Ordnance Factories and Military Services Bill

HL Deb 19 July 1984 vol 454 cc1688-736

House again in Committee on Clause 1.

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". 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 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 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' 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 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 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 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 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 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 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 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 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, 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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, 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 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 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 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 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 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.

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.

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 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: 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 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 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 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 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 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 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 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 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 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 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—

1. (a) any interest in or right over land is transferred in pursuance of a provision made by virtue of section 1(1)(a) above,
2. (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,
3. (c) the works remained, or the use continued, from the end of that period to the time of the transfer, and
4. (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 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 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 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 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 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.