Lords Sitting of 19 July 1984

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Liverpool): The LORD CHANCELLOR on the Woolsack.

Proposed Transmitter: Bearley
Lord Boyd-Carpenter: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether on receipt of the report of the inspector resulting from the recent public inquiry into the proposal for a massive radio transmitter complex at Bearley, near Stratford-on-Avon, they will publish it, and defer any decision on the proposal until there has been time for full discussion of the proposal inside and outside Parliament.
Lord Skelmersdale: My Lords, the public inquiry provided a full opportunity for the investigation of the proposal and the Secretary of State is confident that the inspector's report will provide him with an account of all the relevant arguments for and against it. He has no reason to depart from the normal procedure of publishing the report with his decision. In short, the answer to my noble friend's question is, no.
Lord Boyd-Carpenter: My Lords, following that very disappointing reply, may I ask my noble friend whether he is aware of the fact that in matters of this particular kind, raising national issues in respect of a place of national importance, Parliament also has a right to be consulted before, rather than after, the decision has been taken?
Lord Skelmersdale: My Lords, my right honourable friend is not convinced that this is an issue of national importance in the way that the Windscale inquiry, for example, was. If my right honourable friend were to publish the inspector's report before reaching his decision, that would merely encourage those who disagree with the inspector's conclusion to seek to reopen the argument. It would, in turn, require all parties to the public inquiry to be given the opportunity to comment on any new evidence produced. Since there has already been held a wide-ranging public local inquiry at which it was open to anyone to seek to give evidence, my right honourable friend sees no justification for a further public debate that might in turn lead to a reopening of the public inquiry with all the delays that would be involved.
Lord Strabolgi: My Lords, following what the noble Lord, Lord Boyd-Carpenter, has said about national importance, may I ask the noble Lord the Minister whether the Government are aware that this proposed transmitter is of vital importance to the BBC's external services in their broadcasts to Eastern Europe and the Soviet Union, if they are to maintain audibility for Britain's voice?
Lord Skelmersdale: Yes, my Lords; this is, of course, one of the points that will have been taken into account by the inspector. All of us will read with interest what he has to say on the matter when the report is finally published after my right honourable friend has made his decision. When I talked about matters of national importance, I meant, of course, in the planning context.
Lord Morris: My Lords, would my noble friend not agree that to use in the Question the term "massive…complex" is somewhat misleading in this context, bearing in mind that, in terms of transmitting power, the proposed transmitting station at Bearley will be the smallest of all the five transmitting stations of the BBC's external services?
Lord Skelmersdale: My Lords, I have not the least idea of the answer to that question. My noble friend may be right, or he may be wrong. I am quite convinced that the answer to it will be found in the inspector's report.
Lord Ardwick: My Lords, does the noble Lord agree that whether the decision is made before or after a parliamentary debate, the principle remains the same—that the BBC is in urgent need of a first-class transmitter in order that its excellent services may be fully audible, that the transmitter must be built with minimum damage to the environment and to other people's electrical installations, and that the decision should be made with the cost as not the primary basis, but the secondary basis?
Lord Skelmersdale: My Lords, again, the noble Lord might be absolutely correct. We shall await the inspector's report with interest. If my right honourable friend were to publish the report before coming to a decision on the matter, that would, in effect, produce an appeal against the inspector's recommendation. That, again, would be an undesirable precedent, with repercussions on our entire planning system. I remain unconvinced of the justification for proceeding in any other way.
Lord Nugent of Guildford: My Lords, is my noble friend aware that in assessing the importance of this subject, the theatre at Stratford-on-Avon should be regarded as not only a national institution of importance, but also an institution of international importance? People come from all over the world to the theatre there. Is he aware that strong evidence shows that the interference in the theatre would be very significant from this transmitting station being set up just outside Stratford? Therefore, does he appreciate that this is a matter of very major artistic significance not only to us in this country, but to the world generally? Will my noble friend kindly take that dimension on board and pass it on to his right honourable friend?
Lord Skelmersdale: My Lords, I am grateful to my noble friend for his question. I accept, of course, that the theatre at Stratford-on-Avon is of international importance. But this was one of the factors that led my right honourable friend, although he had no need to do so, because the site in question is Crown land, to set up

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a local public inquiry in the first place. As regards any possible technical aspects, my right honourable friend also had a scientific assessor sitting alongside the inspector so that those matters could be properly evaluated.
Lord Jenkins of Putney: My Lords, is the noble Lord aware that while it would be possible for the Royal Shakespeare Theatre to be put out of action as a result of this—
Noble Lords: No.
Lord Jenkins of Putney: Indeed, that is so. I do not wish to spend time upon this, but it must be accepted by noble Lords that evidence, whether it was right or wrong, was given to the inquiry by the Royal Shakespeare Company and other people suggesting that the lighting equipment and several other items of electronic equipment that the Royal Shakespeare Theatre uses would be put out of business by the very powerful 300 kilowatt transmitter, consisting of five masts 300 feet high. One does not wish to go into all these details, but having regard to them, and to the fact that three other sites are available to the BBC, as well as to the fact that you cannot take up the Royal Shakespeare Theatre and move it somewhere else, is this not a case for a public inquiry and examination in this House before the decision is made?
Lord Skelmersdale: My Lords, I think that the noble Lord has misunderstood what I said earlier. What I said was that, although there was no statutory need for a planning inquiry, my right honourable friend thought that a planning inquiry was appropriate in this case. The planning inquiry has now been held, and my right honourable friend is awaiting the inspector's report. As to the technical matters to which the noble Lord referred, yes, evidence to that effect was given at the inquiry.
Lord Bancroft: My Lords, will the noble Lord cast his mind back to the terms of his original Answer and confirm that it constitutes an acceptance of the proposition that the sequence of decision, publication and debate of planning inquiry reports is governed by convention and not by statute, and that that sequence can be varied according to the dictates of fairness and common sense? Secondly, will the noble Lord cast his mind forward and confirm that the Government have intimated that the report of the Sizewell inquiry will be debated before a Government decision is reached? Thirdly, will he cast his mind back to the late 1970s and confirm that the then Secretary of State for the Environment took steps to ensure that there was a debate on the Windscale issue before a Government decision was reached? Finally—
Noble Lords: No.
Lord Bancroft: Finally, would he agree that a matter of national importance is a subjective issue?
Lord Skelmersdale: My Lords, I have already referred briefly, in a previous answer, to Windscale. But the Sizewell inquiry is, of course, still in progress.
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The Government recognise the public interest in the wide-ranging issues raised by the application of the CEGB to build a pressurised water reactor. The question of a debate will be a matter for the usual channels at the appropriate time. As to the noble Lord's conclusions that he drew from my original Answer, yes, I confirm that the procedure that has been established has become a normal form and that there is nothing statutory about it.
Lord Boyd-Carpenter: My Lords, does my noble friend appreciate, from the questions that have been put to him, the very widespread concern there is about this proposal and its impact on Stratford? Does he also appreciate that while everybody wants to ensure that the BBC gets a good, and a technically efficient, site for its most important transmissions, this proposal raises such serious public issues that it is quite wrong to exclude Parliament until a decision has been taken?
Lord Skelmersdale: My Lords, I accept that my noble friend has put forward a point of view, with which I must confess I do not agree. I should have thought that the logic of the tenor of the questions, both today and when I answered a similar question a fortnight or so ago, is that the House either does not trust the objectors to present their case thoroughly, or does not trust the inspector to make a fair report, or, as a last resort, does not trust my right honourable friend to come to the correct conclusion.
Lord Maude of Stratford-upon-Avon: My Lords, is my noble friend aware that as the former Member of Parliament for Stratford-upon-Avon I was responsible for persuading the then Secretary of State for the Environment to set up this public inquiry? Is he aware that in doing so I was seeking to strike a fair balance between the legitimate apprehensions of my constituents and what seemed to me the very great urgency for the BBC to acquire a high-powered transmitter for its overseas services? Is he aware that I thought that what I was doing was submitting this proposal to a technical inquiry, to be followed by a quasi-judicial decision by the Secretary of State? It did not occur to me that this would become a matter of parliamentary debate between the submission of the report and the decision. I should have thought that it was better to leave this to the normal procedure.
Lord Skelmersdale: My Lords, I am most grateful to my noble friend. Perhaps he can exercise his powers of persuasion continuously, rather than just on the original occasion.
Lord Harmar-Nicholls: My Lords, is my noble friend aware of the dangerous statement that he made in answer to the supplementary question before the last one? Is it suggested that Parliament, by carrying out its proper duty of examining anything which is in the public interest, does not have trust in either the officials or the Ministers of the day? Does giving that kind of an answer indicate that there is some conflict of view as to what are our various functions?
Lord Skelmersdale: No, my Lords; I do not think it is right for me to reconsider the answer I gave earlier, because what I was saying was that with that logic, as

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I see it, in view, it is not right to change the procedure which normally is adopted on these occasions.

Hong Kong: Future
3.13 p.m.
Baroness Phillips: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are satisfied that there are sufficient safeguards for the people of Hong Kong after 1997, in view of the reception given to the visiting delegation by the Government of China.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, we are at present examining with the Chinese Government how it might be possible to arrive at arrangements which would secure for Hong Kong after 1997 a high degree of autonomy under Chinese sovereignty and would maintain stability and prosperity and the present way of life. We are seeking a binding international agreement in which these arrangements would be formally recorded.
Baroness Phillips: My Lords, I thank the Minister for her reply. Is she aware that the people of Hong Kong, a territory always loyal to the British, are greatly concerned about the future? They feel that any agreement which is arrived at must be acceptable equally to the people of Hong Kong as to Britain and China. Is she aware that they are particularly concerned that there may be a loss of rights such as their basic law, or, indeed, some of their other freedoms?
Baroness Young: My Lords, we are of course aware of the concerns and the views of the people of Hong Kong. Indeed, there is a continuous process of consultation with the people of Hong Kong on all matters relating to the territory's future. A wide range of channels has evolved through which people make known their views. We value our regular discussions with the Governor and the unofficial members of the Executive Council. In addition, there are ministerial visits to Hong Kong and the reception of Hong Kong delegations to London.
Lord Kennet: My Lords, in view of the Peking proposal for a joint commission between Britain and China before 1997—in the meantime, that is—have the Government anything to say about the recent proposal of the elected Hong Kong Urban Council that that joint commission should be joined by people of Chinese descent; that it should be a tripartite commission between Britain, China and people of Chinese descent in Hong Kong?
Baroness Young: My Lords, I note what the noble Lord has to say, but, of course, all matters of detailed discussion in the negotiations, which are still going on, are confidential.
Lord Fanshawe of Richmond: My Lords, is my noble friend aware that there is deep concern in Hong Kong regarding the suggestion that there should be a joint Anglo-Chinese condominium to run Hong Kong between now and 1997, and will she give an assurance that Her Majesty's Government have in mind no such proposal?
Baroness Young: My Lords, I am glad to be able to reassure my noble friend that we shall continue to fulfil our responsibilities in the period up to 1997. We shall continue to provide the framework within which the Hong Kong Government can administer the territory and plan for its future.
Lord Cledwyn of Penrhos: My Lords, is the noble Baroness aware that we warmly welcome the publication of the proposals to extend democratic procedures in Hong Kong, although we wish that they might have gone a little further? Can she inform the House how the Green Paper in which the proposals are contained is now going to be processed? Secondly, can she tell the House what is the purpose of the Foreign and Commonwealth Secretary's visit to Hong Kong next week? Is it related to the proposals for an increase of democracy there? Will he be seeing the council or other representative bodies? Could she enlighten the House on the purposes of his visit?
Baroness Young: My Lords, if I might take the last point first, I would say that my right honourable friend will be continuing his series of discussions with the Chinese Foreign Minister and with other Chinese leaders on all aspects of Hong Kong's future. His purpose is to carry the talks forward at the highest level. On the other point that the noble Lord raised, I would refer him to the answer that was given yesterday in another place by my right honourable friend the Secretary of State. We are seeking, by the publication of the Green Paper, to set out the tests of acceptability to an agreement in Hong Kong.
Lord Cledwyn of Penrhos: My Lords, I am obliged to the noble Baroness. Am I mistaken in thinking that the Foreign Secretary is going to Hong Kong as well as to Peking to see the Chinese Foreign Minister? My question was directed to the possibility of a Hong Kong visit, and to ask what the purposes of that might be.
Baroness Young: My Lords, he will be going to Hong Kong and he will be continuing his discussions with people in Hong Kong.
Lord Grimond: My Lords, would the noble Baroness agree that up to now it has been a principle of our dealing with the colonies that formally, so to speak, the whole population should be consulted about their future before it is decided? Do we understand from her statement that, welcome as may be these consultations with certain officials, in the case of Hong Kong there is going to be no such procedure, which, as I say, has been the common form in dealing with the future of all other colonies?
Baroness Young: My Lords, the noble Lord will be aware of the publication of the Green Paper, which

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sets out various ways in which the views of the people of Hong Kong may be made known to the British Government. If he was referring to the possibility of a referendum, which is one of the matters which from time to time has been suggested, I would say that we believe that, given the special circumstances of Hong Kong, a referendum is not a feasible option.
Lord Campbell of Alloway: My Lords, can my noble friend the Minister confirm that in the interim period there will be no alteration of the judicial structure of the colony?
Baroness Young: My Lords, I have already indicated in an earlier answer to the noble Lord, Lord Fanshawe, that in the interim and transitional period up to 1997 we shall continue to provide the framework within which the Hong Kong Government can administer the territory.
The Duke of Norfolk: My Lords, is my noble friend aware than many of us on this side of the House are very confident about the way in which the Government are negotiating these matters, and that above all we do not wish to see the mind of President Deng Xiaoping prejudiced?—because at this particular moment China is moving towards capitalism. Indeed, it has opened up the free markets and is moving further and further towards capitalism. Moreover, is my noble friend aware that the more we try to make demands which are unwise the more we shall cause the opposition in China to prejudice the possibility of China becoming capitalist and the possibility of it being quite reasonable for Hong Kong to join it?
Baroness Young: My Lords, I thank my noble friend for his question. It is of course our wish to maintain both the stability and the prosperity of Hong Kong.
Lord Whaddon: My Lords, is the noble Baroness aware, along with all the other concerns of the people of Hong Kong, of the worries of the various churches now active in Hong Kong that they might not find it as easy to continue after 1997? Will Her Majesty's Government bear in mind those concerns?
Baroness Young: My Lords, the Government will bear in mind the concerns of the churches along with the concerns that have been expressed by other people in Hong Kong.

South Atlantic Fund: Psychiatric Cases
3.22 p.m.
Lord Molloy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will make representations to ensure that servicemen who served in the Falklands War and who now suffer from psychiatric disability will benefit from financial help from the South Atlantic Fund.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, the operation of the South Atlantic Fund, and the decisions taken for the disbursement of funds held by it, are entirely matters for the trustees of the fund. However, I am informed that the trustees of the South Atlantic Fund and the authorities of the Service benevolent organisations, which are working closely with the fund over the handling of individual cases, are all fully aware of the need to take into account psychiatric as well as other disabilities when they make judgments on payments appropriate to need. Certain grants have already been made in such cases.
Lord Molloy: My Lords, I am grateful to the noble Minister for his reply. However, is he aware that this has been the subject for debate at the national conference of the Royal British Legion and at the metropolitan area conference of the Royal British Legion, of which I have the privilege to be president? Moreover, is he aware that at those conferences grave anxieties were expressed as to how the matter was being investigated with regard to those servicemen who fought in the Falklands and who could be described as difficult or perhaps psychiatric cases? There was no problem whatever with the DHSS because they said, "Yes, they are entitled to everything", but there was some disquiet with regard to the manner in which those responsible for administering the South Atlantic Fund were looking at these particular cases.
Lord Trefgarne: My Lords, I am sorry to hear about the disquiet to which the noble Lord has referred, but I believe that the facts are as I have described them. I understand that the trustees of the South Atlantic Fund have considered the claims from men suffering from psychiatric illness in the same way as they have considered claims from men suffering from physical injuries. One of the factors that they have had to take into account is the extent to which such illness was suffered as a result of the conflict. That is of course much more difficult to determine in psychiatric cases than in physical injury cases. I can tell the noble Lord that I think that there have been about a dozen cases so far.
Lord Molloy: My Lords, I should like to thank the Minister very sincerely for the interest that he has shown. I do not consider the matter closed. I may have to pursue it in other fields, but I am very grateful for his deliberations, for the way in which he has examined the matter, and also for what he has told the House this afternoon, which I can assure him will be readily accepted with great approval by the Royal British Legion.

Acid Rain
3.25 p.m.
Lord Stoddart of Swindon: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have calculated the costs to the electricity supply

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industry and electricity consumers of implementing the EEC Commission proposals on acid rain contained in the "Large Plants" directive.
The Parliamentary Under-Secretary of State, Department of Energy (The Earl of Avon): My Lords, I understand the additional annual costs to the electricity supply industry in England and Wales are estimated to be approximately £350 million. This is equivalent to an electricity price increase of around 4 to 5 per cent.
Lord Stoddart of Swindon: My Lords, I am most obliged to the noble Earl for his Answer to my Question. However, would he agree that the increased costs would be quite serious not only for the domestic consumer but also for industrial consumers as well and would indeed put up our industrial costs and injure our competitive position? Would the noble Earl also agree that, although the "Large Plants" directive may he popular in certain quarters in a "sloganish" type of way, it may nevertheless not be the correct and most effective route towards dealing with the effects of acid rain on the environment, although it may prove to be the most expensive? May I have the noble Earl's assurance that the Government will resist any attempts to implement the "Large Plants" directive until proper and wide-ranging research has taken place into the reasons for acid rain and the best way of curing it?—and that would include afforestation policies which have been embarked upon by many countries throughout Northern Europe.
The Earl of Avon: My Lords, I can confirm to the noble Lord that the capital cost of reducing SO2 emissions by 60 per cent. by 1995 would be nearly £1·5 billion, which is obviously a sum that we should find difficult to produce and it would, indeed, take the edge off our competitiveness. The United Kingdom is willing to seek further substantial emission reductions but on a reasonable time-scale. It is for this reason that the Government's research expenditure in this field is now set at £5 million per annum. We are prepared to negotiate constructively on directives with our European partners and that, no doubt, we shall do.
The Earl of Lauderdale: My Lords, can my noble friend say whether this directive has been closely studied by Sub-Committee G of the European Scrutiny Committee and whether a report on the subject will shortly be forthcoming?
The Earl of Avon: My Lords, my understanding is that Sub-Committee G is at the moment taking evidence on pollution. My department submitted evidence to it in May.
Lord Chelwood: My Lords, in regard to my noble friend's reply about a reasonable time-scale, would he be good enough to tell the House what views the Government have formed about what is known as the "30 per cent. Club" which seven countries, now including France, have joined as an earnest of the seriousness with which they take this subject and of their good intentions? Is it Her Majesty's Government's intention to join this club, which would at least take us roughly half way as far as the Commission is asking us to go?
The Earl of Avon: My Lords, the difficulty of joining a club which issues a starting date of 1980 is that all countries have different trends. In our particular country our emissions have already fallen by 37 per cent. since 1970, which is not a record but it is something of which we are very proud. However, in answer to my noble friend, we are saying, yes, to further substantial SO2 reductions to a reasonable time scale; yes, to parallel NOX reductions; yes, to further strengthening of our research; and above all, yes, to an international agreement.
Lord Gisborough: My Lords, will my noble friend attach the greatest importance to speed as regards this matter—because, if the results are proved to be positive, there may, by 1995, be no more forests and no more fish in Norway to save?
The Earl of Avon: My Lords, I think that my noble friend is altogether going too far. There is totally insufficient scientific evidence to establish a clear link between emissions and environmental damage and no guarantee whatever that the substantial expenditure required by the directive would be cost-effective.
Viscount Hanworth: My Lords, would the noble Earl agree that nitrous oxide emissions may be just as harmful as sulphur emissions and that the two together may be even worse than either? Therefore, would he not think it unwise to concentrate entirely on the sulphur emissions?
The Earl of Avon: Yes, indeed, my Lords. I could add, of course, hydrocarbons as well.
Lord Nugent of Guildford: My Lords, is my noble friend aware that the scientific evidence with regard to cause and effect of acid rain is by no means conclusive and that his cautious approach to this matter, as representing that of the Government, is fully justified? Is he aware that, when the Report of the Select Committee of this House on this subject is published, he will find this point fully substantiated?
The Earl of Avon: My Lords, I am grateful to my noble friend for his remarks. I look forward to the publication with enthusiasm.
Lord Stoddart of Swindon: My Lords, will the noble Earl take especial note of what his noble friend Lord Nugent has just said—that we may, in fact, land up having more haste with less speed, and that speed will not necessarily find the right solution—indeed, it might find the wrong solution to the wrong problem?
The Earl of Avon: My Lords, I hope that my answers have not shown excessive speed, and I believe that the Government's policies are right.

Business: Summer Recess
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Cockfield will, with the leave of the House, repeat a Statement that is to be made in another place on film policy.

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It may be for the convenience of the House if I announce that the Committee stage of the Ordnance Factories and Military Services Bill will be adjourned for dinner at approximately 7 p.m. for a short period, and that during this adjournment the Commons amendments to the Repatriation of Prisoners Bill will be considered.
It may also be for the convenience of your Lordships if I announce that, subject to the progress of business, it is proposed that the House should rise for the Summer Recess on Wednesday 1st August and return on Tuesday 16th October. The House will not now be sitting on Friday 27th July.
Baroness Llewelyn-Davies of Hastoe: My Lords, I should like to ask the noble Lord the Chief Whip a question about the business arranged for 23rd July. The House has known for some time that a debate on the report of the EEC Select Committee on Agriculture and the Environment and on the report of the Science and Technology Committee on research into the same subjects had been arranged for 23rd July. It had been understood that, hopefully, Government business would be light on that day in order to allow a reasonable time for the debate.
We learn today that the Third Reading of the local government paving Bill has been put down for that day, so it is hardly likely to be a light occasion; and on that day there will almost certainly be Statements after a long weekend at such a time of national disarray. Is it not unfortunate that in those circumstances, and as the House is sitting until 1st August, no Government business should have been arranged for Friday, 27th July? Is it not unfortunate that the reports of two Select Committees of your Lordships' House, for which the Government are obliged to give us time, should be treated in this way?
Lord Denham: My Lords, I can assure the noble Baroness that absolutely no discourtesy was intended to two Select Committees of your Lordships' House, which are very highly respected in this House. I understand that for reasons of timing it was desirable that the debate on these two reports should be held in July rather than in some earlier month. As the noble Baroness, from her past experience, will remember, this makes it very much more difficult to give a congenial time to such an important debate.
I think that the noble Baroness is probably being unduly pessimistic. The calculation by my office is that the Third Reading of the London Government (Interim Provisions) Bill—
Lord Ponsonby of Shulbrede: "London Government," my Lords?
Lord Denham: My Lords, that was a Freudian slip; I mean the Local Government (Interim Provisions) Bill. The estimation of my office is that this will take about three hours plus, in which case I think this double debate could be expected to come on between 6 and 7 o'clock. I do not think that this could be regarded as being very bad in July, if it can be arranged. Whereas I think the noble Baroness was being over-pessimistic, I hope that I am not being over-optimistic.
Baroness Llewelyn-Davies of Hastoe: My Lords, I am sure the House will agree that the noble Lord must be being over-optimistic. There are bound to be amendments on Third Reading from all parts of the House. Lately, Third Readings have been taking much longer. I am sure there will also be Statements about the various national happenings. I know that serious discussions have taken place through the usual channels, and I do not accuse the noble Lord of discourtesy. Nobody knows better than I how difficult the arrangement of business is. Nevertheless, I think that the House has been treated rather badly over this.
Lord Denham: My Lords, I am of course always willing at any time to listen to representations from any quarter, and most of all from the noble Baroness the Deputy Chairman of Committees. Perhaps we could talk about this outside. I must remind the noble Baroness, although I am sure that she will need no reminding, that sometimes, in order to try to meet worries such as those that she has, one creates more difficulties because noble Lords have possibly made their arrangements and to "unstick" such arrangements causes more trouble. But, of course, I shall listen to anything that any noble Lord says to me about this outside the Chamber.

Building Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Ordnance Factories and Military Services Bill
3.38 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 corn mittee.—(Lord Trefgarne.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 1 [Transfer schemes]:
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 1:
Page 1, line 6, at beginning insert—
("Subject to an affirmative resolution of each House of Parliament").
The noble Lord said: I beg to move the first amendment with which we are to deal this afternoon. Line 6 on page 1 of the Bill deals with ordnance factory transfer schemes. We are talking about the very important matter of the sovereignty of this House over matters such as the transfer of ordnance factories out of public ownership into private ownership.
Clause 1 begins:
"The Secretary of State may make a scheme which".
We are saying that, subject to an affirmative resolution of the House of Commons, the Secretary of State may make a scheme. At the moment the Secretary of State

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has the right to do what he wishes, as he wishes, and when he wishes without the agreement of Parliament. No doubt the Minister will draw my attention and that of the Committee to certain ways in which there may be a circumscription on that statement.
Clause 3(9) of the Bill merely states that:
"Within the period of one month beginning with the day on which a scheme comes into force, the Secretary of State shall lay before Parliament a copy of the scheme".
We shall be dealing with and concentrating very much on the whole basis of transfer, which is the scheme, or schemes, and what they contain. Perhaps I may read to the Committee the detail of a Parliamentary Question which was asked by my honourable friend Mr. Kevin McNamara, who speaks on these matters in another place. It reads:
"To ask the Secretary of State for Defence if he still proposes to place in the Library, before the end of the Summer Recess, the proposed Memoranda of Understanding and the Scheme under the Ordnance Factories and Military Services Bill."
We are attempting at this late stage fully to understand the intentions of the Government. This is the reply given by the Minister of State on 18th July:
"It remains the Government's intention that the Scheme to be made under the Bill, if enacted, will be placed in the Library as soon as work upon it has been satisfactorily completed and certainly not later than the day on which it takes effect".
I draw the attention of the Committee to the particular problems that must arise, in that this stage of the Bill is taken before the House rises and the remaining stages take place in the overspill, so there are special problems about Members being fully aware of matters which are laid in the Library. The Answer goes on from the words,
"and certainly not later than the day on which it takes effect,
to say,
that is to say the Vesting Day of the new ROF Company."
We shall come later to the significance of the vesting day.
"Correspondingly, if considerations of commercial sensitivity allow, my right honourable friend would also hope to publish the Memorandum of Understanding between himself as 100 per cent. shareholder of the Company and the Chairman of the Board as soon as it has been completed and agreed. Again, this would be on or before the day on which it becomes effective, which will also be Vesting Day."
In our view, Parliament must retain control in the interests of national security and commercial interests, and, equally importantly, must retain control of patents and intellectual property rights. We shall return to those matters in later amendments.
There is an enormous welter of detail that has yet to be revealed, and we are quite uncertain as to how the Minister satisfies and squares up to the responsibilities of Parliament with the procedures he has in mind: for instance, the structure of the company, or companies, that may be established at a later date and the methods whereby the Government intend to introduce private capital—because that is what this is all about in respect of changing the basis of control.
In another place on 21st May, at columns 739 and 740, the Minister of State said:
"At a later stage but, we hope, a not much later stage, we propose to seek the introduction of private capital into the company."
He further went on:
"We will at a later date put forward detailed proposals on privatisation in the light of the circumstances at the time".
If Parliament is to have effective control over these matters then guarantees must be in the Bill. The Bill draws up just about the loosest possible mechanism for dismantling the profit-making, efficient and highly successful Royal Ordnance Factory organisation, which is vital to the defence of the nation and the operational efficiency of the armed services. There is no dispute between the Minister and me on the latest points I have made on efficiency, effectiveness, and satisfaction of the national interest. What we are concerned about is, given that the Government have their will, how does Parliament exercise its responsibilities in these matters?
I want to draw the attention of the Committee to an article in The Times on 14th June by Jonathan Davis, headed, "The Many Pitfalls of Privatisation", in which he referred to the evidence of Sir Kenneth Couzens, the Permanent Secretary of the Department of Energy, and Mr. Peter Lazarus, the Permanent Secretary to the Department of Transport, to the Public Accounts Committee on 6th February 1984. The article went on to say:
"the report's other main conclusion that stands out appears to be that a combination of the volatility of the stock market—and the inability of both merchant banks and underwriters always to read it correctly—makes it inevitable that the Government will always be groping for the right solution in privatisation issues".
The article concludes:
"Given the scale and importance of the flotations to come in the next year this is hardly encouraging. The chances of the Government avoiding another Amersham or Britoil may not be that high".
The severe difficulties which emerged when Britoil and, certainly, as recently as last month, Enterprise Oil were floated remain within the memory of many Members of your Lordships' House, and the problem for the Government of securing effectively their will in respect of ensuring that no monopoly ownership occurs. We are dealing today and at other times with how it is possible to achieve the Government's imperative—that is to privatise—and at the same time to ensure that it is not possible for some owner, whether he is British or in fact foreign, to be able to take complete control over one or more or all of the factories involved.
We also have experience of the sale of the Mirror group of newspapers, where it was possible, as a result of the determination of an individual, to circumvent what appeared to be a settled situation. Flotations have ceased to be flotations; individuals have been able to put forward a sum of money sufficient to be attractive. We had the situation yesterday by announcement of the sale of Sealink, where, instead of the matter being floated, an owner came along who is not British or British-based, but foreign-based, and who was able to put up a sum of money which was found to be attractive not only to the Government but to the advisers of the Government as well.
All we raise with the Minister is that it is important, particularly with the sale of our ordnance factories (whether wholly or in part; whether there is a holding company or there are groups) to recognise that, regarding Clause 1—which deals with the scheme whereby these things will take place—it is not unreasonable that a measure of parliamentary control should be introduced.
The Minister may be able to convince the Committee that after the Bill gets Royal Assent there is no need for Parliament to be bothered any more about what happens to our ordnance factories. I believe that most people here will want to have at least some opportunity for this House, and particularly the other place, as regards the Minister and those to whom he is likely to sell our national assets, to have some exercise of parliamentary control. I beg to move.
3.48 p.m.
Lord Diamond: I want to support everything that the noble Lord, Lord Graham, has said on this important amendment at the commencement of our discussions on the Committee stage of this Bill. The background to this amendment is a proposal which has been opposed by all opposition parties in both Houses. It has been opposed by the representatives of more than 50 per cent. of the electorate at the last general election. It is being put forward by the representatives of some 42 per cent. of the electorate who voted Conservative at the last general election.
It has been opposed by all sorts of expert advice, ex-Conservative Ministers—indeed an ex-Secretary of State for Defence himself. It is against that background that we examine the method by which the Government propose to give effect to their dogmatic proposal. It is a very risky one, playing fast and loose with the defences of this country. It is against that background that the Government propose this Bill. In all my experience of legislation, which I daresay is as substantial as that of any Member of your Lordships' House, I have never seen a Bill which consults Parliament so little, and indeed which scorns Parliament in the way it gives all powers to the Government and to the Minister and none to anybody else.
It is an enabling Bill—with a capital E. This difficulty will come up on several amendments. It is bound to come up in particular on this amendment because against that background it is naturally of vital importance and of vital interest to Parliament to know whether a scheme being proposed under this Bill, under the enabling powers of the Secretary of State, will be broadly acceptable, broadly unacceptable, totally unacceptable or whatever the case may be.
The details of the scheme will naturally affect the reaction of Parliament and of those who are opposed to the principle of the Bill, which we can do nothing about at this stage, and will affect them considerably. We therefore press the Government very strongly to take one step backwards and to pay some regard to the fact that Parliament exists. It exists not to deter or to prevent a Government from carrying out proposals, but to examine them, and if possible to improve them.
As the Minister knows, these proposals will give an opportunity to your Lordships' House to discuss any proposal made under the Bill, any scheme which is proposed, but no more than that: just a discussion. The Government need not be anxious about it. All that we can do, if an affirmative resolution is put before us after being passed by another place, is to listen to what the Government propose, to make suggestions, to seek to persuade (if we think there are
1636
matters on which persuasion ought to be exercised), and nothing more than that. We cannot delay the Government nor prevent them from having their will, nor should we, but we want the right to consider what the Government are doing. We want the Government to take one step backwards and realise that they and the Secretary of State himself are Members of Parliament.
Lord Mayhew: My noble friends I know would want me to express our warm support for this amendment. Following the argument of my noble friend, I ask the Government: what are they afraid of in allowing us an affirmative order? This is not a paving Bill. They will not be defeated in the House of Lords if an affirmative order comes before us. They will not be defeated in the House of Commons. The truth is, I am afraid, that this whole Bill is designed precisely to prevent us from exercising any parliamentary influence on the things that really matter in the privatisation of the ROFs.
The truth is that the Government will argue that they will tell us after the deed is done all about what they have done. We shall, no doubt, be able to put down parliamentary Questions and receive an answer after the event. We shall be able to know about it and study it, but we shall have lost the opportunity of advising the Government, of exerting genuine pressure on the Government. I think it is an abuse that we should have a Bill of this kind, an enabling Bill, which removes from us any chance of affecting the real guts of the problem which is before us. I therefore have the warmest enthusiasm for this amendment. I hope that it will be pressed to a Division. I am sure that if it is my noble friends will want to support it.
Lord Trefgarne: In responding to the arguments that have been put forward, I am conscious that both on this amendment and on a number of amendments that follow we shall be covering territory already explored in some detail in another place. I make no complaint of that. But the effect of this amendment would be to require the Secretary of State to seek the authority of both Houses of Parliament before he made a scheme. But this is precisely what he is doing now in bringing this Bill before Parliament. This is an enabling Bill which permits the Secretary of State to make schemes, as well as to determine when they shall come into force. If Parliament gives its authority to these actions covered by the Bill, what would be the point in asking for the same authority again somewhat later on?
No doubt what the noble Lord really has in mind is that the House should be told of the details of the intended transfer before giving its approval to any schemes. But this is not achieved by the amendment, which requires the Secretary of State to come to the House before a scheme is made—which covers the drafting of the scheme, not simply its coming into force. In any case, the Bill already defines and limits the types of assets to be transferred. Clause 2 provides that the property, rights or liabilities to be transferred must be attributable to the operations of the ROFs or be certified as such by the Secretary of State. As regards the destination of the property etc., the Government have already announced their intentions for the future company structure of the ROF companies.

1637
In all this we accept the constitutional principle that legislation permits the Government to take certain actions or exercise certain powers without specifying exactly how these are to be implemented. This enabling Bill allows the Secretary of State to set up companies to carry on the business of the ROFs by transferring defined property from the Crown. The exercise of these powers is an administrative, not a legislative, function. The Secretary of State will of course remain answerable to Parliament, after the event, for the way in which he has exercised his powers, but that is a different question. For example, if there is concern about the return which the Secretary of State obtains for the transfer of Crown property, these financial aspects can be examined by Parliament in the normal way.
I therefore ask your Lordships to reject this amendment on two grounds: first, because it merely adds a further unnecessary process of debate after the principles have already been agreed to, assuming enactment of this Bill, of course; and, secondly, because the detailed intentions of the Government have already been made clear to Parliament and publicly, so that further debate is unlikely to achieve anything more. I hope that the noble Lord will be persuaded by these considerations.
Lord Graham of Edmonton: First, may I express appreciation for the support that the amendment has received from the other Benches in your Lordships' House. The noble Lord, Lord Mayhew, used the phrase, "What can the Government be afraid of?" I had already asked, "What can be lost by having this?" The Minister has indicated that what would be lost would be the Minister's ability to proceed without as full a disclosure and as full a public comment by those who are interested in the nitty-gritty and the details as might be made in this matter. The Minister must know that one of the prime functions of Parliament is to expose to the public gaze matters which might otherwise not be sufficiently made known to others outside this place. The other noble Lords who have spoken have said, quite fairly, that the principles upon which the Bill received its Second and Third Readings and passed from another place to here were that, although they will be challenged, the reality of parliamentary arithmetic quite clearly indicates that it will make progress.
Although the Government have spoken in general terms we feel that there will be people vitally interested in the details. For example, there are the employees who are employed within the organisations. They will not merely want to know that there are schemes which will take account of various matters, but want to have an opportunity of scrutiny. Not only are there the employees, but there are many thousands of ex-servicemen at all levels and every rank of seniority who will be interested in what will happen. When one talks about the destination of property, there will be another group of people who will want to know.
I do not want to use pejorative language, but the Minister should understand that there is a genuine interest, not merely an attempt to put a brake on the passage of these matters. What are we talking about?
1638
Perhaps one or two hours, if that, and we realise the preciousness of parliamentary time. We are really saying that we have a responsibility. I think that the Minister again was helpful when he said that in his view what we have are administrative matters and not legislative matters. In other words, once the legislation has approved the principle, what we are talking about and what we want are really administrative matters, and we ought not to be involved in them.
The Minister might be looking upon the sale of an ordnance factory in the same way as the sale of a ship, a mine, a piece of railway stock, or whatever it might be. We happen to believe that there is an even more vital principle in Parliament wanting to exercise its rights in these particular matters. I am very pleased to be advised that if we press this matter to a Division, there will be support around the Committee. I believe that the best way is to test the will of the Committee by pressing this matter to a vote.
4.1 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 102; Not-Contents, 97.

DIVISION NO. 1

CONTENTS

Airedale, L.

Jacobson, L.

Ardwick, L.

Jacques, L.

Attlee, E.

Jeger, B.

Balogh, L.

Jenkins of Putney, L.

Banks, L.

John-Mackie, L.

Beaumont of Whitley, L.

Kilmarnock, L.

Beswick, L.

Leatherland, L.

Birk, B.

Listowel, E.

Blease, L.

Llewelyn-Davies of Hastoe, B

Boston of Faversham, L.

Lloyd of Hampstead, L.

Bottomley, L.

Lloyd of Kilgerran, L.

Briginshaw, L.

Lovell-Davis, L.

Buckmaster, V.

McIntosh of Haringey, L.

Burton of Coventry, B.

Mackie of Benshie, L.

Caradon, L.

McNair, L.

Carmichael of Kelvingrove, L.

Mayhew, L.

Carver, L.

Milford, L.

Cledwyn of Penrhos, L.

Mishcon, L.

Collison, L.

Molloy, L.

Davies of Leek, L.

Mulley, L.

Dean of Beswick, L.

Nicol, B. [Teller.]

Diamond, L.

Oram, L.

Donaldson of Kingsbridge, L.

Paget of Northampton, L.

Donnet of Balgay, L.

Peart, L.

Elwyn-Jones, L.

Phillips, B.

Ennals, L.

Pitt of Hampstead, L.

Ezra, L.

Plant, L.

Falkland, V.

Ponsonby of Shulbrede, L. [Teller.]

Fitt, L.

Gaitskell, B.

Rathcreedan, L.

Gallacher, L.

Rea, L.

Gladwyn, L.

Rhodes, L.

Gosford, E.

Rochester, L.

Graham of Edmonton, L.

Sainsbury, L.

Grey, E.

Sefton of Garston, L.

Hampton, L.

Shannon, E.

Hanworth, V.

Simon, V.

Hatch of Lusby, L.

Stallard, L.

Hooson, L.

Stamp, L.

Houghton of Sowerby, L.

Stewart of Alvechurch, B.

Hughes, L.

Stewart of Fulham, L.

Hunt, L.

Stoddart of Swindon, L.

Hylton-Foster, B.

Stone, L.

Ilchester, E.

Strabolgi, L.

Irving of Dartford, L.

Strauss, L.

1639

Taylor of Blackburn, L.

Whaddon, L.

Taylor of Mansfield, L.

White, B.

Thurso, V.

Willis, L.

Tordoff, L.

Wilson of Langside, L.

Underhill, L.

Winstanley, L.

Wallace of Coslany, L.

Wootton of Abinger, B.

Wells-Pestell, L.

NOT-CONTENTS

Ampthill, L.

Luke, L.

Auckland, L.

McAlpine of West Green, L

Avon, E.

Mancroft, L.

Bauer, L.

Margadale, L.

Belhaven and Stenton, L.

Marley, L.

Beloff, L.

Maude of Stratford-upon-Avon, L.

Belstead, L.

Bessborough, E.

Merrivale, L.

Birdwood, L.

Molson, L.

Boyd-Carpenter, L.

Montgomery of Alamein, V

Caithness, E.

Mottistone, L.

Campbell of Alloway, L.

Mowbray and Stourton, L.

Campbell of Croy, L.

Moyne, L.

Chelwood, L.

Murton of Lindisfarne, L.

Clitheroe, L.

Newall, L.

Cockfield, L.

Norfolk, D.

Cork and Orrery, E.

Northchurch, B.

Daventry, V.

Nugent of Guildford, L.

De Freyne, L.

O'Brien of Lothbury, L.

Denham, L. [Teller.]

Onslow, E.

Eccles, V.

Orkney, E.

Elton, L.

Orr-Ewing, L.

Fanshawe of Richmond, L.

Pender, L.

Ferrier, L.

Plummer of St. Marylebone, L.

Fraser of Kilmorack, L.

Gainford, L.

Porritt, L.

Gisborough, L.

Rankeillour, L.

Glanusk, L.

Renton, L.

Gormanston, V.

St. Davids, V.

Gray, L.

Saltoun, Ly.

Greenway, L.

Sandys, L.

Gridley, L.

Seebohm, L.

Hailsham of Saint Marylebone, L.

Sempill, Ly.

Skelmersdale, L.

Halsbury, E.

Soames, L.

Henley, L.

Somers, L.

Hives, L.

Southborough, L.

Home of the Hirsel, L.

Stodart of Leaston, L.

Hornsby-Smith, B.

Strathcarron, L.

Ironside, L.

Sudeley, L.

Keyes, L.

Swinton, E. [Teller.]

Killearn, L.

Terrington, L.

Kilmany, L.

Trefgarne, L.

Kinnaird, L.

Trumpington, B.

Kinnoull, E.

Ullswater, V.

Kitchener, E.

Vaux of Harrowden, L.

Lane-Fox, B.

Vivian, L.

Lauderdale, E.

Whitelaw, V.

Long, V.

Wise, L.

Lucas of Chilworth, L.

Young, B.

Resolved in the affirmative, and amendment agreed to accordingly.
4.9 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 2:
Page 1, line 9, leave out ("or to different companies").
The noble Lord said: This amendment goes to the heart of another aspect which greatly worries Members on this side of the Committee. It is the current intention under Clause 1, which speaks in terms of a scheme which provides for,
"the transfer to a company or to different companies".
In effect, we want to leave out the words "or to different companies". The "different companies" aspect, in our view, is very serious.
The amendment is important because it enables the corporate unity of the 13 establishments to be maintained as one under public ownership in the new company for the purposes of maintaining both employment and the efficiency that arises out of the highly integrated production chains in the factory. There is no question but that, although each factory has its own esprit de corps and pride, the Royal Ordnance factories collectively are looked upon as a unity and as an entire complex.
The Government proposals—and no doubt the Minister will say a little more about them—are for a holding company and four fully owned subsidiary companies acting as operating divisions. So already there is the possibility, but not the certainty, that there could be at least four separate companies and ownerships. There could very well be more, but let us look simply at the arrangement whereby there will be four.
At the moment there is one set of administrative costs for headquarters, marketing structure, financial structure, personnel management structure and the like. Here are a Government who believe in efficiency saying, "Although we have a unity of all of those efficiency tools, we intend to create four separate structures to manage something almost precisely the same".
We believe that that is not on. Certainly the interests of the workforce, as well as a great many other interests, are at stake. Quite simply, this amendment is saying to the Government, "Well, all right; you have the power to sell, sell as one block, and do not divide them." I beg to move.
Lord Diamond: I should like to support very strongly, but briefly, what the noble Lord, Lord Graham, has said about this matter, I understand, although it has not been made absolutely clear, that the Government may want to sell in terms of four separate companies. It is not absolutely clear from what the noble Minister said at Second Reading, but he may want to reserve the power to do that. I beg him, as a businessman, not to commit such business nonsense. He surely must give the new owners, under any scheme he makes, the opportunity to decide whether they want to run the business as a whole or in parts. All the evidence of previous examination has pointed to the same result. Every businessman in your Lordships' House would agree with me, I am sure, that it is virtually criminal, that it is commercial folly to divide up a business like this, with all the additional overheads, the lack of integration, and the damage to well-proven loyalties that result from dividing it up. No businessman would dream of running it in this way, in which the Government want to have enabling power and may want to use it. If the Minister wants to avoid destroying the morale and usefulness of these factories, I beg him to leave them as one unit.
Lord Trefgarne: I am sorry to say that I am not able to accept this amendment. We have already announced our intention to establish a holding company and four subsidiary companies, wholly owned by the holding company which, in turn, will be wholly owned by the Secretary of State. The Bill is drafted in such a way as to enable this to the done, and

1641
we are taking the necessary preliminary steps accordingly.
The Opposition have made clear that the intention behind the amendment is to allow the Secretary of State to set up only one company and therefore to maintain the ROF enterprise as a single entity. But in fact, the structure we have proposed is basically the same thing. The subsidiary companies will be answerable to the holding company, which will determine general questions of policy for the group as a whole. But with the kind of structure, the subsidiary companies will be free within certain limits to take their own commercial decisions, making them better able to exploit particular opportunities as they arise. We believe that this arrangement will be better for the competitiveness that we are seeking, as well as for the profitability of the group as a whole.
The Government certainly recognise that there are links and certain inter-dependencies between the individual factories which make up the ROF organisation. But these links can, and will, be preserved within the structure we propose. As subsidiaries of the holding company, the divisional companies will be perfectly able to trade on a sound commercial basis between factories within the same division and between divisions.
As I have said, the holding company will remain responsible for some general policy aspects of the enterprise; for example, personnel matters, and the policy for research and development. Although each subsidiary company will be expected to develop its own R & D capability, we recognise that overall direction for R & D, for example, may be required from the holding company. The structure we propose allows for that.
Inevitably, the setting up of subsidiary companies will facilitate, if this course is proven to be desirable, the disposal of divisions of the ROFs separately to the private sector. We have made clear that if this proved attractive, such a possibility has always been on the cards. However, as seen at this moment, the most likely course for privatisation will be a flotation of shares in the enterprise as a whole. Again, the company structure we have proposed will enable either course to be followed.
I should emphasise that the grouping of factories within the subsidiary companies has been chosen as the most logical grouping of factories which undertake work of a similar nature to each other, but this does not rule out the possibility that further schemes may be made to transfer assets from the holding company to the subsidiary companies, or between subsidiary companies, to create the best possible organisation for privatisation. In no way does any aspect of these possibilities damage the commercial interests of the Royal Ordnance factories; indeed, we have left the possibilities open expressly so that we can provide for their best commercial interests. I hope, therefore, that the noble Lord will not wish to press his amendment.
Lord Graham of Edmonton: The Minister's reply is wholly unsatisfactory and not acceptable because at the beginning he indicated, quite rightly, that the whole purport of the views on this side of the Committee is that there is a unity, not merely an
1642
interchangeability of interest between the factories, but he said that they can all work more efficiently. There is an esprit de corps among the Royal Ordnance factories. Although the Government say that this is almost like a halfway house, it is not 13 separate businesses; it could be four. There is no guarantee as to what might happen in the fullness of time—and it could be sooner, rather than later. The separate companies, which are responsible to the holding companies, by a means of a financial device—I am not talking about a legislative one—could be broken down even further. We have what we regard as a national asset, which we wish to keep together, and therefore I shall test the opinion of the Committee.
4.18 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 103; Not-Contents, 97.

DIVISION NO. 2

CONTENTS

Airedale, L.

Lawrence, L.

Ardwick, L.

Leatherland, L.

Attlee, E.

Listowel, E.

Aylestone, L.

Llewelyn-Davis of Hastoe, B.

Banks, L.

Beaumont of Whitley, L.

Lloyd of Hampstead, L.

Beswick, L.

Lloyd of Kilgerran, L.

Birk, B.

Lovell-Davis, L.

Blease, L.

McIntosh of Haringey, L.

Boston of Faversham, L.

Mackie of Benshie, L.

Bottomley, L.

McNair, L.

Briginshaw, L.

Mayhew, L.

Buckmaster, V.

Mishcon, L.

Burton of Coventry, B.

Molloy, L.

Caradon, L.

Mulley, L.

Carmichael of Kelvingrove, L.

Nicol, B. [Teller.]

Peart, L.

Carver, L.

Phillips, B.

Cledwyn of Penrhos, L.

Pitt of Hampstead, L.

Collison, L.

Plant, L.

Davies of Leek, L.

Ponsonby of Shulbrede, L. [Teller.]

Dean of Beswick, L.

Diamond, L.

Donnet of Balgay, L.

Rathcreedan, L.

Elwyn-Jones, L.

Rea, L.

Ennals, L.

Rhodes, L.

Ezra, L.

Rochester, L.

Falkland, V.

Sainsbury, L.

Fitt, L.

Seear, B.

Gaitskell, B.

Sefton of Garston, L.

Gallacher, L.

Shackleton, L.

Gladwyn, L.

Simon, V.

Gosford, E.

Stamp, L.

Graham of Edmonton, L.

Stewart of Alvechurch, B

Grey, E.

Stewart of Fulham, L.

Hall, V.

Stoddart of Swindon, L.

Hampton, L.

Stone, L.

Hanworth, V.

Strabolgi, L.

Hatch of Lusby, L.

Strauss, L.

Hayter, L.

Taylor of Blackburn, L.

Hooson, L.

Taylor of Mansfield, L.

Houghton of Sowerby, L.

Thurso, V.

Hughes, L.

Tordoff, L.

Hunt, L.

Underhill, L.

Hylton-Foster, B.

Vickers, B.

Ilchester, E.

Wallace of Coslany, L.

Irving of Dartford, L.

Wells-Pestell, L.

Jacobson, L.

Whaddon, L.

Jacques, L.

White, B.

Jeger, B.

Wigoder, L.

Jenkins of Putney, L.

Willis, L.

John-Mackie, L.

Wilson of Langside, L.

Kilmarnock, L.

Wootton of Abinger, B.

Kirkhill, L.

1643

NOT-CONTENTS

Ampthill, L.

Macleod of Borve, B.

Auckland, L.

Mancroft, L.

Avon, E.

Margadale, L.

Bauer, L.

Marley, L.

Belhaven and Stenton, L.

Maude of Stratford-upon-Avon, L.

Beloff, L.

Belstead, L.

Merrivale, L.

Bessborough, E.

Molson, L.

Birdwood, L.

Montgomery of Alamein, V

Boyd-Carpenter, L.

Mottistone, L.

Caithness, E.

Mowbray and Stourton, L.

Campbell of Croy, L.

Murton of Lindisfarne, L.

Chelwood, L.

Newall, L.

Cockfield, L.

Norfolk, D.

Cork and Orrery, E.

Northchurch, B.

Daventry, V.

Nugent of Guildford, L.

De Freyne, L.

O'Brien of Lothbury, L.

De La Warr, E.

Onslow, E.

Denham, L. [Teller.]

Orkney, E.

Eccles, V.

Orr-Ewing, L.

Elliot of Hanvood, B.

Pender, L.

Elton, L.

Plummer of St. Marylebone, L.

Fanshawe of Richmond, L.

Ferrier, L.

Porritt, L.

Fraser of Kilmorack, L.

Quinton, L.

Gainford, L.

Renton, L.

Gisborough, L.

St. Davids, V.

Glanusk, L.

Saltoun, Ly.

Gormanston, V.

Sandys, L.

Gowrie, E.

Seebohm, L.

Gray, L.

Sempill, Ly.

Greenway, L.

Shannon, E.

Gridley, L.

Skelmersdale, L.

Hailsham of Saint Marylebone, L.

Soames, L.

Southborough, L.

Henley, L.

Spens, L.

Hives, L.

Stodart of Leaston, L.

Home of the Hirsel, L.

Strathcarron, L.

Homsby-Smith, B.

Sudeley, L.

Ironside, L.

Swinton, E. [Teller.]

Kinnaird, L.

Terrington, L.

Kinnoull, E.

Thomas of Swynnerton, L.

Kitchener, E.

Trefgarne, L.

Lane-Fox, B.

Trumpington, B.

Lauderdale, E.

Ullswater, V.

Leathers, V.

Vaux of Harrowden, L.

Long, V.

Vivian, L.

Lucas of Chilworth, L.

Whitelaw, V.

Luke, L.

Wise, L.

McAlpine of West Green, L.

Young, B.

West Green, L.

Resolved in the affirmative, and amendment agreed to accordingly.
Viscount Long: I think this is the moment to take the Statement. I beg to move that the House be now resumed.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Film Industry
4.26 p.m.
The Chancellor of the Duchy of Lancaster (Lord Cockfield): My Lords, with permission, I will repeat a Statement on the British film industry made in another place by my right honourable friend the Minister of State for Industry and Information Technology. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a Statement on the film industry.
1644
"The British film industry is undergoing a renaissance. We are fortunate to have so many talented producers, writers, directors, and actors; and outstanding technical skills in film making. Several companies in Britain have achieved commercial success in quality films. Channel 4 has effectively encouraged the thriving independent production sector.
"However, cinema attendances have continued to decline dramatically. From an annual average of 338 million in the 1960s they have dropped to 66 million in 1983. In the same period the number of screens declined from some 3,000 to 1,300.
"Against this background we have drawn up the following proposals which are contained in the White Paper published today.
"Our first and most important conclusion is that the outdated Eady levy on cinema receipts must be ended. Introduced to recycle money from the cinemas to the producing companies, it has become an extra tax on seats which cinemas cannot afford. Its revenue in real terms has fallen by six-sevenths. It is an elaborate and unfair burden on the industry's weakest sector. The Government propose to bring in legislation to end this in 1985, and at the same time to wind up the British Film Fund Agency, the Cinematograph Films Council, and the Naional Film Finance Corporation. The legislation will also repeal eight Acts of Parliament and twenty-five statutory instruments relating to films.
"I have considered carefully the case for extending an Eady-type levy to television or to videos. I am, however, convinced that no sort of recycling mechanism is sensible. A levy on TV could lead to an increase in the BBC licence fee and ITV companies are already paying a subscription to Channel 4 which will be financing film making at a level of £8 million a year. In its review of copyright, the Government are still examining the question of a levy on blank video and audio tapes to protect copyright owners and we intend to invite further comments on this.
"I have been able to make satisfactory arrangements to replace the money which the Eady levy raised.
"Revenue from the Eady levy has in the past provided finance for the NFFC, which has done valuable work to encourage emerging young talent in the British film industry. It has contributed to many notable films including 'Gregory's Girl' and `Another Country' and fostered talent which has come to the fore in such international successes as `Chariots of Fire' and 'Local Hero'. The valuable contribution made with Eady levy finance will in future be secured by a new company in the private sector whose shareholders will initially provide contributions of over £1 million annually. The Government, in addition, will make £1½ million a year available for five years to co-finance low- and medium-budget films to be made in Britain. A further £500,000 a year for five years is to be made available to help in the early stages of the development of film projects. The new company will therefore be able to deploy more than double the resources which NFFC has had in recent years.

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It is an important new deal for the British industry.
"The National Film and Television School is well respected and enjoys an international reputation. We have secured independent funding for five years which will more than replace the current level of the Eady contribution. The noble Lord, Lord Wilson of Rievaulx, and the Interim Action Committee on the Film Industry recommended updating the equipment at the School and the Government will provide £250,000 for this purpose in 1985–86.
"The British Film Institute Production Board also receives a small Eady contribution and I propose, in consultation with the Cinematograph Films Council, to see whether a final payment out of the Eady levy can be made.
"During the passage of the Finance Bill through Parliament, my right honourable friend the Chancellor of the Exchequer made two amendments specifically to help the film industry. First, qualifying investment in film projects will now come within the scope of the Business Expansion Scheme. This will be a valuable incentive to equity investment in film and will help the small producers who have lately gained the confidence of the City.
"Secondly, in addition to the measures announced in the Budget, my right honourable friend has announced that films will have a further option to write off expenditure on a cost recovery basis against income as it arises, instead of spreading it over the income-producing life of the film. The industry will therefore not normally pay tax on its profits until all expenditure has been written off. This will give a greater measure of certainty for those investing in films.
"I am very pleased that the industry is pressing ahead strongly with plans for British Film Year in 1985. This will focus attention on film in education and industry as well as in entertainment. In particular, it will aggressively promote the sales of British films overseas.
"Our policy is to free the film industry from Government intervention and from an intrusive regulatory régime dating from the days of the silent films. Our policy will clear the way for the industry to operate in a more confident framework and to consolidate upon its success".
That, my Lords, completes the Statement.
Lord McIntosh of Haringey: My Lords, I should like to express our thanks to the Minister for repeating the Statement made in another place. I wish I could say the same about the availability of the White Paper itself. My honourable friend in another place was supplied with a copy of the White Paper by the Minister's right honourable friend some time ago, and yet when I went to the Printed Paper office at 2.15 this afternoon I was told that the White Paper was embargoed until 3.30. I think the House will agree that this makes it extremely difficult for the Opposition to make the kind of effective and constructive comments that we like to make on Statements of this kind. It is particularly galling that this should be the case because we have been waiting two years, since July 1982, for this White Paper.
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No fewer than three Government Ministers have tried to deal with this admittedly difficult problem, and have failed to do so. I wonder whether the Minister will agree that the incentive finally to come up with a White Paper has arisen from something which is quite remarkably omitted from the White Paper and from the Statement; that is, the abolition in the Finance Bill of 100 per cent. capital allowances. I wonder whether the Minister will agree that that has been widely seen by the film industry as being a body blow to investment in films of a much greater significance than any of the measures which are being put forward today. Before I forget to do it, I think it is necessary to pay tribute, on one particular aspect, to the protection for the British Film School at Beaconsfield and for the money that is to be given for renewing the equipment there.
The Minister referred in the Statement to the outdated Eady levy. It is certainly true that the Eady levy arose in a very different situation in the cinema, when receipts in the cinema itself were virtually the only receipts available to the film industry. But will the noble Lord not agree that the situation is now very different and that a great part of the film industry's receipts come from open network broadcasting, from cable and from video, and will eventually come from direct broadcasting satellite? Does he not agree that the rational thing is not to abolish such a levy but to bring it into line with modern circumstances and to have it coming from all the sources of income to the film industry?
The Minister referred to the new arrangements for depreciation, which are to be cautiously welcomed. But the British Film and Television Producers' Association made a specific request, to which he did not refer, for depreciation allowances of 50 per cent. on completion, 25 per cent. on first showing and 25 per cent. in the next year. I wonder whether the Minister can tell us how his proposals, as announced in the Statement, compare with that request, and whether it is his view that the BFTPA is likely to be satisfied with the arrangements that he is proposing.
The Minister referred to the replacement for the existing levy, rather as if the Eady levy was equivalent to the National Film Finance Corporation. In fact, the Eady levy produced £4.8 million in its last year and the National Film Finance Corporation received only £1.5 million of it. I wonder whether the Minister would care to comment on whether the up-to-£1½ million from private sources and the £1½ million from the Government are likely to equate to the total amount available from all public sources, which has been the case in the past.
I wonder whether the Minister would like to comment on the lack of reference to international experience in this matter—a remarkable omission from the White Paper, when we are likely to be the only country in the world without secure support for our national film industry. For example, in France there are a large number of fiscal devices available to help the film industry, such as relief for refurbishing cinemas, relief for training expenditure, allowances for low budget films and funds for additional prints. Since many of these measures are largely self-financing, I wonder whether the Minister would undertake to look

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at opportunities of that kind, in addition to the proposals that he is making.
The fundamental point about this Statement is that the facts of what it is introducing are not matched by the rhetoric of the Statement itself. In paragraph 7.2 of the White Paper we read that,
"it is … not surprising that prospective financial backers are reluctant to take further risks by commissioning unknown film makers";
and yet in paragraph 7.3 we read that the Government's policy is to be firmly based in the private sector. Is there not a conflict between those two statements, and is that conflict resolved by the measures now proposed? I wonder whether the Minister will bear in mind that, so far as the film industry is concerned, it is security of income over a period of years that is necessary. These measures, which involve a commitment by the Government for five years and a commitment by the private sector for three years, in no way match the security which has been available in the past from statutes.
4.40 p.m.
Lord Beaumont of Whitley: My Lords, I, too, should like to thank the Minister for repeating the Statement. As is so often the case with this Government, the energy and enthusiasm with which they wield the axe is not completely matched by the thoroughness with which they do the replanting. Most Members of your Lordships' House will agree that the Eady levy was unsatisfactory in a great many ways and that it is not at all a bad thing that we should be moving on from it. However, the question is whether the Eady levy is going to be replaced by anything which is more satisfactory. We shall have to wait and see.
We, too, should like to wait and see the White Paper—of which, unlike the noble Lord, Lord McIntosh of Haringey, I have not had any sight—before making up our minds on this question. However, I see from the Statement that recycling is rejected. I believe it has been rejected too easily. In particular, I see that the Government are still considering the question of blank tapes. Do I gather from the way in which the Statement is worded that the possibility of using a levy from blank tapes to recycle money back to the film industry has not necessarily been ruled out? I should be glad of an assurance upon that point.
Finally, and most importantly, if the Government are clearing the undergrowth in the industry, will they not also clear the forest in the Government? In other words, if simplification is to take place, is this not an ideal opportunity to unify the whole of the film industry under one ministry, preferably that concerned with the arts, and stop it being divided between the Board of Trade and the department with responsibility for the arts, as it has been so unprofitably divided for so long?
I hope that we shall have an opportunity to debate the White Paper. It is quite clear from the announcement made earlier today that a debate cannot occur in the immediate future. All I can say is that that is a very great pity and that your Lordships should be given an opportunity to debate this matter as soon as possible.
Lord Cockfield: My Lords, I am grateful to both noble Lords for their comments. I am sorry that the noble Lord, Lord McIntosh of Haringey, should give such a grudging welcome to what is an imaginative initiative by the Government—one which, in fact, offers the developing film industry an extremely helpful deal.
As one of the Ministers who has in the past been responsible for these matters, let me assure the noble Lord that the time taken to deal with these issues has nothing whatever to do with the somewhat devious motives that he tried to impute to the Government. It was due to a desire to consult the widest possible range of opinion. The noble Lord will find embodied in the White Paper a long list of bodies and distinguished individuals who have been consulted, who have made their views known, and whose views have been taken into account.
I am very sorry about the point which the noble Lord raised about the availability of the White Paper. I shall certainly look into it. There are certain practices and procedures to be followed and I shall certainly inquire to see whether or not something has gone wrong.
Perhaps I may say first of all that the arrangements which we now propose modernising go back in some instances as far as 1927. They relate to a period and an era which has long since passed. In the early 1950s, in the cinema-going days of the noble Lord, Lord McIntosh of Haringey—and mine, too—the number of attendances at cinemas exceeded 1,250 million per annum. That figure has now fallen to 66 million per annum. I do not suggest that this is due to the fact that your Lordships who used to go to the cinema are now tied down in your Lordships' House. It is due to a complete change in the social habits of our people. It is not surprising that a system which was created to deal with the circumstances which existed many years ago is now out of date and desperately needs modernising.
May I make this comment about the Eady levy. It is perfectly true, as the noble Lord, Lord McIntosh of Haringey, says, that it now raises approximately £4½ million per annum, which is only a fraction, in real terms, of what it used to be. But something between one-half and two-thirds of that money goes back into the pockets of the distributors, many of whom, or most of whom, are American controlled. The amount of money which actually comes back into British film production is very little. The finance now being made available under these proposals for the National Film Finance Corporation is more than double what it was under the old Eady levy system. It is for this reason that I was somewhat perturbed that the noble Lord, Lord McIntosh of Haringey, felt that we were dealing with the film industry in a less than generous manner. The noble Lord paid tribute, of course, to what is being done for the National Film and Television School. I am glad about that. I am glad that its future has been secured.
The simple truth of the matter is that the Eady levy had proved, over time, to be completely unsatisfactory. Moreover, the legislation which deals with the Eady levy and the NFFC expires next year, anyway. Therefore something to replace it was going to be essential. May I say also that at no time has the

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lifetime of the Eady levy ever exceeded five years. In other words, it has had to he renewed at five-yearly intervals. Therefore the fact that the arrangements for the NFFC extend also to five years is no less a period of guarantee than existed under the Eady levy.
However, the most important point of all is that immense new opportunities are now opening up in television. The Statement refers to the fact that Channel 4 is spending £8 million a year on films. We have direct broadcasting by satellite to come. There will be cable broadcasting. The bodies responsible for the regulation of both of these have, as part of their remit, a requirement to give special support to the United Kingdom film producing industry. The future of the film industry lies in these expanding markets, and I am very glad to be able to say that the industry is showing a spirit of enterprise which puts the noble Lord, Lord McIntosh of Haringey, somewhat in the shade. It is this spirit of enterprise which offers great hope for the future.
The noble Lord, Lord Beaumont of Whitley, referred specifically to blank tapes. The point was dealt with in the original Green Paper, I think it was, on copyright. We have now said that there will be a further period of consultation. We are looking to people to put forward their views on this very important and, if I may say so, somewhat contentious matter. We can decide what to do only in the light of those representations.
The noble Lord also suggested that we should have a single ministry for dealing with films, in somewhat the same way as we have a Minister for the Arts. Questions of organisation of government are matters for my right honourable friend the Prime Minister. I shall of course draw her attention to what the noble Lord has said.
Finally, I should like to pay tribute to the part which has been played in all these matters by the noble Lord, Lord Wilson of Rievaulx, who, as chairman of the interim action committee, has done so much to ensure progress in this field. We look forward to his continuation in office as a spur and an encouragement to the rest of us.
4.50 pm.
Baroness White: My Lords, as a former member of the Cinematograph Films Council, which is to be abolished, may I say how glad I am that its advisory duties are to be taken over by my noble friend. May I also pay a brief tribute to the late Sir Wilfred Eady, because although times have now greatly changed, and I accept that the present arrangements are less than satisfactory, nevertheless when the Eady levy was introduced—and it has lasted a considerable time—it was a very ingenious method, devised by one of the most resourceful people the Treasury has ever produced, of protecting the British film industry against retaliation by the very much larger English language industry of the United States.
Lord Cockfield: My Lords, I am most grateful to the noble Baroness for what she says. The Cinematograph Films Council of course did a very good job of work in the years in which it existed, but most of its functions were concerned with regulatory matters, and these will
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now disappear. Its advisory functions will be subsumed in a new body in which the Interim Action Committee will take the lead.
Lord Lloyd of Hampstead: My Lords, as chairman of the National Film and Television School and a member of Lord Wilson's Interim Action Committee, I should like to say that I welcome a number of features of the White Paper, which obviously I have not had a chance adequately to absorb as yet, but I am bound to say also that I have some reservations which I do not think I can expatiate upon at this stage. All I can appropriately do now is to ask one or two questions.
I should like to say that I recognise—and it is widely recognised—that the Eady levy has outlived its usefulness. One's only real doubt is whether the Government have done enough by way of replacing it. At least one derives a little encouragement from what the noble Lord the Minister tells us when the says that consideration is still being given to the whole question of a levy on blank tapes. This, in the view of many people connected with the film industry, is thought to be a very practicable avenue by which necessary funds for the film industry can be assured. Those of us who are connected with that industry look forward to the appearance of the Government's consultative paper. In that connection, I would ask when it is anticipated that this paper will appear.
The next specific question I should like to ask is in relation to the body which is to continue the function of the National Film Finance Corporation. As I understand the White Paper, it is the Government's notion that although it is to be replaced by a commercial organisation (a commercial company) that body is to proceed on lines similar to those of the NFFC, for which they express considerable approval in the White Paper. From my knowledge of its activities, I can certainly testify to the fact that the corporation has done an extraordinarily good job and in many ways one regrets its passing. In particular, I refer to the resignation of Mr. Mamoun Hassan, its director.
We are told that the National Film Finance Corporation is to be replaced by a commercial corporation representing various unspecified organisations and, of course, everything is going to depend upon who is to run this new body. All we are told here is that it will be the usual company organisation, with an independent chairman. I presume this means that the Government will nominate the independent chairman, but one wonders who will appoint the board, since the company is to deal with some £1·1 million a year and yet will also have at its command considerable public funds. One hopes, therefore, that the membership of the board will be carefully considered and will not be governed by purely commercial considerations.
My second point is in relation to the film school. Naturally, I very greatly welcome the warm way in which the Government have expressed their support for the school, and I welcome, too, their admiration —which I know is widely felt both here and abroad—for its quite remarkable achievements, if I may say so, over very few years since its foundation. We are told that the Eady levy money—roughly £500,000—is to

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be replaced by a subvention from three sources —namely, the cinema, the independent television companies, and the BBC—but we are not told in the White Paper how this money is to be assured. For instance, what organisation at present exists among the cinemas to guarantee that they can produce whatever is to be their proportion of the money? We are told that what is proposed should ensure the payment of some £600,000 a year for five years, and I, and I am sure your Lordships, should like to know exactly by what process and what mechanism is this to be assured.
Lord Cockfield: My Lords, I did, of course, have the great pleasure of meeting the noble Lord, Lord Lloyd of Hampstead, when, as Secretary of State for Trade, I saw a number of members of the Interim Action Committee, and we discussed many of these matters. Many of the points he raises are, of course, matters of detail, and I accept that they are important matters. I shall note what he has said and ensure that his points are followed up.
As to the consultative document on blank tapes, there is yet no date fixed for its publication, but we of course realise the extent of the interest in it.
So far as the composition of the board of the successor body to the National Film Finance Corporation is concerned, it is important to remember that this will be a private sector company and that it will derive a great deal of its finance from the private sector. The Government will approve the chairman, and there will be a Government director; otherwise the members of the board will be appointed by the industry itself.
With regard to the film school, the replacement finance is rather more generous than the amount of the Eady levy which it has hitherto received, the figures being of the order of £600,000 against £500,000. We appreciate the immense value of the school and the contribution it has made.
Perhaps I may also pick up one other point and join the noble Lord in the tribute which he has paid to Mr. Mamoun Hassan, the director of the NFFC, who has done an outstanding job in this field but who feels that he now wants to get back into film production. It will be awfully important to ensure that whoever succeeds him is a man of real quality.
Lord Auckland: My Lords, obviously, without a sight of the White Paper it is difficult to comment very much on this Statement which, judging from what has been said, I generally welcome. Is my noble friend aware of the number of cinemas which have closed down, in particular in the provinces. The closures deprive people, particularly those who live in areas where Channel 4 cannot always be received.
As a consumer perhaps I may ask my noble friend to pay tribute to the enormous work done by the Rank Organisation over the years in this area, especially in regard to exports. I urge him to take up the point made by the noble Lord, Lord McIntosh, about refurbishing some of our cinemas. In the area of Surrey where I live five cinemas have closed down and so only our local repertory theatre shows films. While one can see these films on television, it is surely desirable—bearing in
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mind the enormous potential of the cinema industry and in particular, if I may say so, the Pinewood Studios—that the British film industry is helped, not necessarily by subsidy, but by as much encouragement as possible. I hope that the White Paper, which will, no doubt, be seriously studied, will be debated as soon as possible.
Lord Cockfield: My Lords, I am grateful to my noble friend for what he says. Perhaps we are beginning to wander a little wide and, as he himself has said, the most valuable thing would be for us all to study the White Paper. The removal of the Eady Levy is a specific measure that will help the cinemas. The simple truth of the matter is that the essential habits of our people have changed so dramatically, and many of the developments to which he referred are a reflection of those changing social circumstances.
Both my noble friend and I—and, no doubt, the noble Lord, Lord McIntosh, too—were brought up in an era when there was no television and when the cinema and the theatre (if one was lucky enough to live in a place where there was a theatre) were the main forms of entertainment and, often, of instruction. We now have television, we have the explosive growth of video, we have cable, and we have DBS. Our institutions have to reflect these changes.
Lord McIntosh of Haringey: My Lords, the noble Lord the Minister in his first reply saw fit to contrast the enterprise of the film industry with my personal lack of enterprise. I may assure him that I will resist any temptation to make personal comments about him.
Lord Cockfield: My Lords, I am awfully sorry if the noble Lord thought that I was making a personal comment; my remarks were not in any sense intended to be a personal comment. But if the noble Lord will reread his remarks, he will find that he exhibited—if I may use the phrase—a lack of enthusiasm for the Government's plans which he may find entirely justified but to which I felt it perfectly legitimate to refer. I assure the noble Lord that there was never any intention of any kind of making a personal comment.

Ordnance Factories and Military Services Bill
5.2 p.m.
House again in Committee on Clause 1.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran had given notice of his intention to move Amendment No. 3:
Page 1, line 10, after ("liabilities") insert ("other than intellectual property and rights or liabilities relating thereto").
The noble Lord said: The purpose of Amendment No. 3 and of Amendment No. 4, was to prevent the Government committing another folly in relation to this matter, to use the phrase used by my noble friend Lord Diamond in speaking to a former amendment. Since I prepared to submit some matters in relation to this amendment the whole scenario and the whole background have been changed by the two remarkable defeats suffered by the Government this afternoon. In

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the circumstances, I should like to examine the effect of those defeats on the Government this afternoon and reserve what I have to say, if anything, for Report stage.
[Amendments Nos. 3 and 4 not moved.]
Baroness Vickers Baroness Vickers moved Amendment No. 5:
Page 2, line 15, at end insert—
("() A scheme shall provide that the Articles of Association of any prescribed company shall include the draft Article set out in Schedule (Limitation on Shares).").
The noble Baroness said: In speaking to Amendment No. 5, I should like to make it clear that this Bill was not in the Conservative Party manifesto and so I consider that I can speak as freely as I like. Also, I have no connection with the armaments firm of Vickers; I thought that I ought to make that completely clear.
My connection with the Royal Ordnance Factories was during the war when I visited the factories on behalf of the Ministry of Supply in connection with the welfare of the women working in them. Whether they were men or women, the people there were doing extremely fine work. I shall never forget how at nights—particularly in Woolwich, for example—they put up with the air raids and so on and still carried on with their work.
Following what has been said by the noble Lord opposite, I consider that this is an enabling Bill and I would ask the Minister again, as I did on Second Reading, whether he can tell me what is the hurry about this Bill. The amendments to which I am speaking today were put down because we were worried about the future of our armed forces and whether they would have adequate supplies. Also, this development may affect the jobs of 20,000 people. I should like to have some information from the Minister that is not quite so vague as the information we have previously been given.
One of the points about this amendment of mine is that it may not prove as helpful as the articles of association drafted by the Government, because I understand that they cannot be challenged, but the importance of the issue of foreign control should be included in this Bill.
The amendment is also important because it goes to the heart of the problem of acquiring control of the ordnance factories, if and when they are sold off. Again, there is nothing in the Bill about acquiring control. In my opinion, there should be cast-iron guarantees preventing ordnance factories from falling into foreign control. The draft article imposing a limitation on shareholdings is in the schedule and I am not going to discuss that now. I should just like to point out to my noble friend that this amendment is based on that; it does provide some guarantee and confers on the Secretary of State certain powers, as stated in the schedule.
The principle behind the articles of association is that the company is required to maintain a register of shares, or any interest in shares, held by people not of British origin; in other words, who are not British citizens. The number of shares to be held must be entered in a register and must not exceed, I understand, 15 per cent. of the total issued share capital of the company.
The issue of foreign control is of the utmost importance in the privatisation of the Royal Ordnance Factories, and, in the interests of national security, the articles of association should be enshrined in legislation. When replying to the debate in another place, the Minister said that the Bill, if given these articles of association, would not be as flexible as the Secretary of State might require. Once a Bill becomes an Act, any change in the articles of association would require amendment to the Act. I therefore suggest that this amendment is of national importance. I can see no reason why the Secretary of State should not come to Parliament to seek consideration of an agreement to any change. This is very important and should be included. It is Parliament and not the Treasury which should control the future. I hope therefore that my noble friend the Minister will take an interest in this and give a satisfactory reply. I beg to move.
Lord Trefgarne: I had understood that it might be for the convenience of the Committee if we take Amendment No. 14 with my noble friend's amendment, together of course, with Amendment No. 38—which I believe she agrees is linked with it.
Amendment No. 14: Page 3, line 22, at end insert ("and
() each transferor company and each transferee company is required under its Memorandum and Articles of Association to issue to the Secretary of State a single share of a nominal value not exceeding £1 giving the holder the right to veto any changes in the structure of the company or of its business.").
Amendment No. 38: After Schedule 3, insert the following new Schedule—

SCHEDULE
LIMITATION ON SHARES
PART I
Limitation on Shareholdings
1. It is a cardinal principle that the Company should be and remain under United Kingdom control.
2. In this Article:—
"Corporation under Foreign Control" means any corporation (other than a Foreign Corporation):—

(i) of which one-third or more of the directors (or persons occupying the position of directors by whatever name called) are Foreigners or Foreign Corporations or are accustomed to act in accordance with the suggestions, instructions or directions of a Foreigner or of a Foreign Corporation; or

(ii) of which shares carrying more than thirty per cent. of the votes which are ordinarily eligible to be cast on a poll at General Meetings of the corporation are for the time being held by a Foreigner or by a Foreign Corporation or by a Corporation under Foreign Control;

"Excess Foreign-held Share" means any Foreign-held Share of which particulars are entered in the separate register maintained by the Directors pursuant to paragraph 4 of this Article and which the Directors decide are Foreign-held Shares in excess of a Permitted Maximum as defined in paragraph 4 of this Article;
"Foreign Corporation" means:—

(a) any corporation other than a corporation which is incorporated under the laws of any part of and which has its principal place of business and central management and control in the United Kingdom; or

(b) a government or government department or government agency or body other than of the United Kingdom or any part thereof; or

(c) any municipal, local, statutory or other authority or any undertaking or body established in any country other than the United Kingdom; or

(d) any other legal entity of any kind whatsoever the legal nature of which is determined by reference to laws (and whether statutory or otherwise) of any country other than the laws of any part of the United Kingdom.

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"Foreigner" means any individual who is not a British citizen, a British Dependent Territories citizen or a British overseas citizen by virtue of the British Nationality Act 1981.
"Foreign-held Share" means any Share (other than a Qualifying Share) of which any Owner is a Foreigner, Foreign Corporation or Corporation under Foreign Control;
"Owner", in relation to any Share, means:—

(a) any person with an "interest" in any Share which would be taken into account in deciding whether a notification to the Company would be required under Part IV of the Companies Act 1981 (as in force as at the date of the adoption of the Articles and notwithstanding any subsequent amendment or repeal thereof), but shall for the purposes of this Article include the interests referred to in section 71(a), (b), (e) and (j) of that Act; and

(b) to the extent not already covered in (a) above, any person with or to whom any holder of any Share has agreed or committed himself or become obliged (whether or not in a manner legally binding) to exercise or refrain from exercising any voting rights attached thereto in accordance with that person's suggestions, instructions or directions.

"Qualifying Share" means any share in the capital of the Company which is at the material time held by, or by a nominee or custodian trustee for, the trustees of:—

(a) any retirement benefits scheme for the employees of a business or undertaking carried on (wholly or mainly) in the United Kingdom otherwise than by a Foreigner or Foreign Corporation which is, or is treated by the Commissioners of Inland Revenue as, an exempt approved scheme for the purposes of the Finance Act 1970; or

(b) any charity which is registered under the provisions of the Charities Act 1960; or

(c) any exempt charity within the meaning of that Act other than (in any such case) a retirement benefits scheme, charity or exempt charity of which the majority of the Trustees are Foreigners, Foreign Corporations or Corporations under Foreign Control.

"Scheme Share" means any share in the capital of the Company which is at the material time held by the trustees of any profit sharing scheme established by the Company and approved by the Board of Inland Revenue in accordance with the provisions of Chapter III of Part III of the Finance Act 1978;
"Share" means any share in the capital of the Company (not being a Scheme Share) which ordinarily carries the right to vote on a poll at General Meetings of the Company;
"United Kingdom" for the purposes of this Article shall include the Channel Islands and the Isle of Man.
3. The Directors shall not register any person as a holder of a Share (other than an original allottee under an issue of Shares by way of capitalisation of profits or reserves made pursuant to these presents) unless there has been furnished to them a declaration (in such form as the Directors may from time to time prescribe) signed by or on behalf of such person (or, in the case of a corporation, sealed by the corporation or signed on its behalf by an attorney or duly authorised officer or agent of the corporation), together with such evidence as the Directors may require of the authority of any signatory on behalf of such person, stating that, upon registration of such Share in the relevant name or names, either (i) such Share will not be a Foreign-held Share or (ii) such Share will be a Foreign-held Share. The Directors shall in any case where they may consider it appropriate require such person to provide such evidence or give such information as to the matters referred to in the declaration as they think fit. The Directors shall decline to register any person as a holder of a Share if such a declaration or further evidence or information is not provided or given.
4. The Directors shall maintain a separate register in which shall be entered particulars of any Share which:—

(a) has been acknowledged by the holder (or by any one of joint holders) to be a Foreign-held Share; or

(b) has been declared to be a Foreign-held Share by virtue of a declaration of the Directors made pursuant to paragraph 8 of this Article;

and in either case which has not ceased to be a Foreign-held Share.
5. If at any time the aggregate number of Foreign-held Shares of which particulars are entered in the register maintained pursuant to paragraph 4 of this Article results in more than 15 per cent. of the votes which are ordinarily eligible to be cast on a poll at General Meetings of the Company being exercisable in respect of Foreign-held Shares ("a Permitted Maximum") Excess Foreign-held Shares shall be dealt with in accordance with paragraph 9 of this Article. It shall be for the Directors to decide whether or not a Foreign-held Share is an Excess Foreign-held Share but, in making any such decision, the Directors shall, so far as practicable, have regard to the order of date in which particulars of Foreign-held Shares have been, or are to be, entered in the separate register as aforesaid save in circumstances where such would, in the opinion of the Directors, be inequitable when the Directors shall apply such other criterion or criteria as they consider appropriate.
6. Subject as hereinafter mentioned, the Directors shall remove from the register maintained pursuant to paragraph 4 of this Article any Foreign-held Share if there has been furnished to them a declaration (in such form as the Directors may from time to time prescribe) signed by or on behalf of the holder of such Foreign-held Share (or, in the case of a corporation, sealed by the corporation or signed on its behalf by an attorney or duly authorised officer or agent of the corporation), together with such evidence as the Directors may require of the authority of any signatory on behalf of such holder stating that such Share is no longer a Foreign-held Share. The Directors shall also in any case where they may consider it appropriate require such holder to provide such evidence or give information as to the matters referred to in the declaration as they think fit. The Directors shall not remove from such register any Foreign-held Share if such a declaration or further evidence or information is not provided or if they are not satisfied that the Share is not a Foreign-held Share.
7. Subject to the provisions of this Article, the Directors shall, unless any Director has reason to believe otherwise, be entitled to assume without enquiry that all Shares, other than those particulars of which are entered in the separate registers maintained by the Directors pursuant to paragraph 4 of this Article, are not Foreign-held Shares. Nevertheless, the Directors may at any time give notice in writing to the holder (or to any one of the joint holders) of a Share requiring him to make a declaration (in such form as the Directors may prescribe) within such reasonable period as may be specified in the notice as to whether or not the Share is a Foreign-held Share.
8. Whether or not they have given a notice under paragraph 7 of this Article, if at any time it appears to the Directors that a Share which they have not treated as a Foreign-held Share may be such a Share, they shall give notice in writing to the holder (or to any one of joint holders) requiring him to show to their satisfaction that such a Share is not a Foreign-held Share. For this purpose failure to make a declaration pursuant to paragraph 7 of this Article shall be sufficient reason for the Directors so acting. If within 21 days after the giving of such notice (or such extended time as in all the circumstances the Directors shall consider reasonable) they are not so satisfied, the Directors shall declare such Share to be a Foreign-held Share, and enter the same appropriately in the register maintained pursuant to paragraph 4 of this Article.
9. The Directors shall give notice in writing to the holder (or to any one of the joint holders) of any Share which appears to them to be an Excess Foreign-held Share requiring him to transfer such Share to another person so that it will cease to be a Foreign-held Share (a "Notice of a Required Disposal") and informing him of the restrictions attached to such Share by virtue of paragraph 10 of this Article. If within 21 days after the giving of a Notice of Required Disposal (or such extended time as in all the circumstances the Directors shall consider reasonable) such notice is not complied with to the satisfaction of the Directors the Directors shall arrange for the Company to sell the Share specified in such Notice at the best price reasonably obtainable to any other person so that the Share will cease to be a Foreign-held Share. For this purpose the Directors may authorise in writing any officer or employee of the Company to execute on behalf of the holder or holders a transfer of the Share to the purchaser and may issue a new certificate to the purchaser. The net proceeds of the sale of such Share shall be received by the Company whose receipt shall be a good discharge for the purchase money and shall be paid over by the Company to the former holder or holders upon surrender by him or them of the certificate for the Share, but such proceeds shall in no circumstances carry interest against the Company.
10. On the giving of any Notice of Required Disposal, the then registered holder of any Share specified in such notice shall not in respect of such Share be entitled to receive notice of, or attend or vote at, any General Meeting of the Company or meeting of an class of shareholders of the Company; and the rights to attend any such meeting (whether in person or by proxy) to speak and to demand and vote on a poll attaching to such Share shall accordingly transfer from the then registered holder and vest in the Chairman of any such meeting. The chairman shall be informed by the Directors of that fact.
11. Any notice given pursuant to paragraphs 7, 8 or 9 of this Article may relate to more than one Share and shall in any event specify the Share or Shares to which it relates.
12. The Directors shall not be required to give any reasons for any decision of declaration taken or made in accordance with this Article.
PART II
THE SPECIAL SHARE
13. The Special share may be held only by, or transferred to, a Minister of the Crown or person authorised in writing by such a Minister to hold the same on his behalf.
14. Each of the following matters shall be deemed to be a variation of the rights attaching to the Special share:—

(i) the amendment or removal of all or any of Articles and;

(ii) the voluntary winding-up of the Company;

(iii) any disposal which, alone or when aggregated with any other disposals forming part of, or connected with, the same or a connected transaction, constitutes a disposal of the whole or a material part of the assets of the Company and its subsidiaries (in this Article referred to as "the Group");

(iv) any disposal which, because of its size, is required by the Council of The Stock Exchange to be consented to or approved by the Company in general meeting; and

(v) the issue of any shares in the capital of the Company with voting rights attached thereto not identical with those of the Ordinary shares.

15. For the purpose of paragraph 14(iii) of this Article, a part of the Group's assets shall only be deemed to be material if—

(i) its book value, calculated by reference to the then latest audited consolidated accounts, or the total consideration to be received on its disposal, is not less than 15 per cent. of the book value of the net assets of the Group; or

(ii) the average profits attributable to it represent at least 15 per cent. of the average profits of the Group, being the average for the last three years (or such shorter period) for which audited accounts are available and after deducting all charges except taxation and extraordinary items;

and the book value of any assets and the attributability of profits thereto shall, in each case, be conclusively determined (at the request of the Special Shareholder) by the Auditors and be subject to such adjustment as the Auditors consider appropriate.
16. The Special Shareholder shall be entitled to receive notice of and attend all General Meetings and meetings of the holders of voting shares but may not speak or vote at such meetings.
17. On a return of assets in a winding-up of the Company, the Special Shareholder shall be entitled to repayment of the captial paid up on the Special share in priority to any payment to other members. The Special share confers no further right to participate in the profits or assets of the Company.
Provision to be inserted in Articles dealing with Directors
18. It is a cardinal principle that at least three quarters of the directors at any time should be persons who are either British citizens or British dependent territories citizens or British overseas citizens by virtue of the British Nationality Act 1981 (referred to in these Articles as "British Directors"). Accordingly there shall at all times be not less than six British Directors and not more than two directors who are not British Directors (the latter being referred to in these Articles as "Foreign Directors").
19. Before accepting his office any intended director shall furnish the Company with a declaration (in such form and with such accompanying evidence as the directors may from time to time prescribe) signed by him stating that on appointment he either will be, or will not be, a British Director. Any British Director shall likewise immediately inform the Company in writing if at any time he should cease to be qualified to be a British Director.")
If that is to your Lordships' convenience, I am quite happy to deal with Amendment No. 5 and Amendment No. 38 as proposed by my noble friend.
The Government have already announced publicly their commitment that the articles of association of the privatised company shall include provisions preventing any foreign takeover of the new Royal Ordnance Company. There has never been any question of the Government's intention in this regard. We have made it clear from the outset that foreign control of the company would not be countenanced.
Towards the end of Committee consideration of this Bill in another place, my honourable friends made available copies of the intended draft articles. I have gone very carefully through the new schedule which my noble friend would, by her amendments, see added to the Bill and there seems to be a remarkable correspondence between it and the draft articles to which I have referred. I would not assert that they are word for word the same, but there is a sufficient similarity to enable me to be able to repeat the Government's assurance that these provisions—or something very much like them—will be incorporated in the articles of association of the new Royal Ordnance Company.
For those of your Lordships who have not examined the articles in detail, let me provide a brief explanation of how they work. They require the company to set up a register in which shall be entered particulars of all shares owned by foreign nationals or in which a foreign national has any kind of interest. Before any person may be registered as a holder of a share, he is required to declare whether or not it is owned, or any interest in it is owned, by a foreign national. If the directors have any reason to believe that a share which is not included in the register of foreign-held shares is in fact one such share, they may make appropriate inquiries and demand appropriate information.
As a result, the register of foreign-held shares will be comprehensive and complete. It is then provided in the articles that the numbers of shares appearing on the register of foreign-held shares shall not exceed, in the aggregate, 15 per cent. of the total issued share capital of the company. As the Committee will appreciate, that percentage is too low to enable even all foreign shareholders acting together to exercise any kind of control over the new company.
Lord Diamond: May I intervene for one moment? I am most grateful to the noble Lord. Can he say why any number of foreign shares is appropriate?
Lord Trefgarne: I am not sure why it is necessary to exclude every conceivable foreign shareholder, provided of course that the limit is kept at the level that I have suggested, where no vestige of control is conceivably possible.
The articles provide, in addition, for the issue of a special share to the Secretary of State. This special share will enable him to veto any alteration of the articles. The avoidance of foreign control provisions are therefore entrenched. The special share also entitles the Secretary of State to veto the disposal of any material part, or all, of the assets of the company. He can thus prevent the sale of part of the business to

1659
any foreign interest—or for that matter to any British interest. Finally, the articles require that at least three-quarters of the directors should be British citizens.
I should add, in case the quesion might have occurred to any Members of the Committee, that the discrimination between British citizens on the one hand and foreign nationals on the other would normally be contrary to the provisions of the Treaty of Rome, and therefore illegal. But Article 223 of the Treaty provides:
"Any member state may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material".
We are advised that these provisions of the Treaty of Rome will enable the company to adopt articles of association which discriminate in the way I have mentioned.
In the circumstances I have to say that the Government look with some sympathy upon these amendments. However, there is an overriding reason why we should not put into this Bill a statutory obligation of this kind. We do no know what circumstances might occur in the future which would require a change in the articles. For example, we may find that they do not work in quite the way intended, and that they could be improved; or, that they work some injustice and require amendment in that respect. It may even be that in the changed situation of five or 10 years from now we find that circumstances are such that, even while we maintain our commitment that there shall be no foreign control of this company, we can dispense with some of the articles altogether. If we put into this Bill a requirement that the company shall include these articles in its articles of association, changes of this kind may prove impossible without an amending Act of Parliament. I think the Committee would agree that this could be a ridiculous situation. Given the exigencies of the parliamentary timetable, any future alteration of these articles would be virtually impossible.
I am pleased to be able to repeat the Government's assurance that articles to the same effect as those set out in the proposed new schedule, even if they are not the same word for word, will be incorporated in the articles of association of the new Royal Ordnance company. Having regard to that assurance, I hope my noble friend will see fit not to press her amendment.
Lord Diamond: Perhaps I may say a few words, since the noble Lord has referred to Amendment No. 14, which I do not propose to move. Amendment No. 14 refers to a foreign shareholding and, by the argument, objects to a foreign shareholding of 15 per cent. I merely want to say to the noble Lord that 15 per cent. of the holding in one company held in one pair of hands is a very dangerous holding. It is not a question of one share: it is a question of 15 per cent. of the total shareholding. It is quite normal for a Government, in circumstances such as these, to prevent the shareholding in one pair of hands going above 10 per cent. I think, therefore, that this is a bad provision. They should limit it to nil.
Lord Mayhew: May I ask a single, specific question? If these articles of association are on the same lines as
1660
the schedule, then they permit, do they not, any foreigner, without any control, to buy any factory, patent or asset of the ROFs, provided only that it is less than 15 per cent. of the net assets of the ROF? Will the noble Lord comment on this and on the implications?
Lord Trefgarne: I do not think the noble Lord has understood the arrangements correctly. The control of activities of that sort is covered by the special share issued to the Secretary of State, to which I referred during my remarks.
Baroness Vickers: As my noble friend the Minister has been quite sympathetic in his reply, I should like to ask him whether it will be possible to see these revised articles of association by Report stage.
Lord Trefgarne: If my noble friend has not seen them, I shall certainly see that she has a copy.
Baroness Vickers: In view of that, I think I shall withdraw the amendment.
Lord Graham of Edmonton: Objection!
The Deputy Chairman of Committees (Lord WellsPestell): The Question is that this amendment be agreed to. As many as are of that opinion—
A noble Lord: It has been withdrawn.
The Deputy Chairman of Committees: There has been an objection.
5.16 p.m.
On Question, Whether the said amendment (No. 5) shall be agreed to?
Their Lordships divided: Contents, 99; Not-Contents, 105.

DIVISION NO. 3

CONTENTS

Airedale, L.

Gaitskell, B.

Ardwick, L.

Gallacher, L.

Attlee, E.

Gladwyn, L.

Aylestone, L.

Gosford, E.

Balogh, L.

Graham of Edmonton, L.

Banks, L.

Grey, E.

Beaumont of Whitley, L.

Hall, V.

Beswick, L.

Hampton, L.

Birk, B.

Hanworth, V.

Blease, L.

Harris of Greenwich, L.

Boston of Faversham, L.

Hatch of Lusby, L.

Bottomley, L.

Houghton of Sowerby, L.

Briginshaw, L.

Hughes, L.

Buckmaster, V.

Irving of Dartford, L.

Burton of Coventry, B.

Jacobson, L.

Carmichael of Kelvingrove, L.

Jacques, L.

Carver, L.

Jeger, B.

Cledwyn of Penrhos, L.

Jenkins of Putney, L.

Collison, L.

John-Mackie, L.

Davies of Leek, L.

Kaldor, L.

Dean of Beswick, L.

Kearton, L.

Diamond, L.

Kilmarnock, L.

Donnet of Balgay, L.

Kirkhill, L.

Elwyn-Jones, L.

Leatherland, L.

Ennals, L.

Listowel, E.

Ewart-Biggs, B.

Llewelyn-Davies of Hastoe, B.

Ezra, L.

Lloyd of Kilgerran, L.

Falkland, V.

Longford, E.

Fitt, L.

Lovell-Davis, L.

1661

McGregor of Durris, L.

Simon, V.

McIntosh of Haringey, L.

Stallard, L.

Mackie of Benshie, L.

Stewart of Alvechurch, B.

McNair, L.

Stewart of Fulham, L.

Mayhew, L.

Stoddart of Swindon, L.

Mishcon, L.

Stone, L.

Mulley, L.

Strabolgi, L.

Nicol, B. [Teller.]

Taylor of Blackburn, L.

Oram, L.

Taylor of Mansfield, L.

Peart, L.

Thurso, V.

Phillips, B.

Tordoff, L.

Pitt of Hampstead, L.

Underhill, L.

Ponsonby of Shulbrede, L. [Teller.]

Wallace of Coslany, L.

Wells-Pestell, L.

Rathcreedan, L.

Whaddon, L.

Rhodes, L.

White, B.

Rochester, L.

Wigoder, L.

Sainsbury, L.

Willis, L.

Seear, B.

Wilson of Langside, L.

Sefton of Garston, L.

Winterbottom, L.

Shackleton, L.

Wootton of Abinger, B.

NOT-CONTENTS

Avon, E.

Lawrence, L.

Barber, L.

Long, V.

Bauer, L.

Lucas of Chilworth, L.

Belhaven and Stenton, L.

Luke, L.

Bellwin, L.

McAlpine of West Green, L

Beloff, L.

Macleod of Borve, B.

Belstead, L.

Mancroft, L.

Bessborough, E.

Margadale, L.

Blakenham, V.

Marley, L.

Boyd-Carpenter, L.

Marshall of Leeds, L.

Broadbridge, L.

Massereene and Ferrard, V.

Caccia, L.

Maude of Stratford-upon-Avon, L.

Caithness, E.

Campbell of Cray, L.

Merrivale, L.

Chelwood, L.

Molson, L.

Cockfleld, L.

Montgomery of Alamein, V.

Coleraine, L.

Mottistone, L.

Daventry, V.

Mowbray and Stourton, L.

De Freyne, L.

Murton of Lindisfarne, L.

Denham, L. [Teller.]

Norfolk, D.

Drumalbyn, L.

Nugent of Guildford, L.

Eccles, V.

O'Brien of Lothbury, L.

Ellenborough, L.

Onslow, E.

Elliot of Harwood, B.

Orkney, E.

Elton, L.

Orr-Ewing, L.

Fanshawe of Richmond, L.

Pender, L.

Ferrier, L.

Porritt, L.

Fraser of Kilmorack, L.

Quinton, L.

Gainford, L.

Rankeillour, L.

Gardner of Parkes, B.

Renton, L.

Gisborough, L.

Renwick, L.

Glanusk, L.

Richardson, L.

Glenarthur, L.

St. Aldwyn, E.

Gormanston, V.

St. Davids, V.

Gray, L.

Saltoun, Ly.

Greenway, L.

Sandford, L.

Gridley, L.

Sempill, Ly.

Hailsham of Saint Marylebone, L.

Skelmersdale, L.

Soames, L.

Harmar-Nicholls, L.

Southborough, L.

Henley, L.

Stamp, L.

Hives, L.

Stodart of Leaston, L.

Home of the Hirsel, L.

Sudeley, L.

Hornsby-Smith, B.

Swinton, E. [Teller.]

Hylton-Foster, B.

Thomas of Swynnerton, L.

Ilchester, E.

Trefgarne, L.

Ironside, L.

Trumpington, B.

Killearn, L.

Ullswater, V.

Kilmany, L.

Vaux of Harrowden, L.

Kinnaird, L.

Vivian, L.

Kinnoull, E.

Westbury, L.

Kitchener, E.

Whitelaw, V.

Lane-Fox, B.

Young, B.

Lauderdale, E.

Resolved in the negative, and amendment disagreed to accordingly.
5.25 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 6:
Page 2, line 15, at end insert—
("() A scheme shall expressly prohibit any diminution or elimination by any prescribed company or companies of the legal and trade union rights of any employee working for or in the Ordnance Factories.").
The noble Lord said: This is considered to be a very important amendment, not only on this side of the Committee but among many other people, and especially by the ROF trade union members. The Minister may very well say that there is no need to write such matters into the Bill, but the union members with whom we have discussed this, without casting aspersions on the Ministers with whom they have negotiated, feel that they would be much happier—as indeed, I believe, would your Lordships—to see this written into the Bill so that there can be no dubiety.
The Minister will tell us that he has absolute confidence that those to whom the factories are sold will respect the need for, and their obligations to, good industrial relations in the way that this and other Governments have. Unhappily, we are in the middle of trying to resolve the GCHQ issue. We cannot take it for granted that the Government, or indeed a company, will not find a pretext to whittle away something that is now accepted as a right and a safeguard. I beg to move.
Lord Trefgarne: I believe that this amendment is unnecessary. The legal and trade union rights of any employee, whether in the Royal Ordnance factories or elsewhere, are protected by legislation already. As I am sure your Lordships are aware, the Employment Protection (Consolidation) Act 1978 guarantees the right of employees to belong to and to take part in the activities of a trades union. If a company tries to dismiss an employee for belonging to, or taking part in the activities of, a trades union, that employee can seek redress in an industrial tribunal. No employer may contract out of these provisions of the 1978 Act. Employees of the ROFs will be entitled to all their trades union rights at the date of transfer, and the company will not be able subsequently to deprive them of those rights, so the amendment is redundant.
Concern has been expressed about the application of the 1978 Act to employment under the Crown. While a Minister of the Crown may certify that the Act should not apply on grounds of national security to any particular Crown employment, such an exemption would be impossible in the new company. Employment within the new ROF company would not be Crown employment as defined by the 1978 Act, and there would accordingly be no power to exempt such employment from the provisions of the Act. In no way can the Government remove or diminish the trades union rights of any employee after vesting day.
I trust that the noble Lord will therefore withdraw his amendment. It is unnecessary on policy grounds, and would, I think, set a dangerous precedent by allowing a scheme to override a statute if that statute is in disagreement with the scheme. Schemes will be made to accord with Acts of Parliament, and not to override them.
Lord Stoddart of Swindon: I do not think that the Minister has answered satisfactorily the points raised by my noble friend. It is all very well to talk about protection under the 1978 Act, but the fact is that people now working at the Royal Ordnance factories have had conditions of service, and ways and means of negotiating settlements and negotiating on grievances that will not be protected under the 1978 Act. We are talking here about the consultative arrangements that were available within the Whitley Council and, indeed, the generally good arrangements for civil servants to consult their employers and to settle internal differences. I do not think, frankly, that the Minister's reply to my noble friend in any way deals with the matter. We believe that the amendment is a reasonable and a good one, and indeed a very necessary one. We shall therefore press it to a vote.
5.31 p.m.
On Question, Whether the said Amendment (No. 6) shall be agreed to?
Their Lordships divided: Contents, 95; Not-Contents, 105.

DIVISION NO. 4

CONTENTS

Airedale, L.

Kilmarnock, L.

Ardwick, L.

Kirkhill, L.

Attlee, E.

Leatherland, L.

Aylestone, L.

Listowel, E.

Banks, L.

Llewelyn-Davies of Hastoe, B

Beaumont of Whitley, L.

Lloyd of Kilgerran, L.

Beswick, L.

Longford, E.

Birk, B.

Lovell-Davis, L.

Blease, L.

McGregor of Durris, L.

Boston of Faversham, L.

McIntosh of Haringey, L.

Bottomley, L.

Mackie of Benshie, L.

Bruce of Donington, L.

McNair, L.

Buckmaster, V.

Mayhew, L.

Burton of Coventry, B.

Meston, L.

Caradon, L.

Mishcon, L.

Carmichael of Kelvingrove, L.

Mulley, L.

Carver, L.

Nicol, B. [Teller]

Cledwyn of Penrhos, L.

Oram, L.

Collison L.

Peart, L.

Davies of Leek, L.

Phillips, B.

Dean of Beswick, L.

Pitt of Hampstead, L.

Diamond, L.

Ponsonby of Shulbrede, L. [Teller]

Donnet of Balgay, L.

Elwyn-Jones, L.

Rathcreedan, L.

Ennals, L.

Rhodes, L.

Ewart-Biggs, B.

Rochester, L.

Ezra, L.

Seear, B.

Falkland, V.

Sefton of Garston, L.

Fitt, L.

Shackleton, L.

Gaitskell, B.

Stallard, L.

Gallacher, L.

Stewart of Alvechurch, B.

Gladwyn, L.

Stewart of Fulham, L.

Gosford, E.

Stoddart of Swindon, L.

Graham of Edmonton, L.

Stone, L.

Grey, E.

Strabolgi, L.

Hanworth, V.

Taylor of Blackburn, L.

Harris of Greenwich, L.

Taylor of Mansfield, L.

Hatch of Lusby, L.

Tordoff, L.

Houghton of Sowerby, L.

Underhill, L.

Hughes, L.

Wallace of Coslany, L.

Irving of Dartford, L.

Wells-Pestell, L.

Jacobson, L.

Whaddon, L.

Jacques, L.

White, B.

Jeger, B.

Wigoder, L.

Jenkins of Putney, L.

Willis, L.

John-Mackie, L.

Wilson of Langside, L.

Kaldor, L.

Winterbottom, L.

Kearton, L.

Wootton of Abinger, B.

1664

NOT-CONTENTS

Ampthill, L.

Lauderdale, E.

Avon, E.

Lawrence, L.

Barber, L.

Lindsey and Abingdon, E.

Bauer, L.

Long, V.

Belhaven and Stenton, L.

Lucas of Chilworth, L.

Bellwin, L.

Luke, L.

Beloff, L.

McAlpine of West Green, L.

Belstead, L.

Macleod of Borve, B.

Bessborough, E.

Mancroft, L.

Blakenham, V.

Margadale, L.

Boardman, L.

Marley, L.

Boyd Carpenter, L.

Marshall of Leeds, L.

Caccia, L.

Massereene and Ferrard, V.

Caithness, E.

Maude of Stratford-upon-Avon, L.

Campbell of Croy, L.

Chelwood, L.

Merrivale, L.

Cockfield, L.

Molson, L.

Coleraine, L.

Montgomery of Alamein, V.

Daventry, V.

Mottistone, L.

Denham, L. [Teller]

Mowbray and Stourton, L.

Drumalbvn, L.

Murton of Lindisfarne, L.

Eccles, V.

Norfolk, D.

Ellenborough, L.

Nugent of Guildford, L.

Elliot of Harwood, B.

O'Brien of Lothbury, L.

Elton, L.

Onslow, E.

Fanshawe of Richmond, L.

Orkney, E.

Ferrier, L.

Orr-Ewing, L.

Fraser of Kilmorack, L.

Pender, L.

Gainford, L.

Quinton, L.

Gardner of Parkes, B.

Rankeillour, L.

Gisborough, L.

Renton, L.

Glanusk, L.

Renwick, L.

Glenarthur, L.

St. Aldwyn, E.

Gormanston, V.

St. Davids, V.

Gray, L.

Saltoun, Ly.

Greenway, L.

Sandford, L.

Gridley, L.

Sempill, Ly.

Hailsham of Saint Marylebone, L.

Skelmersdale, L.

Soames, L.

Hanson, L.

Southborough, L.

Harmar-Nicholls, L.

Stamp, L.

Henley, L.

Stodart of Leaston, L.

Hives, L.

Sudeley, L.

Home of the Hirsel, L.

Swinton, E. [Teller]

Hornsby-Smith, B.

Terrington, L.

Hylton-Foster, B.

Thomas of Swynnerton, L.

Ilchester, E.

Trefgarne, L.

Ironside, L.

Trumpington, B.

Killearn, L.

Ullswater, V.

Kilmany, L.

Vaux of Harrowden, L.

Kinnaird, L.

Vivian, L.

Kinnoull, E.

Westbury, L.

Kitchener, E.

Whitelaw, V.

Lane-Fox, B.

Resolved in the negative, and amendment disagreed to accordingly.
5.38 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 7:
Page 2, line 28, at end insert ("and the consideration of the transfer under this subsection shall be such consideration as shall be certified as being fair and true by the Comptroller and Auditor General.")
The noble Lord said: With the score at 2 all, we will decide the result by penalties, I think. This amendment deals with the clearly very difficult problem of the valuations and satisfaction because the situation has been looked at objectively. The Minister is in a far better position than we are to talk in terms of the valuations. We respect the confidentiality in these matters, but certain public statements have been made as to the likely asset value. On later amendments we shall be talking in terms of the possible figures that might be obtained. It would appear that, in cash terms, we are giving away a great national asset for very little.
This amendment was debated originally in another place. On that occasion it was withdrawn on the strength of the statement that the Government would consider how best to achieve the tightening up and clarification which at that time they admitted we required. They did this by a subsequent amendment which went some way towards meeting the points that had been made. However, it would seem that the amended subsection does not cover the main thrust of the arguments we have about the valuation of assets and protection for the public and also for the taxpayer. This amendment provides that before certain assets of value are transferred the Comptroller and Auditor General should undertake terms of valuation.
The Tenth Report of the Public Accounts Committee, for 1981–82, dealt with the problems, still unresolved, of the sale of shares in British Aerospace. In this House on Friday, 22nd June, the Minister said, at col. 572, in relation to the introduction of private capital, that the Government,
"cannot decide now the exact means, whether by flotation of shares in the whole organisation, by direct sale of parts or of subsidiary companies, or by entering into joint ventures".
An earlier debate and a decision against the Government's intentions in respect of how to dispose of the Royal Ordnance factories may very well have a bearing on this debate. I respect the fact that the Report stage in your Lordships' House may be a suitable opportunity to look at this again.
What we are inviting the Committee to do is to agree that we ought not to support measures of this kind, about which there is no information. What we are seeking is to say that when valuations are even contemplated and have been worked through, the Comptroller and Auditor General ought to be brought into the picture. Perhaps the Minister is going to say that this amendment has his sympathy, but that there are other ways. He may say that if we are not satisfied with the present wording of the Bill but agree to withdraw this amendment, his officials and others will look at other forms of words and on Report stage seek to meet our point. We are far from satisfied with the present intentions and the present coverage by the Bill of those intentions. They do not meet fully our desire to make sure not only that the public get the maximum to which they are entitled but also that some people do not get more than the amount to which they are entitled. I beg to move.
Lord Diamond: I want to support everything that the noble Lord, Lord Graham, has said. As is the case with most of the amendments we are moving, this amendment is very much in the interests of Parliament and parliamentary scrutiny. As I understand it, it was desired to consider at the same time Amendment No. 8, and I should like to speak to that also.
Amendment No. 8: Page 2, line 36, after ("value") insert ("(being the value as certified by an Independent Professional Valuer)").
Amendment No. 8 deals with the valuation being a valuation of an independent professional valuer. It is a very simple point. The Bill as at present constructed, as far as I can read it, does not require a valuation to be made by any expert at all. The valuation could be purely arbitrary, and that is very unsatisfactory. The Government must know that there is a very recent example—Sealink is the one I am referring to—where
1666
differences of view about valuations can well be maintained. In their own interests, the Government ought to see to it that the valuation on the basis of which the Treasury accepts the consideration for the sale of these assets is a valuation which can stand up to examination. The only way one can achieve that, in three short words, is by having an independent professional valuer.
Lord Trefgarne: As your Lordships will appreciate, the purpose of subsection (3) of Clause 1 of the Bill is to protect the creditors of any company out of which property is transferred by means of a scheme made under Clause 1(1)(b) or (c). It provides that a company from which property is transferred should be paid for, either in cash or by the transfer to that company of property to equivalent value; or, failing that, that the distributable reserves—which belong to the Secretary of State in his capacity as sole shareholder—should be written down to an equivalent value. The purpose is to keep intact the assets of the company immediately available for the payment of creditors. Your Lordships will understand that the distributable reserves of a company are not ordinarily available to the creditors, except in the event of a winding-up.
Of course, in order to comply with the provisions of his subsection, it will be necessary to value the property transferred. In any case where it is necessary to certify the value of property, appropriate experts would be employed to do so. Ordinarily one might expect to use the company's auditors, who will be responsible for certifying the accounts of the company as representing a true and fair picture of its position. The Royal Ordnance Company's auditors will be the distinguished and highly reputable firm of Messrs. Coopers and Lybrand. They may be expected to make any necessary valuation for the purposes of this clause. They may, of course, act in conjunction with other expert valuers if the property which requires valuation is land, buildings, or other assets upon which a specialist opinion would be advisable or useful.
I would not suggest that the Comptroller and Auditor General would produce anything but a thoroughly competent and accurate valuation of property for the purpose of this clause. It is, however, difficult to understand why he should be required to act under this particular subsection, and not elsewhere in the Bill. There is good reason why, in fact, he should not be required to act at all. It is our intention to set up an independent company, which would be free of any suggestion of Government control. It is important not only that the company should be free of such control, but that it should be seen to be free. For the company to be subject to a statutory obligation to deliver up its books and records to the Comptroller and Auditor General, for however limited a purpose, would not ensure the appearance of independence upon which the company's success in the market place will inevitably depend.
There is no reason to suspect that any valuation made under the provisions of this subsection, or for that matter under any other provision in the Bill, will be other than independent, fair and reasonable. There is no reason, therefore, to involve the Comptroller and Auditor General, or any other arm of Government. Thus, if the Government's policy with regard to the

1667
Royal Ordnance Company is to bear fruit, the Government have no option but to oppose this amendment.
Those were my observations on the amendment proposed by the noble Lord, Lord Graham. Turning now to the second amendment we are considering, that is, Amendment No. 8, to which the noble Lord, Lord Diamond, was speaking, I want to say that in establishing the Royal Ordnance factories as a public limited company the Government are seeking to put the company in the same position as it would have been if it had been trading as a company for a period of time. In a sense, of course, it will have been, since its trading activities after vesting day will be a continuation of the trading activities of the Royal Ordnance Factories Trading Fund.
If the company had been in business previously as a separate company, it would have a set of accounts which, in the normal way of any such company, would reflect its current trading position. Accordingly, when the capital structure of the new company is decided upon—and this has yet to be done—we shall attempt to give it that form which is best calculated to assist the company's future trading prospects. We expect that the opening account will follow closely the closing accounts of the Royal Ordnance Factories Trading Fund. But there may need to be some differences, because we shall be dealing with an independent commercial entity, and no longer with an adjunct of Government. These accounts, as I have said, will reflect the trading position which we believe will constitute an appropriate starting point for the company. They will not purport to show the net asset value of the company, which is not the purpose of trading accounts.
I would emphasise this last point because I have the impression—and I hope that I am not doing the noble Lord, Lord Diamond, an injustice—that Amendment No. 8 seems to be based upon a misapprehension that it is indeed the function of the statutory accounts of a company to set out its asset value. I think that this would be the case only if the accounts were prepared for the purposes of a winding up, or an asset sale.
We are, as it happens, at the moment in the process of obtaining an independent valuation of all the fixed assets which it is intended to transfer to the new company. But the values so found will not necessarily be reflected in the opening accounts. It is quite likely, for example, that the value of the fixed assets will appear in the accounts calculated on a depreciated historic cost basis. This would be a normal and far from exceptional procedure. The effect of this amendment would be to require the accounts to be produced on a basis which might not be the most satisfactory one for the purposes of the future trading position of the company.
I hope that it is not necessary for me to assure your Lordships that there is no suggestion of transferring assets to the new company at an undervalue. If we proceed to a flotation of the shares in the company, which at this point, as I have said, would appear to be the most likely method of introducing private capital, the prospectus will need to disclose the value of the company's assets. Obviously the value, as determined by our independent valuers, and disclosed in the
1668
prospectus, will influence the amount which investors are prepared to pay for the shares. But it will be only one of several factors which will determine the share price. The value which the Government ultimately receive for the company will, therefore, be to some extent affected by the market value of the assets, but will not be dependent on that value.
Of course, while the shares are wholly owned by the Secretary of State, the question of their value does not arise. During this period the Government investment in the Royal Ordnance factories will, in effect, be maintained, though in a different form. But the value of that investment will not be changed.
I cannot, therefore, accept Amendment No. 8. To do so would be to saddle the company with an obligation which might not be in its best commercial interests. I very much hope that the noble Lord will take that point on board and that he will not move his amendment when we come to it. I also hope that the noble Lord, Lord Graham, will see fit to withdraw his amendment.
Lord Graham of Edmonton: I accept completely that the Minister has sought to give assurances in the absence of these amendments. First, he has sought to assure the taxpayer and the public that there are mechanisms which will ensure that as far as they are concerned these assets, which eventually are to be sold, will be sold at a fair price. Secondly, he has sought to assure those who purchase that the price at which the assets will be offered is a fair price. However, the Minister will be well aware of the comparatively enormous sums of money which are made by other people who are involved in the business of the flotation of shares. One can easily see valuations placed upon assets to be sold, which take into account the costs which have to be borne by the money market and those who deal in it. We have seen millions and millions of pounds paid and added to the asset value.
I am a professional in a secretarial sense but not in the very exact science, these days, of professional valuation. There is a range of assets that are to be valued. At present nominal or sometimes notional values are placed in the accounts. Indeed, the trading accounts system is just a collection of accounts. I imagine that some surprises could be struck. The Ministry must have some idea. They have said no more than they said earlier during the public part of the exercise; namely, that perhaps it might be £250 million or £300 million. One does not know, but one could be surprised. We simply want it to be appreciated that we are against the sale at all, but that if the sale is to take place we want to be satisfied that the best professional and independent advice is sought.
I want to press the Minister a little more on the role of Messrs. Coopers and Lybrand, who I think he said were the Ordnance factory auditors and who have statutory obligations. Can the Minister tell us a little more about their role in the valuation? From my limited knowledge, to be competent to audit involves more than adding up columns on a sheet, because from an accountancy point of view one needs to be satisfied on a range of other matters. We are talking here in terms of millions of pounds. Yesterday we had the strong feeling on this side of the House that the Sealink assets were certainly worth a great deal more

1669
than the figure which professional advisers had advised the Government was a fair price. In other words, there is room for argument as to the precise amount of money which it is possible to get—not even what the assets are worth but what one ought to ask the market to pay. If we are to sell public assets we are concerned that the public should receive the maximum price and that no-one else should get a slice of the action in any other way.
I do not know what the noble Lord, Lord Diamond, will do as regards Amendment No. 8. However, my inclination at the moment as regards Amendment No. 7 is that we should read very carefully what the Minister has said and take advice from outside the House on whether the basis upon which the Minister is to proceed is likely to obviate what all too sadly has been evident recently under this Government—namely, that whoever receives the price of a public asset when it is sold, there are other people who in our view are not entitled to a slice of it but who also get some of the action.
Lord Trefgarne: I am not sure whether the noble Lord, Lord Graham, wants me to dilate on the duties of the auditors of the company. I will do my best "off the top of my head", as they say, to help the noble Lord. As I recall the position—and I confess that I am not an expert in these matters, but I believe that the noble Lord, Lord Diamond, is an expert—the arrangement is that the auditors are appointed by the directors under the Companies Act. The auditors' duties are laid down in the Companies Act. But as far as the question of the valuation is concerned, I believe that the arrangement—and this applies to every company—is that the directors propose a valuation of the assets involved in their company and it is up to the auditors to decide whether they are able to accept that valuation or not either in the light of their own knowledge or in the light of any expert opinion that they may take.
In terms of property—and I referred to this in my remarks just now—the directors themselves very often obtain a valuation by experts of the property involved in their company and submit those figures to the auditors for inclusion in what are eventually the audited accounts and balance sheet.
Lord Diamond: With great respect, the noble Lord has got it very nearly right. Of course, the directors only appoint the auditors in an interim way until their appointment can be confirmed by the shareholders, because the auditors are responsible to the shareholders of a company. The noble Lord has got it quite right and, with great respect, I thought that the noble Lord, Lord Graham, had got it quite right when he said that this seemed to be an appropriate occasion to consider very carefully what the Minister has had to say with regard to Amendment No. 7. However, Amendment No. 8 is a different matter and I shall move it when I am fortunate enough to catch the Chairman's eye.
Lord Graham of Edmonton: If it will assist the Committee, in the light of what the Minister has said
1670
and pending further consideration of future action, I beg leave to withdraw Amendment No. 7.
Amendment, by leave, withdrawn.
5.59 p.m.
Lord Diamond Lord Diamond moved Amendment No. 8:
[Printed earlier.]
The noble Lord said: I beg to move Amendment No. 8 and I do so in the light of what the noble Lord the Minister has been good enough to explain. In short, I am saying that his explanation is not good enough. First, there is the argument, which is plain to everybody, that to the extent that this clause—and we are now dealing with subsection (4)—affects the consideration which may be received by the Government, by the Treasury, at any time for these assets, it is vitally important that they should be valued by an independent valuer. The Government have some defence if there is an independent valuation; they have no defence if there is just an arbitrary internal valuation.
I may be wrong, but the noble Lord has made an assertion but has not indicated the basis for that assertion. He has asserted that the value will be the value put forward by independent valuers. I see nothing in the clause which confirms that, or which is the basis for that assertion. As I read the clause, it merely refers to valuation, and the valuation could be a completely arbitrary one.
So the first point concerns anything which may ultimately affect the receipts by the Treasury for the sale of any of these assets. The second point is the immediate point that this is bound to affect the tax situation between the purchaser and the vendor, and, therefore, there should be a valuation, if only to satisfy the purchaser and the Inland Revenue. Therefore, until the Minister points out to me that I am wrong in my assumption that there can be an arbitrary valuation, and that somewhere or other in the Bill there is a specific provision for an independent valuation, I am quite sure that that independent valuation ought to be inserted in the Bill. I beg to move.
Lord Trefgarne: I am not certain that there is much more that I can say to help the noble Lord. When I spoke just now in response to his amendment, while we were debating the earlier amendment of the noble Lord, Lord Graham, I pointed to the role of the auditors. The noble Lord was subsequently good enough to say that I had got it roughly right. I hope that the noble Lord is not suggesting—I am sure that he is not—that auditors of the distinction of the firm that I mentioned or, indeed, any firm of auditors, being professionally qualified people, as they must be, would be other than independent and unbiased. No doubt some are better than others, but I am quite certain that the proposals that we set out in the Bill, and which are inherent in the proposal for the creation of a Companies Act company, provide for a proper and independent valuation of the assets, or at least for a proper and independent assessment of the value and a checking of the value. On reflection, I hope that the noble Lord will not press his amendment.
Lord Diamond: I must ask the question: where in the Bill does it say "independent valuers"? If that phrase appears in the Bill, I shall immediately withdraw my amendment. If it does not, inasmuch as both the noble Lord and Minister and I are in favour of independent valuers, let us include them in the Bill.
Lord Trefgarne: At the risk of boring your Lordships, and at the risk of repeating myself yet again, the valuers will eventually be the auditors of the company. They are the independent valuers; and independent auditors of the company are required to be independent and are required to be appointed under the Companies Act.
Lord Diamond: I am sorry; I must be boring the Committee, too, but I just do not see that, either. The noble Lord is sticking to a preconceived idea. I am sorry to be a little obstinate about this, but we are both after the same thing. We are both after protecting the state, and the safest way to do this is to see that the phrase goes verbatim and specifically into the Bill.
Baroness Phillips: Can the noble Lord, Lord Diamond, answer me this question? As I have understood it, the training and qualifications of a valuer, certainly in relation to property, are totally different from those concerned with accountancy. Are we talking about a valuer in the sense of a valuation officer?
Lord Diamond: I respond although I have no expertise and a poor memory, and it is a long time since I was a practising accountant. We are talking about a valuation by a valuer; not a valuation by a firm of accountants. Of course, they have certain duties, as do directors, in regard to valuations, as to whether or not they can regard them as reasonable. But the first essential is that there should be a valuation by someone who knows how to value. No practising chartered accountant claims to know how to value all these millions of pounds worth of assets. No sensible government ought to put themselves in a position of being liable to be criticised for not taking normal protective steps. Therefore, on behalf of all the parties in the Committee, I suggest that we pursue this.
Lord Trefgarne: If the noble Lord will allow me, I think that he is ascribing to the art or science of valuation (whichever it may be) rather more mystery than perhaps really exists. If we are thinking of property, I hastily accept that property is best valued by property valuation experts. I guess that it is more of an art than a science because the value of property goes up and down in some extraordinary ways.
I said during my earlier remarks that in those circumstances I would expect professional property valuers to be used. But if we are talking of a piece of equipment—for example, a machine—generally speaking, the art of valuation is very different. For example, one has a choice. Either one can value a piece of equipment by the historical method—in other words, one says that it cost £x y years ago, and therefore it is a simple mathematical calculation to determine its book value today—or (and this is sometimes used nowadays) one can use the current
1672
cost basis, where one determines the value of a piece of equipment by the cost of replacing that piece of equipment today. In the latter case, generally speaking, one arrives at a rather higher price than one did before.
That last process to which I referred—and I hasten to emphasise that I am by no means an expert on this—is very much a role for accountants and auditors, because it is a function which they perform all the time. But, as I have said, there are areas where specific expertise is required, and I have accepted that that is appropriate and that it will almost certainly happen in these cases.
Lord Diamond: At the risk of going one stage further, any sensible businessman would adopt neither of the suggestions made. If this amount of plant were to be valued, he would go to one of the well known practising firms which value plant of this size and dimension, and get a proper professional valuation.
Lord Graham of Edmonton: I wonder whether the Minister would take on board the suggestion that there need not be a difference between us here. We on this side of the Committee want to see those words written into the Bill because they are so clear. I am not at all certain whether the Minister could come up with different words which mean precisely the same thing, but perhaps the Minister would take this matter on board before the next stage. The noble Lord, Lord Diamond, will do what he wishes, and we are at one with him as regards the argument. But if the Minister says that there is no difference as to how it will work in practice, and that professional valuers will be used, even though they may be called something different, then we would want to see the colour of the money, we would want to see precisely what it is.
We do not doubt the Minister's integrity in these matters, but if he is unable to satisfy the noble Lord, Lord Diamond, on the form of words, we on these Benches will happily go into the Lobby with the noble Lord.
Lord Trefgarne: I do not want to seem intransigent about these matters. If the noble Lord, Lord Diamond, wants to withdraw his amendment in the context of my looking at this matter again, then I should be happy to do so. I am not sure that I shall come up with any better ideas than those which I have offered to your Lordships already, but if that would help the noble Lord I should be happy to give that assurance.
Lord Diamond: I am grateful to the Minister for his courtesy, but not for the content of his reply.
6.9 p.m.
On Question, Whether the said amendment (No. 8) shall be agreed to?
Their Lordships divided: Contents, 76; Not-Contents, 107.

DIVISION NO. 5

CONTENTS

Airedale, L.

Beaumont of Whitley, L.

Ardwick, L.

Birk, B.

Attlee, E.

Blease, L.

Aylestone, L.

Boston of Faversham, L.

1673

Bottomley, L.

John-Mackie, L.

Briginshaw, L.

Kaldor, L.

Broadbridge, L.

Kilmarnock, L.

Bruce of Donington, L.

Kirkhill, L.

Buckmaster, V.

Listowel, E.

Carmichael of Kelvingrove, L.

Lloyd of Kilgerran, L.

Carver, L.

Longford, E.

Cledwyn of Penrhos, L.

Lovell-Davis, L.

Collison, L.

Mackie of Benshie, L.

Davies of Leek, L.

McNair, L.

Dean of Beswick, L.

Mayhew, L.

Diamond, L.

Meston, L.

Elwyn-Jones, L.

Mishcon, L.

Ennals, L.

Mulley, L.

Ewart-Biggs, B.

Nicol, B. [Teller.]

Ezra, L.

Phillips, B.

Falkland, V.

Pitt of Hampstead, L.

Fitt, L.

Ponsonby of Shulbrede, L.

Gaitskell, B.

Rochester, L.

Gallacher, L.

Seear, B.

Gladwyn, L.

Sefton of Garston, L.

Gosford, E.

Simon, V.

Graham of Edmonton, L.

Stallard, L.

Grey, E.

Stewart of Alvechurch, B.

Hampton, L.

Stewart of Fulham, L.

Hanworth, V. [Teller.]

Stoddart of Swindon, L.

Harris of Greenwich, L.

Stone, L.

Hatch of Lusby, L.

Taylor of Blackburn, L.

Houghton of Sowerby, L.

Tordoff, L.

Hughes, L.

Underhill, L.

Irving of Dartford, L.

Wallace of Coslany, L.

Jacques, L.

Whaddon, L.

Jeger, B.

Willis, L.

Jenkins of Putney, L.

Wootton of Abinger, B.

NOT-CONTENTS

Auckland, L.

Hanson, L.

Avon, E.

Harmar-Nicholls, L.

Barber, L.

Henley, L.

Belhaven and Stenton, L.

Hives, L.

Bellwin, L.

Home of the Hirsel, L.

Beloff, L.

Hornsby-Smith, B.

Belstead, L.

Hylton-Foster, B.

Bessborough, E.

Kilmany, L.

Blakenham, V.

Kinnaird, L.

Boardman, L.

Kinnoull, E.

Boyd-Carpenter, L.

Kitchener, E.

Brabazon of Tara, L.

Lane-Fox, B.

Brougham and Vaux, L.

Lauderdale, E.

Caccia, L.

Lawrence, L.

Caithness, E.

Lindsey and Abingdon, E.

Campbell of Alloway, L.

Long, V.

Campbell of Croy, L.

Lucas of Chilworth, L.

Cockfield, L.

Luke, L.

Coleraine, L.

McAlpine of West Green, L.

Colville of Culross, V.

Macleod of Borve, B.

Cork and Orrery, E.

Mancroft, L.

Craigavon, V.

Margadale, L.

Daventry, V.

Marley, L.

De Freyne, L.

Marshall of Leeds, L.

Denham, L. [Teller.]

Massereene and Ferrard, V.

Drumalbyn, L.

Maude of Stratford-upon-Avon, L.

Eccles, V.

Eden of Winton, L.

Molson, L.

Elliot of Harwood, B.

Montgomery of Alamein, V.

Elton, L.

Mottistone, L.

Fanshawe of Richmond, L.

Mowbray and Stourton, L.

Ferrier, L.

Murton of Lindisfarne, L.

Fraser of Kilmorack, L.

Napier and Ettrick, L.

Gainford, L.

Norfolk, D.

Gardner of Parkes, B.

Nugent of Guildford, L.

Gisborough, L.

O'Brien of Lothbury, L.

Glanusk, L.

Onslow, E.

Glenarthur, L.

Orkney, E.

Gormanston, V.

Quinton, L.

Gowrie, E.

Rankeillour, L.

Gray, L.

Renton, L.

Greenway, L.

Renwick, L.

Gridley, L.

St. Aldwyn, E.

Hailsham of Saint Marylebone, L.

Saltoun, Ly.

Sandford, L.

1674

Sempill, Ly.

Terrington, L.

Shannon, E.

Thomas of Swynnerton, L.

Skelmersdale, L.

Trefgarne, L.

Southborough, L.

Trumpington, B.

Spens, L.

Vaux of Harrowden, L.

Stamp, L.

Vivian, L.

Stodart of Leaston, L.

Westbury, L.

Sudeley, L.

Whitelaw, V.

Swinfen, L.

Wise, L.

Swinton, E. [Teller.]

Resolved in the negative, and amendment disagreed to accordingly.
6.17 p.m.
Lord Diamond Lord Diamond moved Amendment No. 9:
Page 3, line 18, at end insert ("and, without prejudice to the generality of the foregoing, every scheme shall contain a provision securing to the Ministry of Defence, whenever required, absolute priority in the supply of goods and services to that Department.").
The noble Lord said: I understand that it has been thought that it will be to the convenience of the Committee if we discuss Amendments 10 and 11 at the same time.
Amendment No. 10: Page 3, line 18, at end insert ("and without prejudice to the generality of the foregoing, every scheme shall contain the necessary provisions securing to the Ministry of Defence the supply at fair prices of the goods and services it may from time to time require.").
Amendment No. 11: Page 3, line 18, at end insert ("and without prejudice to the generality of the foregoing, every scheme shall contain such provisions as may be necessary to secure to the Ministry of Defence spare manufacturing capacity to the extent required by that Department so as to meet such emergencies as it may envisage.").
We all know that there is great anxiety lest the arrangements for the proposed transfers which the Government have in mind would result in a serious deterioration in the ability of this country to defend itself. That arises because the ROFs provide a number of things which no other commercial supplier supplies. In the first case they provide complete priority in case of need. That is not supplied in the ordinary way by a commercial manufacturer.
A commercial manufacturer of goods needed by the Ministry of Defence would have to have regard to the contracts he has made both to supply the Ministry of Defence of this country and to supply the Ministry of Defence of other countries. Therefore, he has to act in a purely commercial way. The ROFs provide the Ministry of Defence with something more than a commercial priority; they provide it with complete priority, and that complete priority is essential when difficulties arise in the judgment of the Ministry of Defence and the Secretary of State.
The second thing which they provide are goods of a kind which are not commercially convenient or profitable to provide but which the Ministry of Defence needs. You cannot get them provided by a commercial firm in the ordinary way because it does not suit for a variety of reasons. Maybe the run is far too short; maybe the plant required is far too complicated for the number of articles to be made.
A great number of reasons arise why it is totally unsuitable for a commercial firm, having regard to its duties to its shareholders and employees, to attempt to handle such a contract, and it therefore does not put in a bid for it. But the Ministry of Defence must have such articles in its own judgment in the defence of the

1675
country. Therefore, what is required is the same priority in terms of the supply of goods and services which it may from time to time require and which no other commercial outlet would provide.
The third thing which the ROFs provide at the present time is again vital in terms of the defence of our country: it is spare manufacturing capacity. By definition no commercial firm is going to provide spare manufacturing capacity. It is the duty of an ordinary commercial firm to have regard to maximum profitability, and that is to say to use its assets all the time and not to have them lying idle.
But it may be in the interests of the country when an emergency arises or is foreseen that there should be spare capacity kept for this very purpose, and that spare capacity is so kept, and is required to be kept, by the ROFs at the moment and is of course paid for by the Government. It is a proper cost which the country incurs as a kind of insurance policy against an emergency arising—an emergency which sometimes can be foreseen and sometimes cannot be foreseen. It is in those three different categories that great anxiety has been expressed by people of enormous authority in this field, such as an ex-Secretary of State for Defence. I have consulted two ex-Secretaries of State. I have consulted those who have great responsibilities, not on the political side, but on the service side. They have all come back with the same answer, that there is great anxiety lest, as a result of what the Government propose in the Bill, our defences should suffer. It is as simple as that.
I want to try to prevent a situation in which we are less capable of providing our defences than we are at the moment. That is why these three amendments ensure that when there is a change of the kind contemplated by the Government, these special provisions shall be included.
The Earl of Onslow: May I make a plea to the noble Lords opposite about this amendment? May I suggest to them that to divide as often as we have been doing this afternoon is to run the risk of bringing this Chamber into disrepute? We should divide when we are concerned about something that is really important, and not to try to behave like a rather faded mirror image of the place down the road. Let us consider what would have happened if, when the Labour Party was in power, the Conservatives had divided on five amendments on a Bill of this size. We would have been accused of gross irresponsibility. I suspect that that is the case this afternoon on this Bill.
Lord Carver: I wish to support very strongly the amendments proposed by the noble Lord, Lord Diamond. I endorse everything that he has said in support of his amendments. By the very nature of things, especially when given the vagaries of annual financing of defence, when there are no operations in prospect or in progress, the number of orders which the Minister of Defence can place for the kind of items which the Ordnance factories produce is small. There is great difficulty in even making the orders regular from year to year. When there is a sudden emergency—for instance, had the Falklands operation lasted much longer than it did—one item on which
1676
there is a most urgent need to increase production dramatically is ammunition. The amount of ammunition that is ordered year by year is small. That is perhaps the most important field—it is not the only field—which makes it of great importance that these three amendments should be accepted.
There are other fields; one of them, close to my own heart, is tank production in the Royal Ordnance factory at Leeds. Since the end of the Second World War we have relied entirely for the production of main battle tanks on that excellent factory, which has done an extremely good job. The production of tanks in that factory requires some very specialised machine tools of various types, such as those for handling, welding and machining complete tank hulls and complete tank turrets of enormous size. This is machinery which is used for no other commercial purpose.
We renew our tank fleet at long intervals. It would be quite impossible for a commercial firm, working on a commercial basis, to retain all the machine tools required in the production of many of the items from the Ordnance factories, unless something such as Amendment No. 11 is included in the Bill.
The enthusiasm of the present Secretary of State for extreme competition in every field—including not guaranteeing production to the firm which did the development, and even perhaps splitting production between different firms—to my mind makes these three amendments even more important. My own experience is in the tank field. At the beginning of the Second World War we had very poor tanks because before the war we had had no Government factory engaged in tank production. We relied entirely upon commercial firms. The tanks in which the father of the noble Earl who has just spoken and myself had to face the Germans in North Africa and elsewhere were the remnants of a commercial organisation and, thank heaven, we have not been in that situation since the end of the Second World War. I strongly support all these three amendments.
Lord Mulley: I should like very strongly to support the amendments proposed by the noble Lord, Lord Diamond, and supported by the noble and gallant Lord, Lord Carver. In my view the amendments go only part of the way to mitigating what I believe is a most serious prospect of damage to our armed forces. To the noble Earl, Lord Onslow, I would say that this is not a slight Bill; it involves a matter of grave importance because successive Governments for almost 400 years—the first Royal Ordnance factory was established in 1585—have thought it right (and I do not quarrel with the concept) to make the interests of defence paramount to any commercial interest.
I do not believe it is feasible to ask private investors and entrepreneurs to take on the great responsibilities of producing weaponry or ammunition which may not, in the event, be needed, and to ask them to do research at the behest of the Ministry of Defence in a way which would not be compatible with the maximisation of their profits or to the benefit of their shareholders. In every way that is possible the Royal Ordnance factories, over which I had some control and interest, operate on a very commercial basis within the limitations of putting first the interests of our own armed forces.

1677
I am quite certain that if this Bill is implemented and all the Royal Ordnance factories are privatised—that is a horrible word, and a horrible thing—in a number of years we shall not have a capacity to make tanks and probably not have a capacity to make tank guns. I believe that our tank guns are the best in the world. We may even have great difficulties about getting the ammunition at the time when we want it. It would be scandalous if, at a time of great emergency we had to depend on the possibility of getting supplies from other parts of the world, so that if we had to send our troops (heaven forbid) into another Falklands conflict or something like it, they would be adequately armed.
Equally, I believe that the employment factor is also not unimportant. My own experience was that the trading fund put the industries concerned on a sound footing. They were extremely well managed and they had a loyal and competent workforce. To destroy them in this way simply to meet some political dogma is worse than anything that could be alleged against some of the actions of the Governments in which I was proud to serve.
The Earl of Cork and Orrery: If my noble friend Lord Trefgarne is to reply to this amendment in the sense of resisting it, I should like him to know that 1, for one, extend to him my most heartfelt sympathy. I cannot believe that, if he were not speaking for the Ministry of Defence, he would be other than wholeheartedly in support of the amendment proposed by the noble Lord, Lord Diamond, the noble and gallant Lord, Lord Carver, and the noble Lord, Lord Mulley—with whose arguments I wish wholeheartedly to associate myself.
6.30 p.m.
Lord Mayhew: If I may briefly add some words of support to what has already been said in the House from various quarters and in support of my noble friend Lord Diamond, I do not think that the debate could possibly have more conclusively challenged the remark of the noble Earl, Lord Onslow, that these amendments are not important. I would assure him that to the people in the services or with service experience these are profoundly important matters that we are discussing in this amendment.
I had the honour to represent in another place for many years Woolwich and I know a great deal about the history and contribution of Woolwich Arsenal. In 1939, Woolwich Arsenal had, by design, a huge spare capacity. I believe that it expanded during the war, in spite of the appalling bombing, from employing something like 6,000 people to employing 33,000 people. If Woolwich Arsenal had been commercial in 1939, does one suppose that it would have kept that spare capacity? The tradition of the ROFs of serving the Ministry and of serving the armed forces is something very precious and something that we ought to be safeguarding.
It breaks my heart to see the Government obeying what really are only ideological considerations in this. I can see their minds imagining a perfect market in the production and sale of arms in this country—a whole lot of independent organisations competing against each other. But in the field of defence, this, of course,
1678
is a complete chimera. It cannot happen. You have one buyer in this country for arms. You have the Ministry of Defence dominating, making this firm's fortune, ruining that other firm, by its own decisions about purchases. The ideological concept of getting rid of the ROFs and making a kind of perfect competitive market in arms simply does not match the facts of defence. It breaks my heart as an ex-service man to see the Government behaving in this way towards the ROFs.
Lord Trefgarne: I fully understand your Lordships' concern about each of the matters raised by these amendments. They are serious points and deserve to be taken seriously. Of course, it is the department's responsibility to ensure that our armed forces are properly equipped with modern, efficient and effective weapons and at the right price; and that the necessary manufacturing facilities are available to ensure a continuous and reliable supply, to the extent that any foreseeable demand can be promptly met. The Committee will not, I hope, be surprised that these matters have already been the subject of detailed consideration within the Ministry of Defence. We should have been failing in our duty if we had not done so. But the conclusions we have come to are not such as would lead us to support these amendments.
The amendment seeks to insert in the Bill, under the cover of supplementary, incidental, consequential or transitional provisions, detailed constraints upon the future relationship between the Ministry of Defence and the company. While I foresee what I might describe as technical objections to this, the Government's essential concern about these amendments is that they are unnecessary; and not only that, but run counter to the Government's policy objectives. No one, of course, disputes the need to make appropriate arrangements to secure the supply of ordnance to the armed services at the right price and on the right terms and conditions. As I have said, such arrangements have already been the subject of active consideration within the department.
The intention is that all the essential arrangements will be made between the department and the company by contract. That is the sensible method of dealing with these issues, and one entirely consistent with Government policy. As regards reserve capacity, if we needed this, we could, of course, secure it, but by specific contracts on the company, to replace existing arrangements. It will be, moreover, a far more efficient method of securing these objectives than any provisions contained in a scheme could possibly be. For, once a scheme comes into force, its effect is fixed and cannot thereafter be changed. This is an inevitable consequence of the fact that the essential purpose of a scheme is to transfer property from one owner to another. Now, if arrangements of the kind which these amendments envisage were incorporated in a scheme, and were subsequently found not to be working properly, there would be no way of changing their fixed and settled effect except by the making of another scheme. And the noble Lord will know, because he will have seen Clause 3(4) of the Bill, that once the Crown has disposed of any shares in the company, no further schemes affecting the company can be made. One result of these amendments, if they were passed,

1679
might consequently be to saddle the department with an inefficient, or unworkable, arrangement which there was no means of changing.
A contractual arrangement, on the other hand, is entirely flexible. It may contain its own provisions for review. In any case it can be altered, or terminated, by the agreement of the parties. A new contract can be made remedying the deficiencies of the old one. The noble Lord may object that the company does not have to enter into any such contract, and that the matters in issue are so important that the risk, however remote, that this might happen, cannot safely be incurred. Of course there will be no legal compulsion on the company to enter into any such contract, although I would observe, in passing, that, once entered into, the contract would be legally binding and enforceable.
But let us be realistic. It is obvious that for the foreseeable future, and well beyond, the Ministry of Defence is going to be the major customer of the company. It may well be, in fact, that the department will always remain the company's largest single customer. It is hardly likely in the circumstances that the company will not wish to accommodate the department on this sort of thing. I would go further and say that there is practically no possibility of it. Of course, the company will say, "Yes, we will provide these services, if you will pay a proper price for them".
This is as it should be. There are ways of monitoring the costs of defence companies in order to ensure that the department does not pay an inflated price for its supplies. The same would apply to the provision of facilities, and, while it is important to ensure that the department is not overcharged for such services, it is equally important to ensure that it does pay their economic cost: and included in this cost will be a reasonable return to the company for providing them. The Government have no doubt, therefore, that whatever facilities may be required by the department, they are capable of being secured, and will be secured, by contract. This will be better than any provision in the Bill, or any provision in a scheme.
I am grateful to noble Lords for raising these important issues by means of these amendments. I give my assurance that the department has them all in mind. Whatever arrangements need to be made, in the judgment of the department, will be made. On the basis of this assurance, and in the light of the perhaps more technical matters to which I have referred, I hope that the noble Lord will see fit not to press the amendments.
Lord Diamond: I am most grateful for the consideration which the Minister has given to this matter, which his department has given and which the Ministry of Defence, no doubt, has given as well. I cannot imagine a responsible government putting forward a Bill like this without having considered these matters. But what the noble Lord is saying is, "You must trust us". He is saying, "We want to be rid of any constraints by Parliament. You must trust us. We know best how to run all this." I do not believe that Ministers and their Civil Service advisers do know best.
I believe that, in this one particular instance, there is one little corner of the commercial world which I
1680
know better than the Minister. Having spent 30 years in a commercial firm as financial adviser—and I no longer have any interest in it whatsoever—I know full well the limitations on a commercial firm providing what the ROFs are compelled to provide at the moment. The fact that the Minister thinks that he can find a commercial firm that will undertake on certain terms to enter into a contract for the time being—and a contractual arrangement, the Minister said, is very flexible—I accept with some reservation.
The present situation is that the reserves on which the country relies are 4 per cent., I believe, in the ROFs of the general supply of munitions that it requires. Now 96 per cent. is already provided by the private sector, and the Minister wants to get rid of the safeguard we have in that little 4 per cent. It is not asking a lot that we should make sure in the Bill that the country is committed and that every Government are committed—the Minister's Government or any subsequent Government—to this small 4 per cent. to ensure supplies on a non-commercial basis in the most vital field of our defence.
Of course, I am going to pursue this to a vote. I merely say to the noble Earl, Lord Onslow, that I do not challenge his sense of patriotism, and I hope he does not challenge mine.
Lord Graham of Edmonton: Before the matter is put to the vote, perhaps I can simply say to the Minister that there could be few amendments that have been tabled in your Lordships' Committee that he could more safely accept, even though he may not like to accept it, in order to demonstrate that the Government are willing to acknowledge from time to time that they have not got it absolutely right.
In the case of this Bill and of many others, this Government have shown a singular lack of appreciation of the fact that there are views other than their own which can improve the Bill. The Minister is not prepared, as I see it, to accept a single amendment. Any change that comes has to be fought for and voted on. The answer to why we vote so often is because, although there have been five Divisions, on every one except the last there has been a majority one way or the other in single figures. Of course, with a division like that, we know that the Government are certainly not prepared to give in.
What we have been invited to do, as the noble Lord, Lord Diamond, said, is to trust the Government. We trust the Government in general to have the best interests nationally. There is nothing in these amendments, in our view, which will diminish or weaken the broad sweep of the Bill, but it will give maximum assurance to those like the noble Lord, Lord Carver, and the noble Lord, Lord Mulley, and the noble Lord opposite, who speak from real experience of wanting to feel safe. This is what we are talking about—the national interest and security. Certainly if these matters are pressed to a vote we shall be in the Lobbies.
Lord Trefgarne: Before the noble Lord, Lord Diamond, decides what to do with his amendment, if he has not already made up his mind, I would ask your Lordships to get the matter into perspective. The noble Lord, Lord Diamond, referred to the fact that 96 per

1681
cent. no less, of the requirements of the Ministry of Defence are obtained from companies other than the Royal Ordnance factories. The arrangements we have with those companies which supply that 96 per cent. are of course satisfactory. Where it is necessary to provide the sort of facilities that the noble and gallant Lord, Lord Carver, has been referring to, then of course that is done. Those arrangements have worked.
What your Lordships are asking is that some peculiar arrangement should now be put into the Bill in respect of the Royal Ordnance factories for when they become on all fours equivalent to the rest of industry. I do not think that is an appropriate proposal.
6.45 p.m.
On Question, Whether the said Amendment (No. 9) shall be agreed to?
Their Lordships divided: Contents, 66; Not-Contents, 90.

DIVISION NO. 6

CONTENTS

Airedale, L.

Jenkins of Putney, L.

Ardwick, L.

John-Mackie, L.

Attlee, E.

Kaldor, L.

Aylestone, L.

Kilmarnock, L.

Birk, B.

Lloyd of Kilgerran, L.

Blease, L.

Longford, E.

Boston of Faversham, L.

Lovell-Davis, L.

Bottomley, L.

Mackie of Benshie, L.

Buckmaster, V.

McNair, L.

Carver, L.

Mayhew, L.

Cledwyn of Penrhos, L.

Meston, L.

Collison, L.

Milner of Leeds, L.

Cork and Orrery, E.

Mishcon, L.

Davies of Leek, L.

Mulley, L.

Dean of Beswick, L.

Nicol, B. [Teller.]

Diamond, L.

Phillips, B.

Donnet of Balgay, L.

Pitt of Hampstead, L.

Elwyn-Jones, L.

Ponsonby of Shulbrede, L.

Ennals, L.

Seear, B.

Ewart-Biggs, B.

Simon, V.

Gallacher, L.

Stallard, L.

Gladwyn, L.

Stewart of Alvechurch, B.

Gosford, E.

Stewart of Fulham, L.

Graham of Edmonton, L.

Stoddart of Swindon, L.

Grey, E.

Stone, L.

Hampton, L.

Taylor of Mansfield, L.

Hanworth, V. [Teller.]

Tordoff, L.

Harris of Greenwich, L.

Underhill, L.

Houghton of Sowerby, L.

Vickers, B.

Hughes, L.

Wallace of Coslany, L.

Irving of Dartford, L.

Wells-Pestell, L.

Jacques, L.

Whaddon, L.

Jeger, B.

Wootton of Abinger, B.

NOT-CONTENTS

Airey of Abingdon, B.

Campbell of Croy, L.

Alexander of Tunis, E.

Cockfield, L.

Ampthill, L.

Colville of Culross, V.

Auckland, L.

Colwyn, L.

Avon, E.

Craigavon, V.

Belhaven and Stenton, L.

Craigmyle, L.

Bellwin, L.

Daventry, V.

Belstead, L.

Denham, L. [Teller.]

Bessborough, E.

Drumalbyn, L.

Boardman, L.

Eccles, V.

Brabazon of Tara, L.

Eden of Winton, L.

Brougham and Vaux, L.

Elliot of Harwood, B.

Caccia, L.

Elton, L.

Caithness, E.

Ferrier, L.

Campbell of Alloway, L.

Fraser of Kilmorack, L.

1682

Gainford, L.

Gardner of Parkes, B.

Montgomery of Alamein, V.

Gisborough, L.

Mottistone, L.

Glanusk, L.

Mountevans, L.

Glenarthur, L.

Mowbray and Stourton, L.

Gowrie, E.

Murton of Lindisfarne, L.

Grantchester, L.

Napier and Ettrick, L.

Gray, L.

O'Brien of Lothbury, L.

Hailsham of Saint Marylebone, L.

Onslow, E.

Orkney, E.

Halsbury, E.

Orr-Ewing, L.

Hanson, L.

Pender, L.

Harmar-Nicholls, L.

Rankeillour, L.

Hives, L.

Renton, L.

Home of the Hirsel, L.

Renwick, L.

Hornsby-Smith, B.

St. Aldwyn, E.

Hylton-Foster, B.

Saltoun, Ly.

Kilmany, L.

Sandford, L.

Kitchener, E.

Sempill, Ly.

Lane-Fox, B.

Skelmersdale, L.

Lawrence, L.

Spens, L.

Long, V.

Stodart of Leaston, L.

Lucas of Chilworth, L.

Swinfen, L.

McAlpine of West Green, L.

Swinton, E. [Teller.]

Teviot, L.

Macleod of Borve, B.

Thomas of Swynnerton, L.

Mancroft, L.

Trefgarne, L.

Margadale, L.

Trumpington, B.

Marley, L.

Vaux of Harrowden, L.

Marshall of Leeds, L.

Vivian, L.

Maude of Stratford-upon-Avon, L.

Whitelaw, V.

Wise, L.

Resolved in the negative, and amendment disagreed to accordingly.
Lord Diamond Lord Diamond moved Amendment No. 10:
[Printed earlier.]
The noble Lord said: This amendment has been discussed and therefore I see no point in discussing it any further. I regard this as a very important amendment. Indeed, I recognise what is happening in terms of the Division Lobbies, but I feel I must ask your Lordships to give this amendment very favourable consideration and to support us in the Lobby if you possibly can.
6.52 p.m.
On Question, Whether the said amendment (No. 10) shall be agreed to?
Their Lordships divided: Contents, 63 Not-Contents, 90.

DIVISION NO. 7

CONTENTS

Airedale, L.

Gladwyn, L.

Ardwick, L.

Gosford, E.

Attlee, E.

Graham of Edmonton, L [Teller.]

Aylestone, L.

Bernstein, L.

Grey, E.

Birk, B.

Hampton, L.

Boston of Faversham, L.

Hanworth, V. [Teller.]

Bottomley, L.

Harris of Greenwich, L.

Briginshaw, L.

Hatch of Lusby, L.

Bruce of Donington, L.

Hughes, L.

Buckmaster, V.

Irving of Dartford, L.

Carver, L.

Jacques, L.

Cledwyn of Penrhos, L.

Jeger, B.

Collison, L.

Jenkins of Putney, L.

Cork and Orrery, E.

John-Mackie, L.

Dean of Beswick, L.

Kaldor, L.

Diamond, L.

Kilmarnock, L.

Donnett of Balgay, L.

Lloyd of Kilgerran, L.

Ennals, L.

Longford, E.

Ewart-Biggs, B.

Lovell-Davis, L.

Gallacher, L.

Mackie of Benshie, L.

1683

Mayhew, L.

Stewart of Alvechurch, B.

Milner of Leeds, L.

Steward of Fulham, L.

Mishcon, L.

Stoddart of Swindon, L.

Mulley, L.

Stone, L.

Nicol, B.

Taylor of Mansfield, L.

Phillips, B.

Tordoff, L.

Pitt of Hampstead, L.

Underhill, L.

Ponsonby of Shulbrede, L.

Wallace of Coslany, L.

Seear, B.

Wells-Pestell, L.

Simon, V.

Whaddon, L.

Stallard, L.

Wootton of Abinger, B.

NOT-CONTENTS

Airey of Abingdon, B.

Hornsby-Smith, B.

Alexander of Tunis, E.

Hylton-Foster, B.

Auckland, L.

Kilmany, L.

Avon, E.

Kitchener, E.

Belhaven and Stenton, L.

Lawrence, L.

Bellwin, L.

Long, V.

Beloff, L.

Lucas of Chilworth, L.

Belstead, L.

McAlpine of West Green, L.

Bessborough, E.

Macleod of Borve, B.

Boardman, L.

Mancroft, L.

Brabazon of Tara, L.

Margadale, L.

Brougham and Vaux, L.

Marley, L.

Caccia, L.

Marshall of Leeds, L.

Caithness, E.

Maude of Stratford-upon-Avon, L.

Campbell of Alloway, L.

Campbell of Croy, L.

Montgomery of Alamein, V.

Cockfield, L.

Mottistone, L.

Coleraine, L.

Mountevans, L.

Colville of Culross, V.

Mowbray and Stourton, L.

Colwyn, L.

Murton of Lindisfarne, L.

Craigavon, V.

O'Brien of Lothbury, L.

Craigmyle, L.

Onslow, E.

Daventry, V.

Orkney, E.

Denham, L. [Teller.]

Orr-Ewing, L.

Drumalbyn, L.

Pender, L.

Eden of Winton, L.

Rankeillour, L.

Elliot of Harwood, B.

Renton, L.

Elton, L.

Renwick, L.

Fanshawe of Richmond, L.

St. Aldwyn, E.

Ferrier, L.

Saltoun, Ly.

Fraser of Kilmorack, L.

Sandford, L.

Gainsford, L.

Sempill, Ly.

Gardner of Parkes, B.

Skelmersdale, L.

Glanusk, L.

Somers, L.

Glenarthur, L.

Spens, L.

Gowrie, E.

Stodart of Leaston, L.

Grantchester, L.

Swinfen, L.

Gray, L.

Swinton, E. [Teller.]

Greenway, L.

Teviot, L.

Hailsham of Saint Marylebone, L.

Thomas of Swynnerton, L.

Trefgarne, L.

Halsbury, E.

Trumpington, B.

Hanson, L.

Vaux of Harrowden, L.

Harmar-Nicholls, L.

Vivian, L.

Hives, L.

Whitelaw, V.

Home of the Hirsel, L.

Wise, L.

Resolved in the negative, and amendment disagreed to accordingly.
7 p.m.
Lord Diamond Lord Diamond had given notice of his intention to move Amendment No. 11:
[Printed earlier]
The noble Lord said: I think it will be the sense of your Lordships' Committee that, notwithstanding that this is a very important amendment indeed, the clock is pointing to a magical figure, and all those noble Lords who are anxious to vote for this amendment will, I hope, forgive me if I do not move it.
[Amendment No. 11 not moved.]
Lord Trefgarne: I understand that this would be an appropriate moment for us to discontinue our consideration of this matter. I therefore beg to move that the House do now resume.
Lord Ponsonby of Shulbrede: I take it that the House will not continue with this particular business before 8 o'clock?
Lord Trefgarne: I understand that the noble Lord's understanding of the matter is, as always, entirely correct.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Repatriation of Prisoners Bill [H.L.]
7.2 p.m.
The Parliamentary Under-Secretary of State, Home Office (Lord Elton): My Lords, I beg to move that the Commons amendments be now considered.
Moved, That the Commons amendments be now considered.—(Lord Elton.)
On Question, Motion agreed to.

COMMONS AMENDMENT
[References are to Bill [158] as first printed for the Commons]
1 Clause 1, page 2, line 28, at end insert—
("(bb) in the case of a transfer into the United Kingdom of the effect in relation to the prisoner of the law relating to his detention under that warrant (including the effect of any enactment or instrument under which he may be released earlier than provided for by the terms of the warrant);").
Lord Elton: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 1. When this Bill was last before your Lordships on 10th April, I confirmed an undertaking which I had given by letter to the noble Lord, Lord Mishcon, concerning information to be provided about the effect of a warrant referred to in paragraph (a) of Clause 1(4). I agreed to see whether a Government amendment could be introduced making it clear that in the case of a transfer to the United Kingdom information about the effect of a warrant would include information about the earliest date of release and about provisions governing remission and release on parole. Amendment No. 1 is intended to fulfil that undertaking, and I hope your Lordships will agree that it provides the clarification required. My Lords, I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Elton.)
Lord Mishcon: My Lords, as one would have expected of the noble Lord the Minister, the undertaking has been faithfully fulfilled and, obviously, I am very gratified to see this amendment now before the House.
On Question, Motion agreed to.

COMMONS AMENDMENT
2 Page 2, line 37, leave out from ("unless") to end of line 39 and insert ("the requirements of this subsection were fulfilled in relation to the earlier warrant").
Lord Elton: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 2. This is a technical amendment designed to correct a deficiency in the drafting of the Bill. Clause 1(4) lays an obligation on the Secretary of State to satisfy himself, before issuing a warrant to supersede another, that reasonable steps were taken before the earlier warrant was issued to inform the prisoner fully of all relevant matters it was desirable that he should know before giving his consent to transfer. Provided that such reasonable steps were originally taken, there is no need for the prisoner to be given identical information yet again in the case of a warrant superseding an earlier one.
The Bill as drafted did not, however, allow for the possibility that in some cases there might be more than one earlier warrant. In that case, the most recent earlier warrant would not have been immediately preceded by the provision of information to the prisoner in accordance with paragraphs (a) and (d) of subsection (4) of this clause, although the Secretary of State would, of course, have needed to be satisfied that the prisoner had been properly informed before the initial warrant was issued. This amendment is designed to correct that deficiency, which, had it been last night, I should not have described in such detail. My Lords, I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Elton.)
Lord Mishcon: My Lords, perhaps I may be allowed an elaboration of speech by saying tonight, as distinct from last night, that we are very happy, too, with this amendment, which is really technical.
On Question, Motion agreed to.

COMMONS AMENDMENTS
3 Clause 7, page 10, line 19, leave out subsections (2) to (4) and insert—
("(2) Subject to subsections (3) and (4) below, it shall be the duty of the Secretary of State, in the case of the transfer of a person into the United Kingdom under this Act, to secure the payment to him by that person, or from some other source, of the amount of any expenses incurred by him in connection with the conveyance of that person to the United Kingdom; and for this purpose the Secretary of State shall have the same power as in any other case where he assists the return of a person to the United Kingdom to require a person to give an undertaking to pay the Secretary of State the whole or any part of that amount, to enforce such an undertaking and to make such other arrangements for recovering that amount as he thinks fit.
(3) Subsection (2) above shall not apply to the extent that in any case it appears to the Secretary of State that it would be unreasonable for him to exercise any of the powers conferred by that subsection either because of the exceptional circumstances of the case or because the means of the prisoner are insufficient to meet the expenses and their recovery, whether immediately or at some future time, from the prisoner or from any other source is impracticable.
(4) The expenses mentioned in subsections (2) and (3) above shall not include—

(a) any expenses of providing an escort for a person transferred into the United Kingdom under this Act; or

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(b) any expenses of the conveyance of such a person beyond the place at which he first arrives in the United Kingdom.").

4 Page 10, line 36, leave out ("recovered under") and insert ("received by him by virtue of").
Lord Elton: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 3 and 4. Amendment No. 3 gives effect to an undertaking that I gave to your Lordships on Third Reading. It was then suggested that the Secretary of State should have wider discretion to waive recovery of the travel costs of a prisoner transferred to the United Kingdom. Your Lordships felt that circumstances could arise in which it would be wrong to extract payment from someone who had been imprisoned abroad, and had in mind a situation similar to that of the American hostages detained in Iran. I said that we accepted the principle of widening the Secretary of State's discretion to waive recovery, and would consider a Government amendment to this effect. The new subsection (3) of Clause 7 meets the point by allowing waiver because of the exceptional circumstances of the case, as well as because of the prisoner's means and the impracticability of recovery from some other source.
At the conclusion of the Third Reading debate on 10th April, I referred to anxieties expressed at the Report stage about the provisions in Clause 7 relating to recovery of prisoners' travel costs. I said that we intended to consider the possibility of those provisions being made somewhat more explicit in the Bill, but reserved our position on the merits and feasibility of this. New subsection (2) in Amendment No. 3 makes it clear that where recovery of a prisoner's travel costs before transfer is not feasible, an undertaking to repay after transfer will be acceptable, in the same way as undertakings to repay are signed by stranded British tourists who receive financial assistance from consular officials abroad. By virtue of the final words of subsection (2), such an undertaking could be accepted from either the prisoner or anyone else willing to accept liability for payment.
We have not been able to go as far as some noble Lords (including, I think, the noble Lord, Lord Mishcon) would have liked, by providing that costs could be recovered from relatives only at the prisoner's request. We feel that such a provision would be too restrictive. I hope, however, that noble Lords will accept the repeated assurance that has been given, that there will be no question of putting pressure on prisoners' relatives to pay the travel costs. Amendment No. 4 is consequential on the amendments to subsections (2) and (4), since the new subsection (2) speaks of securing payment rather than recovering expenses. My Lords, I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Elton.)
Lord Mishcon: My Lords, it would be churlish to do anything else but express gratitude for the distance that the Government have gone in regard to this matter, which troubled many of us and, as the noble Lord the Minister was kind enough to say, which also troubled me on behalf of my noble friends. We were so anxious that the spirit of this Bill should be kept and that, because of lack of means or because of the feeling that

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this was too heavy a liability to bear due to commitments to family or whatever it might be, no one who bore our nationality would have to say "No" to a chance to be repatriated.
All I can do, apart from expressing gratitude to the Government for having gone partly down this path, is to express the hope that the directions which go out upon this matter will make it as gentle as possible for prisoners to undertake this liability, since they may find it difficult to do so, even though it could be shown in a formal document that financially they are just about able to meet either the whole of the expense or some part of it. With the plea to the noble Lord the Minister that such a directive will go out and that the spirit underlying the carrying out of the clause will be as I believe the Minister as much as I would want it to be, I have to say that obviously we agree with the amendment.
On Question, Motion agreed to

COMMONS AMENDMENT
5 Clause 8, page 10, line 39, at end insert (" "international arrangements" includes any arrangements between the United Kingdom and a colony;").
Lord Elton: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 5. We hope in due course to enter into prisoner transfer arrangements with countries outside the Council of Europe, including United Kingdom dependencies overseas. It came to our attention that the Bill as drafted might not permit prisoner transfers between the United Kingdom and the dependencies. The amendment is designed to close this loophole. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Elton.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
6 In the Schedules, page 13, line 32, leave out ("1960") and insert ("1984").
10 Page 13, line 44, leave out ("1960") and insert ("1984").
Lord Elton: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 6. At the same time I wish to speak to Commons Amendment No. 10. Commons Amendments Nos. 6 and 10 replace references in paragraph 5(3) and 5(4) of the schedule to the Mental Health (Scotland) Act 1960 by references to the Mental Health (Scotland) Act 1984. These amendments are appropriate because Parliament has recently passed the 1984 Act consolidating Scottish mental health legislation. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Elton.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
7 Page 13, line 34, leave out ("or direction").
8 Page 13, line 37, leave out ("or direction").
9 Page 13, line 40, leave out ("or direction").
11 Page 13, line 45, leave out ("or direction").
12 Page 13, line 48, leave out ("or direction").>
Lord Elton: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 7, 8 and 9 en bloc. At the same time I wish to speak to Commons Amendments Nos. 11 and 12. These are purely drafting amendments, designed to remove redundant words from the schedule. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Elton.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
10, 11, 12 [Printed above.]
Lord Elton: My Lords, Commons Amendments Nos. 10, 11 and 12 are all consequential amendments. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Elton.)
On Question, Motion agreed to.
Baroness Trumpington: My Lords, I beg to move that the House do now adjourn during pleasure until eight o'clock.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended at 7.13 p.m. until eight o'clock.]

Ordnance Factories and Military Services Bill
House again in Committee on Clause 1.
Lord Diamond Lord Diamond moved Amendment No. 12:
Page 3, line 21, after ("consults") insert ("those employed by").
The noble Lord said: This amendment refers to a section in the Bill which states that before making a scheme the Secretary of State has to consult each transferor company and each transferee company. That is fine and obviously there is not a great deal of difference here between the Government and myself. My amendment is to make it clear that consultation means consulting everybody: consulting "those employed", by which I have tried to cover the board, the management, the staff, the workforce, everybody; and I hope that the noble Lord, the Minister, will be able to say that that was his intention and that is the proper construction of the Bill. I beg to move the amendment.
Lord Graham of Edmonton: With the agreement of the House, I wonder if we could discuss Amendment No. 15. It is broadly similar in context. The operative word is "broadly".
Amendment No. 15: Page 3, line 22, at end insert—
("and
() it has been broadly accepted by the majority of the workforce of the Royal Ordnance Factories.").
May I simply remind the House that a recommendation of the Strathcona Study Group said:
"We are also agreed that it is desirable that whatever solution is eventually chosen should be broadly acceptable to the ROF's workforce".

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The noble Lord the Minister will have the backing of legislation and we know the ultimate sanction of power and control which he will ultimately have. We are saying that we want to be satisfied, and we believe the trade unions want to be satisfied, about what is being proposed and that they have an opportunity to influence it; it must be broadly agreeable to the workforce. I am simply saying what I would wish to say on Amendment 15 without moving anything, because it is all of a piece with Amendment No. 12.
Lord Trefgarne: The workforce of the Royal Ordnance factories have, of course, a legitimate and understandable interest in the success of he ROF enterprise. The Government obviously wish to carry the workforce with it in making its proposals about the future. We are already consulting fully the trades union representatives of the employees about the change of status, and we have made available detailed information about the future organisation of the companies. I have no doubt that full consultation arrangements will be worked out before incorporation—I emphasise "before incorporation"—to provide for an effective dialogue between management and employees after the change of status. The workforce will be able to make their views known to management and through them to the Secretary of State as shareholder during the wholly-owned phase. So let us not pretend then that the workforce are being left out of any dialogue about the change of status.
The Bill provides for the Secretary of State to make further schemes during the wholly-owned period in order to make adjustments to the company structure if that is necessary. Clause 1(7)(b) requires him to consult the companies before he makes a scheme affecting them. So they will be given full opportunities to put their arguments to the Secretary of State. But in the final analysis, of course, the Secretary of State must retain the power to make a scheme in the light of the advice received, and the consent of the Treasury. We do not accept that there should be a means by which, as these amendments seek, the employees could veto any course of action which the Secretary of State may propose.
There is no such right in any other commercial company, such as the ROFs will be after incorporation. It is normal commercial practice that the interests of the company, and of the workforce, are protected by the directors and the shareholders. The workforce will be able to make their views known to the directors in the normal way. There is a clear provision in Clause 1(7) that the sole shareholder—the Secretary of State—must consult the company in the persons of the directors. This provision is adequate to ensure that the interests of the company and of its employees are taken into account if and when further schemes are planned, and before they take effect.
The amendments would also give rise to the possibility that the workforce will be at odds with the company management over a particular issue related to a supplementary scheme, and would be able to veto such a scheme whether or not it was in the best commercial interests of the company. This would simply not be acceptable. I hope therefore that the noble Lord will feel able not to press his amendment.
Lord Diamond: I listened very carefully to what was said by the noble Lord the Minister and he did not seem to me to be saying precisely that in subsection 7(b) "consultation" means anything more than consulting the board. He said they would consult the board and that would give them the opportunity. I am not suggesting a veto. I am suggesting that "consultation" there should be read as meaning "consulting those at all levels" and, indeed, with the recollection of Cheltenham fresh in the minds of the Government, I should have thought that they would have espoused the cause of consultation very warmly indeed. I should like to press on the noble Lord the Minister once more the simple question: in practice will consultation as referred to in 7(b) mean "consulting at all levels"?
Lord Graham of Edmonton: Before the noble Lord the Minister rises to reply, I wonder whether I might raise two points. I can see nothing wrong, quite frankly, with including the words of the amendment of the noble Lord, Lord Diamond. I am also intrigued to hear from the noble Lord the Minister that the employees have been fully consulted. I am certain that the Minister's words will be read with care by the employers. Part of the consultation process is that one listens to the other party, and I am bound to say that if what the noble Lord the Minister has said is true, I hope he and his advisers have done that.
I speak with no great authority, but having had consultations with those affected I am bound to say that the impression I get is that they are far from satisfied that the outstanding points dealt with in later amendments have actually been taken on board. There is a great deal of anxiety felt by those concerned. There is a world of difference between what has happened and the Minister feeling that opportunities are in existence for these people to make their views known. If all that happens is that views are represented to the Minister and he (I will not say "ignores them") listens to what has been said and takes no notice of them, there may be some disappointment.
The noble Lord the Minister has failed to answer the point I raised. The Strathcona Study Group said:
"We are also agreed that it is desirable that whatever solution is eventually chosen should be broadly acceptable to the ROF's workforce".
I realise that this was written some time ago, but would the noble Lord the Minister indicate what mechanism is available to ensure that the solution chosen is broadly acceptable to the ROFs workforce?
Lord Trefgarne: We shall, of course, be going deeply into this matter in later amendments. First of all, I should say this. What we are offering to the employees who want to move across is what is for all practical purposes identical terms and conditions under the new arrangements. We are still in the course of consultations with the trade unions. They have raised one or two points on which they are still seeking to make representations, and we are of course listening to them with the greatest care. We are certainly having constructive consultations, but that does not mean that the Government have to put themselves in the position of accepting willy-nilly everything that is suggested. We are entering and conducting the

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consultations with an open mind and in a constructive spirit, and I hope therefore that the noble Lord will be satisfied with that assurance which I believe was the one which he was seeking.
Lord Diamond: The noble Lord has not seen fit to answer my question precisely, and so all that I can do is read very carefully what he said and see whether it amounts to a satisfactory situation. If not, I shall return to this matter at a later stage. Meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
8.10 p.m.
Lord Diamond Lord Diamond moved Amendment No. 13:
Page 3, line 22, at end insert (", and
() each transferor company and each transferee company is required under its Memorandum and Articles of Association to provide for the appointment by all paid employees only of two employees as members of the Board of Directors.").
The noble Lord said: I beg to move this very important amendment, which would have the effect of ensuring that whenever a scheme is arranged by the Minister, the companies concerned shall have in their memorandum and articles of association provisions under which two board directors will be appointed by all paid employees, and by them alone. The suggestion is that they should be appointed by the employees. Once they are appointed, they will of course have the usual responsibilities of all directors; responsibilities which involve having regard to the welfare of the company and especially to the interests of the shareholders and the employees, as they are required to do under the Companies Acts.
There is no difficulty about this; it is not as though the directors would be responsible solely to a sectional interest. They would be responsible in exactly the same way as every other director is responsible, but the company would gain a number of advantages from their being members of the board, and I should like to remind the Minister of these.
First, such directors would have the advantage of being deeply involved in the work of the ROFs and of having great knowledge of how they operate, what goes well, and what causes difficulties. They can be just as valuable to a board as any outside non-executive director who is brought in because of the value of his experience in relevant areas. Not only would they have that experience, but they would provide a sense of participation which is valuable and which, according to both reports made on them, is one of the creditable aspects of the ROFs, and which, I am sure, the Government and any future shareholders will be anxious to maintain. I do not want to give your Lordships a lecture on industrial democracy. We all know that the arguments for industrial democracy are very sound and solid, and this is a method of working towards that.
I am a little anxious about the very form of the amendment I am proposing because I believe that the best way in which industrial democracy can develop is from the bottom, as it were, and it should not be imposed from the top. It is best that people should want to develop in such a manner and that employees'
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and employers' representatives and boards should wish to co-operate in this way. But it is essential that the Government give a lead. Here is a simple and useful opportunity for the Government to provide such a lead, by agreeing that two members of the board—and that is not a large proportion—should be appointed by all the employees, and by them exclusively. I hope the Government will regard this as a reasonable exercise in industrial democracy. I beg to move.
Lord Trefgarne: I fear that the proposed appointments of directors in a "representative" capacity would be quite inappropriate. It would not follow normal commercial practice, nor the Companies Acts provisions about election by the shareholders, and we see no reason for it. The Government quite understand and accept the legitimate interests of the workforce in the success of the ROF enterprise. The board of directors of the ROF company will have the same interests. It is notable that Section 46 of the Companies Act 1980 provides that the directors are to have regard to the interests of the company's employees in general, as well as to the interests of the company's shareholders. That duty is owed by them to the company as a whole, rather than to any particular faction or interest within the company.
We are consulting the trade unions fully about the change of status from the trading fund to Companies Acts companies. I have no doubt that full consultation arrangements will be worked out and, I hope, agreed before incorporation to provide for an effective dialogue between management and employees after the change of status. But that is a separate matter from the workforce nominating representatives as such to the company boards and, as I have explained, we believe that such nomination would not be appropriate.
The board will be constituted with the needs of the ROF organisation in mind, and I am confident that it will have the appropriate expertise and background, committed fully to the company itself. As in any other company, the workforce will have the means of expressing its views to the directors through their representatives. I hope this explanation will allay the anxieties in the noble Lord's mind and that he will not wish to press his amendment.
Lord Stoddart of Swindon: I cannot understand why the Minister and the Government are so intransigent about amendments of this kind. Bearing in mind all that we have seen over the past few weeks, with industrial misunderstanding occurring in many parts of industry, I thought that the Government would wish to take a new look at relationships between managements, shareholders and employees. The Minister said that such appointments would be "quite inappropriate" and not in accordance with normal practice. I submit that normal practice has not brought about the good labour relations which are desirable, not only in the ROFs but in many other organisations as well.
I entirely agree with the noble Lord. Lord Diamond, when he says that the working people of this country—in Royal Ordnance factories and in every

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other factory and workplace in the land—have a great deal to contribute. There is not a monopoly of wisdom among the usual board members. There is a great deal of knowledge, wisdom and know-how on the factory floor. It has been, and is, detrimental to the running of industry in this country that that expertise and knowledge has not been used. Here is an opportunity for the Minister to make a name for himself—
Lord Trefgarne: I have done that already!
Lord Stoddart of Swindon: Well, I think that we made his name for him earlier this afternoon, though perhaps he wishes that we had not done so. Nevertheless, the Minister could make a name for himself by accepting this amendment and acknowledging that we need to find new ways of bringing cooperation and understanding to industry and new ways of enabling employees to make a real contribution. That can be done on the board of directors, and in every other part of the workplace as well.
I have worked in industry for many years and have had quite a lot to do with joint consultation and negotiation. My experience has been that management do not have a monopoly of wisdom, they do not have a monopoly of know-how, and they would save themselves a good deal of time and make many fewer mistakes if they took into consultation—real consultation as decision-makers—those people in our factories, workplaces and offices who make a business work.
In an organisation that the Government are planning to set up, here is an opportunity for them to make history and to help the organisation. We do not agree with the set-up, but we are trying to help. Since the Government are determined to have their Bill, we are trying to help them to make it successful when it passes into law. One of the best ways in which they can do that is by taking the workforce into their confidence and giving them a real say in management and decision-making, not only at board level but at every level in the industry.
Lord Diamond: I am most grateful to the noble Lord, Lord Stoddart, for his support. I agree with everything he has said, both in words and in spirit. May I add this. He said he has had experience on the employee side. I have certainly had experience on the employer and management side. I can assure the noble Lord the Minister that a company works best when it has the advantage of close co-operation with the workforce. The workforce feel they are wanted, are being consulted, are sitting next to you, listening to what you are talking about and having an opportunity to put their oar in at the appropriate time.
I am sorry, but I have to say this. I am grateful to the noble Lord the Minister for having read his brief to us and told us what was the view of his department before this debate started. Now may I come on to the debate and ask him to be good enough to pay us the courtesy of listening to the argument. The argument is not—I repeat "not"; and these were the first words that I used when I moved the amendment—about having representative shareholders. I do not know why he got that into his head. I know it is in his brief, but it is not
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what we are talking about. These are not representative shareholders, representative directors, representing the workforce. These are directors appointed by the workforce to act in conjunction with all other directors, with the same responsibilities as all other directors have.
The Minister knows as well as I do that if you accept an appointment as director then you are governed by the Companies Acts and your duties are to look after the interests of the company, meaning the shareholders and the workforce, and not to look after a particular section. It is the same as any noble Lord who has sat in another place having been appointed for a particular constituency. His duty is to look after the constituency but also to look after the country as a whole. He is not concerned exclusively with constituency interests. Nor would the two directors appointed by the shareholders, in law or in any other way, be regarded as representative directors; that is to say, represenative of one section only—namely, the workforce.
So with the greatest respect to the Minister, everything he said from his brief may be perfectly correct but has nothing whatever to do with the amendment I am proposing. The amendment I am proposing is an exercise in industrial democracy, gently introduced, setting a standard, providing in this case for directors to be appointed in a certain way but serving with their colleagues on the board as they are required by law to do. I hope that with that further explanation the Minister will be good enough to turn his mind to that and say what is wrong with it and why the Government cannot accept it, having heard the argument.
Lord Trefgarne: the noble Lord says that these directors would not be appointed as representing any particular faction, but I think it is absolutely invevitable that two directors appointed specifically in accordance with the legislative provisions which the noble Lord proposes would be seen as representing the employees. After all, that is what it says in the amendment which the noble Lord is proposing to the Committee. I read from his amendment. It says:
"to provide for the appointment by all paid employees of two employees as members of the Board of Directors".
The noble Lord said—and I think this was echoed by the noble Lord, Lord Stoddart—that these directors would bring a special brand of expertise and experience to the boardroom table. I have no doubt that there are people on the shop floor of many industries, including no doubt the Royal Ordnance factories, who would indeed bring such expertise to the boardroom table. However, I am not convinced that we would necessarily acquire that expertise by forcing two representatives of the shop floor onto the board. The noble Lord indicated that some of the difficulties of current—
Lord Stoddart of Swindon: Would the noble Lord give way? I am most surprised at what he is saying. Nobody is suggesting that people should be forced to serve. We are suggesting that they shold be elected to serve, in exactly the same way as the 650 people in another place are elected to serve.
Lord Trefgarne: I agree, of course, that no individual would be forced onto the board. What I am putting to the Committee is that it is difficult to ensure that it is the expertise that is put on the board. Two persons must be found. I am not sure that it would be possible to be certain that we always found those with the expertise which we all agree would be desirable.
The noble Lord, Lord Stoddart, went on to suggest that some of the difficulties of current times might not have arisen had there been more worker representatives—if that is the right description—on the boards of some of the organisations that are having difficulty at the moment. If the noble Lord is suggesting that the present difficulties in the coal mining industry, for example, would not have arisen if Mr. Scargill had had a seat on the National Coal Board, then that is a proposal which may not appeal to everybody.
Lord Mayhew: Would the noble Lord just clear up one point? He argued quite correctly that directors are not supposed to represent either the shareholders or the workforce, but to take the general good of the company into consideration. He then objected to my noble friend's suggestion of two directors being elected by the workforce on the grounds that inevitably they would be considered as representing the employees. Why does the same argument not apply to directors elected by shareholders? Will they not widely be regarded as representing the shareholders?
Lord Trefgarne: I think that is probably correct: that the directors generally appointed by the shareholders, or at least whose appointment is confirmed by the shareholders, take into account the interests of the shareholders. But I would have to say that the interests of the company and the interests of the shareholders are very difficult to disentangle.
Lord Diamond: I am not going to let the Minister get away with this. What he is saying is totally opposed to current practice. There are dozens of the most respected companies in the City which have non-executive directors elected. In the first place, they are appointed by the board and then subsequently confirmed by the shareholders. They are drawn from a wide level of experience because of that experience. It is an insult to such directors to say that they are coming on to the boards solely to represent the companies from which they come.
For example, if you are fortunate enough to get someone who is a part-time director of the Midland Bank to serve on your board and to bring all his financial expertise, he is doing it for the benefit of the company on whose board he is now sitting. It is quite wrong to say that all he is concerned with is to represent the Midland Bank, to see the company's account goes to the Midland Bank, and that everything possible is done for the Midland Bank. He is concerned to see that the company is run as well as possible, and he is concerned to act in the interests of all the shareholders.
Why can the same remarks not apply to two individuals who are appointed by employees? If they are seen to be appointed by employees, that is a good thing, not a bad thing. Employees then know that they have
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some representatives who they hope will bear in mind all the interests of the company, including those of the workforce. It is a good thing. The employees will not feel that it is a case of "us" and "them" so much as they do under the present Government philosophy.
Lord Trefgarne: I think that the noble Lord is helping to make my case for me. All the examples that he quotes of the beneficial effect of non-executive directors being appointed to a company are advantages with which I would wholly agree, but those directors are not appointed because of some provision in the memorandum and articles or in an Act of Parliament. They are appointed because of the views of the shareholders, and indeed of the directors. I think that that goes to show that the best way is to leave it to the shareholders and the directors, and not put a provision into the Bill, as the noble Lord proposes.
Lord Diamond: I quite agree. I have already said that the best way is for people to want this to happen, rather than impose it on them. I agree with the comment that the Minister made on an earlier intervention about not forcing this on anybody. We shall be very happy to amend the wording of the amendment if he gives us any encouragement whatsoever, in any way that he likes, to provide that there is no question of forcing it—that is to say, if two suitable individuals are not available or do not want to come. My experience was not the difficulty of the board not wanting to get such assistance, but of the workforce not being happy about such assistance being made available, and the difficulties the other way round. But if the noble Lord can think of a way of wording it, we shall gladly word it that way.
The essence of the matter is that there should be some posture taken by the Government to show that they are encouraging that step forward in industrial democracy, which can be nothing other than for the benefit of these companies. I hope that he will consider that. I do not want to bore the House with repeating the arguments. I have repeated them sufficiently. The noble Lord realises what we are now after. We are not after representative directors in the sense of representing a sectional interest only. We are after an exercise in industrial democracy and an encouragement by the Government.
Having said that, I hope that the noble Lord will give the matter further consideration, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
8.32 p.m.
Lord Diamond Lord Diamond moved Amendment No. 14:
[Printed earlier: col. 1654.]
The noble Lord said: I move this amendment for the sake of discussion. It is very similar to the amendment which was moved by the noble Baroness, Lady Vickers, and I am not sure whether it was not included in the discussion that we then had. I move it to give the Minister an opportunity to say whether in fact such a provision is to be incorporated in any scheme which he puts forward. The provision is essential in order to protect the future of a company of this kind and the interests of the nation when a scheme is made and the

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companies develop in the years ahead. One is looking forward not to the first few years but to a long period of years. I hope that he will find the amendment acceptable. I beg to move.
Lord Trefgarne: I am pleased to be able to assure the noble Lord that the Government certainly intend that the new Royal Ordnance Company shall include in its articles of association an article creating a special share, carrying with it certain rights, which will be owned indefinitely by the Secretary of State or by some other Minister of the Crown. Among the rights which this share will confer on its holder will be a right to veto a disposal of the whole, or a material part, of the assets of the company and its subsidiaries. A part is deemed to be material if its value is not less than 15 per cent. of the book value of the net assets of the group, or if the average profits attributable to it represents at least 15 per cent. of the average profits of the group over the previous three years.
The share will thus confer on the Secretary of State complete power to prevent any alteration in the structure of the company or of its business. This power will he entrenched, because there will also be attached to the special share a right of veto over any change in the articles to abolish that share or to restrict the rights attached to it. I hope that this will have allayed the noble Lord's fears and that he will not wish to pursue the amendment further.
Lord Mayhew: I wonder whether I may remind the noble Lord that, when I asked him whether the golden share controlled the sale of assets worth less than 15 per cent. of the company, he said that I was mistaken, and that the golden share did in fact control the disposal of such assets. Will he now acknowledge that it is perfectly possible for a foreigner, or anybody else, to buy without any control at all any assets, provided that the amount is less than 15 per cent. of the assets of the company?
Lord Trefgarne: If I misled the noble Lord on an earlier occasion, I apologise. But if I remember rightly, we were talking about something else. Let me look up the words that I used previously; if I have anything to correct, I shall hasten to do so.
Lord Diamond: Having heard what the noble Lord has said, particularly about the words being entrenched—that is to say, that the provision is a reliable provision—I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 15 not moved.]
Lord Trefgarne Lord Trefgarne moved Amendment No. 16:
Page 3, line 29, leave out ("1981") and insert ("1983").
The noble Lord said: This amendment merely corrects a drafting oversight in the reference in Clause 1(8) to the Companies Acts. This subsection of the Bill contains a definition of "statutory accounts" in which there is a reference to the Companies Acts 1948 to 1981. Since 1981 there has been an additional Act, namely, the Companies (Beneficial Interests) Act 1983, which is to be taken as a body with the other
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Companies Acts since 1948. I am sorry about that omission. I beg to move.
On Question, amendment agreed to.
Clause 1, as amended, agreed to.
Clause 2 agreed to.
Clause 3 [Operation of schemes]:
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 17:
Page 4, line 24, at end insert ("but such day shall not be before 1st October 1985.").
The noble Lord said: As will be evident to noble Lords, the main purpose of this amendment is to delay the incorporation of the ROFs for one year. As it happens, it will be rather less than one year, because the Bill will not now receive Royal Assent until after 1st October, but nevertheless it is a significant delay. Indeed, it is all the more necessary that this amendment should be carried following the acceptance by your Lordships of amendments earlier today.
It is quite clear that the ROFs are well behind in the preparation of the transfer to a Companies Acts company. Parliament is being asked to approve something about which it has little, or inadequate, information. There is no memorandum of understanding and indeed no articles of association. The details of the new pensions scheme are only now being provided to the unions on a piecemeal basis. In fairness to the employees, they need considerable scrutiny by the trade unions, including legal advice.
The noble Baroness, Lady Vickers, asked in her Second Reading speech on 22nd June what the hurry was. That question still applies. What is the great rush to get the Bill onto the statute book? The ROFs are not a loss-making organisation. The Government are not concerned because they are making losses. The factories are not a burden on the state. They do not affect the PSBR, except of course favourably. They made £62 million profit for the Government last year. So why on earth are we rushing things? Why are the Government so determined and so anxious to press ahead with the setting up of this incorporated company just as soon as they possibly can? One is almost suspicious, but the noble Lord, Lord Trefgarne, who is an earnest, able and open-minded man, of course, gives the lie to that. Therefore, we do not want to be suspicious of the Government.
We rather feel, in fact, that they are pressing on and hastening on because of their dogmatism and their dogmatic approach to privatisation, regardless of the consequences and regardless that yet again there may be another banana skin in front of them. I would have thought, frankly, that they have had enough banana skins over the past year. I would have expected that they would want to make haste rather more slowly so that they did not trip on any more banana skins.
Lord Trefgarne: Has the noble Lord noted that it is not possible to import any bananas at the moment?
Lord Stoddart of Swindon: I understand that there are still a few in stock. I have no doubt that we can arrange for the Government to have a regular supply if that is their wish. But the fact is that, on every count,

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the Government are failing. They are failing to take into account the views—the proper views—of the trade union movement. They are failing even to take account of the Strathcona report, already mentioned by my noble friend in an earlier debate.
Strathcona stated clearly that any proposed change should be largely acceptable to the trade unions. The changes are clearly not acceptable to the trade unions, not on any basis that the unions wish to oppose Government policy but because the arrangements that are being made simply are not satisfactory to them and to the people who are employed in ROFs up and down the country. On that basis alone, there is a case for delay in order that further consultation can take place with the trade unions and that those areas where sharp disagreements remain can be dealt with and agreements concluded with the trade unions. That is a very good reason for delay.
There is no agreement with the trade unions on many matters, including pensions, continuity of employment and redundancy payments. These are all very important and vital matters to trade unions and individual members of trade unions. They affect their future, their livelihoods, their pensions. The fact that the trade unions are not satisfied with the assurances that they have so far been given ought to make the Government pause and welcome this amendment to give them a proper breathing space. A rushed job can only cause chaos, frustration and uncertainty.
The Bill, as we have noted, is already accident prone. It had two accidents earlier this afternoon. I hope and sincerely trust that there will be more accidents to follow at a later stage. The Government would be well advised for their own sake to accept this amendment. I am trying to be helpful. I do not like the Bill. I do not like what the Bill seeks to do. But, if the Government are determined to have their way, the Government will have their way.
Therefore, we on this side of the House, when the Government do have their way, wish to see that the organisation is set up on a reasonable basis which will satisfy the country, which will be as beneficial as possible for the country, bearing in mind the provisions of the Bill, and which will be satisfactory to the people who work in ROFs. I hope therefore that the Government will see the sense of this amendment and accept it.
Lord Trefgarne: It will be no surprise, I fear, that I must ask your Lordships to reject the amendment, which would delay our plans for incorporation of the ROFs for a year. The Government have introduced this Bill with a specific aim and for specific reasons. Your Lordships will understand that much work has been going on with the plan of a vesting day on 1st October. We have been forced to accept a delay in the passage of the Bill until the close of the Session in late October and, as your Lordships will be aware, we have tabled an amendment to Clause 17 to avoid further delay. As I shall explain when we reach the debate on the Clause 17 amendment, the Government want to see incorporation as soon as practicable.
Our plans have been clear for some time and we would not have asked Parliament for approval to this Bill which allows implementation of those plans if we
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could accept such a delay. We have explained the benefits that we see as flowing from the operation of the ROFs on a fully commercial basis. If we are to make the ROFs more efficient and to stimulate competition, the sooner we do this the better. As I have said, work is necessarily proceeding in parallel with the passage of this Bill. To delay the implementation of our plans would create uncertainty and work against the successful incorporation and subsequent privatisation of the ROFs. Again, we have accepted a deferment of vesting day and now plan to make it in early November rather than October, but we must avoid any slippage past that.
The Government are convinced that the best interests of all concerned, the ROFs, the workforce, the services and indeed the country at large, lie in an early change of status. It makes sense for this change to follow closely after Parliament has debated and considered the provisions of this Bill. I appreciate the concern that has been expressed about the need for more time to gain information about the change of status, but we have made available as much information as possible during proceedings on this Bill and separately. For example, the drafting of the MOU is now almost finalised. I cannot give a commitment that it will be published in full, but some of it certainly will be. There is, of course, difficulty about commercial confidentiality over certain sections of the document. We have articles of association in final draft, and indeed have given details of those concerned with the foreign control and special share, and we shall be able to give more information in due course.
As for the pension scheme to which the noble Lord referred indirectly in talking about the concerns of trade unions, the unions have, in fact, had full information about the proposed scheme and we are discussing it with them. We do not have agreement with them yet, but the unions do indeed have the information that they require and I hope that agreement is not far off. All the principles behind our planning and the outline of our planning, often in much detail, are now public. The noble Lord opposite may not like what we are doing. He has made that clear. I do not quarrel with that. But the noble Lord has adduced no good reason for this sort of delay to our getting on and establishing the ROFs on a sound commercial basis. I must therefore ask your Lordships to resist the amendment
8.49 p.m.
Lord Lloyd of Kilgerran: The noble Lord, Lord Stoddart, indicated a number of areas where the trade unions were unhappy about the results of the Government's policy. The noble Lord the Minister referred to one aspect—the difficulties and apprehensions of members of the staff of ROFs in regard to pensions. He gave the impression in his reply that the trade unions had been adequately questioned and asked to give their opinions.
I wonder whether he can confirm that the Institution of Professional Civil Servants has been consulted in regard to the effect of this legislation on the status of employees of ROFs when they have made inventions. I understand from the IPCS secretary that little information has been given to them about this aspect of the fear of employee inventors in the ROFs who

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qualify for awards to be given under the Patents Act. In that Act, Section 55 and later sections deal with how employees should be rewarded for the use of their inventions, and also with the awards made on an exgratia basis. If the noble Lord can give me an indication, not necessarily now but later, that there has been this kind of full consultation, it will be a great help to me in deciding what we do at the Report stage.
Lord Trefgarne: This was one of the matters covered by the earlier amendments to which the noble Lord had put his name and which, in the event, he did not move. I wonder if perhaps I may look into the point that the noble Lord raises, and if there is anything I can tell him, I will write to him before the next stage.
Lord Lloyd of Kilgerran: I thank the noble Lord.
Lord Stoddart of Swindon: I am extremely disappointed that the Minister has not seen fit to accept this very simple and, I should have thought, very helpful amendment. He tried to convince your Lordships that the trade unions were, if not happy, nevertheless satisfied that discussions and consultations were to their liking and acceptable to them. But my information is that the trade unions remain deeply apprehensive about the matters which I mentioned in regard to continuity of service, pensions and redundancy payments.
When I say, "deeply apprehensive", I mean deeply apprehensive. They are not at all satisfied with the assurances which have been given by the Government and they do not expect—and I should have thought that probably the Government do not expect—to get a satisfactory agreement (that is, satisfactory to the trade unions as well as to the Government) by the time Royal Assent to this Bill is given. Therefore, I urge the Minister to think again. I should not expect him to give a snap reply. I believe that there is a case for a delay for a year. I ask the noble Lord to consider what has been said and to read the debate. Perhaps we can return to the matter again at Report stage, after he has read what has been said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Diamond Lord Diamond moved Amendment No. 18:
Page 5, line 3, at end insert ("and such consent shall be withheld in the case of a disposal to a person or body engaged in the production of articles or the supply of services normally produced or supplied by the Royal Ordnance Factories.").
The noble Lord said: I beg to move Amendment No. 18. I gather it would be for the convenience of the Committee if, together with this amendment, we discussed Amendments Nos. 19, 20 and 21; and also Amendment No. 33, which is consequential upon No. 19.
Amendment No. 19: Page 5, line 3, at end insert ("and such consent shall be withheld where the disposal would reduce the securities held by the Secretary of State to a figure of less than 40 per cent. of the total securities issued under a scheme.").
Amendment No. 20: Page 5, line 3, at end insert ("and such consent shall be withheld in the case of a foreign national.").
Amendment No. 21: Page 5, line 3, at end insert ("and such consent shall be withheld where a person or company would as a result of the disposal own either directly or indirectly more than 10 per cent. of the total securities available for issue under a scheme.").
Amendment No 33: Clause 7, page 6, line 39, at beginning insert—
("() This section shall have effect subject to the provisions of subsection 3(6).").
Amendment No. 18 states that consent to the transfer or sale by the Treasury of shares in the new company which takes over the factories,
"shall be withheld in the case of a disposal to a person or body engaged in the production of articles or the supply of services normally produced or supplied by the Royal Ordnance Factories".
The wording of it, as is the case with the wording of every amateur amendment-maker, may be totally inadequate, but I am sure the noble Lord the Minister knows exactly what is intended.
One of the principles which the party opposite supports and which it incorporates, allegedly, in this Bill is the principle of increasing competition—a basic principle without which it would find it very difficult to mount any argument whatever for this Bill. This is a proposal to assist the Government in carrying out their principles. This is a method of preventing the sale of the shares to competitors. I do not have to demonstrate to the Government that it is necessary to do that, because the Government know that in a recent case competitors did try, in fact, to buy up a very large proportion of one of the companies that was being marketed, and the Government had to intervene and make hasty, untimely and late rearrangements.
So I am hoping that the Government will take on board the need to protect protection, to encourage protection by making it impossible for people who are already competitors to buy up the shares under any scheme under which they would, in the event, have control over these factories. There would be merely a reduction in total competition over the whole field. That is the main argument for Amendment No. 18.
Amendment No. 19 deals with the sale of shares in such a way as to prevent the Government's holding being reduced to less than 40 per cent. Forty per cent. is a minority shareholding, and that means that the majority shareholding could be disposed of; therefore, there is nothing inconsistent in the logic of the Government wishing to transfer these factories to the private sector and their retaining a minority interest, namely, 40 per cent. But 40 per cent. is sufficient to give them some measure of protection in regard to supplies of essential munitions to the Ministry of Defence. That is the purpose of that minimum shareholding.
The next amendment deals with foreign nationals and suggests that the sale of shares to foreign nationals should not be permitted. This is no question of principle which divides the two sides of your Lordships' Committee; it is merely a matter of degree. The Minister has said already that we can rest assured that the control of these factories will not be transferred to foreign nationals. For the life of me, I cannot see why the argument there should be about control and not about possible interference. I think we shall be truly safe only if we have an exclusion of foreign nationals.
I believe the figure the noble Lord had in mind was a figure of 15 per cent. as the maximum holding by a single foreign national. That is far too much. That gives a real measure of interference by a foreign shareholder in the affairs of a company. There are

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many trust holding companies which are closely consulted by operating companies in the City. They have far less than a 15 per cent. share in these companies and yet are thought fit to be consulted; I mean really consulted. The board is telling them what the company's developments are and consulting them about possible future developments.
A shareholding of 15 per cent. would be regarded as giving a single owner an entitlement in that way. I am only suggesting to the Minister that his argument is right. One has to protect the defence services by having a limitation in regard to foreign nationals' shareholdings. The conclusion of the argument, when it is carried to its full and logical extent, is total exclusion of foreign nationals. So much for Amendment No. 20.
Amendment No. 21 deals with an individual shareholding of more than 10 per cent. Again, this is not a matter of principle that divides us; it is a matter of degree. I have here a reference to Jaguar which says that the Government are restricting the holding of shares by individual holders to a maximum of 15 per cent. Why limit it? There is the argument of competition and there is the argument of preventing excessive control in a single pair of hands. Jaguar is nothing like such a vital interest to the country as are these ROFs—these factories manufacturing munitions for the Ministry of Defence. In their case, therefore, I suggest that the same argument applies and that the position ought to be more secure than in the case of Jaguar; the figure should be not 15 per cent. but 10 per cent. Those are the main arguments concerned. I beg to move Amendment No. 18.
Lord Trefgarne: As the noble Lord has explained, these amendments are concerned with the actions of the Government on privatisation of the Royal Ordnance Company. In transferring the Royal Ordnance factories from the public to the private sector, it is of course the Government's main purpose to increase competition. The Government would therefore not look with favour on a concentration of manufacturing resources in fewer hands following a flotation of shares in the new company.
When we come to a decision on flotation we shall need to consider carefully the issues raised about competition. We shall need to consider the situation at the time, in the light of whatever developments there have been in the market, and in the company's development of its business, and the development of business by its competitors.
I fear that Amendment No. 18 is in any case defective in that it would—unless, indeed, that is the noble Lord's intention—be very likely to render any Stock Exchange flotation impossible. The Stock Exchange would, I am advised, be unlikely to allow discrimination between prospective purchasers of shares in the way that he envisages.
It may be that, at least in the event of a Stock Exchange flotation, the Government will not part with all their interest in the company. But I believe that it would be quite wrong to saddle the Government with an obligation to maintain a specific stake of 40 per cent. There are many companies of considerable strategic importance in which the Government have
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an equity interest, but they are not constrained by an Act of Parliament to maintain that interest under all circumstances. Conditions change, and none of us can be sure that good reasons will not arise in the future for the Government to divest themselves of part or all of any residual shareholdings. It would be inadvisable to fetter in this way the Government's discretion to do whatever seems commercially, or economically, advisable in the future, and I cannot therefore accept Amendment No. 19.
As I have already explained, the Government have always maintained that they will not countenance foreign control of the new company. Provision by way of the articles of association will therefore enable a permanent control of foreign-owned shareholdings. Amendment No. 20 on the other hand, would not be effective to achieve this purpose. It would, no doubt, prevent an initial disposal by the Secretary of State to any foreign national, but it would do nothing to prevent that foreign national from subsequently acquiring the shares by purchase on the market. For that reason, the Government, I fear, cannot accept that amendment either. Incidentally, I should perhaps remind the noble Lord that the 15 per cent. limit is an aggregate of all foreign-held shares and not individual shareholdings.
Amendment No. 21 does, I recognise, raise an issue of substance. The issue is, whether it would be right to allow any single person or company to acquire a controlling interest in the new company. This issue goes beyond the question of competition, because such an interest might be acquired by a person or company which had, up to that point, no interest whatever in the defence industry. Yet the question could still arise should any single interest control this new company?
This is a matter which has been highlighted, of course, by the very recent acquisition by Rio Tinto Zinc in the shares of the Enterprise Oil PLC. In the light of this, and other general considerations, the Government will need to consider further whether there is a case for placing restrictions on the size of individual shareholdings.
But there are two points to make in this regard. First, the question cannot be considered in a vacuum. There is a great deal of work to be done in welding the existing Royal Ordnance factory organisation into a viable and competitive commercial company. We cannot be certain, at this stage, what the company is going to look like in a year or two's time. Nor can we tell what the state of the market will be then, or what will he the prospects of the defence industry as a whole. I believe, therefore, that it would be wrong to take a decision on this point now when conditions obtaining at the time of privatisation may be different—and could even suggest that an infusion of capital from some particular source was highly desirable.
It would, in any case, be wrong to deal with this issue by legislation. If, in the end, it is decided to restrict the size of individual shareholdings, the best method of doing this would be via appropriate provisions in the articles of association for the privatised company. There are precedents for this, and it would be a relatively simple matter to accomplish.
I hope the noble Lord, Lord Diamond, will forgive me if I suggest to him that Amendment No. 33 is

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unnecessary. Before the Secretary of State may dispose of any shares he must obtain the consent of the Treasury to that disposal. This is made abundantly plain by subsection (6) of Clause 3, and also by subsection (2) of Clause 5. In the light of all the assurances I have given I hope that the noble Lord's anxieties have been allayed.
Lord Diamond: My Lords, I am grateful to the noble Lord the Minister. Certainly the purpose of Amendment No. 33—which I did not dwell upon—was merely to get the assurance which the noble Lord has already given, and so there is no problem about that. As regards the other four amendments, what the Minister is really saying is that we are not poles apart, but that there may be slightly defective elements within these amendments—which is not all that surprising—and in any event what the Government want to do is to be perfectly free to consider them in their own time and in the circumstances of each individual scheme. That is characteristic of the Government's approach to the whole of this Bill: nothing goes into the Bill; everything remains in the free will of the Minister, whoever it may be at the time—and we have already expressed our dislike of that.
However, the noble Lord has said a number of things which I would want very carefully to consider, to see whether we cannot meet some of the objections to these amendments at a later stage and we shall no doubt return to those points at that time. In the meanwhile, I beg leave to withdraw Amendment No. 18.
Amendment, by leave, withdrawn.
[Amendments Nos. 19 to 21 not moved.]
9.8 p.m.
Lord Mayhew Lord Mayhew moved Amendment No. 22:
Page 5, line 3, at end insert ("and he is satisfied in terms of section (Profit sharing and savings-related share option schemes)").
The noble Lord said: I beg to move this amendment, and I understand that it would be convenient to deal with Amendments Nos. 31 and 32 at the same time.
Amendment No. 31: Clause 5, page 5, line 31, at end insert ("and he is satisfied in terms of section (Profit sharing and savings-related share option schemes)").
Amendment No. 32: After Clause 5, insert the following new clause:
("Profit sharing and savings-related share option schemes.
References in subsection (6) of section 3 and subsection (2) of section 5 to the Secretary of State being satisfied mean that he is satisfied that, at the time of the related disposal, the company whose securities are being disposed of has established, and operates or is about to operate, a profit sharing scheme which is capable of approval in accordance with Part I of Schedule 9 to the Finance Act 1978 and/or a savings-related share option scheme which is capable of approval under Schedule 10 to the Finance Act 1980.").
The purpose of these amendments is to ensure that before the Secretary of State disposes of any securities, he makes sure that the company concerned has made proper provision for a profit-sharing scheme in line with the Finance Act 1978 and/or a savings-related share option scheme in line with the Finance Act 1980. I acknowledge that in other privatisation schemes the Government have made provision for employee share ownership. No doubt the Minister will
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argue, in the familiar style, that we can trust the Government, that we can rely on them absolutely to do what we want, but, that he is sorry, he cannot incorporate it in the Bill. We have heard that argument many times and it is thoroughly unsatisfactory.
Perhaps the Minister will now argue that it is perfectly open to me, or any other noble Lord, to raise this question when we come to debate the affirmative order which must be passed by both Houses before any scheme can be made; perhaps that is the argument that he will use. If he argues in that way, I shall confine my remarks within an even shorter ambit than I had intended.
As it is, I want to make a new point. Is there any reason why the employees should not also profit from the new executive option scheme in the Finance Act 1984. Would the noble Lord look at that? I have made these amendments very flexible and they refer to the Finance Acts 1978 and 1980, but I should like the noble Lord also to look at this point, bearing in mind the record of ROF employees and also the fact that on the whole the group is labour-intensive and, to that extent, more amenable to employee share ownership.
One advantage of privatisation (although it does not justify privatisation in this case) is that it opens the way to employee share ownership. By my amendments the Government are given an opportunity to satisfy at least a proportion of the many critics of the Bill. I beg to move.
Lord Trefgarne: I should perhaps remind your Lordships that this Bill seeks to permit the incorporation of the ROF organisation as a Companies Acts company as the first part of a two-stage operation. The timing of subsequent privatisation, how it is to be done, and who will be involved, will be a matter for my right honourable friend the Secretary of State. This Bill merely lays down some guidelines which he will be required to follow.
The Government have already made clear that, when the time comes to reduce their stake in the ROF company, we would expect the board of the company to look favourably upon the early introduction of employee share ownership schemes. The present board of the ROFs has itself said that it would intend to introduce such schemes. In addition, noble Lords will be aware of the Government's record on previous privatisations regarding participation by employees in share offers. The noble Lord, Lord Mayhew, was good enough to acknowledge that. Of course, at the time of privatisation the Secretary of State will still be the 100 per cent. shareholder in the company and will be in a position to influence any decision on this subject.
In the light of all this, I believe that noble Lords opposite need have no fears about future employee participation in the success of the new company. Nevertheless, any employee share scheme is obviously some way down the road, and I do not accept that it is a matter to be dealt with in this Bill, which is concerned with the incorporation of the ROFs as a wholly Government-owned company.
The noble Lord, Lord Mayhew, asked me a specific question about the Finance Act 1984. I am sorry to have to tell the noble Lord that I do not have the answer to that question, but certainly I shall find out

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what is the position and write to him. With those assurances, I hope that the noble Lord will see fit not to press his amendment.
Lord Mayhew: If I heard the noble Lord aright, he said that the Government would expect the board of the company concerned to lay on a share ownership scheme. Surely the Government should require the board to lay on such a scheme. That is the difference between us. I would find it quite intolerable if when the Government dispose of the securities no scheme is drawn up. If the Government's intention is that a scheme of this kind should be devised, they should require the board to which they are disposing of the securities to make sure that that happens. I find the noble Lord's answer very disappointing.
The last thing I would want to do would be to expose the Government to another defeat in the Lobbies at this hour of night—for various good reasons. Therefore, I do not propose to press the amendment to a Division. But I should like the noble Lord to answer this precise point: why "expect" the board? Why have not the Government declared that they will "require" the board to lay on a scheme of this kind?
Lord Trefgarne: As a member of this Administration, I am very reluctant to require boards of companies to do anything at all. However, I have told the noble Lord that the Government, at the time of the flotation, will be the 100 per cent. shareholder in the organisation, and I think that he can be assured that matters will then proceed in accordance with his liking.
Lord Mayhew: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Vickers Baroness Vickers moved Amendment No. 23:
Page 5, line 3, at end insert ("and unless such disposal has been authorised by an affirmative resolution of both Houses of Parliament").
The noble Baroness said: I beg to move the amendment standing in my name on the Marshalled List. Tonight we have had a disappointing debate in more ways than one, when we think of this important organisation with 20,000 people working for it, and we get so little attention in this Committee, from either side, in regard to this matter. The purpose of the amendment is to have a written affirmative resolution before the Secretary of State sells off more shares. Apart from the technicality of winding up the trading fund as soon as the Bill is passed through Parliament, there will be no opportunity for Parliament to debate the next step, however important it is. There is no possibility after that for both Houses of Parliament to have a debate.
As I mentioned before, this Bill lacks information and is vague, which makes it all the more difficult for us to discuss it and debate it in this Committee. Once the Bill has passed through Parliament it will allow the Secretary of State to do what he wishes, as he wishes, when he wishes, without the agreement of Parliament. The Government have never been clear about the valuation of assets of the Ordnance factories; and the
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valuation impinges on the price. The Ordnance factories have intangible assets such as copyrights, patents, and designs, many of which are shared with the Ministry of Defence. Intellectual property rights can never be valued. As the noble Lord, Lord Lloyd of Kilgerran, said, there is also the question of inventions by the employees. Will they be protected in the future?
I understand that the workforce are concerned about the possibility of asset stripping. I wonder whether we can have more consultation with them and put their worries to rest if it is at all possible. I regret to say that this is a very undemocratic Bill. What is so strange is that we should be in such a hurry at the moment to get rid of this organisation when it made a profit of over £60 million last year. We should like to see whether the profit is to be the same in the years ahead.
If possible, I should like to see a delay, so that, with more consultation, we can get the fundamental propositions in this Bill to our liking. I hope my noble friend may be able to consider this because we are not subsidising this industry—it is paying its way—and I cannot see any reason for this hurried discussion. I beg to move.
Lord Trefgarne: I am afraid that, notwithstanding what my noble friend has said in support of it, I see a number of objections to this amendment. The real essence of the matter, as we perceive it, is whether or not there should be included in the Bill a specific requirement about subsequent discussion in Parliament, whether because an affirmative resolution is required, or otherwise, before the Secretary of State can dispose of any of his securities of the ROF company. If this is the essence of the matter, we have had a very full discussion of it in the other place and on Second Reading in your Lordships' House.
There has been much discussion in another place about the merits and demerits of privatisation, and, indeed, in your Lordships' House, too. I do not propose to lengthen this debate, other than by observing that what we are trying to do with the ROF organisation is to build on its success and to develop the ROFs; by the evolutionary measure which this Bill represents, into a fully-fledged commercial organisation as they will be as a Companies Acts company. We believe that this will increase the ROFs' commercial success and their profitability, and we also believe that it is not right to have done within government functions which are better done outside of it. A large manufacturing operation is clearly not appropriate to government.
Of course, the Bill is concerned with the initial incorporation of the ROFs as a commercial company, wholly-owned by the Secretary of State. We have made it clear that there is no reason why privatisation should be long delayed, and that the most likely route for this, if it can be achieved, is by a Stock Exchange flotation of the whole enterprise, though we do not rule out separate disposals should these make sense. Consistently with other measures, the Government would, of course, make clear their intentions to Parliament, and it would be up to Parliament to determine how far it wished to debate them either in advance of implementation, or subsequently. But a Stock Exchange flotation would be a commercially

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sensitive operation and it would not be right from the point of view of the ROFs themselves, any less than that of the Government, to tie action to specific parliamentary approval in the terms suggested in the amendment.
We have made clear our intentions for the period after incorporation of the ROFs. We would certainly propose to keep your Lordships and the other place informed of the progress of the company while it is wholly-owned by the Government. We would announce our intentions as regards the route and timing of privatisation as soon as we were able, and with as much detail as we were able to give. It would be unreasonable to go beyond that, in the light of all the factors involved in taking the required decisions, by circumscribing the Government's necessary flexibility. I must ask my noble friend, therefore, not to press her amendment. If she is not able to do that, I fear the Government must resist it.
Lord Stoddart of Swindon: I think the noble Lord really ought to think about this again because the noble Baroness, Lady Vickers, is on a very good point here. This is rather different from other privatisation measures, is it not? I see the noble Lord, Lord Cockfield, sitting here; he will be interested in this because of the privatisation of British Telecom. He could claim, and claim reasonably, that the Government wanted to sell British Telecom because they would receive a windfall of between £3,500 million to £4,000 million. In spite of our objections to that Bill, we could well understand the noble Lord's desire to acquire £3,500 million to £4,000 million for the Government. That commends itself to commercially-minded people.
When Enterprise Oil was sold there was a gain to the Government and a relatively good gain: when BNOC was sold there was a gain to the Government: perhaps even when Sealink is sold there will be some cash gain to the Government. In all those circumstances I suppose Ministers could say: "We are getting money into the Exchequer. We are making some money to assist in reducing the PSBR. Why should Parliament worry about that?" That is understandable, but on this Bill the position is quite different. There is no gain. No gain can be shown to the PSBR, to the taxpayer or to anyone else. Only a loss can be expected, because it is estimated that the sale of the ROF factories, if the Government are lucky, will net £300 million, £250 million of which will have to go to guarantee the pensions of existing employees.
Lord Trefgarne: I do hope the noble Lord will not persist in this line of argument. We discussed that fully at an earlier stage on this Bill and to the satisfaction of my noble friends I was able to dispose of that point.
9.24 p.m.
Lord Stoddart of Swindon: I do not know whether he disposed of that point to the satisfaction of his noble friends, but the Minister certainly did not dispose of it to my satisfaction. The fact is—and I do not think he is denying it—that the Government and the taxpayer, when all is taken into account, will not receive any gain from the sale of the ROFs. Indeed they will incur a loss as a result. Therefore I believe this is a different
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case from all other privatisation measures. Because the taxpayer will incur a loss and it could be a considerable loss—
Lord Trefgarne: No.
Lord Stoddart of Swindon: Well, by the Government's own reckoning they are likely to sustain a loss.
Lord Trefgarne: No.
Lord Stoddart of Swindon: I do not know when the noble Lord the Minister explained that he is not going to incur a loss. Perhaps he will wait until I finish.
Baroness Trumpington: Order!
Lord Trefgarne: Perhaps the noble Lord will look at the Official Report of the Second Reading debate.
Lord Stoddart of Swindon: I have not given way. Perhaps the noble Baroness will allow me to keep myself in order and will keep her noble friend in order. What I was going to say to the Minister was that perhaps after I had finished what I was going to say—and that will be very shortly—he can make his own reply. But in spite of what was said at Second Reading, the fact is that it is my own view and that of many other noble Lords that by the time the Government come to sell off this enterprise the taxpayer will face a loss.
It is in those circumstances that Parliament is entitled to have a say in exactly what happens when it comes to the disposal of the shareholdings. As I said earlier, I think that the noble Baroness, Lady Vickers, has done the Committee a great service in bringing forward this amendment because it gives your Lordships the opportunity to think again. It also gives the noble Lord the Minister the opportunity to accept an amendment from one of his noble friends; and I think he will do himself a lot of good with the Committee if he does so.
Lord Diamond: May I congratulate the noble Baroness, Lady Vickers, not only on having moved this amendment, enabling it therefore to be discussed with the most important matters that are being discussed, but on obtaining from the Minister more expressions of understanding and semi-undertakings than anyone else has been able to obtain on this side of the Committee. Your Lordships may wonder, therefore, why I am rising to address the Committee. It is because of the other things that the noble Lord went on to say.
Like the noble Baroness, I am very concerned indeed as to what is the cause of this great hurry. Now the Minister has told us. He is anxious to get this floated on the Stock Exchange. Of all the reasons that could give one any anxiety (that is, anyone who is interested in protecting the Stock Exchange) there is none more so than floating it on the Stock Exchange at the moment, when it is at the lowest that it has been for I do not know how many years. No doubt it might be higher when the Government succeed in their further plans in regard to the economy; but it is at a

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ridiculously low ebb at the moment and the FT index is lower than it has been, I think, for a number of years. I had better not chance a guess at what is the number, but it is a very low figure.
What the noble Lord is proposing is to float it at a time when the most recent flotation in terms of a company asking for money on the Stock Exchange resulted in 97 per cent. being unsubscribed; that is, 3 per cent. subscribed and 97 per cent. left with the underwriters. And this is the time when the noble Lord is anxious to hurry on in order to float this on the Stock Exchange, so that it can be floated at a time when the quotations are at their lowest and when the availability of capital is such that a reasonable offer made by an existing trading company which thought (on its best advice) that it could get the money it wanted found that 97 per cent. was left with the underwriters!
I am bound to say that the Minister has done nothing but give me the collywobbles. I am anxious about what the Government are going to do with the nation's assets. I do not know what the noble Baroness is going to do with her amendment, but I congratulate her on having moved it and having obtained this information from the Government.
Baroness Vickers: Following what the noble Lord, Lord Diamond, has said, I beg leave to withdraw this amendment and hope to discuss it again at Report stage.
Amendment, by leave, withdrawn.
Lord Diamond Lord Diamond moved Amendment No. 24:
Page 5, line 15, leave out line 1 and insert—
("(9) Not less than six weeks before the day on").
The noble Lord said: I beg to move Amendment No. 24, and I understand that it would be convenient for Amendment No. 25 to be discussed at the same time.
Amendment No. 25: Page 5, line 19, at end insert ("and such copy shall include any Memorandum of Understanding entered into by a Minister of the Crown and the Chairman of the Board of any Company referred to in subsection (4) describing the relationship between the Government as shareholder and any such Chairman.").
Page 5, line 15, at present states:
"Within the period of one month beginning with the day on which a scheme comes into force, the Secretary of State shall lay before Parliament a copy of the scheme."
That is, within one month beginning with the day on which the scheme comes into force. That is to say, within the period of one month after (I think that that is the interpretation to put on it) the scheme coming into force, the Secretary of State is going to be kind enough to inform Parliament about it, giving Parliament, again, no possible opportunity of discussing it beforehand. This is the objection we raised time and time again in your Lordships' Chamber. I do not know what has happened to the Tory Back-Benchers in the other place, I really do not. They seem to accept total exclusion from a share in advising the Government or participating in government on these matters. Certainly we do not accept that; we believe that Parliament has a part to play and sometimes we are successful in making the other House have a part to play by the decisions we take in this place.
It is in that sense that I move the amendment which provides that six weeks before the day on which a scheme comes into force the Secretary of State lays it before Parliament so that Parliament has some opportunity of seeing what is intended and making its views known. The next thing we shall be hearing from the Government is that affirmative resolutions will be made not more than one month after they have been given effect to.
I really do not know what is happening to this Government in terms of consulting the House. I think I have said enough to show that we are very, very anxious indeed that both Houses should be given an opportunity of understanding and seeing what is proposed by the Minister with regard to these arrangements in relation to a Bill which gives no information at all. The most we can rely on are the odd statements of Ministers in different places. The Bill gives no reliable information at all, and I hope the Minister will feel that what one is asking for is the minimum. So much for Amendment No. 24.
Amendment No. 25, which is somewhat related but is certainly not the same matter, deals with the memorandum of understanding which we all know the Minister proposes to have with the chairman of the board of any company which is to be set up—the memorandum of understanding describing the relationship of the Government to shareholders and the chairman of the company. It is a very good thing to have a memorandum of understanding, but there is no provision in the Bill for that memorandum of understanding to come before Parliament. So it is proposed that the memorandum of understanding should be disclosed.
At present, the section refers to the fact that the Secretary of State shall lay before Parliament a copy of the scheme, and so on. The amendment has the effect of adding the words which will result in that copy including the memorandum of understanding. That is a very reasonable provision. I hope both amendments will be accepted so that Parliament will have some knowledge of what the Government are proposing under this very wide enabling Bill and so that the Government will be willing to consult Parliament. The Government have a big enough majority in the other place to have the courage to consult Parliament. I have never known a government so frightened, when they have the odd 200 or 300 bodies lying about in the Division lobbies in the other place, I hope therefore that the Government will see fit to accept Amendment No. 24, which I now move.
Lord Trefgarne: My Lords, the Bill requires schemes made under it to be laid before Parliament within one month of their coming into force. Notwithstanding the terms of this provision, the Government are quite prepared to lay the first scheme before Parliament on vesting day, which will be the day on which the scheme takes effect.
I appreciate the desire of the noble Lord to see this scheme as soon as possible, and we shall try to accommodate that wish in so far as we can. However, if an amendment I am to move a little later in these proceedings obtains your Lordships' approval, the earliest date for vesting day would be 1st November 1984. This amendment would require that in such

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case the schemes shoud be laid before Parliament in mid-September. I must tell the committee frankly that work on the scheme may not be completed by that time.
For reasons which I hope to make clear to your Lordships later, we regard it as important that vesting day shall take place as soon as possible, and the Government could not accept a provision which would have the practical effect of delaying vesting day beyond the earliest date that it could be. I do, however, assure the noble Lord, Lord Diamond, that we shall publish the scheme at the earliest practicable opportunity. I hope that, with that assurance, he will be content to let the Bill stand as it is at the moment.
With regard to the noble Lord's second amendment, let me say that there is to be a memorandum of understanding between the Secretary of State and the board of the new Royal Ordnance Company. We have said that we shall publish this also except in so far as considerations of commercial sensitivity demand otherwise. I hope the noble Lord will understand the reasons for that qualification. I may say, however, that we would expect to be able to publish the memorandum of understanding substantially in full.
Work on the memorandum is not yet complete. We see no reason why it should not be made public,
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subject to the qualification to which I have referred, as soon as agreement has been reached by the parties on its terms, and I am happy to give an undertaking to that effect. In any event, we shall publish it, again subject to that qualification, not later than vesting day. In the light of these assurances, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Diamond: I am very grateful to the Minister. He has gone a long way towards meeting the essence of the points covered by these two amendments. Of course I accept the qualification of commercial matters, secrecy and so on. I accept that completely and, as I understand it, both amendments will be met in the sense that the Government have said they will do everything practicable to meet the sense of these amendments but will not be willing to have them incorporated in a Bill. So far as it goes, at Committee stage, that is satisfactory. We can come back to this at a later stage. I repeat my gratitude, and I beg leave to withdraw Amendment No. 24.
Amendment, by leave, withdrawn.
[Amendment No. 25 not moved.]
Clause 3 agreed to.
Schedule 1 agreed to.
Clause 4 agreed to.
Schedule 2 [Employment]:
9.38 p.m.
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 26:
Page 15, line 43, leave out paragraph 1 and insert—
(" 1. Any company or companies established pursuant to a scheme made under section 1(1)(a) shall by the appointed day (as defined in paragraph 2(7) below) make an offer of employment to each person employed immediately prior to the appointed day by the civil service of the State in the Royal Ordnance factories and in the ROF establishments at Westcott and at Waltham Abbey and, where a person thus becomes an employee of such a company or companies, then for the purposes of the Employment (Consolidation) Act 1978, that person's period of employment in the civil service of the State shall count as a period of employment by the company or companies, and the change of employment shall not break the continuity of the period of employment.
Notwithstanding the provisions of paragraph 1 above the terms and conditions applicable to any person who, pursuant to a scheme made under section 1(1)(a), becomes an employee of any company or companies should be no less favourable than the terms and conditions which were applicable to that person immediately before the appointed day (as defined in paragraph 2(7) below) under his employment in the civil service of the State.").
The noble Lord said: The purpose of this amendment is to write into the Bill a specific transfer of rights and offers of employment in the new company for those ROF employees facing compulsory transfer to the new company, and to include in the Bill itself the assurances repeatedly given by Ministers that staff transferred out of the Civil Service and into the new company shall have terms and conditions of employment which are no less favourable than those they currently enjoy in the Civil Service.
I think it would be convenient if I dealt with the first and second paragraphs separately. So far as the first paragraph is concerned, it would ensure that no one currently in employment with the ROFs could be made redundant by virtue solely of the change of status. Ministers have argued in another place that TUPE '81 ensures the transfer of contracts of employment, but there is some doubt about this.
First of all, legal opinion is divided as to whether or not civil servants have contracts of employment, since civil servants are employed at the pleasure of the Crown. Secondly, TUPE '81 specifically prevents employees from being able to take a case for unfair dismissal if they have been dismissed at the time of the transfer for an economic, technical or organisational reason. This is a very wide definition, and thus employees could be dismissed at the time of the transfer quite readily.
The amendment specifically refers to the two ROF establishments at Westcott and at Waltham Abbey, since these are research and development establishments, and it is therefore questionable whether or not they fall within the definition of an "undertaking" under TUPE '81. In fact, TUPE '81 defines an "undertaking" as including
"any trade or business but does not include any undertaking or part of an undertaking which is not in the nature of a commercial, venture".
ROFs Waltham Abbey and Westcott were part of the MoD R & D establishment, PERME, until 1st April. 1984. They will therefore figure in the ROF trading fund accounts for only six months before vesting day; that is, if the vesting day remains as 1st October.
That is a complicated business and I hope that the Minister will be able to make some reasonable reply. But the first part of the amendment seeks to set out, without any doubt and clearly, that by the appointed day an offer of employment must be made by the Secretary of State to every existing employee of the establishments named in the amendment. As the Minister very well knows, many employees have given long and devoted service—indeed, many tributes have been paid throughout the debates in another place and in this Chamber to the employees—and it is scant reward for such people that they should be shunted around like so many pieces of furniture. They are entitled to be treated as decent, dignified people who have served their employers and their country well.
Perhaps I may turn to the second part of the amendment. We are concerned that Ministers in another place have argued that it is unnecessary, and no doubt the Minister here will again argue that it is unnecessary, because of the inclusion of TUPE '81 regulations in the Bill. But TUPE '81 is capable of various interpretations and it is in an effort to ensure that the "no detriment" guarantee is specifically written into the Bill that the amendment has been drawn up and that I have moved it.
Despite the fact that the Ministers have said that TUPE '81 applies to transferred staff, and that, therefore, there will be no change in terms and conditions, except for minor ones relating wholly to the Civil Service scene—for example, the fact that the Civil Service Appeal Board can no longer cover staff in the new company—the trade unions are already experiencing attempts by ROF management unilaterally to change agreements on such conditions as recruitment and promotion procedures, even before vesting day. I should certainly be most grateful if the Minister would comment in particular on that, when he replies.
This part of the amendment seeks to ensure that when a person becomes the employee of a company or companies, he or she should be in a position no less favourable than was the case under the terms and conditions which were applicable in his or her employment within the Civil Service immediately before the appointed day.
It seems to me that the amendment, although a complicated one, is eminently reasonable. It is an amendment which would remove many of the doubts and fears which remain in the minds of the trade unions and the people employed in the Royal Ordnance factories. If the Minister could give assurances on this—indeed, if he could accept the amendments—it would make the Bill far more acceptable to the people working in the industry. I beg to move.
Lord Trefgarne: In answering the noble Lord, I should say at the outset that the Government recognise that it has always been the desire of the employees of the Royal Ordnance Factories—and rightly so—that the terms and conditions of their new employment in the ROF company shall be no less favourable, taken as a whole, than the terms and conditions of their employment in the Civil Service. For their part, the

1717
Government have always accepted this concern and have maintained their determination to ensure that employees do not lose by the transfer.
The Committee will be aware that the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981—the noble Lord referred to these as "TUPE", and I shall, too—ensure that terms and conditions of employment are transferred. In effect, this will give the employees of the Royal Ordnance Factories all the protection which the Opposition are seeking by the second part of this amendment. In that sense, therefore, it is unnecessary.
As has been recognised, there are some exceptions to the application of TUPE. First of all, there are bound to be some small differences in circumstances between one employment and another, particuarly so where the first employment is in the Civil Service and the second is in the private sector. It follows logically that there are some situations in which the precise application of TUPE cannot be made. Indeed, this fact is recognised by paragraph 2(2) of Schedule 2 to the Bill. That paragraph expresses an intention that TUPE shall apply as nearly as possible in the circumstances, and the Bill has been amended to that effect. There is no covert intention behind this other than to say that any differences in the terms and conditions of employment to which TUPE applies shall he no more than is inevitable in the circumstances.
The result of the first part of the amendment would be that the contract of employment in the Civil Service would be terminated immediately before vesting day and a new contract would have to be negotiated to come into force on vesting day and apply thereafter. This would constitute a considerable backwards step. The application of TUPE ensures that the terms and conditions of the present ROF employees continue unchanged into the new employment. Where TUPE does not apply, there are negotiations for new provisions. The first part of this amendment takes all this apart by requiring a new offer of employment, thereby disapplying the provisions of TUPE. This hardly seems designed to be helpful except in delaying the transfer or confusing the issues.
The amendment that has been moved will have one particular effect in respect of redundancy procedures. Taken with the later amendment to leave out paragraph 3 of Schedule 2, the intention appears to be to require the Government to make some other provisions for employees who are unwilling to transfer to the new company. Those who could be deployed elsewhere in the Civil Service would no doubt be offered alternative postings. Of the others, some would probably be offered early retirement while the remainder would be entitled, under the terms of this amendment and other amendments to redundancy compensation.
I must question the reasoning behind such an intention. The Government will indeed do their best to find alternative places within the Ministry of Defence for those employees who do not wish to transfer to the new company. Indeed, a register has been opened giving all employees the opportunity to signify a desire not to transfer, if that is what they wish. But we have always said we cannot guarantee that it would be possible in every case to find alternative employment
1718
for those who do not wish to transfer. If this amendment and a related one are acceped, their effect would be to encourage all employees to seek alternative postings in the expectation either that they would receive a substantial redundancy compensation if no alternative post could be found for them or that the new ROF Company would, as a result of the Government allowing a refusal to transfer, be so starved of employees that it would be willing to offer very favourable terms and conditions to all employees, who could thus benefit by obtaining a job with the new company and at the same time gaining considerable redundancy compensation. It is not difficult to see that this would be an iniquitous use of public money.
It really makes no sense to introduce an artificial redundancy, out of considerations which are extraneous to the essential point that no one is going to be made redundant purely as a result of the transfer. Such a course would be exceedingly expensive and an administratively inconvenient way of dealing with the situation. The Government do not pretend that the establishment of the new company, and the transfer to it of those currently employed within the Ministry of Defence in the service of the ROFs, gives rise to no problems. Indeed, we are now in the middle of negotiations designed to deal with those problems. Clearly, the proper way to proceed is through negotiations with the recognised trades unions. However favourable the course implied in this amendment might be to the employees themselves, it is not the right way of dealing with the situation.
On the point of principle, the process of transition from employment in the Civil Service to employment with the new company will make very little difference in the actual day-to-day work of all those employed in the ROFs. In addition, the Bill provides that TUPE '81 shall apply to transfer the vast majority of the terms and conditions of service. The principle remains that the contract between the new company and its employees will be the same, in essence, as that between those employees and the Government. We therefore see no necessity for this amendment, which we believe will only give rise to problems, delays and inconvenience.
Before I sit down, perhaps I could reassure the noble Lord on one point. We believe that PERME, which he referred to as one of the research establishments, as part of the ROF enterprise as a whole—as it will be when the scheme is made—can be regarded safely as an undertaking for the purpose of TUPE '81. I understand that was an anxiety in the mind of the noble Lord, and I hope I have been able to set his mind at rest. As I said, we therefore see no necessity for this amendment, and I hope that the noble Lord will not press it.
Lord Diamond: Do I gather from the noble Lord the Minister that he is suggesting it would be for the convenience of the Committee if Amendment No. 28 were discussed at the same time? He has referred to it, but the noble Lord who moved the amendment did not.
Lord Trefgarne: No; I was seeking only to reply to Amendment No. 26.
Lord Stoddart of Swindon: I should like to thank the noble Lord for his very full explanation and for the assurance which he gave me about PERME employees. This is an extremely complicated matter; I recognise that. I also recognise that negotiations are still continuing. I think that under those circumstances, and bearing in mind that we are unlikely to come back to the Bill for Report stage, as I understand it, until after the Recess, the best thing one can do is to read what the noble Lord the Minister has said and give time for further negotiations to take place; and, if necessary, we can return to the matter at Report stage. Under those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 27:
Page 16, line 36, at end insert—
("() Any company or companies established pursuant to a scheme made under section 1(1)(a) shall consult and agree with the recognised trade unions on the setting up and the maintenance of suitable machinery to negotiate upon and settle the terms and conditions of employment to provide for reference to arbitration in default of settlement and to discuss other matters of mutual interest to the company or companies and their employees including efficiency in the work of the company or companies.").
The noble Lord said: This is another amendment which is crucial to the trade unions which are affected by the Bill. The noble Lord the Minister constantly refers, quite correctly, to the discussions which are going on. I apprehend that while the Minister acknowledges there are some difficulties and there is a long way to go, he feels that the discussions are going satisfactorily. In other words, there has got to be give and take, and eventually there will be agreement. The last thing that we on this side of the Committee wish to do is to stir up trouble or to imply that there are serious breaches of agreement. Up to now, and on the basis of what we have been told, we have kept the gloves on because as long as there is the possibility of the affected unions realistically and sensibly acknowledging that they have obtained as much as they can, there is no point in doing otherwise.
My noble friend Lord Stoddart has clearly indicated that with the months of August, September and half of October to come, there is almost a lifetime in which to try to get a settlement. There has, of course, been an attempt to get some form of agreement for six or seven months past; discussions have been going on all the time. I will not say that we have been told we are no further forward, but we have been told that on a range of points there is no satisfaction in sight.
I hope the noble Lord the Minister will take it kindly when I say that we are not going to press any of these points tonight. If we have to come back to them in October and have an indication that the unions affected are not satisfied, then we shall certainly be in the mood to be (shall I say?) a little more belligerent.
This amendment deals with a basic trade union right; that employees in an organisation should have the right to consultation and that there should be agreed trade union procedures and suitable machinery
1720
through which to negotiate. The Minister and his colleagues in another place have said more than once that employees will have no less favourable terms and conditions. One of the conditions they enjoy now is the right to negotiate and arbitrate, et cetera.
The Minister may tell me that the arrangements which exist under the Transfer of Undertakings (Protection of Employment) Regulations 1982 are meant fully to cover that situation. But correspondence I have received from a Mr. Howarth of 257 Rothsay Road, Blackburn, writing on behalf of the ROF in Blackburn, explains in detail that they are far from satisfied that TUPE '81 is adequate to give protection. I will read from one paragraph of his submissions:
"In a redundancy situation TUPE '81 not only fails to give adequate protection, but in fact detracts from existing rights (see enclosed EAT authority)"—
that is, the Employment Appeals Tribunal.
Lord Diamond: It is the Employment Assessment Tribunal.
Lord Graham of Edmonton: Yes, that is correct—whatever the noble Lord says; he must be right because he is on my side. The submission continues:
"Regulation 8(2) provides that a dismissal immediately before or after a relevant transfer which is for organisational, technical or economic reasons"—
and those are the reasons which will apply here—
"will, for the purpose of Section 57(1)(b) of the 1978 Act, be deemed to be for some 'other substantial reason'. This has been interpreted by the courts to mean that a dismissal as a result of a transfer cannot be a redundancy".
I cannot speak authoritatively on those judgments, but if they are born out of the Minister's resting on TUPE '81 to cover the kind of situations which are going to worry employees, then the real fact of the matter is that the employees do not accept that.
The amendment now before us seeks to ensure that suitable and acceptable bargaining machinery is set up in the new company to replace the joint Whitley Council committee at factory level and at new holding company level. The Whitley Council committee ensures that management and the recognised trade unions—those representing both industrial and non-industrial staff—meet on a regular basis within a formal framework, to consider problems of mutual concern and deliberate on their resolution. Many informal contacts are maintained in between those formal meetings.
The Civil Service is also covered by an arbitration agreement which provides for either side to seek to put an issue to arbitration if it has proved impossible to arrive at an agreed solution through discussion. I do not want a cast-iron agreement because the Minister has told us—and I accept this—that discussions are in progress. But I hope very much that the worries to which I have given voice tonight will, in his view, be assuaged in the course of discussions over the next 10 weeks. I beg to move.
10 p.m.
Lord Diamond: Perhaps the Minister will allow me to intervene at this stage. I am in a little difficulty because the noble Lord referred considerably to the redundancy question, which is again the subject of Amendments Nos. 28 and 29.
Lord Graham of Edmonton: Yes.
Lord Diamond: If it is for the convenience of the Committee, I will say a word about Amendment No. 28, but if the Minister prefers this to be left until a later stage I will leave it.
Lord Graham of Edmonton: Take it.
Lord Diamond: Very well; I will take both.
Amendment No. 28: Page 16, line 37, leave out paragraph 3.
Amendment No. 29: Page 16, line 37, leave out paragraph 3 and insert—
("3. Any company or companies established under a scheme made pursuant to section 1(1)(a) shall from the appointed day provide for redundancy compensation which is no less favourable than the compensation which would have been paid in the event of their redundancy from the civil service of the State.").
With the leave of the Committee, I will refer first to Amendment No. 28, which deals with redundancy. It is proposed to leave out a paragraph which says there shall be no redundancy payments in certain circumstances—or no redundancy rights; I have not got the words in front of me. There would presumably be no reason for putting that there unless there was a possibility of there being some rights if they were not specifically excluded. So if the Bill is going to exclude certain specific rights, then one wants to know what is being offered in exchange for those rights. That is the first question.
Then I come to the points which have already been alluded to and which give considerable cause for anxiety. These matters have been dealt with by the relevant employment appeal tribunal in two cases. One is Meikle v. McPhail and the other is Canning v. Niaz. Not only have they been dealt with by the relevant Scottish employment appeal tribunals, but the findings of those tribunals have been confirmed by the High Court. Therefore, the Minister cannot dismiss them out of hand.
The situation seems to be that this staff is not going to be protected for redundancy purposes. It is as simple as that. The authority is the authority of the High Court in two cases. One cannot dismiss that in any way at all. It has been suggested—and it may be—that the tribunals misdirected themselves and that there has been a slip-up at some point. However, all of us who are not lawyers know that the undertaking of the Government is that the employees shall not suffer any detriment at all by virtue of the transfer. Yet here is a huge hole being blown into that undertaking in relation to redundancy; namely, that there could be a situation in which a dismissal following a transfer under the TUPE regulations which can be described as being for an economic, technical or organisational reason, would not be a redundancy.
The practical effect of that would be that those concerned would get no redundancy payment if dismissed by the new employer shortly after a transfer.
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I do not know what "shortly" means. It certainly does not mean immediately. It may mean in a period when the Government are not in control of the situation. Therefore, if I were a member of staff I would be considerably concerned lest I lost out in both cases and had no claim for redundancy from my past employer and no claim for redundancy from my present employer, both on the authority of two relevant tribunal decisions supported by the High Court. I do not think I need go further into it than that.
The Government have said that they are an honourable Government and their intention is that the rights of the employees shall not be reduced in any substantial way. They have said that after all these arrangements and schemes have gone through they will make adjustments for the fact that they will no longer be civil servants and, subject to one or two limitations to which civil servants are subject, broadly they will have the same rights as they have at present. I have very real doubt as to whether that is the case.
Lord Trefgarne: Amendment No. 27 deals essentially with arrangements after the vesting day of the new company. It lays an obligation on the new company to conduct its negotiations and industrial relations in a certain way. I hope to carry your Lordships with me when I say that this surely must be a matter for the management of the ROFs to determine, not this Bill. It surely goes without saying, too, that, as a commercial organisation on a par with other companies, the ROFs will seek to maintain the best possible industrial relations by negotiation and agreement between management and the trades unions representing the workforce.
As we are all aware, the application of the Transfer of Undertakings (Protection of Employment) Regulations 1981—TUPE '81—to which I have already referred, to this transfer means that existing collective agreements, recognition agreements, consultation procedures, and so on, are transferred to the new company. They will all therefore be in place on vesting day. The special circumstances mentioned in Schedule 2 to the Bill, relating to the present employment under the Crown, will not affect this. This is not to say that some changes might not be made after vesting day in the light of changing circumstances. But this is true of any company, whose management would seek to notify, consult and negotiate with recognised trades unions if any change in terms and conditions or in the right of trades unions in the company was contemplated. In this sense the ROF company will be in no different a position from any other. But to do what the amendment seeks would be to put the new company into a situation virtually unknown in company law, in which requirements of the type referred to in the amendment were imposed by statute on the company.
It is clearly in the company's best interest to have the best possible industrial relations with its workforce. To raise scare stories about unilateral withdrawal by management of recognition of the trades unions which currently represent the workforce is irresponsible. Many of those trades unions already have members outside the Civil Service, so that the new status of ROF employees will not necessarily affect the standing of their trades unions.

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It is equally absurd to imagine that the new company will renege on collective agreements or on other terms and conditions of service, when to do so could seriously damage its commercial viability or lead to claims for constructive dismissal under the Employment Acts; nor will the Government have any locus to reach out and impose their own idea of industrial relations on the new organisation, which will act in this respect in the best interests of the company as a whole.
I certainly appreciate the sentiments behind the amendment. Indeed, the Government sympathise with its spirit: none of us wishes the ROF workforce any ill, but it is not appropriate to tie the company's hands in the way the amendment does. ROF management is already consulting recognised trade unions—unions recognised now and recognised after vesting day by the terms of TUPE '81—with a view to obtaining their agreement to setting up, and thereafter to maintaining, suitable machinery for negotiation at appropriate levels on all relevant matters. These matters will of course include terms and conditions of employment after vesting day, but will also extend to other matters pertaining to the company and its future, upon which it would be the best industrial practice to consult.
In these circumstances we believe that statutory provision in the Bill is unnecessary, given the existing protection afforded to employees under the Employment Acts, and could even be damaging. We have to give the ROFs the maximum degree of freedom to order their affairs in the way they wish. I hope therefore that this amendment will not be pressed.
I now turn to Amendments Nos. 28 and 29, to which the noble Lord, Lord Diamond, also spoke. The Government have often made it clear that we do not intend any employee to suffer as a result of the transfer of employmemt to the new ROF company. Staff will transfer on broadly the same terms and conditions of employment as they enjoy at present. As we have said before, this is secured by the transfer of undertakings regulations. The Government have already given a commitment that levels of redundancy compensation payable to existing ROF employees will not be made worse by the transfer.
The amendment of the noble Lord, Lord Diamond, (Amendment No. 28) and the first part of the amendment of the noble Lord, Lord Stoddart, (Amendment No. 29), to which I think we are also speaking, seek to delete the existing paragraph 3 from Schedule 2 to the Bill. I am afraid that I must resist that, because paragraph 3 is necessary to make it clear to the courts and to everyone else that there is no question of a purely technical redundancy arising from the transfer. ROF employees are transferring to a new organisation, but they will be doing the same job, in the same place, and on very similar terms. It is therefore clear common sense, and paragraph 3 spells it out in law, that the mere fact of the transfer does not give rise to an entitlement to redundancy payments.
This paragraph is included in the Bill for the more substantial reason that current Civil Service redundancy rules imply that a person could make a claim for redundancy on the grounds that he has been
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moved out of the Civil Service. But these rules do not take into account the fact that, as obtains in this case, the person will have been transferred with his job and his terms and conditions of service intact.
The Government have already publicly explained that a new redundancy scheme for transferred staff will need to be devised for the new ROF company. It will in effect be a replication of the Civil Service redundancy scheme, though some changes of a very minor nature will need to be made in it to take account of the changed circumstances. The Government have given a clear and unequivocal commitment that compensation levels for existing employees under the new redundancy scheme will be no worse than those currently enjoyed by staff in the Civil Service. The new redundancy scheme is currently being negotiated with the trade unions. In the light of that commitment, and those negotiations, I believe that Amendment No. 29 is unnecessary and I hope that the noble Lord will not press it.
The question has also been raised about redundancy compensation levels for new employees of the company after vesting day. The consultative document issued by the Government in March of this year spelt out the arrangements that would apply to these new entrants. The levels of redundancy compensation applicable to them will be in line with normal private sector practice. Such employees will not have been part of the Civil Service previously, and it would be most unwise to saddle the new company with an obligation to pay those employees taken on after vesting day redundancy compensation as high as that in the Civil Service. Such an obligation would impose a restrictive financial burden on the company, and could affect its future viability.
As I have said, the Government will honour their commitment to existing employees that they shall not suffer detriment as a result of the transfer, but after vesting day, the ROFs will be a commercial organisation which must conduct its affairs according to good commercial practice. The obligation implied by Amendment No. 29 would go against that and could prejudice future employment levels, if not the trading performance, of the new company. In the light of these considerations, I hope that both noble Lords will feel able to withdraw their amendments.
The noble Lord, Lord Diamond, referred to some court cases. I should like to consider those a little further. But, at first sight, I am advised that they are Scottish cases of somewhat doubtful authority. There is, I understand, an English judgment that is inconsistent with them. However, perhaps I may look into those cases further and give him a more considered response.
Lord Graham of Edmonton: For the convenience of the Committee, we have rolled in Amendments Nos. 27, 28 and 29 because they are part of a piece. I had something to say directly on Amendment No. 29, although, as the noble Lord, Lord Diamond, stated, I did, in making my case on Amendment No. 27 in respect of conditions, allude to redundancy. I wish simply to say that what, in fact, the trade unions want is what Ministers have said. On 21st May, the Minister of State said:

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"On this I repeat what we made clear on Second Reading and on Report, that compensation levels for existing employees will match"—
The Minister has constantly said "will be no worse than", but the Minister in the other place said "will match"—
"those currently provided for in the Civil Service pension scheme".—[Official Report, Commons, 21/5/84; col. 737.]
The Minister believes that he is supporting precisely the existing rights under the Civil Service pension scheme. However, paragraph 3 of Schedule 2 contains a proposal regarding redundancy compensation on the change of status from Civil Service to public company. The Minister has made a case of the burden that complying with existing rights will have on transfer. That may very well be right. It may be uneconomic and irksome on the new arrangements to carry forward existing rights.
I would, however, ask the Minister to listen to this. Under the Superannuation Act 1972, civil servants are entitled to redundancy compensation if they change their status. The Bill, if enacted, would remove this legal entitlement. The Minister is entitled to start off with something different from that which is already enjoyed by civil servants. If he is doing that, he should not say, and repeat, that they will be no worse off in the future than if there had been no change. The Minister has made a fair point that discussions are going on and that settlements, understandings, or a removal of misinterpretations are clearly possible over the next 10 weeks.
I do not intend to press Amendments Nos. 27 and 29, although not in the light of what the Minister has said. That is no disrespect to what he says. But until the trade unions tell me that they understand and accept what is going ahead, we shall continue to seek to press their case. I would wish to withdraw the amendment this evening, but I fully reserve the right to come back to this point, if necessary, in October. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Diamond Lord Diamond had given notice of his intention to move Amendment No. 28:
[Printed earlier.]
The noble Lord said: I am bound to move this amendment in order to continue the discussion on it. It is very appropriate that the noble Lord has cleared the agenda somewhat by removing his amendment. I think the Minister has said most of what we are asking for in regard to this amendment, dealing with redundancy. I think he has; of course, we will read the Official Report very carefully to make sure that he has. It is nowhere in the Bill, but I take the point that it is under discussion.
So I think the answer on Amendment No. 28 is that we will consider the matter very carefully, and, if satisfactory arrangements are made between the parties concerned—say, between the Government, as employer, and the trade unions representing the employees, the civil servants—then we would not wish to pursue it further at Report stage; but otherwise we would. Having spoken to the amendment in that sense, I do not ask the Minister to comment any
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further. I seek the Committee's permission to withdraw the amendment.
The Deputy Chairman of Committees (Lord Murton of Lindisfarne): I think the answer to the noble Lord, to save me confusion, is not to move the amendment.
[Amendments Nos. 28 and 29 not moved.]
10.17 p.m.
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 30:
Page 16, line 49, at end insert—
("() Any company or companies established under a scheme made pursuant to section 1(1)(a) shall on the appointed day set up a pension scheme for all those persons transferring from the civil service of the State and for all other persons employed by the company or companies, the provisions, contributions and benefits of which are no less favourable (both as to treating previous service as reckonable service and otherwise) than the provisions, as then in force of the Principal Civil Service Pension Scheme as governed by the Pensions (Increase) Act 1971.").
The noble Lord said: This amendment has three main objectives: first, to ensure that the Government guarantee that civil servants transferring to the new company or companies will have pension benefits which are no less favorable than those provided under the principal Civil Service pensions scheme, and are actually enshrined in the Bill itself; secondly, to ensure that there is a single pensions scheme for staff transferring to the new company or companies from the Civil Service and those recruited after vesting day; thirdly, to ensure that the pensions paid by the new company's or companies' pensions scheme are fully index linked in line with the index-linking provisions of the 1971 Pensions (Increase) Act.
Ministers have stated repeatedly that the present ROF employees who face compulsory transfer out of the Civil Service into the new company will have their current terms and conditions of employment protected by the 1981 Transfer of Undertakings (Protection of Employment) Regulations, or the old TUPE '81 again. But TUPE '81 specifically excludes pension benefits. Therefore, unless this amendment is included in the Bill, the ROF employees are totally unprotected in the legislation in a crucial area of their conditions of employment.
Ministers have stated repeatedly that they intend to provide the staff who transfer to the new company with pensions which are no less favourable than those provided under the PCSPS. This amendment seeks merely to enshrine in the Bill those ministerial commitments. To date, Ministers have given no guarantee as to the pensions provisions of staff recruited to the new company after vesting day. The ROF management have indicated that they intend to set up a second, much inferior pensions scheme for new recruits. That seems to us to be entirely reprehensible. The trade unions who will be representing those employees strongly reject the notion of two pensions schemes for staff who otherwise will have largely the same terms and conditions of employment and who will be working alongside each other, doing precisely similar work.
The industrial relations consequences of creating two categories of employee must be obvious to all. Anybody who has worked in an office, a shop or a

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workshop will know just exactly what resentment is caused among employees when one section of the employees doing exactly the same work in the same place is treated differently from another set as regards conditions of service. It will not make for good industrial relations and it will make for resentment among employees themselves.
Ministers have given assurances that the pensions for ROF staff transferred to the new company will be no less favourable than Civil Service pensions. This must include the Civil Service index-linking provisions as set out in the Pensions (Increase) Act 1971. The 1971 Act applies to a wide range of public sector employees—for example, the police, the armed forces, teachers, nurses, and indeed Members of Parliament, and, incidentally, employees and former employees of the CEGB (in which I have an interest) as well as to civil servants.
Ministers have said that the ROF pension scheme for transferred staff will be index-linked, but ROF management have put a limit on the employer/employee's contributions of 17 per cent. of the total pay bill. Possible detriment may therefore arise if the pension fund investments are not able to match index-linking during a period of high inflation and the 17 per cent. limit on overall contributions prevents additional contributions being made to the fund, even on a short term basis, in order to ensure full index-linking. That of course is a very serious worry and a very serious point indeed.
One appreciates of course that Ministers may not want to go too far, but the staff see it in an entirely different way. We had this matter before us during our debates on the British Telecommunications Bill and if I am not mistaken an amendment was written into the Bill to the effect that existing pension obligations would be honoured under all circumstances, even if British Telecom went into liquidation, and that in fact the obligations would be taken on by the Government.
I really cannot see why the Government are prepared to have obligations and make promises to one section while not—although they are not civil servants, nevertheless they are public servants—being prepared to undertake the same obligations and make the same promises and to give the same conditions to another set of employees. I hope that the Minister will consider this matter very seriously and will be able to give me the assurances for which I have asked. Indeed, I hope that he will accept the amendment.
Lord Trefgarne: I must say that I detect an air of mistrust of the Government on the part of the noble Lord—
Lord Graham of Edmonton: Never!
Lord Trefgarne: If I have misinterpreted the attitude of the noble Lord, then of course I hasten to withdraw. But the Government have made pledges about pensions for employees transferred to the new ROF company. We stand by those pledges and continue to negotiate with the trade unions about them. Our commitment is a matter of public record. I do not, therefore, agree that any provision about pensions needs to be written into the Bill. The Government
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have undertaken that pensions for transferred staff should be index-linked, and all work and all discussions with the trade unions have proceeded on that basis. Advice on the new company pensions scheme has been given to the Government by an independent firm of consulting actuaries. It is in the light of the actuarial calculation that a ceiling of 12 per cent. for employer contributions has now been proposed for the new pension scheme. Nevertheless, what we are talking about is a scheme designed from the outset to provide index-linked pensions.
The pension scheme which the company will be setting up will be governed by a trust deed and administered by an independent body of trustees, including both representatives of the workforce and independent members, as well as representatives of the company. The pension scheme will secure its funding from three sources. First, there will be a payment from the Exchequer representing the value of potential pensions earned to the point of transfer by those existing employees who opt to transfer to the new scheme. In addition, there will be the annual contribution by all employees in the scheme. We have suggested that this should be fixed at 6 per cent. of salary and an annual payment by the employer sufficient to ensure that all three sources of revenue taken together will be sufficient when the time comes to pay all pension entitlements in line with inflation. The assessment that the actuaries have made is that in all normal circumstances the income to the fund will ensure that there is enough money in it to meet all liabilities.
The noble Lord has questioned whether the fund can meet all liabilities in circumstances of high inflation. Without wishing to go too far into the details of the actuarial calculations, I should say that those calculations are remarkably less favourable both on inflation and on the return of investment expected than the present reality and the historical trends have shown. For example, over long periods investment in United Kingdom securities has produced a rate of return some 4 per cent. above inflation. Even with a high rate of inflation this assumption is not necessarily jeopardised. So it is simply not possible to relate the ceiling of employer contributions to any specific level of inflation.
The rate of return on investments also has to be taken into account. It has been asked, although I do not think that the noble Lord mentioned it tonight, why a ceiling for the upper level of the employers contribution has been set. Obviously, there has to be a limit on the amount of money that the company can devote to this purpose, as indeed to all other purposes, as a viable commercial entity. Obviously it cannot and should not pay more than it can reasonably afford. If payments up to the ceiling of 12 per cent. will enable index-linking in all normal circumstances, payment beyond that ceiling in extremely abnormal circumstances would, I suggest, be of no benefit because in that circumstance the trading situation of the company is likely to be so adverse and the economic situation of the country so uncertain that the index-linking of pensions makes no sense, even in the private sector or in the Civil Service.
I should also add that the ceiling of 12 per cent. is not a fixed absolute even if the present proposal before

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the unions is agreed by them. The company would have discretion to pay more than that, given a healthy trading position, so that there is an element of flexibility. I hope that these points will have reassured the noble Lord, but if he would like me to give him some further arguments I should be happy to do so.
Lord Stoddart of Swindon: I should very much like to study what the noble Lord the Minister has said. I certainly do not think that he has given me any reassurance about future new employees of the ROFs. But at this time of the night I should like to wait and study what he has said. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Schedule 2 shall be the second schedule to the Bill?
Lord Diamond: I am sorry to detain your Lordships and I recognise that the hour is late, but on this question of adding Schedule 2 to the Bill I must return to the question of the future employees of the ROFs both in terms of their pension arrangements and in terms of their redundancy arrangements. Both those arrangements have been referred to on amendments within this schedule.
As I understand it, the Minister is contemplating that there will he first-class and second-class citizens in the employment of the new ROFs. Is he suggesting that this is a sensible way in which to run a business or to run any firm? It is a recipe for trouble of every kind and the worst possible industrial relations when two men working together on the same lathe, or on adjoining lathes, have different terms of employment. It is a quite impossible situation and no employer would seek to have that; it would not last.
I say, "two different terms of employment" because what is the Minister proposing? He is proposing that there shall be different redundancy arrangements, and proposing in particular that there should be different pension arrangements.
So far as I have understood it the Civil Service salary scales have always taken into account, especially when they have been looked at from outside in relation to what commercial salary scales are, the differences between the terms of employment of the civil servant and the terms of employment of a normal commercial employee. One of those differences has been the more favourable pension arrangements to which civil servants are entitled. That calculation has always been made in arriving at salary scales, and therefore civil servants are paid lower salary scales by virtue of the fact that they are getting higher pension benefits.
Now we come to a situation where you are going to have two classes of employee: one the ex-civil servant who is going to be paid the same level of remuneration, other things being equal, as he was paid before; and the other, a new employee who is newly joined, who, because he is getting less in terms of pension arrangements, must get more in terms of salary scale in order to make his situation equal. We are going to have the ridiculous arrangement that a new employee working side by side with an old employee is going to get more in terms of salary in his pay packet than the old
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employee by virtue of the fact that he has not worked as long within these factories.
It is absolute nonsense. It is an impossible situation in terms of normal employee-employer relations, and it is an impossible situation in terms of having good industrial relations, and it is an impossible situation in terms of trying to relate these pension and redundancy arrangements. The only solution is to give the new employees the same terms in all respects as the old employees—the same salary scales, and therefore the same pension rights. The Minister has so far said that those same pension rights will not be available. I think that this is a recipe for chaos, and I am bound to say so.
10.33 p.m.
Lord Trefgarne: I am sorry that the noble Lord takes that view. I have to tell him that I once worked in a company where I was a comparatively new entrant, and the pension scheme that I had the benefit of was actually less favourable than the scheme for some of the more senior employees in the company who had transferred in from another company which my company had taken over. The arrangements to which the noble Lord has drawn attention are not in fact particularly novel.
The other point that I should like to put to the noble Lord is that the pension scheme which is presently enjoyed by civil servants, and will continue to be enjoyed by those who transfer into the new companies, is a very favourable one indeed. There is no question about that. The Government therefore think it right that we should stand behind that scheme so far as the existing employees of the ordnance factories are concerned who transfer into the new organisation, but that we should not be required to stand behind it in respect of the new employees who subsequently join the new ordnance factory organisation.
I believe that it is right and proper that that new scheme should be the one that is set up by the new companies in the light of the new circumstances in which they find themselves, and that that scheme should not have the potential of being a burden upon the new company, as I think it would be if we were to follow the line proposed by the noble Lord.
Lord Stoddart of Swindon: I should like briefly to follow on what the noble Lord, Lord Diamond, has said and simply to emphasise what he has said. Despite what the noble Minister says his experience has been, the major bone of contention in the industrial scene is a disparity between people's conditions of service. If we are to make any progress at all in industrial relations in this country we shall have to standardise pensions and other conditions of service. I beg the Minister to take that very serious point because upon it hinges the future of the industrial relations, not only in the ROFs but in many other areas of employment as well. I beg him to think about this during the Recess. We shall undoubtedly return to it after the Recess, but I beg him and the Government to think about this point because the Government will be perpetuating a system which has proved to be disastrous in industrial relations in so many firms up and down the country.
Schedule 2 agreed to.
[Amendment No. 31 not moved.]
Clause 5 agreed to.
[Amendment No. 32 not moved.]
Clause 6 agreed to.
[Amendments Nos. 33, 34 and 35 not moved.]
Clause 7 agreed to.
Clause 8 [Vested liabilities on winding up.]
The Deputy Chairman of Committees: Amendment No. 36 not moved?
Lord Graham of Edmonton: Before I say that I do not wish to move Amendment No. 36, I should like simply to give a clear indication that we will return to this at the next stage.
Baroness Vickers Baroness Vickers moved Amendment No. 36:
Page 8, line 24, at end insert—
("() The Secretary of State shall be liable for existing pensions and redundancy payments.")
The noble Baroness said: This was actually my amendment, so I think I should say one small word about it. I listened with great interest to the noble Lord who has taken most of the points that I should like to put. But I still have two that I should like to present to the House.
First, I should like to mention a matter that has not been mentioned before, that
"The Employer may at any time terminate the liability of the Employer under the Scheme"—
this comes under paragraph 13 of the draft trust deed for the transferred pension scheme, which continues:
"by giving notice in writing to the Trustees indicating its reasons. Upon receipt of such notice the liability of the Employer shall be terminated except in respect of payments due on or before the date of such notice".
The other point that I should like to raise is that in the proceedings on the Telecommunications Bill, the Minister, Kenneth Baker, made the following comments. He stated that existing pensions obligations will be honoured fully, even if BT—in this case the ROFs—go out of business: the liability would go to the Secretary of State. I think this is a very important point. I hope that the Minister can tonight give me the assurance that the same arrangements will be made with regard to the ROF employees.
The only other point I should like to discuss is the question of the index-linked pensions. I gather that the trust deed prohibits changes to rules which would reduce benefits, so a successor company could not make changes. I should like to know, whether this refers to the ROFs under the existing pension scheme. I beg to move.
Lord Trefgarne: With respect to my noble friend, I think I dealt with these points, or ones very similar to them, on an earlier amendment. I am not sure whether she was in her place at that time, but perhaps my noble friend may not have understood that I was about to deal with parallel points. If my noble friend would like to study what I said in response to that amendment—although I would not want to put her under any obligation in that way—if she is then not
1732
satisfied perhaps she will come back to me at a later stage.
Amendment, by leave, withdrawn.
Clause 8 to 11 agreed to.
Schedule 3 agreed to.
Lord Trefgarne Lord Trefgarne moved Amendment No. 37:
After Clause 11, insert the following new clause:
("Building and planning contraventions.
.—(1) In this section expressions which are also used in the Building Restrictions (War-Time Contraventions) Act 1946 have the same meanings as in that Act.
(2) Where—

(a) any interest in or right over land is transferred in pursuance of a provision made by virtue of section 1(1)(a) above,

(b) during the war period works on the land not complying with a building law or with planning control were carried out, or a use of the land not complying with planning control was begun,

(c) the works remained, or the use continued, from the end of that period to the time of the transfer, and

(d) immediately before the coming into effect of the transfer the building law or planning control was unenforceable in respect of the works or use.

the works or use shall, at all times after the coming into effect of the transfer, be treated for all purposes as complying with the building law or planning control.").
The noble Lord said: This Government amendment has been tabled to deal with a potentially serious problem which could otherwise affect the Royal Ordnance factories after their incorporation as a Companies Acts company, arising from the operation of the Building Restrictions (War-Time Contraventions) Act 1946. This Act applies to building works and uses of land made or begun between September 1939 and March 1946, defined in the Act as the "war period". Very many buildings were constructed during the war for purposes connected with the war. The local authorities, who were and are responsible for the implementation of a number of planning, building control and health and safety measures, could have taken exception to buildings of the kind raised and to the locations in which they were placed. For obvious reasons they did not exercise their legal rights, and as a result those rights lapsed because the normal statutory period for making objections of six months or one year had in most cases expired.
The 1946 Act therefore revived the rights of the local authorities to take exception to these buildings where they contravened the various planning statutes, and placed a five-year limit on the time during which local authorities could exercise their revived rights. The limit of five years was considered necessary to avoid this sort of suspended right continuing in perpetuity, and to allow owners of the properties affected to know what their position would be likely to be in the event of the local authorities stepping in. At the expiry of the five years all property which had not been the subject of enforcement proceedings would be deemed to comply with the requirements of the various planning laws.
However, a large number of such buildings were constructed on Crown property, which is in any case exempted from the operation of planning laws except where the Crown is expressly included. The 1946 Act provided for the same measures to be taken by local authorities once the Crown interest in the land or buildings had ceased, and gave those authorities again

1733
five years from the date of the cessation of Crown interest in which to take steps to enforce planning control.
I do not want to go into all the detail that I have here on this matter, but it is, I believe, an unexceptionable proposal which I hope your Lordships will find acceptable. I beg to move.
Baroness Vickers: I should like to ask two questions, if I may. As these factories were under the Crown, they did not have the application of the Health and Safety at Work Act, and also factory inspectors were not allowed to visit them. I should like to know whether these two provisions will be changed.
Lord Trefgarne: My understanding is that the provisions to which my noble friend refers will be such that once the companies are set up in the private sector then, certainly, the effect of the Health and Safety at Work legislation and the other legislation, too, to which my noble friend referred, will apply. Perhaps I can look into the matter with more care and, if I am wrong, I will write to my noble friend.
On Question, amendment agreed to.
Baroness Vickers Baroness Vickers had given notice of her intention to move Amendment No. 38:
[Printed earlier: cols. 1654–7.]
The noble Baroness said: I think that we broached this subject earlier today and my noble friend the Minister gave me quite a nice reply. I think he is going to give me a copy of the articles of association which I can read, and I shall then see if I need to come back on them at a later stage.
[Amendment No. 38 not moved.]
Clauses 12 to 16 agreed to.
Clause 17 [Short title, etc.]:
Lord Trefgarne Lord Trefgarne moved Amendment No. 39:
Page 13, line 19, leave out subsection (2).
The noble Lord said: I hope that your Lordships will agree, at any rate, that my amendment has the merit of being clear and obvious in its intention. The Government's plan, since before the introduction of the Bill we are considering, has been to enable the ROFs to begin trading as a Companies Act company in October of this year. That was made clear in Parliament at least as long ago as January, when my honourable friend the Minister of State for Defence Procurement moved the Second Reading of the Bill in another place. We had hoped, while expecting and welcoming a very full discussion of the Bill in all its stages, that it would be enacted by the Summer Recess; and that, therefore, with the lapsing of two months the company could have a vesting day, with the making of a scheme, at the beginning of October.
Your Lordships will be aware that that timetable has gone a little awry. We would hope that noble Lords can complete their consideration of the Bill during October and that it may secure Royal Assent fairly soon thereafter, but Royal Assent will obviously not be
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secured before the end of October at the earliest. We have accordingly considered whether we should retain the provision in subsection (2) of Clause 17 of the Bill, or whether it would be reasonable to propose that it should be withdrawn. The provision was inserted in the Bill when first introduced into Parliament, not in response to any particular need but in deference to recent convention. We would have wished to adhere to that convention but we do not think that any practical difficulties will arise if we do not.
The Bill, as I think your Lordships will recognise, has no direct impact on the public and all those directly concerned—including particularly the workforce—have been told of our plans well in advance. In so far as the rights of third parties are affected by the legislation, we shall be taking steps to make information available about the initial scheme or schemes—which, as your Lordships know, is the mechanism for implementing the Act—as soon as they are made. I think it reasonable, therefore, to say that no individual who is affected in some specific way by the Act will be unaware, by the time of enactment, that he has been affected, and he will know in what way.
It is against this background that we have concluded that it would not be inappropriate for us to propose that the Act should come into immediate force following upon Royal Assent to it; and we see advantages in this course, not for any particular Government purpose, as it were, but in the interest of the avoidance of any uncertainty and in the interest of a successful launching of the ROF company. People are expecting the company to start its operations in October and the acceptance of this amendment will mean that we shall virtually achieve that objective and that the Secretary of State will be able to make a scheme in November rather than a delay until 1985 being incurred. I hope your Lordships will feel able to agree to this amendment. I beg to move.
Lord Graham of Edmonton: My Lords, the Minister has said more than once that the plans of the Government have been well-known for a considerable time; I do not imagine that anyone, including the Government, will have anticipated the decisions of your Lordships' House earlier today. It is quite clear from what the Minister said that the original plans were that the Royal Assent to this Bill would have been achieved before the Summer Recess.
Now, because of the Government's own handling of their business timetable, that has proved not to be possible. I am not going to anticipate what the Government will do, or try to do, when we return at the Report stage. All I would simply put on record is that your Lordships have spoken on a very crucial part of the Government's intentions, and if in actual fact that is persisted in at all stages here and in another place, quite frankly the Government's ideas about this Bill will be in a mess. Even if one anticipates that the will of the Government will prevail, we are looking at a situation where, within a matter of weeks, there is still an enormous amount to be done.
The question is that at the moment the unions do not know the organisation of personnel management at the holding company level or at divisional level or plant level. The unions do not know the financial

1735
structures of the companies. The Royal Ordnance factories have not yet decided on all the locations of their divisional headquarters. The scheme setting out the property and assets to be allocated to each of the divisions has not yet been finalised or valued.
Now all of those things are anticipated by the Minister to be uncertain in regard to the precise nature of the Bill, because we have yet to reach the Report stage. All can be done. The Government have, I think, already burnt their fingers in anticipating what would happen to this Bill and its contents. I think it would be a brave man who would hazard a guess as to the precise shape of the final Bill. Whatever the shape, it will not be known till towards the end of October; and there is all this other work to be done.
We do not intend to press any further matters to a vote here this evening. I simply say that the Government would be well advised not to anticipate too much that their will will prevail here or in another place when these matters are tested. The situation is quite unsatisfactory. The Government say their intentions are, and I quote, "to avoid uncertainty". By virtue of your Lordships' decisions in the House here today, uncertainty will be at least perpetuated, not as a result of what the Government want but as a result of what your Lordships' House wants for at least another 10 weeks. Long may the opportunity which your Lordships have taken prevail!
Whatever the outcome, it is very unsatisfactory. It is the Government's intention not to ride roughshod but to take far too much on their plate to get through with the willing collaboration of the employees. The collaboration is there, from the point of view of the spirit, but certainly arrangements will need to be worked out very, very carefully, and in an unhurried state of mind, over the next few weeks. The Government will not find that we shall oppose the amendment, though we certainly shall not support it. However, we await with interest what happens at the next stage.
Lord Mayhew: We on these Benches certainly do not wish to oppose the amendment, but it gives the Minister an opportunity to clear up the uncertainty which has arisen as a result of the decisions of the Committee today. In the light of those decisions what is the intention of the Government with regard to a timetable for vesting and for the introduction of the scheme?
It seems to me that a number of defects in the Bill have been exposed in the course of our debates today, and in addition a degree of uncertainty has been injected into the situation which, as the noble Lord, Lord Graham, has said, is very unsatisfactory and very harmful. Perhaps the Minister will take this opportunity to explain how the Government propose to handle the decisions taken by your Lordships.
Lord Trefgarne: I am afraid that I have no announcements to make in regard to that matter. The Government will, of course, have to consider the implications of the decisions which your Lordships took earlier today, and decide how to proceed.
Baroness Vickers: May I thank the noble Minister for the trouble he has taken over answering all our amendments? He has had a very long and tiring session on this, and I should like to suggest that we have plenty of time now to think out new amendments. Perhaps we shall be more successful in the future.
On Question, amendment agreed to.
Clause 17, as amended, agreed to.
House resumed: Bill reported with the amendments.

Merseyside Development Corporation Bill
Brought from the Commons, read a first time, and referred to the Examiners.
House adjourned at eight minutes before eleven o'clock.