British Shipbuilders Bill

HL Deb 29 March 1983 vol 440 cc1462-84

3.6 p.m.

Lord Trefgarne

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Trefgarne.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clause 1 [Modification of British Shipbuilders' functions]:

The Chairman of Committees (Lord Aberdare)

I have to point out that if Amendment No. 1 is agreed to, I cannot call Amendment No. 2.

Lord Bruce of Donington moved Amendment No. 1: Page 1, line 10, leave out subsection (2).

The noble Lord said: Since the Lord Chairman has ruled that if Amendment No. 1 is not carried—

Lord Aberdare

Is carried.

Lord Bruce of Donington

I beg the noble Lord's pardon. The noble Lord, Lord Trefgarne, when he was moving the Second Reading of this Bill, dealt with the reasons why Section 2 of the Aircraft and Shipbuilding Industries Act 1977 should cease to have effect. It will be recalled that Section 2 of the 1977 Act imposes certain duties on British Shipbuilders. At Section 2(2) it is stated: It shall be the duty of British Shipbuilders to promote and secure the promotion by its wholly owned subsidiaries of—

1. (a) the efficient and economical design, development, production, sale, repair and maintenance of ships and slow speed diesel marine engines; and
2. (b) research into matters relating thereto".

The way the noble Lord presented this on Second Reading was that it somehow represented a liberation of British Shipbuilders—a relief of the onerous obligation to have a duty. When members of Her Majesty's Government come saying that they want to liberate a public corporation from certain inhibitions, your Lordships must forgive me if I am slightly suspicious of it. It is not normally the attitude, particularly of Her Majesty's present Government, to want to liberate public corporations. I am very curious indeed to see why this step has been carried out.

It will be recalled that the party opposite lays very heavy emphasis indeed on the necessity for people to have duties and responsibilities, as well as certain rights. In more recent years there have been many endeavours to emphasise to the public at large, as well as to corporations, that under a democracy they have not only rights but also duties. There is nothing particularly wrong in a corporation having a specific duty. One of the purposes behind the founding of the original public corporations was that they should not be seen to be merely the creatures of Government or any Government department. The whole idea of the public corporation was that it should have a statutory status all its own, and for the present Government to seek to take away the duties of this particular corporation—British Shipbuilders—must be seen to be in sharp contrast to the original philosophy behind its setting up.

Your Lordships' Committee will recall that in the Electricity Act 1957, for example, duties of a general character were laid upon the Central Electricity Generating Board, and under the Coal Industry Nationalisation Act 1946 duties were laid upon the coal industry. In such legislation the same phrase is always used: "Charged with the duties of …". I do not think that I should be exaggerating if I were to say that the chairmen of such corporations regard the fact that their coporations are charged with a specific duty, or a series of general duties, as being the bulwark of their independence.

It is quite true that in the 1977 Act the corporation itself is protected against proceedings in the courts. Section 2(10) of the 1977 Act states: Nothing in this section shall be construed as imposing upon either Corporation"— the other corporation referred to is British Aerospace— directly or indirectly, any form of duty or liability enforceable by proceedings before any court". Why therefore should it now be necessary to eliminate the duties as such?

One explanation given by the noble Lord during Second Reading was that the revised form in which the coporation is given powers, subject in certain circumstances to the direction of the Secretary of State, as distinct from duties, is to enable it to embark upon joint ventures. That was the term that was used. If one looks at Clause 1(3) of the new Bill, one finds that specific permission is given. The subsection states: and British Shipbuilders may also promote the carrying on of any of those activities to such extent as it thinks fit by other persons none of whom need be a wholly owned subsidiary of British Shipbuilders". I take it that it is upon those words that the noble Lord relies for giving British Shipbuilders powers to embark upon joint ventures, once the Bill has passed. However I really cannot believe that. I accept the noble Lord's assurances in good faith, but if one turns back to the Aircraft and Shipbuilding Industries Act 1977, one finds that Section 3(1)(b) states that the corporation may carry on with the consent of, or in accordance with the terms of any general authority given by the Secretary of State any other activities to which the consent or authority relates". Therefore it is quite clear that the power existed even under the old Act of 1977, and in that Act there was nothing that would have prevented British Shipbuilders from participating in joint ventures. To put no finer point on it, I would add that Section 3(2)(c) of the 1977 Act states that the corporation has power to enter into partnerships with other persons …". It is a very fine point. A joint venture is of course a partnership between people for the exercise of a specific function, not necessarily for a certain duration of time. I believe that it is beyond doubt to think that a joint venture would not come under Section 3 of the old Act, taking together the two subsections that I have quoted.

That brings me back to the question of why at this stage the Government wish to eliminate the statutory duties of the corporation; and I wish to put forward another possible explanation. I believe that the use of the term "duty" in the 1977 Act gives British Shipbuilders a degree of independence sufficient to enable it to resist any efforts to mutilate the industry by—to use the colloquial term—"flogging off" vital parts of it. The Government are quite bent on the dismemberment of British Shipbuilders, and indeed have made no secret of their intention, once the time is propitious, to dispose possibly of its warships division, or at any rate a significant part of that division. Therefore, it seems to me that had it been allowed to remain, the word "duty" might have given the chairman of British Shipbuilders sufficient grounds for resisting any endeavours to mutilate the corporation on the basis that they were likely to impinge upon the general duty entrusted to him by Parliament.

It may well be that that is not the case, but I should have thought that it was far better to leave public corporations independent of the Government, with a direct duty imposed by statute. I am firmly of the opinion that the reasons that I have given for the elimination of the duties are valid, and what the Government are really afraid of is that the chairman of British Shipbuilders will take advantage of the 1977 Act in resisting the mutilation to which I have referred. That is why the Government desire to eliminate the duties, and for our part we believe that they should remain. I beg to move.

Lord Glenarthur

I have listened with care to the noble Lord, Lord Bruce of Donington. I have also studied with interest what he said on Second Reading. It is important that British Shipbuilders should be freed from the constraints of the existing legislation to which the noble Lord referred. It is plainly absurd, in our view, that at present British Shipbuilders could be prevented from withdrawing from an activity when it considered it commercially desirable to do so. Repealing Section 2 of the 1977 Act will free British Shipbuilders to choose whether to engage in activities that it is at present obliged by statute to undertake. This is a freedom that the corporation's international competitors enjoy and which the amendment proposed by the noble Lord seeks to deny.

The noble Lord talked further about duties and also referred to Section 3. It is true that British Shipbuilders has very wide powers under Section 3 of the 1977 Act to form businesses and joint ventures and to sell off holdings in wholly-owned subsidiaries. But those powers have to be exercised within all the limitations imposed by the Act, particularly the strict duties imposed by Section 2, such as the duty to promote the mainstream activities of the wholly-owned subsidiaries.

That is one general fundamental restriction. There is another. The existing Act does not contemplate mainstream activities being carried on by partly-owned subsidiaries. As a result, short, perhaps, of distress sales to keep the rest of the mainstream business going, British Shipbuilders is not able to participate in a normal commercial way with the private sector in shipbuilding ventures except in peripheral activities that are not covered by Section 2 duties. What we seek to do is to get rid of the essentially nationalising flavour of the old Act and open the way for flexible arrangements with private enterprise. The noble Lord and the Government are clearly widely at odds on this issue. This was made plain by the noble Lord at Second Reading. Repeal of Section 2 will enable British Shipbuilders to act in its best interests. I must therefore ask your Lordships to reject the amendment.

Lord Bruce of Donington

I should like to draw the noble Lord's attention to Section 3(3) of the 1977 Act, where he will find that the corporation can dispose of any of its wholly-owned subsidiaries with the permission of the Secretary of State. The duties given in the old Act and set out in Section 2 did not act as an effective bar to British Shipbuilders ceasing any of its activities. It is clearly stated in Section 3 that, provided the Secretary of State consents, it can stop. The noble Lord may say that the application to the Secretary of State itself imposes a responsibility. As the Bill installs a whole new series of directions by the Secretary of State which the Secretary of State may give to British Shipbuilders, this seems to be small in comparison. The same is true of other sections. Section 3 states: Subject to subsection (3) below, each Corporation shall have power to enter into partnerships with other persons". If the noble Lord examines the Interpretation Act 1978, he will find that the term "person" includes corporate bodies. So there is no reason why there should not be joint activity. I am afraid that the explanation does not hold.

Lord Glenarthur

I should like briefly to respond to the noble Lord on Section 3. The noble Lord has possibly not realised that all of British Shipbuilders powers in Section 3 are subject to duties imposed in Section 2.

Lord Bruce of Donington

The explanations given by the noble Lord are not satisfactory, as he must know. There is no reason at all why British Shipbuilders under the old Act, subject in some instances to the approval of the Secretary of State, could not do anything that it wished to do within its general objects. I have the gravest misgiving, for the reasons I have stated, about eliminating the word "duty" in this instance. The noble Lord gave some clue about it in his last intervention when he was careful to point out that under the old Act the provisions of Section 3 were strictly within the provisions of the section imposing the duty. Therefore, he must regard the duty as being a bar of some kind to his own department. I regret that we have to press the amendment.

3.27 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 76; Not-Contents, 104

DIVISION NO. 1
CONTENTS
Airedale, L.	Kirkhill, L.
Amherst, E.	Leatherland, L.
Amulree, L.	Listowel, E.
Ardwick, L.	Mackie of Benshie, L.
Aylestone, L.	McNair, L.
Banks, L.	Milford, L.
Beaumont of Whitley, L.	Mishcon, L.
Beswick, L.	Nicol, B.
Birk, B.	Oram, L.
Bishopston, L. [Teller.]	Peart, L.
Blease, L.	Phillips, B.
Blyton, L.	Plant, L.
Boston of Faversham, L.	Ponsonby of Shulbrede, L.
Briginshaw, L.	Prys-Davies, L.
Bruce of Donington, L.	Rathcreedan, L.
Byers, L.	Rhodes, L.
Chitnis, L.	Rochester, L.
Cledwyn of Penrhos, L.	Sainsbury, L.
Collison, L.	Sefton of Garston, L.
Cooper of Stockton Heath, L.	Serota, B.
David, B. [Teller.]	Shinwell, L.
Denington, B.	Simon, V.
Elwyn-Jones, L.	Stedman, B.
Evans of Claughton, L.	Stewart of Alvechurch, B.
Ezra, L.	Stewart of Fulham, L.
Fisher of Rednal, B.	Taylor of Gryfe, L.
Gaitskell, B.	Taylor of Mansfield, L.
Gladwyn, L.	Tordoff, L.
Glenamara, L.	Underhill, L.
Grey, E.	Wallace of Coslany, L.
Hatch of Lusby, L.	Walston, L.
Jacques, L.	Wells-Pestell, L.
Jeger, B.	Whaddon, L.
Jenkins of Putney, L.	White, B.
Kagan, L.	Willis, L.
Kaldor, L.	Wilson of Langside, L.
Kennet, L.	Winstanley, L.
Kilmarnock, L.	Wootton of Abinger, B.

NOT-CONTENTS
Airey of Abingdon, B.	Beloff, L.
Aldenham, L.	Belstead, L.
Allerton, L.	Brookeborough, V.
Balfour of Inchrye, L.	Campbell of Croy, L.
Belhaven and Stenton, L.	Carnegy of Lour, B.

Cathcart, E.	Long, V.
Chelwood, L.	Loudoun, C.
Clancarty, E.	Lucas of Chilworth, L.
Clifford of Chudleigh, L.	Lyell, L.
Cockfield, L.	McAlpine of Moffat, L.
Cork and Orrery, E.	McFadzean, L.
Cottesloe, L.	Macleod of Borve, B.
Cox, B.	Mansfield, E.
Craigavon, V.	Margadale, L.
Craigton, L.	Marley, L.
Cullen of Ashbourne, L.	Merrivale, L.
Daventry, V.	Mersey, V.
Davidson, V.	Mills, V.
De La Warr, E.	Molson, L.
Denham, L. [Teller.]	Newall, L.
Derwent, L.	Northchurch, B.
Drumalbyn, L.	Nugent of Guildford, L.
Dulverton, L.	Onslow, E.
Eccles, V.	Orkney, E.
Ellenborough, L.	Orr-Ewing, L.
Elles, B.	Plummer of St. Marylebone, L.
Elliot of Harwood, B.
Elton, L.	Polwarth, L.
Ferrers, E.	Porritt, L.
Ferrier, L.	Rankeillour, L.
Fortescue, E.	Rawlinson of Ewell, L.
Fraser of Kilmorack, L.	Rochdale, V.
Gainford, L.	St. Davids, V.
Gisborough, L.	St. John of Bletso, L.
Glanusk, L.	Sharples, B.
Glenarthur, L.	Stamp, L.
Glenkinglas, L.	Stodart of Leaston, L.
Gray, L.	Sudeley, L.
Greenway, L.	Swansea, L.
Hailsham of Saint Marylebone, L.	Swinton, E. [Teller.]
	Taylor of Hadfield, L.
Harmar-Nicholls, L.	Terrington, L.
Hayter, L.	Teviot, L.
Hill of Luton, L.	Thomas of Swynnerton, L.
Hylton-Foster, B.	Trefgarne, L.
Ilchester, E.	Trenchard, V.
Inglewood, L.	Trumpington, B.
Kilmany, L.	Vaux of Harrowden, L.
Kinloss, Ly.	Vivian, L.
Lane-Fox, B.	Ward of Witley, V.
Lauderdale, E.	Westbury, L.
Lawrence, L.	Wise, L.
Lindsey of Abingdon, E.	Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

3.34 p.m.

Lord Bruce of Donington moved Amendment No. 2: Page 1, line 10, at beginning insert ("Subsections (1), (2), (3), (4), (5), (6), (7), (9) and (10) of").

The noble Lord said: I beg to move Amendment No. 2. The reason for tabling this amendment is to secure a reversal of the decision by the Government to eliminate Section 2(8) of the Aircraft and Shipbuilding Industries Act 1977, which reads: In carrying out its functions under this Act, it shall be the duty of each Corporation to promote industrial democracy in a strong and organic form in its undertakings and the undertakings of its wholly owned subsidiaries". It was claimed by the noble Lord opposite that one of the functions of the new Bill was to eliminate the responsibilities of the corporation in regard to its commitment to promote industrial democracy. That is something with which we on this side of the Committee most profoundly disagree.

It seems a long time now since the Bullock Report was debated in your Lordships' House; and even on that occasion, when the party opposite addressed itself to the problem, "it came to bury Bullock, not to praise him". In other words, the party opposite has never done anything else but express its distaste of any form of the promotion of industrial democracy in industry in this country, and this despite the experience of our fellow members in the European Community. Perhaps your Lordships will bear with me if I refer to paragraph 13 of the Bullock Report. It says: As part of a general movement to involve employees more effectively in decision-making, some eight countries in Western Europe now have schemes of one kind or another in operation which secure or at least make possible the representation of employees on company boards. It is now 25 years since Mitbestimmung (co-determination) was introduced in the Federal Republic of Germany. This year has seen further steps to increase the proportion of employee representatives on the supervisory boards of companies employing more than 2,000 people. In Sweden, 1976 has also seen confirmation of the three-year experiment in putting employee representatives on company boards. The fact that the West German and Swedish economies, despite differences between the social philosophies of the two countries, have been among the most successful in the world—not least in avoiding the industrial conflict which has cost Britain so dear—has not excaped notice". Then in the conclusion of the Bullock Report noble Lords will recall that at paragraph 15 it says: First, we believe that there is a widespread recognition in this country of what the EEC Green Paper has called 'the democratic imperative' for employee participation, described in that document as follows: 'those who will be substantially affected by decisions made by social and political institutions must be involved in the making of those decisions'".

The debates that have taken place in your Lordships' House and indeed, in another place, and in the country at large, have shown that there is considerable disagreement as to what form industrial democracy should take. There is even division within, for example, certain sections of the trade union movement as to what form industrial democracy might take. So far as I understand it, there are variations of views in both the Liberal Party and, indeed, our own party on this matter. But one thing upon which I think we have all been agreed is that some progress must be made towards industrial democracy. Nothing has been more depressing than the persistent attacks which have been made by the party opposite—whether in Government or not—on the EEC proposals in connection with the formal establishment of industrial democracy in Britain.

We know perfectly well—and there are still many of us in your Lordships' House who remember this—how valuable it was during the war to have, for example, promotion in the Armed Forces taken well away from the previous old boy and social network within which it previously occurred. During the war we had War Office selection boards in order that there could be recruited from the ranks of the Armed Forces people who were fully capable of exercising leadership. Indeed, they proved a very considerable success. It was found that even though in civil life one did not have very much money or social connections—one might even have been a grocer or someone of that kind—nevertheless one could rise to the highest ranks in the Armed Forces. There was no question that the progressive breaking down of the social class barriers which had hitherto subsisted to a very large extent within the Armed Forces themselves contributed powerfully to the unity of the nation as a whole and to the effectiveness of the Armed Forces themselves.

Such, too, was it the case in industry itself during the war. Nor is this a matter for amusement. It is a matter of very great seriousness on which the future of this country may yet very well depend. During and immediately after the war it was found that the whole machinery of consultative committees, through which workers in factories contributed in an ever-increasing degree to the decision-making and to the creative suggestion-making of our wartime factories, proved to be a very decisive advantage in the logistical supply of the struggle itself. The idea that the ordinary worker at the bench should participate more and more in the decision-making process and in the planning process within the works in which he worked persisted for some time afterwards.

Up to now, at any rate, it has generally been accepted that progress in this direction—even though its final form still remains to be argued out and determined—is of enormous potential value to the country. The noble Lord may well say, as indeed he said on Second Reading, that his party still believes in worker participation. All I shall say is that his actions strongly belie it. In its public and political pronouncements over the past three years it has shown a progressive hostility to any kind of worker involvement in management. In fact, in any event it has shown increasing arrogance in its whole attitude towards the ordinary working person. I have no need to go further in this than to quote one of the party's own leading philosophers on the subject. There was a time when Sir Keith Joseph was the party's guru on matters of this kind, but it will readily be agreed that Mr. Peregrine Worsthorne is probably hot second on the list, being the deputy editor of the Conservative Party's house journal, The Sunday Telegraph. This is what he said in March: I am a Tory Marxist, in the sense of accepting the need to take sides in the class war, even if, so to speak, on the other side. It is difficult to overestimate the extent to which the writings of Marx strengthen my conservatism, by making me aware of the nature of the proletarian danger and the need to combat the threat by all means fair and not so fair. Tories like Sir Ian Gilmour"—

Lord Derwent

Perhaps I may interrupt the noble Lord briefly. I am becoming rather fogged. Can the noble Lord explain to me what this has to do with the Bill

Lord Bruce of Donington

Yes, certainly. Even the noble Lord should understand that when one considers the application of a particular clause which has for its purpose the need for the abolition of any move to industrial democracy, it is quite proper—and the noble Lord would do it in his own place—to discuss the attitude of the party opposite towards exactly that.

Lord Derwent

I was not suggesting that it was improper; I just thought that it was rather boring.

Lord Bruce of Donington

I can understand that it will be boring to the noble Lord, but the noble Lord has to take his medicine as well as give it, and I propose to continue. The article in The Sunday Telegraph continues: Tories like Sir Ian Gilmour are naive, precisely because they knew nothing of Marx. Although Marx intended to teach the proletariat the fight, he also taught some of the owning class to be equally militant. The present Tory recrudescence owes more to Marx than it does to Adam Smith. I am suggesting that the attitude of the Conservative Party and the present Government—as exemplified very often not only in the words of the Prime Minister but also in those of Mr. Norman Tebbit—is completely hostile to any progress being made towards industrial democracy. Their inclusion of this particular clause in the Bill proves it, and I invite the Committee to support our amendment. I beg to move.

Viscount Simon

I should like warmly to support the amendment moved by the noble Lord, Lord Bruce of Donington. As he rightly said, in different parts of the Committee we take different views as to how best to promote employee involvement in decision-making. He used the phrase, which has now become popular, "industrial democracy", which, as I think I have said in your Lordships' House before, is a phrase which I do not like because I think it gives rise to a misunderstanding of what we are getting at.

However, on employee involvement in decision-making, we on these Benches and our allies are very keen to see this advanced. In the original Aircraft and Shipbuilding Industries Act we had this clause which required the corporations—and now it is only the Shipbuilding Corporation—to promote industrial democracy in a strong and organic form in its undertaking. On Second Reading I think it was suggested that this was a fairly nebulous expression of opinion, and I rather agree; I do not like the way in which it was put. Nonetheless, it was put, and it is a spur to the corporation to use its best endeavours to advance employee involvement in decision-making.

I think that the noble Lord, Lord Trefgarne, at Second Reading doubted whether it was very effective. It may not be very effective. I dare say that if it had never existed, there would be no great point at this stage in putting it in. But I maintain that, as this requirement does exist, a great deal of harm will be done by removing it, for it will give everybody the impression that this is something which the present Government do not want to see followed up. I very much look forward to hearing what the noble Lord, Lord Trefgarne, has to say on this matter, and I hope he may be a little flexible.

I know that it may be suggested—and I was reminded of this in the discussion yesterday in the House on the Energy Bill—that to leave this duty with British Shipbuilders might be unfair because the proposed hived-off parts would not have this obligation upon them. That is an argument which should be met in this way. The Government and the national industry should lead the way on these things. British Shipbuilders should be prepared to encourage the development of employee involvement, and if other people do not follow that example I am sorry; but at least British Shipbuilders should set the example.

3.51 p.m.

Viscount Rochdale

I had not intended to take part in this debate, but I feel I must say a word in regard to what the noble Lord opposite said on industrial democracy, and particularly in regard to its relationship with shipbuilding. I happen to have taken part in the debate on the Bullock Report in your Lordships' House. At that time I had only recently given up the chairmanship of what was then the largest company in Northern Ireland: the shipbuilders, Harland and Wolff.

The Government of the day—the noble Lord's Government—had expressed the view that they wanted industrial democracy to be introduced there. I expressed absolute co-operation with them and was willing to help as much as I could. But as things turned out, the way I hoped to do it—and I believe I could have made a success of it, and I say that in all humility—was a different way from the way that the Government wished to do it. Naturally the Government's view prevailed, a plan was drawn up, it had much discussion, but no employee member ever reached the board and, so far as I know, never has reached the board.

The point I particularly want to make is that the responsibility for that was not that of those on this side of the House, it was entirely the responsibility of the trade unions who did not wish to play. That is the situation as it has continued, so far as I know, up to today. I am in favour of a degree of industrial democracy, and I do not believe that my views are very different from those of a great many other of my noble friends on this side of the House, but not necessarily in the way that either is practised in the Community or as recommended by Bullock.

Lord Trefgarne

I am obliged to my noble friend for his intervention, speaking, as he does, with the great weight of experience in a major shipbuilding company. But as I said at Second Reading, industrial democracy goes hand in hand with good management. I reminded your Lordships that in our debate in 1977 the noble Lord, Lord Melchett, who was then speaking for that Government, said: Industrial democracy must develop from the people involved". It should not follow a rigid formulation laid down by Government. The very phrase "strong and organic", the noble Lord, Lord Melchett, admitted had no precise meaning. I agreed with the noble Lord, Lord Melchett, that far at least then as I agree now. That is why we are removing this duty from British Shipbuilders.

In any event, the duty is somewhat inexactly expressed, as the noble Viscount, Lord Simon, admitted. I do not know what "strong and organic" means. It was clear from the debates in 1977 that many of your Lordships did not know what it meant either. Indeed, the Government of that day were wise enough to include subsection (10) in Section 2, which said: Nothing in this section shall be construed as imposing upon either Corporation, directly or indirectly, any form of duty or liability enforceable by proceedings before any court.". I should think not. The courts would have had a field day with that particular subsection.

We are not saying to British Shipbuilders that they should now cease making any attempts to promote employee participation. British Shipbuilders have made considerable efforts in this direction and have established steering groups of employees and management at most yards. The pay agreement provides for joint monitoring of progress on productivity and other matters. We believe, however, that this should be a matter for British Shipbuilders' management as it is for management in the private sector.

British Shipbuilders' subsidiaries will report progress on industrial democracy following the amendment to the Companies Act 1967 introduced by the recent Employment Act, and I expect British Shipbuilders to do so as well. The directors of the operating subsidiaries also owe a duty to have regard to the interests of employees under Section 46 of the Companies Act 1980. The British Shipbuilders group should be subject to the normal commercial disciplines on this matter to be found in the Companies Act. That is consistent with the whole philosophy of this Bill—British Shipbuilders is to be opened up to ordinary commercial opportunities and the commercial disciplines which go with them.

I believe that it is wrong to impose upon British Shipbuilders and their subsidiaries, and upon them alone, the artificial and curious constraints which are imposed by subsection (8) of Section 2 of the 1977 Act. I hope, therefore, that your Lordships will agree to reject this amendment, which would leave those restraints imposed upon them.

Viscount Simon

The noble Lord suggests that this will in any case be done by British Shipbuilders by virtue of the provisions of the Companies Act. But British Shipbuilders is not a Companies Act company, is it?

Lord Trefgarne

British Shipbuilders, as we provide for in the later clauses of the Bill, is to be moved in due course and as opportunity provides back into the environment of the commercial sector. That is the environment that we want British Shipbuilders to operate under, and that indeed is quite different therefore from the proposals in this amendment.

Lord Lloyd of Kilgerran

The noble Lord the Minister, if I may say so with the greatest respect—and I am not being cynical about this—has read his brief with the great charm that he always has in this House. But he did not deal with the point which my noble friend Lord Simon indicated earlier. The Minister said that certain groups had been established, that steering groups had been set up to study certain matters. What he did not deal with—and this is fundamental to this amendment—was what my noble friend Lord Simon said, that the Government and British Shipbuilders should, in the present circumstances, lead the way and set an example to encourage employee involvement. So far as I understood the speech of the noble Lord the Minister—and if I am wrong I will apologise—there was no indication in his reply that there was a definite attempt by the Government to encourage, by statutory form, what we think is so essential, and that is to encourage employee involvement.

Lord Trefgarne

What the noble Lord means by "show the way", as he puts it, is to impose upon British Shipbuilders constraints which are not imposed upon the competition within the private sector in this country, and indeed not imposed in general terms upon their competition in other countries of the world. The industrial democracy "strong and organic", as the old Act describes it—and that is a description, as I say, which I am not able to comprehend—is a constraint which we seek to have removed from British Shipbuilders because we should like to see them operating in due course as an ordinary company within the normal commercial trading environment of this country.

Lord Bruce of Donington

The noble Lord has delivered himself of some most extraordinary observations concerning the removal of constraints. I know of no complaint by the chairman of British Shipbuilders that this particular section in the 1977 Act imposed any particular constraints or burdens upon them. Indeed, as the noble Viscount, Lord Rochdale, has already said, in the capacity he then was, he actively encouraged participation by the sections of the work force in the running of the affairs of the company in which he was at that time. I am sorry if he experienced any obstruction or discouragement from the unions involved. He made an effort, however, and that is all this is about.

The Minister says he believes in participation. Participation is part of the promotion and process of industrial democracy. Had this part of the Bill laid down a form of industrial democracy which the corporation was bound to follow, that would, of course, have imposed some responsibility, and possibly even a burden on it, because there might have been disagreement as to the form of the industrial democracy. But this is a permissive clause in that it asks the company to promote something. It does not say "Do it", but implies that it should promote and actively encourage something, and worker participation is part of that process. Therefore I cannot see the Government's objection to this aspect of the 1977 Act—that is, unless they have an ideological objection to it, and unless the whole idea of workers in a concern ever participating in the running of their company is so repugnant to them that they cannot bear even its presence in the Bill.

More and more as this Government proceed in office they are pursuing a policy of increasing confrontation with the ordinary working people, and they are not even bothering to disguise it. This part of the Bill, in eliminating this part of the 1977 Act, is a further example of their determination to make their stamp on it; they and the interests they represent are the ones who will rule, and no nonsense about it. Again, they are making a great mistake. The future of our country will be seen as soon as the Thatcher episode—and a sordid episode it is—is over and done with (and that may not take very long either) and then the people will see that only by working co-operatively together for common purposes will the nation be successful and its people attain some degree of that personal serenity to which every individual is entitled. For that reason we say that this part of the Bill is regressive and seeks merely to stamp the whole nature of the Government's authoritarian rule on the country at large, and we invite noble Lords to support our amendment.

4.5 p.m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 83: Not-Contents, 102.

DIVISION NO. 2
CONTENTS
Airedale, L.	Kirkhill, L.
Amherst, E.	Leatherland, L.
Amulree, L.	Listowel, E.
Ardwick, L.	Lloyd of Kilgerran, L.
Aylestone, L.	McCluskey, L.
Banks, L.	McGregor of Durris, L.
Beaumont of Whitley, L.	Mackie of Benshie, L.
Beswick, L.	McNair, L.
Birk, B.	Milford, L.
Bishopston, L.	Mishcon, L.
Blease, L.	Nicol, B.
Blyton, L.	Oram, L.
Boston of Faversham, L.	Peart, L.
Briginshaw, L.	Phillips, B.
Bruce of Donington, L.	Plant, L.
Byers, L.	Ponsonby of Shulbrede, L. [Teller.]
Chitnis, L.
Cledwyn of Penrhos, L.	Prys-Davies, L.
Collison, L.	Rathcreedan, L.
Cooper of Stockton Heath, L.	Rhodes, L.
David, B. [Teller.]	Roberthall, L.
Denington, B.	Rochester, L.
Elwyn-Jones, L.	Sainsbury, L.
Ezra, L.	Sefton of Garston, L.
Fisher of Rednal, B.	Serota, B.
Foot, L.	Shinwell, L.
Gaitskell, B.	Simon, V.
George-Brown, L.	Stedman, B.
Gladwyn, L.	Stewart of Alvechurch, B.
Glenamara, L.	Stewart of Fulham, L.
Granville of Eye, L.	Strabolgi, L.
Hale, L.	Taylor of Gryfe, L.
Hatch of Lusby, L.	Taylor of Mansfield, L.
Houghton of Sowerby, L.	Underhill, L.
Hunt, L.	Wallace of Coslany, L.
Irving of Dartford, L.	Walston, L.
Jacques, L.	Wells-Pestell, L.
Jeger, B.	Whaddon, L.
Jenkins of Putney, L.	Willis, L.
John-Mackie, L.	Willoughby de Broke, L.
Kagan, L.	Wilson of Langside, L.
Kennet, L.	Winstanley, L.
Kilmarnock, L.

NOT-CONTENTS
Airey of Abingdon, B.	De Freyne, L.
Aldenham, L.	Denham, L. [Teller.]
Allerton, L.	Derwent, L.
Balfour of Inchrye, L.	Drumalbyn, L.
Belhaven and Stenton, L.	Dulverton, L.
Beloff, L.	Ellenborough, L.
Belstead, L.	Elles, B.
Braye, L.	Elliot of Harwood, B.
Brookeborough, V.	Elton, L.
Caithness, E.	Falmouth, V.
Campbell of Croy, L.	Ferrers, E.
Carnegy of Lour, B.	Ferrier, L.
Cathcart, E.	Fortescue, E.
Chelwood, L.	Fraser of Kilmorack, L,
Clifford of Chudleigh, L.	Gainford, L.
Cockfield, L.	Glanusk, L.
Cork and Orrery, E.	Glenarthur, L.
Cottesloe, L.	Glenkinglas, L.
Cox, B.	Gray, L.
Craigavon, V.	Greenway, L.
Craigmyle, L.	Grimston of Westbury, L.
Cranbrook, E.	Hailsham of Saint Marylebone, L.
Cullen of Ashbourne, L.
Daventry, V.	Hayter, L.
Davidson, V.	Hylton-Foster, B.

Kilmany, L.	Onslow, E.
Kinloss, Ly.	Orkney, E.
Lane-Fox, B.	Plummer of St. Marylebone, L.
Lauderdale, E.
Lawrence, L.	Porritt, L.
Lindsey and Abingdon, E.	Rankeillour, L.
Lloyd of Hampstead, L.	Rawlinson of Ewell, L.
Long, V.	Rochdale, V.
Loudoun, C.	St. Davids, V.
Lucas of Chilworth, L.	St. John of Bletso, L.
Lyell, L.	Skelmersdale, L.
McAlpine of Moffat, L.	Stodart of Leaston, L.
McFadzean, L.	Sudeley, L.
Mancroft, L.	Swinfen, L.
Mansfield, E.	Swinton, E. [Teller.]
Margadale, L.	Taylor of Hadfield, L.
Marley, L.	Terrington, L.
Merrivale, L.	Teviot, L.
Mersey, V.	Thomas of Swynnerton, L.
Mills, V.	Trefgarne, L.
Molson, L.	Trenchard, V.
Monk Bretton, L.	Trumpington, B.
Mottistone, L.	Vaux of Harowden, L.
Newall, L.	Vivian, L.
Northchurch, B.	Ward of Witley, V.
Nugent of Guildford, L.	Westbury, L.
O'Neill of the Maine, L.	Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

Clause 1 agreed to.

Clause 2 [Organisation etc. of British Shipbuilders' activities]:

4.13 p.m.

Lord Bruce of Donington moved Amendment No. 3: Page 2, leave out lines 29 to 34.

The noble Lord said: The amendment relates to the deletion of virtually the whole of subsection (2) of the new Clause 4A referred to in Clause 2 of the Bill. There are two reasons. The first is that the new Clause 2 gives very considerable powers to the Secretary of State. These are by no means confined to his power to order the discontinuance of any of the board's activities nor are they confined even to the powers given here to sell off any or some of British Shipbuilders' assets. On this side of the Committee we do not think that these are powers that the Secretary of State should have, bearing in mind that the Secretary of State is a very important member of the present Government and the present Government have made quite clear their intentions towards British Shipbuilders in two fields: first of all, in their ordinary day-to-day attitude towards the activities of British Shipbuilders as it is now; and, secondly—and I will come to the point presently—as to their plans for disposal. It would be one thing to give the Secretary of State powers to help the activities of British Shipbuilders. That would be a very good thing to do, particularly if one was persuaded that one had a Secretary of State who was willing to do that.

I turn now to the field in which any Secretary of State can be of enormous help to any public corporation whether it be British Shipbuilders or British Steel or whoever it may be. The noble Lord, Lord Trefgarne, in his Second Reading speech dealt with the question of competition. He said, in column 8, on 7th March: The Government would be ready to use these powers if BS were to engage in unfair competition with established shipping interests". That is a very definite statement. What is in doubt, however, is whether the Government are prepared to intervene where BS itself suffers from unfair competition. So far there has been no indication of that.

The signals ought to have been given to any Secretary of State who had the opportunity of reading the chairman's report published on 20th July 1982. I quote from page 13 of the report and accounts covering the year 1981–82 of British Shipbuilders. He said: The new excess capacity which has come into operation in South Korea at a time when other major shipbuilders have significantly reduced employment facilities and throughput must be considered irresponsible since it can only damage recovery prospects in the shipping and shipbuildings markets. The depressed price levels at which South Korea has in recent months been prepared to sell new ships to fill their expanded capacity is a matter of great concern for BS and other European shipyards. This competition coupled with the severe decline in the latter part of 1981 of the dry bulk shipping market means that the improvement in the order book will be hard to sustain". Sir Ronald Atkinson could hardly have been more explicit than that.

What was the reaction by the present Government to that very strong point made about South Korea? Was there any response forthcoming at all? The noble Lord has said that the Government are very willing to intervene if BS competes unfairly with existing shipping interests. That is very nice of them. What are they prepared to do when British Shipbuilders complain of unfair competition from South Korea? Your Lordships will recall—and I hasten to assure the Committee that I will not go through the details again—that on Second Reading I gave the whole sordid, detailed story of the way in which an order for a cable ship was placed in South Korea in unfair competition with British Shipbuilders. Your Lordships will recall the whole series of rather extraordinary events involving a comparatively small and hitherto largely unknown company which successfully by-passed what one would normally have supposed to be the normal procedure on matters of this kind. Indeed, I hazarded the guess on Second Reading—and it certainly has not been denied—that the Department of Trade knew all about it and that, as a consequence. British Steel lost an order which amounted to some £3½ million. This is a not inconsiderable sum.

A whole number of other British firms lost likewise. What was the attitude of the Government towards this? We have only to go to the Select Comittee's report on this particular matter. The House of Commons Select Committee, when going into this question, had the opportunity of questioning the noble Lord's right honourable friend the right honourable Patrick Jenkin on this whole question of competition. This is what Mr. Patrick Jenkin replied on 27th October 1982, which is some time after the observations made by the chairman of British Steel in his report: It is certainly not in the interests of the steel-using industries in this country who, if they can get cheaper steel from Brazil, South Africa, Korea or whatever, are not going to go round telling the British Steel Corporation, the Government or anybody else that that is where they got it from, because they are in a very competitive market. That is a very surprising observation of detachment by a Minister who is supposed to be a help in safeguarding the interests over which he seeks to take powers of direction.

It would seem to me that the intervention of the Minister is all one way. If it is against British Steel they will support any move; if British Steel wants support they do not give a hang, and indeed they made no intervention whatsoever in this case of an order going to a country obviously guilty of dumping in that their wage levels are but a fraction of what they are in Britain and in Europe, who are under a semi-military dictatorship in any event and whose trade union rules, if they had been applied in Poland, would have aroused the noble Lord's ire in very much the same way that the ire is aroused because of the lack of freedom accorded to Mr. Lech Walesa. So does one trust the present Government to give directions that are in any way beneficial to British Shibuilders? I would submit the answer is, "No".

There can be no trust because the British Government are bent on exposing the whole of British industry, including British Shipbuilders and British Steel, to dumped competition from countries where wages levels are but a fraction of what they are in Europe as a whole; and despite their many protestations of support and robust statements about the necessity for action to prevent dumping, it is in fact contrary to their entire philosophy, and they would be quite happy if other sections of British industry, including British Shipbuilders and British Steel were in fact run into the ground.

The other provison of this Bill is to provide for disposals. It has already been hinted as to the kinds of disposals that are going to take place. Indeed if one moves to pages 26 and 27 of the annual report and accounts of British Steel one understands immediately why the noble Lord and the Government are bent on disposing of the warship section. It is very simple indeed because the warship section, apart from certain isolated parts to which I shall refer, is the only division making a profit. That therefore is ripe for disposal by the Government, however much it might mutilate the total structure of British shipbuilding. It is available for disposal to the various city interests and institutions which give more than formal support and, indeed, give financial support, to the party opposite.

But the important aspect to bear in mind about the disposal of the warship division is that it operates on a cost-plus basis. They cannot make a loss. The warship section gets its contracts from the Ministry of Defence. Its cost procedure is well known; it is ascertained; the actual cost of wages and materials, overheads, various fixed, variable and semi-variable expenditure is all taken into account together with the extra expenditure demanded by the Ministry of Defence for extra quality control. It is the total cost, including overtime and everything else: the procedures are well known.

On top of that the profit is added. There is no possibility of loss. That is the only section, for the moment at any rate, that the party opposite wants to sell off to the city interests who give them such profound support. They might wish, of course, to get rid of Hall Russell in the merchant shipbuilding division for they only made a profit of £63,000; or Swan Hunter, which made a profit of £83,000 last year. They might want to dispose of certain sections in the engineering division, but I doubt it because the profits made in the other sections—for reasons the noble Lord knows quite well, because he knows the state of the whole shipbuilding industry as and when British Shipbuilders originally took over—are in a very parlous state.

The noble Lord knows quite well that British Shipbuilders, with the Government subventions that have been made, is able to keep in operation precisely because it is able to apply the profits made by the warship building division against the losses that are incurred in the others. If the warship section were taken out it would completely alter the whole structure of British Shipbuilders and would make it more vulnerable to the forces within which it is at the moment compelled to operate.

Therefore we believe that the power to privatise various sections of British Shipbuilders should be taken out of the Bill. We believe that it is contrary to the national interest and that it serves no useful purpose whatsoever from the point of view of the country's economy, from the point of view of the employees or from the point of view of the managers or the executives. The only purpose that it serves—the one with which the noble Lord is well familiar—is to provide an extra bit of private pelf for those people who might be prepared to buy a cost-plus profit concern. I beg to move.

4.30 p.m.

Lord Trefgarne

The proposed power of veto of changes in the organisation, contained in that part of the Bill which Amendment No. 3 seeks to delete, is a far more modest and less interventionist power than that created by the then Government in 1977. Section 5 of the 1977 Act gave that Government wide-ranging powers over the way in which the corporation was organised. Those have never been used—and quite right, too. The management of the corporation is best placed to propose how the activities it controls should be organised. It should not be subject to the incursive power of Section 5 of the Act, which is being repealed. However, the Government have a natural interest in the efficient organisation of a public sector industry and, if the amendment were accepted, they would have no power to prevent the corporation from making changes in the organisation which, in the Government's view, were likely to be detrimental to public policy.

The corporation and its subsidiaries are at present organised in a decentralised way, with activities contained in discrete and publicly accountable profit centres. This we believe to be right. It brings discipline and incentive if it is known that the results of a group's efforts will be available and open to public examination. We believe, therefore, that a power which can be used to preserve this type of organisation is necessary, but is also all that is necessary. I hope, therefore, that your Lordships will reject Amendment No. 3.

May I speak at the same time, as the noble Lord did, to Amendment No. 4? That amendment is, I am afraid, quite unacceptable to the Government. It is, so far as we can ascertain, designed to wreck the Bill by removing from it those provisions which are to give the Government important reserve powers. In our view, it is essential, particularly where public and private sectors of an industry are in competition, that the Government should have powers to determine where the boundary line between the sectors should lie. It is well-known that there are fears of subsidised unfair competition from the public sector—fears which are inevitably stronger during a recession. When the Government are trying to ensure fair play, their position will be considerably strengthened by holding the reserve power to direct the public sector to withdraw from an activity. We hope that we shall not need to use these powers, but we shall be ready to do so if unfair competition persists.

The noble Lord asked me whether we would be willing to intervene to assist British Shipbuilders in the face of unfair competition, perhaps from the Far East. The United Kingdom's shipbuilding industry, in common with those of other European countries, receives assistance to help secure orders against Far East competition. We are continuing our efforts, along with our EEC partners, in the OECD working party on shipbuilding to bring about a concerted reduction in all aids to shipbuilding, both direct and indirect. Strong representations have been made through the OECD about the share of orders taken by Japan, for example, and the OECD have also taken a welcome initiative to open a dialogue with the Korean industry on world shipbuilding problems.

I said that we would hope not to have to use these powers. Similarly, we hope that we shall not need to fall back on the proposed powers to require British Shipbuilders to dispose of assets. We hope to act in agreement with the corporation. But we believe it necessary to have this power. There could be circumstances where the Government, taking a broader view of the public interest, differ from the corporation. That is understandable. The corporation will be bound to examine the question of disposals from the standpoint of the impact upon the corporation itself. The Government would look at the interests of the corporation, the interests of those parts being disposed of and the interests of the rest of the industry. Without these powers, the public sector of the industry would have unusual freedom. The equivalent of its shareholders would have little control over the extent of its activities, and I think it proper and desirable that the Government should have this control. I hope, therefore, that your Lordships will reject Amendment No. 4 as well.

Lord Ezra

As someone who was concerned for some years with the management of a public corporation, I should like to express a degree of concern about the matters being dealt with under these two amendments. It seems to me that the Government are here proposing to take certain specific rights of intervention which are generally absent in the case of other corporations. Indeed, the directions which the Government usually give are of a general nature. I recall that there was a discussion in the early days of this Government in which there was some debate as to whether or not the Government should take on specific powers of direction, and the Government themselves decided not to do so. It seems to me that this is not the spirit in which these changes in the law are being proposed.

I must confess to feeling there is a degree of contradiction between the arguments used by the noble Lord the Minister in respect of Clause 1, which we debated a moment ago, when he argued strongly in favour of removing a restriction which applied specifically to British Shipbuilders, and this case, where it seems to me that there is an instance of imposing restrictions which would apply specifically to them. Trying to visualise this in the position which I previously occupied, I must say that I would find it very difficult to seek to conduct, in an effective and commercial manner, the affairs of the corporation for which I was then responsible if I felt that the Minister could intervene on any specific issue of a kind indicated in this clause. I believe that it requires a little more reflection before these changes are introduced into the law.

4.37 p.m.

Lord Bruce of Donington

The noble Lord, in his reply, made no further mention of his advertised plans to dispose of certain parts of the warship division, which were referred to by him on Second Reading. For the record, therefore, will he confirm or deny my statement that warship activities carried on by the warship division of British Shipbuilders are on a cost-plus basis to the Ministry of Defence or to various other ministries? Will he confirm that that is the case or, alternatively, deny it?

Lord Trefgarne

I am not in a position to give the noble Lord details of each and every contract existing between the various warship builders and the Ministry of Defence, or indeed the warship builders and any other customer that they may have. I understand that some of the contracts referred to are, indeed, on the basis that the noble Lord described, but other contracts are, of course, on a fixed price tender basis.

Lord Bruce of Donington

I am most grateful to the noble Lord. My information is that the great bulk of the contracts of the warship division are, in fact, on a cost-plus basis. Therefore, the element of risk is very limited indeed, and the possibility of profit is rather more than a probability—amounting almost to a certainty. The noble Lord did not refer in any way to the point that I made to him about the Government's assistance to British Shipbuilders or, for that matter, to any other public corporation when faced with unfair competition, other than saying that they paid very diligent attention to it and would make the utmost representations that they could, in conjunction with either their colleagues in the GATT or their colleagues in the European Community.

Lord Trefgarne

That is not quite fair. I said also that we provide cash assistance to British Shipbuilders in respect of specific orders when they are faced with direct competition from the Far East or elsewhere.

Lord Bruce of Donington

The noble Lord knows as well as anybody else that the intervention fund was established at a certain figure, which takes into account some, and only some, of the adverse circumstances experienced by British Shipbuilders. It is calculated to bring British Shipbuilders on to roughly the same basis as its Western European competitors, or its competitors from what I euphemistically term "the free West". No special help is given by the Government, through the intervention fund or otherwise, to enable British Shipbuilders to compete with dumped competition from Far Eastern states such as Korea. I am not referring to Japan. I am referring to countries like South Korea, Taiwan and Brazil, whose wage rates are a mere fraction—under one-quarter—of those payable in Europe and who can therefore undercut the prices quoted by any of the other Western European states.

The noble Lord may have seen in the Financial Times of 25th March that British Shipbuilders won a £25 million order from Ethiopia for some ships. He will be interested to know that the basis of the quotation to Ethiopia was precisely the same as that upon which British Shipbuilders quoted for the Central Electricity Generating Board cable ship, the contract for which, under rather mysterious circumstances, went to South Korea.

What I and I am sure the Committee would like to know is how the Government propose to act in relation to British Shipbuilders in respect of competition on what I would call the dumped basis. The noble Lord's noble friend Lord Cockfield will be able to supply him with the full particulars because he went to the recent GATT negotiations and expressed some concern about the competitive challenge offered by what GATT term the newly industrialised states—not the developing countries, not the underdeveloped countries but the newly industrialised countries which operate under conditions of near dictatorship, such as South Korea, Taiwan and to a limited extent Brazil. I, and I am sure the Committee, would like to have more positive reassurance of action by the Secretary of State which would prevent such sordid cases as that of the cable ship ever occurring again.

Lord Trefgarne

I do not think that the Committee would wish me to be dragged into the details of a specific contract such as the one to which the noble Lord referred. In any event, I do not have in front of me the details of that contract. South Korea is not a member of OECD, but they do, I believe, although I stand open to correction, subscribe to GATT and there are regulations of widely different kinds under the GATT régime relating to dumping and assistance to shipbuilding. If the noble Lord has specific evidence of a specific case where regulations such as these to which South Korea subscribes have been breached, naturally I shall have the matter looked at.

Lord Bruce of Donington

Is the noble Lord informing the Committee that after giving detailed information concerning this cable ship to the House at Second Reading his department has not even bothered to investigate it?

Lord Trefgarne

I am not sure what allegations the noble Lord is trying to make. He did not say at Second Reading that in some way South Korea has broken the regulations to which both they and we subscribe. Is that what the noble Lord is saying now?

Lord Bruce of Donington

I am saying that it is the business of Her Majesty's Government to protect British companies wherever it is proper for them to be protected. In other words, it is the duty of Her Majesty's Government to give to public enterprises the same degree of protection as that which they are prepared to extend to private concerns. I am also saying that it is the official policy, so I am told, of the Central Electricity Generating Board to buy British.

Lord Trefgarne

What I want the noble Lord to do, if he is able to do so, is to tell me where South Korea broke the regulations. He is not able, I believe, to do that.

Lord Bruce of Donington

I am not alleging that South Korea broke any rules. I am suggesting that there has been gross negligence by Her Majesty's Government.

4.46 p.m.

On Question, Whether the said amendment (No. 3) shall be agreed to?

Their Lordships divided: Contents, 67; Not-Contents, 104.

DIVISION NO. 3
CONTENTS
Amherst, E.	Kilmarnock, L.
Amulree, L.	Kirkhill, L.
Ardwick, L.	Leatherland, L.
Aylestone, L.	Longford, E.
Banks, L.	McCluskey, L.
Beaumont of Whitley, L.	McNair, L.
Beswick, L.	Mayhew, L.
Birk, B.	Milford, L.
Bishopston, L. [Teller.]	Nicol, B.
Blease, L.	Oram, L.
Blyton, L.	Peart, L.
Boston of Faversham, L.	Phillips, B.
Briginshaw, L.	Ponsonby of Shulbrede, L. [Teller.]
Brooks of Tremorfa, L.
Bruce of Donington, L.	Prys-Davies, L.
Byers, L.	Rochester, L.
Chitnis, L.	Sainsbury, L.
Cledwyn of Penrhos, L.	Sefton of Garston, L.
Collison, L.	Shinwell, L.
Cooper of Stockton Heath, L.	Simon, V.
David, B.	Stedman, B.
Elwyn-Jones, L.	Stewart of Alvechurch, B.
Ezra, L.	Stewart of Fulham, L.
Gaitskell, B.	Strabolgi, L.
George-Brown, L.	Taylor of Gryfe, L.
Gladwyn, L.	Taylor of Mansfield, L.
Glenamara, L.	Underhill, L.
Hatch of Lusby, L.	Wallace of Coslany, L.
Houghton of Sowerby, L.	Walston, L.
Jacques, L.	Wells-Pestell, L.
Jeger, B.	Whaddon, L.
Jenkins of Putney, L.	Wilson of Langside, L.
John-Mackie, L.	Winstanley, L.
Kennet, L.	Wootton of Abinger, B.

NOT-CONTENTS
Airey of Abingdon, B.	Carnegy of Lour, B.
Aldenham, L.	Cathcart, E.
Allerton, L.	Chelwood, L.
Avon, E.	Clifford of Chudleigh, L.
Balfour of Inchrye, L.	Cockfield, L.
Belhaven and Stenton, L.	Cork and Orrery, E.
Beloff, L.	Cottesloe, L.
Belstead, L.	Cox, B.
Brookeborough, V.	Craigmyle, L.
Campbell of Croy, L.	Cranbrook, E.

Cullen of Ashbourne, L.	Margadale, L.
Daventry, V.	Marley, L.
Davidson, V.	Marshall of Leeds, L.
De La Warr, E.	Merrivale, L.
Denham, L.	Mersey, V.
Drumalbyn, L.	Molson, L.
Duncan-Sandys, L.	Monk Bretton, L.
Ellenborough, L.	Mottistone, L.
Elles, B.	Newall, L.
Elliot of Harwood, B.	Norfolk, D.
Elton, L.	Northchurch, B.
Erroll, E.	Nugent of Guildford, L.
Ferrers, E.	O'Neill of the Maine, L.
Ferrier, L.	Orkney, E.
Fortescue, E.	Orr-Ewing, L.
Fraser of Kilmorack, L.	Plummer of St. Marylebone, L.
Gainford, L.
Gisborough, L.	Porritt, L.
Glanusk, L.	Rankeillour, L.
Glenarthur, L.	Rawlinson of Ewell, L.
Glenkinglas, L.	Rochdale, V.
Gray, L.	St. Davids, V.
Greenway, L.	St. John of Bletso, L.
Grimston of Westbury, L.	Sharples, B.
Hailsham of Saint Marylebone, L.	Skelmersdale, L.
	Stamp, L.
Hylton-Foster, B.	Stodart of Leaston, L.
Killearn, L.	Sudeley, L.
Kilmany, L.	Swinfen, L.
Kinloss, Ly.	Swinton, E. [Teller.]
Lane-Fox, B.	Taylor of Hadfield, L.
Lauderdale, E.	Terrington, L.
Lawrence, L.	Teviot, L.
Lindsey and Abingdon, E.	Thomas of Swynnerton, L.
Long, V. [Teller.]	Trefgarne, L.
Loudoun, C.	Trenchard, V.
Lucas of Chilworth, L.	Trumpington, B.
Lyell, L.	Vaux of Harrowden, L.
McFadzean, L.	Vivian, L.
MacLehose of Beoch, L.	Westbury, L.
Macleod of Borve, B.	Wise, L.
Mancroft, L.	Wynford, L.
Mansfield, E.	Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendment No. 4 not moved.]

On Question, Whether Clause 2 shall be agreed to?

4.54 p.m.

Viscount Simon

Before we agree Clause 2, I have two questions I wanted to ask the noble Lord the Minister. As this is a rather long clause, perhaps it would be convenient if I mentioned the page and line references. The first question relates to page 2, lines 31–32. Your Lordships will see a reference to "activities that have fallen to be carried on" under the ultimate control of the corporation. I was wondering whether before the next stage of the Bill the Minister would care to consult with the draftsman because it seems to me that the words "fallen to be carried on" are not very apposite. Since under the Bill British Shipbuilders will have no duties to perform, because those are all being eliminated, it seems to me that the activities they carry on must be the result of positive decisions by the board acting within their powers. Can these really be said to, "fall to be undertaken"? The word "fall" suggests to me an inevitability that is not there. I suggest that there must be another word which would be more appropriate.

My second point is, I am afraid, a little more important. It arises at page 3, line 7. Subsection (2) reads: The Secretary of State shall not give any direction under subsection (1) above unless he is satisfied that the giving of it will further the national interest". I believe that similar words have appeared in other legislation. I wonder whether the noble Lord can tell the Committee whether there has ever been any judicial decision as to what these words mean—"will further the national interest". I would suggest that any Secretary of State, whether he supports the party opposite or the Labour Party or the Liberal Party, will believe that the policies of his party are in the national interest. He will believe it genuinely; that is why he belongs to that party.

This leaves me with this difficult question. Supposing a decision is challenged as to whether a policy is in the national interest. We do not—do we?—want it referred to the courts to decide whether the policy of the Government is in the national interest. That would be a disaster in the case of any Government. That would bring the courts solidly into politics. I am wondering whether there is any ruling as to what this phrase means, because an honest Secretary of State—and we believe that all Secretaries of State will be honest—will, of course, believe that what he does is in the national interest; otherwise he would not do it. It seems to me that this clause might lead to some very uncomfortable discussions, and eventually, as I have said, references to the courts, which I would regard as most undesirable.

Lord Trefgarne

If I may deal with the noble Viscount's second point first, these, as he says, are hallowed words; they have appeared in at least one other piece of legislation, and I am certain that if I looked I would find more. The one that immediately comes to mind is the Iron and Steel Act 1981, and subsequently I think they appeared in the 1982 consolidation of that Act and some others. Whether those particular words have ever been tested in a court I rather doubt, but perhaps I can inquire into that, too, and write to the noble Viscount on that particular point.

The noble Viscount also asked about the words "fallen to be carried on" as they appear in subsection (2) of Section 4A of the original Act as amended by this Bill. The answer to that is that they seem to me to be entirely appropriate words. I will nonetheless take those words away and consult with the draftsman to make sure there is no inadvertent slip-up, and again write to the noble Viscount.

Viscount Simon

I am much obliged to the noble Lord.

On Question, Clause 2 agreed to.

Clause 3 agreed to.

[Amendment No. 5 not moved.]

Schedule agreed to.

House resumed: Bill reported without amendment.