Lords Sitting of 4 March 1985

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Derby.

Trident Contracts
Lord Davies of Leek: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government why only 21 of the 250 suitably qualified British firms were allowed to bid for work on Tridents' ballistic missiles to be supplied by American companies for Britain's 1990 nuclear submarine fleet.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, the situation is not as described by the noble Lord. Up to the end of September 1984, the last period for which we have data, 120 United Kingdom firms had been invited to bid, but only 42 responded. The total number of United Kingdom firms qualified to bid for work on the Trident II weapon system programme has now increased to about 300.
Lord Davies of Leek: My Lords, I am grateful to the noble Lord for that Answer. Nevertheless, there is no doubt that authoritative groups of people think that we have come out of this with a bad deal. Sir Raymond Lygo—
Noble Lords: Question!
Lord Davies of Leek: My Lords, is it not true that Sir Raymond Lego himself said that the work on the Trident has meant that we have come out of it with a bad deal; in other words, that it is not as good as it should be, and that, in order to help the unemployment situation, work should have been given to more firms in this country which are able to carry out the work? That is what I believe. I ask that supplementary question; but I shall stand corrected if I am wrong.
Lord Trefgarne: My Lords, I think that there was some confusion in the minds of some people about the number of contracts which were available and the number which have been awarded. The number of 21, which appears in the Question tabled by the noble Lord, was the number of contracts so far awarded. That related to some months ago, and the number is now 54. I must say that I am disappointed that only 42 firms out of the 120 which have been invited to bid have in fact chosen to do so.
Lord Davies of Leek: My Lords, I am grateful to the noble Lord.
Lord Orr-Ewing: My Lords, can my noble friend say whether it is still true that 55 per cent. of the cost of the
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Trident operation, for both the boats and the Trident missiles, will be spent in this country and will therefore provide very valuable jobs? How many jobs, both direct and indirect, will be provided by this programme?
Lord Trefgarne: My Lords, my noble friend is quite right. The answers that I have given relate to the other 45 per cent. which is being acquired from the United States. It is the case that, so far as the Trident programme is concerned, 55 per cent. of the total United Kingdom acquisition will come from United Kingdom sources and at the peak of the programme it will employ some 32,000 people altogether.
Lord Boston of Faversham: My Lords, may we on this Bench say how nice it is to see the noble and learned Lord the Lord Chancellor back among us and restored to health? Is it not the case that, when Trident was first announced. Her Majesty's Government expected that some 70 per cent. of the costs would be spent in this country and only 30 per cent. in the United States? Also, is it not the case that now, as announced last year in the Defence White Paper, it is down to only 55 per cent. in our favour, as has been said this afternoon, and 45 per cent. in the United States favour? Can the noble Lord the Minister say what is being done to redress this imbalance, if this regrettable project is to be continued?
Lord Trefgarne: My Lords, I do not recall the 70 per cent. figure to which the noble Lord refers. If that figure ever existed, it was certainly a long time before I had anything to do with these matters. However, we certainly intend to proceed with the programme. I do not imagine for a moment that the percentage to which I have referred today is likely to change significantly.
Lord Mayhew: My Lords, is the noble Lord able to tell us the value of the bids that have so far been accepted?
Lord Trefgarne: My Lords, at 30th September, which is the last date for which I have figures, 37 contracts had been placed valued at 13.8 million dollars. Since then the award of a further 17 contracts to 15 additional companies has been reported, bringing the total awards to just over 31 million dollars in value.
Lord Boston of Faversham: My Lords, although the Minister may be acquitted as regards those figures and his own involvement, should not the Government have corrected the Financial Times when it published those figures in 1981?
Lord Trefgarne: My Lords, again, that was rather before my time. I should have to see exactly what it was that the Financial Times published before I sought to correct it.
Lord Avebury: My Lords, is the noble Lord able to say what will be the cost over the exchanges in pound terms if one dollar equals £1 over the lifetime of the contracts?
Lord Trefgarne: My Lords, all these questions relating to the parity of the pound and the dollar are purely hypothetical and I hope that the noble Lord will forgive me for not seeking to answer them. Following the seesaws of the past few days and weeks, if anyone can really anticipate what the pound-dollar ratio will be in, say, three or four years' time, he is cleverer than I am.
Lord Ironside: My Lords, will my noble friend say how many of the 42 bidders to which he referred were involved with the high technology classified work and how many were involved with the unclassified work? Will my noble friend not agree that in industry in this country we want to aim to get the maximum amount of the high technology classified contracts?
Lord Trefgarne: My Lords, it would certainly be good to have as much as we can of the high technology work to which my noble friend refers, but we must, I think, be careful not to duplicate high technology facilities in this country which already exist elsewhere because that might render nugatory some of the value of purchasing these systems from the United States.
Lord Jenkins of Putney: My Lords, is the noble Lord aware that it is becoming increasingly apparent to more and more people that Trident is an expensive mistake, and that the Government should change their mind about this before they get themselves involved in a situation in which they cannot escape from a project which is of no value whatsoever and which is a profound waste of money which could be well spent elsewhere?
Lord Trefgarne: My Lords, I am aware that that is the view of the noble Lord, but it is not mine.
Viscount Mersey: My Lords, is it still roughly the case that we are to build the boats and the warheads, and the Americans are to build just the missiles?
Lord Trefgarne: Yes, my Lords, my noble friend is right; we are building the submarines and the warheads and the United States are supplying the missiles and the fire control system.
Lord Paget of Northampton: My Lords, if the real object of this exercise, of which I fully approve, is to spend money in England, would we not be more harmlessly occupied in buying ourselves a "Chunnel"?
Lord Trefgarne: My Lords, the noble Lord is mistaken. The object of this programme is not just to spend money in the United Kingdom, though we are spending a substantial sum of money in the United Kingdom; it is to provide ourselves with an effective deterrent well into the next century.
Lord Mayhew: My Lords, would it not be right to say from the figures that the noble Lord has given that the value of the bids so far accepted is less than 1 per cent. of what is to be the total expenditure in the United States?
Lord Trefgarne: My Lords, yes, the bids to which I have referred today are a comparatively small
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proportion of the money being spent in the United States, but then 55 per cent. of the whole project so far as we are concerned is being spent here.

Iraq-Iran War
2.45 p.m.
Lord Molloy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how the EEC, the United Nations and other bodies have responded to their efforts to end the Iraq-Iran war.
Lord Trefgarne: My Lords, the European Community continues to call for an early end to this tragic conflict. We have supported these efforts and those of the United Nations Secretary-General, who has been involved in a number of initiatives. On 9th June 1984, he appealed to both sides to cease attacks on civilian targets. Both sides accepted, and this agreement has largely been adhered to. The Secretary-General has also called on both sides to refrain from using chemical weapons and to cease attacks on shipping in the Gulf. We shall continue to support all realistic initiatives.
Lord Molloy: My Lords, that comprehensive reply is most appreciated. I acknowledge that to a degree both the United Nations and the EEC have endeavoured to follow the British lead. Would the noble Lord agree that the British Foreign Secretary has given a magnificent lead in all matters involving the Middle East, and particularly in this dreadful conflict? He has pointed out the dangers which can afflict the rest of mankind. In so far as he has given the lead, and in so far as Britain has supported both the EEC and the United Nations in its formative ideas, is it not now about time that these two organisations followed up the submissions of the British Foreign Secretary, which have been both realistic and imaginative?
Lord Trefgarne: My Lords, I think that the best way for progress to he achieved in this matter is for the parties to this dispute, the Iranians and Iraqis, to accept some of the offers of mediation which have been made. Most recently, of course, there were the Japanese proposals, which came before the General Assembly in September last year, which we believe to be both balanced and well conceived.
Lord Shinwell: My Lords, as a matter of information, can the noble Lord the Minister inform your Lordships' House what kind of pressure Her Majesty's Government could exercise over Iraq, which is completely under Soviet control in the first instance, and over Iran, which is under her own control and will not allow anybody else to interfere? Why do we not mind our own business occasionally? Have we not got enough on our plates without interfering in matters which, from the standpoint of exercising human rights I fully applaud, but otherwise over which we have no influence whatever?
Lord Trefgarne: My Lords, I think that the noble Lord is right to suggest that our influence in these matters is somewhat limited. Nonetheless, it is an appalling conflict and we should like to do what we can to bring it to an end.
Lord Cledwyn of Penrhos: My Lords, has the noble Lord read the United Nations report on the appalling treatment of prisoners of war on both sides? Can he say what action Her Majesty's Government propose to take about that? Would it not be worth considering putting an embargo on any financial credit we give to either Iraq or Iran? Is the noble Lord in a position to say what use was made by Iraq of the credit of allegedly £575 million given by the Government to that country?
Lord Trefgarne: My Lords, so far as prisoners of war are concerned, it is quite right that a report on that matter has been prepared under the Secretary-General's auspices. I understand that it is being considered by the Security Council this very day, and I hope that some constructive proposals will come out of that. We certainly support action being taken in the Security Council in that regard. We believe that any resolution should concentrate on the report itself, not on the wider issues of the conflict. On the question of trade with both countries, I think that my noble friend Lady Young wrote to the noble Lord on this recently and I do not think that I can add anything to that letter.
Lord Nugent of Guildford: My Lords, with regard to our interest in this long-running and very unpleasant war, do we not also have an interest in maintaining the safety of oil shipping in the Gulf, where we have, certainly with our partners, a substantial interest?
Lord Trefgarne: My Lords, my noble friend is quite right about that. There have been a number of regrettable incidents in the Gulf recently with regard to shipping. Indeed, the safety of shipping was one of the matters addressed by the Japanese proposals which came before the General Assembly recently and to which I referred a moment ago.
Lord Molloy: My Lords, does the noble Lord the Minister agree that the British Government realises the enormous amount of trade and commerce which goes on in the Gulf between our country and the Gulf States, and that if it were shattered, it could cause an increase of almost another 20 per cent. in British unemployment? At the same time the Government have not ignored the human horror and tragedy of the war. Finally, will the noble Lord confirm that the British Foreign Secretary's proposals for cutting out some of the horrendous actions, such as the bombing of cities, have been accepted by Iraq but not by Iran, and that this is the lead that the British are giving—a lead which I hope the noble Lord will urge the EEC, the Americans and the United Nations to follow?
Lord Trefgarne: My Lords, I am grateful to the noble Lord for his appreciative words on British Government policy.
Lord Mayhew: My Lords, is the noble Lord aware that, whereas everyone will regret the failure of repeated peace initiatives, the present deadlock is at least a considerable improvement on what went before?
Lord Trefgarne: My Lords, any situation which results in a reduction in the numbers of people being killed or maimed is to be regarded as satisfactory; but, taking the wider view, the continuation of this dispute cannot in the least be regarded as satisfactory, and I hope that it can swiftly be brought to an end.

Prison Chaplains: Appointments
2.52 p.m.
Lord Campbell of Alloway: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how chaplains who have visiting access to the young detained in HM prisons are appointed, and where the responsibility for such appointments lies.
The Minister of State, Home Office (Lord Elton): My Lords, full-time chaplains are recruited by the Civil Service Commission and appointed to particular establishments by the Prison Department on the advice of the Chaplain General or the principal Roman Catholic chaplain. Part-time chaplains and other visiting ministers of religion are appointed by the Prison Department, on the recommendation of the bishop or outside religions body concerned.
Lord Campbell of Alloway: My Lords, I thank my noble friend the Minister for that reply. May I ask what steps, if any, are taken to avoid the appointment to such posts of active male homosexuals, and, in particular, whether current procedure is apt to prevent access to the young detained in our prisons?
Lord Elton: My Lords, the interviewing procedures before appointment are very careful. I have inquired and can find no record of any instances of homosexual practice or behaviour by chaplains within the past 25 years.
Baroness Gaitskell: My Lords, may I ask the noble Lord the Minister whether he does not think that the Question by the noble Lord, Lord Campbell, is a very important and deep one which should be looked at really very well and should be taken into account?
Lord Elton: My Lords, it has been looked at well and it is taken into account.
Lord Avebury: My Lords, can the noble Lord say what progress has been made in the consideration of recognising Rastafarianism as a religion and appointing chaplains to administer to the needs of Rastafarians in the prison system?
Lord Elton: My Lords, I hesitate only to see whether I can find any way of bringing that question within the

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rules of order of this House. I can find no connection between the noble Lord's supplementary and the Question on the Order Paper.
The Lord Bishop of Derby: My Lords, would the Minister be willing to pass on the assurance that from independent episcopal experience the appointment of prison chaplains, certainly from the Church of England point of view, is carried out with very great thoroughness and very great judgment after a good deal of inquiry from people who know the particular candidates concerned? Would he be willing to mention the fact, if it gives some assurance, that every prison chaplain has also to be licensed by the bishop of the diocese, who is in duty bound to make careful inquiries before he gives the licence?
Lord Elton: My Lords, I am happy to acknowledge the considerable value, both of the work of the Church authorities in finding and screening appointees and also of the work of the chaplains themselves in the Prison Service, which is of enormous value.
Lord Avebury: My Lords, will the noble Lord agree that if Rastafarianism is recognised as a religion then the appointment of chaplains ministering to the needs of Rastafarians in prison arises from the Question, and that therefore he ought to answer my supplementary?
Lord Elton: My Lords, Rastafarianism is not recognised as a religion within the Prison Service, and therefore the question does not arise at present—to which I should add that prison chaplains nonetheless have the care and welfare of all inmates of the prisons within their care and attend to Rastafarians as well as to others.

Business
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Avon will, with the leave of the House, repeat a Statement that is to be made in another place on the coal dispute. This will be followed by my noble friend Lord Lyell, who, again with the leave of the House, will repeat a Statement on terrorist killings in Northern Ireland.
Representation of the People Bill
The Bill, having been brought from the Commons on Friday last and printed pursuant to Standing Order 48, was read a first time.

London Regional Transport (Amendment) Bill
2.56 p.m.
Lord Brabazon of Tara: My Lords, I beg to move that the London Regional Transport (Amendment) Bill be read a second time.
The purpose of this Bill is to settle the amount of grant to be paid by the Greater London Council to
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London Regional Transport for 1984–85. There is no dispute that the GLC should finance LRT up to 31st March 1985. The Government took responsibility for LRT on 29th June—part way through the present financial year. By then, the GLC had already budgeted and precepted to support London Transport for the whole of 1984–85. So provision was made, in Section 49 of the London Regional Transport Act 1984, for the GLC to be directed to continue paying grants to LRT up to the end of the financial year. Without such a provision, ratepayers and taxpayers would have had to pay twice for the same services—once to the GLC, through their rate precept and through transport supplementary grant, and again after the GLC had lost responsibility for LRT.
Section 49 provided that the GLC should pay up to £360 million in grants for 1984–85, counting the period before the Government took over. This figure was made up of the GLC's revenue support determination for the year, which was £190 million, plus £170 million to cover LT's capital programme. Under the terms of Section 49, the Secretary of State for Transport could direct the GLC to pay up to £360 million, less any grants paid in respect of 1984–85 before the direction was made.
In the event, my right honourable friend made his direction on 29th June 1984. Acting on the information then available to him, he deducted £78.7 million in respect of grant payments made before 29th June. That left a balance of £281·3 million, to be paid in instalments up to the end of March this year. In directing the GLC to pay the full balance of £281.3 million, rather than a lesser sum, my right honourable friend had two principal considerations in mind. First, as far as revenue support was concerned, LRT were predicting a small deficit for the year, after receipt of grants, at the time the direction was made. Although the revenue outlook had been improving in the period immediately before 29th June, there was no way of knowing whether the improvement would be sustained. There were also risks which could have adversely affected the revenue account position. On balance, there was no basis at that time for assuming that LRT would need less than the full amount of revenue grant determined by the GLC.
Secondly, for capital grants the GLC had budgeted to pay £149.2 million—£20.8 million less than the amount provided for in Section 49. But that figure of £149.2 million did not represent the full cost of LT's capital programme for 1984–85, as agreed by the GLC. After the Government had fixed the GLC's capital allocation for 1984–85 on the assumption that the whole of LT's capital programme would be covered by grant (as had always been the GLC's practice in the past) the GLC had decided that LT should finance £27 million of expenditure by leasing, which is effectively a form of borrowing. There were two underlying reasons for this change of policy. First, the GLC hoped that it would enable them to evade the Government's system of capital controls, by reducing the amount of grant which they had to pay to LT for 1984–85. They would then be able to spend more in other areas. Secondly, the GLC hoped that they could escape altogether responsibility for funding part of LT's capital programme, since they knew that they might lose control of LT at some point during

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1984–85, and most of the cost of the leases would then fall on LRT in future years.
My right honourable friend made it quite clear when the London Regional Transport Act was being considered in the other place that the Government did not regard the use of leasing in these circumstances as acceptable. Indeed, he said that he would require the GLC to pay the full amount of capital—£170 million—subject to the final determination and checking of figures. As I have explained, £20.8 million was available within the £170 million ceiling imposed by Section 49 of the LRT Act to help service the costs of the leases which LT had signed while under GLC control. Calculations on a reasonable range of assumptions about future real interest rates showed that, if anything, £20.8 million was somewhat less than sufficient to cover the cost of the leases. Accordingly, my right honourable friend saw no reason why the GLC should not be directed to pay the full amount of capital, and he instructed LRT to use the £20.8 million to set up a reserve to help pay for the leasing commitments.
That is the basis on which the Section 49 direction was made. My Lords, as you know, the GLC subsequently challenged the direction in the courts on a number of grounds. For one thing, the GLC claimed that the amount of grant which they had paid in respect of 1984–85 before 29th June was £88,920,412—some £10·2 million more than they had been given credit for in the direction. On the evidence available to my right honourable friend when the direction was made, it was indeed the case that the GLC had made payments to LT amounting to £10.2 million at the beginning of this financial year. But those payments had been requested by LT to settle their accounts with the GLC for the previous financial year, 1983–84. Subsequently, further evidence came to light which showed that the GLC had instead labelled the payments as being in respect of 1984–85, leaving the position for 1983–84 unresolved. While LT had disputed this decision, the GLC were in charge at that time and LT had had no alternative but to agree in the end.
Another ground of challenge concerned the GLC's Money Bill for 1984, which made provision for their capital expenditure for 1984–85. At the time the Section 49 direction was made, the other place had agreed an instruction to the Committee considering the GLC's Money Bill to the effect that, unless the GLC came forward with specific proposals for expenditure reductions, an across-the-board cut should he made, amounting to some 7½ per cent. At the time of making the direction, my right honourable friend did not feel able to take account of this prospective cut in respect of LRT's capital expenditure, first because it was still open to the GLC at that time to come forward with proposals to reduce overspending on other programmes; and, secondly, because even if the reduction were subsequently implemented, the GLC could vire between expenditure blocks. In the event, the GLC made no proposals and the 7½ per cent. reduction across the board was duly implemented, after the Section 49 direction had been made.
The Bill which is before us now takes account of both the Money Bill point and the £10.2 million paid before 29th June. Although the Government take the
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view that the GLC should have settled up with LT for 1983–84, we accept that it would go beyond the original intentions of Section 49 to require them now to do so. The figure of £258, 179,588 specified in the Bill therefore gives the GLC credit for the additional £10.2 million of grants paid before 29th June. Furthermore, since the GLC's Money Bill has now been enacted with the reductions imposed by the House of Commons, this Bill accordingly reduces the amount of capital grants to he paid by the GLC by £12.9 million. In total, the amount of grant which this Bill requires the GLC to pay is therefore some £23.1 million less than they would have had to pay under the original Section 49 direction. LRT will have to absorb this loss of grant.
These two points having been dealt with, there remain two substantive points at issue between the Government and the GLC. The first concerns the leasing reserve of £20.8 million, which I have already mentioned. The GLC took the view, and argued in court, that they should not be required to make any grant payments to LRT over and above what was needed to meet LRT's strict cash requirements in 1984–85. Although Government Ministers had made it absolutely clear during the passage of the LRT Act that they intended to require the GLC to cover the leasing liabilities, the courts ruled that the direction made under Section 49 should not have included the leasing reserve.
The second point at issue concerns whether the GLC should be required to meet other liabilities which LRT have accrued, and which will show in their accounts for 1984–85. Since 29th June, when the Government took control of LRT, their management have been able to generate additional fares income and to cut costs. On the latest forecasts, allowing for the effects of this Bill, LRT expect to have a cash surplus of some £30 million at the end of this year. But they also have substantial liabilities amounting in total to some £37 million which will appear in their accounts for this year.
Although the sums of money involved in the leasing reserve and the argument over the cash surplus are separate, the issue of principle is the same for both. The GLC argue that they should have a rebate of some £50 million on their grant payments to LRT—in addition to the £23 million which your Lordships will recall is already conceded by this Bill—and that the liabilities and leasing commitments should fall as a charge to LRT in future years. The Government's position is that it would be quite wrong for the GLC to be credited with £50 million to spend as they wish, while leaving LRT to carry forward unfunded liabilities which will fall as charges on passengers and ratepayers in future. This would be unfair to passengers, who have contributed a large part of LRT's expected cash surplus for this year. It would also be unfair to ratepayers who have already paid through the GLC's precept to support public transport services for this year. In fact, it would amount to asking them to pay twice for the same service. That is why the Government are not prepared to concede further sums of money to the GLC.
I have explained how the provision in the Bill has been derived and why the Government consider it to be fair and reasonable as between the parties

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concerned. But the Bill has also raised wider issues, one of which is recognised in the amendment tabled by the noble Lord, Lord Tordoff, and I should like now to deal with three such issues.
First, it has been alleged during the consideration of this Bill that the Government are seeking to use ratepayers' money to create a surplus which will somehow be applied, at least in part, to the benefit of the Exchequer. That is simply not true. As I have explained, although LTR expect to have a cash surplus of some £30 million this year, they have some £37 million of liabilities to set against that. So the grant which this Bill provides for is certainly not more than enough, on present forecasts, to meet LRT's needs.
I can also assure your Lordships that there is no question of any of this money benefiting the Exchequer, for example, by enabling the Exchequer contribution to LRT's grants for next year (1985–86) to be held down to below what it would otherwise be. On the contrary, the Exchequer contribution for next year has been fixed at £35 million higher than this year. It was determined using the same principles as are applied to the calculation of Exchequer support for local authority services generally, so as to be fair to ratepayers in London and elsewhere. Any further increase in the Exchequer contribution to LRT would unfairly reduce the amount of Exchequer grant available for distribution to local authorities. So if LTR did not have the cash surplus and had to carry forward unfunded liabilities into 1985–86 and future years, those costs would have to fall on passengers and ratepayers. It is therefore passengers and ratepayers who will derive the whole benefit of LTR's expected cash surplus for 1984–85.
The second point of principle concerns the passage of legislation to deal with the outcome of a decision in the courts. There are many precedents for this. One thinks immediately of the field of taxation, where it is not unusual for laws to be passed to clarify areas where the courts have brought to light what the Government regard as loopholes in existing laws. During consideration of this Bill in the other place, my right honourable friend mentioned two precedents in the field of transport legislation, both concerning travel concessions. The Public Service Vehicles (Travel Concessions) Act 1955 was passed because the Appeal Court ruled that Birmingham Corportion was in breach of its fiduciary duty to ratepayers in offering travel concessions to elderly people. The Act then gave local authorities who ran transport undertakings the power to provide such concessions. More recently, the Travel Concessions (London) Act 1982 was passed to give the GLC specific powers to finance concessionary travel schemes after legal action by the London Borough of Bromley had called their powers into question.
However, the important question is not whether there are precedents, but whether legislation is necessary and justified in this particular case. I have tried to demonstrate that it is. It is quite clear, particularly in respect of the leasing reserve issue, that the courts took a different view of the scope of Section 49 than the Government had intended in bringing the legislation before Parliament in the first place. The judgment also cast doubt on the extent to which the
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other liabilities which I have mentioned might be admissible within the terms of Section 49.
It is right that the amount of grant should be settled by the Government, with the approval of Parliament. I have explained to your Lordships why the Government consider that the provision in this Bill is reasonable. I am sure your Lordships will accept that the arguments which I have put forward are not legal arguments. They are policy arguments. It is not for the courts to determine the policy; nor have the courts presumed to do so in this case.
Moreover, your Lordships will appreciate, I am sure, that there is a need to settle the amount of grant to be paid once and for all, particularly now that we are fast approaching the end of the financial year. Both LRT and the GLC need to budget and plan ahead for 1985–86.
In sum, in the circumstances of this case, legislation is both necessary, to settle the matter quickly and beyond doubt, and desirable, to enable the Government and Parliament to determine the outcome on proper policy considerations.
I come last of all to the issue of retrospection. I fully recognise the strong feeling in this House against measures of a retrospective nature. That is not to say that retrospective legislation is never justified, but it should be regarded as an exceptional measure. Concern has been expressed, both in the other place and by the noble Lord, Lord Tordoff, in his amendment before us this afternoon, that this Bill is to some extent retrospective. I hesitate, in front of the legal experts in this House to be dogmatic on what is or is not technically retrospective. But I think it may be instructive to re-examine, very briefly, the circumstances surrounding this Bill.
The law as it has stood since the London Regional Transport Act received Royal Assent last June requires the GLC to pay up to £360 million in grants to LRT for 1984–85, counting the three months before the Government took control. To date the GLC has paid some £265.9 million: £88.9 million up to 29th June, when the Section 49 direction was made, and £177 million under the now void direction. There is no doubt that the potential liability of the GLC is that amount and more. The High Court judgment on 11th January opened up the question: How much more? This Bill will resolve the matter. It will make no unforeseen demands upon the GLC; nor does it seek to make lawful the original Section 49 direction which has been quashed by the courts, or to amend Section 49 with retrospective effect. In fact, the GLC's liability under this Bill will be £23 million less than it was before under the London Regional Transport Act and under the Section 49 direction. I do not believe that this measure deserves the stigma which is commonly attached to retrospective legislation. The circumstances of the case do not warrant it.
The Government did not lightly bring this new legislation before Parliament. We did so because there were issues of principle to be resolved, in the interests of passengers and ratepayers. Legislation offered the only certain prospect of resolving these issues quickly and satisfactorily. I have sought to demonstrate that the Government are simply seeking to secure an outcome which is fair and reasonable to passengers,
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ratepayers, LRT and the GLC. I am sure that your Lordships will support that objective and on that basis I commend the Bill to this House.
My Lords, I beg to move.
Moved, That the Bill be now read a second time.—(Lord Brabazon of Tara.)
3.13 p.m.
Lord Tordoff Lord Tordoff rose to move, as an amendment to the Motion that the Bill be now read a second time, at end to insert "whilst this House regrets the retrospective nature of this legislation".
The noble Lord said: My Lords, I beg to move the amendment standing in my name on the Order Paper. We are grateful to the noble Lord, Lord Brabazon of Tara, for his clear exposition of the Government's position on this Bill. As he rightly said, we are dealing here with an amendment to Section 49 of the London Regional Transport Act, which received the Royal Assent on 26th June last year and which set up a system whereby the Secretary of State, having created a nationalised industry, to the surprise of some of his friends, was enabled in future to levy the London boroughs for two-thirds of the grant in aid which is needed to run London Regional Transport, the balance coming from the taxpayer. But there was, as the noble Lord said, special provision for the interim period—that is to say, the first year from 1st April last to 31st March this year—so that the Secretary of State could demand from the GLC that it pays to London Regional Transport the sum of £170 million plus the revenue grants as determined under the 1969 Act, which I think the Government claim is a figure of £360 million.
The new Bill, on the other hand, removes that basis of calculation and substitutes a figure of £258.2 million approximately. On 29th June, three days after the Bill became law, the Secretary of State made a direction which said that this was on the basis of "calculations attached", and this was in the sum of £281.3 million. Unfortunately, the calculations were not attached. That is a pity, because it might have been easier to follow the progress of this problem if they had been attached at the time. But we all make mistakes.
The GLC then disputed this amount and went to court for a judicial review. Mr Justice McNeill, in a long judgment of some 110 pages, said that the Secretary of State had acted unlawfully in a number of aspects and among those aspects was the seeking to achieve what he described as non-transport purposes; that is to say, he took more than he required for the running of London Transport, in order to stop the GLC from spending money in other directions. That might be something which would commend itself to noble Lords, because a number of noble Lords do not like the GLC spending money. I do not want to get into that argument today, and we all have our own views on it.
Nevertheless, Mr. Justice McNeill said that that was an unlawful act. He also said that it was unlawful to seek to establish a leasing fund of £20.8 million, to which the noble Lord the Minister has referred, because this is indeed in respect of leasing which will go on for some considerable period beyond the current year. It may be that there was, as the right honourable
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gentleman the Secretary of State said in another place, a certain amount of creative accounting going on in the GLC at that time. I do not dispute that. But the fact is that the judge has said that it is not lawful for the Secretary of State to provide for the leasing of buses in this way.
In conclusion, Mr. Justice McNeill used what are now becoming the immortal words—immortal because I think that they have been used in every debate in the last few weeks—that,
"The Secretary of State acted unlawfully, irrationally and procedurally improperly in giving a direction which exceeded his statutory powers".
Your Lordships should notice that this is not just a simple misinterpretation of an Act which is less than a year old. The Secretary of State has acted ultra vires. He had asked for more from the GLC than he was entitled to ask for, and to do so was unlawful and is still unlawful at this moment, as I speak.
The Secretary of State then had a number of options open to him. He could have appealed. I believe that he did not appeal, because he knew that he would not win. He said that he did not appeal because it would have left things in a state of uncertainty. Either way, it was an option which was open to him and which would, in the end, have cleared up the matter either in his favour or in favour of the GLC. He could, more positively, have made a lawful direction, which would have left him with sufficient money to provide for London Regional Transport during the coming year—that is to say, with enough revenue to expend on its current requirements—which is what I think most of us, when this Bill went through the House previously, understood it to be about. But he failed to do that. Instead, he brings a Bill before Parliament, and takes it through the other place in two days, in order to make lawful that which at the moment is unlawful, not just from now, but back to 1st April last year.
Perhaps, in response to what the Minister has just told us, I may draw your Lordships' attention to what the Bill actually says. Clause 1(1) states:
"The Greater London Council shall under this section pay to London Regional Transport by way of grant for the initial year (that is to say, the financial year ending on 31st March 1985) the sum of £258,179,588".
To me, the financial year starts on 1st April 1984 and clearly, on the face of the Bill, it is retrospective in form. It is certainly retrospective in effect.
Let us now come to the sum which is being demanded on the face of the Bill. It is, as the noble Lord has said, lower than the original figure, and it is lower by £23.1 million because the Secretary of State got his sums wrong. He got his sums wrong partly because he did not actually consult the GLC on the facts of the case. He says that he did not do that because he would not have got a proper answer. Again, those of us who have read the judgment by Mr. Justice McNeill will know that that got its come uppance from him. He says in fact that surely the Minister would not have gone into consultation without assuming that there could be some change on his part. But anyway he does accept now that the original figure was wrong, and that this was partly reduced because of the carry over from 1983 and partly reduced by the smaller capital needs of LRT in the current year.
At this point we have to say quite clearly that LRT is now functioning well, though not necessarily to the benefit of the fare paying passengers who are having to pay higher fares—which perhaps touches on the point made later on by the noble Lord, Lord Brabazon of Tara. Nevertheless, it is functioning, and it would be idle of us to pretend otherwise. But the new figure, the lower figure, of £258.2 million still includes £20.8 million for leasing reserve, which Mr. Justice McNeill said is at this moment unlawful.
It also includes £29.5 million surplus to the revenue needs of LRT which, we are told, is required for a number of things, including (the Minister did not mention this) redundancy payments—redundancies which have not yet been declared or asked for. In other words, these are payments into subsequent years and not part of the revenue requirement of LRT during the current 12-month period. This, again, Mr. Justice McNeill said, was unlawful and remains so.
The Secretary of State is trying to get £50 million which at this moment he is not lawfully entitled to do, and one can understand why he did not go to appeal. He has made a mistake and he seeks to cover it by an Act of Parliament, which I submit to your Lordships is operating retrospectively. Furthermore, he introduces it to your Lordships' House as a Money Bill. I may make no criticism of that because the Bill bears the Speaker's Certificate; it would be improper for me to criticise that. It is clearly a Money Bill because the Speaker says it is a Money Bill; but I think it is regrettable that the Government saw fit to bring a Bill to this House in this way, having forced it through another place in two days with a very large whip majority. The only place where it could ordinarily be amended is your Lordships' House and we are precluded from doing that by the terms of it being a Money Bill.
Perhaps I may quote my noble friend Lord Diamond on the question of retrospection. At column 592 of the Official Report of 29th January, when we were discussing a Statement from the Secretary of State which was repeated in this House by the noble Lord, Lord Brabazon of Tara, the noble Lord said:
"although Parliament can do a great deal, it cannot bail the Government out on every mistake they make? If the Government have made a mistake and have been supported by Parliament, and the court has drawn attention to that mistake, the law is the law as the judge has decided. That covers the period up to the date when the new legislation is brought in or is effective. In those circumstances, how can the Government possibly justify coming to Parliament with a proposal which is flatly in contradiction with what the judge has decided was the law of the land at the time the judge was asked to make the decision?"
That is the position we take from these Benches, and I am grateful to my noble friend for putting it so clearly.
Because it is a Money Bill we cannot effectively amend it. Retrospective legislation always causes concern in your Lordships' House. Indeed, the noble Lord, Lord Brabazon of Tara, has indicated that in some way he goes along with that. People acting lawfully should not later be penalised by their actions being made unlawful retrospectively. Nor do I believe that Ministers acting unlawfully should be able to legalise their action in retrospect.
Of course we all recognise that there are occasions when Governments have no option other than to do this, where there are extremely grave matters at risk, for the good of the nation and for the safety of the state. But these should be very few, they should be of the last resort, and they should be for serious purposes. This Bill, I submit to your Lordships, is neither. It is neither because it is not the last resort when the Minister could have made a lawful direction; nor is it a serious purpose because LRT will have sufficient money in 1984, even without the extra £50 million.
In that same discussion on the Statement, at column 591 of the Official Report of the same day, 29th January, the noble Lord, Lord Harmar-Nicholls, whom I am sorry to see is not in his place today, said:
"I should hate the principle of retrospection to be brought here. I think retrospective legislation is bad and unfair. Although this may have elements in it which would perhaps justify a certain element of retrospection, I hope the Government will forgo that for the benefit of the higher principle of not having retrospective legislation".
I believe that the Government should have forgone the benefit of the extra £50 million, however much they believe it is justifiably the property of London Regional Transport, for the higher principle of not having retrospective legislation. They have decided not to do so. It is a matter of regret, and I ask noble Lords to join me in saying so. I beg to move.
Moved, as an amendment to the Motion that the Bill be now read a second time, at end to insert "whilst this House regrets the retrospective nature of this legislation".—(Lord Tordoff.)
The Deputy Speaker (Lord Nugent of Guildford): My Lords, the original Question was, That this Bill be now read a second time?, since when an amendment has been moved in the terms set out on the Order Paper.
The Question I now therefore have to put is, That this amendment be agreed to?
3.26 p.m.
Lord Boyd-Carpenter: My Lords, there appear to be three points which arise in this debate: first, the merits of the Bill; secondly, whether or not it is retrospective, which is obviously a matter on which opinions can differ, and there will no doubt be some argument; and, thirdly, the procedure which the noble Lord, Lord Tordoff, has seen fit to adopt in putting down what courtesy demands I should describe as "a reasoned amendment."
I shall comment first, if I may, on the third point. This is a Money Bill under the Parliament Act. It bears Mr. Speaker's Certificate, and as the noble Lord, Lord Tordoff, very properly said, it is not for any of us here or elsewhere to question that certificate. We are dealing with a Money Bill, and the first point that I think your Lordships will want to consider, whatever view you take on the merit, is whether it is an appropriate action for this House to append a critical amendment to the Motion that a Money Bill be read a second time.
There is a certain irony in the fact that this proposal should come from the Liberal Benches. It was, after all, the Liberal Party which some years ago passed the Parliament Act, and there are some of us here—one

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sitting very near to me—whose forbears did their best to prevent that coming into law. But it was passed into law, and while I do not argue to your Lordships that in any strict sense it is out of order to put down a reasoned amendment to a Money Bill, I am going to suggest that it is a very unfortunate practice; and let us see where it leads.
Your Lordships may well dislike other Money Bills that come from another place. Indeed, were there to be a change of Government, there might be intense dislike of some of those Money Bills. But accepting, as we do, the terms of the Parliament Act—that we cannot amend a Money Bill, that we cannot delay it for more than a month—are we really going to say, "But we can tag on to the Motion for Second Reading what is intended to be a critical and perhaps even an offensive amendment"? That seems to me a most unfortunate posture for your Lordships' House to adopt. It has an atmosphere of "willing to wound, but unable to strike". I suggest to your Lordships that it is an attempt to undermine the principle, which has been accepted since 1911, that your Lordships' House, though co-equal in other matters with the other place, apart from the delaying factor, does not touch Money Bills.
I suggest that whatever view your Lordships take of the merits of this proposal—and I will address a word to that aspect in a moment—it would he wrong to add an amendment of this kind to the Motion for a Second Reading. I will go further and say that such action would be harmful to the relations between this House and another place—when we should appear to be taking upon ourselves the right, although we cannot amend, to pass derogatory comments on what another place has done. I suggest to your Lordships that that is not an appropriate posture for your Lordships' House to take.
I profoundly hope that your Lordships will—whatever view you may take of the merits—hesitate to take such action. In view of the opinions held by the Official Opposition on the Benches of this House, I am bound to observe that it would be a very strange inconsistency were the Official Opposition to declare that, despite their wish to abolish this House, and despite their hostility to its powers, they would support this House coming in with a rude commentary on a matter which—under the Parliament Act—falls well within the discretion and responsibility of another place, and another place alone, to enact.
Whether or not there is retrospection here depends a good deal, I suppose, on one's philosophy. I am sure some of your Lordships could mount a perfectly good case for saying that this provision was retrospective. But is the sense of it such as to offend the reality which lies behind the dislike we all have of retrospection?
The harm of retrospection consists in changing the law so that people who have acted previously in the belief that the law was different are disadvantaged. It is difficult to establish that that is the case here. It was known very soon after the decision of Mr. Justice McNeill—and of course decorum forbids me from making any comment on the decision of the learned judge, whatever views I may hold—that the Government were intending to restore the position to
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what they had thought it to be. As far as I can see, no one has been prejudiced by the fact that for a matter of days, the law appears to have been different to what it will be when this Bill becomes an Act.
One can take this matter further. The GLC precepted local authorities and their ratepayers at the beginning of the year for this money for London Transport. The GLC has had this money, through the precept, for a considerable period of time. As far as the ratepayers are concerned, they have not been misled. They paid the money through their rates to the GLC, and the only question that arises now is whether the GLC—having precepted on the boroughs and on their ratepayers for this money—should keep that money and use it for other purposes. That would be an intolerable state of affairs.
The noble Lord, Lord Tordoff, sought to argue that there was retrospection because of the provision, to which he invited our attention, in Clause 1(1) of the Bill—under which payment has to be made in the current financial year and which, as he reminded us, ends on 3Ist March. We are only at the beginning of March and that subsection does not include any provision for payment of the money other than in a period, or by the end of a period, for which this Act, it is hoped, will be in force. With respect to the noble Lord, Lord Tordoff, his argument in respect of the current financial year does not carry any weight at all.
As to the merits of this matter, the arguments seem to be very simple. The GLC, whose general attitude, as your Lordships know, has been one of hostility to this measure as to all the Government's measures, has been reluctant to help in the work of London Transport. Indeed, through its representatives on LRT it has done a good deal to obstruct the improvements which are being made. Your Lordships have before you the simple fact that the GLC undertook, by the exercise of its precept, to raise funds to make the contribution to London Transport, and it would be absurd to allow the GLC to retain those funds and use them for such other purposes as they want—such as, presumably, plastering London with propaganda pointing out what wonderful people the GLC were.
The whole essence of the attack made on this Bill is that the Government, having apparently made a mistake—according to Mr. Justice McNeill—should then, instead of legislating, have accepted that mistake (leaving the GLC with what would have really been their ill-gotten gains) or should have appealed. Certainly the Government could have appealed, but your Lordships know that the appeal process—and I am very glad that the noble and learned Lord the Lord Chancellor is no longer on the Woolsack—is not always a matter of great celerity. If this matter is to be tidied up by the end of the financial year for the sake of all concerned, and particularly for those Londoners who require the efficient operation of London Transport, there would not have been time for a successful appeal.
It seems therefore that the Government are taking the only action that they can in clearing up a difficult situation, and that if the first attempt to obtain these due payments failed for whatever reason, good or bad, then the honest, sensible and practical action is to come to Parliament and ask Parliament to put that matter right. That is what this Bill seeks to do.

The Miners' Strike
3.37 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment (The Earl of Avon): My Lords, with the leave of the House, I shall now repeat a Statement on the coal dispute which is being made by my right honourable friend the Secretary of State for Energy in another place. The Statement reads as follows:
"With permission, Mr. Speaker, I wish to make a Statement about recent developments in the coal dispute.
"Yesterday, at a delegate conference of the National Union of Mineworkers, a decision was made to end the industrial action which has been conducted by some sections of the NUM over the past year. The conference decided that there should be a return to work tomorrow.
"The Government regret that this unjustified dispute, which has taken place without a ballot, has done so much damage to miners, to mining communities and to the coal industry. Without this dispute, the industry would have received £800 million of captal investment during the past year; miners' pay would have been substantially above average industrial earnings; 1,000 firms would have been persuaded to convert to coal; export orders would have been obtained; and any miner in a pit facing closure would have been given the opportunity of continuing to work in the industry or of taking advantage of early retirement provisions more generous than those available in any other industry.
"The dispute has inflicted heavy damage on the coal industry, and on those companies which supply that industry with plant and machinery.
"However, I am pleased to tell the House that during the period of this dispute, industry at large was able to obtain the energy supplies it required. There were no power cuts due to the dispute, and there are still nearly 12 million tonnes of coal stocks at Britain's power stations.
"I would like to express the Government's appreciation to all those people whose efforts have ensured that Britain's energy supplies have continued to be available.
"I believe the country would also like to thank the police who, throughout this dispute, have ensured that organised mob picketing did not deprive people of their freedom to go to their place of work. Sadly, during the dispute, 1,391 police officers have been injured.
"It is now vital that the coal industry swiftly returns to normal working and recovers from the damage of the past 12 months.
"The National Coal Board have stated that obtaining full safety in all pits is their first priority, so that production can be restored.
"Both the National Coal Board and the Government hope that the coal industry will now take full advantage of the considerable opportunities available both at home and abroad".
My Lords, that concludes the Statement.
Lord Stoddart of Swindon: My Lords, I thank the noble Earl for repeating the Statement which was made in the other place. While there will be a sense of relief that there is to be a return to work tomorrow, does he not agree that a negotiated settlement would have been the best way to end this dispute, both for the miners and for the industry? If the noble Earl does so agree, why did the Government not accept the proposal from the National Union of Mineworkers that it was prepared to sign and implement in full the NACODS agreement when the Secretary of State himself stated on 4th February that if the NUM wished to accept it, it could have a settlement "today or tomorrow"? Is it not a fact that until the modified colliery review procedure is in operation, all pits will remain open? Is he aware that only today the general secretary of NACODS stated that the new procedure cannot be put in place until the NUM is party to the agreement?
Can the noble Earl assure us that there will be no victimisation of miners who have remained on strike throughout the dispute? Will the Government urge on the NCB magnanimity in its dealings with the miners who have been convicted of minor, or relatively minor, offences during the dispute? Is the noble Earl further aware that there is widespread concern over the future of mining communities and that people living in those communities view their future with despair? In the light of that, will the noble Earl impress upon the Secretary of State the need to take urgent and exceptional measures to increase substantially the finance available to NCB enterprises and to intervene directly to bring new industries to the blighted areas?
Finally, can the noble Earl impress upon the NCB that a strong coal industry is vital to our country's future and to achieve this will require the wholehearted co-operation of the total workforce? Will he and his right honourable friend the Secretary of State therefore urge upon the NCB the use of the velvet glove in a hand of friendship rather than the strong arm and an iron fist?
Lord Ezra: My Lords, I should like on behalf of these Benches to express satisfaction that this sad dispute is due to end tomorrow. The main objective for the coal industry must now be to rebuild its fences, get the industry moving again and repair the physical and human damage that might have been created by this long-running strike.
There are, in fact, some short-term market opportunities facing the British coal industry at the moment. Due to the change in the value of the dollar, at which imported coal is quoted, British coal is now very much more competitive. It is very important that this short-term market opportunity is seized on behalf of all in the mining industry and the rest of Britain. If this short-term opportunity is seized successfully the long-term prospects will look all the brighter. Therefore, I propose that there should be an approach to the affairs of the coal industry now that the strike is being brought to an end which will lead to a sympathetic attitude on the part of all within it to try to recover the lost ground, seize the benefits of the short term and build for the future—which will involve substantial, continued investment and on which I hope the noble Earl will reassure us.

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However, in those cases where mines, for whatever reason, might have to be closed, redoubled efforts must be made to bring alternative employment in the area. Here I join with the noble Lord, Lord Stoddart, in saying that the amount of money so far made available for this purpose seems inadequate. I hope that we can obtain an assurance from the Government that this money will be substantially increased in order for this transition in those areas where mining has to cease and other activities take their place to be adequately financed.
The Earl of Avon: My Lords, I am grateful to both noble Lords. On the agreements, I think that over the past year we have had enough talk from Mr. Scargill to last us for a very long time. With regard to the amnesty, no one can in any way condone the acts of serious violence, intimidation or vandalism. However, men may have been dismissed for offences of a very much less serious nature: for example, unruly but not violent or intimidatory behaviour, or trivial theft. In such cases it will be up to the NCB to show what moderation it wishes by either reinstating or re-engaging such men. The conciliation machinery is there and therefore can be used.
I should like to remind the House of the question which the noble Lord, Lord Shinwell, put last week. Personally, I endorse every word of it, and having read it in Hansard I go along with it. The noble Lord, Lord Ezra, made three points. On marketing the National Coal Board was becoming quite successful when the strike started. I assure the noble Lord that we shall get cracking as quickly as we can. As regards investment the Government will undertake the new investment. To turn to the enterprise board, the NCB have given some money towards this which at the moment looks like being adequate; but we shall of course ask the board to keep a close eye on the situation. I shall close by saying to both noble Lords that we should like to see a very strong coal industry, and that surely is the aim of the National Coal Board, too.
Lord Shinwell: My Lords, the noble Earl, Lord Avon, has been generous enough to refer to an observation in which I indulged recently. I would not wish to withdraw a single word that I uttered on that occasion. I venture to suggest—and I can do no more than make a suggestion as I have no authority or power in the matter—that there should be no discrimination as between one section of the industry and another now that there has been a partial closing down of this very unseemly and, in my judgment, unnecessary dispute. This is a matter for questions and not debate, and I ask the noble Earl whether he is aware that this is history repeating itself. A great many people have taken part in the debates in this matter in one way or another—some rightly, and many wrongly because they are not aware of the overtones and undertones of this very difficult subject.
Many people may think that the dispute has been settled, but of course nothing of the sort has happened.
Pretty much the same thing happened rather more than 30 years ago when we had Mr. Arthur Cook—the forerunner of Mr. Arthur Scargill and, indeed, much more venomous, if that is possible, than Mr. Scargill. Very few noble Lords were around then. I doubt
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whether even the noble Lord, Lord Boyd-Carpenter, was. I cannot remember him being in the other place at that time. But I was, and I was closely associated with it because I was Secretary for Mines and I had to deal with the subject. On that occasion, when there was a dispute the Government intervened—and I happened to be working on behalf of the Government—in order to prevent the dispute continuing and developing, as a result of which we did not see many of the unseemly incidents which have occurred in this recent trouble.
Is the Minister aware that I express a view which I am sure is accepted by every Member of your Lordships' House when I say that many of the things that happened during the dispute were intolerable in a civilised society? The police undertook their duties as they were rightly entitled to do. Therefore, there should be no criticism against them if sometimes they acted in an unseemly and difficult fashion. One can understand it, and there should be no criticism of that kind.
I ask the noble Earl to note this. There has been a partial closing down of the dispute. But look at the newspapers—at the glorification in the Telegraph this morning, and at the leading articles in the Sunday papers! How delighted they are! And they point out how delighted Mrs. Thatcher, our Prime Minister, must he because she has gained what she set out to gain—if not to destroy the miners' union, to weaken it and the trade union movement generally to such an extent that they will offer no trouble for a long time to come. This is not a question, but my advice to the Government is that they be very careful indeed. They should consider what happened on the last occasion. The Cook development led to the General Strike, and after the General Strike the miners stayed on strike for eight or nine months. There has been any amount of bitterness since—and there will be a great deal of bitterness for some years to come, unfortunately.
If anybody thinks that everything in the garden will now be lovely and that the members of the Coal Board are anxious to help the miners to have a negotiated settlement and to have no trouble, he is mistaken. They will use this advantage in a way that I and many of your Lordships will dislike. I beg the Government now to use all the influence that they possess, even at this late stage—it is a late stage, but it is better late than never, if I may use a cliché—to ensure that there is no victimisation whatever and that miners who are unemployed or are likely to be unemployed will gain other employment of some kind, or, if not, will not be reduced to a condition of semi-starvation and poverty. I hope that the Government will do that. If they do, it will be of some advantage. But if anyone in your Lordships' House imagines that this is the end of the story, he simple does not know the miners as I know them; he does not know the history of the mining industry that I and many other noble Lords have read about.
We beg the Government to be very cautious indeed, and less discriminatory, less venomous and less glorying in what they regard as a victory for them. It is no victory, and it is certainly not a victory for the nation.
The Earl of Avon: My Lords, I join with the noble Lord, Lord Shinwell, in describing it as an intolerable situation—an intolerable strike, an intolerable dispute—and I also join with him in praising the police. I think his mathematics have gone a trifle awry. When he said "30 years ago," I think perhaps it was a mistake for 60 years ago. However, that is as may be. There has been no victory. The Prime Minister herself said yesterday—and I quote now off the top of my head—words to the effect that it is all over, and nobody has won.
What can I add to what the noble Lord has said? He went on for a little while. I should like to say that there will be no victimisation, either, and there will be no question of the people being re-employed—I am sorry, that is wrong. There will be no question of those who have done wrong things—
Lord Elwyn-Jones: My Lords, the noble Earl has not got it quite right.
The Earl of Avon: No, I have not, my Lords; the noble and learned Lord is quite correct. What I am trying to say is that those people who have been charged with offences will have the opportunity to—
Lord Elwyn-Jones: The noble Earl has done very well so far.
The Earl of Avon:—will have the ability to go to conciliation.
Lord Marsh: My Lords, may I ask the noble Earl whether he agrees that, while no one in the House would want to see the present situation followed by any attitude of vindictiveness to those people who have been out on strike in this long, sad and stupid dispute, one is entitled to ask the Government for an unqualified undertaking that those very brave men who have braved organised thuggery on an unprecedented scale for the past year will also be entitled to the protection of the Coal Board and the Government?
The Earl of Avon: My Lords, I can say that without hesitation.
The Earl of Lauderdale: My Lords, is my noble friend aware that the large-minded magnanimity which his Statement and that in another place have shown will be widely accepted, respected and welcomed throughout the country? Can he tell us whether there is yet any tally of the number of coal faces that have been lost, of the number of mining jobs lost in consequence, and of the value of capital equipment which has been irretrievably lost?
The Earl of Avon: My Lords, as far as concerns the number of colliery faces lost, I understand it to be in the region of 60. As far as concerns the number of jobs that will be lost, there has been no evaluation there. I also think it is a little too early to give the other figure for which my noble friend asked.

London Regional Transport (Amendment) Bill
Second Reading debate resumed.
3.58 p.m.
Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Boyd-Carpenter, in a most interesting speech, chose to make the majority of his comments about the constitutional issue as between this House and another place, and on the issue of retrospection. On the first issue, I join with him whole-heartedly in feeling that this House should not in any way seek to increase its powers in relation to those of another place and in his spirited defence—perhaps somewhat belated—of the Parliament Act 1911.
It is unfortunate that the noble Lord did not find time in his speech to talk more about the merits of the issue, because this is what I wish to do, yielding to the noble Lord, Lord Tordoff, in his excellent exposition of the retrospection issue. The noble Lord, Lord Boyd-Carpenter, in his closing remarks, seemed to think that it was an open and shut case—that this Bill was the only choice open to the Government, that the Government were right to bring it forward and that it was in some way improper for this House even to comment on the Bill. I am not referring in this instance to the amendment on the Order Paper.
It is a fact that the London Regional Transport Bill was debated at considerable length in this House and assurances were given to your Lordships about the content of it. We therefore have some interest in seeing to it that its conditions, as they were explained to us by Government spokesmen, just as they were explained in another place, should be adhered to. In Committee in another place the right honourable gentleman the Secretary of State for Transport made it clear—and I believe that the assurance was repeated here, although I have not been able to find the reference—that it was the intention of the Act that the demand from the Greater London Council should be restricted to what was strictly necessary for the "operational needs" (those are the words in column 1114 of Hansard, at the Committee stage of the Bill in another place) of London Regional Transport in a particular year.
The importance of that is not just the importance of sensible year-on-year budgeting for London Regional Transport. In this case it is also a matter of there being a division of funding as between the passengers, the ratepayers and the taxpayers. Part of the Government support for London Regional Transport—a figure which can be determined by the Secretary of State and changed at will under Section 13(6) of the Act—is to come from the taxpayers.
Why is that significant? It is significant because if a surplus is to be carried forward from 1984 to 1985 it is to be carried forward at the expense of the London ratepayers only. The surplus will then be available not only for London ratepayers but also for the taxpayers in the year 1985–86. So there is a split, a change in the division, which has been determined by the Secretary of State with the authority of Parliament, as between the funding to come from the ratepayers and that to come from the taxpayers. I notice that the noble Lord, Lord Brabazon, in his opening speech, made the same mistake as that made by the Secretary' of State for

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Transport in another place. He repeated that the failure to pass this Bill would be at the expense of the ratepayers and passengers in a future year. He omitted to say that it would be to the benefit of the taxpayers.
The Government had three alternatives when considering the situation in which Mr. Justice McNeill found that the Secretary of State had behaved in all these terrible ways which the noble Lord, Lord Tordoff, repeated, and which I will forbear to repeat. First of all, they could have done nothing; they could have accepted that there would be a deficit carried forward. That would not have been such a terrible thing. After all, London Regional Transport is not a public service in the strict Civil Service sense. It is a business, and noble Lords who know anything about business will be aware that the accuracy of particular forecasts of cash surpluses carried forward can be very much questioned. I very well remember that when I was a member of the Greater London Council Transport Committee we were advised that to change the date of a fares change, a fares rise, by even one day, would make a difference of one and a half million pounds to the revenue of London Transport. Under those circumstances, clearly a cash surplus at March 31st of £20 million or even £30 million either way could depend on a quite a number of factors, such as changes in the weather or changes in the effectiveness of the fare rises which took place in January. Many matters of that kind could account for differences in the surplus carried forward. So it would not have been so terrible to have done nothing.
The second alternative was this Bill. I shall come back to that in a moment. The third alternative would have been to make a legal demand. The significance of a legal demand, as the judge made clear, was that that legal demand would have to be in accordance with the terms of the London Regional Transport Act. In other words, it would have to be for the operational needs of London Transport in 1984–85. The significance of the choice of the alternative of introducing a Bill is quite simply that the Government have not been prepared to make a legal demand, have not been prepared to reduce the demand for finance from the London ratepayers for the operational needs for London Transport. That is really the crux of the matter.
That is what the noble Lord, in his very lucid exposition, totally failed to make clear. He has found no way out of the dilemma that a Bill is necessary only because the Secretary of State is determined to go outside the terms of his own 1984 Act. If that were not the case, a legal demand would be entirely possible. I ask the noble Lord, in summing-up, to please get off the horns of that dilemma. Will he tell us how it is that a Bill is necessary other than to go outwith the terms of the 1984 Act?
4.5 p.m.
Lord Teviot: My Lords, when I first saw this Bill referred to on the Order Paper, I thought that I really must try to support the Government on what is a public transport matter, especially as I fully supported the need for the original London Regional Transport Bill. I congratulate the new London Regional Transport organisation on the way that it is proceeding. Through its efforts the ratepayers of
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London and those of us who visit London will benefit, and, indeed, are already benefiting.
One absolutely deplored the conditions under which the professional executive had to operate under the control of the GLC in the last nine months of its reign. The board had a majority with people who propounded their doctrinal political views. Changes had to be made, and changes have happened. Fares have increased in some areas, but the increases have been not swingeing but practical.
Having said that, one cannot but feel that this Bill appears thuggish. Necessary it may be, but one may have preferred the Government to obtain the money through Section 49 and, if necessary, gone back through the courts. But time is of the essence here. Everyone needs certainty, and needs it quickly. London Regional Transport needs grant aid. It is nonsensical for it to have to borrow at expensive rates of interest. The full judicial processes, which my noble friend Lord Boyd-Carpenter has mentioned, could well extend into the next financial year and could present problems. Certainty has a price and it might be considered preferable to pay it.
I must turn to another area of this Bill about which I am not terribly happy. The premise that it is essential to secure from the GLC this money, which was earmarked for the capital's transport, and not spend it elsewhere simply does not hold water. There, I am afraid, I differ from my noble friend. Over the years London Transport Executive, and, I suppose, before it the board, received subsidy only when it needed it. There is no doubt about that. There is probably a very good case that London Regional Transport needs this money now. One can argue, "Who are the GLC to say now what LRT needs? It is divorced from them"—though I concede that the GLC are fully entitled to express their views and contest the matter.
This Bill has given cause for embarrassment to loyal supporters, especially those who belong to the minority on the GLC and who have a great deal on their plate at the moment. There is a great deal more one could say about the merits or demerits of this Bill and about its background.
I must turn to the amendment which has been proposed by the noble Lord, Lord Tordoff. It states:
"whilst this House regrets the retrospective nature of this legislation".
I am afraid that I cannot agree that this legislation is retrospective—although I respect the arguments that he has produced—for the following reasons. The amount of money paid by LRT under the Bill was required for 1984–85 under the GLC and will be paid this year, though there are only so many days in which to do it. The GLC's position is not adversely affected at a time when they can do nothing about it. If this Bill had been introduced in 1985–86, that would have been retrospective and would have been wrong. I do not feel that a change of this kind, however unfortunate, can properly be described as retrospective. Since the Bill was first published on 1st December 1983, the GLC have known of the theoretical maximum amount which could be the subject of a direction.
It is for those reasons that I am afraid that I cannot support the noble Lord in the Division Lobby—or, at the moment, I cannot support him. One should always

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keep one's options open. There are more speeches to which I have to listen. However, I am most unhappy about the Bill. I join with the noble Lord and his supporters in their protest. It is only left for me to say that I wish London Regional Transport the very best in its endeavours. It has made a very good start. I hope that this type of legislation never finds its way into Parliament again.
4.10 p.m.
Lord Diamond: My Lords, I warmly support the last sentence of the noble Lord, Lord Teviot. I want to put before your Lordships two simple propositions. The first is that this Bill is clearly retrospective. The second is that we should say so. I hope that I do not need to delay your Lordships' House by explaining how abhorrent is retrospective legislation. It is a denial of personal liberty. It is an affront to natural justice. I cannot think of cases, even though my noble ally has imagined them, where we are justified in saying to an individual or a body, "You acted lawfully, but we are going to decide that what you did lawfully shall now be deemed unlawful." That is the effect of retrospective legislation.
Why do I say that this Bill is retrospective?—simply because the Bill says so. I did not invent it, and we do not take sides on the matter here. We are concerned with the principle of retrospection. The Bill says that an amount shall he paid in respect of the year starting 1st April 1984. I do not know why anyone wants to dispute the fact that 1st April 1984 is past; it has gone. I say particularly to the noble Lord, Lord Teviot, that by the time the Bill receives Royal Assent—not the time it was introduced—the date of the 1st April 1984 will be roughly 12 months past. None of us can know the precise date on which it will receive Royal Assent. I do not know. The noble Lord, Lord Boyd-Carpenter, does not know, although he made an assertion on the assumption that it would be passed in this financial year. I am a simple kind of chap who understands that something that is 12 months past has gone and that legislation referring to it must be called retrospective.
The amount which is in dispute and which forms part of the argument concerning retrospection is approximately £50 million. That is the sum being transferred, in effect, from the ratepayers of London to the taxpayers of the United Kingdom. However cross may be the Government and some of their supporters with the electors of Greater London for having returned the kind of council that they do not like, I beg of them not to give vent to their antipathy towards individuals and the make-up of that council by attempting to pass a law that is a flagrant injustice to them. Whether or not they should be treated justly is not a matter for us. The elections have taken place. A council has been duly elected in accordance with our democratic principles. It has certain powers.
Any accountant looking at accounts he is preparing for a business for a year would say of the £50 million, "These are reserves, future leasing costs, future redundancy costs—the reserves which a wise board provides for." However, as all of us know, there are two kinds of reserves which a wise board provides for. There are reserves in respect of expenditure incurred, which must be so stated, and there are reserves which
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you can put on one side because you know that in future you have to meet that liability. You can reserve for that second category. You are required by law to show it separately because it is not set against current expenditure. It will be set against future expenditure when it is incurred.
That is what the £50 million is. It is not money which the recipient body, London Regional Transport, needs to fulfil its current requirements. That was the manner in which the Secretary of State said that he would decide on the amount involved, at the time the original Bill was being explained in another place. There is nothing in the amount that varies the principle that I have enunciated previously—the astonishing Diamond principle that anything referring to 1st April 1984 is past.
Before dealing with the second simple proposition, I should perhaps offer a comment on how this difficulty arose. It might affect the attitude of some of your Lordships towards the vote which I hope very much will take place on what is an important principle. Your Lordships' House is here to defend principles. It is not here necessarily to argue about the details of money. It is here to defend important principles—principles of the liberty of the subject. This is the case whether the subject is someone who is affected by Parliament, for which reason we prevent Parliament renewing itself endlessly, or whether the subject is a ratepayer in London who has exercised his democratic right to elect representatives who have made a certain decision. How did this matter arise? It arose, as we now know, because the judge has said so, from what I might call "the Cheltenham characteristic". It arose through a no-consultation "cock-up". Once more there was the avoidance of consultation. Therefore, the Secretary of State did not know all the figures, because he had not found out and had not consulted. I do not think that this should prevent us doing our duty.
I now turn to the second proposition—that having decided that the Bill is retrospective, we should say so. The Bill has been certified as a Money Bill. Why is it so certified?—because the Government of the day asked the Speaker to certify it. The initiative rests with the Government. Once it is certified by Mr Speaker, that is the end of the matter so far as your Lordships' rights are concerned. It cannot be amended. We are not seeking to amend the Bill by one comma. I should like to refresh your Lordships' memory as to what is a Money Bill. I quote from the latest edition of the Companion to the Standing Orders, which states:
"A Money Bill is a Bill endorsed with the certificate of the Speaker, signed by him, that it is a Money Bill because in his opinion it contains only provisions dealing with national, but not local, taxation, public money".
National, but not local! This is a Bill which affects the rights of a large locality administered by a body called the Greater London Council, and so I can well imagine that those who advised Mr Speaker had to think twice before they recommended that he should certify it. But it has been so certified, and that is the end of the matter: we cannot therefore amend it.
However, we have got a month. We are entitled to one month in respect of this Bill. What are we supposed to do in that month? Are we supposed to admire the colour of the paper on which the Bill is printed? Of course not. We are supposed to use our

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heads. We are supposed to act as this House always feels itself entitled to act and to draw the attention of the Government, of the other place and of the country at large to the danger of an important principle of liberty being over-ridden by an unwitting Government. We are not arguing about the detail of money. I have referred to the £50 million only to describe what it is and to show that it is irrelevant to the issue of retrospection. Retrospection remains the key matter, and this House is entitled to express its view on retrospection.
I do not think that really there is anything more I need say to your Lordships. It is clearly retrospective. We are given a month in which to make up our minds whether it is retrospective. We have put on the Order Paper a form of words which does not alter the Bill by one comma and does not delay it by one second but gives your Lordships' House the opportunity to say, "We are, in the last resort, the defenders of the liberty of this country, and we shall say so".

Northern Ireland: Terrorist Killings
4.22 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell): My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Northern Ireland. The Statement is as follows:
"I shall with permission, Mr. Speaker, make a Statement on last Thursday's attack by the Provisional IRA on Newry police station and on later incidents in which two members of the security forces died.
"At about 6.40 on the evening of 28th February, nine mortars were fired at Newry police station from a lorry parked about 200 metres away. The lorry had earlier been stolen near Crossmaglen. Seven mortars exploded. One of these hit the prefabricated canteen at the back of the police station. Three exploded at the front of the police station, two more exploded on derelict property opposite, and the seventh exploded in the garden of the rear of this property. The two mortars which did not explode landed in a street near the police station.
"Nine police officers, including two police-women, were killed. Seven other officers were taken to hospital, one of whom is still detained, and 23 civilians also received treatment.
"Later that evening, at about 10.30, a device beside a telegraph pole in Pomeroy, County Tyrone, exploded as a UDR foot patrol passed. One soldier, a part-time private in the regiment, was killed, and another soldier was injured.
"Yesterday morning outside St. Gabriel's Roman Catholic church in Enniskillen two terrorists shot dead an off-duty RUC officer in front of his wife and children. The terrorists escaped in a stolen car towards the border, and abandoned the vehicle at Belcoo.
"The Provisional IRA has claimed responsibility for all these brutal murders.
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"I reviewed security arrangements with the Deputy Chief Constable and the GOC on Friday, and these are now being urgently re-examined. So far as the attack at Newry is concerned, no building can be made impregnable and the risks faced by the security forces in Northern Ireland are well understood. I have already approved a capital expenditure programme for police building of between £20 and £25 million in the next three years, including a new police station in Newry. We shall now look carefully and urgently at possible further physical measures for the protection of buildings and at all the procedures designed to forestall attacks of this kind.
"These attacks on Protestant and Catholic members of the security forces show once again the callous savagery of the terrorists. I know the whole House will wish to join me in expressing our deepest sympathy to the families of the dead and injured and our appreciation of the courage and steadiness of the security forces. I believe this House will want to send out another message: we must not and will not bow to terrorists—they will not win".
My Lords, that concludes the Statement.
Lord Cledwyn of Penrhos: My Lords, we are grateful to the noble Lord for repeating the Statement, and we join with him in offering our profound sympathy to the families and friends of the nine men and women killed last Thursday by the attack on Newry police station, as well as the relatives of the others who have been killed over the last two or three weeks. Words are inadequate to convey our horror and revulsion at this wicked deed, which is reported as being one of the worst attacks since the beginning of the present troubles in Northern Ireland 16 years ago. Sadly, it reflects a worsening of the violence in the Province during the last 14 days. Last year it seemed that the violence was abating, and it is disappointing to find that this is not the case.
I am sure the noble Lord agrees that there are no simple solutions, but the supporters of terrorism must not think that an escalation of violence is a solution. It is totally counter-productive. I should like to say also that we appreciate very much Dr. Garret FitzGerald's absolute condemnation of this wicked act. Further-more, I hope it will not be thought that as a result of this act the political situation in Northern Ireland has reached an impasse and that further initiatives should not be taken, even though the talks between the SDLP and the two main Unionist parties have broken down, mainly as a result of Mr. Hume's agreement to meet the IRA.
We noted that the right honourable gentleman the Secretary of State for Northern Ireland said after the Newry attack that although political progress is important—I quote him:
"it shrinks into insignificance when compared with the job of getting rid of terrorism".
Of course it is absolutely essential that the defeat of terrorism should be a key priority of any government, but will the noble Lord give an assurance that this will not be at the expense of seeking a political solution? Is it not true that striving for a political solution is in fact part of the remedy against terrorism itself?

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Will the noble Lord also assure the House that the Government, with the Government of Eire, will carefully consider new security initiatives on both sides of the border, on the grounds that these are essential if the safety of both the Catholic and Protestant communities of Northern Ireland, and of that area below the border, are to be secured?
Finally, can the noble Lord elaborate on the measures to be taken to protect the RUC stations in Ulster from this type of attack in the future? It is, I think, a matter of comment that the armaments used by the IRA were in fact heavy armaments; and it is further a matter of comment that they can be trundled about so easily without the security forces of either side being in touch with them or knowing about them. I hope that this matter will be investigated very carefully by Her Majesty's Government in concert with the Government of Eire.
The Statement rightly says that,
"no building can be made impregnable".
But the point is clear, and is made in the Statement, that these were in fact prefabricated buildings and therefore were particularly vulnerable to attack. I wonder whether the noble Lord, when he replies, can tell us what is the total amount now spent by the Government on security in Northern Ireland.
Lord Hampton: My Lords, I, too, should like to thank the noble Lord the Minister for repeating this Statement. The Statement covers a new sequence of evil and utterly pointless atrocities. I accept that it is virtually impossible to make police stations 100 per cent. safe; but we are glad that the position is being reviewed as a matter of urgency.
We are told that nine mortars were fired at Newry police station from a lorry parked about 200 metres away. The lorry had earlier been stolen from near Crossmaglen. I should like to ask the Minister two questions about that. First, how much earlier had the lorry been stolen? Secondly, could it not and should it not have been tracked down before the mortars could be launched? The other outrages run true to form for the IRA. They seem to take vile pleasure in gunning down officers in front of their wives and children, and very often in the act of attending worship. There are no other questions that I wish to ask.
We on these Benches applaud the immense courage and devotion to duty of the security forces serving in the Province and we send our deepest sympathy to the injured and the bereaved, and the promise that we shall do all we can in the fight for a better, safer life for all in Northern Ireland. We wholeheartedly support the closing message from the Secretary of State:
"We must not and will not bow to terrorists—they will not win".
Lord Lyell: My Lords, may I begin by thanking the noble Lords, Lord Cledwyn and Lord Hampton, for the words that they have expressed about the bereaved and the injured? I shall certainly ensure that their good wishes and their tributes to the security forces, and above all to the brave men and women of the Royal Ulster Constabulary, are passed on. I am most grateful for them.
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The noble Lord, Lord Cledwyn, noted that the Taoiseach had issued a very forceful statement. We too are very grateful for Dr. FitzGerald's forthright support. Your Lordships will know that we all regard the fight against terrorism in Ireland and elsewhere as being of paramount importance. However, we appreciate Dr. FitzGerald's comments and the forthright statement that he issued.
The noble Lord, Lord Cledwyn, also raised the question of a twin-track: of trying to achieve a political solution as well as combating terrorism. I understand that yesterday, in the course of an interview on the television programme, "Face the Press", my right honourable friend said that he was all in favour of political progress. One aspect of that is the discussions that we are having with the Irish Government, which I hope will succeed. I think that it is a twin-track, and if we can reach agreement over such an arrangement with the Irish, then that would be helpful. I do not think that it is a substitute for political progress within Northern Ireland. I am doing my best, and shall continue to do my best, to bring about such political progress. However, my right honourable friend was quite correct when in Newry—and this weekend in the light of the later events—he stressed that our one aim is to defeat the terrorists.
The noble Lord also asked whether there were any further points about which I could help regarding joint security between ourselves and the Republic. I am able to say that these relationships are very strong. I know that at the moment the security forces are reviewing whether anything could have been done. However, I am sure that both the noble Lord and the House will accept that any discussions of details, or any lessons that have been learned as a result of the tragic events of last week and the weekend, will be put into effect as soon as possible, but of course they should remain confidential.
The noble Lord, Lord Cledwyn, also asked about measures for ensuring the safety of the security forces. The noble Lord referred to the Portakabin prefabricated buildings. I alluded to that in my opening Statement and mentioned that my right honourable friend has funds of between £20 million and £25 million for a further capital programme to improve RUC stations. It would be invidious of me to single out any particular improvements. I stressed that there would be a new, improved police station at Newry. However, as regards any reinforcement of roofs and suchlike of the Portakabins or covering the roof of the station with a layer of concrete, other liabilities may be involved, as we have found in the past at Ballykelly and more recently at the Abbeystead explosion in Lancashire, where very serious problems were encountered in rescuing the injured among concrete which had collapsed as a result of a very powerful explosion. However, we shall certainly take on board any lessons that we can learn from this.
The noble Lord, Lord Cledwyn, also raised the question of expenditure on security. I am afraid that I am unable to give the noble Lord or your Lordships any meaningful figure of expenditure involving the Royal Ulster Constabulary and all kinds of operations; but I can tell the noble Lord that an extra amount of £3.1 million has been made available in 1984–85 to meet the cost of the force's expansion and, indeed, the

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increase in man-hours. I understand that for 1985–86 the increase will be in the region of £7 million. However. I hasten to add that that is an approximation. I hope that I have covered all the points raised by the noble Lord, Lord Cledwyn.
The noble Lord, Lord Hampton, asked me two questions about the lorry which was hijacked. I understand that the lorry was hijacked near Crossmaglen at about one o'clock, lunchtime, on Thursday. The driver was held until 30 minutes after the bombing took place. I understand that he was released at about 7 p.m. Therefore, there was no way in which he could have reported the incident or in which the incident could have been averted by speedier action over the loss of this particular lorry.
The noble Lord also raised the point as to how the lorry came to be parked there. I understand that this falls within part of the operational procedures in and around Newry and that this particular aspect of the tragedy is being examined. Certainly any lessons that are learnt will be digested.
4.38 p.m.
Lord Somers: My Lords, the whole country is horrified at the absolutely wanton and meaningless slaughter which is indulged in by the IRA. Can the noble Lord say whether the Government have any intention of reconsidering their decision about introducing capital punishment for the authors of such crimes?
Lord Lyell: My Lords, we do not have any plans to reconsider any measures of capital punishment. Indeed, in July 1983 both your Lordships' House and another place rejected a proposal to reintroduce capital punishment—and, above all, for acts of terrorism. I believe that it would be the opinion of your Lordships that, despite this particular series of atrocities which I have had the misfortune to announce today, the position has not changed since then. Indeed, we believe that the effects of such a step would in the long-term prove counter-productive by making it much more difficult to bring terrorists to justice, and that would strengthen their support and certainly destabilise society in the Province.
Lord Blease: My Lords, as my home and family are in Northern Ireland I should like to be associated with today's Statement and particularly with the comments and the remarks on the Statement made by my noble friend on the Opposition Front Bench. Because of the tragic sorrowing and suffering with which it deals, the Statement is an important matter for the people of Northern Ireland and for all Irish people—for Irish people in Northern Ireland, for Irish people in the Republic, for the Irish in Britain and for the Irish overseas.
I should have liked to hear a much more vigorous and more thought-out Statement. I hope that the remarks made by my noble friend on the Opposition Front Bench will not go unheeded and perhaps to some degree they will supplement the Government's Statement. The Statement has arisen out of death and destruction. It deals with shattered lives and shattered homes. It deals, sadly, with shattered hopes—the
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shattered hopes of children and our children's children in Northern Ireland—brought about by the brutal crimes of terrorist murder.
It has been said that over the past 16 years, after the evil deeds which have been committed in Northern Ireland, we have perhaps run out of suitable words to express our deep sense of revulsion and condemnation of these fiendish acts. Nevertheless, having said that, the importance of this Statement today is that it should have been made by the Government and that it should be supported and acted upon. The message should go out from this Parliament of wholehearted support for the men and women of the Royal Ulster Constabulary and for the other security services who are in the frontline seeking earnestly, under great difficulties, to uphold the accepted principles of justice, peace, and law and order.
We would all hope that the expressions of sympathy from the Government and from this side of the House, made here today, may bring some comfort to those who have recently and so tragically been bereaved, in that they may know that we share in some little measure at least their terrible sorrow and grief at this time. I would hasten to add, in view of some remarks which have already been made, that this House should appeal to the people of Northern Ireland not to allow their understandable upsurge of emotion to overspill into actions of retaliation, revenge or hatred.
The Government propose to carry out a number of security measures. With regard to those security discussions, which I can understand have to be in confidence and have to be guarded for obvious reasons, I feel that, nevertheless, it is in the interests of the morale of the RUC and other security forces that the representatives of the men be brought fully into consultation, and that they should be aware of what is being done in their name.
Finally, may I say that in this House today we should underpin and reinforce the determination of this Parliament to take urgent and forthright decisions to ensure that the evils of terrorism, which the Minister has already mentioned and which have been mentioned from our Front Bench, should not succeed. If we do so, I believe that these recent murders and other which have gone before, and the sufferings of the loved ones of the victims, will not have been in vain.
Lord Lyell: My Lords, we are grateful for the forthright, excellent and kind support from the noble Lord, Lord Blease, who of course has contributed so much to life in Northern Ireland and still contributes so much. So far as concerns the noble Lord's comment on this apalling tragedy reflecting upon everybody in Northern Ireland, and indeed on everyone in Ireland, perhaps I could draw your Lordships' attention to the opening paragraph of a statement issued by Dr. FitzGerald on the evening of the Newry atrocity. He said:
"Once again the IRA, in pursuit of their policy of seeking to provoke repression of the minority in Northern Ireland, have engaged in the mass murder of fellow Irishmen".
That, coming from the Taoiseach, is an expression of the feeling of abhorrence and shock felt by everybody in the island of Ireland. We in this Government are particularly grateful for that forthright support from the Taoiseach.

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The noble Lord raised a particular point about the consultations between the members of the security forces, and indeed the representatives of the security forces, and the Government. We shall certainly make sure that so far as is possible what is discussed at these consultations is made known, but of course this is a matter for the chief constable, or indeed the general officer commanding, as to the scope of the discussions between the Government and the security forces on security policy. It is a matter for them; and, of course, there is a great deal of operational policy as well, and I hope that the noble Lord will accept that.
Lord Fitt: My Lords, in view of the ruthless and relentless campaign of savagery that we have seen carried out by the IRA over this past fortnight, is it not time to say that a new atmosphere must be created? Over these past 14 days the IRA have murdered civilians and members of the security forces, both Catholic and Protestant, and they have carried on a campaign of murdering on the doorsteps of their places of worship, of their chapels, members of the judiciary, the RUC and the prison service. These murders have been carried out on the doorsteps of their own churches and chapels as they have gone to, or come from, mass. Would this not indicate that there is a new element of savagery entering into the activities of the IRA?
In view of this, and particularly when one recalls the howls of protest which emanated after three IRA men were killed in Strabane, would it not be right to pose the question, as I have done this weekend: if the security forces had apprehended that lorry, loaded with its mortar shells, two minutes before they unleashed them at the RUC station, would there not have been a howl of protest from Cardinal O'Fiaich, Peter Barry of the Irish Republic, and leaders of the minority population in Northern Ireland?
Is it not right that we should now say to the religious and political leaders of the minority in Northern Ireland that they, by these protests, and by their arguments and protests against the RUC and the UDR, however justified they may think their attitude is, are creating the conditions and the atmosphere in which the IRA can then engage in their murderous savagery? Is it not time that the Catholic minority population, of which I was one for 57 years until I left it last year, should now stand back and say, "We will withdraw our reservations against the security forces and assist them in every possible way to eradicate this terrorism from our land"?
Lord Lyell: My Lords, the whole House, and people far outside your Lordships' House, will appreciate the comments made by the noble Lord, who, after all, has such experience of facing up to this problem of the appalling violence and terrorism himself. For my part—and, indeed, I am sure on behalf of all your Lordships—I salute his courage over many years. His comments over the weekend are all the more valuable for his experiences.
I appreciate the appalling atrocities which have been carried out at the cathedral at Armagh since I was there this year. I went right round the cathedral and stood on the steps where the principal officer was
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murdered. I have not been to St. Gabriel's at Enniskillen, but I have a personal feeling for what the noble Lord points out.
The noble Lord raised the question of the lorry loaded with the mortar shells. He raised it over the weekend. His comments were particularly welcome and very relevant, and perhaps caused people to search their consciences. He will note that strong comment and condemnation was made in similar vein in the Irish newspaper, the Irish Independent. For all I know they copied the noble Lord's wise words. Certainly nobody is better qualified to condemn this appalling treachery and butchery by terrorism than the noble Lord, and I am sure that everybody is grateful for his comments.

London Regional Transport (Amendment) Bill
4.49 p.m.
Second Reading debate resumed.
Lord Carmichael of Kelvingrove: My Lords, until the repetition of the sad Statement which we have just heard we were discussing the London Regional Transport (Amendment) Bill. It has been said by a number of noble Lords that the Bill has been made necessary because of the wrong directions given by the Secretary of State following the passage of the London Regional Transport Act 1984. The Act received Royal Assent on 26th June, and on 29th June, only three days later, the Secretary of State directed the GLC to pay London Transport £281.3 million. The GLC took the Secretary of State to court on this direction and Mr. Justice McNeill gave a judgment in January of this year which incorporated what must surely be one of the most severe reprimands any Secretary of State has ever received from the High Court. I will refrain from reading the actual words but they are extremely sharp and extremely to the point.
Most noble Lords have spoken about the retrospective nature of this legislation and I certainly agree with the noble Lord, Lord Diamond, when he says that there is no doubt that it is retrospective legislation and that we should say so. I know that all of us in the whole Palace of Westminster look on retrospective legislation with great suspicion. It is an offence to parliamentary democracy and should never be considered except in most special circumstances. I am sure that in this House there must be many noble and learned Lords who will be aware of the previous uses of retrospective legislation and of the instances where it is acceptable to Parliament as a whole. This is usually because the law, as it stood, perhaps had been quite happily interpreted and generally accepted for many years before a deeper examination of the wording revealed a flaw.
I remember, as a Member of a Committee many years ago, being told by the then Minister—who is now ennobled and sits in your Lordships' House—of an example (which, I think, fills the bill very well) of the type of retrospective legislation that I am thinking of. I understand—and I am relying on my memory, so I may recall incorrectly one or two of the titles—that the Wireless Telegraph Act under which the old ten

1123
shillings radio licence was paid came into the category of an Act which, although it had been working apparently well for over 20 years, was suddenly discovered to be flawed. A Bill was brought before Parliament to clear up this mistake. I understand that it met with general approval because the alternative, had there not been an amendment, would have been that the Post Office would have been required to pay hack ten shillings a year to all who could prove that they had paid their ten shillings over the previous 20 years. This was a very reasonable example where Parliament as a whole accepted that there had been a genuine mistake so that people had been paying the ten shillings believing that it was reasonable to do so.
But this is not the case with the Bill. The legislation which it seeks to bring in is not retrospective in form, as was the Act to which I referred. But it is retrospective in effect. With this amendment Bill, we are not tidying up some drafting error discovered by the courts; we are being asked retrospectively to make lawful what were unlawful administrative actions taken by the Secretary of State. Mr. Justice NcNeill found against the Secretary of State primarily on grounds of the Secretary of State's exercise of the law; first, in getting his facts wrong; secondly, in failing to take account of all the relevant facts; and, thirdly, in failing to consult the GLC.
The Secretary of State was not found against on the grounds of his interpretation of Section 49 of the London Regional Transport Act. The original intention of Section 49 of the LRT Act could still meet what was assumed during all the stages in another place to be the intention of the Secretary of State: that is, to provide London Regional Transport's operating needs in 1984–85. Both the Secretary of State and the Minister of State said frequently that no surplus in 1984–85 was intended to be produced by the Act. The Secretary of State could still issue a new, and this time lawful, direction after consultation with the GLC and provide (under the existing law and without the necessity of this amendment Bill) for London Regional Transport's operating needs in 1984–85. This would not harm the travelling public and would be in the best interests of the ratepayers.
But this is not enough for the Secretary of State. He wants to go well beyond the promises that he made many times in another place. He has so drafted the amendment Bill that he will be deliberately creating a surplus for London Regional Transport at the expense of the ratepayers of London. What is in dispute is a sum of about £50 million which, it is contended, is more than the operating needs of London Transport. One of the reasons why the ratepayers of London will then be defrauded, if this Bill is accepted and if there is actually a surplus, is that if there was a surplus carried forward by London Regional Transport it would mean that they would have £50 million of London ratepayers' money to offset costs and charges next year; whereas, if they merely had enough to carry them through this year with their operating costs and they had to raise £50 million next year, they would get under the Act only two-thirds of that from the GLC. Therefore the ratepayers of London will be that two-thirds (that is, about £16 million to £17 million) out of
1124
pocket if this £50 million is actually going to be a surplus.
The Secretary of State claims that the £50 million extra for which he is asking is made up of a number of elements which he believes he is quite entitled to ask the GLC to provide. For example, he deducts £20.8 million for the leasing reserves on buses. This has been dealt with by a number of noble Lords, including my noble friend Lord McIntosh of Haringey and the noble Lord, Lord Diamond, who is extremely well qualified to deal with this type of subject. It should be noted I think (and it was said frequently in another place) that on the question of leasing the Department of Transport urged and encouraged the Greater London Council to lease buses in 1983–84. So this is not something which some fancy accountants at London Transport themselves got up to; it was suggested and encouraged by the Department of Transport.
In any case, surely, in terms of the London Regional Transport operating needs in 1984–85, there is no need to establish a leasing reserve such as this. I understand that the leasing will not be fully realised until 1996; so that we are really jumping more than 10 years ahead with the reserves that have been put aside for leasing—which, surely, is well outwith the range of expenses and costs of running London Transport in 1984–85. The Secretary of State has also claimed that £30 million is needed to meet London Transport's accrued liabilities and that these include a provision of £21 million for future redundancy payments. Again, this could not be considered part of the needs for the year 1984–85, although in fact, one of the problems is that we have not been able to get any figures from the Secretary of State or from the Department of Transport as to what the redundancy level is likely to be and what costs will be involved in the redundancies.
There is no doubt that this sum of £50 million which is involved goes beyond what could be lawfully directed by the Secretary of State under the Act as currenty drafted. The actions of the Secretary of State and his statements during the debates in another place make it clear that London Regional Transport—and many of us were afraid of this during the passing of the principal Bill—is no longer accountable to any elected body. That is irrespective of whether London Regional Transport is doing a better job than the previous set-up—and I do not make any comment one way or the other. All I am saying is that there is no accountability now for London Transport. It was said, I think very cruelly, during one of the debates in the other place that had a measure such as this been brought before the GLC, there would have been open debate, all the figures would have been published in advance, the press would have been there, the Opposition would have access to all the figures and been able to discuss them fully, and of course all the arguments would have been available to the general public.
At present we do not know anything about the detailed calculations on which the leasing reserve is based. We do not know the full details of the redundancy and other sums that the Secretary of State referred to in another place. We do not even know whether it will be possible to have audited accounts and that the GLC will get money back, if all their subvention is not used in the year, as has always happened before. What happened before was that,

1125
although the GLC perhaps budgeted so much for London Transport, London Transport only got what they actually required, whether it was under the budget or, in some cases, over the budget.
The Bill is a poor reflection on the Government, and particularly on the Secretary of State. I agree wholeheartedly with the noble Lord, Lord Diamond, when he says that, irrespective of the statements that have been made about it being a Money Bill, it comes before us and we have to make some comment on it. The obvious comment we must make is that the Bill is retrospective. I agree with all those who have said that, it being retrospective, we should say quite clearly that it is.
5.2 p.m.
Lord Brabazon of Tara: My Lords, we have had a thorough and perceptive debate on the issues raised by this legislation. I have listened carefully to the contributions which have been made, and I shall try to respond on as many points as I can. But before I do, I should just like to stress once again the main points of principle which lie behind this Bill.
I set aside the point about the £10.2 million paid by the GLC to LRT before 29th June and the £12.9 million reduction in the GLC's Money Act, because these sums are no longer at issue. As I explained in my opening speech, we have conceded this money to the GLC, and LRT will have to absorb the consequent loss of grant. The sums at issue are the £20.8 million leasing reserve and the expected £30 million cash surplus for 1984–85; some £50 million in all. The principle at issue is whether the GLC should be required to fund LRT's liabilities and leasing commitments for 1984–85 or whether any money which is surplus to LRT's strict cash requirements for the year should be refunded to the GLC.
Let us consider first the cash surplus of £30 million. This extra money has been generated by LRT since 29th June, when the GLC lost control. In part, it is extra money paid by passengers, attributable to increased tourism and buoyant sales of Travelcards. Seen from another angle, it is grant which ratepayers have contributed for 1984–85 through the GLC's precept, with a contribution from taxpayers in the form of transport supplementary grant. Either way, it is certainly not the GLC's money.
The question is: should the GLC retain the money which it has raised from ratepayers to spend as it wishes, or should it pay the money to LRT? If the money is paid to LRT, as required under this Bill, it will be set against the liabilities which LRT has accrued and which would otherwise fall as costs on passengers and ratepayers in future years. I said in my opening speech, and I shall repeat now, that there is no question of the Exchequer benefiting in any way at the expense of ratepayers or passengers.
The GLC may nevertheless object to the principle of providing for liabilities. There are three things to be said about that. First, we are not dealing with a normal year, in which the GLC could adjust its grant payments to London Transport as between one year and the next, and might choose not to make provision for liabilities until they actually fell due for payment. We are dealing with a situation in which responsibility for financing LRT is being transferred from the GLC
1126
to the Government; and it is right, and in the interests of passengers and ratepayers, that there should be a fair settling of accounts at the end of this financial year.
The second point is that it is normal commercial accounting practice to make provision for liabilities. LRT themselves have done so in previous years. The third point is that a substantial part of the liabilities—£21 million—is for voluntary redundancy payments, which arise as a direct result of the efforts of LRT's management to bring forward cost savings. I ask your Lordships: would it be reasonable for the GLC to receive a rebate of grant payments, partly because LRT have made cost savings, and yet not be held responsible for any part of the transitional costs which flow with those savings? I put it to your Lordships that that would be quite unreasonable.
I now turn to the question of the leasing reserve. As I have said, the GLC habitually financed London Transport's capital programme by means of grant. This year, uniquely, the GLC decided that a substantial proportion of the capital programme should be financed by leasing. The £27 million worth of assets which were leased are principally new buses; they are an important, indeed essential part of LRT's capital investment requirements for this year. Instead of paying for these buses with grant, as it was accustomed to do, the GLC attempted to frustrate the system of controls on its overall capital programme by deciding upon leasing after its capital allocation had been fixed on the assumption that LT's capital programme would he grant-funded. Indeed, the GLC sought to evade paying for this part of the capital programme altogether, since the whole cost of the leasing deals—apart from the first year's payment—would be landed on LRT, after the GLC had lost responsibility for it.
Lord Diamond: My Lords, would the noble Lord give way? Is he suggesting to the House that, because the GLC has acted in a way which he or the Government do not like, that justifies the Government bringing in retrospective legislation?
Lord Brabazon of Tara: My Lords, I shall come to the question of retrospective legislation in a moment, but I am just suggesting that it is odd that the GLC, in their last year, should suddenly do something which they had not done before and should try to get round the capital programme which they had had imposed upon them.
Lord Carmichael of Kelvingrove: My Lords, may I ask the Minister whether he can confirm or deny that the Department of Transport actually urged the GLC in 1983–84 to start leasing buses? Perhaps the noble Lord would write to me.
Lord Brabazon of Tara: My Lords, I may have to write to the noble Lord on that point. My understanding is that they did in 1983–84, but that in 1984–85 they made it very clear that the GLC should not go outside its capital budget. However, I shall write to the noble Lord.
The Government quite reasonably take the view that the GLC should not be allowed to evade its normal responsibilities and saddle LRT with debts in

1127
this way. Ministers have made this clear all along. They said in terms that the GLC would be expected to cover the cost of the leasing commitments when what is now Section 49 of the LRT Act was being considered in another place. Subsequently, the courts ruled that the direction made under Section 49 should not have included the leasing reserve. It is clear that the Act, as interpreted by the courts, did not properly reflect the Government's intentions, as expressed to Parliament. But that in no way affects the argument about whether it is right in principle that the GLC should cover the leasing commitments. The amount provided in this Bill for setting up a reserve to help pay for the leases is no more than Ministers have given notice all along that they would expect the GLC to provide. So there is nothing unexpected in the requirement.
The noble Lord, Lord McIntosh, asked why the Bill was necessary at all, instead of our making a legal demand. I made clear in my opening speech that the courts took a different view of the way in which the powers of Section 49 should be exercised than that which the Government intended when they brought the legislation before Parliament in the first place and explained it to Parliament. I have explained the arguments as to why the leasing reserve and the cash surplus are needed by LRT, and why the demand on the GLC is reasonable. The noble Lord was wrong to suggest that there is a dilemma about the Bill. There is no dilemma. It is clearly right that the GLC should not leave LRT with unfunded liabilities—
Lord McIntosh of Haringey: My Lords, since the noble Lord has referred to the judgment, I wonder whether he will confirm or deny that Mr. Justice McNeill said specifically, in so many words, that the department's officials seemed more concerned with creating a surplus in 1984–85 to be carried forward, to enable much smaller revenue to be required in 1985–86, than with a careful appraisal of all the relevant facts. Does that not give the lie to the Minister's claim that this is a matter of providing for liabilities?
Lord Brabazon of Tara: My Lords, I do not see how the noble Lord can argue that, if the GLC makes a surplus of £30 million on the one hand and has liabilities of £37 million on the other, it is not going to be £7 million worse off. However, various noble Lords have argued that the Bill effectively taxes ratepayers, because any cash surplus carried forward to 1985–86 will go to reduce the Exchequer contribution for 1985–86 under the one-third/two-thirds split, as specified in the Act. As I have said, there is really no substance in the claim that this Bill effectively taxes ratepayers to the benefit of the Exchequer. First, we did not simply fix the Exchequer contribution to LRT's grant for 1985–86 at one-third of the total. The Exchequer contribution was fixed at £111 million, which is more than one-third of the total grants of £323 million. The Exchequer contribution was derived using the same principles as are applied to the calculation of Exchequer grant towards the cost of local authority services generally on the basis of LRT's projected public support requirement for 1985–86. It was set at the maximum level that would be fair to ratepayers in London and elsewhere, since the amount
1128
of Exchequer grant set aside for LRT affected the amount available for distribution to local authorities in London and elsewhere.
There is therefore no question of the Exchequer contribution having been reduced on account of any cash surplus which LRT may have for 1984–85. On the contrary, the Exchequer contribution is £35 million higher than it was in 1984–85 on a pro rata apportionment of the grants which the GLC received. If there were insufficient funds available to meet LRT's cash requirement and liabilities for 1984–85, there could be no question of increasing the Exchequer contribution for 1985–86. Any additional costs would fall on passengers or ratepayers in future years, though the ratepayers' contribution for next year has now, of course, been fixed. So the fact that refunds will be available under this Bill to meet LRT's liabilities is wholly to the benefit of ratepayers and passengers. Furthermore, we should not just look at this question purely from the ratepayers' point of view. The additional cash which LRT has managed to generate has come largely from passengers, through increased sales of Travelcards and the 6th January fares increase. It is therefore right that passengers as well as ratepayers should benefit, and that is exactly what will happen, as I explained.
I now turn to the matter of retrospection, which was raised by all noble Lords but particularly by the noble Lords, Lord Diamond and Lord Tordoff, who claimed that because the Bill covered the whole of 1984–85 it was retrospective. It could equally be said that the original Section 49 direction, and indeed Section 49 of the London Regional Transport Act, were retrospective because they were brought in part-way through 1984–85, at the end of June, to deal with the financing of LRT for the whole of the financial year, starting on 1st April. This Bill in no way makes it lawful with retrospective effect to require the GLC to pay a certain amount of grant to LRT. It introduces a demand now, but that demand is consistent with what the GLC has been on notice all along that it might be expected to provide. This Bill will make no unforeseen demands on the GLC, nor does it seek to make lawful the original Section 49 direction which has been quashed by the courts.
In fact, the GLC's liability under this Bill will be £23 million less than it was under the original Section 49 direction. It is true that the courts ruled that Section 49 did not cover future liabilities in respect of leasing. As I have explained, the question of liabilities is the principal respect in which the court's interpretation of the statute differed from the Government's express intentions, and that is why new legislation is needed to clarify the law. But the GLC has had the clearest possible warning of the Government's intentions since before Section 49 was enacted, and the Bill now before us imposes no new liability which the GLC has not been given to expect. It will provide for the establishment of a reserve of £20·8 million towards the cost of the leases, which is the same figure as the GLC was led to expect at the outset.
In summing up, I acknowledge that this Bill has had controversial aspects. I said at the end of my opening speech, and I reaffirm now, that the Government did not lightly bring this legislation before Parliament. It was brought forward to ensure that the financial

1129
arrangements between the GLC and LRT for this financial year were settled, and settled satisfactorily, from the point of view of passengers and ratepayers. I hope that what I have said today will have convinced your Lordships that this Bill is indeed necessary and that it seeks to secure a reasonable outcome for all the parties affected. I therefore hope that we can put the controversy behind us. I ask for your Lordships' agreement that the Bill be now read a second time, and I urge your Lordships to reject the amendment standing in the name of the noble Lord, Lord Tordoff.
5.16 p.m.
Lord Tordoff: My Lords, I shall be very brief, but I should just like to deal with one point which was raised by the noble Lord, Lord Boyd-Carpenter, since he suggested that I have in some way acted improperly in putting down this amendment to a Money Bill. Were it that this amendment detailed some item within the Bill, were it to attempt to change the sums in the Bill or to alter it in any other way, then I would understand what he has said. Were I to put down an amendment at Committee stage, which any noble Lord would be entitled to do because a reading of the Companion shows that it is within the power of this House to move an amendment—indeed, amendments have been moved to Money Bills in the past and have, on very limited occasions, been accepted in another place—I would also understand. But that is not the point.
The point is that we have a choice here of allowing this Money Bill to go through on the nod, as it were, having had an interesting Second Reading debate, or we have the important duty, as my noble friend Lord Diamond said, of demonstrating not only to this Government but to future Governments that this House does not like retrospective legislation. It seems to me that that principle is by far the more important one, and therefore I feel no sense of impropriety in putting down this amendment. I only—
Lord Boyd-Carpenter: My Lords, will the noble Lord allow me to intervene?
Lord Tordoff: No, my Lords. I am sorry—
Lord Boyd-Carpenter: My Lords, the noble Lord referred to me. If the noble Lord has not the guts to give way—
Lord Tordoff: My Lords, I am replying to something that the noble Lord said, and I would rather get this over with now.
Lord Boyd-Carpenter: I am sorry, my Lords, but the noble Lord has referred to me. He has not the guts—
Lord Tordoff: My Lords, that is perhaps an unfortunate phrase. May I deal with the situation referred to by the noble Lord the Minister in relation to the new Bill? As I said earlier, what the new Bill does is retrospectively to remove a section from an Act that was brought into this House less than a year ago and to replace it by a single sum. That, to me, is a retrospective piece of legislation. I believe that noble
1130
Lords on all sides would wish to regret that. That is why I put down the amendment, and I ask for your Lordships' support.
5.18 p.m.
On Question, Whether the amendment to the Motion for Second Reading shall be agreed to?
Their Lordships divided: Contents, 91; Not-Contents, 110.

DIVISION NO. 1

CONTENTS

Allen of Abbeydale, L.

John-Mackie, L.

Amherst, E.

Kilmarnock, L. [Teller.]

Ardwick, L.

Kirkwood, L.

Attlee, E.

Leatherland, L.

Aylestone, L.

Llwelyn-Davies of Hastoe, B.

Banks, L.

Lloyd of Kilgerran, L.

Barnett, L.

Longford, E.

Beaumont of Whitley, L.

McIntosh of Haringey, L.

Bernstein, L.

McNair, L.

Beswick, L.

Mais, L.

Birk, B.

Mayhew, L.

Blease, L.

Melchett, L.

Bottomley, L.

Meston, L.

Brockway, L.

Mishcon, L.

Brooks of Tremorfa, L.

Molloy, L.

Burton of Coventry, B.

Molson, L.

Carmichael of Kelvingrove, L.

Morris of Kenwood, L.

Cledwyn of Penrhos, L.

Mulley, L.

David, B.

Murray of Epping Forest, L.

Davies of Leek, L.

Northfield, L.

Delacourt-Smith of Alteryn, B.

Ogmore, L.

Oram, L.

Denington, B.

Phillips, B.

Diamond, L.

Ponsonby of Shulbrede, L.

Elwyn-Jones, L.

Raglan, L.

Ennals, L.

Rathcreedan, L.

Evans of Claughton, L.

Ritchie of Dundee, L.

Falkender, B.

Seear, B.

Falkland, V.

Serota, B.

Fisher of Rednal, B.

Shepherd, L.

Foot, L.

Shinwell, L.

Gaitskell, B.

Simon, V.

Gallacher, L.

Stallard, L.

Gladwyn, L.

Stedman, B.

Graham of Edmonton, L.

Stewart of Fulham, L.

Grey, E.

Stoddart of Swindon, L.

Grimond, L.

Stone, L.

Hampton, L.

Strabolgi, L.

Hanworth, V.

Taylor of Blackburn, L.

Harris of Greenwich, L.

Taylor of Gryfe, L.

Hayter, L.

Tordoff, L. [Teller.]

Heycock, L.

Wallace of Coslany, L.

Houghton of Sowerby, L.

Wedderburn of Charlton, L.

Irving of Dartford, L.

Willis, L.

Jacques, L.

Wilson of Langside, L.

Jeger, B.

Wilson of Rievaulx, L.

NOT-CONTENTS

Ailesbury, M.

Buckinghamshire, E.

Airey of Abingdon, B.

Caithness, E.

Alexander of Tunis, E.

Cameron of Lochbroom, L.

Allerton, L.

Campbell of Alloway, L.

Atholl, D.

Campbell of Croy, L.

Auckland, L.

Carnegy of Lour, B.

Avon, E.

Cathcart, E.

Bauer, L.

Chelwood, L.

Belhaven and Stenton, L.

Coleraine, L.

Beloff, L.

Colwyn, L.

Belstead, L.

Constantine of Stanmore, L.

Bessborough, E.

Craigavon, V.

Blake, L.

Cross, V.

Boyd-Carpenter, L.

Cullen of Ashbourne, L.

Brabazon of Tara, L.

Davidson, V.

Bruce-Gardyne, L.

De Freyne, L.

1131

Denham, L. [Teller.]

Mersey, V.

Dilhorne, V.

Middleton, L.

Ellenborough, L.

Mottistone, L.

Elliot of Harwood, B.

Norfolk, D.

Elton, L.

Nugent of Guildford, L.

Faithfull, B.

Onslow, E.

Fortescue, E.

Orkney, E.

Fraser of Kilmorack, L.

Orr-Ewing, L.

Gainford, L.

Pender, L.

Glanusk, L.

Penrhyn, L.

Glenarthur, L.

Peyton of Yeovil, L.

Gowrie, E.

Quinton, L.

Gray, L.

Rankeillour, L.

Gridley, L.

Reigate, L.

Hailsham of Saint Marylebone, L.

Renton, L.

Rodney, L.

Halsbury, E.

Runciman of Doxford, V.

Hampden, V.

St. Davids, V.

Home of the Hirsel, L.

Sandford, L.

Hornsby-Smith, B.

Seebohm, L.

Hylton-Foster, B.

Skelmersdale, L.

Iddlesleigh, E.

Soames, L.

Kaberry of Adel, L.

Somers, L.

Kilmany, L.

Stamp, L.

Kimberley, E.

Strathspey, L.

Kinloss, Ly.

Sudeley, L.

Kinnaird, L.

Swinton, E. [Teller.]

Kitchener, E.

Terrington, L.

Lane-Fox, B.

Teviot, L.

Lauderdale, E.

Thomas of Swynnerton, L.

Lawrence, L.

Thorneycroft, L.

Long, V.

Trefgarne, L.

Lucas of Chilworth, L.

Trumpington, B.

Lyell, L.

Vickers, B.

McAlpine of Moffat, L.

Vivian, L.

McAlpine of West Green, L.

Ward of Witley, V.

Mancroft, L.

Westbury, L.

Margadale, L.

Whitelaw, V.

Marley, L.

Wilberforce, L.

Marsh, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.27 p.m.
On Question, Bill read a second time; Committee negatived.

Trustee Savings Banks Bill
The Chancellor of the Duchy of Lancaster and Minister for the Arts (The Earl of Gowrie): My Lords, I beg to move that this Bill be now read a second time. This is a somewhat unusual Bill. Its purpose is to enable the trustee savings banks to complete their transition from their present unique and anomalous status to independent banking companies in the private sector.
The Bill will enable the trustee savings banks to put into effect the policy that they, rather than the Government but of course in consultation with us, have worked out for their future. The Bill has the full support of the TSBs, and I know that representatives of the TSBs will be very happy to discuss their plans with any noble Lord who wishes to do so. The Bill does, however, tell only part of the story of the TSB reorganisation, as it deals only with that part of the reorganisation which requires statutory authority. In some respects the Bill has some of the characteristics of a private Bill to reorganise a bank's business; in others, it addresses questions of public policy.
Many of your Lordships will be familiar with trustee savings banks and Members of this House have made
1132
a major contribution, to which I am delighted to pay tribute, to the trustee savings banks movement over the past 170 years. However, others may be less familiar with the TSBs. The history and organisation of the TSBs are complex, so perhaps I may refer noble Lords to the summary of relevant, information on the TSBs—their history, present organisation, and plans for the future—which is contained in the White Paper published on 18th December last year. I shall not take up time in covering in any detail the background material which the White Paper sets out. I should, however, set out very briefly myself how TSBs evolved and how their role has developed, because this is essential to an understanding of the Bill.
The origin of TSBs lies in the early nineteenth century in Scotland. Local community leaders organised savings banks in which the poorer classes could put their pennies at a time when the banks would accept only pounds. The savings banks were run by trustees—from the best motives but essentially in a spirit of nineteenth century paternalism. Unlike building societies, TSBs have no membership structure. Parliament has regulated them since 1817 through a succession of Trustee Savings Banks Acts, of which this will be the last.
For very many years, TSBs operated as an arm of national savings, providing basic savings facilities to their depositors and a source of cheap funds to government. By the 1960s, it was evident that demand for this traditional service was falling and the TSBs were in danger of withering away. Depositors expected a fuller banking service, and took their business elsewhere when they were unable to get it from TSBs. In 1973, the Page Committee on National Savings—to which I shall return—recommended that the TSBs should substantially widen the services they offered.
The TSB Act 1976 provided the wider powers and the framework for co-ordination through the central board which made the growth of the TSBs over the past decade possible. That Act did not, however, address the fundamental question which the Bill now seeks to resolve: namely, the future constitutional form of the trustee savings banks.
Because of the special circumstances in which the TSBs evolved, ownership of them has never been established. The Government have considered the legal position very carefully and we are satisfied that neither depositors, staff, trustees nor indeed the Government themselves own the TSBs. As the White Paper acknowledges, the Acts are silent on this point. In the Government's view—and this is shared by the trustees who are currently responsible for the TSBs—it is essential that the issue of ownership should be clearly established for the future. Organisations of this size and importance should be clearly accountable to their owners.
One option would be to follow the route suggested in the Page Report and make the TSBs mutual institutions. I must stress that at present they are not mutual institutions because they have no membership structure or other mutual constitution. It is of course true that mutual institutions such as building societies and some insurance companies play a very important part in the financial services sector.
But mutuality, as it is called, is not without problems. In particular, it is difficult to establish the

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accountability of management to individual members, and mutual institutions do not have the access to additional capital from the markets which companies enjoy. There have been very substantial changes in the financial market place since the late Sir Harry Page (who died on New Year's Eve) made his recommendation.
On the one hand, the importance of access to the capital markets is now surely much more evident than it was 10 years ago. On the other, the TSBs have developed a range of financial services and a degree of sophistication and centralisation that could not have been imagined in the early 1970s. As the chairman of the TSB Central Board points out in paragraph 5 of his letter to my right honourable friend the Chancellor of the Exchequer, published in the White Paper, the TSBs today are radically different to those of 10 years ago. Not even the critics of the reorganisation proposals have argued that the TSBs will have difficulty in holding their own in their new role.
The TSB Central Board and the Government have therefore decided another course, which we believe is more appropriate in present circumstances. The Bill will therefore vest the business of the existing TSBs and of the financial services companies which collectively make up the existing TSB Group into new companies which will be set up for that purpose under the Companies Acts. The Bill fully protects the rights and position of TSB employees. The new holding company, to be called Trustee Savings Banks Group plc, will then issue shares to the public and the successful subscribers will become the owners of the new group. The TSB Central Board, not the Government, will be responsible for this operation under the powers which the Bill confers. The central board has already made it clear that depositors and staff will be offered priority in the share issue. To quote Sir John Read, the TSBs are
"firmly set on the principle of wide ownership of our shares, with priority for our customers and staff".
Those words appear in paragraph 8, on page 13 of the White Paper.
The Bill does not attempt to set out in terms how the flotation itself is to be achieved; that is surely the TSB's business, and in any event it is necessary to leave a great deal of the detail to be decided by the experts at the time in the light of market conditions. But the Bill does provide the central board with such powers as may be necessary in this connection.
I should also draw your Lordships' attention to the fact that the memorandum and articles of association of TSB Group plc will contain provisions to safeguard the independence of the new company. Specifically, the memorandum will provide that no person may own more than 5 per cent. of TSB shares during the first five years of the new company; thereafter, the articles of association will restrict maximum shareholdings to 15 per cent. Drafts of these documents are in the Library.
The main object of the Bill is to enable the vesting operation which I have described to take place; that is, the reorganisation of the existing TSB Group into the new Companies Act structure. It will place the new TSBs in precisely the same position as their main
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clearing bank competitors—as commercial banking companies set up under the Companies Acts with access to the capital markets. The proceeds of the sale will be retained in the TSB Group. That is extremely important.
However, the Bill also achieves another important object. It abolishes the special restrictive supervision which the Treasury has exercised over TSBs for very many years. The new banking companies will be supervised by the Bank of England under the Banking Act 1979 in exactly the same way as are their competitors. This will simplify the banking supervision system.
Over the years, a great many references to TSBs have accumulated on the statute book. Most of these are incidental, but some are major—notably the Trustee Savings Banks Act 1981, which consolidated all earlier TSB legislation then extant into one statute. The Bill makes arrangements for the dismantling of the 1981 Act and the removal of other references from the statute book as soon as they become redundant. This operation will be technically complex, and will be achieved largely by statutory instrument under the Bill. The Bill also contains a number of tax provisions which are necessary in order to allow the TSBs the same tax treatment during the reorganisation as they would have enjoyed had the old TSB Group been a group of limited companies.
Clause 6 of the Bill deals with another nineteenth century foundation; the Scottish "1819" savings banks, of which there is now only one—the Airdrie Savings Bank. It enables this type of savings bank to apply for authorisation under the Banking Act 1979 by remedying an oversight in that Act.
I should be happy to answer specific points on the Bill at the end of the debate as well, of course, as in Committee—but for the moment I will not burden your Lordships with further technical details. Discussions in the other place and outside have concentrated on two key questions: whether the Companies Act approach is the right one, and whether the Bill should contain additional provisions to govern or restrict the conduct of the new TSB banking companies once they have been established.
These are the most important points. I have explained why the balance of argument in the mid-1980s, and looking forward into the next decade, favours the Companies Act approach over the mutual approach. I do not believe that it would be right for Parliament to continue to apply any special legal provisions to the TSBs, whether these are adverse or favourable in nature. It would not serve the interests of the TSBs, their staff or their customers, to single the TSBs out for special treatment, and to make the TSBs come back to Parliament when they need a change to the legal framework which applies to them.
Some people may be concerned that the change in the status of the TSBs will in some way diminish the quality of the service they provide and change the character of the organisation; that is natural when dealing with such a well-known and long-established institution handling something so personal as people's financial affairs. I do not believe that these fears are justified and I draw the attention of the House again to Sir John Read's letter in the White Paper, which

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provides reassurance on this point. The strength of any organisation, and most particularly of a bank, depends on the customer base which it exists to serve. As Sir John Read says in his letter to my right honourable friend:
"First and foremost, we intend to maintain our traditions as a personal bank, proud of our achievements in the communities which we were established to serve."
A change in constitution does not, however, imply a change in role or in the ability of the new banking companies to continue to provide the fullest possible customer service to their traditional customers. What these proposals do promise is security for the future in the sense that the TSBs will be placed on a basis where they can maintain and enhance their services in the 1990s and beyond. It is proper to recognise the enormous contribution that the trustee savings banks have made under their present constitution, and the Government are confident that the new constitution will enable them to continue to play a vital part in a financial market place which is likely to become even more different from that in which they passed their first 150 years. My Lords, I beg to move.
Moved, That the Bill be now read a second time.—(The Earl of Gowrie.)
5.42 p.m.
Lord Stoddart of Swindon: My Lords, I should like to thank the noble Earl for his full and clear explanation of the Bill. Certainly the Bill is designed to end a series of changes in the trustee savings bank movement—changes which, in fact, began with the Page report and which led to the Act in 1976 which, as the noble Earl explained, radically changed the operations of the TSBs. These changes enabled the TSBs to expand their services and provide the conditions for a new dynamic in the movement which has been of great benefit to customers, staff and the world of banking itself.
The trustee savings bank movement has certainly had a long and distinguished history. It has been particularly strong in Scotland, where the movement began and, of course, in the north of England. As the noble Earl explained, the banks were established by local people whose main aim was to encourage thrift among poor people so that they would not become a burden on the public funds and also to assist people to obtain access to savings and the benefits that such savings could bring. Like so many other institutions in our society, the TSBs had small beginnings and modest aims, but they have developed into large organisations with great scope and ambition.
The changes since the first bank was set up in 1810 in Ruthwell, Dumfriesshire, have certainly been considerable. The TSBs now have about 6 million customers and 2 million credit card holders. The changes brought about by the 1976 Act have enabled the TSBs to provide full banking services, including making loans to depositors. In addition, TSBs have developed a range of services such as cheque, savings, and investment accounts, and fixed-term bonds. Insurance services are available and the TSB Unit Trust Company has proved highly successful since its formation. Mortgage facilities are available and there is, of course, the instalment and leasing company, United Dominions Trust Limited. The early founders
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of the movement would hardly have recognised in the modern TSBs the simple savings movement they had established; but I feel sure they would have only admiration for the present organisation which has developed to meet the needs of the times.
The Opposition accept that the further changes envisaged in the Bill do not amount to a privatisation measure; that is, in the sense of the British Telecommunications Act which was designed to sell off public assets for individual private gain and to bolster the Chancellor's policy of giving tax cuts to the well-heeled at the expense of the poor. There is no crock of gold here for the Chancellor to get his sticky fingers on. The Government do not own the trustee savings banks and, therefore, cannot benefit in a financial sense from this Bill. The money raised from the sale of shares will, as I understand it, be added to the existing reserves of about £600 million and be used for the further development of TSB services. Under these circumstances the Opposition will not oppose the Bill in principle, although amendments may be proposed during later stages to clarify and improve it.
Having said that, however, let me make it quite clear that we are not entirely happy with the route being taken to establish ownership of the TSBs. The public limited company route was not the only route possible. Indeed, the Opposition, while clearly recognising and understanding the developments in banking since the 1976 Act, nevertheless believe that mutualisation should have been given far better consideration than has been the case. The Page report rightly noted that the principle of mutuality operates in the vigourously competitive fields of building societies, insurance and some unit trusts. Further-more, the same report expressed the view that mutuality was highly suited to the needs of financial organisations such as trustee savings banks if they play a wider role in the provision of financial services. The report went on to say that there was no reason why the trustee savings banks, suitably reorganised, should not exist as mutual organisations primarily in the private sector of the economy.
Clearly, then, the mutualisation option was a real and relevant one. In fact, it was one that would introduce a third force into banking. With mutualisation there would be the clearing banks, Giro and the TSBs. As it is, with the TSBs reorganised as a PLC and likely to drift further towards the clearing banks, we shall have Giro and the clearing banks, and the option of a third force in banking is effectively closed.
I remain somewhat puzzled as to why the Government rejected the mutualisation option so firmly. After all, it is not opposed to their own oft-repeated philosophy of wider ownership. Indeed, mutualisation would achieve the widest possible ownership since the customers would be the owners and the sole beneficiaries of profits, either through direct bonuses or improvements in services at cheaper rates, or a combination of all those elements. One has to ask whether there has been any great pressure from account holders or the staff for conversion to a public limited company. If there has been, neither I nor anyone else has heard about it. The real pressure seems to have come from management who, for their own reasons, believe that better accountability will be

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achieved through the creation of shareholders, whoever they may be at any given point in time.
It is also true of course that the TSB wishes to raise new capital for further development and sees the PLC option as the best way of achieving that. One is bound, however, to say that there are alternative ways of raising capital for development, and indeed the TSB has itself already accumulated reserves of £600 million to date—a significant sum.
This brings me to the question of the possible takeover of the TSB by another bank or financial institution. It is of course true that Sir John Read in his letter to the Chancellor—which has already been quoted by the noble Earl—referred to protection against takeover. It might be as well to recall exactly what Sir John said. His letter is printed in the White Paper. He said:
"We have taken the view that it would not be right, given the history and traditions of the TSB, for the TSB Group to be unduly exposed to the risk of takeover, expecially in the early years following reorganisation. The draft memorandum of association of TSB Group plc therefore contains a provision that in the first five years following the issue no one may own more than 5 per cent. of its ordinary shares. The draft articles of association of the company provide that after this five year period has elapsed no one may own more than 15 per cent. of the shares. This arrangement will give the new Group a very fair degree of protection against takeover, particularly in the first five years".
At first glance the safeguards against takeover seem reasonable and effective, and for the first five years may very well be effective. But five years is a comparatively short period of time and after that it is proposed that no one may own more than 15 per cent. of the shares.
The first question that I should like to put to the noble Earl is: what is his definition of "no one"? It is a very loose definition indeed. Does it mean no single individual or a single company? Does it refer, more importantly, to each of the four joint stock banks; or does the 15 per cent. limit refer to all the joint stock banks as one for the purposes of shareholdings? If each of the four joint stock banks bought 15 per cent. of the total shareholding, they would among them hold 60 per cent. of the total shareholding and would therefore be in a controlling position in the one bank, the TSB PLC, which would be their major competitor. I should certainly like to have the noble Earl's comments on this aspect when he winds up.
Furthermore, the 15 per cent. limit will be safeguarded not by statute as we should prefer, but simply by the articles of association of TSB PLC. While it is true that articles of association cannot be amended at the drop of hat, they can be so amended at an extraordinary general meeting, and if a bid offer is made attractive enough to the existing shareholders, the requisite majority to amend the articles of association is always attainable. We must, after all, understand that in the last analysis shareholders are primarily concerned—and this is quite understandable—with their own personal interest and are unlikely to be persuaded against their own interest by abstruse arguments about the future control of the company. Therefore this is a matter with which we may very well wish to deal at the Committee stage.
We must not overlook either the possibility that TSB PLC might wish to take over another bank either
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in the United Kingdom or overseas. In so doing it may very well overstretch itself or get its fingers burnt through bad judgment. The TSB PLC will of course be subject to control in such operations by the Bank of England, but the record of the Bank of England so far does not inspire confidence that it will be able to prevent unwise ventures that may hurt the TSB PLC's customers and shareholders in varying degrees.
Perhaps I should now turn to the question of the position of existing depositors and staff in relation to shares. There is in the Bill no provision as to the date or the time limit for flotation after the assets have been transferred to TSB PLC, nor is there any reference to the allocation of shares. Therefore we do not know under what conditions the shares will be floated; nor do we have any indication of the proportion of shares that will be set aside for purchase by depositors and staff. We know that a great deal of interest has been aroused, since there was a significant increase in the number of accounts prior to the closing date of 17th December entitling depositors to a pink priority slip for the purchase of shares.
We also have an indication from TSB chairman, Sir John Read, of the number of depositors who would become shareholders in the new company. According to press reports Sir John has said:
"If we could get a 10 per cent. response, we would feel very encouraged".
I have to say that in my view and in that of the Opposition Sir John's target seems rather modest and we should be very disappointed if the takeup of shares by staff and depositors was not very much higher than 10 per cent. Do the Government agree with the assessment of Sir John Read, and, if so, do they not share our concern at the low level of expectation? We shall be interested in the noble Earl's reply, and in the light of that reply we may wish to return to the matter during later stages of the Bill, when we may also wish to raise the question of staff participation in the management of the new company.
I have one final point on flotation. Can the noble Earl make some statement about the sale of shares abroad? Is there to be a stipulation limiting the number of shares which can he held by foreign owned companies, so that control of the TSB PLC cannot fall under the control of foreigners? If there is to be such a stipulation, perhaps we can be given details? If not, perhaps we can he told why not.
I now turn to local involvement. We have all noted the assurance given by Sir John Read that the regional boards, which were set up on 1983 to take the place of the boards of trustees of the former TSBs, will be maintained to help to ensure a continuing close relationship between the TSB Group and local communities, and that assurance is to be welcomed. However, there is no statutory backing to this under-standing and therefore no certainty that at some future date all local involvement will cease, in which case the ethos of the Trustee Savings Bank movement will be entirely eradicated, and that would be unfortunate indeed.
We wish to see permanent involvement in local communities to help to ensure that services are maintained in what in strict commercial terms are less profitable areas of the country. It would be ironical

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indeed if areas in Scotland where the TSB movement began found themselves, as a result of this Bill, deprived of TSB service because the new board decided to concentrate its main thrust in the lucrative banking areas in the south of England. It would be useful to be assured that Scotland and the north of England will not be neglected and forgotten while TSB PLC concentrates all its efforts on forging ahead in southern England.
We would also hope that, as the new organisation builds up its commercial lending business, its ordinary private customers who have built up the total business of TSBs are not neglected and demoted to a second-class status. Of course it is well understood—and I appreciate it—that the existing management has no intention of doing any such things, but it is the future in five to 10 years that must give cause for concern.
As I have already said, we shall not oppose this Bill in principle, but I should have preferred a Bill that could have been welcomed wholeheartedly on all sides. During later stages we shall not obstruct the Bill in any way, but we reserve our right to come forward with amendments to write into it safeguards which we think necessary for the protection of depositors and staff and for the continued strength of the TSB movement.
6.1 p.m.
Lord Banks: My Lords, I should like to join in thanking the noble Earl, Lord Gowrie, for his clear and lucid explanation of the Bill. I am afraid that I cannot speak as enthusiastically about the Bill itself. I am struck by the contrast between the picture of the future, so far as the TSBs are concerned, which was presented to us when the Trustee Savings Banks Bill of 1975 was before this House, and the picture of the future with which we are now confronted.
That Bill, which was introduced at the end of 1975, as has already been explained, followed the Page Committee report on national savings. That report dealt in detail with the trustee savings banks. The Page Committee found that at that time there were 73 trustee savings banks of varying sizes. They provided an outlet for small savings supported by a Government guarantee and subject to tight Government control affording a limited amount of tax relief and offering limited banking facilities. A £50 deposit was required before a current account was permitted. There were no overdrafts or personal loans in those days. The majority of depositors were in the lower income group. The trustee savings banks were on the fringe of commercial banking.
The Page Committee had to consider whether changes were necessary and, if so, in what direction the trustee savings banks should go. As has already been made clear in this debate, the Page Committee decided that the trustee savings banks should become mutual banks, freed from much of the Government restriction and offering full banking facilities for personal accounts only, The government of the day, which was the previous administration to the present one, accepted that. The Bill which came before us at the end of 1975 and the early part of 1976 facilitated that. It was not long before overdrafts, personal loans, credit cards, and mortgage loans were available, and arrangements
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were made for the relaxation of the restrictions on investment. In their report, the Page Committee said:
"A set of mutual Banks similar in organisational form to Building Societies seems to us an excellent way of promoting a competitive service for the financial needs of the small saver and depositor".
The noble Lord, Lord Stoddart, said that there were to be three types of bank: the clearing banks, privately owned; the Giro, owned by the state, and the third force, which was to be different and was to be on a mutual basis. In this House, from these Benches, I welcomed those proposals, regretting the fact that it had been necessary to cut down the number of individual banks from 73 to 17, but realising the reasons why that was so. I expressed satisfaction that the regional structure, though greatly modified, was being maintained. A scheme was to be prepared by each bank for the appointment and removal of trustees by the depositors.
Our first major objection to the Bill from these Benches is that the concept of mutuality has been thrown overboard. The trustee savings banks are to become public limited companies, controlled by shareholders, just like the clearing banks. In other words we are creating—and I think the noble Earl, Lord Gowrie, said as much in his introductory remarks—another clearing bank.
The Page Committee in paragraph 263 of their report had this to say:
"The suggestion has been made that the Trustee Savings Banks should be hived off to the private sector as commercial concerns. If by this is meant that they should have shareholders and operate from the point of view of ownership like commercial banks we see such a solution as neither practicable nor desirable in principle".
The noble Earl has said, and the Government say generally, that the current ownership of the trustee savings banks is obscure and that Parliament must determine it. I would agree with that. But Parliament can quite as easily determine that it should be a mutual ownership. As has already been pointed out, there are many successful mutual organisations operating today: the co-operative societies, the building societies, and the mutual life offices. Looking at that latter group, organisations like the Scottish Widows' Fund, the National Provident Institution, the United Kingdom Provident Institution and others, can hold their own with the best of the proprietary life offices. One must ask why that should not be so in the banking field as well.
The noble Lord, Lord Stoddart, raised the question of the degree to which members of the staff and depositors will take up the opportunity to purchase shares. I should very much like to know what is the estimate of the noble Earl of the percentage of shares which will be held by members of the staff and depositors, and how much of the concern they are likely to own.
Our second objection is to the abandonment of regional principle. Of course, there will still be regional boards and there will naturally be a proper attempt to try to maintain a relationship between the local area and the organisation generally. But the organisation itself will no longer be controlled from a regional level in any way. The number of regional banks has been reduced to four: England and Wales; Scotland; Northern Ireland; and the Channel Islands. As I

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understand it, at least up until now the confederal structure, with autonomous individual banks co-operating, has been maintained. It is now proposed that the TSB group should control the individual banks which will become subsidiaries of it. Thus TSB Scotland Limited will be a subsidiary of the group covering the whole of the United Kingdom and operating from headquarters in the south of England. In other fields in the past Scotland has had the unhappy experience of ultimate decision-making being transferred from Scotland to London.
The trustee savings banks have contributed much to meet the financial need of small savers in this country. They have been identified with the localities in which their depositors live. They have been able to act purely in the interests of their depositors. Naturally we, on these Benches, wish them well in the future in whatever guise they may operate. But I think that I have said enough to indicate how strongly we feel about the abandonment of the concept of mutuality and the loss of local identity.
6.8 p.m.
Earl Ferrers: My Lords, I should like to thank my noble friend, Lord Gowrie, for having introduced this Bill this afternoon. I apologise to him for something which I daresay he did not notice, which was that regrettably I was not here for the first few minutes of his speech. I should declare an interest by the fact that, in concert with about 6 million other people, I am a depositor and a user of a Trustee Savings Bank. I should declare an interest insofar as I was chairman of the Trustee Savings Bank of Eastern England. I was a director of TSB Trustcard and also of the Central Trustee Savings Bank.
I welcome this Bill wholeheartedly. I was a little disappointed with the reactions of the noble Lord, Lord Stoddart of Swindon, and of the noble Lord, Lord Banks. They were not as enthusiastic as one might have expected. The noble Lord, Lord Stoddart, I think found every bogy possible about the Bill. I do not blame him for that; that is the duty of Oppositions and it is the duty of Government to reply and ensure that those bogies in fact shall not become realities.
To witness the transformation of the trustee savings banks over the past 20 years has been an exhilirating experience. They were, after all, originally a Victorian depository for the slender funds of those who were commonly called, in those days, the working classes. Their money was copper-bottomed. They were guaranteed a modest interest. They knew that their money and their savings were safe. What the Government did with the money was not their affair. They received their interest. They got their money back. It transpired, in fact, that the Government used the money frequently as a very cheap form of finance. I do not blame them for that. That was the history and the pattern of those days.
How this system withstood the changes of the twentieth century up to and including the 1950s and the 1960s—changes that were taking place all around the country in other financial institutions but from which the trustee savings banks were excluded—is, for me, one of the most astonishing wonders of the British financial system. Even in the 1960s, the trustee savings
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banks were paying about 2½ per cent. on their deposits. And if you were really brave and had shown that you were a good boy and had a certain amount of money in the ordinary department—I think that it was £500—you were allowed to invest in the special investment department where you received 5 per cent. Of course, overdrafts and such like were taboo. They were against the ethos of the savings bank movement which existed for savings. Yet, for some extraordinary reason, despite the attractions and the wooings of the outside commercial world and outside bankers, people still put their money in the trustee savings banks. The deposits still grew. The trustees, despite the magnificence of their name, could virtually do nothing. They were hidebound by Government and by that model of inventiveness, the Treasury.
I shall never forget the endeavours to get one simple thing introduced—to allow cheque books to be used by trustee savings banks. The pleadings and the arguments went on for years. It was like trying to move Mount Sinai. But still the deposits went on. I thought in those days that there must be either a lot of very stupid people or a lot of very loyal people in the country. In fact, there were a lot of very loyal people indeed to the trustee savings banks. Then came the Labour Government, bless their hearts. I pay tribute to them for what they did. In a quiet and unobtrusive way and as a lone example, they did a volte-face on all their political doctrines. They denationalised the trustee savings banks. They set them free. They set them free from Government control. They allowed them to compete in the harsh competitive world of the financial money markets. No one realised the political profundity of what the Labour Government did in those days. But they did it. I congratulate them for having done it and for the way that they did it.
However, for the trustee savings banks, it was rather like telling a person, who, after a long illness, has had the plaster removed from both his legs, to take part in a rugger scrum. Of course, the patient wobbled. But, for some extraordinary reason, he did not collapse. He took part in the rugger scrum. What is more some of the other participants in the scrum said, "Who is this new boy with the unshaven face? It prickles and it hurts". Mark you, my Lords, people inside the organisation, too, began to wonder what was going on and to wonder whether they were employees or trustees. "Our cosy existence is going to be altered", said some employees. Some of the trustees said, "This is terrible. We are not going to be wanted any more". Fresh air was blowing in through the organisation from all directions. Some found it was healthy. Some found it was chilling. Some just wanted to get out, and they did.
The 72 banks amalgamated down to 18. This process of amalgamation was considered very avant-garde. But there were still 18 banks, all proudly individualistic and vigorously jealous of their historical background, bound together by the slender corporateness of the central board. It was rather like having 18 Jack Russells being taken for a walk on a lead, each straining to ensure that the fulcrum jolly well moved in his direction. Fortunately, now, that struggling will be over. Now there are to be four banks—territorially, four—but operating with a sense of oneness.

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The transition of the trustee savings banks in the past 20 years I consider to have been fascinating. Few would have believed, even 15 years ago, that that diverse set of financial depositories would have developed into an exciting, competitive, attractive and attracting organisation—part of the clearing bank system, lending money, giving overdrafts, mortgages, life insurance, hire purchase, credit cards, almost the lot. It has been a remarkable transformation. It has a very unique advantage. It has a very wide base of public involvement.
When you see in the mirror of your car a car coming up behind at speed in the fast lane, the others want to watch out. And so does the driver. I welcome the Bill as being the last Bill to set the trustee savings banks totally free. One always thinks that everything is going to be the last. It does not always work out that way. I remember during the last war that someone made the profound observation that this war, like the next war, is the war to end all other wars. That may prove to be so with Trustee Savings Banks Bills. But this Bill does set the trustee savings banks truly free to reorganise themselves into a Companies Act structure, to enable them to issue shares, to enable them to become fully part of the private sector.
I congratulate the Government. I congratulate the trustee savings banks. I congratulate whoever it was—I doubt if it was only one person—who devised a system of determining who actually owns the bank. It could only be in the United Kingdom that an organisation is built up with resources of £700 million and yet actually belongs to no one. Even that conundrum has now been resolved although the noble Lord, Lord Stoddart, is not too fascinated by it, and the noble Lord, Lord Banks, does not like it. But it is a conundrum that has been resolved. I am sure that, under the new organisation, the Trustee Savings Bank will have a stout and effective position in the financial system of the country.
6.18 p.m.
The Earl of Iddesleigh: My Lords, I too must declare my interest. I have been connected with the TSB Group since 1970. In that year, I was first appointed a trustee to the then Devon and Exeter Savings Bank which was founded, I believe, in 1815. Today, following two reorganisations in the mid-1970s and 1983, I am a trustee of the TSB England and Wales and chairman of its South-West regional board based on Exeter. I am also a director of United Dominions Trust Limited, a subsidiary company of the group. I am a member of the TSB board here in London. At all times. I have been in a part-time non-executive capacity and, although prior to the mid-1970s, no fees were paid to board members, since I think 1975 or 1976, I have received a fee for my work. However, as I am not dependent on my fees for my bread and butter, I hope that I am not out of order in taking part in the debate. I also hold an account with the TSB.
I have naturally read with interest the Hansard reports of the debates in another place on this Bill. I should like to enlarge a little on some of the points raised there, and indeed in your Lordships' House this afternoon. First, I can assure the House that the
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decision to go public, assuming that the Bill receives Royal Assent, has not been taken lightly. Even before the passing of the Banking Act 1979 discussions and debates were taking place within the TSBs on their future and structure.
It may be appropriate here to remind this House of some of the provisions of that Act. I think that possibly too much has been made of the share issue, and attention has not been focused on this vital part of the legislation. The Explanatory Memorandum to the Bill which passed into law as the Banking Act 1979 stated that it would provide for the prior authorisation and supervision of institutions which took deposits from the public. A two-tier system of authorisations would be established whereby institutions satisfy a wide range of exacting criteria might be recognised as banks, and other institutions would be eligible for a licence to take deposits. The first crucial decision taken by the TSBs was to work towards full banking status rather than be just a licensed deposit-taker.
Certain institutions were exempted from these provisions. Among them, because of their special transitional relationships with Her Majesty'sTreasury, were the trustee savings banks. The Treasury was given power to vary the list of exemptions, and it was stated at the time that removal of the exemption of trustee savings banks was envisaged,
"at an appropriate stage of their development".
This was compatible with an EEC Directive—No. 77/780—providing for member nations to establish, over a period of time,
"laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions".
The time has now come for the trustee savings banks to be released from special Treasury regulation and to become appropriately subject to the requirements of the Banking Act 1979.
It is submitted that the provisions of this Bill now before Parliament, whereby a Companies Acts structure will be applied to them, provides the most appropriate means for the TSBs to achieve suitable status under the Banking Act. They are already recognised, in the general sense of the word, as a banking group. They enjoy a high reputation and standing and they provide the necessary wide range of banking services. This reputation has been enjoyed for some considerable time, and the full range of services has been developed by one of the most significant transformations of operations in banking history in the decade, following the publication of the Page report, as the noble Earl, Lord Ferrers, has just mentioned. It is now necessary to provide the TSBs with the means to enable them to demonstrate to the authorities responsible for banking registration and supervision that they have the management structure and accountability to qualify as a recognised banking group. As I have said, this Bill provides such a means.
I must confess that originally my regional board and I, and indeed many others in the group, were more in favour of keeping the existing more cosy, mutual type of organisation, even though this would have left unanswered the ownership and accountability questions. However, after considering all the arguments, the TSB Central Board, certainly my regional board and I, and, as far as I know, all regional

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boards, are unanimously in favour of the PLC answer. This decision was not forced on the TSB by Her Majesty's Government. It is the wish of the TSB Group itself, after literally many hundreds of hours of debate and discussions on this point.
As your Lordships know, the TSB is committed to reserving a large proportion of the share issue for its customers and staff if they wish to subscribe to our issue. I refer to the letter of 6th December of our chairman, Sir John Read, which the noble Earl, Lord Gowrie, has already mentioned. It is attached to the White Paper. In another place Questions were asked as to how large this proportion was going to be. I can assure this House that no firm decision has yet been taken. I am sure this House will agree with me that no firm decision can be taken until the group is closer to the day of its issue and market research has been done. I can further assure the House that it is the central board's intention to have initially (and to try to keep) a very large proportion of our shareholders from our customers and staff. I speak here for all members of the central board. As I have said, we are firmly committed to that.
It is true that this will mean a large register of shareholders. Even if the proportion is 10 per cent., that is 600,000 shareholders from our customers and staff. Consequently, the price of the administration of this register will be slightly higher in proportion than a normal issue of this size. Nevertheless, the central board accepts that—this will not be a normal issue. The TSB is not a normal bank. I say, "not a normal bank", because I believe, having worked for the TSB in a non-executive capacity, that I have the feeling of it. I realise that working for the TSB, or even being a customer of the TSB, engenders a rather special loyalty, which, again, the noble Earl, Lord Ferrers, mentioned. I do not think this loyalty exists to anywhere near the same extent in any other financial institution.
The noble Lord, Lord Stoddart of Swindon, and other noble Lords have raised several points and queries. Frankly, they are too many to answer now, on Second Reading, and I hope that if amendments are put down I shall be here in your Lordship's House to help answer them. However, I should like to try to answer one point which was raised by the noble Lord, Lord Banks. He mentioned the question of regional representation. From my own experience, I am quite sure that one of the reasons for this loyalty is that we have—and we intend to keep—strong, interested, non-executive regional boards. They are drawn at the present time from a wide range of professions and occupations. I can speak only for the Exeter-based hoard, but there we still have a large proportion of board members who are ex-trustees of their local banks. They regularly visit our branches and take an interest in all our staff. The newer members of my board have certainly caught on to the spirit we have established and are as enthusiastic as the older members as to our future. By retaining our regional boards and recognising their importance I feel the TSB Group is going a long way towards retaining not only its humble beginnings but also its rather special place now in the market place.
Finally, I strongly commend this Bill to this House. The TSBs have demonstrated that they are well
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capable of running their own affairs. Our clearing arm—the Central Trustee Savings Bank—has already established itself as a much respected organisation in the City of London. We are still increasing the range of services we can offer our customers. As your Lordships have already been told, the money raised by the share issue will go towards increasing this range of services. The passing of this Bill will complete the transition from a purely savings organisation to a fully-fledged bank and allow the group the independence it needs to compete fully in the high streets of England, Scotland, Wales, Northern Ireland and the Channel Islands.
6.29 p.m.
Lord Wilson of Langside: My Lords, so far in the debate one simple point has emerged with clarity; that is, that this Bill enacted, as I am sure it will be, will see another chapter in a remarkable success story which began around 175 years ago. That success, achieved from such simple beginnings, is a fascinating tale, and the noble Earl, Lord Ferrers, touched upon it. The achievement was, of course, the achievement of the founders, the trustees, the managers and the staff, and was due to the thrift of the depositors. So far as I am aware, no group of political enthusiasts can claim any special credit in the matter at all. We know that successive Governments—Whig and Tory I suppose, and Conservative and Liberal, and latterly Labour Governments—have been concerned only to provide a statutory framework within which the banks could operate, defining the duties of the trustees and the rights of the depositors and, having provided that framework, to modify it from time to time as changing social and economic circumstances made necessary.
I gather that the principal criticism directed against this Bill and the framework which it provides centres upon the point that the Government have not followed the path recommended by the Page report and created a framework within which TSBs could operate as a mutually-owned third force for the banking world, but have opted instead for the PLC structure. I do not propose to enter into that argument because, frankly, as at present advised, I should not attach any very great value to my judgment upon it, and accordingly I shall not waste your Lordships' time in that area.
Faced with the competing dogmas of the political patent medicine men, and now women, too, of the Conservative and Labour parties, I have no difficulty in concluding that above all our country needs a third force in her political life; but as to the need or not for a third force in the world of banking, I shall suspend judgment and I hope, with your Lordships' assistance, I shall be able to reach a conclusion upon it by the time our debates are concluded.
Although over the years I have had some association with the old Savings Bank of Glasgow—as a customer in the 1930s and later as a trustee or manager ex officio—it never occurred to me to intervene in this debate until the very last minute when I recalled the village of Ruthwell, in Dumfriesshire, which I first came to know when, on one or two occasions, I was the Labour candidate in the county of Dumfriesshire. I then learned of the extraordinary Dr. Henry Duncan, the parish minister who had started it all. Dr. Duncan started the savings bank in Scotland in 1810, taking deposits of one shilling at a time when the banks would

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not take less than £10, which was as much as an agricultural labourer earned in a year in those days.
Then I thought that I might try speaking for five minutes or so on the early history of the savings bank when, unfortunately, I discovered that Sir Hector Monro, the Member of Parliament for Dumfriesshire, had done just that in the other place, and I did not want to be repetitive. However, there is one point worthy of comment in Sir Hector's speech. He referred to the close interest that the TSB had taken in Dr. Duncan and to the well-tended museum which had been established in his old cottage in Ruthwell. Sir Hector expressed the hope that all the financial pundits in the other place would visit it and kneel at the shrine of Dr. Duncan who began it all. I thought that that was a very good idea. Indeed, it was just the kind of thing that I would commend for the grandees of a great variety of our national groupings. It is just the kind of thing that I would commend to, say, lawyers and, perhaps, politicians as well as bankers: a pilgrimage for reflection and prayer at the shrine of the visionaries of whose wisdom they are the beneficiaries. It might induce a touch of humility. I do not know about bankers, but I can think of a few lawyers and an odd politician or two in whom a touch of humility would not go amiss. It might also of course inspire. Therefore, that is something that might be taken aboard—visits to the shrine.
As I thought about all that background and the constant use of the jargon word "unbanked" and the debates in the other place, there frequently intruded into my mind two lines of the words of W. S. Gilbert's "Gondoliers" about,
"The aristocrat who hunts and shoots,
The aristocrat who banks at Coutts".
Quite seriously, it will surely be important to remember the significance in the past of the special relationship between the savings banks and their depositors, of the bankers place in, and their involvement with, local communities, and of the need to provide a competitive service for the financial needs of the small saver and the small depositor. I would hope that, when the Bill is passed, the managements in this new framework, whatever form it takes, and whatever your Lordships decide to be the right one, will remain dedicated to these particular ends. No doubt in Committee we shall discuss whether we should include further provisions in those directions, but in any event, the Bill will no doubt pass before very long.
6.39 p.m.
Lord Houghton of Sowerby: My Lords, I do not wish to take up too much of the time of the House at this stage, especially as I am due to speak in a subsequent debate of some importance. However, I want to say straightaway that this Bill makes me very cross indeed. I am astonished that the noble Earl, Lord Ferrers, should be so complacent about some of the proposals—not the provisions in the Bill, but the proposals in connection with the Bill. My grievance concerns the treatment of the depositors, of whom I, like the noble Earl, am one. My membership goes back many years; with my father before me, we have well over 100 years as depositors in trustee savings
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banks. I have regarded myself as a member, though technically speaking there is no membership of the trustee savings banks. But I felt that I was a member just as much a trustee savings bank as of a building society, or a co-operative society. It has not been noticeably different in the rewards that one gets for the investment.
This loyalty, to which the noble Earl, Lord Iddesleigh, referred, is a potent factor in all these movements which had their origins in working-class combination for self-protection. Unless that is understood, one can never appreciate how strongly some people feel about the institution to which they belong. Certainly I have felt strongly about it. I have felt that the trustee savings bank movement was something that I should support, and I have supported it. Whatever the conditions they offered, I have thought it a duty to foster the movement to which my own family have been attached for so long. That is something that noble Lords may not understand, but I am sure that it has a profound influence upon those who have remained loyal to the trustee savings banks and other similar institutions over many years.
Earl Ferrers: My Lords, may I interrupt the noble Lord? While he has been saying that, he has been looking at me with a penetrating eye. I actually said that there were a great many loyal people—6 million of them. I hope he does not think that I was assuming that there were not a lot of loyal people, because I said there were a lot.
Lord Houghton of Sowerby: My Lords, I must apologise to the noble Earl for not having acknowleged that he referred to the point. Had not the noble Earl, Lord Iddesleigh, referred to it, I would have fastened on to what the noble Earl said in that regard. Coming from the quarter it did, from a member of the central board, I thought that I was entitled to refer to what he had said.
Now, why am I so cross about the way the depositors are being treated? The White Paper says:
"The making of a deposit with a trustee savings bank and the earning of interest on that deposit does not carry with it the implication of a share in the ownership, or a claim to the reserves, of the bank".
That is what I dispute. In the few minutes during which I shall speak I want to deal with this central fallacy that the trustee savings bank belongs to nobody, and that when it does belong to somebody it should belong to those who subscribe for shares in the ordinary course of a flotation of a new public limited company.
I believe that depositors are entitled to a share of the equity of this company. What this proposal does is to question the right of the depositors to any preferential share of the equity, though I think when there is doubt as to who property belongs to one can take a commonsense line, and that is that property belongs to where the money is, and the money is the depositors' money. The whole of the trustee savings bank movement, its profits, its reserves, everything connected with it, has been built upon the deposits of the depositors. Therefore it is their contribution to the prosperity of the trustee savings bank which should now be acknowledged.

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Another point to bear in mind is that all small savers throughout the whole period of inflation have been cheated. They have been cheated by Government and they have been cheated by institutions because they have used the money of small savers at less than the going rate, and they have relied on the loyalty and the unsophistication of small investors to keep money available on such favourable terms to those who would take it.
Nobody who invested in the trustee savings bank over the years got any hedge against inflation, as nobody got a hedge against inflation in the Post Office, and as nobody got a hedge against inflation in the building societies. All small investors—the working-class movement which supported these institutions—have been cheated during this period of inflation. That is another reason why, when it is proposed to transfer an institution from its historic environment to a new and more competitive and, so to speak, capitalistic enterprise, now is the time to deal fairly with the depositors.
What is involved here is taking the depositors' share of the equity, selling it, putting it on the market, and telling the depositors that they can buy it back if they like, and priority will he given to them if they wish to buy back their own share of the equity and the assets of the bank. That is coming near to a sleight of hand. Indeed, people in the City have gone to prison for less than this. I could use a strong word in connection with this, but I shall say that I think the depositors are being diddled.
Just to safeguard their right to acquire at the market rate a share in the equity which really belongs to them anyway is not the bargain which this arrangement should offer to them. Even though we may have shareholdings and a public limited company, some means should be found of providing the depositors with a rights issue or other means of discounted purchase of the shares; certainly do not ask them to buy at the market rate and think you are virtuous in safeguarding their claim to some modest share of the total. This idea to give priority to depositors is just insulting. Depositors own the dammed thing, and I do not think that one can say that they are on sufferance at all. I feel that this is the central feature of the arrangements before the House.
As for the proposed safeguard against a dominant shareholding in the company, I do not think that the 5 per cent. limit over the next five years, or the 15 per cent. limit over the remaining 15 years, are any safeguards at all. As my noble friend Lord Stoddart pointed out, there is no way of preventing people acquiring shares over these limits if they want to, or if the company decides that they shall. That is another reason for giving depositors a firm stake of their own in the company.
The staff occupy a different position. I do not suggest for a moment that they should not also have preferential treatment, but certainly when a company is starting from the theory that nobody owns it, then is the time to try to dish out justice to those who have been engaged in the enterprise and have contributed to it over such a long period. After all, what is 5 per cent.? It takes only four people to acquire a 20 per cent.
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share, which is a substantial shareholding for a combination of four people in any public company. If later the four people get together to acquire 15 per cent. each, then they have control of the company. I do not see that that is an adequate safeguard against the possibility of being taken over or the possibility of a dominant shareholding which may seek to alter the course of the whole enterprise.
Mark my words, my Lords, I do not think that the term "trustee savings bank" will last for ever, either. One notices over the years how the original descriptions of institutions which had been quite proud to be related to their environment and origin are gradually shed because they are not in keeping with the status which it was hoped to have in a different world entirely. The Co-operative Building Society became Nationwide; the Workers' Travel Association became Galleon Travel. I could recite other examples. Where there has been a relationship with a movement from which they sprang there has been a tendency to move away from it and seek a title less associated with their origins. It is perhaps inverted snobbery. I do not think that the term "trustee savings bank" will last very long. It will not be thought to be in line with the clearing hank movement that they are going to join. That is the main point that I wanted to make.
I shall conclude by saying that I hope noble Lords will read the debates in the other place because there was a Division on Second Reading there as well as a Division on Third Reading. The Bill met with a very mixed reception there. It was not wholly on party lines and I wonder whether it is at all proper for the Government to be acting as parliamentary agents for what ought to be a Private Bill. This is not really, and should not be, a Government Bill. The Government's interest in this is to release the trustee savings banks from controls that have been put there by Parliament. Although I think that the Government should help to advise a trustee savings bank and other institutions that want to promote themselves in a different way, I do not think that the Government should he acting as the agents for them, defending from the Government Benches matters which are particularly related to the conduct and proposals of the company or those who are at present organising it for the future. My Lords, we are going to have a busy time at Committee stage.
6.51 p.m.
Lord Bruce-Gardyne: My Lords, like the noble Lord, Lord Houghton, I shall aim to be brief although for a somewhat different reason: I think that I am probably infectious and I would rather limit your Lordships' exposure. Like my noble friend Lord Ferrers and the noble Earl, Lord Iddesleigh, I must begin by declaring an interest as a director of the Central Trustee Savings Bank, and perhaps also a secondary interest in that when I was a Minister in the Treasury I was very much involved in what might be called the building of the foundations of the edifice of which (what shall I say?) a facade is presented to the House tonight. So your Lordships will not be surprised if I say that I hope very much that this Bill will be given a fair wind and a rapid course to the statute book, and that I was a little disappointed by some of the responses from the other side.

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I was very interested to hear the noble Lord, Lord Houghton, pointing out that the working classes, as he put it, had been "ripped off" by the processes of inflation through the holding of their savings in institutions such as the Trustee Savings Bank. I think there is a lot of truth in that and I sometimes wish that the party of which he was such a distinguished member showed more concern about the impact of inflation on the poorer section of the community than they seemed to show when they were in office. But, that apart, I would not want to elaborate on the descriptive passages which my noble friend Lord Ferrers and the noble Earl, Lord Iddesleigh, gave your Lordships so eloquently on the background to the TSBs and the evolution which has been almost, one might say, miraculously achieved over a period since the publication of the Page Report to which there have been several references.
Because of my own direct involvement, I want to concentrate briefly on the more immediate past and in particular, on the argument about mutuality versus PLC status. Of course, it is true (as several noble Lords have already pointed out) that there was a lot of argument and discussion as to which was the more appropriate route to go down. But I have to say to the noble Lords, Lord Stoddart and Lord Banks, that I wonder—and I wondered at the time when these discussions were going on with the TSBs and within the Treasury—whether the building societies are necessarily in this respect such an ideal example of the consequences of mutuality as seems to have been suggested this evening. I wonder whether all depositors in recent years in some of the major building societies have felt that the principle of accountability of the directors of those building societies has exactly worked out to their satisfaction. That is not the impression that one is given, and it seems to me—and it did seem to me—crucially important that one should establish a clear principle of accountability for the TSBs as they left the wing of the Treasury and moved out fully fledged into the private sector. I must say to your Lordships that I could not see then and I do see now how that could be satisfactorily achieved except down the PLC route.
The noble Lord, Lord Houghton, felt almost the victim of highway robbery. I listened very carefully to his comments on the issue of what I believe is known in the jargon as the "ownership of produce", the produce of the bank, of the TSBs. I am no lawyer and I should not like to bandy legal provisions with the noble Lord; but I must say that it was my understanding at the time and has been my understanding ever since that the best available legal advice was that there was indeed no legal entitlement in the hands of depositors to produce. I have to put it to your Lordships that it is not immediately apparent, even supposing that there were to be conceded some legal entitlement to produce, as with whom precisely that ownership would rest. At what date would the ownership be struck? Should those who had happened to make their deposits on the eve of the publication of this measure or at a date fixed before which the chopper should come down, be entitled to produce?—while others who might have wound up their deposit accounts some weeks before, after having
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suffered precisely the depredations of inflation on the very modest interest that they had traditionally received, and to which the noble Lord referred, should be denied. Should the late comers be privileged and the ones who had been there faithfully (as my noble friend Lord Ferrers pointed out) through many long years be denied?
It is impossible, I submit, even if there had been any grounds for accepting that there was some entitlement to produce—and I believe that there was none—to see how that could conceivably have been established on a basis which would appear like equity to all those who had been or were presently concerned.
I must say that I find the responses of noble Lords opposite a little disappointing. I am bound to say to the noble Lord, Lord Houghton of Sowerby, that I wonder whether all his fellow depositors will be quite so unenthusiastic about the opportunity to acquire by priority (as Sir John Read has pointed out in his letter, to which many references were made) a stake in this business when the flotation occurs. I have to suggest to the noble Lord, Lord Houghton, and others that the enthusiasm which employees in British Telecom showed, and are still showing, to acquire an equity stake in that business hardly suggests that there is going to be a wailing and gnashing of teeth among the depositors and the employees of the trustee savings banks when the flotation occurs. I believe it will be very much the opposite.
I just want to pick up one reservation which the noble Lord, Lord Stoddart, made in his remarks, the question of protection against a possible future takeover. He made your Lordships' hair curl with the prospect of the four major clearing banks each taking a 15 per cent. stake in the business. I have to say to the noble Lord that if they tried doing that, they might in the first place have a certain amount of explaining to do to the take-over panel (in whatever form it may exist in that brave new world) which has tended to have a certain resistance to what are known as "coffee housing" or various other euphemisms for that kind of acquisition of ownership of a business. And, quite apart from that, if any one of the existing clearers acquired a 15 per cent. stake in the TSB when that will have become possible, I cannot see how that can fail to be a matter for the scrutiny of the monopolies commission which will still be there. Therefore I think to some extent that these anxieties are over-stated. But I must say that in my view, while it is perfectly right and proper during the period of its emergence from the chrysalis, as one might say, into its full-fledged status as a publicly-quoted PLC, that the management of the TSBs should enjoy a measure of security against the predators in the big wide world, I do not think that unlimited security in that respect could be regarded as desirable. The compromise which is set out in Sir John Read's letter gets the balance just about right.
My own hope and expectation is that although of course this is a totally different animal, as my noble friend the Minister has pointed out and as the noble Lord, Lord Stoddart, has acknowledged, from a genuine privatisation such as British Telecom and the like, nevertheless I believe there is every prospect that the TSB, when it comes to flotation, will achieve another giant step forward towards the concept of a share-owning democracy in this country, thereby

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building upon the achievement of British Telecom in that respect. I think that will be a consummation much to be desired.
Perhaps in conclusion I may, from my own experience, just express a word of appreciation for what I believe has been the remarkable achievement of the present chairman of the TSB, Sir John Read, in leading the banks together forward into this new era and presiding over what was bound to be a hazardous and difficult transition period. I think that has been supremely well achieved and I hope that when your Lordships—as I am sure you will—give godspeed to this Bill, the TSBs will emerge, if not precisely in the form that Page envisaged, nevertheless as a new force in banking from which the consumer, the employee and the depositor will all greatly benefit.
7.3 p.m.
Lord Grimond: My Lords, I regret, like my noble friend Lord Banks, that the savings banks were not mutualised, but I follow the powerful arguments which have been advanced by the noble Lord, Lord Bruce-Gardyne, and I do not want to continue with that debate, which has been fairly fully explored.
I want to raise four questions. The first two are rather minor. One concerns the name. The name "Trustee Savings Bank" has a long and honourable history and meant something. It seems to me that it will mean very little in connection with the new bank: the word "Trustee" is not very relevant to it. As for the initials "TSB", I find it exceptionally boring and I very much doubt whether it is an attractive name for what is said is going to be a new, enterprising and forward-looking bank.
The second small point is this. I wonder whether the noble Earl could tell us a little more as to what is going to happen to the Airdrie Bank. Will that continue as an independent saving bank or will it be open to it to amalgamate with the new TSB? There were rumours that it might he taken over by one of the Scottish banks but it seems to me that it would he rather more to the advantage of the savings movement in general if it were to come into the TSB fold.
My two main questions are first of all, about local investment. I have been much struck, particularly looking at the accounts of the Aberdeen Savings Bank, which covers Shetland, at the great amount of money which it has been taking in, particularly of course from the oil areas. The fact is that it has at least until fairly lately—it now has a unit trust, of course—taken this money off to London, where it has been very useful to the Government but has not given a very good return to the investors, and of course has been steadily eroded by inflation.
What has really killed that form of savings has been inflation. What is lacking, it seems to me, in our financial arrangements is any machinery for directing local savings into local equity investment. Instead of that, we take it down to London; it is given over to Government in point of fact and then local industry depends almost entirely upon grants which come back from London. In most countries there is a far stronger local banking system which does to some extent channel local savings directly into local investment. I just wonder whether there is any chance, now that we
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are introducing a new form into the general banking system, of that being encouraged.
My second point is control in Scotland. As has been said, this movement grew up in Scotland and there seems to be now a very grave danger that it will be controlled from London. I know there are going to be four regions, and certainly Mr. Macdonald, the Chief General Manager in Scotland is a man of extreme enterprise who will do his best to maintain the Scottish identity of the Scottish Savings Bank. But looking at recent developments, all privatisation measures have really been of primary benefit to the City of London. It is the big City of London institutions which have carried them through and which have benefited chiefly from them, except of course for some employees who got special conditions. But even so, outside British Telecom, the number of shares available for employees was not very large.
I would ask the Government: is there any possibility that they may be able to take steps to ensure that Scottish control is possibly exercised over the operations in Scotland or at least that Scottish individuals and Scottish institutions have a fair crack of the whip when the next stage in the development of the savings banks takes place? I think it would be a tragedy from Scotland's point of view, and indeed from the banking point of view, if control were removed to London. I believe it would further encourage centralisation, which would be very bad for local investment. Therefore, while I welcome the opportunities which the savings banks now have, I believe that the really important point is what happens next and how the later development of the savings banks is done. With those reservations, I would certainly wish the Bill well.
Lord Jacques: My Lords, I apologise to the House for intervening in the gap but it will be for one minute. I want to put a question to the Minister which I hope he will be able to answer in his winding-up speech. The bank will keep whatever the shareholders pay for their shares. The bank will belong to the shareholders collectively. Therefore, whatever the shareholders pay for their shares, they will get the present bank as a gift. That is, I contend, fair and logical reasoning and I invite the Minister to fault it.
7.8 p.m.
Lord Taylor of Gryfe: My Lords, as we are near the end of this debate, I will be brief. I should like first to thank the noble Earl, Lord Gowrie, for his usual clarity in introducing this Bill. He has been somewhat less controversial than in some of his more recent contributions to debates in this House, although he has upset the noble Lord, Lord Houghton of Sowerby.
We have benefited this evening from the experience, knowledge and enthusiasm of several noble Lords who have had, and still have, an association with the Trustee Savings Bank. Inevitably the debate has centred round the question of mutuality or PLC status, and I will return to that in a moment. Perhaps I may just say to the noble Earl, Lord Iddesleigh, that while I was impressed by his statement that he and his colleagues had given a great deal of thought to the question of mutuality or PLC status, I should like to quote a witness on the other side. Mr. Bryant, who until recently was Chief General Manager of the TSB,

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has appeared on television recently, regretting that the route of mutuality has not been taken. I would suggest that his experience in this field ought to be considered in arriving at our conclusions. I am not doctrinaire in these matters, but I believe that we have an opportunity in this Bill for doing something interesting and unusual.
I am a great believer in the mixed economy. I believe it is wrong to have a totally dominating state economy and it is equally wrong for any society to deny opportunities of experimenting in economic forms. We have a chance here in this Bill of recognising the existing powerful clearing banks with their rightful place in our economy. We also have the Giro bank, a state bank, a post office bank, and now we have the opportunity in this Bill to have a different kind of bank, a bank owned by the depositors, and this could be a real third force. This would bring an interesting variety in our banking experience and might be well worth while.
As has been stated in the debate, the Scottish connection is well established and the noble and learned Lord, Lord Wilson of Langside, has mentioned the question of pilgrimages to the home of the founder in Dumfries. I visited a very large mutual insurance society in the United States recently, Nationwide Insurance, and they have built themselves a magnificent new head office in Nationwide Plaza in Ohio. But next to the board room in that office they have rebuilt the farmhouse, or at least one of the rooms of the farmhouse, of the original and distinguished founder of that great organisation—a man called Mr. Murray Lincoln. It is a permanent reminder to the directors of that great insurance company that their origins were well established by a simple farmer of the Middle West and that they have some responsibility for maintaining the traditions and standards which were set by their founder.
In discussing this Bill we have to be mindful that we, too, are custodians of a tradition and that the people who at the beginning of the 19th century set up these banking institutions for the small depositor, to encourage thrift, made an important contribution to our society and to our social life. They collected the pennies, as was said before, while the major banks were concerned about the pounds. They arrived at a period in our history, like the co-operative societies and the friendly societies, and all of them in turn made an important contribution to our social life and to our communities. We should not readily discard that tradition in favour of creating just another clearing bank, because that is all we are doing. All we are doing is transforming this institution, with all its rich historical traditions and its importance for our communities, and creating just another bank on the high street or in the villages. So we should just think twice. It is like a Bill being introduced into this House to convert the co-operative societies of this country into Tesco's. It might have its attractions in some ways, but it would not be socially defensible.
Those of us who are concerned about the future structure of the TSB accept the need for change and for legislation. As has been evidenced in the discussions in the House this evening, there is confusion over ownership and that has to be clarified in legislation. I
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think everyone welcomes the removal of the TSBs from the supervision of the Treasury—in fact, they had become a branch of the Treasury in many ways—to the supervision of the Bank of England which is their rightful place, and I think we all accept the need for a national structure and even national direction of policy in many areas of the TSBs.
The development of chequeing services, the development of credit cards and the centralisation of investment policy are all essential to the good functioning of the TSBs and, inevitably, structural changes have to be taken care of. But at the same time most of us are concerned about the deep roots of the TSBs in the regions, and particularly in the Scottish region. If you look at the structure as outlined in the Bill, it provides that the shareholders will elect their board like any other PLC, but the board will, in turn, elect the regional directors—not the shareholders in Scotland electing their board, but the members of the Scottish board being appointed by the central board, which means that they are rather far removed from democratic control and election by the shareholders.
I am interested, too, and I am sure that the noble Earl, Lord Gowrie, is also interested, in some commitment that is made in the White Paper and in the Bill to contribution to foundations. Perhaps the noble Earl will tell us a little about the scope of these contributions, because that is important to the communities in which they operate, and it may even help the noble Earl with some of the problems that he has with the Arts Council at the moment. So that is important.
Then the question of widespread share ownership is a matter which concerns us, and I am sure that this concern is shared by others in the House. Some figures were quoted during the debate in the other place and it was said that only about 40 per cent. of the depositors were in a position to take up shares. That would be unfortunate if it were true, and I suspect that, since many of the depositors are very small depositors, it may be true and the possibility of the widespread share ownership which is envisaged may not, in fact, be realised.
A great deal has been said about the prospects, the inventiveness and the imagination of the present management of the TSB. I certainly pay tribute to them for many of the changes that they have made in the last few years. But, once they emerge in a period when there is a banking revolution going on in the City, they will have to assume certain responsibilities which include a degree of high risk. There will be pressures on the TSB for profits for their shareholders, at the same time as there will be a demand for a continuation of the services which have been traditionally maintained by the TSBs.
The Financial Times, reviewing the anual report to the depositors last week, quoted:
"The harsher climate of retail banking has already begun to tell on the TSB, well before its flotation."
It went on:
"the traditional loyalty of TSB members will be tested to its limit unless the bank brings its rates more in line with building societies".
There will be pressure on the TSB to service the new shareholders at the time as there will be pressure from the depositors to pay competitive rates, and that may

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not be easy. I should just like to add that in an interesting article on the same subject of the future of the TSBs, which appeared in the New Stateman last week, it was pointed out that the TSBs exist in areas where a community service is necessary like Easterhouse near Glasgow, where there are no clearing banks, there is 35 per cent. unemployment and there are 42,000 people who need a banking service, but only the Giro bank and the TSB choose to operate in that terribly depressed area.
As I say, there will be pressure on the TSB to maintain that kind of service. But, as everyone who is in the clearing bank business knows, their profits are affected at the moment—for example, in the case of the Royal Bank of Scotland—by the proliferation of a whole lot of branches all over the country, which is very expensive. The TSB will have to face the responsibility of maintaining the local and regional distribution of branches, some of which are uneconomic, which is traditionally their position, at the same time as the new shareholders will insist on strict economic discipline and high profit earnings.
These are some of the matters at which we shall be looking in the future. We wish the TSB well: there is no doubt at all about that. We are sorry that the mutual principle is not being observed in this case, and we hope that all the promises contained in the Bill and made by speakers from the other side of the House will be fully justified by the results.
7.21 p.m.
The Earl of Gowrie: My Lords, I yield to no one in my appreciation of continuity, regional roots and the trust of communities which are served by institutions, but it is nonetheless forever fascinating to me that arguments against change and development are these days made far more by the opposite side of the House than by my highly conservative friends on the Back-Benches. At one point when the noble Lord, Lord Houghton of Sowerby, was speaking, I almost felt that he might be nostalgic for a system which delivered 1 per cent. or 2 per cent. in interest and delivered most of the money in the TSBs to the Government as an adjunct of National Savings.
I am glad that the noble Lord, Lord Stoddart of Swindon, felt that the Bill which I put before your Lordships was altogether uncontaminated by privatisation, as he would see it, and agreed that the Treasury was not going to do well out of it. The Treasury, like the country at large, has a great interest in a wider participation of people in our financial system. I believe that it is one of the most successful aspects of the Government's policy that wider share ownership has been promoted. I know that this is a principle dear to the Alliance Benches, though they seem to be greeting it with modified rapture this evening. I believe that this Bill will create a greater dispersal of share ownership than hitherto.
Many of the points made to me were of the kind which are liable to come up at Committee stage. Your Lordships gave me a good run in my opening speech, and I do not want to be too long now. The general philosophy of the Bill and, indeed, many of the criticisms put to me by noble Lords opposite, could not really be better answered than in the words of the
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noble Earl, Lord Iddesleigh, speaking from the Cross-Benches. He said that it was time for the TSBs to be released from Her Majesty's Treasury regulations and made subject to the Banking Act 1979. He said—and I hope I quote him correctly—that they are already recognised as a banking group; they enjoy a wide reputation and high standards; and they should be able to offer a wider range of services—not least, may I say to the noble Lord, Lord Houghton, in the interests of their depositors.
The mutualisation argument has been discussed extensively, and I dealt with it in my opening remarks. Perhaps I may say to the noble Lord, Lord Stoddart, if I may take a more minor or technical adjunct to the argument, that it seems to me wrong to confuse wider ownership—the ownership of shares—with mutual ownership. The noble Lord asked me what pressure customers and staff have exerted in favour of the Companies Act. The proposals have been widely known since August 1982, and very few comments have been made. The TSBs have kept staff fully in the picture, but that, of course, is their business. I agree with my noble friend Lord Bruce-Gardyne, who has taken a leading role in the build-up to the present Bill, that staff will use their preferential position, as indeed will many depositors, to acquire shares. But, of course, I cannot force them to do so, and nor should I be able to do so.
The noble Lord, Lord Stoddart, asked me what "no one" meant in relation to no one being able to own more than 5 per cent., or later 15 per cent., of the shares. That simply means any legal person. He asked me what was to stop groups of individuals or companies buying blocks of shares under their entitlement. Again, I think he was answered very well later on by my noble friend Lord Bruce-Gardyne, who suggested that the monopolies and mergers legislation would apply should this highly unlikely scenario of takeover take place.
As to the question of the sale of shares abroad, of course there is no stipulation in the Bill on the subject, but the TSBs are unlikely to offer shares abroad; and, in any case, the anti-takeover and monopoly and merger provisions to which I have referred apply equally to foreign as to domestic purchasers of shares. I do not believe it possible or indeed appropriate to control the residential status of purchasers of shares, which will in any case change from time to time.
A number of noble Lords were worried about loss of regional status of individual banks and about the loss of local identity. I shall come back to that briefly when I deal with some of the points that were made about Scotland by the noble Lords, Lord Grimond and Lord Taylor of Gryfe. But, generally, banking policy will be carried out by the individual banking subsidiaries in Scotland, England and Wales, Northern Ireland and the Channel Islands, not by the holding company. The holding company is not itself a bank.
The noble Lord, Lord Stoddart, asked me how many depositors will buy shares. I have to some degree dealt with this. I cannot possibly know. I hope that a great many will. The precedent of privatisation in another context and its popularity has indicated that the take-up will be good. The noble Lord, Lord Houghton, based his argument on the view that depositors were the owners of the trustee savings

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banks. My advice is that that is simply not the case. In my judgment it is also wrong of the noble Lord to say that the basis of the trustee savings bank tradition was working class self-help. The trustees of the original banks were employers, though admittedly of a benevolent kind.
We are dealing here with a great tradition of nineteenth century paternalism, but one which is not appropriate in this particular day and age—and it seems to me to be a little patronising to suggest that it might be. Of course, I profoundly agree with the noble Lord, Lord Houghton of Sowerby, that inflation hits the poorer or smaller groups of savers worst. That is why we are determined to get inflation down, and we have achieved some considerable success in that area. That is also why it seems to me right that a wide and diverse range of banking services should be offered by the TSBs in order to protect and augment the savings of depositors.
It would be inequitable if we were to distribute the proceeds of sales among individuals who happen to hold trustee savings bank accounts at a particular recent date, because the group's resources have been accumulated over generations. That is pertinent to the questions concerning ownership raised by the noble Lord, Lord Houghton. He also asked me why the Government were promoting a Private Bill. I do not deny that the Bill is an unusual one. Indeed, the first sentence of my opening speech said just that. But large parts of the Bill are clearly public policy, and all earlier TSB Bills have been public policy. Only Parliament can reform TSBs, and, given the Government's special relationship and Treasury controls over TSBs, it is natural and right that the Government should bring forward this particular Bill.
I share with the noble Lord, Lord Grimond, a distaste for acronyms. I tend to ask my officials to spell things out in my briefs whenever they can. But there is no doubt that acronyms have gone very deep in our society, and they are difficult to eradicate. I suppose that if I were a benevolent controller of the language up and down the land, with a Gowers remit, I might do something about "TSBs"; but surely in our present system they must determine their own name. They have decided to keep the name Trustee Savings Banks Limited for reasons of continuity, and I cannot find very profound reasons why they should not do so.
The noble Lord, Lord Grimond, asked me a particular question about the Airdrie Savings Bank. It will, assuming it receives authorisation from the Bank of England, continue as at present. If it wants to amalgamate with another bank, it will be able to do so as other "1819" savings banks have done; for instance, the Annan Savings Bank, which merged with the Royal Bank of Scotland on 31st January this year. Airdrie will choose its own future; and should it ever wish to merge with TSB Scotland, it may of course do so.
As to the points made by the noble Lords, Lord Grimond and Lord Taylor of Gryfe, concerning local involvement and Scottish control, TSB Scotland will be a major and powerful financial institution well able to preserve its identity—and it will continue to make a powerful local impact. My honourable friend the Economic Secretary to the Treasury noted in another
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place that he had visited TSB Scotland in Edinburgh and saw no grounds whatsoever for fears that Scottish influence would wane.
I am very grateful to my noble friends Lord Ferrers and Lord Bruce-Gardyne for the very warm welcome they have given to this Bill. I am also profoundly grateful to the noble Earl, Lord Iddesleigh, with all his experience, for what he said. I look forward to a lively and interesting Committee stage on the Bill, and am glad that the House in general has given the Bill a fair passage.
I should just say, to the conundrum posed by the noble Lord, Lord Jacques, as to how the trustee savings banks could offer shares in such a way as to avoid a bonanza, that the proceeds of the issue will supplement the existing considerable assets of the TSB. The pricing of the issue will therefore take account of the fact that bank shares stand at a substantial discount to their net assets.
Lord Jacques: My Lords, if the noble Earl will give way, I may say that, no matter what the shareholders pay, they will get the present bank as a gift. One can make the price whatever one likes because they will part with their money individually but will retain collective ownership of that money.
The Earl of Gowrie: My Lords, I am tempted to suggest that the noble Lord, on behalf of shareholders and depositors, should not look a gift bank in the mouth. Nevertheless, perhaps we may argue that point further at Committee stage. I feel that the noble Lord is not taking sufficient account of the accumulated previous assets that have been mentioned.
I now see that I have a note relating to a point made to me earlier by the noble Lord, Lord Taylor of Gryfe, as to whether local shareholders should elect the local board. They can effectively run their company in that way if they wish, and the Bill leaves that to them as its own business. In the same way, they will have their own charitable activities—and (dare I say it?) their own deep desire to sponsor the arts in Britain, including in Scotland. My Lords, once again I beg to move that the Bill be now read a second time.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Local Government (Choice of Electoral Systems) Bill [H.L.]
7.36 p.m.
Lord Blake: My Lords, I beg to move that this Bill be now read a second time.
It is customary for a mover of a Bill to speak at some length, but I hope to be briefer than most on this occasion. We are, I am afraid, talking rather late into the evening—and noble Lords will appreciate that that is not my fault.
The Bill before your Lordships is the same (except for some drafting points) as that which was introduced by the noble Lord, Lord Harris of Greenwich, just over two years ago. It was narrowly defeated by what I may fairly describe as a wrecking amendment, by 68 votes to 60. I and some of my noble friends, and other noble Lords, believe it is time to test the opinion of your Lordships' House again.

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The object of the Bill is to permit district councils in England and Wales to opt for the single transferable vote as their mode of election. Clause 1 provides for this option and defines the single transferable vote. Clause 2 provides for the new electoral system to be introduced by resolution in any district council, and lays down the way in which the new electoral divisions will be drawn. Clause 3 gives the Secretary of State the necessary powers to make regulations; and Clause 4—the interpretive clause—interprets the expression "district council" to include London borough councils also.
The object of this Bill is a very small move towards greater democracy in local government. Democracy does not simply mean rule by the majority. That could be a sort of populist tyranny, and in some places it is. As I understand it—and I am sure your Lordships agree—democracy means certainly rule by the majority but also rule by the majority with due regard and due respect for the interests and opinions of minorities. But under the present first-past-the-post system (I will not call it FPP, in deference to the noble Lord, Lord Grimond) it is quite possible for a minority—indeed, quite a large one—to win no seats at all; as has happened, for example, with the Labour Party in Bournemouth and the Conservative Party in Islington. If so, no one on the council would be in a position to query or argue anything that it decides to do. There can be total party monopoly based on a tiny majority of the votes cast. That cannot be squared with any rational interpretation of democracy. It can happen, it has happened and will happen again if the rules remain as they are.
There are other oddities which can occur under the current system. How can it be called democracy when, as happened recently in a local authority, one Part—the Conservatives in this case—with 42 per cent. of the vote won 30 seats and the other party, Labour, with 36 per cent. of the vote won 33 seats? This actually occurred in Brent in 1982. There are other examples. It is true of course that since 1918 a similar situation has occurred three times at Westminster level. In 1929 and 1974 the Labour Party, with fewer votes, gained more seats than the Conservatives. In 1951 the converse happened. This brings me to an important point. I am a supporter of proportional representation for Parliament. It would be quite disingenuous of me to deny that. Some of your Lordships may have read the report of the Hansard Society Commission on Electoral Reform, of which I had the honour to be chairman, which was published in 1976. It came out in favour of a variety of proportional representation; not the one we are discussing today. Two of my noble friends, my noble friends Lord O'Neill of the Maine and Lord Holderness, were members.
The fact remains, however, that the arguments for proportional representation in local government are not the same as those for elections to another place. The local government case is in many respects a good deal stronger. There is nothing inconsistent or self-contradictory in any noble Lord voting for a Second Reading of this Bill but nevertheless feeling doubts or misgivings about proportional representation on a national level. There are two important differences. The first is that in local elections one is not voting for
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a Government or a Cabinet. The argument about strong versus weak government does not arise, or should not. Local authority councils are run by committees serviced by executives. They are intended to reflect the party composition of the electorate. Perhaps I should not say that. Perhaps I should not say that they are "intended" because it is impossible in the chaotic and confused history of local government legislation over the past century to say what, when and by whom anything was intended. What I mean is that the system makes sense only if the committees reflect different voices and different opinions from the community. A one-party council elected on little over half the votes cast is an absurdity.
The second difference between proportional representation for local as against national government is a matter of numbers. Numbers have to be considered in absolute terms, not percentage terms. The greatest parliamentary landslide in history was the defeat of the Labour Party in 1931. It won 30 per cent. of the votes cast, but it only had just over 50 seats out of 600—less than 10 per cent. That, of course, was very unfair. The party ought to have had about 180 seats. Nevertheless, the Opposition managed to do its duty which, as we all know, is to oppose, to scrutinise, argue, inquire and generally make trouble for the Government. The Labour Party had enough voices to do this and it is generally said and agreed that it did very well in spite of being in such a small minority. However, it is one thing for 50 out of 600 to do that in an assembly which sits for most of the week, apart from the customary periods of recess, and it is a very different matter for five people out of 60 to do the same kind of thing in a local government council. There is a certain numerical limit below which effective opposition is virtually impossible. Therefore, I do not think we need be influenced too much by the Westminster argument. It is valid but it is different.
I hope too that we can avoid the "thin end of the wedge" argument which I fear has some effect on some of my noble friends and no doubt on noble Lords in other quarters of the House. I hope that we can concentrate our minds on local government; on a system of election for Westminster there can be very divergent views even among those who favour proportional representation for local government. I am sure that the case for the latter is more powerful —indeed, it is very powerful—and although I favour it for national Government, too, I do not think that the two need go together. I quote an example. In Northern Ireland there is proportional representation—the single transferable vote—for the Assembly, for local government and for the European Parliament; but the first-past-the-post system for electing members to Westminster still prevails. Northern Ireland demonstrates that two of the possible objections to the Bill do not hold up to scrutiny. One objection which some people may raise—and I believe did raise when this was debated two years ago—is that it would be confusing and too complicated to have different systems of election for different bodies in the same country. That does not seem to be the case in Northern Ireland.
No one appears to have any difficulty in operating the single transferable vote and the first-past-the-post system at the same time. The other objection—the

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"thin end of the wedge" argument—that proportional representation in local government will somehow pave the way for the same thing in national Government, is also invalid. That of course is an objection which will only apply to those who are against proportional representation for Westminster, although they may have an open mind on local government. Noble Lords who take that view can take at least some measure of reassurance from Northern Ireland. Proportional representation in local government and the regional assembly has not led to any attack upon the Westminster system for the parliamentary constituencies. Experience of Northern Ireland has shown that the two systems can co-exist.
I briefly deal with some possible objections to the Bill. It was said of the Bill of the noble Lord, Lord Harris, that there was no point in having a permissive measure because the local authorities, where the worst abuses occurred, would be precisely those least likely to adopt it provisions. I very carefully considered the question of whether this Bill should be a mandatory Bill because I can see the strength of that argument; although it is hardly one that opponents of proportional representation in principle could logically use. I decided on a permissive measure because I believe that local authorities should, so far as possible, be responsible for local affairs and the way that local affairs are run. At the moment it is being argued by some of my noble friends, and certainly by noble Lords in other parties and on the Cross-Benches, that central Government is encroaching too much on local government; that Whitehall is overshadowing the town hall.
I do not want to go into the merits of such measures as rate capping. These may, in the peculiar circumstances of our times just now, be necessary. I certainly do not want to add to the encroachment, if that is the word, of central Government on local government. This is essentially a Bill to permit experiment. If, as I believe it will, proportional representation proves to be a success when it is tried by local authorities then the system will catch on of its own accord. There will be increasing pressure within district councils and borough councils to adopt something which gives a fair deal to minorities. People will stand for that particular cause in particular places. I think that it is better to act, in this instance at any rate, by example and persuasion rather than by fiat or command; and I believe that public opinion will in the end bring about the needed change if it is made possible through this Bill.
It might be asked, why confine the Bill to district councils? Why not extend it to county councils? Well, I considered that, and there would be quite a lot to be said for doing it, but my answer would be that it is better, perhaps, to try this experiment with authorities where the size of the newly created districts would not be too large, and also, more importantly, with authorities where there is already a tradition of voting for more than one candidate. If it is a success, I hope that in the course of time it will be extended to all types of local authority.
There were two years ago a number of objections raised which, in my view, do not have very much substance. My noble friend Lord Elton said that
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proportional representation might lead to the "exaltation" of minority groups. I think he cannot really have meant that. That cannot be correct, at any rate, except in the sense that minorities would do better than they now do by being fairly represented instead of unfairly represented. But they would not be exalted or exaggerated in any way. They would be getting their fair share of seats which they hitherto had not had; and that of course is the whole point of the Bill.
My noble friend Lord Beloff feared that extremists might get in. Well, extremists seem to have quite a lot of success in getting in under the present system, and so I am by no means sure that that is a very powerful argument. If in fact a section of the electorate is extreme, is it altogether reasonable to deny them representation?
I would just make this point. Under a system of the single transferable vote there is quite a substantial threshold effect—a percentage above which you are not going to have a chance of getting in at all; and the percentage is well above the levels which have ever been achieved by the National Front, Trotskyists or Communists.
On one matter which was criticised in the debate two years ago I have rather more sympathy, and that is the question of whether, if this Bill achieves a Second Reading, it should be referred to a Select Committee. I can see the case for this, but on balance I believe that it would be better to let the Bill take its ordinary course. A Select Committee is more suitable when there are important factual matters to determine. I think that the facts about this are pretty well known. I think that this is in the end a matter for political judgment, and I am not clear that a Select Committee would really be of any great help in this particular case.
This is a modest, permissive measure. I believe that it would make elections more fair. I am sure that it would raise voter participation. It has done so wherever it has been tried, for the simple reason that the voter does not feel that his vote is wasted and a whole lot more voters are in a position to make their vote effective. There is considerable support, I think, for this experiment among at any rate some of my noble friends, among noble Lords on the Cross-Benches and the Bench of Bishops and among supporters of the Alliance. I very much hope that your Lordships will support the Second Reading. My Lords, I beg to move.
Moved, That the Bill be now read a second time.—(Lord Blake.)
7.53 p.m.
Lord Evans of Claughton: My Lords, it gives me very great pleasure to follow the noble Lord, Lord Blake, in supporting the Second Reading of his Bill. I suppose that it will not come entirely as a surprise to your Lordships to find someone who sits on these Benches supporting the concept of proportional representation. In one of the debates some years ago when I raised the subject myself I think that I was accused of having a neurotic obsession with the subject. Of course if one has suffered under the present system as some of us have in the past, it is hardly surprising that we have an obsession about the subject.

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But I do not wish to pursue that particular aspect. I do not regard proportional representation as a panacea for every ill; it is not. It is an amelioration of some of the conditions of our democratic system.
During the debate when I raised this subject some considerable number of years ago both the noble Lord, Lord Boyd-Carpenter and the Minister, the noble Lord, Lord Elton, described my proposal for proportional representation in local government as some fancy form of franchise, which had the benefit of alliteration and nothing else. It had that wonderful thing that the British are so good at—implying in some way that we British are superior with our old-fashioned, first-past-the-post system and it is only inferior foreigners who tinker with other systems of fancy forms of franchise.
In fact, it is our present form of first past the post in this country that is the fancy form of franchise now. The widely accepted form of franchise in nearly every European democracy—in nearly every country where there is not a simple two-party system, as there is in the United States and one or two other countries—is to have a form in one way or another of proportional representation. I am sure that those of your Lordships who have been to the European Parliament and met European politicians have been impressed by their total amazement at the way in which we persist in this outdated system of election.
As the noble Lord, Lord Blake, said—and it was a very effective point, I think—this has been introduced in Northern Ireland for the Assembly and for the European elections and of course it has been in operation in the Republic of Ireland for some considerable time. So in fact we are surrounded by countries that go in for fancy forms of franchise. They do not seem to me to be any the worse for it. Very often they seem to be very much better governed in the respect of the voice of the people being properly heard than is the case in this country.
People suggest to me—and coming from Merseyside, as I do, it is often suggested to me—that it is too complicated for the ordinary man in the street to have to vote 1, 2, 3, 4, 5, rather than "X". Quite frankly, anyone who can do the pools successfully, which are very frequently done in many parts of the country, can surely cope with a system where one uses a 1, 2, 3, rather than an "X" form of filling in one's ballot paper.
I concede that the counting of the votes is longer and more complex. In fact, I would go so far as to confess that I have never worked out how it could be done. But that is a matter for the people who are employed to do it and who do it very effectively, as we have seen. I do not know whether any of your Lordships watched the last election in the Republic of Ireland, but it was done very effectively, efficiently and quickly. There was no problem at all in that sense. I think that we should get some of these ideas out of our minds about this complex, fancy form of franchise. It is not. It is a straightforward, perfectly acceptable form of franchise for the British Isles. We supported that system in your Lordships' House, you may remember, in the abortive legislation for the Scottish and Welsh Parliaments.
It will be argued, I expect, during the debate that the circumstances in Northern Ireland are special and unusual and that is why there is proportional
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representation there. May I suggest that these days the circumstances in the rest of the United Kingdom are unusual in that sense? In my youth there was a two-party system in this country. I think that approximately 98 per cent. of the people who bothered to vote voted Conservative or Labour and we Liberals and others for whom the remaining 2 per cent. voted got a pretty harsh time of it.
But the circumstances are totally different at the moment. Anyone who cares to look at opinion polls—and if someone does not like opinion polls, he can look at election results at both local and national level—has to concede that there is a very strong third force in this country indeed. Therefore the circumstances are very different now from what they were in the 1940s and 1950s. I think therefore that, since the circumstances have changed, and changed permanently, in my submission, we should be giving serious consideration to, and carrying out changes in, legislation about how people should vote. That is the first point—that in this country the two-party system is over.
The second point is that we are in a period of unprecedented confrontation between central Government and local government. If your Lordships care to look at Clauses 86 and 93 of the proposed Local Government Bill, which your Lordships will shortly be considering here, you will see that the centralisation involved in the reserve powers that Ministers are proposing to take to themselves will make that position even more absurd and even more difficult and that there will be even more causes of conflict.
It seems to me, and I believe that it seems to the electorate at large, that it is an absurd situation that, because of the electoral system, this country should have inflicted upon it an absurdly inflated majority at Westminster (at present with the Conservative Party) in conflict with a series of absurdly inflated majorities for the Labour Party in many of the local authorities. That is a natural ground and basis for serious and unending conflict. I know that this will be denied, and frequently it is, but it is very firmly my belief that a very great deal of this legislation which is at present going through Parliament, emasculating local government, is brought about entirely because of the conflict that exists, and has been going on for some time, between the Prime Minister, Mr. Livingstone and other local government leaders.
In the last discussion we had on the previous Bill, it was interesting that my noble friend Lord Harris of Greenwich pointed out that he was a member of, I think he said, Harlow Council, where there was no opposition; there was just the Labour Party. The noble Lord, Lord Blake, has rightly drawn attention to the evils that can come out of that kind of situation. In the past, I have been a councillor for nearly a quarter of a century. I was on an authority where there was a tiny Conservative minority and an even tinier Liberal minority. Because local government operates through committees, it is impossible to organise a constructive opposition in local government if you are unrepresented on perhaps three-quarters of the committees which make decisions in local authorities. The council meeting itself is largely a farce for reasons that are quite obvious: because of the strong whipping of the majority party and because the members of the

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minority parties have not the sources of information to know why decisions have been come to if they are not members of the committees which make those decisions.
I can hardly let a speech that I make in your Lordships' House pass without mentioning the problems of the city of Liverpool. I feel I have to mention them. There is there now a first-past-the-post Labour majority, which is excluding the opposition parties, whether they be Liberal or Conservative, from almost every say in any decision that is made about the government of that city, much to its disadvantage. This goes on time and time again.
In the debate we had some years ago, I thought it was very significant that the noble Duke, the Duke of Portland, pointed out that if we had had a PR system in the GLC election last time round, we should not be having the problems that many of your Lordships have in contemplating the activities of Mr. Livingstone and his friends because there would not have been, and should not be under a fair system, a Labour majority on the Greater London Council.
It seems to me that the present Government have been busily and effectively, if I may say so, reforming our outdated 19th century trade union laws and many of our other laws which may have been right and proper for the conditions that existed in this country in the 19th century. Why do they not now see that we need to turn our attentions to our 19th century first-past-the-post system of elections? Such a system might have been perfectly appropriate in a Whig-Tory confrontation in constituencies with small numbers of people. Why do the Government not realise that one of the things which is holding back development in this country is our persistent obsession with the first-past-the-post system?
As the noble Lord, Lord Blake, has rightly said, local government is perhaps one of the ideal ways of doing this. I think PR would be very good in Westminster elections; I think it would be excellent in European elections, but I think its suitability for local government elections is absolutely unrivalled, for the reason which the noble Lord has given.
I conclude my remarks by saying that I am not supporting Lord Blake's Bill because I think the present system is unfair to minority parties. It patently is, but that is not my reason for supporting it. My reason for supporting it is that I believe that the present system is unfair to the people of this country and unfair to any basic principle of modern democracy.
People are always criticising the fact that, depending on where they happen to live, only 15, 30 or 40 per cent. of the electorate bother to vote in local elections. I think it is remarkable that even that number bother to vote, because it is such an appalling lottery and perhaps the majority of people who go out to vote will never be represented by the person they wanted as their local councillor.
The present system distorts the wishes of the electorate in very many local authority areas in this country. To me it is a great sadness that also, in my belief, the present system makes the party whip system far too strong. I believe very strongly that if we had a
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PR system it would encourage more people of independent mind to come in. It would give greater opportunities to people from ethnic minorities. I am told, and I believe this to be the case, that it would encourage a greater number of women to stand as candidates and to be elected and that you would have more representative local government with less obsession with the power of the whip and more concern for the wishes of the people.
As your Lordships know, this experiment was tried in Sligo, in Ireland, before it became a republic. It was such a success there that it spread throughout the rest of the country. I support the Bill very warmly because I believe that once an experiment has been permitted to take place in this country in one of our district councils, that concept will then spread like wildfire and we shall have local government more representative and certainly more democratic. I very strongly support the Bill.
8.8 p.m.
The Lord Bishop of Derby: My Lords, all of us in this House are criticised from time to time for being remote from the ordinary world. One value of the televising of our proceedings has been the unforced provision of the information that among us there is considerable practical experience and marked professionalism. We bishops have many direct contacts with people of all ranks in the communities of our dioceses. We learn much indirectly through the experience of our parochial clergymen. Like all of your Lordships, we have the right to vote in local government elections and we are well aware of the effects on us and our people of the policies of district councils. We have a right to speak in this particular matter because of our knowledge as well as because of our membership of this House.
Spiritual peers are also members ex officio of the General Synod of the Church of England, which, however limited in some ways, is a fair cross-section of ordinary people in this country, both laymen and laywomen, as well as clergymen. On two occasions, the first in 1976 and the second in 1983, the General Synod has carried, with large majorities, the motion:
"That this Synod believes the time has come for a change in the present parliamentary voting system and urges all political parties to adopt a preferential system of proportional representation as a policy commitment for future public elections".
That motion was passed in 1983 by 251 votes to 61. This is not a situation in which the bishops or the Church or the General Synod can be accused of being trendy "Lefties" or trendy Conservatives, since both the larger political parties are opposed to proportional representation. Rather, the Church is helping to set the trend. It has used a single transferable vote system in Convocation and General Synod elections for over 60 years, which is no small period of time. We have had wide experience of it. We see every reason, in the light of this experience, not to change it.
So much has it been valued that during the time of the General Synod's existence the system of elections to our committees has been changed, with general agreement, to the system of the single transferable vote. The voluntary use of it is the arrangement for diocesan and deanery elections. This is the principle of choice in local elections expressed in this Bill. We

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support the system in the light of experience. As an archdeacon I presided over elections by proportional representation, and my experience in that way adds to my conviction about its fairness.
It is fairness in local government that this Bill seeks to provide. As an illustration of unfairness, let me refer to figures given by a responsible layman in the General Synod debate in November 1983. He lives in the borough of Islington. He said:
"In the 1978 election in our borough, 65 per cent. of the votes were cast for Labour, and they gained 100 per cent. of the seats on the council. In 1982, their share of the votes fell from 65 per cent. to 51 per cent. and they gained 98 per cent. of the seats on the council".
A situation like that is not an expression of democracy: it is government by an elected dictatorship. The Synod speaker went on to say:
"People feel alienated and disillusioned with the system and they cease to bother to vote".
That state of affairs is widespread. It does not exist merely in Islington. My wife and I know that in our area there is no point in our voting because our votes will never count. Hers might do so in a parliamentary election, but never in a local government one. If people live in an area where there can be swings between one of the larger parties and the other there are alternate dictatorships with abrupt changes of policy, and still many people are disfranchised. That fact exposes the canker in our present system, which is the introduction into local politics of the national party system. Local affairs, local needs, local opportunities are made subject to ideologies. It is now impossible in most places for any genuinely independent candidate to be elected. All representatives vote as they are told to vote.
This, of course, strengthens the attitude of confrontation rather than consensus. It is the latter that is required if the needs of whole communities are to be met. At the present time, they are made subject to the desires of those who wish to retain or gain power for their own nostrums. This is one clear view from the grass roots. It is not a matter that we must consider in theory: we must relate it to the circumstances in which we live. I welcome the initiative of the noble Lord, Lord Blake, in introducing the Bill. It is a worthwhile step towards the recovery of-democracy in local affairs.
8.13 p.m.
Lord Houghton of Sowerby: My Lords, if the television cameras were in the Chamber at the present time, your Lordships' House would offer a strange appearance to the viewers, with the Alliance Benches packed, the Labour Benches empty and a fairly representative attendance of noble Lords on other sides of the House. I make no claim therefore to be speaking on behalf of any of my noble friends. My noble friend Lord Mishcon will have the unenviable task of replying on behalf of his noble friends who are not here.
I shall not detain the House for more than a minute or two. The list of noble Lords wishing to take part in the debate is so impressive and my views on this subject should be so well known that I need not detain the House to listen to them again. I shall, however, say this. Since the last occasion upon which we discussed
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a Bill of this kind, ballots have become the "in" word in our democratic system—ballots for this, ballots for that. Indeed, we have had legislation since then to make ballots for the election of trade union officers and executive committees obligatory. We have had a law to make a re-run of ballots on the inclusion in trade union rules of political objects compulsory every 10 years. There has never been more talk of ballots. The strike that ends tomorrow has been largely concentrated on the failure of a trade union to hold a ballot in accordance with its rules. Therefore, if the ballot is to become such a common instrument of the expression of democratic opinion, I think that we should study much more closely what kind of ballots we are to have.
Mostly the institutions that must now hold ballots by law are left to decide for themselves what method of election they choose. It is about time that we began an experiment in an alternative form of election and that we did so where it is probably more suitable than anywhere else. We can give an option for local authorities, whereas we cannot give an option for parliamentary constituencies. At least, I think that it would be difficult to give options to parliamentary constituencies in the same way that one can give options to local authorities. A pilot scheme is not really valuable because it will be a mock scheme. So we want a pilot scheme that is part of the reality of elections to the body chosen for the experiment. It would be very interesting indeed to see what happened in those local authorities where the alternative system was chosen. We should learn a great deal from it. I am sure that a number of local authorities would choose to have it. This is perhaps the least venturesome, certainly the least reckless, of all experiments. It is one that would probably give the best indication of how the public responded to it.
In passing, I dismiss completely the idea that electors these days are baffled by ballot papers. As was stated a few minutes ago, they are not baffled by football pools. Many are not baffled by income tax forms. In any case, it would be possible to revert to the practice that existed when universal suffrage was first introduced into parliamentary elections in a by-election at Pontefract in 1874. On that occasion there was a register for illiterates. An illiterate going into the polling station was able to take a friend with him to advise him on how to fill out his ballot paper. While that advice was being given and while the ballot paper was being filled in, everyone else, except the recording clerks was cleared out of the polling station. There were well over 100 illiterates in the Pontefract by-election in 1874. We could have an electoral counsellor, suitably in uniform, wearing a badge or otherwise identified, who would be available for any elector who found it difficult to fill up the ballot paper and needed a little help. One can laugh that objection out of court.
We therefore have to come to the main issue of how we are going to get a representative democracy. I believe that we are running into increasing danger for the stability of our parliamentary and local government democratic system if we continue the existing system of election. The real mischief in Britain today is that so many people are in power who have it without adequate representation behind them. The

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reason Governments become unpopular so soon after being elected is that they have not got the electoral strength behind them to begin with. This threat of extremes by Governments and local authorities that may come in by a swing of the pendulum, that can take them from a minority position to a majority position of considerable strength, presents dangers. It is better to have harmonious, if not adventurous, local government which is well supported by the electors than to have one which is extremely controversial and is running serious risk of exceeding its mandate. Therefore I sincerely hope that your Lordships will support this Bill.
I have before me the result of a by-election held the other day in my former constituency. There were three candidates. They had seven recounts to find out who had won a local government by-election. The Liberal candidate came first, with 1,198 votes; the Labour candidate came second, with 1,193 votes; and the Conservative candidate came third, with 594 votes: seven recounts to find who should be elected by five votes under the existing system, with more votes against the successful candidate than for him! A single transferable vote would have settled that by-election in a matter of minutes after the first count and would have given the holder of the office of councillor greater assurance of his merits and his legitimate right to be there. So let us this time give this Bill a Second Reading.
8.21 p.m.
Lord Fraser of Kilmorack: My Lords, I should like to thank my noble friend Lord Blake for the brevity, clarity and care with which he introduced this Bill. The Bill, as he indicated, is a re-run, with a few drafting amendments and one or two changes of intention of a minor sort, of the Bill introduced some two years ago by the noble Lord, Lord Harris of Greenwich, and which was debated in this House on 18th February 1983. Some noble Lords may consider that the re-run is perhaps a bit premature. I think so, in one respect to which I shall refer later. But I do not think that is really very important, and it is not a real objection to having the re-run. After all, we live in a rapidly changing world, and in such circumstances a change of mind, if people wish to make it, can sometimes be as necessary and as salutary as a change of linen. Therefore I have no objection to the Bill in its present form coming here again.
However, I should point out straight away that, as most noble Lords who know me and who attended that debate before will know already, in regard to the electoral system at Westminster I remain an ardent supporter of the present first-past-the-post system. I shall not go into the arguments on that tonight, because the hour is late and the arguments are well known and are not immediately relevant to the Bill we are discussing. On this, I differ from my noble friend Lord Blake, but the Conservative Party is a broad church and both of us have managed to sustain our position in it over the past 20 years during which we have known each other.
In looking at this Bill—the revised Bill—the problem before us is whether it is as relevant, less relevant, or more relevant than it was when we discussed it two years ago; certainly that is my view,
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from the way I am looking at it. As I hope I made clear two years ago in my contribution to the debate on the Bill of the noble Lord, Lord Harris of Greenwich, while I am a stern supporter of the present first-past-the-post system at Westminster and would be prepared to argue about that for a long period, I have no fundamental objection in principle to some form of preferential or proportional voting being applied to non-sovereign assemblies such as, for example, the European Parliament, or, for that matter, local government here in Britain.
Indeed, in the light of developments in local government over the two years since we discussed Lord Harris's Bill, I can now see some advantage in having different electoral systems in this country for Westminster and for local government. The introduction of a suitable proportional system in local government—I keep open the sort of system—at an appropriate time—and that is another question that I keep open—on a mandatory but not an enabling basis might indeed help to mitigate some of the abuses in certain councils to which the noble Lord, Lord Harris, dramatically drew attention two years ago. Moreover, a clear attempt to make the electoral systems at Westminster and in local government purposely different would get over the thin-end-of-the-wedge argument which has been used in the past, with some validity, in relation to Bills of the kind that your Lordships' House is discussing this evening.
The changes which have been made in the Bill seem to me on the whole an improvement. I have no objection to them, and in any case we can think about them if we come to a Committee stage. I am particularly glad that the idea of sending this Bill, if it gets a Second Reading (as I presume it will) to a Select Committee has been dropped. I shall not go into the reasons: there are plenty of reasons which have been canvassed before.
Finally, I should like to say that it seems to me that, as Napoleon said:
"Time is man's great art".
I am very doubtful that now is the right time to introduce this sort of legislation. In my view, the proponents of the Bill are not quite timely, if I may put it that way. I believe now, as I did two years ago, that a Bill of this sort is still premature and that this is no time to impose further experiments on local government. If ever there was a moment when local government in England and Wales should be left for a period of years at least to sort out its real and pressing problems of finance and administration, it seems to me to be now. In my view, it would be pointless and counter-productive in the long run to inflict further tangential and unnecessary electoral experiments upon local government at the present time. Therefore, although I have no disagreement in principle with this Bill and would not under any circumstances oppose the Second Reading—in any case it would not be customary—I have my doubts about the timing, and it may be that another re-run in due course would be a good idea.
8.27 p.m.
Lord Chelwood: My Lords, my noble friend Lord Fraser of Kilmorack has made a very interesting

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speech. He always speaks very well in this Chamber, and I feel very encouraged that someone of his undoubted intelligence and good judgment is not opposed in principle to this Bill—I rather gathered from his speech two years ago that he was, but I may have been wrong—and that his real grounds of opposition are that it is premature and perhaps will have a better chance if it is introduced in a few years' time. I find that encouraging.
I am a strong supporter of the Bill—that will come as no surprise to noble Lords—because I think that it would permit a system that would enable minority parties and minority views to be represented in a way that broadly reflected their electoral support. That in turn would lead to real and better debates in council chambers; and there is plenty of room for improvement. The arguments which have been mustered against the Bill this time and two years ago, and, indeed, in another place, where permission to introduce a broadly similar Bill was refused, are to me not very impressive. If I may, I shall briefly—I am going to speak briefly—paraphrase them; I hope I shall do it fairly.
We are told that it would let in the extremists and the "nuts". Well, why not? They would not be there for very long. If "flat earthers" or "Screaming Lord Sutchs" or "Trots" can muster enough support to get in under the STV system, I say "Good luck to them". I should prefer them to be letting off steam in the council chamber than sapping and undermining authority outside.
People are inclined to ask—though this is sometimes the unvoiced question—"What will my party gain from changing the system?" I think that in some ways that may be the real root of opposition to a measure like this—the real root of opposition to this sort of change. However, I think that it is quite the wrong question to ask. The right question is: Would this measure, or one like it, improve local government by making it more representative, more responsive and more responsible? In my opinion it would do all three, which one could call the "three Rs".
We are told—and this argument has been briefly dealt with and I shall be even briefer—that such a measure is too complicated and too hard for people to understand. I believe that that is rather insulting to the intelligence of the British electorate. I reckon that if the Maltese and the Irish can understand it, we ought to be able to as well. We are also told that it would be untidy because the system would not be uniform across the country. I believe that there is some truth in that; it would be a little untidy, but I have never thought that tidiness for its own sake has very much merit.
However, I accept the criticism that authorities dominated by one party are the least likely to change the system, even were they permitted to do so by this measure getting onto the statute book. I am the first to admit that the first time round they would do nothing about it at all. But what about the second time round or the third time round? Let us try to give the voters a chance to assert themselves, and I believe they would do so. Like my noble friend who moved the Second Reading in such a felicitous way, I believe that a measure such as this would prove to be a success where it was adopted and that it would catch on.
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Then we are told that it would be the thin end of the PR wedge. This is sometimes the argument of those whose minds seem shut to constitutional change of any kind. It is the argument of those who think that the present electoral system cannot be improved upon at all, which is a very negative argument. It is the argument of those who are fearful that in local government a PR system might be both popular and successful, which was one of the points so well made by my noble friend Lord Blake. I agree with everything that my noble friend said, and I certainly agree that, if this Bill were to become law, it would not be a precedent for national elections to another place or, for that matter, even for the European Parliament, where we are the only country without any element of PR at all. However, whether or not it is a precedent, what is wrong with a good precedent anyway?
Therefore, I think that this is a very good Bill. In my view, it would be very difficult indeed to devise a worse system for district council elections than the present one. If the Bill were passed, it would mean that for the first time in local government and district council elections a clear majority of votes cast would actually count. At the moment a majority of votes cast does not count. The present system, which I regard as a thoroughly bad one, means apathy. On average across the country only one in three of local electors bothers to vote. Often as few as only one in six or seven bothers to vote, and that is obviously very bad. The present system distorts the voters' wishes and this has been made very clear in all the speeches that have been made. All too often the present system means permanent and predictable domination of an authority by one party, against which any challenge is unlikely to succeed, and that is a very depressing thought for those who do not agree with that party's views. Indeed, all too often the present system means that the winner takes all and quite often that second past the post gets control of the authority concerned, and not first past the post. There are many examples of that in this land.
I promised to be brief and I have been reasonably brief. I regard this measure as a modest and sensible proposal. I regard it as an experiment, if you like to call it that, in constitutional reform. I look on it as a hesitant step forward in the constitutional field. I believe that under successive Governments too much power has been concentrated in Whitehall and local authorities have been required to dance to the Whitehall tune. How very refreshing that local electors should be able to choose the sytem by which they elect their own representatives.
I fear that this measure is hardly likely to become law this Session; in fact, I would not mind betting on it. But perhaps I may say politely and with affection for my old friends in another place that a system that is good enough for electing the Chairman of the 1922 Committee ought to be good enough for electing councillors to district councils. Therefore, I congratulate my noble friend Lord Blake most warmly on the way in which he introduced the Bill and I wish the Bill well.
8.35 p.m.
Lord Simon of Glaisdale: My Lords, I, too, wish to congratulate the noble Lord, Lord Blake, on

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introducing a Bill which I consider to be of central importance, because we are concerned with the machinery by which our system of representative democracy operates. It seems to me to be a great pity that Government business has taken precedence so that this Bill came on for discussion only after 7.30 this evening. One could not help remembering with some cynicism that when the Bill of the noble Lord, Lord Harris of Greenwich, was discussed on a Friday mysteriously 15 Ministers were working in this Palace and not in their own offices, and it was those 15 Ministers who secured the defeat of the noble Lord's Bill. I am bound to say that there is quite a noticeable number of Ministers about this evening, and I sincerely hope that the Government are not getting the idea that a Lord in Waiting means more than its honorific title indicates.
As I have said, the Bill is an important measure. It is an important one intrinsically because it is concerned with the machinery of representative democracy. But it is also important because of a word which we have heard more than once this evening from the noble Lord, Lord Evans of Claughton, and from the right reverend Prelate the Bishop of Derby—the word "unfairness". Is it not terrible that 25 per cent. of our fellow countrymen are profoundly convinced that the present electoral system treats them unfairly? I suppose that a large number of others, such as those who were mentioned by the right reverend Prelate, agree with them profoundly.
Therefore, when the noble Lord, Lord Fraser, says that this Bill is untimely and is premature, I venture to ask your Lordships: Can it be untimely, can it be premature to correct a fundamental unfairness? Even if the system worked with perfect smoothness, would it not be right to correct this unfairness? This Bill deals with franchise. It therefore deals with liberty and, after all, that is the meaning of "franchise". Even if the word "franchise" is used in the narrow sense that is used by constitutional lawyers, it still denotes a means by which citizens can exercise their liberty—the means by which they can control the decisions that affect their lives.
Your Lordships will remember the story of the happy marriage, and the wife was asked to what she ascribed the felicity. She said, "Well, I make the small decisions, and I leave the large decisions to my husband". She was asked, "What are the small decisions?" She said, "Well, where we live; how many children we shall have; where they shall be educated. They are the small decisions". The interlocutor then said, "Well, what are the large decisions?" She immediately replied, "Well, things like the size of the public sector borrowing requirement; the strategic defence initiative; or the common agricultural policy. I leave those to my husband".
That is how our system of democracy, our system of liberty, works. We try to vouchsafe as many decisions as possible to the individual citizen, but some cannot be taken by him individually. Some of these big ones, such as I have just mentioned, are taken by representatives. But because those representatives are answerable to their electorate, the citizen can still exert an influence even over those big matters which affect his destiny.
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Then at another level, the level with which your Lordships are concerned this evening, there are the decisions which are made in local government. When your Lordships discussed the Bill of the noble Lord, Lord Harris, the noble Lord, Lord Elton, was inclined to discount the significance of it. He said that it was a matter between councillor and ward in local government. But the essential point is that council decisions, local government decisions, are taken collectively. Therefore, unless there is a proper, fair system of representation which can ensure that the citizen can affect those decisions, even if they are about drains, highway cleansing, and that kind of thing, then he is denied his democratic rights; he is denied his liberty; he is denied his influence over the decisions which affect him.
The noble Lord, Lord Blake, used words which were virtually the same as I heard falling from Lord Attlee in another place. He said, as I remember, that democracy does not mean rule by the majority; it means rule by the majority with deference to the interests of the minority. I mentioned that on the last occasion, and I have no hesitation in repeating it, because it is a profound political truth. But our present system does not ensure that the majority need at all consider the interests, the wishes, the well-being of the minority, and frequently it does not do so.
It is an additional misfortune, your Lordships may think, that this debate has come on so late, because on the last occasion we had a graphic account, an authoritative account, by the noble Lord, Lord Harris, of the wickednesses—one cannot say less—which go on in some local authorities. That was borne out by the noble Lord, Lord Houghton of Sowerby, speaking not only with his matchless knowledge, but with the authority of his membership of the Salmon Royal Commission on Standards in Public Life. It is in these one-party, or practically one-party, authorities where the greatest mischiefs occur.
The noble Lord, Lord Mishcon, is going to reply to this debate on behalf of his party, I imagine. He has great experience of local government. As your Lordships will have learned, he is a superb debater, and it is not to be thought that he will condone the kind of mischiefs which were described last time and which are written down in Hansard, and which are indeed commmon knowledge. But I hope he will explain, if he chooses to, how otherwise than by such a measure as this those kind of mischiefs can be averted.
I want to say only a word about the argument on the "thin end of the wedge". I would ask those who take the Conservative Whip to consider just two matters. The first is the way that Mr. Scargill was received at the Labour Party conference, and secondly, combined with that, the opinion poll which we read over the weekend. I would ask those on the Labour Benches to consider in turn whether they do not prefer what went on under the Lib-Lab pact to what they choose, with opprobrium, to call "Thatcherism".
Apart from that I desire to say only this about the "thin end of the wedge". It was a great politician who was also a great constitutional scientist who said that the British constitution is full of the thin ends of wedges, that the good sense of the community refrains from driving them home. Therefore, I trust that none

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of your Lordships will be deterred from voting for this Bill because it might be said to involve proportional representation at national level. It seems to me that that was disposed of by the attitude of the noble Lord, Lord Fraser.
There are three particular reasons why the system of the single alternative vote is peculiarly suited for district councils and London Borough councils. The first is that it is in those that, as I have said, we were shown the greatest mischiefs occur. The second is that, as the noble Lord, Lord Chelwood, said, it is an area where we can experience how this works before moving on to other constitutional spheres. The third is that the present system involves a tyranny: the tyranny of often a small majority over a large minority.
My Lords, for myself I should like to see this measure amended in Committee so that it is no longer permissive only but is made mandatory; because it seems to me that the very worst authorities will be the slowest to apply it. The other thing is that I should myself like to see a commencement date not linked to the volition of the Secretary of State, because the Secretary of State is likely to come from one of the two major parties and it is, after all, idle to pretend that they do not find the present system extremely comfortable to their own interests. Subject to that, I shall unhesitatingly follow the noble Lord, Lord Blake, into the Division Lobby.
8.50 p.m.
Lord Moyne: My Lords I shall be very brief, as suits the lateness of the hour and also because the noble Lord, Lord Blake, with much better powers of persuasion than I have, has, in such detail and with such eloquence, put forward the points to support the Bill. I simply want to stand up and be counted in favour of it. The thin-end-of-the-wedge argument has been thoroughly disposed of; the thin end of the wedge has been entirely chipped away. The argument is that there would be no strong decisions in the Commons. But, for local elections, consensus is the first consideration, While deploring, like many of my generation, the growth of party politics in local government, the greater the balance of parties, the greater the consensus and the less political bias. I doubt whether dissatisfaction with such bodies as the GLC would have been so great if there had been within their ranks a more equal balance of parties and a closer consensus of opinion.
As a Conservative, I am a cautious reformer. I do not agree with the odd Conservatives who say that they are Radicals. They are like Humpty Dumpty when he said that words had whatever meaning he chose they should have. I see Conservative policy as one of wanting above all to conserve what is good and to improve it pragmatically by trial and error. That seems to be exactly what this Bill is designed to do. It gives freedom to local authorities to move in a new direction at a time when many of us have seen their freedom reduced in one way or another. It gives the opportunity to minority interests to make themselves felt; it gives freedom to experiment. It takes none away. I hope that I shall not put the parties opposite against us if I say that the Bill is a good conservative measure of reform.
Lord Henderson of Brompton: My Lords, at this time of the evening and at this stage in the debate, it is very difficult to say anything new. But what I can say new in congratulating the noble Lord, Lord Blake, on introducing this Bill today is that this House has not, as some people who are ignorant of the House might think, a bad record on electoral reform. I have found an example exactly 205 years ago of the Duke of Richmond trying, not unsuccessfully, to interest this House in proposals—and I quote from the Record (which was then not "Official"):
"to procure a more equal representation".
That is pretty remarkable in 1780. He chose a very bad time to do it. It was in the middle of the Gordon Riots, and Peers were having their wigs and clothes torn off them as they came into the House. There was no electoral reform, I need hardly say, for 52 years. Nevertheless, that is not bad for this House of Parliament. It means to say that this House was not always on the side of what is supposed to be its electoral interests, the rotten boroughs, and so on.
The noble Lord, Lord Houghton of Sowerby, mentioned the television cameras. I, myself, am glad they are not here today. Otherwise, they might give the erroneous impression that the Alliance has somehow packed the Benches next to the Throne with Lords Spiritual as well as Lord Temporal.
I think that it is quite right that the Bill should be introduced by a Private Member who is a supporter of one of the two major political parties. The truth is, as I think everyone must recognise, that the two major political parties cannot abide the thought of proportional representation. It is anathema to them. So, with great respect to the spokesmen of two political parties in this House—and they know that I have great respect for them—one must seriously discount most of what they say, speaking as they do for parties which have either political power or the reversion of political power; and they act in collusion to retain that power or the reversion of that power. That is why I ask the House to discount what either of those remarkable spokesman in this House will say.
To be entirely fair, I would also ask the House similarly to discount the views expressed by the official Alliance spokesmen, because they are interested in change in their direction. May I give an instance of the bias which can creep into their utterances when speaking for their political parties? The noble Lord, Lord Evans of Claughton, said,—and perhaps I am paraphrasing him—words to the effect that things are now quite different because there is a third force in the land and that in the old days that was not so. Times have changed. Well, my Lords, it may be true that there is a third political force but I do not think that the electorate has changed. The electorate in the old days merely had the choice of voting for one of two parties. They now have a choice of voting for—what shall we say—one of three or one of four. That does not indicate that the electorate has changed; and I think that all political parties should remember that the majority of the voters in this country do not belong to any political party—none at all! And it is those who do not belong to any political party whom the parties have to try to persuade to vote for them.
I would say that the electorate no longer wishes to be treated like children offered an "either/or" option.

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They are far more sophisticated, they are far more grown up, than they were before—partly due to better education, partly due to television coming into their homes and to the quality of political argument advanced on "the box". As I say, they are no longer content to be treated like children with an "either/or" option. I would say, particularly in the local context, that they would now expect to be given a rather more sophisticated choice which matches their political sophistication.
So, my Lords, let me just say two things which are both related to local government. This has been touched on before, not least by the right reverend Prelate the Bishop of Derby. Those who live in a constituency which is dominated by one party or the other of the two main political parties are, to all intents and purposes, disfranchised if they do not happen to belong to the dominant party in that constituency. This must be bad for those who are disfranchised, because their vote never has any value; but it is also bad, it must be bad, for the dominant party in such a constituency, because they do not feel the need to respond to those whom they know to be in a permanent minority in that constituency.
I have deliberately taken the most extreme example of someone living in that kind of constituency—as it were, Bournemouth or Newcastle Central—in the old days, but the same is true to a certain extent in constituencies which are slightly more volatile, and there the only choice you have is to indulge, if you are clever enough, in some kind of tactical voting other than the straight "either/or" option. So I would say that the two dominant political parties should now realise that voters do not belong to either of those two parties. I think that the Alliance Party should realise that they do not belong to that party either. With great respect to the noble Lord, Lord Evans, I hope he will agree with that. That ought to make everyone politically conscious go for some more politically sophisticated form of voting which matches the political sophistication of the electorate.
My second reason is also entirely devoted to local government. There was the Commission on the Constitution, and noble Lords will remember that the commission was very properly concerned with the relationship between local and central government. Though I agree generally with the views expressed by the Government and their supporters—notably by the noble Lord, Lord Broxbourne—that the issues raised by the local government legislation of the last Session and this Session are not "constitutional", if I can put the word in inverted commas, in the sense that what has been given by statute can be modified by statute, the issues nevertheless are "constitutional" in the broad sense, as understood by the Royal Commission, in that this legislation does alter the balance between central and local government. I do not like to see this centripetal tendency, which I see (in shorthand) as a function of the militant tendency in local government. Here, I must just say it was extraordinary to hear the noble Lord, Lord Beloff—himself an extremist—expressing the fear that any kind of proportional representation would spawn extremists in local government. I would say exactly the opposite.
I should like to see STV introduced into local government, even in the tentative way introduced by
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the Bill of the noble Lord, Lord Blake, for the two reasons that it would give greater real choice to the local government elector, whose vote would then have some value, and that that choice is far more likely to contribute to the election of the less militantly tendentious of the local councillors, who would be likely to concentrate more on good local and answerable administration—and I very much prefer the word "administration" to the word "government" in this context—and less on national politicking.
9.3 p.m.
Lord O'Neill of the Maine: My Lords, I will be very brief, partly because of the lateness of the hour and partly because I have the tail-end of a cold. I should like, as usual, to support the noble Lord, Lord Blake, under whose chairmanship I had the honour to serve, first of all, on the Hansard Committee some nine years ago and then on other committees, and also as a member of the Conservative Association for Electoral Reform. In my view, proportional representation in some form will come to this country before the end of the century. Let us hope it will not come too late.
If I may say a word about Northern Ireland, perhaps I am the only Member of your Lordships' House who has voted under the STV system in Northern Ireland. Preparations were made for those elections. They were very well done; and I remember that one of the slogans was, "As simple as one-two-three", Of course, that is a fact; and I congratulate the noble Viscount, Lord Whitelaw, for have stood up to the extremists in Northern Ireland when he was head of the Northern Ireland Office—those who opposed the introduction of STV on the grounds that it would hurt the Unionist Party.
Prior to the last election there was much more support for our views in the City, as the noble Lord, Lord Houghton, and I, who serve on the National Committee for Electoral Reform, will know. Since the last election finances have dried up to a large extent, and if anybody in the City gets hold of what I have just been saving I hope they will realise that this financial support is needed more today than it ever was. People should not rest on their laurels and say, "Now we have a large majority, a Conservative Government, we need not worry any more about proportional representation; everything is all right". In fact, as I say, it is more essential than ever that we should have financial support for the national committee.
Lastly, I should just like to say that one or two noble Lords have suggested that this Bill should be mandatory. It seems to me that politics is the art of the possible, and if there is to be any possibility of getting this Bill made into legislation, then it must be permissive. It could not be mandatory. One would never get the Conservative Parts, in power at the moment, to support a mandatory measure of this kind, as I see it. I think that my noble friend Lord Blake was absolutely right to make it permissive, and I wish him good luck. I hope I have not detained your Lordships for too long, and I hope very much that we shall have an uninterrupted Second Reading.
9.7 p.m.
Lord Harris of Greenwich: My Lords, only two years ago, as the noble Lord, Lord Blake, said in his

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introductory speech this afternoon, we debated a remarkably similar Bill to this one. We failed then to secure a Second Reading by a mere eight votes. Tonight I hope that we shall be a great deal more successful. I must say, in winding up this debate so far as my noble friends are concerned, that this has been a very unusual debate because we have not yet heard a single Member of the House who is a root-and-branch opponent of this Bill stand up and make a speech against it. The one Member of your Lordships' House who spoke against this Bill on the last occasion—and indeed he was one of the tellers against it—was the noble Lord, Lord Fraser. In his speech today, he indicated quite a substantial change in his own position—one which, as one who has a very high respect for the noble Lord, I very much welcome.
What struck me about the debate that we had two years ago was the extraordinary degree of complacency which was demonstrated by many of those who opposed the Bill on that occasion. It is tempting to remind the House of what they said on that occasion and to compare it with what has happened in local government in England and Wales in the two years since then. But quite apart from that, there was an extraordinary amount of intellectual confusion in one case. I speak before the noble Lord, Lord Elton, and therefore he will have the opportunity of dealing with this point because I am referring to his own speech on that occasion.
At col. 487 of the Official Report of 18th February 1983, the noble Lord expressed his commitment to what I would describe as the confrontational approach to local government; the two great armies drawn up against one another in opposing lines, waiting for the trumpet call to signal the beginning of the battle. The noble Lord said then—and for all I know this will be the basis of the speech that he delivers this evening—
"The voter at a local government election usually has a choice … between one set of policies which he knows will have one effect on the rates and services, and another set of policies which will affect them rather differently".
A few moments later he added:
"At present, as I have said, voters tend to pick a team for something which in general terms rather resembles a team game".
Yet in the very next column of Hansard the noble Lord is reported as saying precisely the opposite. The two great opposing armies had miraculously dispersed. He said:
"We do not think primarily of party politics when we think about our local councillor, I hope. We think of him because we want something done about the dustbins, the street lighting or our children's education. Our concerns are not general and national: they are intimate and local".
No doubt the noble Lord, Lord Elton, will be good enough to tell us when he speaks in a few moments which of these two entirely contradictory arguments tie is putting before the House this evening.
For myself, I prefer by quite a substantial margin the second of his arguments. When we elect members of a local authority we are not, as the noble Lord, Lord Blake, said at the beginning of this debate, electing a Government. We are choosing local representatives to deal with local problems. It seems to me highly desirable that this being so we should base our local elections on an electoral system that encourages
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compromise and tolerance and not the endless, pitiless, damaging confrontations that we have seen between a number of local authorities and central Government.
That brings me to another of the noble Lord's arguments in 1983, and this, I suspect, we shall not hear deployed quite so vigorously this evening. Apart from a few side-swipes at a number of local Labour councils, the noble Lord, Lord Elton, seemed extremely pleased with our system of local government. At col. 489 of Hansard he said that it had "a few warts and wrinkles"; but apart from that apparently everything was absolutely fine. The House may find it a bit difficult to relate those comfortable cosy words with what has happened since, with the proposed abolition of the Greater London Council and the metropolitan counties and a system of central Government intervention in the affairs of local government, including rate capping, which makes us the most highly centralised democracy in the Western world.
What we are debating tonight is not just a Bill concerning proportional representation in some local elections. It is whether there is to be a serious prospect of moving towards more independent and vigorous local government. We all know that there have been substantial abuses practised by a number of local authorities. Rights have been denied to oppositions. Sometimes they have been deliberately, and in the most calculated way, excluded from important committees of councils. There has been a denial of free speech. Increasingly, senior officers have been appointed on the basis of their presumed political views and others have been forced out of their jobs to make way for political placemen. Large sums of money have been voted for organisations believed to be sympathetic to the majority party and, in a number of cases, local authorities have practised reckless expenditure policies which have inflicted severe hardship on both residents and small businessmen. It will be said that only a small minority of local authorities is involved in this kind of conduct. That is true; but that minority is growing and so are the number of abuses. We all know that to be true.
The Government's response has been twofold. First, they have announced that they are proposing to set up a committee to study the type of abuses that have taken place. As has been made clear from these Benches, we very much welcome that, but the committee will no doubt take a long time to report. Nevertheless, it would clearly be wrong to anticipate at the moment what we believe that committee will recommend. Secondly, as a result of the behaviour of local authorities of the kind that I have described, the Government have intervened more directly in the affairs of local authorities than has ever previously been done in the history of local government in England and Wales.
This has provoked deep resentment throughout local government, as the House as a whole is aware. It has provoked resentment in the shire counties, which are largely controlled by Conservative majorities, in the leafy suburbs and certainly in the inner cities. Where will this end? On Thursday of this week a number of local authorities which have been rate capped will deliberately refuse to set a rate. The resolve

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of a number of them will no doubt crumble in the weeks to come; but a handful, which are spoiling for a fight with the Government, may well refuse to back down.
What will happen then? The law will ultimately be enforced, and quite right too. No one on these Benches—and I am sure in the House as a whole—will support defiance of the law of this country. There will then be disqualification of councillors—I shed no tears for them—and ultimately commissioners will be appointed by Ministers to administer the affairs of the local authorities concerned, no doubt with some refusal by some local authority workers to co-operate with these commissioners. Yet many of the councils which are contemplating taking action of this sort do not even begin to have majority support from their own electorates.
Let us look at the case of Lambeth. At the last local authority elections in Lambeth, which were very nearly a plebiscite as to whether you agreed with Mr. Ted Knight or you did not, one third of the voters of Lambeth indicated by voting for Mr. Knight and his colleagues that they agreed with him; two thirds of the people of Lambeth voted against Mr. Knight. But who has the majority in Lambeth? Mr. Knight, and by a significant majority. All I am saying to the House is that it seems to me quite astonishing, first, that local authorities can behave with such a remarkable degree of arrogance; and, secondly, that we should tolerate an electoral system which gives people such as Mr. Knight the opportunity to behave in this fashion.
I say this as an afterthought. Twelve months ago I decided that it was a long time since I had been to a meeting of a local authority, having been a member myself, and so I attended a meeting of the Lambeth local authority. I am bound to say that after two and a half hours of listening to the debate at their then rate-fixing meeting, I was astonished at the character of the behaviour of the members of that local authority. There was in the most direct fashion a denial of free speech of people who dissented from the majority opinion on that local authority which I have not seen in my political lifetime. Unfortunately, this type of behaviour is now becoming increasingly common throughout this minority, as it certainly is at the moment, of local authorities in this country which are in fact controlled by people such a Mr. Knight.
There is a very similar sitution in Southwark. There the present majority party had a larger vote than Mr. Knight but it was certainly a substantial minority of the electorate. Yet they are contemplating taking on Thursday of this week exactly the kind of action I have suggested. Then, as the right reverend Prelate the Bishop of Derby remarked a few moment ago, we have the case of Islington, where 51 per cent. of the electorate voted Labour at the last local authority elections; 51 Labour councillors were returned; the 49 per cent. who voted either for the Conservative Party or the Alliance were represented by a single councillor.
That local authority has, as we all know, behaved in a quite intolerable fashion ever since. Knowing what has been taking place in local authorities of this kind, are we really going to tolerate an electoral system which permits this degree of abuse of power? I would
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not suggest for a moment that this Bill if enacted will transform the situation. As the noble Lord, Lord Blake, pointed out, this is an enabling Bill and is not mandatory. However, I believe that it points the way to a new, more democratic framework for local government. In doing so, it will offer a message of hope to many communities in this country.
9.20 p.m.
Lord Mishcon: My Lords, with his usual consummate charm, the noble Lord, Lord Henderson of Brompton, gave me encouragement by saying, before I had the privilege of addressing your Lordships, that your Lordships should discount anything that I said. I must pay tribute to his fairness, because he said exactly the same of the noble Lord the Minister, who is to follow me. I admire your Lordships for having stayed in the Chamber in order to hear either of us speak, having received that mandatory instruction to discount anything we had to say.
I have listened with the utmost attention to what has been said in a most important debate on a most important Private Member's Bill. I should have thought that any of us who loves democracy and who has a respect for local government would have been unanimous in decrying many of the practices about which complaints have been made. We are told that there are some local authorities who behave very badly. The noble Lord, Lord Harris, said he had attended one such council—an authority where, if my memory serves me correctly, the majority is not a large one at all. The noble Lord was referring to Lambeth, and said he was disgusted at the way in which certain members of that council were howled down. Presumably they were members of the opposition, which had almost the same number of members as the majority party there. He found that behaviour extremely bad.
I hope that the noble Lord, Lord Harris, will recall that there is another House of Parliament. When he listens to the deliberations there, he may find that the same kind of conduct is likely to occur. I, with him, decry such behaviour in any democratic assembly—the refusal of people to allow others to be heard. But that has nothing to do with proportional representation.
We have heard that in other places local councils behave with arrogance because of their majority. The same arrogance will occur if there is a majority with proportional representation. What we must do is examine for a moment something other than that for which one party has striven to achieve. I admire them for their principles, but they did not always stand for the principle in question. When they had a majority and were in power, it was not one of the planks of the Liberal Party to ask others to agree to proportional representation. But one always takes it for granted that in politics—and possibly this is an aspect which those of us who are mere amateurs in the game find a little disillusioning—self-interest does seem to play a part in motives and propaganda.
I do not want to indulge in self-interest tonight: I want to examine the very evils we have been talking about. The first thing that is wrong with local government is that power has been taken away from local government. That is what leads to a lack of

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interest in local government elections. That is also what leads to the election of lesser people in local government. That is the first thing that is wrong.
I was brought up in local government—a sphere of political life which I loved for over 20 years. One was able to do things, and not just legislate. One could build houses; one could talk about schools; and one saw that the schools were built, and could watch them being built. The same applied to parks and other things for which local government was supposed to be responsible. I can remember that well. There is no difference between any of us, I should have thought, who have indulged in local government and its elections over the years. My guide and mentor—and I proudly say so—was one Herbert Morrison. Herbert Morrison said to me, not just at one LCC election but at more than one when he and I stood side by side in South London constituencies addressing what were very full audiences in those days, "I dare not say it from the platform, but I hope we get a workable majority. I hope we do not get an overwhelming majority". How wise he was! How wise was a Conservative politician who said the same in the last election, but who was reprimanded for sayng it! I say precisely the same of any Government, whether it be Labour, Tory or, with the dream of proportional representation, one day the Alliance Party.
I say, as a democrat, that I do not like overwhelming majorities; but that is not what we are talking about.
Lord Simon of Glaisdale: My Lords, is that not what we are talking about? Does the noble Lord really think one is more likely to have an overwhelming majority under the present system rather than under a system of proportional representation?
Lord Mishcon: My Lords, the noble and learned Lord, as one would expect of him, has made a perfectly fair point. What does happen with proportional representation, whether it be with national Governments or local government, is that one gets an inconclusive result. In many ways that is as bad as having an overwhelming majority. That has been the experience with national Governments and local government. If you put before an electorate, and certainly if you put before the chief officers of local authorities, the option of having a workable majority or an inconclusive election result when a firm policy cannot be carried out and when there is alteration from one meeting to another depending on the number of councillors who attend, you will receive the reply that an inconclusive majority is the worst of all results.
Lord Evans of Claughton: My Lords, will the noble Lord the Minister give way?
Noble Lords: Oh!
Lord Evans of Claughton: My Lords, the noble Lord was making such a ministerial speech! Would the noble Lord not agree that if he bothered to consult his Labour friends in Liverpool, and their officers, they might come up with an entirely different answer and would prefer almost anything rather than the Labour majority that now exists?
Lord Mishcon: My Lords, it is rather difficult to answer an intervention of that kind, which, if I may say so, is just the sort of political remark one would except in the very council chamber to which the noble Lord, Lord Harris, objected.
I return to my theme. I can understand this debate having been conducted on the basis that politics ought to be taken completely out of local government. I have heard that argument, and it can be a very strong one. Then, of course, you get the people we were talking about before, who are worried about the lack of local amenities and who take a completely independent point of view. I have heard that argument. The argument against it is that the one way in which you can govern is not by having a whole series of independent people: one must have groupings. The independent people would form themselves into groups in order to carry out policies. There are also, of course, the compromises and bargains, with, "I'll vote for you on this matter if you will vote for me on the other matter".
If I may turn to this Bill, as I said, it does not deal with the evils—and they are evils—that have been talked about. I should like to see, as I imagine would other noble Lords, too, stronger local government. I should like to see the independence of local government back again, and I have referred to that. But let us look at this Bill. Let us consider what would happen with a permissive system—and this is not an original thought; I know that it was echoed in the debate of 18th February 1983. I do not claim originality for it.
If these are the evils which we are supposed to overcome and these are the examples, how do we get over them with a Bill which is permissive? Is the local authority that we are talking about going to pass a measure which says. "We will now have proportional representation which will of course reduce our majority"? Is that going to happen? It is not practical. Is it sensible, having got it permissive, to have in this country a system of local government which varies from one area to another, and in which the man who moves from Lambeth to another borough and changes his residence finds that there is an entirely different system?
Are we to get rid of something which people regard as very healthy—the annual resignation of one third of the members of a council, so that they are judged year by year and not every three or four years? We should have to get rid of that if we passed this Bill. Is it right that, having decided in one local authority to adopt that system, it stays with that local authority which cannot get rid of it for 12 years at the very minimum? Is that right? Is that sensible? It is a pretty long time for an experiment. It is not that anybody on any Bench of your Lordships' House does not want to take a close look at the dying local government of this country to see whether it cannot be revived, but in all the circumstances this Bill will not do it.
9.32 p.m.
Lord Elton: My Lords, I have listened to your Lordships' speeches on this Bill with close attention and with great respect. As far as the contribution of my noble friend Lord Blake is concerned, this is hardly to be wondered at. He occupies a position in relation to

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me which puts him, in a number of ways, at a considerable advantage. He is a senior and respected member of my own political party and its historian, and the biographer of one of its most illustrious leaders. He is the provost of the college of which my late father was dean; and, as he was a don at Oxford when I was a mere undergraduate, his shadow falls, as it were, across my past. I suppose I could add that as he is editor of the Dictionary of National Biography he has at least the option of publishing his opinion of me in the future and casting it over me once again. By then of course I should be a spectator from another world.
I note also what I think is the best turn out of bishops almost that I have yet seen in this House in a debate on this kind of matter, adding their silent support to the solitary voice of the right reverend Prelate the Bishop of Derby, under the benign eye of the most revered Primate. I therefore consider that if I put a foot wrong, even my position in the next world is somewhat in doubt.
Moreover, my noble friend's formidable grasp of this subject, which he again displayed when moving the Second Reading, was already established when he chaired the Hansard Society's commission for electoral reform 10 years ago. Your Lordships will realise therefore that common prudence, as well as respect and courtesy, require me to deal carefully with anything he puts before me, and that I would disagree with him only of necessity and then only in the most restrained of terms.
My noble fried puts before your Lordships a matter too close to the wellsprings of democracy for us to look at it with anything but the greatest detachment and impartiality. I turn first to the electoral system that we have and then to what my noble friend proposes and the results we could expect from the change.
The system we have may not be perfect but it is simple, it is familiar and it is well understood. The residents of any district or borough are divided into groups according to where they live and each group is asked to choose for itself one or more representatives from all those who offer themselves for election. There are 8,577 of these groups or wards altogether in England alone and only five of them return more than three members to the council. The question asked of the voter is simple in every case. It is "Who do you want to represent you on the council?"
The simplicity of the system is reflected in the size of the wards. In this context I agree with my noble friend, I think it was Lord O'Neill of the Maine, that numbers have to be considered in absolute terms. The average number of electors in the metropolitan districts is 10,410. If that seems rather large, it is because they are the largest groups that we have for this purpose. In Greater London (excluding the City) the average is smaller, it is 6,784. In the non-metropolitan districts it is only 3,153 and that is healthily compact. The question of scale is important. If local democracy is to work there must be a mutual regard between the electors and their representatives. The voters need to know the councillors' intentions and conduct and the councillors need to know the voters' hopes and worries. Strength lies in intimacy rather than in scope. The present system does permit local councillors to
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become familiar with the intensely local issues that are the concern of their electors and which alone it lies within their grasp to act upon.
At this point, I break off to recall that the noble Lord, Lord Harris of Greenwich, kindly repeated some of what I think were the rather better parts of a speech I made over two years ago on the same subject and asked me to elaborate on it. I am always grateful to noble Lords when they pay me the courtesy and consideration of waiting until I have sat down before they raise questions on my speeches, but I do not think I have ever known courtesy carried to the extent of 24 months before. I am deeply grateful to him. As I recall, I said in the first extract which he quoted that electors voted for programmes. It is possible that the noble Lord thought that I was referring to national political programmes but if he looks again at the record he will find that I was not. In the second extract, I said that those programmes related to local and not to national issues. So I do not see a contradiction in what I said. It just seems that, as I fear is my habit, I said it twice,
As I think we are agreed that these are local issues that we are talking about, I am a little concerned to see that under Clause 2(3) of his Bill, my noble friend is proposing to create new electoral areas by amalgamating existing wards into groups of which every single one, even the smallest, will be bigger than all but five of the wards we now have. Eight thousand five hundred and seventy-two of our well-known and even quite well-loved existing wards return only three members or fewer. All the proposed new groupings, even the smallest, would return four members or more, and the maximum proposed is not less than nine.
The effect of that would be to increase the average size of the electorates in non-metropolitan areas from roughly 3,000 to between 6,000 and 9,000; and in metropolitan areas from roughly ten and a half thousand to no less than between 20,000 and 30,000. If strength does lie, as we believe it to lie, in intimacy, this must be a very much weaker system than what we now have. That system is not very complicated. It did not take me many minutes to describe it. The electors make their choice, they cast their votes and the canditates receiving the most votes win.
Your Lordships will readily accept that the proposed new system is not quite so simple as that. It is described with an elegant simplicity of language on the face of the Bill but the simplicity of language reveals, or perhaps I should say conceals, a complexity of operation that becomes deeper as one looks at it more closely although it is not fully defined, and, as the noble Lord, Lord Mishcon—whose very effective support I have real pleasure in welcoming this evening—pointed out, much if it is left to the Secretary of State, who would not perhaps regard the task with relish.
These elections are things that have to be understood and discussed not only in the upper common rooms of universities but also in the downstairs room of the village hall and the back snug of the Bull and Bush. So what is this thing that my noble friend would like to see discussed and understood in the thousands and tens of thousands of such meeting places in which such matters actually are

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threshed out? And who should we get to explain the new mechanism? Certainly not the noble Lord, Lord Evans of Claughton, who has put it on the record that although he has been a councillor for a quarter of a century, he is quite incapable of understanding the way the votes are counted—a suggestion that my noble friend Lord Chelwood said would be insulting if applied to the general electorate.
Lord Evans of Claughton: Will the noble Lord give way—the noble Lord, the Minister? I am correct this time, although you cannot tell because they are interchangeable on this occasion. I said that I did not understand not how votes are counted because they are counted very effectively in my case and I have always won. May I say that I did not understand how the votes come out and the preferences are selected during a PR election. That is an honesty that I hope every Member of your Lordships' House might also admit to.
Lord Elton: My Lords, I am sorry that if, in the attempt to save words and therefore time at this late hour, I did not make myself clear; but that is precisely what I meant. The noble Lord is an experienced local councillor; however, he is proposing to introduce a system but he says he does not understand the workings of it.
Noble Lords: No!
Lord Elton: My Lords, I have no wish to make too much of this point. I withdraw if the noble Lord did not say that. I shall look at the record. I apologise to the noble Lord.
I return to the task of explaining how the system works. What does the promoter, the proportionalist, have to say? He does not have to say, "Just give your vote to the person or people you like best and whoever gets the most votes wins". I suppose that he has to say, "You have a vote and there is a piece of paper with 12 names on it". I say 12 names because I want to be fair to my noble friend. I have therefore taken the smallest single transferable vote electoral area that the Bill allows which is a four-seater area and I have assumed that there are only three main contending parties and no fringe candidates. If I were not to put the best case for my noble friend but instead looked at a nine-seater single transferable vote electoral area, which his Bill provides for, and if, moreover, I was looking not all that far ahead to the time when the marriage between the Liberal and the Social Democratic parties may have been dissolved so that there were four main parties contending and if the ecologists, women's lib and the National Front entered the list together with the ratepayers who after all do these things, even with only one candidate each—none of which is in the least unlikely—the piece of paper in my hand in the snug would have nearer to 40 names on it than 12.
Here we are with a piece of paper containing 12 names. We say to the voter, "Here are these 12 names. You have only one vote. But we don't want you to choose just one person. You can choose as many as you like. You write the numbers, 1 against the one you like best, 2 against the one you like next best, and so on". My noble friend Lord O'Neill of the Maine says
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that it is as simple as 1, 2, 3 but the Bill does not say that. The Bill leaves it open to have as many preferences as the voter wishes. So you might be electing someone not with your first, second, third, fourth, or fifth preference, but with your sixth, seventh, eighth or ninth preference. In that case, I wonder to what extent and how far down the list the voter would go with his preferences before he felt that his vote did not count.
Lord Tordoff: My Lords, will the noble Lord give way?
Lord Elton: My Lords, it may be that other noble Lords wish to interrupt. I wonder whether, with the clock in mind, I should ration it to the different Benches. The noble Lord is sitting alongside the last interrupter. I am sure that he will forgive me if I try to exercise a certain proportionality in this also.
At this point in my noble friend's shoes, I should be ordering the second round of bitter and considering how to explain what happened to the surplus of votes acquired by a successful candidate. Under the Bill, the surplus votes can be allocated to the voter's next preferred candidate but it prudently leaves the precise arrangements for deciding which votes to select as surplus to the Secretary of State to put in regulations. I cannot at the moment say what those might be. I can, however, say that much of the process described in the Bill is a great deal more complex than what we now have and that electors would not see the direct and simple connection between their action and its electoral results that they are used to and we believe to be healthy. So, if the strength of the system lies in part, again as we believe it to do, in its simplicity, this system must be very much weaker than what we have now. I pass over the question of the three seats a year in a three-year cycle, because the noble Lord, Lord Mishcon, has already pointed out that it is removed by the Bill.
My first conclusion about the Bill is that it would obscure the visible causal link between the counting of votes and the electing of representatives. It would cease to be seen as something direct and pragmatic, and become something obscure and mysterious —something, I was almost tempted to say, which might be signalled more by white smoke from the town hall chimney than by the town clerk appearing on the town hall steps. That air of remoteness is intensified by the considerable increase in the size of the electorate in any STV area using the system. In my home borough, I am at present represented by three councillors for a ward with roughly 8,000 electors. None of them, as it happens, had my vote, but I know who they are and they would not have had my umpteenth preference had it been available. But, as it is a small patch, I know them, and they know what are our local concerns. Under what is now proposed I should, I suppose, be one not of 8,000 but of 24,000 electors, and I should be represented not by three but by nine possibly conflicting voices on the council.
The element of conflict is important, because the whole purpose of this Bill—and it is a purpose that is avowed and acknowledged—is to get minority groups represented on the council. My Lords, I am a minority group. Conservative Peers are a minority group almost

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everywhere—even, on occasion, in this Chamber, if I recall correctly—and I am not actually sure that I altogether welcome the prospect offered by this Bill in this respect. My reluctance to snap up this offered benefit rests on two considerations. First, it renders the outcome of an election even more uncertain than it now is. At present we know that in the great majority of cases the real contest is between two or three large blocks of interest represented by candidates from the two or three major political parties. If I vote for a candidate I vote for a programme worked out to reflect not merely his individual objectives but those of the party to which be belongs. If the blues win, I get a blue programme; if the reds win, I get a red programme. The intention of the Bill, however, is to see that nobody wins, in that sense, at all. I think I am right—
Lord Campbell of Croy: My Lords, will my noble friend give way? I wonder whether I may intervene for a moment from this side of the House. My noble friend is now making a point which the noble Lord on the Opposition Front Bench made; that is, that it is better to have a policy adopted than have something which is uncertain. If, in a certain area, the majority of the electorate happen to want a middle-of-the-road policy, are they not entitled to have it, even if it is inconvenient for the chief executive or the previous chairman of the council?
Noble Lords: Hear, hear!
Lord Elton: My Lords, the noble Lord attracts obvious sympathy for what he says from the Benches which the noble Lord, Lord Henderson of Brompton, said should be discounted because of their interest in the case, it is true he discounted as well my views and those of the Opposition Front Bench, which left the Cross-Benches and the right reverend Prelates in a very strong position.
Lord Reigate: And some of us, too, my Lords.
Lord Elton: My Lords, the fact is that there is a choice between having visible programmes and electing people to horse-trade about what the programmes should be. What you then get is not necessarily a blend. My noble friend describes it as a middle-of-the-road policy. It is the best deal that can be got, cobbled together from the agreement to abstain or vote preferentially in the council chamber, or, indeed, in the caucus room, on a whole series of options, which can produce something quite unrecognisable from any party's programme and any individual programme. Therefore, I feel that what the noble Lord is asking us to adopt is something uncertain in its results and unclear in its operations.
I do not wish to detain your Lordships much longer. I think I should mention the contribution by the right reverend Prelate the Bishop of Derby, because he commended this Bill to your Lordships on, among other things, the strength of something which none of the rest of your Lordships referred to; that is, the debate in the General Synod of the Church of England in 1983, in which eight people spoke. There was a convincing majority for the proportional representation
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system. I do not think that I would counsel your Lordships to argue from the General Synod's experience of proportional representation as to its desirability for local government. It is quite clear that in national and local government there is a group of people in power with a known policy. Your Lordships know what our policy is; your Lordships know the policy of the noble Lord, Lord Mishcon. But as I understand it, that is not the case in the General Synod. That is no form of criticism of the Church at all because the General Synod is there for a totally different purpose. It is not for managing the affairs of a community in secular matters.
Your Lordships raised a number of other matters which I shall pass over. If your Lordships are owed an answer, I shall readily write. I shall say only that the Bill is permissive, not mandatory, and that is put forward very much by my noble friend Lord O'Neill of the Maine and others as an advantage. However, the noble Lord, Lord Mishcon, pointed out that it must also be a disadvantage. The choice would lie with existing councils elected by the existing system.
One might have expected that the existing councils would have been consulted through their association. That was not the case on the last occasion we debated a Bill on this matter and it has not been the case on this occasion. However, we have made that inquiry on each occasion and on each occasion have found that the association opposed the legislation, and its members were most unlikely therefore to take up the opportunity it seeks to offer them. I am sure that they would absolutely understand and support the view of my noble friend Lord Fraser of Kilmorack that this is not the time to add to the stresses and changes with which local government is already having to contend. Her Majesty's Government share their lack of enthusiasm.
We do not of course condone any of the abuses referred to by the noble and learned Lord, Lord Simon of Glaisdale, or by the noble Lord, Lord Harris of Greenwich. However, we doubt if what is now proposed would put an end to them, and we think that it would substitute a different colour of the same difficulty. At no stage have I relied upon the argument that this might be the thin end of the wedge because it did not seem to me to have been necessary.
We shall not seek to deny my noble friend his Second Reading, but I much regret that, high as is the esteem in which I hold him, I can offer him no assistance from this Bench either now or at a later stage.
9.53 p.m.
Lord Blake: My Lords, it is late and I do not propose to reply at any great length. I believe that your Lordships have heard a great deal of argument and it is all fairly familiar. I should like to begin by thanking the many noble Lords who have taken part in the debate—and I even thank my noble friend Lord Elton and the noble Lord, Lord Mishcon, for their most interesting contributions. Apart from them of course almost every noble Lord who spoke, with the possible exception of my noble friend Lord Fraser of Kilmorack, who was a little more doubtful, was in favour of the Bill. I think that that is a matter of some significance.

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Perhaps I may very briefly deal first with what the noble Lord, Lord Mishcon, said. As we all know, the noble Lord is a masterly debater. He thought that this Bill would not be a cure for all the ills of local government. He conceded that there are a great many ills in the current system of local government; that there are many very bad features of it, some of which the noble Lord, Lord Harris of Greenwich, outlined and some of which I mentioned.
I would agree with the noble Lord, Lord Mishcon; I would not expect a Bill of this sort suddenly to transform the whole situation and all the corrupt malpractices of local government overnight. It would be most unlikely that it would do so. I would say that it is a step in the right direction. I quite agree with the point about it being permissive and not mandatory, and I gave the reasons, and other noble Lords have given the reasons, why we consider that it is better to go slowly and to hope that a permissive measure will persuade other authorities to adopt a system of proportional representation. I am aware of that difficulty. I do not believe that the Bill can possibly do any harm. I think it will do some good.
The authorities where the worst abuses take place are the ones, as I think the noble Lord, Lord Mishcon, said, where you have big majorities. He made quite a point about his deploring the size of the phenomenon of very large majorities. This Bill, if adopted, would do something to prevent that phenomenon. There would be a more even balance. It would correspond more closely to the actual political composition of the electorate.
The noble Lord, Lord Mishcon, also said that there would be something absurd about voting under a different system in different places. I think I have got him right on that. It is sometimes known as the "patchwork quilt argument", which I have heard. I rather like a patchwork quilt. It looks rather pretty and rather nice. In any case, I cannot see why this should be a difficulty. I cannot see that there should be any inherent diffficulty in adopting a different system of voting in, say, Islington or Bournemouth, or wherever it might be. I cannot understand what difficulty arises over that, though it is always said to be a problem.
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This brings me to my noble friend Lord Elton. I should like to thank him for his civil remarks about me to begin with, though I do not know that I thank him very much for what he said at the end. A message was conveyed to me that my noble friends on the Front Bench would regard this Bill with malevolent neutrality. I thought that the noble Lord, Lord Elton, fully justified that description in his speech.
I want to make two points here. The noble Lord made a great deal of fuss about the terrible problems of explaining the single transferable vote at the local pub. Well, there is no need to do it. The answer is that the single transferable vote is a perfectly simple system for those who do the voting. It may be complicated to work out how it is done. It may set a bit more of a headache for the returning officer. But the fact is that what you put down is as simple as one, two, three, although I agree you go to larger numbers, five, six, seven, eight and nine.
I cannot think that this is a major problem. You put the people down in your order of preference. You have not got to put the whole lot down anyway. You can put down just two, or one, if you want to. It is a simple system. It is no more difficult from the point of view of the voter than the first-past-the-post system. The noble Lord was making an absolute dog's breakfast out of this. I think that some of his remarks verged upon the absurd.
There seemed to be some reproach implied to myself and to other noble Lords who are sympathetic to this Bill, in that we had not consulted the local associations. The noble Lord, Lord Elton, evidently has. He has discovered that the local associations would not be in favour of this measure. Well, they would not, would they? That is all I can say to that. I hope that the House will give this Bill a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
House adjourned at one minute before ten o'clock.