. 3

CONTENTS

Airedale, L.

Pitt of Hampstead, L.

Aylestone, L.

Sefton of Garston, L.

Beswick, L.

Stewart of Alvechurch, B.

Bishopston, L. [Teller]

Stewart of Fulham, L.

David, B.

Stone, L.

Davies of Leek, L.

Tanlaw, L. [Teller]

Harris of Greenwich, L.

Tordoff, L.

Howie of Troon, L.

Underhill, L.

John-Mackie, L.

Whaddon, L.

Llewelyn-Davies of Hastoe, B.

White, B.

McCarthy, L.

Wigoder, L.

Mountevans, L.

Wynne-Jones, L.

NOT-CONTENTS

Avon, E.

Loudoun, C.

Balfour of Inchrye, L.

McFadzenan, L.

Bellwin, L.

Mackay of Clashfern, L.

Beloff, L.

Macleod of Borve, B.

Belstead, L.

Mansfield, E.

Boardman, L.

Margadale, L.

Broadbridge, L.

Marley, L.

Brougham and Vaux, L.

Marshall of Leeds, L.

Campbell of Alloway, L.

Mersey, V.

Colville of Culross, V.

Moltistone, L.

Craigavon, V.

Murton of Lindisfarne, L

Cullen of Ashbourne, L.

Orkney, E.

Denham, L. [Teller]

Orr-Ewing, L.

Drumalbyn, L.

Plummer of St. Marylebone, L.

Dundee, E.

Elliot of Harwood, B.

Renton, L.

Elton, L.

Romney, E.

Faithfull, B.

Sandys, L. [Teller]

Ferrers, E.

Skelmersdale, L.

Forester, L.

Stodart of Leaston, L.

Fortescue, E.

Trumpington, B.

Gisborough, L.

Vaux of Harrowden, L.

Glenarthur, L.

Vivian, L.

Grimston of Wesbury, L.

Ward of Whitley, V.

Henley, L.

Windlesham, L.

Hives, L.

Young, B.

Long, V.

Resolved in the negative, and amendment disagreed to accordingly.
9.33 p.m.
Lord Tanlaw Lord Tanlaw moved Amendment No. 11:
Page 2, line 15, at end insert—
("( ) In exercising powers under subsections (1) and (3) above the Oil Corporation shall not dispose of any shares to an existing member of the board of the Oil Corporation or to any company of which such a member is a director, or to any company which is a subsidiary of a company of which such member
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is a director and no such member shall participate in the employee share scheme established under subsection (3) above.").
The noble Lord said: I beg to move the amendment standing in my name and in that of the noble Lord, Lord Bishopston. I am not happy with the wording of this amendment. Indeed, in respect of the first half of it, I must make clear (as was done in Committee) that this does not refer merely to the directors' share. It was said in Committee that directors had a share by right, a single share. A director's share is normal practice. But this does not refer to that. As the noble Earl has said that it is not the intention of the Government to have a director to represent the employees, therefore no director should be eligible for participation in an employees' share scheme. This is quite simply to indicate that the employees' share scheme is entirely separate from the board and would not have participation by a director who buys into it. I beg to move.
The Earl of Mansfield: I was waiting for some justification from noble Lords opposite for this amendment, but there has been none. What the amendment seeks to do is to prevent BNOC from disposing of Britoil shares to members of its board or to companies in which BNOC board members are involved as directors. The Committee will know, since I have said it already on more than one occasion, that it is going to be the Government who will carry out the sale of the shares. I take the noble Lord's point to the extent that what he seeks to achieve, as I understand it, is to prevent members of the board of Britoil from owning shares in the company particularly under an employees' pay scheme.
I can see no reason for this restriction on the disposal of the shares of Britoil. Such disposal is normal. It is within the normal commercial practice and, indeed, I should have said that it was desirable for people closely involved in an enterprise to be able to express their confidence in the enterprise by giving it their financial backing. Many companies have a condition in their articles of association that directors must have a minimum shareholding. It is regarded as being an additional incentive, particularly for profitability. It seems to me that the noble Lord's amendment is undesirable from that point of view alone.
I do not think that the noble Lord means that he intends to differentiate between a director of Britoil and BNOC so far as the two boards are concerned and the shareholding of the shares in Britoil. In any event, it does not make any difference. I cannot see why the directors of either corporation should not be entitled to purchase Britoil shares if they want to. One then asks: Why should present members of BNOC who become eligible for participating in an employee share scheme be prevented from doing so? Any share scheme which is produced under the clause will have to receive the consent of the Secretary of State. It seems to me proper that all employees of the corporation—whether directors or not—should have the opportunity to share in its fortunes when it moves into the private sector.
I had wondered whether the point would be taken that the directors of BNOC might be considered to have some inside knowledge which should bar them from purchasing Britoil shares. I see the noble Lord

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is nodding. I do not agree that the purchase of the shares of a company in a public flotation by directors of that company, or persons who have been in a position to control the company, constitutes insider dealing within the terms of Part IV of the Companies Act 1980. Part IV describes a number of transactions which are examples of insider dealing and those transactions do not include applications by members of the board of BNOC for shares of Britoil when those shares are offered for sale as we intend later this year.
Of course, members of BNOC will have to exercise their own personal judgment like anybody else whether or not to purchase any Britoil shares. Likewise, if they become subsequently eligible to participate in a Britoil employee share scheme they will have to reach their own decisions in exactly the same way as any other employee as to how far they wish to participate, if at all. In other words, the directors of Britoil will be subject to the law in exactly the same way as any other directors of companies are subject to that law and I see no reason to depart from the normal provisions in this Bill. If the noble Lord, or any other noble Lord for that matter, can produce considerations which are different in this particular instance or which make the consideration differ from the norm, I will consider the matter; but, at present, I cannot see that this amendment is going to achieve anything and I do not see any reasons for writing it into the Bill.
Lord Bishopston: The Minister expressed some surprise that this side of the Committee was not forthcoming, but surely this amendment falls into line with what we thought the Government had in mind over the dispersal of shares to individual British people so that they can have some stake in their national asset. Also, it aims to prevent shares being bought by foreign corporations or individuals and thereby ensures that the maximum dispersal takes place within the United Kingdom, as opposed to the very substantial oil corporations and others who would obviously seek to benefit by this flotation. It is really aimed at the widest possible share ownership within the reach of the British people generally, and I am rather surprised that the Minister has expressed any surprise with an aim which I would have thought was compatible with the Government's objectives.
The Earl of Mansfield: Either I am being denser than usual or the noble Lord's mind is not running with the amendment. What I thought we were discussing was the sale of shares in Britoil to directors of what at the moment is BNOC, which has really nothing to do with large corporations or multi-national share ownership, or anything else. It concerns the desirability or otherwise of directors in effect being allowed to buy shares in the flotation of Britoil. What I have sought
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to show is that, as at present advised, taking all the considerations into mind that I can, I cannot see anything against it.
Lord Davies of Leek: I agree with what the noble Lord says pretty well. I will put this interrogatively. Are not some of the dangers the possibility of pre-knowledge of people on the inside pocketing shares and thus getting a corner in them? I do not want to delay the Committee; but is that a problem or is it not?
The Earl of Mansfield: I am obliged to the noble Lord. Obviously one must take seriously any concern which any Member of the Committee expresses. What we are talking about is individual directors of BNOC being given a chance to buy a few shares—because I do not suppose they can afford more than a few—in what is going to be the privatised Britoil. It is a matter for their own judgment as to whether they should seek to subscribe for shares. We are not talking about cornering the market or some unjust or some undue advantage being taken of an individual's position. Therefore, I am saying that an individual should be treated like any other director of a company which is to have a flotation.
Lord Tanlaw: The noble Earl has been most helpful over this. As I said, because of the slightly poor wording, he could have been much harsher in his criticism than he was. In fact, he has been extremely constructive, because I think there are two main points here on which we wish to have clarification from the noble Earl; that is, whether a director of the company should not really buy up, with his opportunity, large tracts of the employees' shares. He has said he is against that in principle, which is common sense and I am delighted to hear it.
The second point, which is a much more difficult one is the one of insider trading. The noble Earl has made it clear that a civil servant or anyone else in the corporation can buy a share in Britoil quite happily, without having the worry that he is in any way infringing insider trading rules, because he may have been privy to some information which could have an effect. The point of this probing amendment is to make sure what is the position. The noble Earl has made that clear and has been most helpful. As a result of that, I am pleased to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
[Amendment No. 12 not moved.]
Clause 2 agreed to.
Clause 3 [Powers of Secretary, of State as respects disposal by Oil Corporation]:
9.45 p.m.
Lord Whaddon Lord Whaddon moved Amendment No. 13:
Page 4, line 15, at end insert—
("( ) When the Secretary of State directs the Oil Corporation to dispose of subsidiaries or assets under clause 3(1) above, he shall on each occasion seek independent professional advice as to the value of the subsidiary or assets to be disposed of and any valuation so made shall be laid before Parliament:
Provided that such disposal shall not take place unless the total net sum to be realised from that sale is at least equal to ninety-five per cent. of the aforementioned independent valuation.").
The noble Lord said: This amendment is intended to be of assistance to the Government in a somewhat difficult situation. They have been concerned with looking after the interests of small investors. It is absolutely right that they should do so and, in a sense, we are all small investors in the British National Oil Corporation. What I am concerned with is that they shall get the best deal they can for the mass of us small investors in the nation.
The Government have been having difficulty in fixing the price of shares in assets which they have been selling and have come under considerable criticism, including some from this Committee today. The Public Accounts Committee have added their weight in the last few days. Cable and Wireless and British Aerospace were grossly over-subscribed. Amersham were 23 times over-subscribed and, on coming to the market, immediately rose 34 per cent. I mention those facts again, because wrong marketing of the oil shares would be infinitely more damaging and we would be dealing with a loss to the nation not of tens of millions of pounds, but of hundreds of millions of pounds. Therefore, it is imperative that the Government base their actions on the very best possible advice.
Shares, in themselves, are very tricky to price but oil shares are in a particularly difficult condition at the moment. Indeed, very many people would consider that present oil share prices do not reflect the real value of the assets underlying them. This is why simple advice on share values at the present period may not represent the real interests of the country. Oil shares are particularly depressed. The oil shares index is down 25 per cent. in the last 18 months up to the end of April, whereas in the same period the ordinary shares index is up 7 per cent., showing that oil is in a very special position. BP peaked during 1980 at £5·02 a share, but last Friday they were £3·16—down 37 per cent. in that period. Prices for North Sea oil in 1981 were 39 dollars 25 cents a barrel, but they are now down to 31 dollars a barrel. Therefore, even if they are correctly fixed in respect of other oil shares at the moment, share prices are likely to result in a very poor bargain indeed for the nation, and we have seen that the Government do not have a very good record even in getting share prices right.
Apart from the technical reasons applying to the oil industry, these shares are subject to very special political depressing factors. The Committee will be only too well aware of the comments that were passed during the Second Reading of the Bill in another place,
1142
and of suggestions from one Labour spokesman of renationalisation without compensation. That that would happen I do not take seriously, but the threat of what may happen to these shares is certain to act as a depressing factor. Therefore, for various reasons—technical reasons, world market reasons and political reasons—these shares are under particular pressure at the moment. It is very important, therefore, that the Government should get the best technical advice on the underlying asset value and not allow themselves to be rushed into selling the shares at a price which would he a betrayal of the national interest.
The method used by Energy Resource Consultants is highly technical and certainly not something to be gone into this evening in Committee. However, it is very widely used in the industry for valuing the underlying assets of oil finds and oil prospecting areas, particularly when outside interests, such as banks, are moving into the shares and want to be sure of the value of what they are getting into. The advice of the consultants is a very good indication of whether the share values applying at the time bear any close relationship to the real long-term values underlying the shares.
The noble Earl said with regard to the criticisms of the Amersham sale that it was easy to be wise after the event. I have sympathy with that point of view, but in the present situation we can enable Her Majesty's Government to be a little wiser before the event by adopting this method of valuation which is so widely used by the experts within industry. I can see no reason why it should not be used to the advantage of Her Majesty's Government and the nation in the case of this sale. The amendment will enable Her Majesty's Government to show that they are not allowing political doctrine to override normal prudence in the disposal of this asset. I urge that it should be given the most serious consideration as being normal practice among those experienced in the industry. I beg to move.
Lord Beswick: It is conceivable that the Government will not accept the amendment, but if they do not accept it I wonder whether they can give an assurance about the advice that they will take into account. I am quite certain that if they did go, as has been very wisely suggested, to independent professional advice, that advice would take into account timing. It is not just a question of the valuation of the shares. It is a question of when they are placed on the market. I have no doubt that the appropriate professional advisers would say whether or not such and such a date was appropriate for getting the best possible price.
If the Government are not prepared to accept the amendment, can they give an assurance to this Committee that the flotation will not be determined by any parliamentary considerations, any political considerations or any parliamentary timetable, but will be dependent upon the state of the market, the idea being to get the best possible price?
Lord Bishopston: Although one can display some sympathy for the aims behind the amendment, following my suggestion relating to a previous amendment that we ought to await the report of the Public Accounts

1143
Committee and the Government's observations upon it, there may be another occasion when we can discuss the merits of this amendment. I believe that it is one of great importance. Public concern about the method of disposal, and, as my noble friend Lord Beswick has said, its timing, will be a matter of concern for some time to come. However, it would be helpful to have the Government's views on this amendment.
The Earl of Mansfield: This amendment falls into two parts. The first part of this amendment would require the Government to seek independent advice before pricing the shares in Britoil. The Government are very much aware of the need to have such advice and an independent firm of consulting petroleum engineers, Energy Resource Consultants, are already preparing a study of Britoil's oil assets. This study will be available to the Government and their advisers in pricing the shares, and a summary of it will be published in the prospectus. The Government are also receiving advice from S. G. Warburg and Company Limited on the offer and we will be consulting them on the price. I hope that the Committee will agree with me that there is no doubt about the Government's intention to obtain proper professional advice in connection with the offer for sale. I do not believe that there really is any requirement to write this into the Bill.
Then we come to the second part of the amendment—
Lord Beswick: Surely the noble Earl is going to deal with this question of the timing? Is he or is he not going to give an assurance to the Committee that the timing will be dependant upon the advice received from these independant professional advisers—or is it just going to be a question of parliamentary conveinence?
The Earl of Mansfield: Ever eager in his lust for pursuit, the noble Lord, Lord Beswick, has anticipated my remarks. He himself said that he hoped the offer would not be, as it were, subject to the parliamentary timetable—which, of course, it would be if this amendment was accepted. So perhaps I can develop my remarks, and I promise the noble Lord that I will come to his particular point of concern.
What I was going to say before I was interrupted was that the second part of the amendment would in effect require that an independent valuation of Britoil be laid before Parliament and that the price of the shares in the offer for sale should reflect at least 95 per cent. of this value. The noble Lord, Lord Beswick, will now see how the importance of timing comes into the whole matter, when one considers what the second part of the amendment would write into the Bill.
The noble Lord, I am sure, with his commercial experience, will agree that pricing in a flotation such as this has to be done at the last possible moment. I am sure the noble Lord, Lord Whaddon, will agree that that moment comes and, when it comes, whoever is doing the pricing has to take into account all the relevant factors which obtain at the time when the pricing is made. They may include such matters as future oil prices, the exchange rates so far as the dollar is concerned, and the discount rate at which future
1144
earnings have to be assessed. All these things have to be taken into account.
We also have to look closely at the expected after-tax earnings of Britoil and the dividends that it may be in a position to pay. We have to compare those dividends with other quoted companies in a similar position. In the light of those assessments, we have to discuss with our merchant bank advisers the price that reasonably can be obtained in a particular state of the market. I do not believe that this can be done, possibly, in a simplistic rule of thumb manner. In fact the remark I made in respect of a previous amendment still holds good so far as this amendment is concerned: that the publication of a valuation of the company in advance of the offer, which is implied in this particular amendment, could be prejudicial to the success of the offer and it might very well mislead future shareholders.
What I say to the Committee, and in particular to the noble Lord, Lord Beswick, is that the precise timing of the sale of the shares remains subject to market conditions. The Government will have to be satisfied that the price obtained for the shares represents fair value for the taxpayer. I have already said words like these in a debate on a previous amendment today. We have always made it clear that our aim of selling the shares in the autumn is subject to market conditions. We will not go ahead unless we are satisfied that the selling price represents fair value to the taxpayer. If there is a convincing case for delaying the sale until next year then of course we shall, as it were, proceed along that particular path.
I hope, therefore, that I have satisfied the Committee that on both these points the Government are taking a very serious and close look at the position which will obtain at the time when the shares are to be sold. We are taking the very best advice that can be obtained, and I can assure the Committee that there is no question of rushing headlong into the sale of these shares. There is no question of selling them at all unless there is advice, which will be taken, that the price which is likely to be obtained will be satisfactory from the point of view of the public.
Lord Whaddon: I understood the noble Earl to say that he was taking technical advice in connection with the present sales of shares, which I am pleased to hear. Can he assure the Committee that such practice will apply in any future sale of shares so as to make sure they are not sold at considerably below the real asset value underlying the share value?
The Earl of Mansfield: I would have thought that that was implicit in my argument. I have not taken the point which is implied in the noble Lord's amendment, that it is not going to be BNOC that sells these shares to the public, it is going to be the Secretary of State. I do not believe in taking technical points of this nature so far as this type of amendment is concerned. But it is going to be the Secretary of State who is going to be responsible for the sale of these shares, both at the original flotation and on any subsequent occasion.
Lord Whaddon: I thank the noble Earl. I feel that his reply warrants consideration and possibly the

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tabling of a similar amendment at a later stage. I therefore beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 14 not moved.]
Clause 3 agreed to.
Clause 4 [New financial structure of Oil Corporation]:
Lord Bishopston Lord Bishopston moved Amendment No. 15:
Page 5, line 39, at end insert ("so long as the amount does not exceed £1 million").
The noble Lord said: This is a probing amendment to give the Government an opportunity to give the Committee more information regarding the position after privatisation of BNOC and when some of its functions have been taken away. I think the Committee would be grateful to know more about the financial and capital structure. BNOC will be a trading undertaking with few assets on which money can be borrowed, and there will be restrictions, of course, on its purchase and sale of oil; the prospects for the oil undertaking are uncertain, to say the least. The possibility of loss of sums of money appears to be likely. I wonder whether the Minister would tell us how BNOC is to be financed. Can he say something about its potential for profit and something about its cash flow?
I notice in Clause 4(2) that the Government anticipate a debt at the start, because the clause says:
"On the commencement date the Oil Corporation shall assume a debt due to the Secretary of State (in this section referred to as the Oil Corporation's commencing debt) of such amount as may be determined by the Secretary of State, with the approval of the Treasury and after consultation with the Corporation, to be the excess of the aggregate of the sums paid out of the Account under"
the sections mentioned.
It would be interesting to have some idea of what size this kind of indebtedness might be. If the corporation is to do the job which will be expected of it, it would be helpful to know how it is going to cope with its liabilities and with such assets as it has at the time of the changeover. We would certainly like to use this probing amendment for the Government to give some information on the lines that I have put forward.
The Lord Advocate (Lord Mackay of Clashfern): It has been explained that the purpose of this amendment is to probe the Government's proposals in this area and therefore I shall not say anything particular about the figure of £1 million which has been selected for the amendment.
The purpose of Clause 4 is to set up a new financial structure for the corporation. Under the Petroleum and Submarine Pipe-lines Act 1975, BNOC is obliged to pay all its receipts, except where the Secretary of State has issued exemptions, into the National Oil Account. It is able to draw on the account to meet its expenditure. No interest is payable on the sums drawn. We have taken the view that there is no reason for the corporation to continue to have privileged access through the National Oil Account, to royalty and other moneys—that is to moneys to which the corporation itself is not directly entitled. Nor should it
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have access to interest-free money. As noble Lords know, this access to interest-free money has been much criticised by the Public Accounts Committee. Clause 4, therefore, ends BNOC's access to the National Oil Account and in place of the corporation's net drawings from the account enables the Secretary of State to set a commencing debt at the appropriate level. The provision has, however, been drafted to cover a number of situations.
First, if privatisation were delayed. As this House knows, our intention is to proceed with the privatisation of the corporation's upstream business. But in terms of the financial framework replacing the link with the National Oil Account we have thought it right to cover the possibility of privatisation being delayed for any reason—for example, because of the market situation or something of that sort. In these circumstances, since we would still wish to see an end to the National Oil Account, the clause could be used in the meantime, until flotation took place, to set up an appropriate capital structure for the corporation as a whole based on its net drawings from the account.
Secondly, the clause could be used to set a commencing debt for a transitional period, after the ending of the link with the National Oil Account but before flotation. This could enable the National Oil Account debt to be refinanced. Although no decisions have yet been taken on Britoil's capital structure, it would be possible for the company to negotiate a new loan to replace the whole or part of the corporation's net drawings from the National Oil Account. We shall, of course, want to be sure that the company is set up with a sound financial structure in order to get fair value for its shares.
Thirdly, turning to the corporation's position after privatisation of Britoil, it is not our intention to require the trading corporation to carry the commencing debt envisaged in Clause 4. BNOC has drawn from the National Oil Account primarily to finance its capital expenditure programme which relates to the upstream side of the business. The trading corporation itself will need little in the way of fixed assets. It will, however, need working capital and we therefore believe it is right that BNOC should be allowed to retain an element of the reserves it has built up in recent years. This, together with a short-term borrowing facility, would be sufficient to meet its financial needs.
Clearly, to enable this clause to be used effectively, there needs to be flexibility to determine the level of the commencing debt and accordingly, although the formula is given that I have indicated, the Secretary of State may fix another figure if he thinks that to be right.
As regards the present situation, I think that I can give some indication of the level of the figure that would be arrived at using the formula if I say that the level of the commencing debt on the basis of the formula in subsection (2) of the clause would have been just under £200 million at 31st December 1981. I hope that that gives the noble Lord the sort of information which he was seeking.
Lord Tanlaw: Before the noble and learned Lord sits down, I should like to ask him one question on

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accountability. After privatisation, the corporation will, in effect, be commodity trading on the spot market with oil to the tune of about 500,000 barrels a day. Four hundred thousand barrels a day would be in the area of what I would call "actuals", with 100,000 based on market conditions. There could be very considerable risks in this and also very considerable profits. The question I wish to ask the noble and learned Lord, Lord Mackay, is: will the Public Accounts Committee have sight of the daily open position book of the trading corporation in order to see its trading movements on a daily basis before arriving at either its net profit or net loss at the end of the financial year?
Lord Mackay of Clashfern: Certainly the Public Accounts Committee will be able to review the situation of the trading corporation in accordance with the ordinary principles. I am not certain whether the noble Lord is asking me whether that would happen on a day-to-day basis. If that is the question, I would think not. In other words, I do not think that the review would take place on a day-to-day basis, but I think that the Public Accounts Committee would be able to get any information it wished about the basis on which the ultimate accounts of the trading corporation were made up.
Lord Bishopston: I thank the Minister for his clarification, but he will, of course, be aware that this will now be a major one-product company and will no longer be part of a major international concern. But it certainly warrants the Government keeping in mind some of the problems with which the new undertaking will have to deal, and the points made by the noble Lord, Lord Tanlaw, seem to be relevant in this situation. In view of the Minister's reply and clarification of some of the issues, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 agreed to.
Clause 5 agreed to.
Clause 6 [Grants by Secretary of State to Oil Corporation]:
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 16:
Page 6, line 39, leave out from ("Act") to end of line 40 and insert ("(power to enter into, and give effect to, participation agreements)").
The noble and learned Lord said: I beg to move Amendment No. 16. I hope that this amendment need not detain your Lordships long. As the Committee is aware, the power to pay grants to BNOC under Clause 6 is limited to expenditure incurred by, or in connection with, the corporation's power to give effect to participation agreements.
The reference to participation derives originally from Section 2(1)(e) of the Petroleum and Submarine Pipe-lines Act 1975, and it is to that section that Clause 6(1) refers. However, Section 2(1)(e) of the 1975 Act was drafted with a rather different concept of
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participation in mind than has, in fact, developed since then.
The first difference is that participation policy now extends to onshore as well as offshore oil fields. It is for this reason that the description of participation in parenthesis at the end of Clause 6(1)—
"activities connected with petroleum beneath controlled waters"—
needs to be adjusted.
The second difference is that in 1975 participation was conceived in terms of BNOC acquiring a majority equity stake in producing fields. In practice, however, it has developed into the present system of options to purchase at market price up to 51 per cent. of the oil produced.
I should like to refer briefly to a later amendment to Schedule 3—No. 54 on the Marshalled List—which is linked to this amendment. Because of the way participation policy has developed, there is the possibility of a difference of interpretation between the definition in the 1975 Act and the more recent definition in the Participation Agreements Act 1978. It is this second Act that requires a statement giving particulars of agreements to be laid before Parliament, as has been mentioned earlier. The purpose of the amendment in Schedule 3, therefore, is simply to bring the reference to participation in the 1975 Act up to date. With that slight digression I ask the Committee to accept Amendment No. 16. I beg to move.
On Question, amendment agreed to.
10.16 p.m.
Lord Bishopston Lord Bishopston moved Amendment No. 17:
Page 6, line 43, at end insert ("and the total of all grants made to the oil corporation in any one financial year shall not exceed £1 million").
The noble Lord said: Following the amendment which has just been approved concerning grants, this amendment is also concerned with grants made by the Secretary of State to the oil corporation. Clause 6(2) says:
"Grants under this section may be made subject to such conditions as the Secretary of State with the approval of the Treasury may determine".
The addition of the words on the Marshalled List are meant to give the Minister once again an opportunity, this time to refer to the grant situation.
Under Clause 6(2) grants may be made, but it would be useful to be able to get the reply to the question, what does this mean in the case of the exercise of the powers of the BNOC?
As we all know, the Industry Act 1972, and indeed other legislation, has qualifications. It has limits and restrictions as to what is granted and how it is to be granted, and for what purposes. Can the Minister tell the Committee for what reasons grants will be necessary, and under what provisos will grants be made to the corporation?
Can the Minister tell us more about the financial structure so far as the grant side is concerned? He has already made some reference to the aspect so far as the debt is concerned, but we should like to know in relation to grant need something more about the assets and reserves of the corporation and also something about its capitalisation. Of course, not all state

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enterprises need grants. Indeed, the gas corporation makes grants to the Government in order to help reduce taxation. It may not wish to but it has no alternative. Indeed, this is happening in the case of other public enterprises which are helping the right honourable lady with her national housekeeping. We have tabled the ceiling figure of £1 million in order to probe what the Government have in mind, and we need to know more about the finances after privatisation, and something more about grant availability. With those words, I beg to move.
Lord Mackay of Clashfern: Participation agreements will remain in the public sector after privatisation. The trading arm of BNOC is to continue as a public sector corporation; its prime purpose will be trading in participation oil. It is in the national interest that BNOC should continue to give effect to the participation agreements. The purpose of Clause 6 is to provide a reserve power which would enable the Government to pay grants to the corporation to help meet expenditure incurred in connection with giving effect to the agreements, should this ever prove necessary. I hope that answers the question about the purpose.
The trading arm has operated successfully and to a large extent separately from the rest of the corporation for a number of years. There is no reason why this should not continue. Normally, as a trader, BNOC arranges purchases and sales of oil on a back-to-back basis. But finance is needed to cover any mismatch which may occur in the timing of payments. In normal times we would expect the corporation's reserves to be sufficient for this purpose. There may, however, be occasions on which BNOC may be unable to match exactly the buying and selling price for all the oil which it must take and a loss could ensue. In such a situation, if the loss were unexpectedly large, or in the case where reserves had gradually been used up, after privatisation the trading arm would no longer be able to rely on the rest of the corporation for support. We have therefore thought it prudent to include provisions in the Bill to enable grant to be paid to the corporation should unexpected circumstances arise.
For the powers under this clause to be effective, they must be sufficient to cope with any reasonable need. Oil trading, by its very nature, must involve some risk; a single cargo of 100,000 tonnes is worth around £10 million. The corporation will continue to handle a very large number of cargoes each year, amounting to some 50 per cent. of North Sea output. While they have so far run their operations successfully, the risk of making a trading loss does exist. It always has existed and is not, of course, increased by privatising the upstream business of the corporation.
Against that background, we believe it would be imprudent to limit the payment to any particular figure—say, £1 million—in any one year. I would stress, however, that this is very much a reserve power. We do not envisage the payment of grant in the normal course of affairs. Any grants paid will be subject to parliamentary scrutiny through the standard Estimates and Vote procedure. If the corporation were subsequently able to make good any losses, we should still have the powers under Clause 5 to extract surplus cash from the corporation. So, if, on a long view, too much
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had actually been paid in grant, the powers are available to recover what has turned out in the longer view to have been an overpayment. I hope that, in the light of that explanation, the noble Lord will feel able to withdraw the amendment.
Lord Bishopston: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6, as amended, agreed to.
Clause 7 agreed to.
[Amendment No. 18 not moved.]
Clause 8 agreed to.
Lord Skelmersdale: This seems an appropriate moment at which to adjourn the Committee stage. I therefore beg to move that the House be now resumed.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Commercial Banking Company of Sydney Limited (Merger) Bill [H.L.]
The Bill was presented and read a first time.