SCHEDULE

HL Deb 19 July 1984 vol 454 cc1654-84

LIMITATION ON SHARES

PART I

Limitation on Shareholdings

1. It is a cardinal principle that the Company should be and remain under United Kingdom control.

2. In this Article:— Corporation under Foreign Control" means any corporation (other than a Foreign Corporation):—

1. (i) of which one-third or more of the directors (or persons occupying the position of directors by whatever name called) are Foreigners or Foreign Corporations or are accustomed to act in accordance with the suggestions, instructions or directions of a Foreigner or of a Foreign Corporation; or
2. (ii) of which shares carrying more than thirty per cent. of the votes which are ordinarily eligible to be cast on a poll at General Meetings of the corporation are for the time being held by a Foreigner or by a Foreign Corporation or by a Corporation under Foreign Control;

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

1. (a) any corporation other than a corporation which is incorporated under the laws of any part of and which has its principal place of business and central management and control in the United Kingdom; or
2. (b) a government or government department or government agency or body other than of the United Kingdom or any part thereof; or
3. (c) any municipal, local, statutory or other authority or any undertaking or body established in any country other than the United Kingdom; or
4. (d) any other legal entity of any kind whatsoever the legal nature of which is determined by reference to laws (and whether statutory or otherwise) of any country other than the laws of any part of the United Kingdom.

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

1. (a) any person with an "interest" in any Share which would be taken into account in deciding whether a notification to the Company would be required under Part IV of the Companies Act 1981 (as in force as at the date of the adoption of the Articles and notwithstanding any subsequent amendment or repeal thereof), but shall for the purposes of this Article include the interests referred to in section 71(a), (b), (e) and (j) of that Act; and
2. (b) to the extent not already covered in (a) above, any person with or to whom any holder of any Share has agreed or committed himself or become obliged (whether or not in a manner legally binding) to exercise or refrain from exercising any voting rights attached thereto in accordance with that person's suggestions, instructions or directions.

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

1. (a) any retirement benefits scheme for the employees of a business or undertaking carried on (wholly or mainly) in the United Kingdom otherwise than by a Foreigner or Foreign Corporation which is, or is treated by the Commissioners of Inland Revenue as, an exempt approved scheme for the purposes of the Finance Act 1970; or
2. (b) any charity which is registered under the provisions of the Charities Act 1960; or
3. (c) any exempt charity within the meaning of that Act other than (in any such case) a retirement benefits scheme, charity or exempt charity of which the majority of the Trustees are Foreigners, Foreign Corporations or Corporations under Foreign Control.

Scheme Share" means any share in the capital of the Company which is at the material time held by the trustees of any profit sharing scheme established by the Company and approved by the Board of Inland Revenue in accordance with the provisions of Chapter III of Part III of the Finance Act 1978; Share" means any share in the capital of the Company (not being a Scheme Share) which ordinarily carries the right to vote on a poll at General Meetings of the Company; United Kingdom" for the purposes of this Article shall include the Channel Islands and the Isle of Man.

3. The Directors shall not register any person as a holder of a Share (other than an original allottee under an issue of Shares by way of capitalisation of profits or reserves made pursuant to these presents) unless there has been furnished to them a declaration (in such form as the Directors may from time to time prescribe) signed by or on behalf of such person (or, in the case of a corporation, sealed by the corporation or signed on its behalf by an attorney or duly authorised officer or agent of the corporation), together with such evidence as the Directors may require of the authority of any signatory on behalf of such person, stating that, upon registration of such Share in the relevant name or names, either (i) such Share will not be a Foreign-held Share or (ii) such Share will be a Foreign-held Share. The Directors shall in any case where they may consider it appropriate require such person to provide such evidence or give such information as to the matters referred to in the declaration as they think fit. The Directors shall decline to register any person as a holder of a Share if such a declaration or further evidence or information is not provided or given.

4. The Directors shall maintain a separate register in which shall be entered particulars of any Share which:—

1. (a) has been acknowledged by the holder (or by any one of joint holders) to be a Foreign-held Share; or
2. (b) has been declared to be a Foreign-held Share by virtue of a declaration of the Directors made pursuant to paragraph 8 of this Article;

and in either case which has not ceased to be a Foreign-held Share.

5. If at any time the aggregate number of Foreign-held Shares of which particulars are entered in the register maintained pursuant to paragraph 4 of this Article results in more than 15 per cent. of the votes which are ordinarily eligible to be cast on a poll at General Meetings of the Company being exercisable in respect of Foreign-held Shares ("a Permitted Maximum") Excess Foreign-held Shares shall be dealt with in accordance with paragraph 9 of this Article. It shall be for the Directors to decide whether or not a Foreign-held Share is an Excess Foreign-held Share but, in making any such decision, the Directors shall, so far as practicable, have regard to the order of date in which particulars of Foreign-held Shares have been, or are to be, entered in the separate register as aforesaid save in circumstances where such would, in the opinion of the Directors, be inequitable when the Directors shall apply such other criterion or criteria as they consider appropriate.

6. Subject as hereinafter mentioned, the Directors shall remove from the register maintained pursuant to paragraph 4 of this Article any Foreign-held Share if there has been furnished to them a declaration (in such form as the Directors may from time to time prescribe) signed by or on behalf of the holder of such Foreign-held Share (or, in the case of a corporation, sealed by the corporation or signed on its behalf by an attorney or duly authorised officer or agent of the corporation), together with such evidence as the Directors may require of the authority of any signatory on behalf of such holder stating that such Share is no longer a Foreign-held Share. The Directors shall also in any case where they may consider it appropriate require such holder to provide such evidence or give information as to the matters referred to in the declaration as they think fit. The Directors shall not remove from such register any Foreign-held Share if such a declaration or further evidence or information is not provided or if they are not satisfied that the Share is not a Foreign-held Share.

7. Subject to the provisions of this Article, the Directors shall, unless any Director has reason to believe otherwise, be entitled to assume without enquiry that all Shares, other than those particulars of which are entered in the separate registers maintained by the Directors pursuant to paragraph 4 of this Article, are not Foreign-held Shares. Nevertheless, the Directors may at any time give notice in writing to the holder (or to any one of the joint holders) of a Share requiring him to make a declaration (in such form as the Directors may prescribe) within such reasonable period as may be specified in the notice as to whether or not the Share is a Foreign-held Share.

8. Whether or not they have given a notice under paragraph 7 of this Article, if at any time it appears to the Directors that a Share which they have not treated as a Foreign-held Share may be such a Share, they shall give notice in writing to the holder (or to any one of joint holders) requiring him to show to their satisfaction that such a Share is not a Foreign-held Share. For this purpose failure to make a declaration pursuant to paragraph 7 of this Article shall be sufficient reason for the Directors so acting. If within 21 days after the giving of such notice (or such extended time as in all the circumstances the Directors shall consider reasonable) they are not so satisfied, the Directors shall declare such Share to be a Foreign-held Share, and enter the same appropriately in the register maintained pursuant to paragraph 4 of this Article.

9. The Directors shall give notice in writing to the holder (or to any one of the joint holders) of any Share which appears to them to be an Excess Foreign-held Share requiring him to transfer such Share to another person so that it will cease to be a Foreign-held Share (a "Notice of a Required Disposal") and informing him of the restrictions attached to such Share by virtue of paragraph 10 of this Article. If within 21 days after the giving of a Notice of Required Disposal (or such extended time as in all the circumstances the Directors shall consider reasonable) such notice is not complied with to the satisfaction of the Directors the Directors shall arrange for the Company to sell the Share specified in such Notice at the best price reasonably obtainable to any other person so that the Share will cease to be a Foreign-held Share. For this purpose the Directors may authorise in writing any officer or employee of the Company to execute on behalf of the holder or holders a transfer of the Share to the purchaser and may issue a new certificate to the purchaser. The net proceeds of the sale of such Share shall be received by the Company whose receipt shall be a good discharge for the purchase money and shall be paid over by the Company to the former holder or holders upon surrender by him or them of the certificate for the Share, but such proceeds shall in no circumstances carry interest against the Company.

10. On the giving of any Notice of Required Disposal, the then registered holder of any Share specified in such notice shall not in respect of such Share be entitled to receive notice of, or attend or vote at, any General Meeting of the Company or meeting of an class of shareholders of the Company; and the rights to attend any such meeting (whether in person or by proxy) to speak and to demand and vote on a poll attaching to such Share shall accordingly transfer from the then registered holder and vest in the Chairman of any such meeting. The chairman shall be informed by the Directors of that fact.

11. Any notice given pursuant to paragraphs 7, 8 or 9 of this Article may relate to more than one Share and shall in any event specify the Share or Shares to which it relates.

12. The Directors shall not be required to give any reasons for any decision of declaration taken or made in accordance with this Article.

PART II

THE SPECIAL SHARE

13. The Special share may be held only by, or transferred to, a Minister of the Crown or person authorised in writing by such a Minister to hold the same on his behalf.

14. Each of the following matters shall be deemed to be a variation of the rights attaching to the Special share:—

1. (i) the amendment or removal of all or any of Articles and;
2. (ii) the voluntary winding-up of the Company;
3. (iii) any disposal which, alone or when aggregated with any other disposals forming part of, or connected with, the same or a connected transaction, constitutes a disposal of the whole or a material part of the assets of the Company and its subsidiaries (in this Article referred to as "the Group");
4. (iv) any disposal which, because of its size, is required by the Council of The Stock Exchange to be consented to or approved by the Company in general meeting; and
5. (v) the issue of any shares in the capital of the Company with voting rights attached thereto not identical with those of the Ordinary shares.

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

1. (i) its book value, calculated by reference to the then latest audited consolidated accounts, or the total consideration to be received on its disposal, is not less than 15 per cent. of the book value of the net assets of the Group; or
2. (ii) the average profits attributable to it represent at least 15 per cent. of the average profits of the Group, being the average for the last three years (or such shorter period) for which audited accounts are available and after deducting all charges except taxation and extraordinary items;

and the book value of any assets and the attributability of profits thereto shall, in each case, be conclusively determined (at the request of the Special Shareholder) by the Auditors and be subject to such adjustment as the Auditors consider appropriate.

16. The Special Shareholder shall be entitled to receive notice of and attend all General Meetings and meetings of the holders of voting shares but may not speak or vote at such meetings.

17. On a return of assets in a winding-up of the Company, the Special Shareholder shall be entitled to repayment of the captial paid up on the Special share in priority to any payment to other members. The Special share confers no further right to participate in the profits or assets of the Company.

Provision to be inserted in Articles dealing with Directors

18. It is a cardinal principle that at least three quarters of the directors at any time should be persons who are either British citizens or British dependent territories citizens or British overseas citizens by virtue of the British Nationality Act 1981 (referred to in these Articles as "British Directors"). Accordingly there shall at all times be not less than six British Directors and not more than two directors who are not British Directors (the latter being referred to in these Articles as "Foreign Directors").

19. Before accepting his office any intended director shall furnish the Company with a declaration (in such form and with such accompanying evidence as the directors may from time to time prescribe) signed by him stating that on appointment he either will be, or will not be, a British Director. Any British Director shall likewise immediately inform the Company in writing if at any time he should cease to be qualified to be a British Director.")

If that is to your Lordships' convenience, I am quite happy to deal with Amendment No. 5 and Amendment No. 38 as proposed by my noble friend.

The Government have already announced publicly their commitment that the articles of association of the privatised company shall include provisions preventing any foreign takeover of the new Royal Ordnance Company. There has never been any question of the Government's intention in this regard. We have made it clear from the outset that foreign control of the company would not be countenanced.

Towards the end of Committee consideration of this Bill in another place, my honourable friends made available copies of the intended draft articles. I have gone very carefully through the new schedule which my noble friend would, by her amendments, see added to the Bill and there seems to be a remarkable correspondence between it and the draft articles to which I have referred. I would not assert that they are word for word the same, but there is a sufficient similarity to enable me to be able to repeat the Government's assurance that these provisions—or something very much like them—will be incorporated in the articles of association of the new Royal Ordnance Company.

For those of your Lordships who have not examined the articles in detail, let me provide a brief explanation of how they work. They require the company to set up a register in which shall be entered particulars of all shares owned by foreign nationals or in which a foreign national has any kind of interest. Before any person may be registered as a holder of a share, he is required to declare whether or not it is owned, or any interest in it is owned, by a foreign national. If the directors have any reason to believe that a share which is not included in the register of foreign-held shares is in fact one such share, they may make appropriate inquiries and demand appropriate information.

As a result, the register of foreign-held shares will be comprehensive and complete. It is then provided in the articles that the numbers of shares appearing on the register of foreign-held shares shall not exceed, in the aggregate, 15 per cent. of the total issued share capital of the company. As the Committee will appreciate, that percentage is too low to enable even all foreign shareholders acting together to exercise any kind of control over the new company.

Lord Diamond

May I intervene for one moment? I am most grateful to the noble Lord. Can he say why any number of foreign shares is appropriate?

Lord Trefgarne

I am not sure why it is necessary to exclude every conceivable foreign shareholder, provided of course that the limit is kept at the level that I have suggested, where no vestige of control is conceivably possible.

The articles provide, in addition, for the issue of a special share to the Secretary of State. This special share will enable him to veto any alteration of the articles. The avoidance of foreign control provisions are therefore entrenched. The special share also entitles the Secretary of State to veto the disposal of any material part, or all, of the assets of the company. He can thus prevent the sale of part of the business to any foreign interest—or for that matter to any British interest. Finally, the articles require that at least three-quarters of the directors should be British citizens.

I should add, in case the quesion might have occurred to any Members of the Committee, that the discrimination between British citizens on the one hand and foreign nationals on the other would normally be contrary to the provisions of the Treaty of Rome, and therefore illegal. But Article 223 of the Treaty provides: Any member state may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material". We are advised that these provisions of the Treaty of Rome will enable the company to adopt articles of association which discriminate in the way I have mentioned.

In the circumstances I have to say that the Government look with some sympathy upon these amendments. However, there is an overriding reason why we should not put into this Bill a statutory obligation of this kind. We do no know what circumstances might occur in the future which would require a change in the articles. For example, we may find that they do not work in quite the way intended, and that they could be improved; or, that they work some injustice and require amendment in that respect. It may even be that in the changed situation of five or 10 years from now we find that circumstances are such that, even while we maintain our commitment that there shall be no foreign control of this company, we can dispense with some of the articles altogether. If we put into this Bill a requirement that the company shall include these articles in its articles of association, changes of this kind may prove impossible without an amending Act of Parliament. I think the Committee would agree that this could be a ridiculous situation. Given the exigencies of the parliamentary timetable, any future alteration of these articles would be virtually impossible.

I am pleased to be able to repeat the Government's assurance that articles to the same effect as those set out in the proposed new schedule, even if they are not the same word for word, will be incorporated in the articles of association of the new Royal Ordnance company. Having regard to that assurance, I hope my noble friend will see fit not to press her amendment.

Lord Diamond

Perhaps I may say a few words, since the noble Lord has referred to Amendment No. 14, which I do not propose to move. Amendment No. 14 refers to a foreign shareholding and, by the argument, objects to a foreign shareholding of 15 per cent. I merely want to say to the noble Lord that 15 per cent. of the holding in one company held in one pair of hands is a very dangerous holding. It is not a question of one share: it is a question of 15 per cent. of the total shareholding. It is quite normal for a Government, in circumstances such as these, to prevent the shareholding in one pair of hands going above 10 per cent. I think, therefore, that this is a bad provision. They should limit it to nil.

Lord Mayhew

May I ask a single, specific question? If these articles of association are on the same lines as the schedule, then they permit, do they not, any foreigner, without any control, to buy any factory, patent or asset of the ROFs, provided only that it is less than 15 per cent. of the net assets of the ROF? Will the noble Lord comment on this and on the implications?

Lord Trefgarne

I do not think the noble Lord has understood the arrangements correctly. The control of activities of that sort is covered by the special share issued to the Secretary of State, to which I referred during my remarks.

Baroness Vickers

As my noble friend the Minister has been quite sympathetic in his reply, I should like to ask him whether it will be possible to see these revised articles of association by Report stage.

Lord Trefgarne

If my noble friend has not seen them, I shall certainly see that she has a copy.

Baroness Vickers

In view of that, I think I shall withdraw the amendment.

Lord Graham of Edmonton

Objection!

The Deputy Chairman of Committees (Lord WellsPestell)

The Question is that this amendment be agreed to. As many as are of that opinion—

A noble Lord

It has been withdrawn.

The Deputy Chairman of Committees

There has been an objection.

5.16 p.m.

On Question, Whether the said amendment (No. 5) shall be agreed to?

Their Lordships divided: Contents, 99; Not-Contents, 105.

DIVISION NO. 3
CONTENTS
Airedale, L.	Gaitskell, B.
Ardwick, L.	Gallacher, L.
Attlee, E.	Gladwyn, L.
Aylestone, L.	Gosford, E.
Balogh, L.	Graham of Edmonton, L.
Banks, L.	Grey, E.
Beaumont of Whitley, L.	Hall, V.
Beswick, L.	Hampton, L.
Birk, B.	Hanworth, V.
Blease, L.	Harris of Greenwich, L.
Boston of Faversham, L.	Hatch of Lusby, L.
Bottomley, L.	Houghton of Sowerby, L.
Briginshaw, L.	Hughes, L.
Buckmaster, V.	Irving of Dartford, L.
Burton of Coventry, B.	Jacobson, L.
Carmichael of Kelvingrove, L.	Jacques, L.
Carver, L.	Jeger, B.
Cledwyn of Penrhos, L.	Jenkins of Putney, L.
Collison, L.	John-Mackie, L.
Davies of Leek, L.	Kaldor, L.
Dean of Beswick, L.	Kearton, L.
Diamond, L.	Kilmarnock, L.
Donnet of Balgay, L.	Kirkhill, L.
Elwyn-Jones, L.	Leatherland, L.
Ennals, L.	Listowel, E.
Ewart-Biggs, B.	Llewelyn-Davies of Hastoe, B.
Ezra, L.	Lloyd of Kilgerran, L.
Falkland, V.	Longford, E.
Fitt, L.	Lovell-Davis, L.

McGregor of Durris, L.	Simon, V.
McIntosh of Haringey, L.	Stallard, L.
Mackie of Benshie, L.	Stewart of Alvechurch, B.
McNair, L.	Stewart of Fulham, L.
Mayhew, L.	Stoddart of Swindon, L.
Mishcon, L.	Stone, L.
Mulley, L.	Strabolgi, L.
Nicol, B. [Teller.]	Taylor of Blackburn, L.
Oram, L.	Taylor of Mansfield, L.
Peart, L.	Thurso, V.
Phillips, B.	Tordoff, L.
Pitt of Hampstead, L.	Underhill, L.
Ponsonby of Shulbrede, L. [Teller.]	Wallace of Coslany, L.
	Wells-Pestell, L.
Rathcreedan, L.	Whaddon, L.
Rhodes, L.	White, B.
Rochester, L.	Wigoder, L.
Sainsbury, L.	Willis, L.
Seear, B.	Wilson of Langside, L.
Sefton of Garston, L.	Winterbottom, L.
Shackleton, L.	Wootton of Abinger, B.

NOT-CONTENTS
Avon, E.	Lawrence, L.
Barber, L.	Long, V.
Bauer, L.	Lucas of Chilworth, L.
Belhaven and Stenton, L.	Luke, L.
Bellwin, L.	McAlpine of West Green, L
Beloff, L.	Macleod of Borve, B.
Belstead, L.	Mancroft, L.
Bessborough, E.	Margadale, L.
Blakenham, V.	Marley, L.
Boyd-Carpenter, L.	Marshall of Leeds, L.
Broadbridge, L.	Massereene and Ferrard, V.
Caccia, L.	Maude of Stratford-upon-Avon, L.
Caithness, E.
Campbell of Cray, L.	Merrivale, L.
Chelwood, L.	Molson, L.
Cockfleld, L.	Montgomery of Alamein, V.
Coleraine, L.	Mottistone, L.
Daventry, V.	Mowbray and Stourton, L.
De Freyne, L.	Murton of Lindisfarne, L.
Denham, L. [Teller.]	Norfolk, D.
Drumalbyn, L.	Nugent of Guildford, L.
Eccles, V.	O'Brien of Lothbury, L.
Ellenborough, L.	Onslow, E.
Elliot of Harwood, B.	Orkney, E.
Elton, L.	Orr-Ewing, L.
Fanshawe of Richmond, L.	Pender, L.
Ferrier, L.	Porritt, L.
Fraser of Kilmorack, L.	Quinton, L.
Gainford, L.	Rankeillour, L.
Gardner of Parkes, B.	Renton, L.
Gisborough, L.	Renwick, L.
Glanusk, L.	Richardson, L.
Glenarthur, L.	St. Aldwyn, E.
Gormanston, V.	St. Davids, V.
Gray, L.	Saltoun, Ly.
Greenway, L.	Sandford, L.
Gridley, L.	Sempill, Ly.
Hailsham of Saint Marylebone, L.	Skelmersdale, L.
	Soames, L.
Harmar-Nicholls, L.	Southborough, L.
Henley, L.	Stamp, L.
Hives, L.	Stodart of Leaston, L.
Home of the Hirsel, L.	Sudeley, L.
Hornsby-Smith, B.	Swinton, E. [Teller.]
Hylton-Foster, B.	Thomas of Swynnerton, L.
Ilchester, E.	Trefgarne, L.
Ironside, L.	Trumpington, B.
Killearn, L.	Ullswater, V.
Kilmany, L.	Vaux of Harrowden, L.
Kinnaird, L.	Vivian, L.
Kinnoull, E.	Westbury, L.
Kitchener, E.	Whitelaw, V.
Lane-Fox, B.	Young, B.
Lauderdale, E.

Resolved in the negative, and amendment disagreed to accordingly.

5.25 p.m.

Lord Graham of Edmonton moved Amendment No. 6: Page 2, line 15, at end insert— ("() A scheme shall expressly prohibit any diminution or elimination by any prescribed company or companies of the legal and trade union rights of any employee working for or in the Ordnance Factories.").

The noble Lord said: This is considered to be a very important amendment, not only on this side of the Committee but among many other people, and especially by the ROF trade union members. The Minister may very well say that there is no need to write such matters into the Bill, but the union members with whom we have discussed this, without casting aspersions on the Ministers with whom they have negotiated, feel that they would be much happier—as indeed, I believe, would your Lordships—to see this written into the Bill so that there can be no dubiety.

The Minister will tell us that he has absolute confidence that those to whom the factories are sold will respect the need for, and their obligations to, good industrial relations in the way that this and other Governments have. Unhappily, we are in the middle of trying to resolve the GCHQ issue. We cannot take it for granted that the Government, or indeed a company, will not find a pretext to whittle away something that is now accepted as a right and a safeguard. I beg to move.

Lord Trefgarne

I believe that this amendment is unnecessary. The legal and trade union rights of any employee, whether in the Royal Ordnance factories or elsewhere, are protected by legislation already. As I am sure your Lordships are aware, the Employment Protection (Consolidation) Act 1978 guarantees the right of employees to belong to and to take part in the activities of a trades union. If a company tries to dismiss an employee for belonging to, or taking part in the activities of, a trades union, that employee can seek redress in an industrial tribunal. No employer may contract out of these provisions of the 1978 Act. Employees of the ROFs will be entitled to all their trades union rights at the date of transfer, and the company will not be able subsequently to deprive them of those rights, so the amendment is redundant.

Concern has been expressed about the application of the 1978 Act to employment under the Crown. While a Minister of the Crown may certify that the Act should not apply on grounds of national security to any particular Crown employment, such an exemption would be impossible in the new company. Employment within the new ROF company would not be Crown employment as defined by the 1978 Act, and there would accordingly be no power to exempt such employment from the provisions of the Act. In no way can the Government remove or diminish the trades union rights of any employee after vesting day.

I trust that the noble Lord will therefore withdraw his amendment. It is unnecessary on policy grounds, and would, I think, set a dangerous precedent by allowing a scheme to override a statute if that statute is in disagreement with the scheme. Schemes will be made to accord with Acts of Parliament, and not to override them.

Lord Stoddart of Swindon

I do not think that the Minister has answered satisfactorily the points raised by my noble friend. It is all very well to talk about protection under the 1978 Act, but the fact is that people now working at the Royal Ordnance factories have had conditions of service, and ways and means of negotiating settlements and negotiating on grievances that will not be protected under the 1978 Act. We are talking here about the consultative arrangements that were available within the Whitley Council and, indeed, the generally good arrangements for civil servants to consult their employers and to settle internal differences. I do not think, frankly, that the Minister's reply to my noble friend in any way deals with the matter. We believe that the amendment is a reasonable and a good one, and indeed a very necessary one. We shall therefore press it to a vote.

5.31 p.m.

On Question, Whether the said Amendment (No. 6) shall be agreed to?

Their Lordships divided: Contents, 95; Not-Contents, 105.

DIVISION NO. 4
CONTENTS
Airedale, L.	Kilmarnock, L.
Ardwick, L.	Kirkhill, L.
Attlee, E.	Leatherland, L.
Aylestone, L.	Listowel, E.
Banks, L.	Llewelyn-Davies of Hastoe, B
Beaumont of Whitley, L.	Lloyd of Kilgerran, L.
Beswick, L.	Longford, E.
Birk, B.	Lovell-Davis, L.
Blease, L.	McGregor of Durris, L.
Boston of Faversham, L.	McIntosh of Haringey, L.
Bottomley, L.	Mackie of Benshie, L.
Bruce of Donington, L.	McNair, L.
Buckmaster, V.	Mayhew, L.
Burton of Coventry, B.	Meston, L.
Caradon, L.	Mishcon, L.
Carmichael of Kelvingrove, L.	Mulley, L.
Carver, L.	Nicol, B. [Teller]
Cledwyn of Penrhos, L.	Oram, L.
Collison L.	Peart, L.
Davies of Leek, L.	Phillips, B.
Dean of Beswick, L.	Pitt of Hampstead, L.
Diamond, L.	Ponsonby of Shulbrede, L. [Teller]
Donnet of Balgay, L.
Elwyn-Jones, L.	Rathcreedan, L.
Ennals, L.	Rhodes, L.
Ewart-Biggs, B.	Rochester, L.
Ezra, L.	Seear, B.
Falkland, V.	Sefton of Garston, L.
Fitt, L.	Shackleton, L.
Gaitskell, B.	Stallard, L.
Gallacher, L.	Stewart of Alvechurch, B.
Gladwyn, L.	Stewart of Fulham, L.
Gosford, E.	Stoddart of Swindon, L.
Graham of Edmonton, L.	Stone, L.
Grey, E.	Strabolgi, L.
Hanworth, V.	Taylor of Blackburn, L.
Harris of Greenwich, L.	Taylor of Mansfield, L.
Hatch of Lusby, L.	Tordoff, L.
Houghton of Sowerby, L.	Underhill, L.
Hughes, L.	Wallace of Coslany, L.
Irving of Dartford, L.	Wells-Pestell, L.
Jacobson, L.	Whaddon, L.
Jacques, L.	White, B.
Jeger, B.	Wigoder, L.
Jenkins of Putney, L.	Willis, L.
John-Mackie, L.	Wilson of Langside, L.
Kaldor, L.	Winterbottom, L.
Kearton, L.	Wootton of Abinger, B.

NOT-CONTENTS
Ampthill, L.	Lauderdale, E.
Avon, E.	Lawrence, L.
Barber, L.	Lindsey and Abingdon, E.
Bauer, L.	Long, V.
Belhaven and Stenton, L.	Lucas of Chilworth, L.
Bellwin, L.	Luke, L.
Beloff, L.	McAlpine of West Green, L.
Belstead, L.	Macleod of Borve, B.
Bessborough, E.	Mancroft, L.
Blakenham, V.	Margadale, L.
Boardman, L.	Marley, L.
Boyd Carpenter, L.	Marshall of Leeds, L.
Caccia, L.	Massereene and Ferrard, V.
Caithness, E.	Maude of Stratford-upon-Avon, L.
Campbell of Croy, L.
Chelwood, L.	Merrivale, L.
Cockfield, L.	Molson, L.
Coleraine, L.	Montgomery of Alamein, V.
Daventry, V.	Mottistone, L.
Denham, L. [Teller]	Mowbray and Stourton, L.
Drumalbvn, L.	Murton of Lindisfarne, L.
Eccles, V.	Norfolk, D.
Ellenborough, L.	Nugent of Guildford, L.
Elliot of Harwood, B.	O'Brien of Lothbury, L.
Elton, L.	Onslow, E.
Fanshawe of Richmond, L.	Orkney, E.
Ferrier, L.	Orr-Ewing, L.
Fraser of Kilmorack, L.	Pender, L.
Gainford, L.	Quinton, L.
Gardner of Parkes, B.	Rankeillour, L.
Gisborough, L.	Renton, L.
Glanusk, L.	Renwick, L.
Glenarthur, L.	St. Aldwyn, E.
Gormanston, V.	St. Davids, V.
Gray, L.	Saltoun, Ly.
Greenway, L.	Sandford, L.
Gridley, L.	Sempill, Ly.
Hailsham of Saint Marylebone, L.	Skelmersdale, L.
	Soames, L.
Hanson, L.	Southborough, L.
Harmar-Nicholls, L.	Stamp, L.
Henley, L.	Stodart of Leaston, L.
Hives, L.	Sudeley, L.
Home of the Hirsel, L.	Swinton, E. [Teller]
Hornsby-Smith, B.	Terrington, L.
Hylton-Foster, B.	Thomas of Swynnerton, L.
Ilchester, E.	Trefgarne, L.
Ironside, L.	Trumpington, B.
Killearn, L.	Ullswater, V.
Kilmany, L.	Vaux of Harrowden, L.
Kinnaird, L.	Vivian, L.
Kinnoull, E.	Westbury, L.
Kitchener, E.	Whitelaw, V.
Lane-Fox, B.

Resolved in the negative, and amendment disagreed to accordingly.

5.38 p.m.

Lord Graham of Edmonton moved Amendment No. 7: Page 2, line 28, at end insert ("and the consideration of the transfer under this subsection shall be such consideration as shall be certified as being fair and true by the Comptroller and Auditor General.")

The noble Lord said: With the score at 2 all, we will decide the result by penalties, I think. This amendment deals with the clearly very difficult problem of the valuations and satisfaction because the situation has been looked at objectively. The Minister is in a far better position than we are to talk in terms of the valuations. We respect the confidentiality in these matters, but certain public statements have been made as to the likely asset value. On later amendments we shall be talking in terms of the possible figures that might be obtained. It would appear that, in cash terms, we are giving away a great national asset for very little.

This amendment was debated originally in another place. On that occasion it was withdrawn on the strength of the statement that the Government would consider how best to achieve the tightening up and clarification which at that time they admitted we required. They did this by a subsequent amendment which went some way towards meeting the points that had been made. However, it would seem that the amended subsection does not cover the main thrust of the arguments we have about the valuation of assets and protection for the public and also for the taxpayer. This amendment provides that before certain assets of value are transferred the Comptroller and Auditor General should undertake terms of valuation.

The Tenth Report of the Public Accounts Committee, for 1981–82, dealt with the problems, still unresolved, of the sale of shares in British Aerospace. In this House on Friday, 22nd June, the Minister said, at col. 572, in relation to the introduction of private capital, that the Government, cannot decide now the exact means, whether by flotation of shares in the whole organisation, by direct sale of parts or of subsidiary companies, or by entering into joint ventures". An earlier debate and a decision against the Government's intentions in respect of how to dispose of the Royal Ordnance factories may very well have a bearing on this debate. I respect the fact that the Report stage in your Lordships' House may be a suitable opportunity to look at this again.

What we are inviting the Committee to do is to agree that we ought not to support measures of this kind, about which there is no information. What we are seeking is to say that when valuations are even contemplated and have been worked through, the Comptroller and Auditor General ought to be brought into the picture. Perhaps the Minister is going to say that this amendment has his sympathy, but that there are other ways. He may say that if we are not satisfied with the present wording of the Bill but agree to withdraw this amendment, his officials and others will look at other forms of words and on Report stage seek to meet our point. We are far from satisfied with the present intentions and the present coverage by the Bill of those intentions. They do not meet fully our desire to make sure not only that the public get the maximum to which they are entitled but also that some people do not get more than the amount to which they are entitled. I beg to move.

Lord Diamond

I want to support everything that the noble Lord, Lord Graham, has said. As is the case with most of the amendments we are moving, this amendment is very much in the interests of Parliament and parliamentary scrutiny. As I understand it, it was desired to consider at the same time Amendment No. 8, and I should like to speak to that also. Amendment No. 8: Page 2, line 36, after ("value") insert ("(being the value as certified by an Independent Professional Valuer)"). Amendment No. 8 deals with the valuation being a valuation of an independent professional valuer. It is a very simple point. The Bill as at present constructed, as far as I can read it, does not require a valuation to be made by any expert at all. The valuation could be purely arbitrary, and that is very unsatisfactory. The Government must know that there is a very recent example—Sealink is the one I am referring to—where differences of view about valuations can well be maintained. In their own interests, the Government ought to see to it that the valuation on the basis of which the Treasury accepts the consideration for the sale of these assets is a valuation which can stand up to examination. The only way one can achieve that, in three short words, is by having an independent professional valuer.

Lord Trefgarne

As your Lordships will appreciate, the purpose of subsection (3) of Clause 1 of the Bill is to protect the creditors of any company out of which property is transferred by means of a scheme made under Clause 1(1)(b) or (c). It provides that a company from which property is transferred should be paid for, either in cash or by the transfer to that company of property to equivalent value; or, failing that, that the distributable reserves—which belong to the Secretary of State in his capacity as sole shareholder—should be written down to an equivalent value. The purpose is to keep intact the assets of the company immediately available for the payment of creditors. Your Lordships will understand that the distributable reserves of a company are not ordinarily available to the creditors, except in the event of a winding-up.

Of course, in order to comply with the provisions of his subsection, it will be necessary to value the property transferred. In any case where it is necessary to certify the value of property, appropriate experts would be employed to do so. Ordinarily one might expect to use the company's auditors, who will be responsible for certifying the accounts of the company as representing a true and fair picture of its position. The Royal Ordnance Company's auditors will be the distinguished and highly reputable firm of Messrs. Coopers and Lybrand. They may be expected to make any necessary valuation for the purposes of this clause. They may, of course, act in conjunction with other expert valuers if the property which requires valuation is land, buildings, or other assets upon which a specialist opinion would be advisable or useful.

I would not suggest that the Comptroller and Auditor General would produce anything but a thoroughly competent and accurate valuation of property for the purpose of this clause. It is, however, difficult to understand why he should be required to act under this particular subsection, and not elsewhere in the Bill. There is good reason why, in fact, he should not be required to act at all. It is our intention to set up an independent company, which would be free of any suggestion of Government control. It is important not only that the company should be free of such control, but that it should be seen to be free. For the company to be subject to a statutory obligation to deliver up its books and records to the Comptroller and Auditor General, for however limited a purpose, would not ensure the appearance of independence upon which the company's success in the market place will inevitably depend.

There is no reason to suspect that any valuation made under the provisions of this subsection, or for that matter under any other provision in the Bill, will be other than independent, fair and reasonable. There is no reason, therefore, to involve the Comptroller and Auditor General, or any other arm of Government. Thus, if the Government's policy with regard to the Royal Ordnance Company is to bear fruit, the Government have no option but to oppose this amendment.

Those were my observations on the amendment proposed by the noble Lord, Lord Graham. Turning now to the second amendment we are considering, that is, Amendment No. 8, to which the noble Lord, Lord Diamond, was speaking, I want to say that in establishing the Royal Ordnance factories as a public limited company the Government are seeking to put the company in the same position as it would have been if it had been trading as a company for a period of time. In a sense, of course, it will have been, since its trading activities after vesting day will be a continuation of the trading activities of the Royal Ordnance Factories Trading Fund.

If the company had been in business previously as a separate company, it would have a set of accounts which, in the normal way of any such company, would reflect its current trading position. Accordingly, when the capital structure of the new company is decided upon—and this has yet to be done—we shall attempt to give it that form which is best calculated to assist the company's future trading prospects. We expect that the opening account will follow closely the closing accounts of the Royal Ordnance Factories Trading Fund. But there may need to be some differences, because we shall be dealing with an independent commercial entity, and no longer with an adjunct of Government. These accounts, as I have said, will reflect the trading position which we believe will constitute an appropriate starting point for the company. They will not purport to show the net asset value of the company, which is not the purpose of trading accounts.

I would emphasise this last point because I have the impression—and I hope that I am not doing the noble Lord, Lord Diamond, an injustice—that Amendment No. 8 seems to be based upon a misapprehension that it is indeed the function of the statutory accounts of a company to set out its asset value. I think that this would be the case only if the accounts were prepared for the purposes of a winding up, or an asset sale.

We are, as it happens, at the moment in the process of obtaining an independent valuation of all the fixed assets which it is intended to transfer to the new company. But the values so found will not necessarily be reflected in the opening accounts. It is quite likely, for example, that the value of the fixed assets will appear in the accounts calculated on a depreciated historic cost basis. This would be a normal and far from exceptional procedure. The effect of this amendment would be to require the accounts to be produced on a basis which might not be the most satisfactory one for the purposes of the future trading position of the company.

I hope that it is not necessary for me to assure your Lordships that there is no suggestion of transferring assets to the new company at an undervalue. If we proceed to a flotation of the shares in the company, which at this point, as I have said, would appear to be the most likely method of introducing private capital, the prospectus will need to disclose the value of the company's assets. Obviously the value, as determined by our independent valuers, and disclosed in the prospectus, will influence the amount which investors are prepared to pay for the shares. But it will be only one of several factors which will determine the share price. The value which the Government ultimately receive for the company will, therefore, be to some extent affected by the market value of the assets, but will not be dependent on that value.

Of course, while the shares are wholly owned by the Secretary of State, the question of their value does not arise. During this period the Government investment in the Royal Ordnance factories will, in effect, be maintained, though in a different form. But the value of that investment will not be changed.

I cannot, therefore, accept Amendment No. 8. To do so would be to saddle the company with an obligation which might not be in its best commercial interests. I very much hope that the noble Lord will take that point on board and that he will not move his amendment when we come to it. I also hope that the noble Lord, Lord Graham, will see fit to withdraw his amendment.

Lord Graham of Edmonton

I accept completely that the Minister has sought to give assurances in the absence of these amendments. First, he has sought to assure the taxpayer and the public that there are mechanisms which will ensure that as far as they are concerned these assets, which eventually are to be sold, will be sold at a fair price. Secondly, he has sought to assure those who purchase that the price at which the assets will be offered is a fair price. However, the Minister will be well aware of the comparatively enormous sums of money which are made by other people who are involved in the business of the flotation of shares. One can easily see valuations placed upon assets to be sold, which take into account the costs which have to be borne by the money market and those who deal in it. We have seen millions and millions of pounds paid and added to the asset value.

I am a professional in a secretarial sense but not in the very exact science, these days, of professional valuation. There is a range of assets that are to be valued. At present nominal or sometimes notional values are placed in the accounts. Indeed, the trading accounts system is just a collection of accounts. I imagine that some surprises could be struck. The Ministry must have some idea. They have said no more than they said earlier during the public part of the exercise; namely, that perhaps it might be £250 million or £300 million. One does not know, but one could be surprised. We simply want it to be appreciated that we are against the sale at all, but that if the sale is to take place we want to be satisfied that the best professional and independent advice is sought.

I want to press the Minister a little more on the role of Messrs. Coopers and Lybrand, who I think he said were the Ordnance factory auditors and who have statutory obligations. Can the Minister tell us a little more about their role in the valuation? From my limited knowledge, to be competent to audit involves more than adding up columns on a sheet, because from an accountancy point of view one needs to be satisfied on a range of other matters. We are talking here in terms of millions of pounds. Yesterday we had the strong feeling on this side of the House that the Sealink assets were certainly worth a great deal more than the figure which professional advisers had advised the Government was a fair price. In other words, there is room for argument as to the precise amount of money which it is possible to get—not even what the assets are worth but what one ought to ask the market to pay. If we are to sell public assets we are concerned that the public should receive the maximum price and that no-one else should get a slice of the action in any other way.

I do not know what the noble Lord, Lord Diamond, will do as regards Amendment No. 8. However, my inclination at the moment as regards Amendment No. 7 is that we should read very carefully what the Minister has said and take advice from outside the House on whether the basis upon which the Minister is to proceed is likely to obviate what all too sadly has been evident recently under this Government—namely, that whoever receives the price of a public asset when it is sold, there are other people who in our view are not entitled to a slice of it but who also get some of the action.

Lord Trefgarne

I am not sure whether the noble Lord, Lord Graham, wants me to dilate on the duties of the auditors of the company. I will do my best "off the top of my head", as they say, to help the noble Lord. As I recall the position—and I confess that I am not an expert in these matters, but I believe that the noble Lord, Lord Diamond, is an expert—the arrangement is that the auditors are appointed by the directors under the Companies Act. The auditors' duties are laid down in the Companies Act. But as far as the question of the valuation is concerned, I believe that the arrangement—and this applies to every company—is that the directors propose a valuation of the assets involved in their company and it is up to the auditors to decide whether they are able to accept that valuation or not either in the light of their own knowledge or in the light of any expert opinion that they may take.

In terms of property—and I referred to this in my remarks just now—the directors themselves very often obtain a valuation by experts of the property involved in their company and submit those figures to the auditors for inclusion in what are eventually the audited accounts and balance sheet.

Lord Diamond

With great respect, the noble Lord has got it very nearly right. Of course, the directors only appoint the auditors in an interim way until their appointment can be confirmed by the shareholders, because the auditors are responsible to the shareholders of a company. The noble Lord has got it quite right and, with great respect, I thought that the noble Lord, Lord Graham, had got it quite right when he said that this seemed to be an appropriate occasion to consider very carefully what the Minister has had to say with regard to Amendment No. 7. However, Amendment No. 8 is a different matter and I shall move it when I am fortunate enough to catch the Chairman's eye.

Lord Graham of Edmonton

If it will assist the Committee, in the light of what the Minister has said and pending further consideration of future action, I beg leave to withdraw Amendment No. 7.

Amendment, by leave, withdrawn.

5.59 p.m.

Lord Diamond moved Amendment No. 8:

[Printed earlier.]

The noble Lord said: I beg to move Amendment No. 8 and I do so in the light of what the noble Lord the Minister has been good enough to explain. In short, I am saying that his explanation is not good enough. First, there is the argument, which is plain to everybody, that to the extent that this clause—and we are now dealing with subsection (4)—affects the consideration which may be received by the Government, by the Treasury, at any time for these assets, it is vitally important that they should be valued by an independent valuer. The Government have some defence if there is an independent valuation; they have no defence if there is just an arbitrary internal valuation.

I may be wrong, but the noble Lord has made an assertion but has not indicated the basis for that assertion. He has asserted that the value will be the value put forward by independent valuers. I see nothing in the clause which confirms that, or which is the basis for that assertion. As I read the clause, it merely refers to valuation, and the valuation could be a completely arbitrary one.

So the first point concerns anything which may ultimately affect the receipts by the Treasury for the sale of any of these assets. The second point is the immediate point that this is bound to affect the tax situation between the purchaser and the vendor, and, therefore, there should be a valuation, if only to satisfy the purchaser and the Inland Revenue. Therefore, until the Minister points out to me that I am wrong in my assumption that there can be an arbitrary valuation, and that somewhere or other in the Bill there is a specific provision for an independent valuation, I am quite sure that that independent valuation ought to be inserted in the Bill. I beg to move.

Lord Trefgarne

I am not certain that there is much more that I can say to help the noble Lord. When I spoke just now in response to his amendment, while we were debating the earlier amendment of the noble Lord, Lord Graham, I pointed to the role of the auditors. The noble Lord was subsequently good enough to say that I had got it roughly right. I hope that the noble Lord is not suggesting—I am sure that he is not—that auditors of the distinction of the firm that I mentioned or, indeed, any firm of auditors, being professionally qualified people, as they must be, would be other than independent and unbiased. No doubt some are better than others, but I am quite certain that the proposals that we set out in the Bill, and which are inherent in the proposal for the creation of a Companies Act company, provide for a proper and independent valuation of the assets, or at least for a proper and independent assessment of the value and a checking of the value. On reflection, I hope that the noble Lord will not press his amendment.

Lord Diamond

I must ask the question: where in the Bill does it say "independent valuers"? If that phrase appears in the Bill, I shall immediately withdraw my amendment. If it does not, inasmuch as both the noble Lord and Minister and I are in favour of independent valuers, let us include them in the Bill.

Lord Trefgarne

At the risk of boring your Lordships, and at the risk of repeating myself yet again, the valuers will eventually be the auditors of the company. They are the independent valuers; and independent auditors of the company are required to be independent and are required to be appointed under the Companies Act.

Lord Diamond

I am sorry; I must be boring the Committee, too, but I just do not see that, either. The noble Lord is sticking to a preconceived idea. I am sorry to be a little obstinate about this, but we are both after the same thing. We are both after protecting the state, and the safest way to do this is to see that the phrase goes verbatim and specifically into the Bill.

Baroness Phillips

Can the noble Lord, Lord Diamond, answer me this question? As I have understood it, the training and qualifications of a valuer, certainly in relation to property, are totally different from those concerned with accountancy. Are we talking about a valuer in the sense of a valuation officer?

Lord Diamond

I respond although I have no expertise and a poor memory, and it is a long time since I was a practising accountant. We are talking about a valuation by a valuer; not a valuation by a firm of accountants. Of course, they have certain duties, as do directors, in regard to valuations, as to whether or not they can regard them as reasonable. But the first essential is that there should be a valuation by someone who knows how to value. No practising chartered accountant claims to know how to value all these millions of pounds worth of assets. No sensible government ought to put themselves in a position of being liable to be criticised for not taking normal protective steps. Therefore, on behalf of all the parties in the Committee, I suggest that we pursue this.

Lord Trefgarne

If the noble Lord will allow me, I think that he is ascribing to the art or science of valuation (whichever it may be) rather more mystery than perhaps really exists. If we are thinking of property, I hastily accept that property is best valued by property valuation experts. I guess that it is more of an art than a science because the value of property goes up and down in some extraordinary ways.

I said during my earlier remarks that in those circumstances I would expect professional property valuers to be used. But if we are talking of a piece of equipment—for example, a machine—generally speaking, the art of valuation is very different. For example, one has a choice. Either one can value a piece of equipment by the historical method—in other words, one says that it cost £x y years ago, and therefore it is a simple mathematical calculation to determine its book value today—or (and this is sometimes used nowadays) one can use the current cost basis, where one determines the value of a piece of equipment by the cost of replacing that piece of equipment today. In the latter case, generally speaking, one arrives at a rather higher price than one did before.

That last process to which I referred—and I hasten to emphasise that I am by no means an expert on this—is very much a role for accountants and auditors, because it is a function which they perform all the time. But, as I have said, there are areas where specific expertise is required, and I have accepted that that is appropriate and that it will almost certainly happen in these cases.

Lord Diamond

At the risk of going one stage further, any sensible businessman would adopt neither of the suggestions made. If this amount of plant were to be valued, he would go to one of the well known practising firms which value plant of this size and dimension, and get a proper professional valuation.

Lord Graham of Edmonton

I wonder whether the Minister would take on board the suggestion that there need not be a difference between us here. We on this side of the Committee want to see those words written into the Bill because they are so clear. I am not at all certain whether the Minister could come up with different words which mean precisely the same thing, but perhaps the Minister would take this matter on board before the next stage. The noble Lord, Lord Diamond, will do what he wishes, and we are at one with him as regards the argument. But if the Minister says that there is no difference as to how it will work in practice, and that professional valuers will be used, even though they may be called something different, then we would want to see the colour of the money, we would want to see precisely what it is.

We do not doubt the Minister's integrity in these matters, but if he is unable to satisfy the noble Lord, Lord Diamond, on the form of words, we on these Benches will happily go into the Lobby with the noble Lord.

Lord Trefgarne

I do not want to seem intransigent about these matters. If the noble Lord, Lord Diamond, wants to withdraw his amendment in the context of my looking at this matter again, then I should be happy to do so. I am not sure that I shall come up with any better ideas than those which I have offered to your Lordships already, but if that would help the noble Lord I should be happy to give that assurance.

Lord Diamond

I am grateful to the Minister for his courtesy, but not for the content of his reply.

6.9 p.m.

On Question, Whether the said amendment (No. 8) shall be agreed to?

Their Lordships divided: Contents, 76; Not-Contents, 107.

DIVISION NO. 5
CONTENTS
Airedale, L.	Beaumont of Whitley, L.
Ardwick, L.	Birk, B.
Attlee, E.	Blease, L.
Aylestone, L.	Boston of Faversham, L.

Bottomley, L.	John-Mackie, L.
Briginshaw, L.	Kaldor, L.
Broadbridge, L.	Kilmarnock, L.
Bruce of Donington, L.	Kirkhill, L.
Buckmaster, V.	Listowel, E.
Carmichael of Kelvingrove, L.	Lloyd of Kilgerran, L.
Carver, L.	Longford, E.
Cledwyn of Penrhos, L.	Lovell-Davis, L.
Collison, L.	Mackie of Benshie, L.
Davies of Leek, L.	McNair, L.
Dean of Beswick, L.	Mayhew, L.
Diamond, L.	Meston, L.
Elwyn-Jones, L.	Mishcon, L.
Ennals, L.	Mulley, L.
Ewart-Biggs, B.	Nicol, B. [Teller.]
Ezra, L.	Phillips, B.
Falkland, V.	Pitt of Hampstead, L.
Fitt, L.	Ponsonby of Shulbrede, L.
Gaitskell, B.	Rochester, L.
Gallacher, L.	Seear, B.
Gladwyn, L.	Sefton of Garston, L.
Gosford, E.	Simon, V.
Graham of Edmonton, L.	Stallard, L.
Grey, E.	Stewart of Alvechurch, B.
Hampton, L.	Stewart of Fulham, L.
Hanworth, V. [Teller.]	Stoddart of Swindon, L.
Harris of Greenwich, L.	Stone, L.
Hatch of Lusby, L.	Taylor of Blackburn, L.
Houghton of Sowerby, L.	Tordoff, L.
Hughes, L.	Underhill, L.
Irving of Dartford, L.	Wallace of Coslany, L.
Jacques, L.	Whaddon, L.
Jeger, B.	Willis, L.
Jenkins of Putney, L.	Wootton of Abinger, B.

NOT-CONTENTS
Auckland, L.	Hanson, L.
Avon, E.	Harmar-Nicholls, L.
Barber, L.	Henley, L.
Belhaven and Stenton, L.	Hives, L.
Bellwin, L.	Home of the Hirsel, L.
Beloff, L.	Hornsby-Smith, B.
Belstead, L.	Hylton-Foster, B.
Bessborough, E.	Kilmany, L.
Blakenham, V.	Kinnaird, L.
Boardman, L.	Kinnoull, E.
Boyd-Carpenter, L.	Kitchener, E.
Brabazon of Tara, L.	Lane-Fox, B.
Brougham and Vaux, L.	Lauderdale, E.
Caccia, L.	Lawrence, L.
Caithness, E.	Lindsey and Abingdon, E.
Campbell of Alloway, L.	Long, V.
Campbell of Croy, L.	Lucas of Chilworth, L.
Cockfield, L.	Luke, L.
Coleraine, L.	McAlpine of West Green, L.
Colville of Culross, V.	Macleod of Borve, B.
Cork and Orrery, E.	Mancroft, L.
Craigavon, V.	Margadale, L.
Daventry, V.	Marley, L.
De Freyne, L.	Marshall of Leeds, L.
Denham, L. [Teller.]	Massereene and Ferrard, V.
Drumalbyn, L.	Maude of Stratford-upon-Avon, L.
Eccles, V.
Eden of Winton, L.	Molson, L.
Elliot of Harwood, B.	Montgomery of Alamein, V.
Elton, L.	Mottistone, L.
Fanshawe of Richmond, L.	Mowbray and Stourton, L.
Ferrier, L.	Murton of Lindisfarne, L.
Fraser of Kilmorack, L.	Napier and Ettrick, L.
Gainford, L.	Norfolk, D.
Gardner of Parkes, B.	Nugent of Guildford, L.
Gisborough, L.	O'Brien of Lothbury, L.
Glanusk, L.	Onslow, E.
Glenarthur, L.	Orkney, E.
Gormanston, V.	Quinton, L.
Gowrie, E.	Rankeillour, L.
Gray, L.	Renton, L.
Greenway, L.	Renwick, L.
Gridley, L.	St. Aldwyn, E.
Hailsham of Saint Marylebone, L.	Saltoun, Ly.
	Sandford, L.

Sempill, Ly.	Terrington, L.
Shannon, E.	Thomas of Swynnerton, L.
Skelmersdale, L.	Trefgarne, L.
Southborough, L.	Trumpington, B.
Spens, L.	Vaux of Harrowden, L.
Stamp, L.	Vivian, L.
Stodart of Leaston, L.	Westbury, L.
Sudeley, L.	Whitelaw, V.
Swinfen, L.	Wise, L.
Swinton, E. [Teller.]

Resolved in the negative, and amendment disagreed to accordingly.

6.17 p.m.

Lord Diamond moved Amendment No. 9: Page 3, line 18, at end insert ("and, without prejudice to the generality of the foregoing, every scheme shall contain a provision securing to the Ministry of Defence, whenever required, absolute priority in the supply of goods and services to that Department.").

The noble Lord said: I understand that it has been thought that it will be to the convenience of the Committee if we discuss Amendments 10 and 11 at the same time.

Amendment No. 10: Page 3, line 18, at end insert ("and without prejudice to the generality of the foregoing, every scheme shall contain the necessary provisions securing to the Ministry of Defence the supply at fair prices of the goods and services it may from time to time require.").

Amendment No. 11: Page 3, line 18, at end insert ("and without prejudice to the generality of the foregoing, every scheme shall contain such provisions as may be necessary to secure to the Ministry of Defence spare manufacturing capacity to the extent required by that Department so as to meet such emergencies as it may envisage.").

We all know that there is great anxiety lest the arrangements for the proposed transfers which the Government have in mind would result in a serious deterioration in the ability of this country to defend itself. That arises because the ROFs provide a number of things which no other commercial supplier supplies. In the first case they provide complete priority in case of need. That is not supplied in the ordinary way by a commercial manufacturer.

A commercial manufacturer of goods needed by the Ministry of Defence would have to have regard to the contracts he has made both to supply the Ministry of Defence of this country and to supply the Ministry of Defence of other countries. Therefore, he has to act in a purely commercial way. The ROFs provide the Ministry of Defence with something more than a commercial priority; they provide it with complete priority, and that complete priority is essential when difficulties arise in the judgment of the Ministry of Defence and the Secretary of State.

The second thing which they provide are goods of a kind which are not commercially convenient or profitable to provide but which the Ministry of Defence needs. You cannot get them provided by a commercial firm in the ordinary way because it does not suit for a variety of reasons. Maybe the run is far too short; maybe the plant required is far too complicated for the number of articles to be made.

A great number of reasons arise why it is totally unsuitable for a commercial firm, having regard to its duties to its shareholders and employees, to attempt to handle such a contract, and it therefore does not put in a bid for it. But the Ministry of Defence must have such articles in its own judgment in the defence of the country. Therefore, what is required is the same priority in terms of the supply of goods and services which it may from time to time require and which no other commercial outlet would provide.

The third thing which the ROFs provide at the present time is again vital in terms of the defence of our country: it is spare manufacturing capacity. By definition no commercial firm is going to provide spare manufacturing capacity. It is the duty of an ordinary commercial firm to have regard to maximum profitability, and that is to say to use its assets all the time and not to have them lying idle.

But it may be in the interests of the country when an emergency arises or is foreseen that there should be spare capacity kept for this very purpose, and that spare capacity is so kept, and is required to be kept, by the ROFs at the moment and is of course paid for by the Government. It is a proper cost which the country incurs as a kind of insurance policy against an emergency arising—an emergency which sometimes can be foreseen and sometimes cannot be foreseen. It is in those three different categories that great anxiety has been expressed by people of enormous authority in this field, such as an ex-Secretary of State for Defence. I have consulted two ex-Secretaries of State. I have consulted those who have great responsibilities, not on the political side, but on the service side. They have all come back with the same answer, that there is great anxiety lest, as a result of what the Government propose in the Bill, our defences should suffer. It is as simple as that.

I want to try to prevent a situation in which we are less capable of providing our defences than we are at the moment. That is why these three amendments ensure that when there is a change of the kind contemplated by the Government, these special provisions shall be included.

The Earl of Onslow

May I make a plea to the noble Lords opposite about this amendment? May I suggest to them that to divide as often as we have been doing this afternoon is to run the risk of bringing this Chamber into disrepute? We should divide when we are concerned about something that is really important, and not to try to behave like a rather faded mirror image of the place down the road. Let us consider what would have happened if, when the Labour Party was in power, the Conservatives had divided on five amendments on a Bill of this size. We would have been accused of gross irresponsibility. I suspect that that is the case this afternoon on this Bill.

Lord Carver

I wish to support very strongly the amendments proposed by the noble Lord, Lord Diamond. I endorse everything that he has said in support of his amendments. By the very nature of things, especially when given the vagaries of annual financing of defence, when there are no operations in prospect or in progress, the number of orders which the Minister of Defence can place for the kind of items which the Ordnance factories produce is small. There is great difficulty in even making the orders regular from year to year. When there is a sudden emergency—for instance, had the Falklands operation lasted much longer than it did—one item on which there is a most urgent need to increase production dramatically is ammunition. The amount of ammunition that is ordered year by year is small. That is perhaps the most important field—it is not the only field—which makes it of great importance that these three amendments should be accepted.

There are other fields; one of them, close to my own heart, is tank production in the Royal Ordnance factory at Leeds. Since the end of the Second World War we have relied entirely for the production of main battle tanks on that excellent factory, which has done an extremely good job. The production of tanks in that factory requires some very specialised machine tools of various types, such as those for handling, welding and machining complete tank hulls and complete tank turrets of enormous size. This is machinery which is used for no other commercial purpose.

We renew our tank fleet at long intervals. It would be quite impossible for a commercial firm, working on a commercial basis, to retain all the machine tools required in the production of many of the items from the Ordnance factories, unless something such as Amendment No. 11 is included in the Bill.

The enthusiasm of the present Secretary of State for extreme competition in every field—including not guaranteeing production to the firm which did the development, and even perhaps splitting production between different firms—to my mind makes these three amendments even more important. My own experience is in the tank field. At the beginning of the Second World War we had very poor tanks because before the war we had had no Government factory engaged in tank production. We relied entirely upon commercial firms. The tanks in which the father of the noble Earl who has just spoken and myself had to face the Germans in North Africa and elsewhere were the remnants of a commercial organisation and, thank heaven, we have not been in that situation since the end of the Second World War. I strongly support all these three amendments.

Lord Mulley

I should like very strongly to support the amendments proposed by the noble Lord, Lord Diamond, and supported by the noble and gallant Lord, Lord Carver. In my view the amendments go only part of the way to mitigating what I believe is a most serious prospect of damage to our armed forces. To the noble Earl, Lord Onslow, I would say that this is not a slight Bill; it involves a matter of grave importance because successive Governments for almost 400 years—the first Royal Ordnance factory was established in 1585—have thought it right (and I do not quarrel with the concept) to make the interests of defence paramount to any commercial interest.

I do not believe it is feasible to ask private investors and entrepreneurs to take on the great responsibilities of producing weaponry or ammunition which may not, in the event, be needed, and to ask them to do research at the behest of the Ministry of Defence in a way which would not be compatible with the maximisation of their profits or to the benefit of their shareholders. In every way that is possible the Royal Ordnance factories, over which I had some control and interest, operate on a very commercial basis within the limitations of putting first the interests of our own armed forces.

I am quite certain that if this Bill is implemented and all the Royal Ordnance factories are privatised—that is a horrible word, and a horrible thing—in a number of years we shall not have a capacity to make tanks and probably not have a capacity to make tank guns. I believe that our tank guns are the best in the world. We may even have great difficulties about getting the ammunition at the time when we want it. It would be scandalous if, at a time of great emergency we had to depend on the possibility of getting supplies from other parts of the world, so that if we had to send our troops (heaven forbid) into another Falklands conflict or something like it, they would be adequately armed.

Equally, I believe that the employment factor is also not unimportant. My own experience was that the trading fund put the industries concerned on a sound footing. They were extremely well managed and they had a loyal and competent workforce. To destroy them in this way simply to meet some political dogma is worse than anything that could be alleged against some of the actions of the Governments in which I was proud to serve.

The Earl of Cork and Orrery

If my noble friend Lord Trefgarne is to reply to this amendment in the sense of resisting it, I should like him to know that 1, for one, extend to him my most heartfelt sympathy. I cannot believe that, if he were not speaking for the Ministry of Defence, he would be other than wholeheartedly in support of the amendment proposed by the noble Lord, Lord Diamond, the noble and gallant Lord, Lord Carver, and the noble Lord, Lord Mulley—with whose arguments I wish wholeheartedly to associate myself.

6.30 p.m.

Lord Mayhew

If I may briefly add some words of support to what has already been said in the House from various quarters and in support of my noble friend Lord Diamond, I do not think that the debate could possibly have more conclusively challenged the remark of the noble Earl, Lord Onslow, that these amendments are not important. I would assure him that to the people in the services or with service experience these are profoundly important matters that we are discussing in this amendment.

I had the honour to represent in another place for many years Woolwich and I know a great deal about the history and contribution of Woolwich Arsenal. In 1939, Woolwich Arsenal had, by design, a huge spare capacity. I believe that it expanded during the war, in spite of the appalling bombing, from employing something like 6,000 people to employing 33,000 people. If Woolwich Arsenal had been commercial in 1939, does one suppose that it would have kept that spare capacity? The tradition of the ROFs of serving the Ministry and of serving the armed forces is something very precious and something that we ought to be safeguarding.

It breaks my heart to see the Government obeying what really are only ideological considerations in this. I can see their minds imagining a perfect market in the production and sale of arms in this country—a whole lot of independent organisations competing against each other. But in the field of defence, this, of course, is a complete chimera. It cannot happen. You have one buyer in this country for arms. You have the Ministry of Defence dominating, making this firm's fortune, ruining that other firm, by its own decisions about purchases. The ideological concept of getting rid of the ROFs and making a kind of perfect competitive market in arms simply does not match the facts of defence. It breaks my heart as an ex-service man to see the Government behaving in this way towards the ROFs.

Lord Trefgarne

I fully understand your Lordships' concern about each of the matters raised by these amendments. They are serious points and deserve to be taken seriously. Of course, it is the department's responsibility to ensure that our armed forces are properly equipped with modern, efficient and effective weapons and at the right price; and that the necessary manufacturing facilities are available to ensure a continuous and reliable supply, to the extent that any foreseeable demand can be promptly met. The Committee will not, I hope, be surprised that these matters have already been the subject of detailed consideration within the Ministry of Defence. We should have been failing in our duty if we had not done so. But the conclusions we have come to are not such as would lead us to support these amendments.

The amendment seeks to insert in the Bill, under the cover of supplementary, incidental, consequential or transitional provisions, detailed constraints upon the future relationship between the Ministry of Defence and the company. While I foresee what I might describe as technical objections to this, the Government's essential concern about these amendments is that they are unnecessary; and not only that, but run counter to the Government's policy objectives. No one, of course, disputes the need to make appropriate arrangements to secure the supply of ordnance to the armed services at the right price and on the right terms and conditions. As I have said, such arrangements have already been the subject of active consideration within the department.

The intention is that all the essential arrangements will be made between the department and the company by contract. That is the sensible method of dealing with these issues, and one entirely consistent with Government policy. As regards reserve capacity, if we needed this, we could, of course, secure it, but by specific contracts on the company, to replace existing arrangements. It will be, moreover, a far more efficient method of securing these objectives than any provisions contained in a scheme could possibly be. For, once a scheme comes into force, its effect is fixed and cannot thereafter be changed. This is an inevitable consequence of the fact that the essential purpose of a scheme is to transfer property from one owner to another. Now, if arrangements of the kind which these amendments envisage were incorporated in a scheme, and were subsequently found not to be working properly, there would be no way of changing their fixed and settled effect except by the making of another scheme. And the noble Lord will know, because he will have seen Clause 3(4) of the Bill, that once the Crown has disposed of any shares in the company, no further schemes affecting the company can be made. One result of these amendments, if they were passed, might consequently be to saddle the department with an inefficient, or unworkable, arrangement which there was no means of changing.

A contractual arrangement, on the other hand, is entirely flexible. It may contain its own provisions for review. In any case it can be altered, or terminated, by the agreement of the parties. A new contract can be made remedying the deficiencies of the old one. The noble Lord may object that the company does not have to enter into any such contract, and that the matters in issue are so important that the risk, however remote, that this might happen, cannot safely be incurred. Of course there will be no legal compulsion on the company to enter into any such contract, although I would observe, in passing, that, once entered into, the contract would be legally binding and enforceable.

But let us be realistic. It is obvious that for the foreseeable future, and well beyond, the Ministry of Defence is going to be the major customer of the company. It may well be, in fact, that the department will always remain the company's largest single customer. It is hardly likely in the circumstances that the company will not wish to accommodate the department on this sort of thing. I would go further and say that there is practically no possibility of it. Of course, the company will say, "Yes, we will provide these services, if you will pay a proper price for them".

This is as it should be. There are ways of monitoring the costs of defence companies in order to ensure that the department does not pay an inflated price for its supplies. The same would apply to the provision of facilities, and, while it is important to ensure that the department is not overcharged for such services, it is equally important to ensure that it does pay their economic cost: and included in this cost will be a reasonable return to the company for providing them. The Government have no doubt, therefore, that whatever facilities may be required by the department, they are capable of being secured, and will be secured, by contract. This will be better than any provision in the Bill, or any provision in a scheme.

I am grateful to noble Lords for raising these important issues by means of these amendments. I give my assurance that the department has them all in mind. Whatever arrangements need to be made, in the judgment of the department, will be made. On the basis of this assurance, and in the light of the perhaps more technical matters to which I have referred, I hope that the noble Lord will see fit not to press the amendments.

Lord Diamond

I am most grateful for the consideration which the Minister has given to this matter, which his department has given and which the Ministry of Defence, no doubt, has given as well. I cannot imagine a responsible government putting forward a Bill like this without having considered these matters. But what the noble Lord is saying is, "You must trust us". He is saying, "We want to be rid of any constraints by Parliament. You must trust us. We know best how to run all this." I do not believe that Ministers and their Civil Service advisers do know best.

I believe that, in this one particular instance, there is one little corner of the commercial world which I know better than the Minister. Having spent 30 years in a commercial firm as financial adviser—and I no longer have any interest in it whatsoever—I know full well the limitations on a commercial firm providing what the ROFs are compelled to provide at the moment. The fact that the Minister thinks that he can find a commercial firm that will undertake on certain terms to enter into a contract for the time being—and a contractual arrangement, the Minister said, is very flexible—I accept with some reservation.

The present situation is that the reserves on which the country relies are 4 per cent., I believe, in the ROFs of the general supply of munitions that it requires. Now 96 per cent. is already provided by the private sector, and the Minister wants to get rid of the safeguard we have in that little 4 per cent. It is not asking a lot that we should make sure in the Bill that the country is committed and that every Government are committed—the Minister's Government or any subsequent Government—to this small 4 per cent. to ensure supplies on a non-commercial basis in the most vital field of our defence.

Of course, I am going to pursue this to a vote. I merely say to the noble Earl, Lord Onslow, that I do not challenge his sense of patriotism, and I hope he does not challenge mine.

Lord Graham of Edmonton

Before the matter is put to the vote, perhaps I can simply say to the Minister that there could be few amendments that have been tabled in your Lordships' Committee that he could more safely accept, even though he may not like to accept it, in order to demonstrate that the Government are willing to acknowledge from time to time that they have not got it absolutely right.

In the case of this Bill and of many others, this Government have shown a singular lack of appreciation of the fact that there are views other than their own which can improve the Bill. The Minister is not prepared, as I see it, to accept a single amendment. Any change that comes has to be fought for and voted on. The answer to why we vote so often is because, although there have been five Divisions, on every one except the last there has been a majority one way or the other in single figures. Of course, with a division like that, we know that the Government are certainly not prepared to give in.

What we have been invited to do, as the noble Lord, Lord Diamond, said, is to trust the Government. We trust the Government in general to have the best interests nationally. There is nothing in these amendments, in our view, which will diminish or weaken the broad sweep of the Bill, but it will give maximum assurance to those like the noble Lord, Lord Carver, and the noble Lord, Lord Mulley, and the noble Lord opposite, who speak from real experience of wanting to feel safe. This is what we are talking about—the national interest and security. Certainly if these matters are pressed to a vote we shall be in the Lobbies.

Lord Trefgarne

Before the noble Lord, Lord Diamond, decides what to do with his amendment, if he has not already made up his mind, I would ask your Lordships to get the matter into perspective. The noble Lord, Lord Diamond, referred to the fact that 96 per cent. no less, of the requirements of the Ministry of Defence are obtained from companies other than the Royal Ordnance factories. The arrangements we have with those companies which supply that 96 per cent. are of course satisfactory. Where it is necessary to provide the sort of facilities that the noble and gallant Lord, Lord Carver, has been referring to, then of course that is done. Those arrangements have worked.

What your Lordships are asking is that some peculiar arrangement should now be put into the Bill in respect of the Royal Ordnance factories for when they become on all fours equivalent to the rest of industry. I do not think that is an appropriate proposal.

6.45 p.m.

On Question, Whether the said Amendment (No. 9) shall be agreed to?

Their Lordships divided: Contents, 66; Not-Contents, 90.

DIVISION NO. 6
CONTENTS
Airedale, L.	Jenkins of Putney, L.
Ardwick, L.	John-Mackie, L.
Attlee, E.	Kaldor, L.
Aylestone, L.	Kilmarnock, L.
Birk, B.	Lloyd of Kilgerran, L.
Blease, L.	Longford, E.
Boston of Faversham, L.	Lovell-Davis, L.
Bottomley, L.	Mackie of Benshie, L.
Buckmaster, V.	McNair, L.
Carver, L.	Mayhew, L.
Cledwyn of Penrhos, L.	Meston, L.
Collison, L.	Milner of Leeds, L.
Cork and Orrery, E.	Mishcon, L.
Davies of Leek, L.	Mulley, L.
Dean of Beswick, L.	Nicol, B. [Teller.]
Diamond, L.	Phillips, B.
Donnet of Balgay, L.	Pitt of Hampstead, L.
Elwyn-Jones, L.	Ponsonby of Shulbrede, L.
Ennals, L.	Seear, B.
Ewart-Biggs, B.	Simon, V.
Gallacher, L.	Stallard, L.
Gladwyn, L.	Stewart of Alvechurch, B.
Gosford, E.	Stewart of Fulham, L.
Graham of Edmonton, L.	Stoddart of Swindon, L.
Grey, E.	Stone, L.
Hampton, L.	Taylor of Mansfield, L.
Hanworth, V. [Teller.]	Tordoff, L.
Harris of Greenwich, L.	Underhill, L.
Houghton of Sowerby, L.	Vickers, B.
Hughes, L.	Wallace of Coslany, L.
Irving of Dartford, L.	Wells-Pestell, L.
Jacques, L.	Whaddon, L.
Jeger, B.	Wootton of Abinger, B.

NOT-CONTENTS
Airey of Abingdon, B.	Campbell of Croy, L.
Alexander of Tunis, E.	Cockfield, L.
Ampthill, L.	Colville of Culross, V.
Auckland, L.	Colwyn, L.
Avon, E.	Craigavon, V.
Belhaven and Stenton, L.	Craigmyle, L.
Bellwin, L.	Daventry, V.
Belstead, L.	Denham, L. [Teller.]
Bessborough, E.	Drumalbyn, L.
Boardman, L.	Eccles, V.
Brabazon of Tara, L.	Eden of Winton, L.
Brougham and Vaux, L.	Elliot of Harwood, B.
Caccia, L.	Elton, L.
Caithness, E.	Ferrier, L.
Campbell of Alloway, L.	Fraser of Kilmorack, L.

Gainford, L.
Gardner of Parkes, B.	Montgomery of Alamein, V.
Gisborough, L.	Mottistone, L.
Glanusk, L.	Mountevans, L.
Glenarthur, L.	Mowbray and Stourton, L.
Gowrie, E.	Murton of Lindisfarne, L.
Grantchester, L.	Napier and Ettrick, L.
Gray, L.	O'Brien of Lothbury, L.
Hailsham of Saint Marylebone, L.	Onslow, E.
	Orkney, E.
Halsbury, E.	Orr-Ewing, L.
Hanson, L.	Pender, L.
Harmar-Nicholls, L.	Rankeillour, L.
Hives, L.	Renton, L.
Home of the Hirsel, L.	Renwick, L.
Hornsby-Smith, B.	St. Aldwyn, E.
Hylton-Foster, B.	Saltoun, Ly.
Kilmany, L.	Sandford, L.
Kitchener, E.	Sempill, Ly.
Lane-Fox, B.	Skelmersdale, L.
Lawrence, L.	Spens, L.
Long, V.	Stodart of Leaston, L.
Lucas of Chilworth, L.	Swinfen, L.
McAlpine of West Green, L.	Swinton, E. [Teller.]
	Teviot, L.
Macleod of Borve, B.	Thomas of Swynnerton, L.
Mancroft, L.	Trefgarne, L.
Margadale, L.	Trumpington, B.
Marley, L.	Vaux of Harrowden, L.
Marshall of Leeds, L.	Vivian, L.
Maude of Stratford-upon-Avon, L.	Whitelaw, V.
	Wise, L.

Resolved in the negative, and amendment disagreed to accordingly.

Lord Diamond moved Amendment No. 10:

[Printed earlier.]

The noble Lord said: This amendment has been discussed and therefore I see no point in discussing it any further. I regard this as a very important amendment. Indeed, I recognise what is happening in terms of the Division Lobbies, but I feel I must ask your Lordships to give this amendment very favourable consideration and to support us in the Lobby if you possibly can.

6.52 p.m.

On Question, Whether the said amendment (No. 10) shall be agreed to?

Their Lordships divided: Contents, 63 Not-Contents, 90.

DIVISION NO. 7
CONTENTS
Airedale, L.	Gladwyn, L.
Ardwick, L.	Gosford, E.
Attlee, E.	Graham of Edmonton, L [Teller.]
Aylestone, L.
Bernstein, L.	Grey, E.
Birk, B.	Hampton, L.
Boston of Faversham, L.	Hanworth, V. [Teller.]
Bottomley, L.	Harris of Greenwich, L.
Briginshaw, L.	Hatch of Lusby, L.
Bruce of Donington, L.	Hughes, L.
Buckmaster, V.	Irving of Dartford, L.
Carver, L.	Jacques, L.
Cledwyn of Penrhos, L.	Jeger, B.
Collison, L.	Jenkins of Putney, L.
Cork and Orrery, E.	John-Mackie, L.
Dean of Beswick, L.	Kaldor, L.
Diamond, L.	Kilmarnock, L.
Donnett of Balgay, L.	Lloyd of Kilgerran, L.
Ennals, L.	Longford, E.
Ewart-Biggs, B.	Lovell-Davis, L.
Gallacher, L.	Mackie of Benshie, L.

Mayhew, L.	Stewart of Alvechurch, B.
Milner of Leeds, L.	Steward of Fulham, L.
Mishcon, L.	Stoddart of Swindon, L.
Mulley, L.	Stone, L.
Nicol, B.	Taylor of Mansfield, L.
Phillips, B.	Tordoff, L.
Pitt of Hampstead, L.	Underhill, L.
Ponsonby of Shulbrede, L.	Wallace of Coslany, L.
Seear, B.	Wells-Pestell, L.
Simon, V.	Whaddon, L.
Stallard, L.	Wootton of Abinger, B.

NOT-CONTENTS
Airey of Abingdon, B.	Hornsby-Smith, B.
Alexander of Tunis, E.	Hylton-Foster, B.
Auckland, L.	Kilmany, L.
Avon, E.	Kitchener, E.
Belhaven and Stenton, L.	Lawrence, L.
Bellwin, L.	Long, V.
Beloff, L.	Lucas of Chilworth, L.
Belstead, L.	McAlpine of West Green, L.
Bessborough, E.	Macleod of Borve, B.
Boardman, L.	Mancroft, L.
Brabazon of Tara, L.	Margadale, L.
Brougham and Vaux, L.	Marley, L.
Caccia, L.	Marshall of Leeds, L.
Caithness, E.	Maude of Stratford-upon-Avon, L.
Campbell of Alloway, L.
Campbell of Croy, L.	Montgomery of Alamein, V.
Cockfield, L.	Mottistone, L.
Coleraine, L.	Mountevans, L.
Colville of Culross, V.	Mowbray and Stourton, L.
Colwyn, L.	Murton of Lindisfarne, L.
Craigavon, V.	O'Brien of Lothbury, L.
Craigmyle, L.	Onslow, E.
Daventry, V.	Orkney, E.
Denham, L. [Teller.]	Orr-Ewing, L.
Drumalbyn, L.	Pender, L.
Eden of Winton, L.	Rankeillour, L.
Elliot of Harwood, B.	Renton, L.
Elton, L.	Renwick, L.
Fanshawe of Richmond, L.	St. Aldwyn, E.
Ferrier, L.	Saltoun, Ly.
Fraser of Kilmorack, L.	Sandford, L.
Gainsford, L.	Sempill, Ly.
Gardner of Parkes, B.	Skelmersdale, L.
Glanusk, L.	Somers, L.
Glenarthur, L.	Spens, L.
Gowrie, E.	Stodart of Leaston, L.
Grantchester, L.	Swinfen, L.
Gray, L.	Swinton, E. [Teller.]
Greenway, L.	Teviot, L.
Hailsham of Saint Marylebone, L.	Thomas of Swynnerton, L.
	Trefgarne, L.
Halsbury, E.	Trumpington, B.
Hanson, L.	Vaux of Harrowden, L.
Harmar-Nicholls, L.	Vivian, L.
Hives, L.	Whitelaw, V.
Home of the Hirsel, L.	Wise, L.

Resolved in the negative, and amendment disagreed to accordingly.

7 p.m.

Lord Diamond had given notice of his intention to move Amendment No. 11:

[Printed earlier]

The noble Lord said: I think it will be the sense of your Lordships' Committee that, notwithstanding that this is a very important amendment indeed, the clock is pointing to a magical figure, and all those noble Lords who are anxious to vote for this amendment will, I hope, forgive me if I do not move it.

[Amendment No. 11 not moved.]

Lord Trefgarne

I understand that this would be an appropriate moment for us to discontinue our consideration of this matter. I therefore beg to move that the House do now resume.

Lord Ponsonby of Shulbrede

I take it that the House will not continue with this particular business before 8 o'clock?

Lord Trefgarne

I understand that the noble Lord's understanding of the matter is, as always, entirely correct.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.