Trustee Savings Banks Bill

HL Deb 16 April 1985 vol 462 cc647-80

6.9 p.m.

Report received.

Clause 1 [Preliminary]:

Lord Taylor of Gryfe moved Amendment No. 1: Page 1, line 9, after ("banks") insert ("other than Trustee Savings Bank (Scotland) Limited which is hereby excluded from this Act").

The noble Lord said: My Lords, some noble Lords may feel that this amendment was fully discussed at the Committee stage of the Bill. I apologise for its reintroduction this afternoon, but since our debate new factors have emerged and as these raise matters of fundamental importance, I feel that the House should have this further opportunity to consider the full implications of the Bill and the proposed amendment. Indeed, I am encouraged by the Division which took place in this Chamber only an hour ago to believe that the House will pay due heed to reasoned amendments on what I regard as a matter not of party politics but of good administration.

Two factors have emerged since we discussed this matter in Committee. One is the publication of the annual accounts of the Trustee Savings Bank group, to which I shall return; the other is the emergence in Scotland of widespread disatisfaction about these proposals. One in four of the entire population in Scotland has an account with the Trustee Savings Bank in Scotland. They have more than two million accounts in TSB (Scotland). While these proposals have not received much publicity until now, I can assure the Minister that in the past few weeks there has been very considerable activity and very great concern about the fact that the depositors who created this bank and this wealth have not been consulted about the fate and the future of their business. If this bank had been a public limited company, the shareholders would have held an annual meeting to decide whether this was the right course or the wrong course for their company. In this case, because of the Trustee Savings Banks' peculiar structure, depositors are not enfranchised to determine or influence the course of their business.

I understand that a number of depositors in Scotland are taking legal advice on their rights in the matter and that the Bill may be challenged in the courts, though I confess that I have no part in those proceedings.

This is not a wrecking amendment. I agree with the necessity for restructuring the TSBs because their new role in banking and new services require a change in the structure in order that they may play their full part in the banking business. They are no longer a part of the National Savings organisation. It is right that the TSBs should have answerability to the Bank of England and not to the Treasury. It is right that they should be able to issue shares like any other PLC. This amendment is not designed to destroy that concept. It is designed simply to secure the independence of TSBs in Scotland to enable them to make similar arrangements for the conduct of their business.

It is my submission that TSB (Scotland) can stand on its own feet as an independent bank and make an even greater contribution to the expansion of financial services in Scotland. I shall argue that this exercise in further centralisation of financial services, which is implied in the proposals, is unhealthy and undesirable. Edinburgh is the second largest financial centre in Europe. It is second only to London. It has under fund management more than £30 billion in its institutions and banks. Foreign banks have recognised its significance. There are no fewer than 30 foreign banks with offices in Edinburgh. Edinburgh handles 23 per cent. of the investment trust business of the United Kingdom, 20 per cent. of unit trust business, and 14 per cent. of the life assurance business of the United Kingdom. The financial services sector is the greatest growth sector in the Scottish economy. No fewer than 80,000 people are employed in Scotland in financial services.

As was said earlier, the TSB has a long history. It was established 175 years ago in Scotland. It is solidly based in our towns and villages and is very much a community affair; indeed, it has been said that it reaches parts which other banks do not reach. It has a lively management. It is making remarkable progress. It employs 3,000 people. It had an operating profit last year of £32 million. TSB (Scotland) has assets of £1.4 billion and deposits of more than £1 billion. So it is a sizeable bank and it is perfectly able to operate independently and efficiently.

It will be argued by opponents of this amendment that TSB (Scotland) will continue to exist under the new arrangements, but I must insist that the structure proposed in the Bill will destroy the independence of TSB (Scotland). The TSB holdings board under this Bill will be elected by shareholders but TSB (Scotland) directors will be appointed by that central board. In a sense it will be a poodle. In saying that, I do not mean to minimise the activities of the very good men who operate TSB (Scotland); they are excellent men. But by necessity, and because of the proposed structure, TSB (Scotland) directors will be appointed by the TSB operating from London.

In case your Lordships have any doubts about this matter, I shall quote from the TSB annual report which has just reached me, in which the chairman, Sir John Read, writes: As a holding company hoard it will exercise ultimate control over the profitable development of the Group's activities. It will have responsibility for the formulation of Group policy and for providing the organisation and management structure to meet the Group's needs". That is a clear definition of the new power relationship within the trustee savings banks. This is the fundamental issue before us.

6.15 p.m.

I should like to quote one or two additional, factors which might justify the House in resisting, even at this stage, this very dramatic change. Three years ago in Scotland there was a proposed takeover of the Royal Bank of Scotland. I am sure that the Minister will state that the TSB hoard in Scotland is favourable to these proposals, but that was also the case with the board of the Royal Bank of Scotland. However, the shareholders disagreed and the takeover was referred to the Monopolies and Mergers Commission, which looked at the implications of transferring a Scottish bank to London or Hong Kong. This is what the commission concluded: We foresee a detriment to the public interest in Scotland in the case of either merger arising from the removal of ultimate control from Edinburgh. We also think that there is value in preserving such independent local centres of business initiative and opinion 'as survive in the United Kingdom. Scotland and Scottish banking have an honourable record of innovation, and we believe that the independence which fosters such innovation is best preserved by leaving full control of the bank in Edinburgh".

I suggest that the matters considered by the Monopolies and Mergers Commission and the recommendations ad conclusions of that commission which were accepted by the Government in that case are relevant to the proposal now being discussed.

There is in Scotland, thankfully, a very powerful organisation called the Scottish Development Agency. It is supported by Government funds. It has an excellent record. It was initiated by a Labour Government and has been consistently supported by the present Government. It has identified the financial services sector as a vital element in regional growth. Indeed, it has received some encouragement and assistance from the Bank of England in pursuing this matter with great vigour. At the same time as the Scottish Development Agency is busy pursuing the development of the financial services sector in Scotland, the Government are in this proposal seeking to diminish that effort. I suggest that there is a certain inconsistency here.

I could quote at some length statements made my Ministers. A Minister at the Department of Trade and Industry, Mr. Alex Fletcher, who has some responsibility for financial matters in the Government, said recently: I am anxious therefore that Scotland should be equally innovative in this new financial revolution and I am looking to brokers, bankers, investment managers and businessmen throughout Scotland to show Britain the way". To diminish the Trustee Savings Bank in this way is certainly not encouraging that train of thought.

I hope that the Minister will feel that there is sufficiently good reason to take this back. It is not an exercise in Scottish nationalism. Anyone who knows my position in Scottish life and politics will recognise that I am not much given to supporting the Scottish National Party or the Scottish national movement. It is a question of good administration. What I propose is a protest against greater centralisation, and is intended to encourage in Scotland the continued growth of the innovation, the imagination and the exercise of power which is traditional in Scottish banking. I beg to move.

Baroness Carnegy of Lour

My Lords, the noble Lord has again brought in front of your Lordships' House the amendment that he moved in Committee, giving as the grounds for justifying this break with our normal convention that new information is available as a result of the publication of the annual report of the TSB.

I obtained the impression in Committee that the Committee felt that in some way the Government and the TSB had been ignoring Scottish interests, that they did not remember the importance of Edinburgh as an important financial and commercial centre, and that the noble Lord's proposal that it would be quite easy at this late stage to remove TSB (Scotland) from the Bill and to legislate separately for it subsequently would be a viable proposition.

I do not think that the noble Lord made it clear to us—although I am sure he meant to—that the arrangements in this Bill have taken a decade to develop. The TSB began in Scotland as a movement for small savers and it spread to the rest of the United Kingdom from Scotland. However, as time went on the need to enable the customers to have the full services which are only possible in a bigger group became evident. The noble Lord has now said that the smaller bank-25 per cent. of the size of the whole bank—would be adequate to provide these services. However, it was the view of TSB (Scotland), and TSB generally, that it would be enormously to the benefit of Scottish customers if the arrangements proposed in the Bill could find fruition. The TSB persuaded the Government to legislate and it has taken 10 years to arrive at this point.

The arrangements are proposed because they are in the best commercial interests of Scottish customers. The Scottish board met last week and confirmed that it is 100 per cent. in favour of the proposals. Twelve thousand staff outside Scotland are ready for the legislation; as are 4,000 staff inside Scotland. The unions are in favour. They, and the customers—those in Scotland and outside—will have preference in participation in the flotation of the company when it comes. This is a last-minute and, with the greatest respect to the noble Lord, Lord Taylor, a politically motivated move. Nationalist interests have been hard at work during the past few days. When asked for his view on what was going on, the general manager of TSB (Scotland), Mr. Ian McDonald, is reported by the Scotsman as saying: My concern would be if we took the Scottish bank out we would be eaten up eventually. As part of the larger TSB group we will be a predator rather than a prey. He adds that since TSB (Scotland) will have its own banking recognition it will be running its own affairs. A senior member of the Scottish board to whom I spoke last week said: It will be a total disaster if at this point this amendment is accepted. I hope that the House will reject the amendment.

Lord Grimond

My Lords, I must with respect take issue with some of what the noble Baroness has just said. To begin with, let us make it clear once again that those of us who support the amendment are in favour of the general tenor of the Bill; which is, as the noble Lord, Lord Taylor, said, to enable the savings bank to change its nature and to take part as a normal bank in the wider banking business. We are not against that. We believe that the amendment does nothing to derogate from that. The Government are missing an opportunity. They are not being asked to harm the Bill in any way.

The noble Baroness said that the depositors are in favour of this Bill. I do not know how she knows that because as far as I know they have not been asked. If she has evidence of some poll that has been taken of all the depositors I will willingly defer to her.

Baroness Carnegy of Lour

My Lords, I said that the employees and the unions were in favour. The depositors cannot be consulted.

Lord Grimond

My Lords, we shall have to refer to the Official Report tomorrow. I thought that the noble Baroness mentioned depositors. To my mind the depositors are the most important people: I shall come to the question of ownership in a moment. Moreover, I am not clear that any poll has been taken of the employees. It might be that their union leaders have said so, but to say that the employees of the bank are not in favour of the amendment is going too far. The employees of the bank may be in favour of the general purposes of the Bill but they might equally be in favour of it if Scotland were taken out of the Bill and, with a separate Bill, put in a position of independence with essentially the same powers as are given to the bank in this Bill. I see absolutely no evidence that the employees would be opposed to that.

I can well believe that the directors are in favour because as far as I know the directors are appointed. That is one of the complaints we make about the present set-up in the Bill. As the noble Lord, Lord Taylor, said, the directors were in favour of being taken over but were overruled, and rightly so in my view, in the national interest—the national interest, I may say, not only of Scotland but also of Great Britain.

Having, I hope, made it clear that we are not against the Bill and having, I hope, made it clear that there has been no poll or referendum among the depositors or employees of the savings bank and that although they may well be in favour of the Bill they might also welcome the bank remaining under Scottish control, let me now say a word about ownership. We had considerable discussion about ownership at a previous stage. Ownership is no doubt important, but it is not absolutely vital. What is vital is control. If the noble Earl the Minister looks into it, he will find it extremely difficult to establish who owns the Tote. The Tote is a very effective body and we know who controls it. It is control which matters, and control is passing to London. There is no conceivable doubt about that. The Scottish Savings Bank is going to be the subsidiary of a London controlled company. The directors are not going to be elected by any democratic process by shareholders, or anyone else, but are to be appointed from London.

The noble Earl is a Scottish Peer, so I believe. The Earls of Gowrie, up to a certain point, had a distinguished history. Like certain other noble families in Scotland, they blotted their copybook rather severely, but they were not alone in that, and had to leave the country in a hurry. I dare say one or two of them left their heads behind, but that has happened before in Scottish history. However, the noble Earl is a Scottish Peer and I am sure he is very susceptible to the view that Scottish financial institutions should remain under Scottish control.

6.30 p.m.

As has been pointed out, it is the Government's policy to build up Edinburgh. Here we have an essentially Scottish institution, founded and financed by Scotsmen. The point at issue is whether its control should be handed over to London or whether it should continue to be under Scottish control in Edinburgh. I should have thought that in every way from the Government's point of view the case is overwhelming for keeping it as an independent institution, for initiating a certain amount of decentralisation, and for keeping it as a Scottish institution without in any way derogating from the powers which are supposed to be given.

Unlike the noble Baroness, I am very surprised that there has not been more alarm in Scotland over this matter. The Scots seem to be fixed on the idea that they must have a Parliament. Of course the Scottish Parliament was not very much of a thing when it existed and, indeed, was not widely admired by the Scots. However, since then they have somehow got their ideas fixed on a Parliament. I believe that the great fund of energy, good will and legitimate sentiment which exists in Scotland should be concentrated on specifically Scottish institutions such as its law, its education and its universities and now its opportunity in the financial sector and the possibility that it really will become a great new source of financial services.

This would seem to me to be something around which all of us who are not Scottish nationalists but who are Scottish patriots can coalesce. This seems a golden opportunity for the Government to forward the whole of that sentiment and feeling. It seems that since we last discussed this the situation has changed in that people are coming to realise that an opportunity is being missed, and missed for no good reason—not for any party political reason, but simply because the Government did not think.

If this Bill is passed in its present form, as I understand it, there will be no safeguards for the Scottish Savings Bank at all. As I understand it, it could be abolished and totally taken over by the central London bank. It could be sold by the holding company. So far as I know, there will be no safeguards against this. Therefore I beg the Government, if they are really determined not to accept this amendment—and I certainly urge them to accept it—at least to see that when the Bill is implemented some safeguards are written into it to ensure that the Scottish Savings Bank will continue to be Scottish in whatever form is possible, even as a subsidiary of London.

Baroness Elliot of Harwood

My Lords, I should like to support the amendment which has been ably moved by the noble Lord, Lord Taylor of Gryfe, and supported by the noble Lord, Lord Grimond. I am sorry to disagree with my noble friend Lady Carnegy of Lour, but I do so on this occasion. I listened with interest to the original debate. I was impressed, but not to the point to which I am today. I am impressed by the changes that have taken place since we had that debate and by the arguments which have been put forward by the noble Lords, Lord Taylor and Lord Grimond. I think that it would be a great pity and something which we would deeply regret if the trustee savings banks just went down to be one of the many banks which are operating from the City of London.

I can remember very well, as we all can, when the Royal Bank of Scotland was supposed to be going to be taken over by another bank. I forget exactly which one it was, but I think that it was the Hong Kong Bank or something like that, miles away. I am glad to say that that was stopped and that the Royal Bank of Scotland is still with us and still an operating bank. It is one of the banks with which I deal myself, though the Bank of Scotland is the one in which I have most interest. I think it would be a great pity, if, in this Bill, the opportunity was not taken to establish the Trustee Savings Bank as an independent bank in Scotland with all the associations that we know it has all over the country. We have a very large clientele in Scotland. Appointments, elections and so on would all take place in Scotland. I think that we would miss a very great opportunity. I hope that the Government will give more thought to this.

The TSB employs about 3,000 people. Last year it was very successful and made a profit of £32.6 million. It is a very successful enterprise. As we know, it has a great number of clients. I think this is an opportunity that we should not miss. I hope the Government will have second thoughts about this. I hope that we shall be able to persuade them that this would be greatly to the advantage of the bank and of the people of Scotland and that the consequences would be very valuable.

I should also like to add to what the noble Lord, Lord Grimond, has said. I am not a Scottish nationalist. I never have been and never will be. I am a patriotic Scot who lives in Scotland. I support this amendment not because it is one of the efforts of the Scottish nationalists; the Scottish nationalists have absolutely nothing to do with me or nothing to do with this amendment. However, I have been approached by a number of people who are anxious about this matter. They are people who are in business in Edinburgh and are interested in banks in Edinburgh. I have changed my mind. At the beginning I did not support this amendment of the noble Lord, Lord Taylor. However, as I say, I have changed my mind. I think this is an important matter. I have had approaches from important people all wanting this to happen. I very much hope that my noble friend Lord Gowrie will consider this again and that he will support this amendment or at least agree to look at it again.

Lord Bruce-Gardyne

My Lords, I should again declare an interest as a director of the Central Trustee Savings Bank. I listened with great care to the speech with which the noble Lord, Lord Taylor, introduced his amendment. I must confess that, unlike my noble friend Lady Elliot, I could not actually detect all that much more additional information or supporting evidence than that which persuaded your Lordships a month ago to reject this proposition by a margin of three to two. I must confess that I hope your Lordships will not be of a mind to change that decision this evening.

We have heard numerous references to the precedent (if I may put it that way) of the Royal Bank of Scotland affair. I confess that at the time I thought that the outcome of the Royal Bank of Scotland affair was a rather desirable one. That was not perhaps entirely for the same reasons advanced by the noble Lord, Lord Taylor, the noble Lord, Lord Grimond, and my noble friend Lady Elliot, but because it actually got the Bank of England out of a rather awkward hole. However, it was a hole of its own contriving. It was hard to see how that could have happened otherwise.

I must say to the noble Lord, Lord Taylor, that, as I recollect it, I do not think there was the great rebellion of the shareholders of the Royal Bank of Scotland, to which he referred. As I recollect it, what happened was that there was a great alacrity to accept the first offer that came along from the Standard and Chartered Bank until the Hong Kong and Shanghai Bank came along with a much better one. There was perhaps little surprise at the fact that that offer received preference. I recollect that there was a great deal of enthusiasm in certain quarters in Edinburgh for the absorption of the Royal Bank of Scotland into the stomach of the Hong Kong and Shanghai Bank.

Perhaps we may revert for a moment to the nature of the amendment itself. The fundamental objection to this amendment to the structure which is suggested for the TSBs—the TSB in England and Wales, TSB (Scotland), TSB (Northern Ireland) and the TSB (Channel Islands)—in the Bill emerges from the consensus of opinion within the TSBs themselves. I speak here with some feeling because, as I mentioned to your Lordships when we discussed this question in Committee, I was responsible for these matters in the Treasury over a rather key period in the preparation of the Bill. It is perfectly true that on the issue of mutuality, which we discussed extensively at the Committee stage, I and the Treasury had a view which we did not hesitate to communicate to the TSBs. That view, as I explained when we were discussing these matters in Committee, was that the mutuality route would not provide adequate accountability for the sort of bank that we envisaged this bank becoming after flotation and after escaping from the maw of the Treasury.

We may have been wrong. We argued about it in Committee. I have no intention of going back over the argument now. I would, however, seek to put to your Lordships the point that on the issue of structure, as opposed to the issue of mutuality, the solutions devised were not imposed by the Government. They were the choice of the TSBs themselves, including TSB (Scotland). I would remind your Lordships that the trustees of TSB (Scotland) agreed unanimously again last week that they stood by their original decision and did not wish that to be changed.

Of course, noble Lords opposite have argued that this ignores the interests and wishes of the depositors. The noble Lord, Lord Taylor, seemed at one point to be equating depositors and shareholders. That is not, it seems to me, an entirely appropriate equation. Obviously, the nature of risk undertaken by the depositors is of a completely different order. The rights and ownership of the shareholder are quite different by definition from those of depositors. What is, however, incontrovertible, I believe, is that it is the wish, so far as we can judge, of all those engaged in the TSBs in Scotland that we should not seek to make a change of this nature at this very late hour. I must say to your Lordships that I find this unsurprising. I agree with the noble Lord, Lord Taylor, that TSB (Scotland) is of a size, significance and profitability to be able to stand on its own two feet.

On the other hand, it is very hard to imagine that a separate flotation for the TSBs in Scotland would realise proportionately the same value as the flotation of the TSBs in Scotland as part of TSB plc. That, after all, must be, and can be, a legitimate consideration of employees and, for that matter, of depositors who, under the terms of the proposals that the TSB put to the Government, are to have priority access when the flotation occurs.

There is one last point I wish to make. I am sure that I shall then have said enough. The noble Lord, Lord Taylor, referred to the efforts of the Scottish Development Agency in seeking to expand the financial services sector in Scotland. I must admit that I do not share the noble Lord's unlimited enthusiasm for all the works of the Scottish Development Agency, nor do I believe that it has always proved itself a model of commercial prudence or wisdom. Nevertheless, I accept that this is a sector that it has identified and to which it rightly attaches great importance. The noble Lord fairly quoted my honourable friend the Parliamentary Under-Secretary. However, when the noble Lord says that the Government are seeking to diminish the financial services sector in Scotland if the Bill is passed in its present form, I am bound to say that I do not see the logic of that or how that conclusion can be deduced from the proposal before your Lordships. I believe that there is nothing in the arguments that we have heard which should be conducive to your Lordships taking a different vote tonight from that taken a month ago. I hope very much that that decision will be confirmed this evening.

6.45 p.m.

Lord Stoddart of Swindon

My Lords, I rise to support the amendment moved by the noble Lord, Lord Taylor of Gryfe. Indeed, I said at Committee stage that I believed that the noble Lord had put up a very convincing case. He has elaborated on that case this afternoon and has made it, in my view, even stronger. I have no doubt that the noble Lord will deal with some of the points that have been made, notably by the noble Baroness, Lady Carnegy of Lour, and the noble Lord, Lord Bruce-Gardyne. There have been assertions from the noble Baroness and the noble Lord that people in Scotland show no signs of wanting this amendment.

In particular, the noble Lord, Lord Bruce-Gardyne, said that the directors of TSB (Scotland) did not want it and, indeed, that they supported the present arrangments. I am not sure that that can be stated absolutely. So far as I know, there has been no real consultation with either the staff or the depositors of the bank. Unless those people, particularly the staff, have been consulted, it is difficult to know whether or not they would be in favour of this amendment. After all, directors of banks and other institutions have been wrong before. I am not at all sure that the directors of TSB (Scotland) know the views of the Scottish people or, indeed, of the depositors of their banks. They have no way of knowing because they have not taken soundings. I have no doubt, however, that the noble Lord, Lord Taylor of Gryfe, will reply fully to those points when he winds up.

I suppose that I am an Englishman intruding into a debate monopolised so far by Scottish people. I suppose that I can excuse myself by saying that at least I have Scottish antecedents. However, I am certainly aware, because I have been told so by my colleagues, of the growing feeling in Scotland with regard to this matter. There is a growing awareness as people in Scotland have been alerted as to what is happening about the issue in question. There is increasing opinion that this amendment is sensible and that it should be passed by the House because it will assist the trustee savings banks and benefit the Trustee Savings Bank (Scotland) in particular.

Prior to the Bill—it is the present position—there was a confederal structure in the TSBs. There was a central board with autonomous units co-operating together to improve the service and the image of the trustee savings banks. What is proposed in the Bill is a new central board with shareholders who will in future make the major decisions affecting all the TSBs throughout the whole of the United Kingdom. This means that investment decisions will be taken by the central board. Undoubtedly, its strategy as a public limited company will be to invest in the most lucrative business in the most prosperous parts of the country. That is the danger to Scotland. That is the danger to the development of TSB (Scotland).

Lord Bruce-Gardyne

My Lords, I apologise for interrupting the noble Lord, but I just wonder whether he is aware that the financial institutions based in Edinburgh have always been celebrated as investors—not in other parts, and certainly not in Scotland; not even in other parts of the United Kingdom, but overseas and mainly in North and South America. So there is no comparison with that situation.

Lord Stoddart of Swindon

Indeed, my Lords, I recognise that point absolutely, and in fact I think it probably is a case in favour of this amendment. What the noble Lord is in fact saying is that the Scottish people are pretty canny financially, that Edinburgh is a great financial centre and that they are so canny that they can handle their business very well. What the amendment seeks to do is to allow them to continue to do it independently. The Bill itself, as I understand it, will create the central board which will have its headquarters in London. That board will not have its headquarters in Edinburgh. That is the point I was seeking to make and I am most obliged to the noble Lord, Lord Bruce-Gardyne, for helping me to make that point more succinctly.

As I was saying, the strategy of the new public limited company will he to invest in the most lucrative business in the most prosperous parts of the country. Scotland may very well lose out by such a strategy. Indeed, it is likely that Scotland will lose out, for the most prosperous areas which provide the most lucrative business lie south of Watford, not north of Hadrian's Wall. That is something with which all of us present in this House would agree at the present time.

It is certain that the real decision-making will be removed from Scotland, and yet another twist will be given to the ratchet of total financial control over TSB affairs from London. It is most unfortunate that this should be so. Scotland is unique in that it has a history. Like other noble Lords, who have spoken, I am no Scottish nationalist. I think that they are an irrelevance. Nevertheless, we cannot ignore the fact that Scotland has a history of nationhood which was not completely compromised by the Act of Union.

Much of our legislation has to take account of Scotland's own unique history and there is every reason why this piece of legislation should also do so. That is what the noble Lord, Lord Taylor of Gryfe, is asking the House to do. I believe that his case should be very seriously considered by your Lordships. I believe that it gives a fresh opportunity for another look to be taken at the amendment, and I trust that when we come to vote, as I hope we certainly shall, the House will take a different view from the one it took at Committee stage.

The Earl of Selkirk

My Lords, the noble Lord, Lord Grimond, said that he agreed broadly with the tenor of this Bill, and I fully agree with him. The noble Lord, Lord Bruce-Gardyne, no doubt did a very fine job at the Treasury in getting this going. I accept that. But it is a very seriously wrong trend. It is all very well to talk about bankers and depositors but does anyone look at money from the point of view of the Scottish economy?

I shall quote the words of my predecessor Commissioner of Special Areas in Scotland. He asked: "Is anything to be done to provide a source of loan capital?" That is the basis of any form of employment or activity. We talk about employment investments overseas and in South America, but it is very difficult to drag money out of London into an area in Scotland. What is this Bill doing? It is taking about £1½ billion out of Scotland and putting it in a bank in England. That is the main purpose of this Bill.

A noble Lord

No, my Lords.

The Earl of Selkirk

My Lords, is that not right?

A noble Lord

No.

The Earl of Selkirk

My Lords, it is very nearly that. I shall again quote from the Monopolies and Mergers Commission's Report. In conclusion, they refuse the Standard Bank the possibilities of going there, and they say that its effects on the initiative and business enterprise in Scotland would be damaging to the public interest". In other words, if the centre of management were moved fron Edinburgh to London, it would damage that. Further on they explained why and stated: The adverse effect would arise from the fact that with the change from scattered shareholdings to a single or dominant shareholder, ultimate control would shift from the present management to that of the new parent company. Whatever formal definitions of management responsibility were laid down, the last word would rest with the parent", and that is where it will rest now.

It is said that some 2 million from Scotland are gathered together in this place. Is this wise from the point of view of the economy? Is it really wise, no matter what the shareholders say? I am not interested in that. I am interested in this. The two things that you want for employment in this country are initiative and money. A great deal of the highest initiative from Scotland comes down to London. The rewards are better, the opportunities are better. If anyone doubts that, look at the telephone book and see the number of people with Gaelic names who are now occupying themselves thoroughly in London.

This is a misguided Bill in principle. It is not the way anybody who is interested in the economy of Scotland would ever have agreed to go on. Your Lordships may remember the Toothill Report. It asked: "What do the people in London do?" When the directors start a new company they ask: "Where shall we put it? A car distance from London is a nice convenient place, so say 50 miles from the company". That is in the mind of all directors who are in control. It does not necessarily follow—there may be other reasons—but it is very widely practised.

This Government should think a little harder. I am not saying that they are not trying to help unemployment. This is against the interests of unemployment outside London and I have got to say that. If I had been a Commissioner for Special Areas I should have made no end of a row if this sort of thing had been done at that time. There is no one making a row now. It is not so much the interests of the TSBs as the interests of the very economy itself that are involved. Therefore, I hope that the Government will look at it again.

7 p.m.

The Chancellor of the Duchy of Lancaster and Minister for the Arts (The Earl of Gowrie)

My Lords, while that particular point about employment is fresh in the minds of the House, perhaps I may answer my noble friend. The fact of the matter is that the holding company may be in London. It will not be a very large organisation, but the bank, with all the economic activity and employment that that implies, will of course be in Scotland. I am answering the point while it is fresh in our minds, and I shall come back to it as my own argument progresses.

As has been acknowledged on all sides, this amendment is identical with that put forward by the noble Lord, Lord Taylor of Gryfe, in Committee. There was a very full discussion then, with a clear majority against the amendment of 113 to 76, and a similar amendment was debated at length in another place. I say that only because I wish to apologise to the House if those who heard my comments on the substance of the amendment in Committee now find me a little bit boringly repetitive. In the circumstances, as this is virtually an identically tabled amendment, I am afraid that that is inevitable.

However, first, I should like to make one new point. As drafted, this amendment would not have the effect which the noble Lord, Lord Taylor, is seeking. His purpose is to strike out of the Bill the body known as the Trustee Savings Bank (Scotland); that is, the present Scottish TSB. TSB (Scotland) is one of the "existing trustee savings banks" to which line 9 on page I of the Bill refers. However, the noble Lord's amendment mentions by name the intended successor company to TSB (Scotland); namely, Trustee Savings Banks (Scotland) Limited. The word "Limited" means, of course, that the body so described is a company established under the Companies Acts, whereas this part of Clause 1 deals with existing trustee savings banks which are not companies. In short, the noble Lord has got the name wrong and his amendment would be ineffective for that reason were it to he adopted. Perhaps I owe the noble Lord an apology for not having made this small but nevertheless important point in Committee; I would have done so had I known he would return to the charge even after unsuccessfully dividing the House. But I felt it then more appropriate, as indeed I do now, to concentrate on the principle rather than on the drafting. However, as the noble Lord has reverted to this matter, I feel that I must emphasise that his amendment would not work in practical terms.

Secondly, I should perhaps go into rather more detail on the consequence which this amendment would have for TSB (Scotland)—assuming for the moment that, contrary to what I have just been arguing, the amendment did work practically. As the noble Lord, Lord Grimond, acknowledged in Committee, it would not be sufficient just to leave TSB (Scotland) out of this Bill. That would leave TSB (Scotland) in its present unsatisfactory constitutional position as a trustee savings bank under the old TSB legislation, and it would deprive TSB (Scotland) of the opportunities which the Bill creates. I say to my noble friend Lord Selkirk that I do not think that that would be a very exciting prospect for employment in Scotland.

The Earl of Selkirk

My Lords, the Government could quite well introduce an additional Bill to put the matter straight. We agree that the tenor of the Bill is good.

The Earl of Gowrie

My Lords, my noble friend has a very relaxed view of what Governments can do in the way of finding time for additional legislation. It is hard enough to get any kind of legislation into the queue these days, let alone something which, in the Government's own judgment, is perfectly well covered by the legislation for which they have been able to find time.

As I was saying, this would put the Scottish TSB into the old unsatisfactory position and deprive it of the opportunities which the Bill creates. But what is even more serious is that this Bill provides for the repeal of the old TSB legislation as the reorganisation and flotation provided for in the Bill proceeds. When the relevant parts of the Bill are brought into force, the old TSB legislation will therefore cease to exist. If TSB (Scotland) were still in operation on the old basis at that time, it would of course effectively be put out of business.

I think that it would be quite wrong to take TSB (Scotland) out of this Bill and to leave it in cold storage, operating under legislation which Parliament has decided in principle to repeal, until such time as an alternative Bill for Scotland is worked out and legislative time becomes available; and, as I have pointed out to my noble friend, that is not always easy. Surely this would not be in the interest of TSB (Scotland), its depositors, the Scottish financial community in general, or indeed the Scottish economy in general. I do not make too much of these points, though I believe that they are substantial, and I think that it is important that the House should be clear about the consequences of what is proposed if this amendment is carried.

Perhaps I may now turn to the merits of the amendment. I should perhaps first say that the amendment rests on a misconception of the future structure of the TSB group, and this is why I was registering dissent in body language, as it were, when my noble friend Lord Selkirk was talking about taking a valuable part of the Scottish economy out of Scotland and plunking it down in England. TSB (Scotland) Limited, the successor bank in the jargon of the Bill, will not be a subsidiary of TSB (England and Wales) Limited. Both these banks will alike be subsidiaries of the holding company and, as I have said, that holding company will not itself be a bank. Indeed, the Banking Act 1979 will specifically prohibit the holding company either from calling itself a bank or from behaving like a bank.

There will, of course, be a small headquarters staff based in London, but the operations of TSB (Scotland) Limited will be run from Edinburgh as the operations of the present Trustee Savings Bank (Scotland) are now. Indeed, it would not be at all in the interests of the TSB group to run things differently or to make its Scottish subsidiary an insignificant pawn in some City of London game. In the first place, those who argue that Scottish financial interests are in some way under threat seem to me to be taking a remarkably pessimistic view of the capacity of Scottish institutions to hold their own. As the noble Lord, Lord Stoddart of Swindon said, the Scottish are pretty canny financially and indeed have become figures in legend for this canniness.

In the second place, the TSB holding company in London will, in its own interests, wish to retain a powerful Scottish bank because otherwise it will lose supporters and customers in Scotland on whom the holding company relies for business and profits. I believe that that substantially answers both the noble Lord. Lord Grimond, and my noble friend Lord Selkirk on the point about the Scottish economy.

The Earl of Selkirk

My Lords, perhaps I may ask a question. As I read it, that is a very important statement. Will this be a separate joint stock company in Edinburgh or will it simply be a subordinate company to the holding company?

The Earl of Gowrie

My Lords, it is a bank, and the bank is one of a number of banks owned by the holding company. I think that that is a fair description.

Lord Ross of Marnock

My Lords, will the noble Earl make it perfectly clear that what we are trading is independence for being a subsidiary of a holding company, which inevitably has final control of policy?

The Earl of Gowrie

My Lords, the reason that I do not think we are doing any such thing is that the holding company is a company that has a number of banks. It needs those banks to behave vigorously and independently as banks in their areas of influence. As I argued previously, the holding company is not a bank. Perhaps if I could elaborate my argument a little further it may deal with some of these points.

The Bill will enable the TSB group to reorganise on the basis which was announced as long ago as August 1982. The trustees of the then four Trustee Savings Banks (Scotland) were parties to the decision which the TSB movement announced at the time. I note from the Scotsman newspaper that the trustees of TSB (Scotland) have as recently as last week reaffirmed their commitment to the proposals in the Bill. Indeed, far from being a poodle if it stays in the TSB group it will, I think, be predator rather than prey, as Mr. Ian Macdonald, its chief general manager, said of TSB (Scotland) only a few days ago. I note that the chief general manager of TSB (Scotland) therefore is of the opinion that the future of the Scottish bank will be more secure inside the United Kingdom group than it would be on its own. Even the most passionate Scot in this House is not suggesting—and everyone has reiterated that this is not a Scottish nationalist issue—that in some way it should be taken out of the United Kingdom context.

I also do not accept that there have not been consultations. There were wide consultations within TSBs for several years before the reorganisation plans were decided, as my noble friend Lady Carnegy of Lour has said, and the plans have been given considerable publicity since 1982. There were few comments until very recently, again as my noble friend said, though there has been some rather frenzied agitation in recent weeks.

May I say to the noble Lord, Lord Taylor, that no new information, as he appeared to be suggesting, has been brought forward since the Committee stage. There may have been some skilful lobbying by certain parties brought forward since the Committee stage, but no new infomation whatsoever.

I should like to pay tribute to the key role which the Trustee Savings Banks in Scotland have always played within the TSB movement, and I believe that it will continue. In the past, TS banks in Scotland have provided one kind of local service; that is to say, a savings medium for depositors. But as I emphasised strongly in Committee, the counterpart to that has been their role as a channel of Scottish savings to central Government in London.

If TSB (Scotland) is to make a really effective contribution, it must operate in Scotland on the other side of the balance sheet, as it is already starting to do, by lending locally. As a member of the future group, TSB (Scotland) will be in a positon to make a valuable contribution to the Scottish economy. We share the view of TSB (Scotland) that the concerns which have been expressed about its future independence are grossly exaggerated and, indeed, betray a surprisingly defeatist point of view. The Government are therefore unable to accept the purpose behind this amendment, and I hope that the noble Lord will decide not to press it.

The Earl of Selkirk

My Lords, could the holding company dissolve the company in Edinburgh at any time it liked? The noble Earl's statement is interesting, but nothing is in the Bill.

The Earl of Gowrie

My Lords, the holding company could only dissolve aspects of the other banks, in my judgment, if it went off its head. The idea of the holding company is to have a vigorous banking group. As the noble Lords, Lord Taylor and Lord Grimond, and others have said, there is perhaps no area where banking is more vigorous in the world, let alone in the rest of the country, than in Edinburgh.

7.15 p.m.

Lord Ross of Marnock

My Lords, I should apologise as I was not here at Committee stage because of illness, but I have been listening fairly carefully to the arguments presented. There is a misconception on the Minister's part, and on the part of the noble Baroness, Lady Carnegy, if it is thought that all who have spoken in favour of this amendment—including the noble Baroness, Lady Elliot, the noble Earl. Lord Selkirk, and others—are dupes of some political movement, and that it was politically motivated, according to the noble Baroness, Lady Carnegy.

The Earl of Gowrie

No.

Lord Ross of Marnock

My Lords, I think that the noble Baroness, Lady Carnegy, can rise and speak for herself, without the Minister helping. I have the words written down, and she said that it was "politically motivated".

Baroness Carnegy of Lour

My Lords, I did indeed say that. There has been a tremendous Scottish nationalist campaign in the last fortnight to get this going, ably assisted by the Alliance, and now it seems that the main Opposition party has got on the bandwagon as well. My noble friends, I would claim, are misled.

Lord Ross of Marnock

My Lords, the main Opposition parties here have not been the only speakers today. Is the noble Baroness, Lady Elliot, politically motivated, or a dupe of some political lobby? Similarly, is the noble Earl, Lord Selkirk, so weak that he cannot make up his mind about these things? I would never accuse my once noble friend Lord Taylor of being politically motivated about this or anything else. We are able to make up our own minds as to whether something is good or had for Scotland.

All we have to do is read the report on the last banking worries in Scotland to see what the Government at that time felt when they would not allow an important merger, which of course was what was wanted by certain people in banking circles. It is not what they want, what they see as the future, on which we have to make up our minds here. We have to take the broad view as to what is right for Scotland.

I can remember that my children had deposits in what was then called the Glasgow Savings Bank. It is unfair to be told by anybody that this has just come along at the last minute when we are persisting, so far as I can see, with a point of view that we put forward earlier and before all this hullaballoo started—which has never reached me—about political motivation.

One thing I want to say to the noble Earl, Lord Gowrie, is that if we discussed this before and he saw a powerful defect in its drafting and its consequences, he did not do the House any service by not mentioning it. It is part of his duties to guide the House in relation to such a weakness. He said that he was too busy talking about the principles. But today that was the first thing he spoke about, and it was an important point that he made.

I have never been terribly worried about drafting in that respect, because these things can be put right. This could go to another House and the Government could change it there. They did it on the Scottish local government Bill, when this House threw out the great Strathclyde. It reappeared in another place. This was done on Third Reading. By means of a Lords' amendment when we discussed it, it was changed, and Strathclyde was retained. We could make those changes if we accepted this amendment even though the Government were not satisfied about the drafting.

It was unfair to talk about this being a last minute affair, and unfair to talk about it having been subject to political motivation. I spent a long time trying to get decision-making in Scotland. Here we are taking decision-making out of Scotland. That is the important point; and it is in respect of an organisation which has its roots in Scotland, in Scottish communities, and in Scottish people.

We do not require Scottish national parties to tell us what to do. There are going to be new oportunities. It may well be, as the noble Earl, Lord Selkirk, said, that we require a Scottish Bill—and we are prepared to wait for that—to get the new freedoms that this new Trustee Savings Bank will have. But please appreciate exactly our concern!

Time and time again we have seen Scottish organisations removed from Scotland and quickly losing their influence within Scotland. Time and time again we have seen factories coming in which have proved to be only branch factories, with no decisionmaking—and I can remember that it may well have been in Canada in respect of Massey Ferguson. From that point of view you can judge what importance we place on this amendment. I certainly support it.

Lord Taylor of Gryfe

My Lords, the noble Lord, Lord Ross of Marnock, has been so compelling in his arguments, particularly in relation to the drafting difficulty mentioned by the Minister, that I do not require to elaborate upon that matter. Presumably we shall return to this Bill at Third Reading, and if the House decides in favour of the principle involved—and it is quite clear what the principle is—I assume that the drafting difficulties can then be overcome.

The noble Baroness, Lady Carnegy of Lour, made a number of statements, but all of them were pure conjecture. For example, she quoted the phrase, "This is in the best commercial interests of the trustee savings banks". She quoted some friend of hers in the TSB movement who said that it would be a disaster if this does not go through. There is no evidence to prove that. This is purely imagination on the part of the noble Baroness. Does she assume that a Scottish bank of this size is not viable?

I should say that I am engaged in banking in Scotland and I have a fair idea of the viability of Scottish banks. In fact last year the Trustee Savings Bank, this modest bank in Scotland, earned more than the Clydesdale Bank in Scotland, a well-established financial institution. There is no doubt that the management of the TSB (Scotland), with its substantial investment and assets, is certainly capable of becoming a third force in Scottish banking, if we assume that the only other independent banks are the Royal Bank of Scotland and the Bank of Scotland. Her case in that respect was answered effectively by her colleague, the noble Lord, Lord Bruce-Gardyne, because he has no doubts about the viability of that bank.

I should say a word about the consequences of the rescuing of the Royal Bank of Scotland. I quoted the Monopolies and Mergers Commission's judgment on the Royal Bank of Scotland. As a result of that the Royal Bank of Scotland did not deteriorate after the intervention of the Monopolies and Mergers Commission. Indeed, it has shown a great liveliness. It has developed into a merchant banking international association and it has given a great impetus to the Royal Bank of Scotland to remain independent: an impetus that it would not have enjoyed if it had been absorbed into one of the great financial institutions whether it was Standard Chartered or the Hong Kong Bank. I suggest that the establishment of this bank in its independent status can be an encouragement to innovation and development, particularly under the excellent management which the TSB (Scotland) now enjoys.

It is said that the trade unions support this. I suspect that the affiliation of the Labour Party is much closer to the trade unions than is the noble Baroness, Lady Carnegy of Lour. The trade unions in this case are United Kingdom trade unions, but at no stage have employees in the Trustee Savings Bank (Scotland) been consulted in this matter. I should have thought that with the commitment of the noble Baroness, Lady Carnegy, to consultation at grass roots and consultation at the workplace she would have accepted that the trade unions on the job have not been consulted in this case. Indeed, I should have thought that the commitment of the noble Baroness to decentralisation philosophy would also have encouraged her to support the proposition that is now before us.

The critical issue was the point raised by several noble Lords, including the noble Earl, Lord Selkirk, and the noble Lord, Lord Ross of Marnock. It is the power relationship of the new company. I quoted earlier the chairman of the TSB group, who simply says: As a holding company board it will exercise ultimate control over the profitable development of the Group's activities. It will have responsibility for the formulation of Group policy and for providing the organisation and management structure", to carry that out. Is that not complete control at the centre? It may be exercised by a small body of people and the detailed day-to-day work of the bank may be operating in Scotland, but the centre of power is now being removed to TSB Holdings and that is the issue now before us. This is critically important for Scotland.

I give one more quotation from the Monopoly and Mergers Commission's report: We believe that an important factor in Scotland's economic difficulties has been the progressive loss of morale which the taking over of large companies has caused; and we accept that this is damaging to Scotland. Entrepreneurial spirit and business leadership depend critically on self-confidence, and on balance we believe that such self-confidence is weakened by this take-over". That is the issue before this House—whether one believes that decentralisation contributes to growth, imagination and the retention of employment in Scotland or whether you are prepared to surrender that important principle to create just another high street bank. I call on Members of this House to make that judgment now.

7.25 p.m.

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

Their Lordships divided: Contents, 67; Not-Contents, 54.

DIVISION NO. 3
CONTENTS
Attlee, E.	Jacques, L.
Banks, L. [Teller.]	Jenkins of Putney, L.
Beaumont of Whitley, L.	John-Mackie, L.
Beswick, L.	Kilbracken, L.
Bottomley, L.	Kilmarnock, L.
Brockway, L.	Kinloss, Ly.
Bruce of Donington, L.	Kirkhill, L.
Carmichael of Kelvingrove, L.	Lawrence, L.
Collison, L.	Lloyd of Kilgerran, L.
David, B.	Lovell-Davis, L.
Davies of Leek, L.	McIntosh of Haringey, L.
Diamond, L.	MacLeod of Fuinary, L.
Elliot of Harwood, B.	McNair, L.
Elwyn-Jones, L.	Meston, L.
Ennals, L.	Mishcon, L.
Falkender, B.	Mulley, L.
Falkland, V.	Munster, E.
Ferrier, L.	Nicol, B.
Gallacher, L.	Perry of Walton, L.
Galpern, L.	Ponsonby of Shulbrede, L.
Glenamara, L.	Raglan, L.
Graham of Edmonton, L.	Ritchie of Dundee, L.
Grey, E.	Rochester, L.
Grimond, L.	Ross of Marnock, L.
Hampton, L.	Saltoun, Ly.
Harris of Greenwich, L.	Selkirk, E.
Hooson, L.	Stedman, B. [Teller.]
Houghton of Sowerby, L.	Stewart of Fulham, L.
Irving of Dartford, L.	Stoddart of Swindon, L.

Taylor of Blackburn, L.	Whaddon, L.
Taylor of Gryfe, L.	Wilson of Langside, L.
Taylor of Mansfield, L.	Winstanley, L.
Tordoff, L.	Winterbottom, L.
Walston, L.

NOT-CONTENTS
Beloff, L.	Hornsby-Smith, B.
Belstead, L.	Hylton-Foster, B.
Boardman, L.	Inglewood, L.
Brabazon of Tara, L. [Teller.]	Lane-Fox, B.
Brougham and Vaux, L.	Lothian, M.
Broxbourne, L.	Lucas of Chilworth, L.
Bruce-Gardyne, L.	McFadzean, L.
Cairns, E.	Mersey, V.
Caithness, E.	Morris, L.
Cameron of Lochbroom, L.	Mottistone, L.
Carnegy of Lour, B.	Mountevans, L.
Colwyn, L.	Newall, L.
Cox, B.	Onslow, E.
Crathorne, L.	Orkney, E.
Cullen of Ashbourne, L.	Orr-Ewing, L.
De La Warr, E.	Rankeillour, L.
Drumalbyn, L.	Renton, L.
Enniskillen, E.	Sandford, L.
Faithfull, B.	Skelmersdale, L. [Teller.]
Ferrers, E.	Sudeley, L.
Gisborough, L.	Suffield, L.
Glenarthur, L.	Swinfen, L.
Gowrie, E.	Trefgarne, L.
Hanson, L.	Trumpington, B.
Harmar-Nicholls, L.	Ullswater, V.
Henley, L.	Vivian, L.
Hives, L.	Zouche of Haryngworth, L.

Resolved in the affirmative, and amendment agreed to accordingly.

7.33 p.m.

Lord Banks had given notice of his intention to move Amendment No. 2:

Page 2, line 35, at end insert— ("( ) Provision shall be made for two directors of the holding company's board to be appointed by the employees and similar provision shall be made in the case of local boards.").

The noble Lord said: My Lords, this amendment is not moved. My noble friend and I wish to support Amendment No. 8, which has a similar purpose.

[Amendment No. 2 not moved.]

Lord Houghton of Sowerby moved Amendment No. 3: Page 2, line 39, after ("day") insert ("which shall not be earlier than 1st January 1986").

The noble Lord said: My Lords, I beg to move Amendment No. 3. The decision which the House has just taken has very serious reverberations throughout. My amendment is intended to ensure that there is reasonable time for opinion to emerge from the various interests that are concerned. What we have been listening to on Scotland is the problem of consultation generally. There has been just as much consultation in Scotland as there has been elsewhere. The unions have been consulted but the depositors have not. The difficulty is in consulting depositors who are not organised. There are large numbers of them and there is great difficulty in providing a satisfactory vehicle of communication.

The consultation has been with the trustees of the local boards and they have tried to gather opinion as they have gone along to formulate eventually the request for this very big change to be made. But at the root of the Scottish problem is the root of the English problem: the difficulty of consultation and the lack of adequate consultation, anyway. My amendment is intended to ensure that the vesting day shall be sufficiently far ahead to allow opinions to formulate about certain matters which the central board will have to consider.

It probably is not fully realised that the whole operation is in the hands of the Treasury in the end, because under Clause 1(3), The vesting day shall be appointed by the Treasury by order made by statutory instrument after consulting the Central Board".

I assume that a statutory instrument has to be laid before Parliament, and this one will presumably be under the negative procedure; namely, that it would be open to a Prayer for annulment within the specified period if there was enough consensus of opinion in either House of Parliament to do so. I stress that because the Treasury hold the linchpin of the whole operation by being in control of the vesting day.

I want to ensure that there is no undue haste in accomplishing the transfer because I want to give reasonable time for depositors in particular to formulate any opinions that they wish the central board to consider regarding the conditions of the flotation. I shall come to the conditions of flotation in later amendments. But this amendment is to enable the time to be there for opinions to be brought to bear upon the central board on matters which are very important to the depositors and which raise many difficulties of administration. I am really having to move the horse before I can describe the cart; but that is the way we do things in Parliament. We nearly always have the horse before the cart. And because it comes earlier in the Bill than the cart, I have to move the horse now; and I am trying to get it moving.

There is really no controversy about this because I understand that the vesting day in any case could not be earlier than November, and that is pretty late in the year. Nevertheless, it may not be long enough. I hope that I can at least get an assurance from the Government that the vesting day would not be fixed at such a date as to prevent full consideration being given by all concerned, and especially the central board, in the light of any opinions that may be expressed to it, about the conditions under which shares shall be made available to acquisition by depositors. That is really my main interest here.

The unions are properly organised. They have a voice, they are not short on representations, believe me, in this and other matters. They are organised and they have a collective voice that they can put to the central board; and they can do it just as well in Scotland as they can do it anywhere else. But the depositors are in a different position entirely. They do not belong to any union, there is no requirement to convene a meeting of them. I do not know how a meeting of them could be convened properly and constitutionally under the structure of the Trustee Savings Banks. If we were dealing with a building society, all this would have to go to a properly convened meeting of the shareholders. However, in the case of the Trustee Savings Bank there is no such body to be consulted. Depositors are not members; they do not have votes. There is no means of deciding what qualifications they may have to be brought together. It can only be done in the same way as the Leader of the Conservative Party used to be appointed—that is, the emergence of opinion, the emergence of a consensus and the emergence of some representations that the board might have to consider.

That is my case, and I sincerely hope that we can have an assurance that the vesting day—and I understand it cannot be earlier than November because there is such an enormous amount of work to be done on the flotation and the preparations for it in any case—will be fixed so that there will be time for the board to consider whatever may arise in the intervening months.

My final comment is this. There has been too little publicity about the whole enterprise that we are considering in the House tonight. There have been specialist journals and there were special columns devoted to it some time ago, notably when the White Paper came out. But the general mass of depositors, I should say, are in ignorance of what is going on. They have no means of knowing. I am a depositor and I have had no communication from the Nottingham Trustee Savings Bank, of which I have been a member for donkey's years, about anything—no communication whatsoever. I imagine that most depositors are in the same position. In those circumstances, how can I know? I should not have known what was going on had I not studied the parliamentary drill and the White Paper, because so little publicity has been given to this in general publications.

I leave it there. I do not want to make unnecessary difficulties about this amendment, but I just want to be assured that there will be no undue haste in doing it. I believe it certainly will not be before November, but it should be longer than that if possible, although I realise that the choice of opportunity has to be taken into account for very important financial reasons. I shall listen to the noble Earl's reply with great interest. I beg to move.

The Earl of Gowrie

My Lords, I have only a brief point to make on this, but that does not mean to say that I have not in turn listened with great care to what the noble Lord, Lord Houghton, has said. However, it seems to me that it is not really needful to circumscribe the TSB's freedom of action in the way the amendment suggests. They have said, as he has acknowledged, that the flotation should be late this year or early next year, but the essence of the legislation is that this should be a matter for them.

Lord Houghton of Sowerby

My Lords, that is not a very satisfactory reply, because, as I said a moment ago, since the Treasury hold the reins on the change because they are in charge of the vesting day, then somebody on the Government side should be able to give some assurances about the considerations they will take into account in deciding on the vesting day. In fact, as I also said a moment ago, the order for the vesting day has to be by means of statutory instrument, and that can only be introduced by the Government; and the Treasury are going to decide the day.

In those circumstances, cannot the Minister assure the House that when the Treasury come to fix the vesting day they will want to take account of what has happened in the intervening period regarding the consideration of matters which come later in the Bill; namely, the conditions under which shares may be issued and at what price, whether certain share options should be given to depositors and whether any preferential treatment should be given to the depositors? All these are matters which the Treasury can take into account in deciding on the vesting day.

The Earl of Gowrie

My Lords, perhaps I could have put my answer more clearly than I did to the noble Lord. and I apologise. It is in fact as I implied: it is the TSB that will decide the vesting day. The Treasury will just make the instrument formally.

Lord Houghton of Sowerby

My Lords, in those circumstances there is no point in going on with the amendment at the moment because I do not want to divide the House on it at this particular time. However, I can say that I am not satisfied with the Minister's reply. I was not aware that it was going to be a pure formality: that the board of the Trustee Savings Bank would say, "we want the vesting day to be on a certain date" and the Treasury would say, "Very well, we will lay the necessary instrument". I thought there was more behind Clause 1(3) than is implied by what the Minister has said. However, I beg leave to withdraw the amendment because I will probably have something to say about this at a later stage of the Bill

Amendment, by leave, withdrawn.

7.45 p.m.

Lord Jacques moved Amendment No. 4: After Clause 1, insert the following new clause:

("Provision for charities.

. The directors of the holding company of the new T.S.B. group shall in consultation with the Treasury appoint three trustees. For every ten shares sold by the new T.S.B. group one share shall be vested in the trustees. The trustees will be responsible to the directors of the holding company for the distribution of the income from the shares to charities which are likely to improve the lot of working people.").

The noble Lord said: My Lords, I beg to move Amendment No. 4. Throughout a long period of years the Trustee Savings Banks up and down the country have taken a very active part in the life of the local community and have considerably benefited charities which have been associated with the lives of the working-class depositors, who have been the backbone of the bank. This is recognised in a letter which is published in the White Paper which preceded this Bill. It is from the chairman of the bank, Sir John Read, to the Chancellor of the Exchequer; and in paragraph 14 he says that the bank has undertaken to set up TSB charitable foundations. He goes on to say: These will continue the TSB's traditional role in contributing to the life of the community by assisting local needs of many different kinds". So this is acknowledged by the bank itself, and they say: It has not merely been a tradition but a tradition which will be continued".

The purpose of this amendment is to pinpoint the extent to which there should be asistance to charities and also to say by what means it should be given. As the mover of the amendment, I have the onus of doing two things: first, of satisfying the House that the amount is correct (that is, one share in 10) and, secondly, of suggesting that the way of doing it by means of trustees is the best way.

At the Committee stage it was explained to the Committee that the bank will retain whatever monies are paid by the shareholders for the new shares. I repeat that whatever the shareholders pay will be retained by the bank. The bank will belong to the shareholders, and so it follows logically that, if those are the true facts, the shareholders will get their money back in the form of assets within the bank. In turn, that means that they will get the present value of the hank as a complete gift—completely free. For example, if X represents the present value of the bank and Y represents the amount paid by the shareholders for the shares, then the new value of the bank will be X plus Y; that is, the present value plus the money paid by the shareholders. But the shareholders will get that for just paying Y, which means that they get X, the present value of the bank, completely free, as a gift.

The Minister had to acknowledge the logic of my argument. His only reply was, "Ah, but the shareholders may not be able to realise that base value at any time because at any point of time the market value of the shares may be less than the base value". That is, of course, no real answer because that applies to every shareholder in every company. The plain fact is that as far as the base value of the shares is concerned, the shareholders are getting the present bank completely free of charge. It includes £700 million in reserves which have been created over the years by the depositors.

With such generosity it can surely be said that to allocate 10 per cent. to the kinds of charities which will benefit the lives of the people who have built up this bank over the years is very modest indeed. The amendment merely says that for every 10 shares that are sold one only shall be vested in trustees; and that the income on those shares shall be used to benefit charities which will help to make the life of working class people better than it is.

This general principle is not denied by the hank because in paragraph 14—from which I have already quoted—it is proposed to have some special shares for the purposes of the charitable foundations. Therefore, the general issue of the income from particular shares being used is not something that is foreign to the ideas behind the bank.

Why do I say it should be done by vesting these shares in trustees? The reason is that the bank has already indicated that it intends to carry on with the present name of Trustee Savings Bank. It would be quite wrong for Parliament to authorise something which is completely misleading. I submit to you that if there are no trustees, and if everything is vested in shareholders, then it is quite wrong to call it a Trustee Savings Bank. We have no right to be a party to that. One purpose of this amendment is to justify the continued use of the name. If, as the amendment proposes, there are appointed by the bank three trustees who shall be responsible for the allocation of the income from one share in ten to the kind of charities that have benefited in the past, that will make it a Trustee Savings Bank in the future.

My Lords, I believe it is very important that if we are going to have a bank which is a Trustee Savings Bank and is known to be a Trustee Savings Bank it should, in fact, be a Trustee Savings Bank. This is a way in which it can be done at a minimum of cost and with a small benefit to those charities which have benefited in the past. I beg leave to move the amendment.

The Earl of Gowrie

My Lords, the Trustee Savings Control Board have made it clear that they would like to endow charitable foundations. Wearing another hat, no one is more glad of that than I. I hear a murmur of support from the noble Lord, Lord Mishcon. The National Theatre will be a beneficiary, and I shall be delighted if it is. However, that is a matter for them and for the shareholders in the new TSB Group plc. The charities proposal was set out in the reorganisation plans when they were announced in August, 1982, and it was repeated in Sir John Read's letter to the Chancellor published in the White Paper at paragraph 14.

My Lords, we have considered very carefully whether it is appropriate to provide for the endowment of charities in the Bill. We have concluded that it is not necessary to do so and that it is best to allow the TSBs to take their own decisions under their own powers and those of the new companies. It is surely a matter for the charities once they are set up to decide how to use their funds under the usual law relating to charities, and there seems to us to be no need to make specific provisions for them.

On the point about the name that the noble Lord, Lord Jacques, made, it is already legal for a company to use the word "trustee". That is a matter of existing company law. There seems no reason, therefore, why TSB should not keep their name as they themselves —or rather as the Government—wish. This provides an admirable sense of continuity and a tradition which is important.

Lord Stoddart of Swindon

My Lords, I should like briefly to support the amendment moved by my noble friend, Lord Jacques, and indeed supported by other noble Lords. While I appreciate very well what the Minister says, that the trustees themselves will wish to decide where the charitable monies should go, what my noble friend is seeking to do is to ensure that a given amount of money and a given number of shares are made available to the trustees in order that they will have a sure income from dividends paid on those shares which are to be paid to charities. It seems to me that my noble friend is right to try to write this into the Bill specifically, because we have no way—in spite of the assurances given by Sir John Read in his letter—of knowing what level of support will be given by the new TSB plc to charitable organisations. If it is written into the Bill, then, of course, we are laying down what will be a minimum to be provided.

Therefore, I hope that the noble Lord will think again. If my noble friend decides to press this amendment to the vote he will, of course, get our support.

The Earl of Gowrie

My Lords, I am still foxed as to why the noble Lord thinks that this plc company should be put in a different position from any other.

Lord Stoddart of Swindon

My Lords, the answer is very simple: there is nothing like it and there never has been anything like it, so we really cannot but put it in a different position from anything else because it is something entirely new, something entirely unique. We have no precedents to guide us, no precedents to work to. Therefore, I would have thought that we could introduce unique measures into this particular Bill.

The Earl of Gowrie

My Lords, we are now engaged precisely in an exercise to make it less unique.

Lord Stoddart of Swindon

Until we pass the Bill—

Lord Beswick

On a point of order, my Lords, are we not engaged in Report stage and not Committee stage?

The Earl of Gowrie

That is indeed right and I apologise to the House. The noble Lord put points to me directly, as I thought, and so I felt obliged to answer them.

Lord Jacques

My Lords, the Minister has made two points in reply to me. I want to reply to both points.

First of all, he says that as far as the amount is concerned it should be a matter for the bank. I would dispute that. The Treasury has promoted the Trustee Savings Banks and has used them for 150 years; Parliament has approved that, and Parliament has some responsibility at this point of time when the TSB is being handed over to a new body of shareholders. I would entirely disagree with the Minister on that point.

Secondly, he tells me that the bank could use trustees, that that is legal. I have never suggested that it is illegal. What I am suggesting is that it is misleading, and therefore immoral.

I should like to put a question to the Minister: would the Government agree to any new bank calling itself a Trustee Savings Bank under the Banking Act 1979? Of course it would not. It would regard it as completely misleading if there were no trustees, and therefore it will be completely misleading if we substitute, as we shall in this Bill, shareholders for trustees.

This amendment is a very simple way out. For every 10 shares, one shall be used to give an income for charities and for that purpose there shall be three trustees. It is worth paying this price to make the Trustee Savings Bank something different from the other High Street banks and, in addition, to justify the use of the name "Trustee". I believe that this is a really worthwhile amendment, and it is in the interests of the bank. I shall therefore ask the House to make a decision accordingly.

8 p.m.

On Question, Whether the said amendment (No. 4) shall be agreed to?

Their Lordships divided: Contents, 54; Not-Contents, 36.

DIVISION NO. 4
CONTENTS
Attlee, E.	Llewelyn-Davies of Hastoe, B.
Banks, L.	McIntosh of Haringey, L.
Beaumont of Whitley, L.	MacLeod of Fuinary, L.
Beswick, L.	NcNair, L.
Bottomley, L.	Mishcon, L.
Brockway, L.	Mountevans, L.
Carmichael of Kelvingrove, L.	Munster, E.
David, B.	Nicol, B.
Davies of Leek, L.	Northfield, L.
Elwyn-Jones, L.	Perry of Walton, L.
Falkender, B.	Ponsonby of Shulbrede, L. [Teller.]
Gallacher, L.
Galpern, L.	Raglan, L.
Glenamara, L.	Rhodes, L.
Graham of Edmonton, L. [Teller.]	Ritchie of Dundee, L.
	Ross of Marnock, L.
Greenway, L.	Shackleton, L.
Grey, E.	Stedman, B.
Hampton, L.	Stewart of Fulham, L.
Houghton of Sowerby, L.	Stoddart of Swindon, L.
Hylton-Foster, B.	Strauss, L.
Jacques, L.	Taylor of Blackburn, L.
John-Mackie, L.	Taylor of Gryfe, L.
Kagan, L.	Taylor of Mansfield, L.
Kilbracken, L.	Tordoff, L.
Kilmarnock, L.	Walston, L.
Kinloss, Ly.	Whaddon, L.
Lawrence, L.	Winstanley, L.

NOT-CONTENTS
Beloff, L.	Henley, L.
Belstead, L.	Hives, L.
Brabazon of Tara, L. [Teller.]	Hornsby-Smith, B.
Bridgeman, V.	Inglewood, L.
Brougham and Vaux, L.	Lane-Fox, B.
Bruce-Gardyne, L.	Lucas of Chilworth, L.
Cairns, E.	McFadzean, L.
Cameron of Lochbroom, L.	Mersey, V.
Carnegy of Lour, B.	Rankeillour, L.
Cathcart, E.	Renton, L.
Colville of Culross, V.	Sandys, L.
Colwyn, L.	Skelmersdale, L. [Teller.]
Cox, B.	Sudeley, L.
Elliot of Harwood, B.	Suffield, L.
Gardner of Parkes, B.	Thomas of Swynnerton, L.
Gisborough, L.	Trumpington, B.
Glenarthur, L.	Ullswater, V.
Gowrie, E.	Zouche of Haryngworth, L.

Resolved in the affirmative, and amendment agreed to accordingly.

8.8 p.m.

Lord Banks moved Amendment No. 5: After Clause I, insert the following new clause:

("Share holdings for deposit holders and employees.

. From the vesting day 25 per cent. of the shares in the TSB Group shall be held in trust for holders of deposits in the TSB Group and employees of the TSB Group, the trustees being elected annually in equal numbers by appropriate Associations of both groups.").

The noble Lord said: My Lords, this amendment provides that from the vesting day 25 per cent. of the shares in the TSB group shall be held in trust for holders of deposits in the TSB group and employees of the TSB group, the trustees being elected annually in equal numbers by appropriate associations of both groups. A similar amendment calling for 49 per cent. of the shares to be held in this way was moved during the Committee stage by my noble friend Lord Taylor of Gryfe. That amendment was defeated on a Division, but because we thought that the same proposal on a more limited scale might have a stronger appeal for your Lordships, and because we felt that there was more to be said about the arguments advanced against the earlier proposal, we tabled this amendment.

The amendment stems of course from the widespread dismay at the abandonment of mutuality. It provides a way in which both depositors and employees can share in the control and prosperity of the enterprise. Although of course it falls far short of mutuality, it may be said to go a little way towards it. The Government have made it clear in previous debates that they wish for widespread participation and would welcome it on a broader basis than we suggest in this amendment, but our complaint is that they have not provided any satisfactory method of bringing it about. All they have offered is priority for depositors and staff in the purchase of shares but we have no confidence that that will result in a substantial shareholding by depositors or staff.

On 11th November 1984 the Sunday Times in a leading article said: By abandoning its mutual status the TSB jettisons its basic difference from the high street clearing banks".

This amendment would maintain a basic difference while falling far short of the mutuality which the Page Committee desired. Twelve and a half per cent. of the shares would be held on behalf of employees and 12½ per cent. would be held on behalf of depositors. The trustees would allocate dividends earned on these shares on an agreed basis. In the case of the employees, length of service and position held might be the determining factors; and in the case of depositors the size of deposit and the length of time as a deposit holder might be appropriate factors.

In the course of the debate in Committee the noble Earl, Lord Gowrie, said that it would be inequitable to distribute all or even a portion of the proceeds of the sale of shares among those individuals who happened to hold TSB accounts at a particular date. Of course, in this amendment it is not proposed to do so. Shares would be held in trust collectively for the whole body of depositors and the whole body of staff. Only when the trustees came to pay out the proceeds from dividends in the manner which I have just described would the depositors or the staff benefit individually. No individual ownership is envisaged.

The noble Earl, Lord Gowrie, also said that it would be difficult to see how a bank would operate satisfactorily as a bank with a bizarre structure of the kind proposed. I do not think that he advanced any reason why the structure should be called "bizarre". It is not bizarre for shares to be held in trust for employees. That is not new; that is not startling; that is something which already exists—for example, in the case of the John Lewis Partnership 100 per cent. of the shares are held on behalf of the employees. In other companies smaller percentages of shares are held in trust on behalf of the employees. I see no reason why a similar procedure should not operate for depositors, particularly with a tradition such as the TSBs have.

The noble Earl also asked: how do the trustees maintain their specified minimum percentage structures if, for example, there is a rights issue? If the trustees wish to increase their percentage by purchasing shares in the TSB on the open market, or if they wish to lower their percentage by declining to take up a rights issue, I see no reason why they should not be free to do so. They would of course be obliged to continue to hold the original shares in trust.

The noble Earl also asked during the Committee stage: what influence would directors appointed by trustees exercise over the company? It seems to me that one might just as well ask: what influence would directors appointed by the shareholders exercise over the company? It is certainly in the interests of everyone—shareholders, staff and depositors—that the business be conducted on a sound and successful basis. The noble Earl also put this question: how could the new company hold its own against competitors with such a restrictive provision written into a statute affecting it alone? The suggestion is that if there is some rule regarding a particular company that a certain percentage of its shares must be held on behalf of the employees, that somehow puts it at a disadvantage. One might well ask: how does the John Lewis Partnership manage to hold its own against its competitors? It seems to get on all right. It is our belief that the TSB would be greatly strengthened by the direct involvement of its staff and depositors. Because we believe that, we have presented to your Lordships this amendment. I beg to move.

8.15 p.m.

The Earl of Gowrie

My Lords, the noble Lord puts his argument in a very moderate and persuasive way but I cannot get over the fact that the amendment is the same in principle as that debated in Committee except that the percentage of shares to be held by the proposed trustees is 25 per cent. rather than 49 per cent. While I admit that a 25 per cent. holding is somewhat less objectionable than the 49 per cent. holding which your Lordships rejected in Committee, the fundamental difficulties of principle that the shareholding arrangement, which I have to say I find bizarre, would produce, do I think remain.

There is no reason in equity to allocate this benefit to those persons who happen to be depositors or staff at the time of flotation, if that is what is intended. If however it is intended that the shares will be held in trust for all individuals who will at any time in the future be depositors or staff, it is far from clear what purpose that would serve or how the system would actually work. The fact is that the trustees, whether they are elected or not, are unlikely to provide an adequate system of accountability. How, for instance, does one make a rights issue to trustees? How in real terms, and not just in sentiment, can one apply the proceeds of the shares which the trustees hold to the benefit of depositors and staff? If that means ploughing their share of the dividends back into the bank, the effect will surely be to benefit the other conventional shareholders because the bank will be able to afford a bigger dividend. On the other hand, the proposed divisions between two types of shareholder seem likely to damage the interests of the bank as a whole. In my judgment it would be wrong to impose such a system by statute in perpetuity, and I therefore hope that the noble Lord will not press his amendment.

Lord Banks

My Lords, I am bound to say that I am very disappointed with that reply. It seems to me that I answered in advance some of the points which the noble Earl raised as objections. I explained how the system would work. I think I made it very clear indeed that the shares would be held for the employees, that that would not just mean those who happened to be employees on the particular day, and that the same applied in regard to depositors.

If the principle were entirely new, and if there were no firms at all where shares are held in trust for the employees, I might understand the perplexity of the noble Earl. But since that is not the case, I cannot understand it. It does not seem to me to be a valid objection, and I should therefore like to test the opinion of the House on this issue.

On Question, amendment agreed to.

Clause 2 [The Central Board and the reorganization]:

Lord Houghton of Sowerby moved Amendment No. 6: Page 3, line 15, at end insert ("or, in the case of employees in post and depositors having credit balances on a date or dates to be fixed by the Central Board, is to be on terms and conditions exclusively applicable to them.").

The noble Lord said: My Lords, with this amendment it will be convenient to take Amendment No. 7.

Amendment No. 7: Page 3, line 15, at end insert— ("( ) Any determination of the Central Board under subsection (2) above may include provision for rights in shares or share options, free, discounted to less than the full consideration, or paid for on deferred terms for the staff in post and for depositors holding credit balances on a date or dates to be fixed by the Central Board.").

These amendments reveal a retreat on my part from those I moved in Committee. In Committee I proposed that it should be mandatory upon the Central Board to provide in the flotation for preferential terms to be given to depositors and so on. That was resisted by the Minister and after further consideration I decided to withdraw the amendments.

I now go to another position and ask for a clarification of the powers under the Bill to do the things set out in the two amendments. There may be some doubt about this. I referred to the point at the Committee stage. I quoted from the explanatory statement issued by the Treasury which was revised last March and which was different from the original version. I quoted an extract from the revised Treasury brief for March, which I referred to at column 698 of the Official Report of the proceedings on 21st March. It read: The Central Board's powers extend to determining whether the consideration due on the transfer of any shares or rights to shares in connection with the reorganisation is to be for full consideration or discounted or whether that consideration is to be paid or left unpaid for any period".

I then asked the Minister about the power which the Central Board would have in this connection in respect of the relevant part of the Bill, which is Clause 2 on page 3. The noble Earl replied—and I now quote from column 704: As the Bill stands, TSBs have the power to offer depositors cheaper shares if they want to do so. But that is a matter for them to decide. We should have no objection if they decided to do so".

The noble Earl went on to refer to Sir John Read's letter, which gave an undertaking that depositors would be offered priority. But the Minister added at column 705: There is no basis on which Government or Parliament should require TSBs to offer cheaper shares to depositors".

The amendments now on the Marshalled List no longer require the board to do anything. All I am seeking is a firm assurance that the Bill as it stands enables certain things to be done. In order to make that clear without any peradventure I set out in my two amendments what I believe it is proper that the board should have the power to do. So there is really no difference between us here, except regarding the degree of clarity which I seek to contain in the Bill.

Amendment No. 6 seeks to insert at line 15, on page 3 the words: or, in the case of employees in post and depositors having credit balances on a date or dates to be fixed by the Central Board, is to be on terms and conditions exclusively applicable to them". That is, some issue of shares exclusively applicable to employees or depositors.

In Amendment No. 7 I go on to add to line 15, on page 3 the words: Any determination of the Central Board under subsection (2) above may include provision for rights in shares or share options, free. discounted to less than the full consideration, or paid for on deferred terms for the staff in post and for depositors holding credit balances on a date or dates to be fixed by the Central Board".

This amendment would extend the description of the preferential treatment which the board may, not shall, give and which it shall have the power to give to depositors and employees. I do not say that it goes any further than the assurance given by the noble Earl; I am saying that my description is at least clearer than his assurance. I do not see that there are any grounds for dispute between us. I am not requiring the board to do anything, but I am requiring the board to be explicit about its powers.

In fairness I ought to say at this point that at Committee stage I made reference to the position of the Central Board, with Sir John Read as its chairman, being a little remote from the proceedings in this House, and I asked why we could not get closer to him. Sir John noted that comment and very kindly invited me to meet him and his colleagues at the Central Board of the Trustee Savings Banks. I had a very long discussion with them and put my point of view very fully. I did not ask for assurances. It would be improper of me to disclose in our debate in this House what was really a private conversation, but on the question of the powers I believe it can be said that point which the Central Board wants to be clearer about is the same as that which I want to be made clearer. I understand that the Central Board has been assured that it has the power. The question is: does it really have that power?

In these circumstances where is the difficulty in accepting these two amendments, which would make absolutely clear the different and varying options which may be offered and which are within the board's powers to offer? I sincerely hope that we are not going to have a dispute over words. Sometimes Ministers resist amendments to a Bill on the ground that the substance of the amendment is already in the Bill. One never understands why Ministers want to resist an amendment that will make sure that the substance is in the Bill. I have not put anything in these two amendments which runs counter to that which the noble Earl said was within the power of the board to do. In those circumstances I believe it is incumbent upon the House to ensure that those powers are spelt out in this Bill. All concerned would then know what options the board has. I shall deal with this latter point in my closing sentences.

It is important that all concerned, on reading this Bill, should know what it really means and what options are open to the board to adopt. Such persons may then bring to bear upon the board proposals as to what the board might do in respect of certain categories of depositors and, from that point of view, for employees as well. To have this opportunity hidden within the ambiguity of a Bill is not proper publicity. I want publicity. I want depositors to know what the board proposes to do. I want them to understand what are the implications for them. I want them to understand also what they may ask the board to consider in this particular direction.

I am sure that the board will consider the various options when the time comes, but obviously it will have to consider them in the light of the circumstances which exist at the time the change takes place. I am not tying the board's hands in any way in these two amendments. I am not committing the Government or the board to anything, but I am indicating, for the knowledge and understanding of those who wish to comprehend what the Bill does, that various options are open to the Central Board if it wishes to take them up.

I feel very strongly that the great difficulty with this Bill—I shall not call it the mischief, because it is a difficulty—is the problem of communication. We had all this out in the case of Scotland earlier today and it is probable that it may well arise again later. There is no means of communication with the vast army of depositors whose interests are at stake here and who have a right to be heard if they can collect voices and bring them to bear on the Central Board.

In my view it is not fair and it is not satisfactory for the board to have to proceed solely on the kind of advice which it is given by local trustees who may or may not be in touch with depositors. This is the problem, and I want there to be some assistance in at least resolving any doubts as to what the board has the power to do. I sincerely hope that we will receive a favourable response from the noble Earl on Amendments Nos. 6 and 7.

The Earl of Gowrie

My Lords, I am advised that the amendments are technically wrong from the drafting point of view, but I have a great deal of sympathy with what the noble Lord said. I am of the view, and so are my advisers, that the Bill gives the board the powers that the noble Lord requires, and does so clearly. However, in view of what the noble Lord said I will look at the wording again to see whether it can be made a little clearer still.

Lord Houghton of Sowerby

My Lords, I am very much obliged to the noble Earl, and I need say no more except to thank him and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 7 not moved.]

Lord Stoddart of Swindon had given notice of his intention to move Amendment No. 8: After Clause 3, insert the following new clause:

("Worker directors.

. The Trustee Savings Bank Group Board and each of the Boards of the subsidiary companies shall contain three worker directors the qualifications of whom and the method of appointment to the Boards shall be on a basis agreed with the employees themselves and their trade union representatives.").

The noble Lord said: My Lords, I have to admit that I am now in something of a quandary about Amendment No. 8, because the passing of Amendment No. 5—I assume the Government have accepted that—gives the employees of the TSBs a considerable voice; in fact, trustees will hold on their behalf, and on behalf of the depositors, 25 per cent. of the total shares of the new TSB plc. That is a very powerful position for them to be in. Under the circumstances, if it is in order, it would perhaps be as well for me not to move this amendment on the understanding, of course, that the Government will not seek to alter Amendment No. 5 in any way at Third Reading. I hope the noble Earl will agree that if the Government did so move to alter the decision arrived at by Amendment No. 5 it would then be in order, and there would be no objection, if the House decided to annul Amendment No. 5, to move Amendment No. 8 at Third Reading. If that is understood, I will not move Amendment No. 8 now.

The Deputy Speaker (Lord Aberdare)

My Lords, if the noble Lord wishes to have a reply, he must move his amendment and withdraw it later.

Lord Stoddart of Swindon

My Lords, I formally move Amendment No. 8.

The Earl of Gowrie

My Lords, in addition to my other shortcomings this evening I do not want to be in trouble for constitutional abnormalities. On the surface, I think that what the noble Lord has said is reasonable enough. I hope he will take that as sufficient an assurance from me. I cannot conceal that the Government are opposed to his amendment. If I have to make clear my opposition to his amendment at a later stage, I will be doing so in good faith on the basis that I have now said I am opposed to it. However, it would appear that it is not necessary for him to press the amendment now, and, therefore, I hope that he and I are in agreement on this matter.

Lord Stoddart of Swindon

My Lords, is it now in order for me to withdraw the amendment? It is, I understand. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.