Lords Sitting of 3 July 1986

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Chichester): The LORD CHANCELLOR on the Woolsack.
Lord Blyth—Sat first in Parliament after the death of his father.

Zimbabwe: Detention of British Citizens
The Marquess of Salisbury: 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 what steps they are taking to secure the release from prison in Zimbabwe of Philip Hartlebury and Colin Evans, both British citizens who have been detained without trial for more than five years.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, my right honourable and learned friend raised those cases when he visited Zimbabwe in January 1985, as did my honourable friend the Minister of State in June this year. The High Commission in Harare has also continued to make clear to the Zimbabwean authorities our hope that Mr. Hartlebury and Mr. Evans can be released soon. Their appeal against detention is due to be heard on 30th July.
The Marquess of Salisbury: My Lords, I thank the noble Baroness. Is she aware that there have been several previous appeals against detention but that they have all been turned down? Is she aware also that, as yet, there have been no charges made against the men in question, although they were informed two years ago that they were about to be released? Can the noble Baroness say what treatment they have received during their detention?
Baroness Young: My Lords, their detention is regularly reviewed by the tribunal, as laid down in the Zimbabwean constitution. Since June 1973 three separate review tribunals have been convened, but none has recommended the release of the men. On 13th March this year the men claimed in the High Court that the proceedings of the tribunal were unfair. In March of this year that petition was dismissed. An appeal to the Supreme Court will now be heard on 30th July. I must make clear that the case is therefore sub judice.
So far as concerns the men's treatment, our High Commission consular staff have paid regular visits to Mr. Hartlebury since he was first arrested. Mr. Evans was until recently a Zimbabwean citizen also, and therefore we had no consular standing in his case, but as he has now allowed his citizenship to lapse, he has been regularly visited by the High Commission staff.
Lord Cledwyn of Penrhos: My Lords, is the noble Baroness aware that we fully support the representa-tions that have been made by her right honourable and learned friend and by the Minister in this matter? Can she say whether or not the family of Mr. Hartlebury are still in Harare, and whether it is the case that Mr. Hartlebury's assets have been taken away? If that be the case, can the noble Baroness say what assistance his family are receiving to enable them to live? Can the noble Baroness also say a word about Dr. Frank Bertrand, a British citizen who has also been detained in similar circumstances? What treatment is being meted out to him?
Baroness Young: My Lords, as to the second point of the noble Lord's question, I shall have to write to him because I have no information to hand. As to the first, Mr. Hartlebury is a British subject, as I have indicated, and to the best of my knowledge and belief his immediate family were until recently resident in Harare. Because he is British, he is visited regularly by consular staff.
Lord Orr-Ewing: My Lords, my noble friend's earlier remarks implied that our diplomatic represent-atives are not very closely in touch with these men. Can she say whether they are regularly visited and whether their families are regularly visited? Is their situation unique, or, given the intention of Dr. Mugabe to form a one-party state, are other people being detained without trial, and kept in prison? Surely our diplomatic representatives ought to be in close touch with those problems and reporting back, so that this House and another place know what is happening.
Baroness Young: My Lords, I very much regret it if anything that I said might have been construed in the terms that my noble friend has suggested. The men have been regularly visited by our consular officials. If they were not British citizens, then of course our locus standi would be very different. As I have explained, Mr. Evans was also a Zimbabwe citizen until recently, but has now allowed that citizenship to lapse. Both men are now regularly visited and we have been in touch with the families under those circumstances.
So far as concerns any other British subjects, there are, as I understand it, two other British citizens held under the same regulations. Charges have not yet been laid against them, but they, too, would be visited regularly.
Lord Elwyn-Jones: My Lords, are those men legally represented and have they the resources to be legally represented?
Baroness Young: My Lords, their cases, unquestion-ably, have been taken up, and they have lodged an appeal to the Supreme Court. As to their expenses, I am not in a position to comment, but their case is being heard. Perhaps I may say to your Lordships that in these cases, which have been taken up by both my right honourable and learned friend and by my honourable friend Mrs. Chalker in another place, it is sometimes in the best interests of the people involved if matters are not necessarily talked about across the Floor of the House. We all of us wish to do what we can in the best interests of the men concerned.
Lord Gladwyn: My Lords, what are the crimes that these men are supposed to have committed?
Lord Broxbourne: My Lords, a question from this side, I think. Does my noble friend appreciate that she has not answered the very important question that was put to her by the noble and learned Lord, Lord Elwyn-Jones? Is it not necessary that in proceedings before the Supreme Court the gentlemen referred to in the Question of my noble friend should be adequately, properly and professionally represented? Will Her Majesty's Government do what in them lies to ensure that that is the case?
Baroness Young: My Lords, I understand the point made by the noble and learned Lord, Lord Elwyn-Jones, and by my noble friend Lord Broxbourne. The information that I have is that the cases have been reviewed and that there is to be an appeal to the Supreme Court. Obviously the men cannot do that unless they have been able to support that appeal. I assure the House that our consular officials and the High Commission will do what they can under the circumstances.
Lord Mellish: My Lords, how can a case be sub-judice—
Noble Lords: Order!
Lord Gladwyn: My Lords, what offences are the men supposed to have committed? Of what are they accused?
Baroness Young: My Lords, the two men were originally charged with contravening the Zimbabwean Official Secrets Act and the Emergency Powers Maintenance of Law and Order Regulations. On 28th January 1983 they were acquitted because the court ruled that certain prosecution evidence was inadmis-able. They were re-arrested under the country's emergency power regulations, which were created many years before the present Government in Zimbabwe under regulations passed by the former Rhodesian régime.
Lord Nugent of Guildford: My Lords, is my noble friend the Minister aware that discouraging exchanges across the Floor of the House on this matter hardly seem fit in this case? These people have been in prison for five years. Is my noble friend aware that it is an outrage to human freedom that men should be treated like that? Is she further aware that this calls for the utmost influence to be used by Her Majesty's Government to get justice for these men?
Baroness Young: My Lords, once again, I much regret that my noble friend should feel that the men are not being helped. We have used what influence we have. My right honourable and learned friend visited Harare and there have been other ministerial visits. We have used our influence through our High Commission and by regular visits. I have explained the situation. It is a matter for the Zimbabwean legal system, ultimately, to determine what shall happen. Of course, I note the very strong feelings in all parts of
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the House on this matter, and what we all have to determine is how best we can help in this situation.
Lord Cledwyn of Penrhos: My Lords, may I further pursue the extremely important question of legal representation raised by my noble and learned friend and by the noble Lord, Lord Broxbourne? The House will fully understand that the noble Baroness may not have the details in her brief, but will she be good enough to look into the matter and inform my noble and learned friend and the noble Lord whether or not solicitors and counsel have been instructed in this case?
Baroness Young: My Lords, I shall of course do as the noble Lord asks. As I am writing to him on the other matter, I shall also advise him on this matter. I can say that under the constitution in Zimbabwe there is provision for such detentions to be regularly reviewed by a tribunal. Although it would be true to say that there has been some administrative delay, the procedure has in the main been followed.
Lord Harris of Greenwich: My Lords, is the noble Baroness aware that gratified though we are to learn that the tribunal exists, the fact is, as her noble friend pointed out, that these people have been held in custody for five years? Is it not quite intolerable that this situation continues in circumstances where, as the noble Baroness recognises, there is widespread concern in all parts of the House?
Baroness Young: My Lords, I have taken the point made by the noble Lord. We are speaking about an independent country, Zimbabwe. We can only make the representations that we do. We have to consider all the factors involved. We have made our representa-tions, as I have already said in answer to an earlier question, and we are not in a position, because it is not the United Kingdom, to do more than make these representations in the course of justice in another independent country.
Lord Tordoff: My Lords, is it not true that we have a duty to make sure that these people are properly represented? That question has been asked a number of times from all sides of the House. To my mind, it is astonishing that the noble Baroness is not able to give a simple answer to this simple question: have they been properly represented?
Baroness Young: My Lords, to the best of my knowledge and belief they have been properly represented and the procedures are taking place. However, we have to recognise that we are, as I have said, speaking about an independent country and one must recognise the limits of what we, as another independent country, can actually do in the circumstances.
The Marquess of Salisbury: My Lords, is it not correct that these regulations were produced when there was an emergency and they have been continued when presumably no such emergency exists? Is it not an offence against human rights to continue in this way?
Baroness Young: My Lords, there is of course something in what my noble friend says. The regulations which were introduced by the former Rhodesian regime were produced at a time when the situation was not as it is today in Zimbabwe. However, whether or not these regulations are repealed is a matter for that Government.
Lord Mellish: My Lords, the noble Baroness said that the matter is sub judice. How can that be when there has not been a trial?
Baroness Young: My Lords, the appeal to the Supreme Court is to be held on 30th July. It was originally fixed for 28th June but was delayed as the defence counsel was not available. In those circumstances it is right to recognise that this whole long procedure—it is the end of a long procedure—is still sub judice.

Trading Codes of Practice
3.15 p.m.
Baroness Burton of Coventry: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government, whether, further to their reply to the Baroness Burton of Coventry's Starred Question on 7th June 1984 (H.L. Debates, col. 770), they are now able to state the expected date of publication by the Director General of Fair Trading of his discussion paper dealing with trading codes of practice.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, I understand that the Director General of Fair Trading plans to publish next month his discussion paper on the concept of a statutory general duty to trade fairly.
Baroness Burton of Coventry: My Lords, is the Minister aware that I am glad we have managed to get somewhere after two years, although I appreciate the delay has not been the Government's fault? However, can the Minister go further? Does he recall that way back on 7th June two years ago I stressed the concern about enforcement of codes of practice and asked whether it would be helpful in general if there were to be an extension of these codes of practice negotiated with trade associations? Furthermore, can the noble Lord tell the House whether the discussion paper that is to be published soon covers that aspect and also the general consideration of the concern felt about traders who are not members of associations?
Lord Lucas of Chilworth: My Lords, I do indeed recall the exchange way back in June 1984. Although I do not know the total content of the paper, I understand that it will review relevant areas of law and the experience of the Office of Fair Trading with codes of practice. The paper will also consider parallels for a general duty both in domestic and overseas legislation.
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It will also outline options on how a general duty might be framed and enforced.
As regards enforcement on companies or traders who are not within a trade association. (I should perhaps put in parenthesis that there are 20 codes already in practice) the director general has powers to seek assurances from companies or traders who infringe and has further powers in the event of those undertakings not being kept.
Baroness Burton of Coventry: My Lords, may I help the Minister a little more with the Question? Does he recall that the noble Lord, Lord Belstead, in answering my Question on 7th June two years ago, said that both these matters to which I had referred he understood to be matters which the Director General of Fair Trading is considering? Has the noble Lord the same information and will he confirm it?
Secondly, if the proposals from the director general necessitate legislation, will the Government let the House have a statement as to their reactions on the report when it is published?
Lord Lucas of Chilworth: My Lords, on the first point, I have explained that I do not know entirely what the paper will contain, and since it is to be published next month it is a little late for me to direct the attention of the Director General of Fair Trading to the point raised by the noble Baroness this afternoon.
On the second point, the Government await the publication of the discussion paper with interest. We shall of course consider very carefully any proposals that it contains and any proposals that emerge from the director general's consideration of the response he receives to that paper.
Baroness Gardner of Parkes: My Lords, can my noble friend the Minister inform me whether the discussion paper will cover further the items which we discussed recently when this House passed the Consumer Safety (Amendment) Bill, which he agreed was just a first step in this matter? Will this paper on fair trading cover this matter in a wider aspect? If it does, is my noble friend aware how welcome that would be?
Lord Lucas of Chilworth: My Lords, I can only say to my noble friend that I do not know exactly what is contained in the paper. It is a paper on fair trading. It is certainly not a paper on consumer safety, so I imagine that the safety elements will not be included. The paper is about fair trading and about codes of practice.
Lord Bruce of Donington: My Lords, is the noble Lord aware that the production of this discussion paper has taken an unconscionable time? Can he give some indication as to the extent, if any, that the collaboration of officials within his own department and from the Office of Fair Trading has contributed toward the delay? After all, we are only dealing with a discussion paper and not proposed legislation. Will the noble Lord define a little more closely the date of publication? He said "next month". Is it to be the

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beginning of the month or the end of the month? Does the noble Lord know that?
Lord Lucas of Chilworth: My Lords, in reply to the first question from the noble Lord, I said to the noble Baroness, Lady Burton, on 25th March this year that the Director General of Fair Trading has needed a lot of time and has devoted a considerable amount of time to studying what he felt was a very complex matter. There were consultations with many interested parties. I do not believe that there has been any delay that could have been avoided in the director general's consideration. As regards the noble Lord's second question, I am afraid that I cannot tell him any more than "next month".
Baroness Burton of Coventry: My Lords, I am sure that the Minister wishes to be helpful, and I do, too. But I think perhaps he did not quite understand the point I put to him a minute ago. Was the answer that he gave to the House that it was too late to ask the Director General of Fair Trading to include something in the report? I told him that the noble Lord, Lord Belstead, informed me two years ago that these matters were in the report. I wonder whether he would care to alter his answer.
Lord Lucas of Chilworth: My Lords, I have not seen the report. I cannot tell the noble Baroness what is in the report. My noble friend Lord Belstead may very well have said that. I have a copy of Hansard in front of me. I cannot add to what I have said. I have not seen the report.

Fuel Use and Atmospheric Effects
3.22 p.m.
Lord Campbell of Croy: 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 what weight they attach to theories that, unless care is taken in the choice of the main fuels used in the world, the atmosphere could be so changed as to produce a greenhouse effect with serious results for most forms of life.
Lord Skelmersdale: My Lords, the Government recognise that international scientific opinion now accepts the probability that the continuing accumulation of carbon dioxide and other so called greenhouse gases in the atmosphere will lead to an increase in global temperature. Somewhat over half these gases result from fuel combustion. Best current estimates are that a rise of 0·5 degrees centigrade may already have taken place and that a further increase of about 3 degrees centigrade may occur by the middle of the next century. The processes are complex and the implications for sea level, rainfall distribution and local climate are still uncertain. For this reason the Government are supporting co-operative research through the world climate programme. It is too soon to consider specific policies to mitigate possible effects.
Lord Campbell of Croy: My Lords, I thank my noble friend for his reply. Has he seen reports from the United States that such a development would be considerably more dangerous to life than radioactivity arising from nuclear accidents? As the greenhouse condition would be caused by excessive use of fossil fuels, notably coal, is there not a pressing need for international co-ordination of all sources of energy?
Lord Skelmersdale: My Lords, I have not seen such wide-ranging reports from the United States as described by my noble friend in his first supplementary question. I have seen the article by John Gribbin in the New Scientist of 15th May reporting on the four reports of the United States Department of energy which have just been published. I agree with the foreword of those reports, which says:
"The citizens of today's nations have the responsibility for the stewardship of all the Earth, including their actions which may affect climate. Exercising this reponsibihty requires an understanding of atmospheric carbon dioxide and its effects Once understood, stewardship then becomes nurturing rather than unrecognised neglect".
So in regard to exercising this responsibility, I agree with my noble friend's second point.
Lord Renton: My Lords, is my noble friend aware that 30 years ago this country, under a Conservative Government, set a splendid example to the rest of the world with our original Clear Air Act? Will he ensure that the advantages obtained for this country and the experience gained as a result of the administration of that Act are given world-wide publicity, so that other nations may benefit from our example? Will he also say to what extent it is considered that deforestation, especially of the rain forests of Central Africa and South America, has a bearing on this important matter?
Lord Skelmersdale: My Lords, yes, I believe with my noble friend that this country can be justly proud of the Clean Air Act 1956, which of course went a long way toward reducing atmospheric pollution. But I should point out that we are a long way from total understanding of the relevant chemical interactions in the atmosphere. I certainly agree that the effects that the Act has had in this country should be published world-wide.
So far as concerns tropical forests, they are of course generally important in the cycle of atmospheric carbon dioxide. The destruction of forests reduces the rate at which carbon dioxide is removed from the air. Burning obviously produces carbon dioxide as well. Reafforestaton of crop growth partly reverses the process. Overall, deforestation is thought to contribute considerably less (about 10 per cent. to 20 per cent.) to atmospheric carbon dioxide than fuel combustion.
Lord Jenkins of Putney: My Lords, does the noble Lord agree that while no doubt this development needs watching, the suggestion that it is probably more dangerous than nuclear radiation is one that a number of us would hardly like to support? No doubt there are things about which all of us are alarmed and others about which we are not alarmed, and if the human race wants to continue it had better keep a fairly close eye on all of them. Does the noble Lord agree?
Lord Skelmersdale: My Lords, I agree with the noble Lord that nuclear power has its own particular problems, but raising the sea level is not one of them.
Lord Rea: My Lords, is the noble Lord aware that renewable sources of energy would be free from this particular problem? Is he further aware that there has been widespread criticism of the Government's reduction in funding for resarch and development of wave power, which is potentially a huge source of energy, particularly on the Atlantic coast off Scotland? Does he not think that the Government should change their policy on this matter and perhaps put a little more money into this promising development?
Lord Skelmersdale: My Lords, I agree with the noble Lord that of course renewable sources would be free from the particular problem of the greenhouse effect. Some years ago this Government had a policy of reviewing all forms of possible renewable energy; since when, having conducted that review, they have put their greatest research effort and money into those which look the most promising. I think that the House will agree that this is the right way to perform.
Baroness Nicol: My Lords, can the noble Lord assure the House that the level of support for the Natural Environment Research Council is sufficient to deal with what research can be done in this country? For example, is he aware that at the moment there is no director of atmospheric research? Has he any comments to make on that fact?
Lord Skelmersdale: My Lords, the NERC does not take the lead in this particular form of co-operation and research so far as climate is concerned. This is done by the Meteorological Office. The cost of the programme in 1984–85 was £7.7 million.

Royal Ordnance Factories: Privatisation
3.29 p.m.
Lord Graham of Edmonton: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are satisfied that the plans for the privatisation of the Royal Ordnance factories are proceeding in accordance with the programme of disposal previously announced.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, the Government announced last October that we hoped that Royal Ordnance plc would move to the private sector in mid-1986, subject to the usual caveats of trading performance and stock market conditions. As your Lordships already know, in the event we decided it was not possible to proceed with these plans and we are now considering further how best to achieve privatisation.
Lord Graham of Edmonton: My Lords, may I first ask the Minister to accept from me that I wish to withdraw without qualification any implication that I may have made on Friday last that he had misled the House in this matter? Is he aware that he must reconcile his statement of intent, which was given on Second Reading, that the 13 factories which were to be floated would be floated in divisions of three and four together with the clear impression gained from recent announcements that factories such as the Enfield small arms factory can be sold separately? Is he further aware that in Enfield there are 1,200 workers who, according to the local press, fear for their jobs as a result of what they perceive as a change in Government policy? Will he give the workers at Enfield an assurance that their fears are groundless?
Lord Trefgarne: My Lords, I can perhaps do no better than quote the words which I used on 19th July 1984. I entirely accept the noble Lord's correction to the remarks he made when we were considering this matter the other day. On 19th July 1984 I said:
"Inevitably, the setting up of subsidiary companies will facilitate, if this course is proven to be desirable, the disposal of divisions of the ROFs separately to the private sector We have made clear that if this proved attractive, such a possibility has always been on the cards. However, as seen at this moment, the most likely course for privatisation will be a flotation of shares in the enterprise as a whole. Again, the company structure we have proposed will enable either course to be followed".—[Official Report, 19/7/84, col. 1641]
That is what I said then. We are now reviewing the policy in the light of the matters to which I have referred.
Lord Diamond: My Lords, the noble Lord did not give any clear indication of the matters he keeps talking about. Will he tell the House exactly what has happened? Why are we in this totally different situation? All the proposals made when the Bill was being considered were rejected by the noble Lord because there was no time to protect the future of the industry or the interests of Parliament due to the need to rush through the legislation. What has happened to make that a nonsense in the two years which have passed?
Lord Trefgarne: My Lords, perhaps again I can do no better than to quote my right honourable friend the Secretary of State for Defence, who said in another place on 18th June that although,
"substantial progress has been made in the process of transforming Royal Ordnance into a fully fledged commercial entity, it has not been possible to take this far enough and to have in place all the features necessary … for a successful flotation this summer".— [Official Report, Commons, 18/6/86; col. 1034]
Lord Dean of Beswick: My Lords, is the Minister aware that the kind of fears expressed by my friend and colleague on the Front Bench, the noble Lord, Lord Graham of Edmonton, about the group of workers at that factory are also expressed by the workers at the Royal Ordnance tank factory at Barnbow in Leeds? May I take it that the workers at the tank factory at Barnbow in Leeds can carry on on the understanding that in the foreseeable future there will be no change in their circumstances or ownership?
Lord Trefgarne: My Lords, I do not believe that I can add to what I said in the original Answer when I said that we were considering how best to achieve privatisation.
Lord Harris of Greenwich: My Lords, is the noble Lord aware that he is merely repeating a bland statement made by his right honourable friend in another place? He has given no clear indication as to why this has been delayed. Why has it been delayed?
Lord Trefgarne: My Lords, I am indeed aware that I have given no clear indication. The reason for that is that the Government have not yet decided the way forward.
Lord Graham of Edmonton: My Lords, in his response the Minister repeated earlier indications that the factories would be floated either as a whole or in divisions. We are now faced with rumour, innuendo or something stronger that it is possible that individual factories such as the Enfield small arms factory will be floated separately. The employees, whether or not they are right, believe that their interests will be worsened if that happens. Will the Minister confirm that what I have heard—that there is a possibility of the factories all being bought by one purchaser, Vickers—is correct? Will he also tell the House what are the levels of performance or achievement that the Government have in mind before they float an individual factory? At what level do the interests, future and careers of the employees equate to the Government's intentions to float the factories at any price?
Lord Trefgarne: My Lords, I am firmly convinced that the best interests of the employees lie in the moving of their company into the private sector, whether it be in one entity or more than one. That is what we are seeking to achieve.
Lord Hunt: My Lords, will the Minister enlighten someone who is ignorant about these matters? Will the status of the Ordnance factories as Royal factories be affected by privatisation, and if so, how?
Lord Trefgarne: My Lords, clearly the position would be slightly changed. That problem was of course addressed during the legislation's passage through Parliament.

Business
3.36 p.m.
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon, my noble friend Lord Glenarthur will, with the leave of the House, repeat a Statement that will be made in another place on the publication of the Peacock Report on the financing of the BBC.
It may be for the convenience of the House if I announce that the Committee stage of the Building Societies Bill will be adjourned at approximately 7 p.m. for approximately one hour and that during this adjournment the Lord Chancellor's Salary Order 1986 and the Second Reading of the Crown Agents (Amendment) Bill will be taken.

Business of the House
The Lord President of the Council (Viscount Whitelaw): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That Standing Order 38 (Arrangement of the Order Paper) be dispensed with to enable the Gas Bill to be further considered on Report before the Motion standing in the name of the Lord Swansea on Wednesday 9th July.—(Viscount Whitelaw.)
On Question, Motion agreed to.

Company Directors Disqualification Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Insolvency Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Parliamentary Constituencies Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Family Law Bill [H.L.]
3.38 p.m.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Family Law Bill, has consented to place her interest, so far as it is concerned on behalf of the Crown, at the disposal of Parliament for the purpose of the Bill.
Bill read a third time, and passed, and sent to the Commons.
Lord Elwyn-Jones: My Lords, may I be permitted to congratulate the noble and learned Lord on his noble pilgrimage?
The Lord Chancellor: My Lords, I am obliged to the noble and learned Lord, who has been this way before.

Building Societies Bill
3.40 p.m.
Lord Brabazon of Tara: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Brabazon of Tara.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 1 [The Building Societies Commission]:
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 1:
Page 1, line 11, leave out ("subject to subsection (3) below").
The noble Lord said: I beg to move Amendment No. 1. This amendment is linked with Amendment No. 4, which is the substantive amendment. This is not a very important point, but whenever I see a Bill making provision for someone to do as they may think fit, I view that with a certain amount of suspicion. Clause 1(3) of the Bill, which concerns size of the Building Societies Commission, states:
The Treasury may, by order made by statutory instrument, increase the maximum number of members of the Commission to such number as they think fit".
The number provided for in the Bill is contained in subsection (2), which stipulates that not more than 10 and not less than four members shall be on the commission. So I wish to inquire why provision should be made to increase the number of members on the commission without, presumably, any limit being prescribed. I think there are reasons why the numbers may vary from time to time, but to have unlimited scope for increasing the number of members on the commission, when the Government are regarded as safeguarding the public interest on the size of quangos and similar bodies, seems to me to provide an undesirable flexibility concerning the size of the commission.
What I propose to do is to delete the proviso that the numbers may be increased by order. I have no doubt that the Minister will have reasons why that should not be done, but I fear at times that Bills are drafted with an eye on almost every conceivable possibility so that the administration may be free to go beyond the bounds of statute law if they so wish by means of statutory instrument. I am not sure that that is desirable, especially when one is fixing the size of a commission of this importance and standing and making provision for its duties. I think that the Government should be very clear about the numbers they want and that those numbers should be specified in the Bill and should not be exceeded. I beg to move.
Lord Brabazon of Tara: To begin with perhaps I should explain that as currently foreseen it should not be necessary to increase the number of members beyond the statutory limit set out in subsection (2) which specifies 10 members. In order to cater for the unexpected it was considered appropriate to provide the Treasury with the ability to increase the membership by means of statutory instrument. However, in the light of the points made by the noble Lord, Lord Houghton of Sowerby, with which I have a great deal of sympathy (particularly concerning the growth of quangos), I am able to say that the Government will accept his amendment in principle.
There is one slight problem, and that is that this amendment will also necessitate deletion of subsection (4) on page 2 of the Bill in order to make the amendment complete. I am advised that to fail to do that at the same time could cause difficulty, but I am able to give a guarantee to the noble Lord that I—or perhaps the noble Lord himself—will bring back
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amendments at the next stage of the Bill to deal with these points.
Lord Barnett: I am sure the Committee will be delighted with the response. If this is the way the Government propose to proceed with all or our amendments, we shall make very rapid progress.
Lord Brabazon of Tara: I hope we shall make rapid progress, but I cannot give a guarantee that we shall proceed along these lines all the way through the Bill.
Lord Houghton of Sowerby: I am very grateful for that response. May I make a comment in passing? I think it is always unwise for members of the Opposition, upon getting a concession, then to ask whether it is the first of many. It does not auger well upon getting one concession to ask for more. However, I am grateful for this one. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 2:
Page 1, line 11, after ("members") insert (", of which 8 members are").
The noble Lord said: In moving this amendment I should like to speak also to Amendment No. 3. The Bill, as drafted, marks, as I think the Committee will recognise, a major step forward in legislation governing building societies. In particular, it extends the activities of building societies into sectors over which hitherto they have not been allowed to trespass. The problem that faces us is how building societies can be properly monitored in their activities.
The amendment seeks to ensure that the commission has in its membership two people, out of whatever the number may be as a result of the previous discussion, who are expert in two particular sides of the financial services business. One area is banking supervision and the other area is what might be broadly regarded as other financial services to be covered when your Lordships come to debate the Financial Services Bill. Because we have not had an opportunity of debating the Financial Services Bill, Amendment No. 3 specifically refers to two appointments to be made by the Bank of England. I had to use this expression because as yet the Securities and Investments Board—which is a preview, as it were, in terms of the Financial Services Bill—has not yet passed into any sort of statute and indeed has not been discussed in your Lordships' House. I hope the noble Lord the Minister understands the reasons for my use of the words "Bank of England" in both senses.
What we are asking for is a commitment that the commission will itself contain one person who is expert in banking supervision and one person who is expert in the other financial services into which the building societies may feel they ought to enter. We are very pleased that Mr. Sidney Procter has been appointed, as the noble Lord, Lord Brabazon, mentioned on Second Reading. This seems to us to auger well for the banking side of the commission. We should like to see a similar appointment on the other, financial services, side of the commission. We should also like to see that enshrined in statute on the face of the Bill, as we believe it is only in that way that we will

1039
get a continuing and proper supervision of building societies in their new role. I beg to move.
Lord Brabazon of Tara: The noble Lord, Lord Williams, has rightly drawn attention to the need for the new Building Societies Commission and the Bank of England to co-operate closely over the general principles of the prudential supervision of deposit-taking institutions, and in the day-to-day course of business. Their paths will cross at working level on many occasions, and it is obviously right for there to be some formal link at the top. As the noble Lord pointed out, this has already been recognised by the appointment of Mr. Procter, and I am glad that the noble Lord has welcomed that appointment. It would certainly be the Government's intention that, when Mr. Procter retires, there should be a further appointment of somebody with experience of banking and banking supervision.
Nevertheless, it would be wrong, I believe, to build into statute a requirement for the bank to appoint part of the commission. The commission will be an important body and there should be direct answerability to Parliament for appointments to it. While that clearly points to the power staying with the Treasury, I have no doubt that there will continue to be informal consultation with the bank about those appointments. As to the other point the noble Lord made about a possible representative from the future SIB, I shall certainly draw the noble Lord's remarks to the attention of Treasury Ministers. It is, I know, their firm intention that the composition of the commission should reflect the close links between its functions and those of banking supervision and that sort of thing. I would not wish at the moment to build this rigidly into the legislation. I regret that on this occasion therefore I cannot accept the noble Lord's amendment.
Lord Williams of Elvel: I am most grateful to the noble Lord for his reply. Clearly, we have to be satisfied with ministerial assurances on this matter. I would ask the Minister to go a little further and to assure us that, assuming that the Securities and Investments Board is created, it is the intention of the Treasury to ensure that at least one member of the commisssion will be on the general financial services side, which is within the remit of the SIB, just as Mr. Sidney Procter is going to be on the banking supervision side. If the noble Lord will give that general assurance, I shall be happy to withdraw the amendment.
Lord Brabazon of Tara: I am afraid that I cannot give that specific assurance this afternoon. I said that I would draw what has been said to the attention of Treasury Ministers. I certainly undertake to do that. However, that is as far as I can go at the moment.
Lord Williams of Elvel: I understand that the noble Lord cannot go further at this stage. This is a matter to which we may wish to return on Report should there be no further progress in the interim. I hope, however, that there will be some further progress in the interim
1040
with new appointments. In the light of that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 3 not moved.]
The Chairman of Committees (Lord Aberdare): Amendment No. 4 is, I believe, not moved.
Lord Houghton of Sowerby: I beg to move Amendment No. 5.
The Chairman of Committees: I am dealing with Amendment No. 4 which is, I believe, not moved. I call therefore, the noble Lord, Lord Houghton, to move Amendment No. 5.
Lord Houghton of Sowerby: All right. We will get it right this time. Not moved.
Lord Brabazon of Tara: With respect, the noble Lord does, I think, wish to move Amendment No. 5.
[Amendment No 4 not moved.]
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 5:
Page 2, line 8, at end insert—
("and the alleviation of hardship imposed upon borrowers by the unavoidable misfortunes of life or brought about by other adverse changes in their ability to fulfil their obligations under the mortgage deed ")
The noble Lord said: I apologise for what has just occurred. It is a very hot afternoon. The fact that the first clause of the Bill sets up the Building Societies Commission with wide functions and responsibilities is an indication of the need for some overall surveillance and, if necessary, control or regulation in order that the new powers of building societies may be exercised with a full sense of responsibilty and efficiency. The first of the general functions of the commission as set out in subsection (6) are
"to promote the protection by each building society of the investments of its shareholders and depositors"
The amendment proposes to add at the end of that description of the first duties of the Building Societies Commission the words,
"and the alleviation of hardship imposed upon borrowers by the unavoidable misfortunes of life or brought about by other adverse changes in their ability to fulfil their obligations under the mortgage deed"
This is a proposal to bring building societies into what I would describe as the poverty circuit. It can be related to the decision of the Government recently to alter the conditions upon which mortgage interest shall be covered by supplementary benefit for the first six months where borrowers are in need of help, get supplementary benefit and hitherto have got an allowance for their mortgage interest that could be regarded as the equivalent of the rent allowance for people in rented accommodation.
The restriction to one half of the mortgage interest payable by people who are to receive supplementary benefit can, of course, add to their difficulties. It seems to me that here the building societies should come in. In conditions where the Government are virtually making home ownership the only option for many people seeking accommodation and when the building

1041
societies, on the whole, are those who are providing the service to the borrower to acquire a home on a mortgage, then the state and the building societies jointly have some responsibility for what may happen to those who are suffering hardship. That is why I believe that part of the duties of building societies is to look after borrowers in trouble and relate their difficulties to what the state may be doing in the way of additional help through supplementary benefit or, later on, the social fund.
I am not at present bringing into the discussion the terms of Amendment No. 70 because I would like a response on the general approach to this matter. It seems to me that what I have in mind is not fully and clearly covered by subsection (6)(a) on page 2.1 want that to be made absolutely clear. We cannot envisage that this problem will become less difficult. It is likely to be the other way round. I cannot see that in the period ahead we shall have fewer cases of difficulty. It would be better therefore to formalise the position of the building societies in regard to the help to be given to their borrowers.
The debate that took place in another place on 25 th June covered a good deal of the ground here without any clear indication being given by the Government that to bring the building societies into this area was in their minds. There were, however, numerous references to what some building societies are doing in respect of insurance against redundancy and what insurance policies were available for cases involving this kind of difficulty. But the amendment is seeking that the commission should have a duty to make this provision general among building societies, to provide a scheme under which it can be done, and to make a levy on building societies to finance it. It would not require building societies to bear the cost wholly out of their own funds. They might very well impose a levy on borrowers as a form of insurance in their own scheme of things.
When, years ago, I was chairman of the Civil Service Housing Association we had the advantage of our arrangement with a building society to lend money at half per cent. lower than they were lending generally, because of the secure quality of civil servants as borrowers. With that half per cent. difference we were able to bring into the scheme of mortgages hedging arrangements to cover certain risks in life, and hardship was one of them. So it was really a social fund provided by the borrowers on a levy paid throughout their mortgage life and the building society's own resources where they were needed.
Something of that kind should be considered by the commission. I think it would be unsatisfactory to have a Bill of this importance, and this wide coverage of new duties and opportunities, without looking at this matter, because it is bound to be serious in many cases. So I sincerely hope that the Government will respond to this amendment.
Unfortunately, we are in what I saw described recently as a debtor culture, when it has never been easier for people to get money and never easier to get into debt. The Citizens' Advice Bureaux are talking about the number of cases that they have where there are money troubles, and the amount of indebtedness
1042
involved is very large indeed. We are therefore in a society where the borrowing of money is easy, creating financial difficulties, especially for young people, who may be induced to take on more than they really should.
A great many of the people who are borrowing money through building societies are comparatively young and some of them have family responsibilities with a mortgage on top. It is not surprising that, if they lose their jobs, fall ill or have an injury and there is a loss of wages they are soon in difficulties. The building societies find no difficulty in deferring repayments of capital, but the payment of interest is regarded by them, naturally, as of some importance.
Are we going to cover the borrower, in the same way as the person in rented accommodation paying rent? If social security is not going to do that, building societies should come in and discharge some responsibility of their own. So I beg to move this amendment and hope that the Government will respond to it. Whatever the imperfections in drafting, the whole spirit of the amendment must be clear. I beg to move.
Baroness Turner of Camden: I rise to support the amendment moved by my noble friend Lord Houghton of Sowerby, and I do so for a number of reasons. First, we are now contemplating legislation in this field under which building societies will be taking on a whole number of other financial services duties which they have never had before. This legislation, and other legislation in the financial field, will mean that everybody in the financial services area will be offering all kinds of financial services. This also means that building societies, which, of course, were built up originally as a movement to provide housing loans for people, will be providing a whole range of other services, and in those circumstances it is important that the social aspect of building societies' functions should be emphasised. As I understand it, this is what this amendment seeks to do. It would be a great pity if that were to be lost sight of; and for those reasons I commend the amendment to the Committee.
I think it would be a great pity if we were to pass this Bill without ensuring that there was in it something which emphasised the function of building societies to provide a social service to borrowers and ensured that if borrowers are in difficulty, there is some means by which that difficulty can, to some extent, be alleviated.
Baroness Gardner of Parkes: I rise to oppose this amendment, and I should begin by declaring my position as an honorary vice-president of the Building Societies Association, but that in no way influences what I intend to say on this matter. It would be quite impossible to build a social clause of this type into the building societies' future. I happen to be a member of the London Electricity Board and we went to France to see the situation there. They have none of the social problems attached to their energy authorities that we have in this country. The problems that are created by mixing a financial and business function with a social one are very great.
In this country in the past the building societies have always been very good and they will do whatever they can to help genuine cases of hardship. But to write an

1043
obligation into a Bill asking that this must be done, and without in any way quantifying the financial commitment involved, is quite wrong. We have to look at the other side of the building societies' issue.
Like many women in this country, I am a great believer in having my little bit of savings in a building society, and the people who rely upon the building society to give them their income in the form of interest might find that they suffered very badly if something of this type was built in. If it was something discretionary that the building societies could do, then I should hope that, so far as possible, they would do it. But to write something of this type on the face of the Bill is to demand an enormous financial commitment and I cannot support that.
Lord Shepherd: I rise to support my noble friend in regard to this amendment and perhaps I may initially reply to the noble Baroness. She, quite rightly, declared her interest. However, I think she would agree that in the past the building societies have been within the friendly societies legislation. That type of organisation has been seen, although it has been commercial—clearly, it has to be commercial—to be an organisation which is providing great service to the community. I agree with the noble Baroness that the building societies—certainly, all those that spring readily to mind—have an extraordinary reputation as regards the way in which they deal with their borrowers who temporarily fall into difficulties. They do it in a number of ways, usually after consultation and examination of the individual's position.
So my anxiety is not so much for the present; my anxiety is not so much for the new borrower who may go to a building society once this legislation has been passed; my anxiety is for the many millions of borrowers who have borrowed from a building society under the existing psychological approach of the managers, and those responsible within the building societies to the borrowers.
My noble friend said that there is a touch of indebtedness. My support for the concept that people should buy their own houses—and that is where building societies have played such a notable part—is based on the belief that this is one of the best forms of saving that is open to any individual. Certainly in recent years, taking account of the rate of inflation, the purchase of a house has probably been the best protection against inflation.
Borrowers have borrowed with the knowledge and experience of the building societies behind them. The Bill will change that situation, although building societies will be required primarily to raise money in most cases for the purposes of lending it to existing depositors. But the concept of the Bill and the new opportunities could well change the attitude of local managers or even the main board of building societies. We may then have a new situation which was not foreseen by the borrower when he took up the loan in the early stages with the building societies.
I think that the noble Baroness will agree that in the past—certainly 10 or 15 years ago—most young people when they went to a building society found it relatively easy to satisfy both themselves and the building society as to their ability to purchase and to
1044
take out a mortgage. Regretfully, it is not now assured to anyone that he will remain in employment. A man may be a first-class executive, who is performing with extraordinary success within an organisation, but it may be subject to a merger, and he may suddenly find that he has lost his post. There is a touch of instability. But at the present moment people feel that because of their reputation and past record if such circumstances arise, the building societies will take a lenient and humanitarian view of the situation.
However, as my noble friend said, things can change. We are moving into the commercial field where the interests of money become much more important. As the building societies develop into other forms of business, there may always be a clash within the organisation as to the best use of the money: "should we be tolerant to those who have fallen into difficulty or should we put on the squeeze in order to recover the money more quickly or, perhaps more harshly, in order to use the cash flow in other fields?".
It seems to me that the amendment does not lay down a fundamental duty upon anybody except the commission. It does not lay down a fundamental rule or place a duty on the building society. It is to be only a function of the commission. Truthfully, my only anxiety is whether the amendment is in the right place. I believe that it should have been a subsection on its own. Then it would have sat more easily within the framework of the clause. But as to my noble friend's purpose and intention, I think that he is entirely wrong.
Despite what the noble Baroness said, taking into consideration the record of the building societies, such a provision, which only calls for the function of seeking ways to alleviate the problem, would be in the long-term interests of building societies not only in their relationship to borrowers but in fairness to the many depositors who place money in the building societies for reasons other than interest. I hope that the Government will accept the spirit and purpose of the amendment. If they did that, they would be conferring a considerable favour on building societies as a whole; but in particular it would remove some of the anxieties among existing borrowers. I hope that the Government will feel able to accept at least the spirit and intention of the amendment.
4.15 p.m.
Lord Plummer of St. Marylebone: I hope that this amendment will be rejected. I should perhaps first declare an interest in that I am chairman of a building society, and I am also president of the Metropolitan Association of Building Societies.
The noble Lord, Lord Houghton of Sowerby, I shall not say gave the game away but at least made the point that he wanted to bring building societies into the poverty service. It is not the duty of building societies to act as a poverty service. As the noble Lord, Lord Shepherd, said, the building societies have for years taken a most sympathetic attitude towards people who find themselves in difficulty, and I am sure that they will continue to do so. But we are moving into a commercial world. There is great competition from bodies which will not, as I see it, be subject to the provisions in the amendment. If this provision is

1045
imposed on the building societies, I do not see where we stop. For that reason, I ask the Committee to reject the amendment.
Lord Campbell of Alloway: I apologise to the Committee for not being in my place at the time when the noble Lord introduced the amendment. These are words of exhortation—and what excellent words they are! They are noble sentiments, they are most beautifully expressed, and I wholeheartedly agree with them. But what is the effect? What will the courts make of it? Those are the questions that one has to ask before words of exhortation such as those are ever to be included in a statute.
With respect to the noble Lord, Lord Shepherd, it is not understood how, if those words were included, his anxieties would in any way be allayed. Perhaps in another form, perhaps in another place; but assuredly, with respect to the noble Lord, those words would achieve nothing and would not be appropriate for inclusion in the statute in the form in which they are.
Lord Barnett: I should also like to support my noble friend Lord Houghton of Sowerby. I think that it would be fair to say that he is not wedded to the words, and certainly I am not. I have rarely seen in legislation—indeed, I doubt whether they have ever been in legislation—such words
as: "the unavoidable misfortunes of life".
I am not sure how they would be interpreted. I am sure that my noble friend, and those who have supported him, like my noble friends Lord Shepherd and Lady Turner, do not want necessarily to go along with precisely that form of words. As they have all said, it is the spirit of the amendment that we should be concerned with.
Nobody has any doubt that building societies today are helpful and considerate to borrowers who get into difficulties because of the misfortunes of life or for other reasons. They may not be the misfortunes of life in the normal sense of the word, but they may be brought about through no fault of the borrowers, for whatever reason. In my experience, building societies have always helped in those circumstances.
My noble friend Lord Shepherd made an important point. We are moving into a very different era. Indeed, the whole objective of this major Bill is to allow building societies to deal with a whole new financial world into which they are moving. We cannot know how things will work in this new financial environ-ment. It is precisely for that reason that we should understand what underlies the spirit of the amendment. I hope that the Committee will support that spirit. I do not know whether my noble friend has in mind to divide the Committee, but I hope that the Minister, although perhaps not accepting the amendment as drafted, will be able to accept the spirit of what is being said by those who have supported it, including my noble friend. In that way I hope that we shall be able to give a lead in a form of words.
As has been said, we are not here imposing a burden on the building societies as such. We are talking about the functions of the commission. Speaking for myself, I should not be at all happy about the idea of cross-
1046
subsidisation of one borrower by another. Frankly, I do not think that it would ever be necessary. There is in normal circumstances ample equity in a house and the borrowing that is made against it. It would be a very rare circumstance indeed where a borrower who got into serious financial difficulties found himself in due course unable to meet the bill to the building society in full. In terms of the sale and purchase of houses and the involvement of mortgages in my experience we are talking of periods of six or seven years nowadays; or it may be even less. In those circumstances, and given the equity that exists in the house as security to the building society, it is extremely unlikely—if the societies are able to continue to alleviate hardship as they have done so far—that there would ever be a need for cross-subsidisation or that there would be a burden on building societies.
I recognise that many may feel that the wording of the amendment would seem strange in a piece of legislation—strange certainly to a legal mind, which I do not possess. I can well understand that as a lawyer the noble Lord, Lord Campbell of Alloway, may find unacceptable the words,
"the alleviation of hardship … by the unavoidable misfortunes of life".
But I hope that he will accept the spirit of what is being said in this amendment. I hope that the Minister will, too, and that members of the Committee will not show themselves to be as hard-hearted as might otherwise have been thought.
Lord Brabazon of Tara: Perhaps I may start by explaining to the Committee what is the main purpose of the commission. The commission is essentially in the business of prudential supervision. Those who are putting their money into a building society need to be assured that the institutions in questions are solvent if their money is to be safeguarded and the integrity of the financial system is to be maintained. The supervisory function which Parliament has laid on the Bank of England in the case of banks, and which it will shortly give to the Building Societies Commission under this Bill, is directed to that end. Therefore the commission does not relate to borrowers. They are not at risk in the same way if an institution becomes insolvent. The protection of the borrower is hence not a matter for the commission.
However, that was not the main thrust of the argument which the noble Lord, Lord Houghton, introduced and on which we have had a very good debate this afternoon. It concerned the position of borrowers who are facing difficulty in making their repayments rather than the institutional arrange-ments. There are several avenues open to a borrower in this position. The first thing he should do is to approach his building society or other lender to discuss his position rather than to allow arrears to build up without explanation. I think that most noble Lords who have spoken this afternoon have reminded us—certainly my noble friend Lady Gardner of Parkes and the noble Lord, Lord Plummer have—of the building societies' excellent record in the sympathetic view which they take in these cases. I believe, for example, that they allow borrowers to suspend

1047
repayments of principal over a period, and the mortgage interest payments of anybody who has been receiving supplementary benefit for more than six months will be met in full. At the end of the day if a borrower cannot afford the repayments on his loan, he needs to consider very carefully whether he can continue to maintain the commitment.
Several noble Lords have raised the point that the building societies are in competition with a number of other lending institutions nowadays. To put a duty such as this on the building societies alone, where it did not fall on the banks or any of these other competitors now in the mortgage market, would be very difficult.
It is incumbent on building societies to follow prudent lending policies, since nobody benefits from a loan on which the borrower ultimately defaults. This point is particularly important at the present time when there is much more intense competition to lend money than there has been for many years past. Lenders should resist the temptation to advance money without considering properly the borrower's ability to repay. Following prudent lending criteria is the best way to prevent these problems from arising in the first place.
The noble Baroness, Lady Turner of Camden, said that building societies should provide a social service for their borrowers. I think that my noble friend Lord Plummer rejected that. I certainly agree with him that it is not the duty of the building societies to do that. As I have said, they have an excellent record, but it is not their duty to do that. It would be unfair on their other borrowers, or indeed their lenders, to expect them to provide this kind of social service.
For those reasons I am afraid that I am not able to accept this amendment—apart from the reasons given by the noble Lord, Lord Campbell of Alloway, which were very good reasons as to why the amendment was not very suitable. I do not think as a matter of principle that it is right to insist upon the building societies going into the social security field and I must ask my noble friends to reject the amendment.
Lord Houghton of Sowerby: I am very disappointed with that reply. The Government have precipitated this problem through their proposal to discontinue supplementary benefit to cover one half of the interest payments during the first six months. That has sparked off this problem. If people are not to get the full cover for the interest on their mortgages during the first six months, in the same way that occupants of tenanted accommodation get full cover for their rent, what are the borrowers expected to do? The Building Societies Association, in its evidence to the joint advisory committee, has suggested that the probability is that the borrower will want to capitalise the interest that is not being covered by social payment. The regulations apparently already made by the Government provide for benefit to cover interest on capitalised interest. That is a somewhat cynical way of dealing with the difficulties of the borrower. In many cases it will only pile up more indebtedness to the building society and leave him in difficulties later on.
1048
We have to bear in mind that the incidence of this problem is very uneven because of the unevenness of unemployment. That is another aspect of the matter which makes it more difficult for some building societies to provide for it on their own than others in more prosperous areas with less unemployment. This was intended to be a mutual arrangement. I should like any noble Lord connected with a building society to say what is his understanding of the principle of mutuality in building societies. Where is the mutuality in building societies between the investor and the borrower if the investor does not urge his building society to take care of the borrower? If there is not mutuality in this situation, I should like to know where mutuality exists at all in the relationship between investor and borrower. The investor is not making money; he is lending money at a reasonable rate of interest. The mutuality is that any benefit should be shared between him and the borrower. When borrowers get into difficulties it is the clear duty of building societies to do all that they can to take care of them. This amendment is merely an extension of the spirit of the building societies which are already doing that; it is an extension of the spirit of those building societies which are recommending borrowers to take out an insurance policy against redundancies. In those circumstances, I am absolutely amazed at the rejection of a proposition of this kind to give the Building Societies Commission power—it does not say that it "shall"—to take this matter into their functions and to enable them to make arrangements as regards the whole of building societies, if they think fit.
Meanwhile, what will the Government do about the proposition in respect of half of the mortgage interest in the first six months? They are aggravating the difficulties of the borrower by their change in social policy. If the Government are to persist in making more difficulties for borrowers in these conditions, then the building societies, with their traditions of help and generosity towards their borrowers in difficulties, will want to do something themselves and not merely allow borrowers to capitalise interest, then pay interest on capitalised interest and then receive benefit from the social services for that. They want to do the job properly. It can be done properly under the umbrella of the Building Societies Commission. I know of no other way at present in which building societies can all co-operate together under a disciplined and well-organised scheme of this kind.
In the circumstances, I say to those who have interests to declare—as have a number of noble Lords—and who have responsibilities for building societies that they should be counted. Let us know where they stand so that we shall be able to say whether some building societies are not in favour of dealing with this problem in a reasonable manner. We should now strip away from the argument the bare indication of whether building societies are willing to do this or whether they are not. If they are not willing to do it, then it is an added argument for social benefit taking a different direction from that which it takes at present.
Therefore, in the circumstances I am bound to say that I must divide the Committee on this amendment.
4.32 p.m.
On Question, Whether the said amendment (No. 5) shall be agreed to?
Their Lordships divided: Contents, 81; Not-Contents, 119.

DIVISION NO.1

CONTENTS

Airedale, L.

John-Mackie, L.

Ardwick, L.

Kagan, L.

Aylestone, L.

Kaldor, L.

Banks, L.

Kilbracken, L.

Barnett, L.

Kilmarnock, L.

Belhaven and Stenton, L.

Leatherland, L.

Birk, B.

Listowel, E.

Boston of Faversham, L.

Llewelyn-Davies of Hastoe, B.

Bottomley, L.

Lockwood, B.

Brockway, L.

Lovell-Davis, L.

Bruce of Donington, L.

Mackie of Benshie, L.

Carmichael of Kelvingrove, L.

McNair, L.

Cledwyn of Penrhos L.

Mishcon, L.

Crawshaw of Aintree, L.

Molloy, L.

David, B.

Morton of Shuna, L.

Dean of Beswick, L.

Mulley, L.

Denington, B.

Nicol, B.

Diamond, L.

Ogmore, L.

Elwyn-Jones, L.

Oram, L.

Elystan-Morgan, L.

Parry, L.

Ennals, L.

Phillips, B.

Ewart-Biggs, B.

Ponsonby of Shulbrede, L.

Ezra, L.

Rochester, L.

Fitt, L.

Ross of Marnock, L.

Foot, L.

Scanlon, L.

Gallacher, L.

Serota, B.

Gladwyn, L.

Shepherd, L.

Graham of Edmonton, L.

Silkin of Dulwich, L.

[Teller.]

Stallard, L.

Grey, E.

Stoddart of Swindon, L.

Hampton, L.

Strabolgi, L.

Hanworth, V.

Taylor of Blackburn, L.

Harris of Greenwich, L.

Tordoff, L.

Hatch of Lusby. L.

Turner of Camden, B.

Hayter, L.

Underhill, L.

Houghton of Sowerby, L.

Wallace of Coslany, L.

[Teller.]

Wells-Pestell, L.

Hunt, L.

White, B.

Irving of Dartford, L.

Wigoder, L.

Jacques, L.

Williams of Elvel, L.

Jeger, B.

Winstanley, L.

Jenkins of Putney, L.

NOT-CONTENTS

Ailsa, M.

Denham, L. [Teller.]

Aldington, L.

Denning, L.

Alexander of Tunis, E.

Dilhorne, V.

Allenby of Megiddo, V.

Drumalbyn, L.

Alport, L.

Dundee, E.

Ampthill, L.

Ellenborough, L.

Annan, L.

Elles, B.

Auckland, L.

Elliot of Harwood, B.

Beloff, L.

Elliott of Morpeth, L.

Belstead, L.

Elton, L.

Bessborough, E.

Faithfull, B.

Boyd-Carpenter, L.

Fortescue, E.

Brabazon of Tara, L.

Fraser of Kilmorack, L.

Brougham and Vaux, L.

Gainford, L.

Broxbourne, L.

Gardner of Parkes, B.

Bruce-Gardyne, L.

Gisborough, L.

Cameron of Lochbroom, L.

Glenarthur, L.

Campbell of Alloway, L.

Gray of Contin, L

Campbell of Croy, L.

Gridley, L.

Carnock, L.

Hailsham of Saint

Cathcart, E.

Marylebone, L.

Cross, V.

Halsbury, E.

Cullen of Ashboume, L.

Hardinge of Penshurst, L.

Davidson, V.

Henderson of Brompton, L.

De Freyne, L.

Henley, L.

1050

Hill of Luton, L.

Renton, L.

Hooper, B.

Richardson, L.

Hylton-Foster, B.

Ridley, V.

Ilchester, E.

St. Aldwyn, E.

King of Wartnaby, L.

St. Davids, V.

Kinnaird, L.

Saint Oswald, L.

Kitchener, E.

Sandford, L.

Lane-Fox, B.

Savile, L.

Lawrence, L.

Selkirk, E.

Layton, L.

Sempill, Ly.

Lloyd of Hampstead, L.

Shannon E.

Long, V.

Shaughnessy, L.

Lothian, M.

Sherfield, L.

Lucas of Chilworth, L.

Shrewsbury, E.

McFadzean, L.

Shuttleworth, L.

Macleod of Borve, B.

Skelmersdale, L.

Mancroft, L.

Stamp, L.

Maude of Stratford-upon-

Strathcona and Mount Royal,

Avon, L.

L.

Merrivale, L.

Sudeley, L.

Mersey, V.

Swinton, E. [Teller.]

Morris, L.

Teviot, L.

Mountgarret, V.

Thomas of Swynnerton, L.

Mowbray and Stourton, L.

Thorneycroft, L.

Murton of Lindisfarne, L.

Torrington, V.

Newall, L.

Trenchard, V.

Norfolk, D.

Trumpington, B.

Nugent of Guildford, L.

Ullswater, V.

Pender, L.

Vaux of Harrowden, L.

Peyton of Yeovil, L.

Vickers, B.

Plummer of St Marylebone,

Vivian, L.

L.

Whitelaw, V.

Porritt, L.

Wise, L.

Portland, D.

Young, B.

Quinton, L.

Young of Graffham, L.

Rankeillour, L.

Ypres, E.

Reigate, L.

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

4.40 p. m.
Lord Skelmersdale: I think that this is an appropriate moment to take the Statement I beg to move that the House do now resume.
House resumed.

Peacock Report
4. 41p.m.
The Parliamentary Under-Secretary of State, Home Office (Lord Glenarthur): My Lords, with the leave of the House, I shall now repeat a Statement on the Peacock Report which is being made in another place by my right honourable friend the Home Secretary. The Statement is as follows:
"With permission, Mr Speaker, I should like to make a Statement on the report of the committee on financing the BBC under the chairmanship of Professor Alan Peacock which was published today. I should like to record my deep gratitude to Professor Peacock and his colleagues for their industry in pursuing their inquiries and for their efficiency in completing their work and producing this report in 12 months.
"The committee puts forward a number of interesting and constructive proposals for replacing the present system of financing the BBC in a few years' time, which I shall come to. However, it rejects the proposal that the BBC should at present

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be funded wholly or in part by advertising and concludes that at this stage the licence fee, with some modifications, should remain as the principal source of funding for the BBC. The committee argues that, since spectrum is still scarce, and there is as yet no way in which the consumer can pay direct for the programme of his choice, the introduction of advertising would reduce the effective range of choice open to viewers and listeners. Given the original work which the committee undertook and commissioned on the economics of the advertising market and on the relationship between advertising and broadcasting services, we cannot lightly put aside its assessment of this point. However, before reaching any conclusions the Government would welcome comments on the committee's analysis.
"The committee's view is that our present system of public service broadcasting has provided the best means of securing diversity of choice and programmes of quality—under the prevailing market conditions. The committee sees a need for this system to remain in being for some years, though with important modifications, but argues that, under pressure for inevitable technological change, it must and should give way to arrange-ments where, as channels multiply and customers find means to register their own preferences directly, a genuinely competitive broadcasting market develops. The committee believes that this will take time but in a few years, in preparation for this, payment for BBC services should be made through subscription, leading to the end of the licence fee system. In the longer term, perhaps through the provision of a national cable grid, a genuinely competitive market in television services could be brought about so that the current arrangements, dependent on the duopoly, would no longer be needed. There would be scope for greater diversity of programmes and a wider choice for consumers, who would have much greater freedom than is now possible to decide which programme services they would like and at what price. Special arrangements are envisaged to ensure that public service programmes are available which, though needed, the market might not produce unaided.
"The Government see much merit in this approach which fits well with our general philosophy. All of the committee's proposals, which have profound implications for all broadcast services, and the institutions which provide them, deserve and will receive careful study. We shall reach final views on the Report only in the light of parliamentary and public reaction; and we should welcome any comments from the public and other interested parties. However, there are four matters on which I should like to make some comment now.
"First, there is the proposal by four members of the committee that IBA contracts should be awarded by a competitive tender, with the IBA required to make a full public and detailed statement of its reasons if it decided to award a franchise to a contractor other than the one making the highest bid. The Government have reached no conclusion on this recommendation. However, we are anxious that the option for change should
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remain open. This would not be the case if the IBA proceeds to arrange new ITV contracts to take effect from the beginning of 1990 for eight years. Accordingly we are considering with the IBA the relationship between this timetable and the committee's recommendation. We do not propose to disturb the work the IBA has in hand to make a contract for the provision of DBS services.
"Second, there is the question of the regulaion of the content of broadcast programmes. The committee suggests that broadcast services should be subject only to such regulation as is provided for all material in the general law of the land, as is the case for the print media, and that in the long term there should be no pre-publication censorship or vetting of any kind of broadcasting. There is also a recommendation that arrangements should be made now that the non-occupied night time hours of existing broadcasting frequencies should be sold for broadcasting use and that there should be no regulation of the programme content for such services except in so far as the law of the land, amended as necessary, restricted it. Our present arrangements reflect the view that the peculiarly intrusive nature of broadcasting, and in particular of television, continue to require special regilatory arrangements to ensure certain standards in broadcast services. For this reason we have broadcasting authorities to enforce controls on such matters as taste and decency in broadcasting which are much stricter than applying to the print media, or than could easily be accommodated in the criminal law. The present regulatory regime, and the institutions to give effect to them, are certainly not sacrosanct; but the Government believe that any future arrangements should be no less effective than those now in place.
"Third, there are the recommendations on radio. The Peacock Committee recommends that the BBC should have the option to privatise Radios 1, 2 and local radio in whole or in part and the IBA regulation of radio should be replaced by a looser regime. Five of the Committee's members went further and said that Radio 1 and Radio 2 should be privatised and financed by advertising and that further radio frequencies becoming available should be auctioned to the highest bidder. I have already announced my intention to publish a Green Paper looking at the existing framework for the provision and regulation of radio broadcasting as a whole. I believe that it would be helpful for this consultative document to examine further services at national, local and community level and that the future of BBC radio services and of those provided by the IBA should be looked at in the ight of the Peacock Committee's recommendations.
"Fourth, we see merit in a number of the committee's shorter term proposals designed to pave the way for the free broadcasting market which they wish to create, including for example the recommendation to increase the proportion of television programmes supplied by independent producers. The best way of achieving this will need careful consideration.
"I welcome the Committee's report and the many stimulating ideas which it contains. It is a

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challenging piece of work. We look forward to the constructive public debate about the future of broadcasting which I am sure it will encourage."
My Lords, that concludes the Statement.
Lord Mishcon: My Lords, we on these Benches should like to thank the Minister for repeating the Statement made in another place by his right honourable friend. It would be singularly ungracious of us too if we did not thank the members of the Peacock Committee for their industry over the past 12 months. Perhaps I may be permitted to close my eulogy with those words.
The first reaction that I believe many of us would have is thank heavens the report rejects the proposals that the BBC should be funded wholly, or partially, by advertising. The dislike that some of us have is for the words "at present" which appear both in the report and in the Statement. The Government appear anxious from the Statement which has just been repeated to us to keep their options open. These Benches, without any qualification whatsoever, oppose BBC advertising, hook, line and sinker: not least because we believe very definitely that this would have the effect not only of lowering standards—a most important matter—but it would also throttle some of the media including local commercial radio stations.
The Statement goes on to say that the committee would like to see a genuinely competitive market develop and that meanwhile there should be a payment made by subscription, presumably dependent on user. We think that is a very bad idea indeed. If I may alliterate for one moment, it seems to want to make the BBC into the begging-bowl broadcaster. I say that for the obvious reason that it seems to me, if I may say so humbly, that any such suggestion will encourage the public to switch from the BBC as soon as they possibly can presumably to save themselves money; but, far worse than that, will encourage the BBC to produce only the programmes that will be largely in demand, and this will obviously detract from the standards of which we are so proud in relation to the BBC.
The Statement then concentrates on certain matters. The first is that IBA contracts will be awarded by competitive tender with the IBA who would be required to make a full, public and detailed statement of reasons if it decided to award a franchise other than one making the highest bid. I emphasise that that is a recommendation proposed by four members out of the seven-man committee. The Government say that they have reached no conclusions on that recommendation. On behalf of these Benches, I should say that we reached a conclusion immediately: it is that money alone will not be allowed to speak, as far as we are concerned, in the awarding of tenders.
I move quickly to the second item which is mentioned so specifically in the Statement: that concerns the regulations of content of broadcasting programmes. I believe many of us in this Chamber are still anxious about violence and sex as portrayed often in television where some of us feel that young people are being adversely affected. Your Lordships' House has expressed itself strongly from time to time on these
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matters. May I ask the noble Lord the Minister what is the position of the code which was under discussion? Can the Board of the BBC be encouraged to take a more lively interest in guiding policy in this connection?
Thirdly, the Peacock Committee recommends for radio that the BBC should have an option to privatise Radio 1 and Radio 2 and local radio in whole or in part. We believe that the BBC must be allowed to cater for all types of people and for all types of taste. From our point of view, we oppose any recommendation to privatise.
I conclude my observations on this Statement and on the report generally. One could go on for a long time, but the House would not appreciate that at Statement time. I envy somebody much wittier than I who, in one sentence, summarised what he thought to be the position of the Peacock Report. He said that this must be the first peacock to be pigeon-holed before it was even hatched. I borrow the Statement and ask the Minister for his comments on it.
Lord Winstanley: My Lords, on behalf of my noble friends on these Benches I join the noble Lord, Lord Mishcon, in thanking the Minister for repeating this important Statement on this very complex and important report.
Many of us on these Benches when the Peacock Committee was first appointed tended to regard the whole exercise as a delaying device; a device intended to postpone rather difficult and touchy decisions, perhaps even until after the next general election. It would seem from the Statement, from promises of further Green Papers and the Government waiting for further comments that it might turn out to be exactly that. However, there are some matters that cannot wait that long.
I shall now refer to matters in the Statement and in the report which from these benches we welcome. First we welcome warmly the statement that the licence fee should remain as the principal source of funding for the BBC. We welcome that, but it is something which cannot wait and in advance of any Green Paper we should like to hear something about a fixed licence fee over a lengthy period, perhaps index-linked, established as soon as possible. On these Benches we have always felt that for the BBC having to go at short intervals cap in hand to the government of the day for an increase in the licence fee has always rendered the BBC perhaps undesirably dependent on the government of the day, whatever government that may be.
Secondly, we welcome the Statement rejecting, for the moment, advertising on BBC television. I think, too, I should like to welcome what is said in the Statement and in the report which recognises what can be done with new technology to enable pay television to become a reality. That would provide enhanced opportunities for minority interests in many ways. With the use of DBS (which has been referred to in the Statement) it is possible that there may come a time when one might be able to choose a particular programme, perhaps an opera from New York or even a boxing-match from somewhere else in the world, and be able to watch that live at three o'clock in the

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morning by paying a fee. The technology is available for that, and I am glad to see that that technology has not been rejected.
In relation to the parts of the report and the Statement to which we take some exception, I should say at once that the idea of giving the franchises to the highest bidder surely is absolutely absurd. The only power the Independent Broadcasting Authority has over programme standards is its power to award, to withhold or withdraw a franchise. If the franchises were once sold off to the highest bidder one might as well abolish the IBA the following day. That is something which noble Lords on these Benches would certainly not support.
Also, we have some doubts about Radios 1 and 2 being paid for by advertising and being privatised. Radio is not free; it has to be paid for. It is paid for at the end of the day by the listener. It is my impression that the BBC under its present structure is able to mount Radio 1 and Radio 2 very cheaply indeed. It is my belief that any private company who bought it would find it very much more expensive to provide the same service, and that extra money would have to be provided by the listener.
Finally, I should like to acknowledge from these Benches that it would appear from the comments that have been made by the Home Secretary and by the Statement which has been made here, that Mr. Hurd really is perhaps more deeply committed to the maintenance of broadcasting standards than some of us feared. We look forward very much indeed to debates on the promised Green Paper and to taking a full part in them. We hope that important matters such as the licence fee and making it index-linked over a lengthy period could be dealt with before the time of the Green Paper.
5 p.m.
Lord Glenarthur: My Lords, I am grateful to both noble Lords for their comments on the Statement. I shall endeavour to respond to some of the points that they have raised. Many of those points are points which will have to be taken in the round, with the other views that will be expressed generally on what the Statement contains. To that extent I can assure them that what they have said will be noted very carefully.
The question of advertising was raised by the noble Lord, Lord Mishcon. His view was that he was glad that that was not a recommendation which had been adopted by the committee. Certainly the Government welcome the committee's endorsement of the valuable contribution of the BBC and the IBA, and I think we must accept that the committee has done important and original work on the economics of advertising on television which cannot lightly be laid aside. But I think that nevertheless we must look forward to further discussion on the issues that have been raised before we make up our minds.
As to the matter of subscription, again raised by the noble Lord opposite, the Government certainly welcome the careful technical and economic studies which the committee has undertaken on that issue. My right honourable friend is persuaded that subscription will have an increasing role to play in the financing of
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broadcasting. The Government's plans for direct broadcasting by satellite specifically envisage the possibility of payment by subscription and the transmission standards for DBS are particularly suited to subscription technology. Cable programmes, of course, are already paid for in this way. It is clearly attractive that people should be able to pay directly for those services which they wish to receive and not for others. I am sure that this will have added benefits in making the broadcasters more responsive to public opinion.
However, there are many technical questions to be overcome before we could entirely replace the licence fee by subscription and again we look forward to hearing particularly the views of the broadcasters, the set manufacturers and others who have technical knowledge of this issue before our minds are made up on the right way forward.
I listened with care to both noble Lords' comments on the content of programmes. The noble Lord, Lord Mishcon, asked me specifically about it. My right honourable friend the Home Secretary met the chairmen of the BBC and the IBA in December to draw their attention to the public concern which had been voiced about this question. There is no question but that the broadcasters have taken the concerns very seriously and they have both instigated reviews of their procedures. The IBA in particular has been running an advertising compaign to remind parents of its family viewing policy and the fact that some programmes after 9 p.m. may not be sutable for children and to encourage parents to share responsibility for what their children watch. The BBC has reconvened its internal committee to consider programme standards and I understand that it will be reporting shortly.
So far as the code is concerned, both the BBC and the IBA have been reviewing their codes and how they have been implemented. The noble Lord, Lord Mishcon, opposed the recommendation that a car-radio licence should be introduced. The committee makes a specific recommendation on that point. In the body of its report, however, the committee refers to the desirability of broadening the base of the licence fee by the method that is suggested. There are, therefore, various options incompassed by the recommendation to broaden the whole base of the licence fee. They all have their attractions. They have their disadvantages and advantages. But they inevita-bly introduce new complexities into the collection and enforcement system. Again, this is a recommendation which must be considered in the light of the commit-tee's report as a whole.
As to the matter of the ITV contracts, again, as I said when I repeated the Statement, the current contracts between the IBA and the programme companies terminate at the end of 1989 and we shall be exploring with the IBA what scope there is for action on the committee's recommendation within the IBA's timetable for new contracts.
Lord Mishcon: My Lords, before the noble Lord the Minister continues, is he able on behalf of the Government categorically to say that the mere possession of cash, therefore making possible the highest offer, must not be the criterion for granting

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franchises? Is he not able to make a categorical statement on behalf of the Government to that effect?
Lord Glenarthur: My Lords, I think that I should be very rash to make any categorical statement at this stage with the report fairly new in our hands. What I have said is that my right honourable friend will consider the matter in the way that I described in the Statement. As to the question of selling Radio 1 and Radio 2, the term used by the committee was "privatised". The Green Paper on radio provides an opportunity for us all to consider what sort of radio services we want in future, by whom they should be provided and the nature and extent of the regulation required. So, again, I am afraid that this is a matter which has to be considered in the round, so to speak.
I certainly share the view that the noble Lord, Lord Winstanley, expressed about new technology, summarising briefly his remarks. There is a great deal of complexity in that and I certainly share his other view that the matter which is being considered by the Peacock Committee in a most comprehensive way is an extremly complex matter, as anyone who reads the report will understand. I believe that I have covered most of the points that have been raised. If I have not, I shall correspond with noble Lords.
Lord Parry: My Lords, I should first—
Lord Broxbourne: My Lords—
Lord Parry: My Lords, shall I give way?
Lord Broxbourne: My Lords, it would be courteous for the noble Lord to do so. I cannot answer for the House but it is certainly appreciated by me.
May I direct the attention of my noble friend the Minister in particular to Recommendation 8 at page 142 of the report, which contains what is at first blush the somewhat surprising requirement that within 10 years the BBC and ITV should be required to secure not less than 40 per cent of programmes from what are called independent producers? Will Ministers subject this proposal to careful scrutiny and ensure that there is no derogation from the accepted aim and traditional endeavours, as particularly exemplified in BBC2 and Channel 4, to provide programmes of high quality and distinction?
Lord Glenarthur: My Lords, I note my noble friend's remarks. We have been much impressed by the contribution of independent producers following the introduction of Channel 4 and we recognise that there may be a place for widening their role. But we question whether formal quotas are the right way of doing that. I think I can only say to my noble friend that we look forward to the views of independent producers and established broadcasters on this important question.
Lord Parry: My Lords, as I was saying when I was interrupted by my own own politiness, it is necessary for me to declare my interest as a member of the general advisory council of the BBC and as someone who has spent a very considerable number of years on
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the IBA Committee. I do that because what I shall now say is my own opinion and in no way carries the imprimatur of the committee on which I serve.
I wish to welcome the Peacock Report and the speed with which it has come before the House because in a democracy it is absolutely essential that the people who contribute to it in the media are confident of their own position. There has been a very great deal of indecision among those who produce the programmes and a great deal of indecision in the BBC and in the independent television companies because of the various reviews that have been undertaken. So I welcome the speed and I welcome some of the recommendations.
I particularly welcome, with my own interest, a sentence that I find in paragraph 593 on page 133. It says:
"In practice we have no doubt there will be a distinct and important role for the BBC as far ahead as anyone cares to look".
While the Minister, as he said, is not in the business of giving categoric assurances, I am sure that will carry a great deal of assurance. I hope that the Statement he has been kind enough to repeat to the House gives that sort of assurance to the BBC and that we can all be assured that this fine institution has a long future before it.
I also want to say that in another paragraph reference is made to the controls that exist over the BBC and the IBA in the matter of programmes—controls which do not exist over the press. It is interesting to see that these have been isolated in the Peacock Report and will be subject to discussion in your Lordships' House.
Finally, may I say that I always felt that when the IBA came to consider the granting of new franchises (and there were relatively few occasions when they did that) they had in mind the social obligations to the community as much as anything else. In my own country of Wales, where a notable change took place that set the pattern for the holding of the tribunals and the public reassurances and the examinations that went with them, we were very pleased to see that the system worked well. Personally I believe that if those controls were thrown over simply in order to raise a few extra thousand pounds on putting the thing up to the highest bidder, it would be a very retrograde step. I would urge the Government to consider very carefully all the evidence which we now have of the way in which the IBA's granting of licences and franchises has worked.
Lord Glenarthur: My Lords, I certainly acknowledge the fact that the noble Lord has a great deal of experience and interest in this field. He has mentioned a number of points which of course we shall study carefully during our consideration of the issue over the coming months.
Lord Boyd-Carpenter: My Lords, is my noble friend able to give any indication at this early stage, first, as to the likely date of issue of the promised Green Paper? Secondly, can he indicate the kind of time-scale the Government have in mind, leading up to their final decisions? Here I must declare an interest as a director of a company which applied last autumn, following the invitation extended by the former Home

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Secretary, for a licence for community radio. Is my noble friend aware that the present Home Secretary, in a written reply in another place earlier this week, said that all those applications for community radio were to be put on ice because of current developments, although we had of course expected a reply many months ago?
Is my noble friend further aware that there is very considerable interest in the Government clearing their minds on the major and biggest issues to which the Statement refers, so that those who have, in good faith and at some cost, prepared plans in response to a Government invitation will be able to know where they stand and what to do by way of pursuing their plans which the Government previously had encouraged?
Lord Glenarthur: My Lords, I am grateful to my noble friend. He asked about the date of the Green Paper. I cannot be specific, but I understand that it is hoped to produce it by the end of the year. As to the further timetable, I am afraid I am not in a position to tell my noble friend what it will be.
On the question of community radio, I note my noble friend's declared interest. He will have seen the Statement which my right honourable friend made in another place not so long ago. Certainly the views of all those who have expressed concern about the efforts that have been made by all those who were prospective applicants for licences for community radio will be considered by my right honourable friend. I can assure my noble friend that my right honourable friend will respond more fully to those views, as they are expressed, in due course.
5.15 p.m.
Lord Jenkins of Putney: My Lords, I shall be grateful if your Lordships will allow me to make one single comment, leading to one question. The comment is this. It seems to me that the general drive of the report goes against the pattern which we have established in this country so far as broadcasting generally is concerned. We have established what might be called a "mixed economy" with a public service element and a commercially-sponsored element. No doubt it works so well because it is a vertical division. Each of the two corporations is required to cover the whole range of broadcasting from top to bottom.
What is proposed here seems to me to be a horizon-tal split. I think that is fundamentally a mistake because it is undesirable that the BBC should, as it were, be cut off from the generality of broadcasting, and it is equally undesirable, and possibly even insulting, that the commercial sector should be regarded as capable only of popular broadcasting and not capable of rising to the levels to which we know it can rise. So I think the general drift so far as that goes is wrong, and we need to watch it very carefully. I agree with the comments made from my Front Bench which seemed to me to drive in that direction.
The particular question arising from this concerns the Green Paper; and here I must declare a slight interest in that I have written radio plays for the BBC and hope to write more in the future. It seems to me that the proposal to sell off, or to refinance, Radio 1
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and Radio 2 would be almost as bad as removing them altogether. If you force the BBC to take advertising on these two stations, you then fundamentally alter the nature of the corporation and disturb the delicate balance which has existed in this country and upon which the very success of broadcasting is founded. There are aspects of the report which I think all your Lordships will welcome, but we have to march very carefully so that we do not destroy what has become very precious to us all.
Lord Glenarthur: My Lords, I note the noble Lord's comments. Obviously the committee's recommendations have very wide implications and it would be wrong to reach a snap judgment on any of them until there has been the fullest opportunity for debate within the country and among the particular interests which might be affected. I think at this stage I can merely note the noble Lord's remarks.
Lord Nugent of Guildford: My Lords, I welcome my noble friend's Statement that the Government are to reject the alternative form of finance for the BBC through advertising. I should like to make a short point about the Statement which rejects the recommendation of the report that broadasting standards should be governed by the general law and that instead they should continue to rely—I think these were the words—on the much stricter standards which now exist in regard to the informal obligation which the BBC has. Is my noble friend aware that there are a great many people, including myself, who think that over the last 20 years standards of broadcasting material in the BBC, and the IBA for that matter, have gone steadily downwards and that much material now contains elements of violence and obscenity which are entirely objectionable when they appear in the home—in the kitchen and the sitting room—for the family to see? Is he aware, therefore, that if he is going to rely on that existing obligation he has got to make it a great deal stronger?
Lord Glenarthur: My Lords, I am sure that many people share my noble friend's point of view; I certainly respect it enormously. My right honourable friend, in his Statement, made clear that we do not accept the apparent view of the committee that there is no qualitative difference between broadcasting and the print media. Broadcasting, as I said, is particularly powerful; it is available in people's homes at the turn of a switch and, not least, it can be extremely expensive to produce. It costs nothing to pick up a pen and write, but to produce an effective television programme can require an extensive investment in time and money. For all these reasons we believe that special arrangements will continue to be needed for broadcasting to ensure that there is proper regulation of the content of programmes and that there are opportunities for a genuine plurality of voices, views and subject matter to be expressed. That does not necessarily mean that the present structure should be perpetuated, or that the general law, suitably modified, might not have a part to play. I stand by the remarks that I made earlier in answer to the noble Lord, Lord Mishcon, that those are matters that my right honourable friend has already discussed with the

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chairmen of the IBA and the BBC, and also by my comments on the code.
Lord Mulley: My Lords, I welcome the decision of the Government to produce a Green Paper. In doing so, will the Minister bear in mind the great difficulty that will be presented to the existing independent commercial stations if either Radio 1 or Radio 2, or any other national radio scheme, came to be dependent upon advertising, taking away advertising from the independent local radio stations who are in many cases having great difficulty in generating enough revenue to maintain their services?
Secondly, while I understand the problem that the noble Lord, Lord Boyd-Carpenter, described to the House, concerning those awaiting a decision about community radio, there is also likely to be a considerable problem if community radio stations are permitted without any regulation at all, as apparently may be the case. Will that point be considered along with the possible relaxation of some of the regulations on existing IBA radio stations? Will the noble Lord give the House an assurance on those two points?
Lord Glenarthur: My Lords, I can certainly give the noble Lord an assurance that all factors connected with community radio and with Radio 1 and Radio 2, and with everything else to do with radio, will be examined in the Green Paper. Some of the issues that have been raised by the report will require relatively early decisions. Others, and particularly those that look forward to the second and third stages to which the report refers, can be taken rather more slowly. Certainly those points will be borne in mind.
Lord Annan: My Lords, since noble Lords have naturally been reacting immediately to the recommen-dations of the report, perhaps I may say that my own immediate reaction is very much in sympathy with that of the noble Lord, Lord Mishcon. However, I have a certain affinity with Professor Peacock at this moment. When one issues a report, one implores the public to read it. None of us has had time to read and digest the report.
It seems to me that two points ought to be stressed. The first is that the whole inquiry sprang from the fact that the licence fee was felt to be rising too steeply. There were many complaints from the public, and they were endorsed in many quarters. The BBC tried to defend its position but it was perfectly natural that someone should ask, "Is this still the right way of financing the BBC?" A great deal of the report deals with that particular problem, and that problem we ought to treat seriously. I do not know whether the noble Lord, Lord Boyd-Carpenter, considers that there is much chance of the Treasury agreeing to indexing the licence free. I rather doubt it, but that matter is one that will have to be discussed in Whitehall.
The second circumstance from which the report sprang was a deliberate attempt by members of Professor Peacock's committee to look into the technological future. What will happen when we have satellite broadcasting, cable developed more than it is
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today, and so forth—in other words, when we have a multiplicity of channels that can be viewed in this country? We ought to acknowledge that any committee always has difficulty when it gazes into a crystal ball.
I remember when I was first asked by Mr. Stonehouse to be chairman of the committee on the future of broadcasting in 1970. I was somewhat astonished when he asked me whether I realised that within a few years we would have pictures coming out of the wallpaper. I said that I was interested to hear that. When it actually came to the point, the committee reached the view that the pace of technological change would be rather slower than the Postmaster-General at that time, in 1970, thought was likely.
However, the technology of broadcasting is moving forward all the time. For that reason we ought to be grateful to Professor Peacock and to his committee for trying to cope with the difficult task of trying to forecast what will happen when there is a major technological change. There are many questions I should like to discuss now, but I wonder whether this is the right moment to do so. Will the Government be willing to find time in the autumn, before any Green Paper is published, for your Lordships' House to discuss the Peacock Report? It surely is the collective wisdom of your Lordships' House that ought to be available to influence the make-up of the Green Paper. Would the Minister reply to that particular point?
Lord Glenarthur: My Lords, the noble Lord. Lord Annan, has more experience probably than anybody in this particular field and I readily acknowledge that that is so. So far as concerns studying the report, I agree that it is a complex document that we would all do well to study in great depth. I agree also with the noble Lord that the subject of the licence fee is a legitimate matter to be examined. That is precisely what the committee has done. I share the noble Lord's view, as we all do, about the complexity of the area with which the report deals; and technology is changing with great rapidity. As to a debate, I note the noble Lord's remarks, but such a proposal is a matter for the usual channels.
Lord Harris of Greenwich: My Lords, is the Minister aware that we welcome his remarks about the need to study the report very carefully before reaching final conclusions on at least some of the issues that it raises? Is the Minister aware also that some of us are mildly surprised to hear him say so, given that for the past week we have been reading reports in very nearly every national newspaper in which the recommendations of Professor Peacock and his colleagues have been rubbished in a most systematic fashion?
I have two questions to ask the Minister. One relates to a point that was put to him a moment ago by the noble Lord, Lord Mulley, concerning the question of Radio 1 and Radio 2. Is the Minister aware that in table 6.3 of the report it is stressed that the total estimated profits of independent local radio in the year up to September 1985 were £1·9 million after debit? In the context of that situation, is the Minister not aware that if Radio 1 and Radio 2 were privatised or allowed

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to carry advertising, it is absolutely certain that a substantial number of local independent radio stations would be driven out of business? Is the noble Lord additionally aware that many of us would regard that as wholly objectionable?
Secondly, is the Minister aware that my noble friend put to him a specific question on indexation which, given the number of questions put to the Minister, he no doubt inadvertently failed to answer? Will he deal with that question now?
I draw the Minister's attention to paragraph 624 of the report, where it is stated:
"One of the most important arguments for indexation is that it would bring a measure of insulation of the BBC from political influence".
Is the Minister aware that on the day when we have been told that the chairman of the Conservative Party has set up a special unit in Conservative Central Office to transmit criticisms about BBC programmes, it is particularly necessary that the Government should respond as soon as possible to that particular recommendation? Is he aware also that it is necessary to insulate the BBC from political pressures of that kind when it is suggested, as it often is, that unless the BBC views matters in the way in which the Government want the BBC to view them, there is the risk that the licence fee will not be increased? Given the specific character of that recommendation, will the Minister indicate that the Government will make an early statement on the question of indexation?
Lord Glenarthur: My Lords, perhaps I may expand a little on indexation. The current settlement which was announced in March 1985, runs until 1987 and unless displaced by a different system until 1988. My right honourable friend's predecessor made clear in announcing the present fee levels that the BBC should plan its expenditure for the three years to 1988 on the basis that it must, for that period, live within an income equivalent to that generated by fees at the present level of £58 for colour and £18 for monochrome.
Therefore, there can be no question of any general increase in the standard licence fee before March 1988. I believe that that allows ample time, if required, for consideration and discussion of the basis on which the level of any changes from that date, and beyond, should be determined. In saying that I note the noble Lord's views.
With regard to the monitoring unit referred to, I can say that this unit was recently established by my right honourable friend the Chancellor of the Duchy of Lancaster to examine, among other things, whether the suggestions of bias on radio and television are well founded. There can be no objection, surely, to regular and informed scrutiny of programmes. I can add that the Government receive complaints from both ends of the political spectrum, and from the centre, that broadcasters are biased against them. I believe that the right people to judge these matters are the governing bodies of the BBC and the IBA. They are independent men and women from a wide range of backgrounds who are much better able to judge these matters fairly than are politicians whose own views are perhaps not entirely impartial.
Lord Skelmersdale: My Lords, I think that as the noble Lord, Lord Annan, said and as my noble friend Lord Glenarthur, said also, we are in danger after 50 minutes of turning this into a somewhat less informed debate than those which your Lordships currently conduct Perhaps this would be an appropriate moment to return to the Building Societies Bill.
Sensing the mood of the House, I beg to move that the House do now again resolve itself into Committee on the Building Societies Bill.
Moved accordingly, and, on Question, Motion agreed to.

Building Societies Bill
5. 32 p.m.
House again in Committee on Clause 1.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No 6:
Page 2 line 12 leave out (", primarily from their members,")
The noble Lord said: In moving this amendment, it may be convenient for the Committee if I speak also to Amendment No. 16.
These amendments reflect a discussion that took place on Second Reading of the Bill on the balance that should properly be struck between the retail deposits of building societies and the ability of building societies to raise funds on the wholesale market The Bill as drafted seems to be somewhat restrictive because we can envisage circumstances in the future—and perhaps in the present—where building societies will wish to have regard to the experience of the chairmen of the mortgage banks (if I may quote them in evidence) who raise money at long term in order to perform their proper function, which is lending at long term.
I believe that on Second Reading the noble Earl, Lord Selkirk, mentioned what he regarded as the miracle of intermediation—borrowing short and lending long In an exchange I had with the noble Lord, Lord Campbell of Croy, when he intervened in my speech on Second Reading, I tried to indicate the way that our thinking was going We believe that building societies will wish to have greater flexibility in going into the wholesale market. At the moment I understand that about 10 per cent. of their liabilities are in the wholesale market and the rest in the retail market. That is a figure which I read in a Building Societies Association brief and I take no responsibility for the figure.
The object of this exercise is to make sure that in future building societies should not necessarily be constrained from building up the proportion of their liabilities that come from the wholesale market and, inevitably, allowing to decline the proportion of liabilities which comes from the retail market That does not seem to us to be an undesirable development As I said, the chairmen of the mortgage banks go out of their way to match the maturities of their assets and the maturities of their liabilities.
By putting expression into Clause 1 that a major function of the commission shall be to ensure that the principal purpose of building societies remains that of

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raising funds primarily from their members would appear to inhibit building societies now and, perhaps more importantly, in the future from having access to the wholesale market. The wholesale market is now, and could easily be in the future, a source of funds of a longer maturity and greater stability so that we can get away from the problem that I believe has faced many building societies, and many banks, that the lending rate is determined by the intake of retail deposits.
I hope that the Government will accept the amendment. It gives the building societies greater freedom. I am advised that the Building Societies Association welcomes this greater flexibility. I hope that the Government will feel free to accept both the thrust of what I am saying and the amendment. I beg to move.
Lord Morris: I am most grateful to the noble Lord, Lord Williams of Elvel, for raising this point with his usual clarity, to which we have now become accustomed. I am concerned in only one respect. There is not so much to fear as the noble Lord suggested, because the word "primarily" has been included in the Bill. I may be totally wrong but my interpretation and construction of that is precisely as the clause says—that the societies should primarily raise funds from their members. That does not in any way stop them from borrowing on the wholesale market. I may be wrong, but that is my view.
Lord Denning: I hope the Committee will not accept this amendment. The clause expresses the real character of building societies as they have developed; namely, that their members should provide the money—I use the phrase, the "retail trade". That is the position historically and traditionally. The word "primarily" does not mean that it must be done solely in that regard. The word "primarily" allows them to borrow money on the wholesale market. It is not necessary to have this amendment.
Lord Houghton of Sowerby: I support my noble friend on this amendment and disagree with the noble and learned Lord, Lord Denning. It seems to me that the paragraph concerning the functions of the commission place it under an obligation to secure—the word "secure" is used—that the fund-raising activities of building societies shall be concentrated upon getting subscriptions or deposits from members. I doubt whether that takes full account of the possibility that at some time or other the state and the building societies may be in competition for personal savings.
The national savings movement was directed toward the savings of the mass of the people and the conditions were there to attract them. Building societies are in the same market and I think that more than once the building societies and the national savings movement have been in conflict. If building societies are to be regarded as having an obligation to the same people as the national savings to obtain their money, a build-up of competitive interest in personal savings may occur. More and more the building societies may have to turn to other sources of money
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for lending, because the demand for mortgages is unremitting in its intensity and likely to continue as increasingly the only option for securing accommo-dation is to obtain a mortgage to buy a house. I think that the demand for mortgages will increase and the more the private sector supplies housing needs, the greater the demand on building societies. The contraction of municipal housing schemes combined with the sale of council houses has increased the strain on the resources of the building societies.
I think that this problem of conflict of interest and competition for personal savings may either require building societies to retreat to some extent from their claim upon personal savings, or require the Government to retreat from their claim upon personal savings. The Government may have to borrow elsewhere what they cannot obtain from the people, and the building societies may have to do the same. There is not an unlimited reservoir of personal savings to be obtained by the two rivals who are competitors for it.
In the circumstances I think that one must not put an obligation upon the Building Societies Commission,
"to secure that the principal purpose of building societies remains that of raising (funds) primarily from their members".
That may be an old fashioned idea about building societies and it may to some extent become impractical because the savings are not there.
What about the slump in the revenue of building societies that has occurred in the past few weeks? We are told that it means that any prospects of lower interest rates have flown out of the window. After all, they have only £500 million, or whatever sum it is, compared with much more in the previous months, and they have forward commitments of many millions. This may lead to the building societies having to go on the market. Indeed, some of them already are on the market and supplementing their income from other sources.
So I think that this is possibly an obsolete concept, not in the sense that it is not desirable but in the sense that it is unlikely that building societies can maintain their primary source of income when there are other competitors for the money. It makes no difference to intention, but it makes a difference to what I think is the sense of obligation placed upon the Building Societies Commission.
The Earl of Selkirk: It is only in recent times of course that building societies have gone to the wholesale market at all. This is a new development which I think came up about 10 or 15 years ago.
I am bound to say that I am not absolutely certain what these words mean, but it is suggested—and I think the suggestion is right—that building societies should not lose their local contact with individual people. I do not agree with the noble Lord, Lord Houghton, that we have entirely to give way to the Government on personal savings. This is one of the ways that savings have been undertaken and it is liked by the public. It is merely a suggestion—or not very much more than that—that building societies should continue in this way and should not go into a purely City business, borrowing money as if they were joint

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stock companies and having vast take-overs or whatever. This is not the work of building societies. If building societies lost their local contact with the people throughout the country, I think that something of their character would disappear.
5.45 p.m.
Lord Brabazon of Tara: My Lords, the noble and learned Lord, Lord Denning, and my noble friend Lord Selkirk have reminded us that one of the principal distinguishing features of building societies has always been that they rely upon their members to raise funds. The mutual principle of building societies has always been the raising of money from members for lending to members. These amendments would remove that in one fell swoop. While this legislation seeks to equip building societies to compete effectively in the commercial environment of the late 1980s, the 1990s and beyond, it has never been the intention to dismantle the fundamental bases of their operations. Thus the Government seek to provide that, notwith-standing the new powers, the bulk of building society business will continue to be residential mortgages. The Bill preserves the mutual status of the societies and introduces a series of constitutional changes designed to make mutuality work better.
In due course we shall reach Clause 7 of the Bill and there the Committee will find that societies are being allowed to raise up to 20 per cent. of their money in the wholesale market, and indeed, by order that amount can be raised to up to 40 per cent. in due course. Nevertheless, we believe that the primary purpose should remain as it is, that of a mutual society. If, of course, the building society chooses to go further and further along the lines suggested, it has the option to convert to a plc under a clause which we shall come to later in the Bill.
It is rather interesting that in fact two Members on the other side of the Committee, the noble Lords, Lord Williams and Lord Barnett, have put down a Motion to oppose that clause standing part of the Bill. I always thought that the Opposition regarded themselves somewhat as the protectors of mutuality. Therefore I find these two particular amendments rather curious and I must join with other noble Lords in urging the Committee to reject them.
Lord Williams of Elvel: The noble Lord, Lord Brabazon, has introduced a rather aggressive attitude toward these amendments which certainly are designed to give building societies somewhat greater flexibility—together, I agree, with amendments to Clause 7 which we shall come to later. As my noble friend Lord Houghton has said, none of this reflects upon the mutuality of building societies. On this side we certainly wish building societies to continue to be mutual organisations. All we are trying to do is to envisage circumstances in the future in which building societies may wish to have rather greater recourse to the wholesale market than they have at present.
It seems to me that the Government are being slightly schizophrenic on the issue of mutuality. On the one hand they say that they wish to preserve mutuality, and on the other hand they say that they wish to allow building societies to convert themselves
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into fully-fledged, all-singing, all-dancing banks by conversion to plcs. We are trying to preserve the mutuality concept, but to allow within that concept greater access to wholesale markets than is allowed under the Bill as now drafted.
If I may say so, I am slightly disappointed in some of the reactions of those who are directors or chairmen of building societies in not welcoming what I am saying, which is not a great Labour Party theme or a great social crusade. I am trying to give greater flexibility to building societies than there is in the Bill and indeed, if I may say so, the Building Societies Association regards these amendments with a certain amount of sympathy. However, it seems that the Government have set their face against allowing building societies to expand in a way which I think would be sensible for them to do in the future. We shall read very carefully what the noble Lord has said, and in the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 1 shall stand part of the Bill?
Lord Houghton of Sowerby: I should like to ask the noble Lord a question about subsection (7), which states:
"The Commission shall have power to do anything which is calculated to facilitate the discharge of its functions, or is incidental or conducive to their discharge".
How literally are we to take those words in the Bill? What on earth do they mean? Does that offer the wide, wide world to the Building Societies Commission? It is a strange, loose subsection to have for the commission's general functions. Although I think that in many respects the Bill is well drafted, when one comes to such a clause it seems an extremely sloppy law-making process. May I suggest that the problem we were just discussing might be overcome if the word "secure" were re-examined? The commission's general functions are to promote, to administer and to advise, but subsection (6)(c) wishes to "secure". How can it secure? That is a matter that needs to be re-examined.
Lord Denning: With regard to subsection (7), the law will read it in any way. The clause is better as it stands.
Lord Brabazon of Tara: I think that the noble and learned Lord, Lord Denning, has probably answered the first question that the noble Lord, Lord Houghton, asked. I gather that it is a standard provision in legislation of this sort and has been given to all statutory bodies of this kind since the 19th century. I assure the noble Lord that there is nothing sinister in it.
I had better read what the noble Lord said about the word "secure", and if there is any reason for me to come back, I shall do so.
Clause 1 agreed to.
Lord Barnett Lord Barnett moved Amendment No. 7:
After Clause 1, insert the following new clause:
("Code of Practice

.—(1) The Commission shall, after consultation with the Lord Chancellor and the Director-General of Fair Trading,

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prepare, publish and administer a code of practice with regard to the provision by building societies of conveyancing services.

(2) The code of practice referred to in subsection (1) shall (inter alia) make provision for the manner in which and the standards to which conveyancing services shall be provided by building societies and shall in particular make provision for protecting persons for whom conveyancing services are provided by building societies from conflicts of interest that might otherwise arise in connection with the provision of such services.

(3) Notwithstanding any practice rule made by the Council of the Law Society under section 31 of the Solicitors Act 1974, a building society operating in accordance with the code of practice referred to in subsection (1) above may, subject to such terms and conditions as the Commission may state, provide conveyancing services generally, including the provision of such services to persons to whom advances are made under section 10 of this Act.

(4) A building society not operating in accordance with the code of practice referred to in subsection (1) above may provide conveyancing services, but only to persons other than those to whom advances are made under section 10 of this Act.").

The noble Lord said: The amendment provides a new clause which will allow building societies to do conveyancing for those taking out mortgages with them, but only if they operate in accordance with the code of practice as set out in the new clause. The Committee will recall the promise that was made to my honourable friend in another place, Mr. Austin Mitchell, that the Government would introduce legislation to enable that to take place. After consideration, the Government eventually decided that they could not do so because they felt that there would be a conflict of interest. That is their basic case against introducing the provision.
The case for allowing conveyancing to be done by building societies and banks is surely not disputed. First, consumers want it. In 1984, there was a survey and 81 per cent. of those interviewed said that they would be pleased to have conveyancing services offered to them in a one-stop-package type of housing service operation. Secondly, few can dispute that by doing that there would be greater freedom of choice for the consumer. Thirdly, I doubt whether it could be disputed that greater competition in this area would lead to lower costs. One recognises the conflict of interest argument. The new clause seeks to deal with it directly, although as I said on Second Reading I believe that the case is weak and applies more in theory than in practice.
The Building Societies Association has had some comments to make upon what the Law Society has been saying. It referred to the Law Society maintaining that there is an inherent and insuperable conflict where a lender's employed solicitor acts also for a borrower, and that only independent advice can avoid that. In its evidence to the Lord Chancellor's Department, the Law Society listed 12 areas of likely conflct between lenders and borrowers. They included the calculation of the rate of interest, provisions for early repayment, restrictive covenants in mortgages, third-party guarantees, secret profits, links between lenders and vendors and the purchase price of the property.
The implication was that the solicitor advises on those matters and that if a solicitor is acting simultaneously for the purchaser and for the building society, there is the inherent conflict of interest to which I have referred. The Building Societies Association refutes that argument, and does so very well. It made inquiries
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among building societies. They reveal that it is unknown for the terms of any mortgage offer by a building society to be rejected or even to be varied at a solicitor's instigation. That is not surprising because the terms of mortgage loans made by building societies are fairly standard and generally well known.
There is also the point that at present it is a building society's normal practice to employ the purchaser's solicitor to prepare the mortgage deed. No conflict of interest is seen in such cases although the Law Society argues that at that stage the negotiation between lender and purchaser is complete. In the opinion of the Building Societies Association, that is far too simplistic a vew to take. The solicitor is often not approached until after a house has effectively been purchased and the terms of the purchase and of the loan have been decided.
The Committee does not have to take what might be considered the biased view of the Building Societies Association or even the biased view of the Law Society—not that I dare to accuse the Law Society of taking a biased view. I know that irony does not come out in Hansard, but what I am saying will be clearly understood.
The Committee does not have to take my view on these matters. The question of conflct of interest was considered by the Director General of Fair Trading in a speech in June 1985. He said that he did not see any inherent or unsurmountable conflict of interest were a building society to provide conveyancing services to a purchaser who is also a borrower of that society in that both have a common interest in ensuring that there is a good title. He suggsted that if a lawyer is offering independent advice, that would seem to be more a selling point than grounds for disallowing a building society-employed solicitor from providing basic conveyancing services.
Professor Farrand, who chaired the Government's inquiry on conveyancing services, commented that although solicitors can advice on various matters—for example, relating to the mortgage term—that does not mean that he either does advise or should advise. Professor Farrand commented that what legal authority there was, was that solicitors were under no obligation to give such advice. Those are not my views or those of the building societies but the views of independent people in this field.
In fairness to the Law Society, I feel that I should deal with some of the points that it has raised. It has a brief. I do not know whether it was a mistake, but the Law Society kindly sent me a copy. Perhaps I may comment briefly on some of the points in the brief. First, it says among other things in relation to the background of the proposition:
"Potential clients will often shop around asking both about the service and about the price".
Anyone who knows about these matters will know that it is very rare for anybody buying a house to ask about the service that they will receive in the conveyance. Their primary objective is whether they can have it done cheaper. They do not normally say to a solicitor, "Are you going to see to it that I get a proper title?" I should have thought that they naturally assume that the solicitor acting for them, whether employed by a

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building society or not, would do the job for which he or she was being paid.
The Law Society go on to ask why the Government is now legislating, and they answer the question in this way.
"It can hardly be with the aim of forcing solicitors to be more competitive. The competition could not be more lively. The only reason is to fulfil the unwise commitment given to Mr. Mitchell".
At least the Law Society have no doubt about the commitment given by the Government to my friend in another place about carrying out the pledge to which they had committed themselves. However, I leave that on one side and say that the new clause, which I am sure should be accepted by anyone considering what we propose, would indeed inevitably and obviously increase the level of competition if building societies were enabled, without any conflict of interest, to carry out a one-step housing service for people who wish not simply to borrow money from them but also to buy a house and generally use the kinds of service I would have thought most people would want to see carried out.
The Law Society, in this brief which I have found very helpful, go on to ask why the institutions want to get hold of the conveyancing market. They answer the question in this way.
"Building societies are no longer the friendly non-profit-making institutions they once were. They are now highly competitive and aggressive".
I am not sure whether that is intended to be a derogatory comment but this Committee must take that as I have read it. They go on to say,
"It is clear that the aim of an institutionally owned estate agency conveyancing department will be to be an outlet for the sale of the financial services of that institution. A 'Woolifax' Building Society estate agent or conveyancer will be expected to make profits for the Woolifax by ensuring that house buyers take out mortgages with the Woolifax, that the Woolifax earns commission on the insurance policies placed by the buyer, etc."
One is bound to ask: is it really thought that solicitors acting for a building society or a bank would be any less professional in the way they carried out their duties than they are now in giving what is called independent professional advice? The fact is that, as we all know, solicitors acting independently frequently also act for building societies at the same time. Nobody has ever suggested that that is an inherent conflict of interest that does great damage to potential purchasers of houses or those seeking to take out mortgages. Therefore I do not think the argument holds up.
Finally, perhaps I may quote again from the Law Society's brief under the heading "The threat to the independence of lawyers". It would be very dangerous for me, in this Committee with more than one or two very distinguished lawyers, to propose anything that could or would be deemed to be a threat to the independence of lawyers. With the eye of the noble and learned Lord, Lord Denning, upon me, I should be even less likely to propose any such threat; but the fact is that the Law Society say,
"The consumer would have little protection left. The voice of the independent professional who can dispassionately advise clients on the merits of major transactions affecting house buyers would be effectively silenced".
We all receive representations on many things, and issues and subjects; but I think it is fair to say that that
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is stretching it a bit. The plain fact is that if somebody is seeking to buy a house and wants dispassionate financial advice, with the greatest possible respect to the lawyers in your Lordships' House they should not be going to lawyers.
The Lord Chancellor: I certainly would.
Lord Barnett: If that is the advice that the noble and learned Lord the Lord Chancellor seeks to give, then I am bound to say that my experience of obtaining financial advice would make me feel I would rather find it elsewhere. I do not say that as a legal judgment.
The Lord Chancellor: If the noble Lord reflects for a moment that if he borrowed money on the security of a house, he would lose the house and his money if things went wrong, he might come to a rather less superficial view.
Lord Barnett: With the greatest possible respect, if the noble and learned Lord had heard what I said earlier, he would realise that what I was saying was that professional solicitors acting for a house buyer, whether that buyer is purchasing through an independent solicitor or through a building society, would give precisely that security without the matter necessarily involving a conflict of interest. That was what I was arguing.
The Lord Chancellor: I heard very clearly what the noble Lord was saying. What he did not reflect upon was what would happen to him if he entered into an unwise mortgage and failed to keep up his instalments. The number of repossessions is rather high this year.
Lord Barnett: With the greatest possible respect to the noble and learned Lord, this has nothing whatever to do with the new clause I am moving. I hesitate to argue with the noble and learned Lord on legal matters, but he has begun to widen the area. Although I do not wish to trespass upon any ruling the Chairman might make about widening the discussion, what the noble and learned Lord says now has nothing whatever to do with the clause I am moving. I am simply attempting to make a case which, strangely enough, the noble and learned Lord's Government agrees with, and that is that we should improve competition wherever possible.
As I have said, and as the Law Society concede, it was the original intention of the Government, including the Solicitor-General in another place, that they should introduce a new clause almost identical to the one which I am now moving, because they gave a firm pledge and commitment to my right honourable friend in another place. It was only the conflict of interest argument which stopped the introduction of that, and not the wider area that the noble and learned Lord the Lord Chancellor now seeks to introduce. The plain fact is, as I have indicated and as the building society movement have made quite clear, there is no threat to the independence of lawyers and no conflict of interest if we have a code of practice along the lines of the clause I am moving, and I hope the Committee will accept that.
Lord Denning: Perhaps I may say that in this case I regret very much that a Government gave that promise. It seems to me that, on principle, when you have a borrower and a lender dealing in a conveyancing matter the parties should be represented by different solicitors. Indeed, it has often happened that trouble arises in the courts when both parties have had the same solicitor. Frequently it is done to save expense but time after time judges experienced in these matters have indicated that there ought to be separate representation for the the parties concerned. This has been recommended time after time for the simple reason that there is an inevitable conflict of interest arising. So on principle I would hope that there would not be a single conveyancing system, so to speak, by the building society or bank or any institution of that kind.
I will also go one step further. What is the whole object of this amendment? Is it to save money or to let the building societies be more competitive? Look at the other expenses of estate agents, insurance firms and the like. We are doing nothing whatever in regard to those expenses, and I think that the expense of having separate solicitors to do conveyancing is really a quite small part of the whole expense. Therefore, I would be against conveyancing being done generally by or through building societies or banks. However, the promise has been given. Let it be done, if needs be, by a later clause in the Bill; namely, regulations very carefully and strictly made by and on behalf of the committee. I am against the amendment.
Lord Templeman: This amendment, together with later amendments—I have in mind Amendment No. 105 and Amendments Nos. 247 to 264—raise the same question of what limitation should be placed on a building society that undertakes conveyancing and estate agency work. There should be no more limitations than are necessary in the interests of the public. But two questions arise. There are two interests to protect. The first is the interest of the public in getting the best advice and getting impartial advice. The second interest that I still put forward, notwith-standing the remarks of the noble Lord, Lord Barnett, is that it is in the public interest that the solicitors' profession should be protected not against competition but against unfair competition. It is to those two principles that I address my remarks.
There is a real problem of conflict of interest. It is not simply something dreamt up by chancery lawyers. It is something that has evolved as a matter of practice. It is the question of fairness. I shall give the Committee an illustration. Let us suppose that there are no restrictions at all on the building society. Let us suppose that the building society has a borrower who cannot keeep up with his instalments. The building society is very kind to him and does its best, but he simply cannot keep up with the instalments. The building society says, "We think that you will simply have to sell the house". He agrees and asks the building society whether it will sell the house for him. It says, "Oh, no. We are bound to tell you that that is very depreciatory. You had better sell it". But the society goes on to say, "We do have an estate agent who is a subsidiary. We suggest that you go to him and he will do his best". No doubt he will. His charges will
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be the usual charges of 2·5 per cent. The vendor goes to the estate agent, and they agree on a price. In walks a purchaser. The same estate agent says, "This is a very desirable property. It is on offer at £100,000". That is enough to clear the building society mortgage and to give the first borrower something in his pocket. Acting perfectly properly, the estate agent asks the purchaser, "Would you like to buy this property? By the way, if you do, our parent company is a building society. We shall be able to arrange a loan for you. One favourite method is by taking out an endowment policy. Our society—we make no bones about it—will get a commission on the endowment policy. What is more, we will carry out all the conveyancing for you at a cost of £400".
I venture to suggest that whatever the probity of building societies, there must be some limitation. That kind of conduct must be forbidden. One cannot have a spider at the centre of a web, however well meaning a spider and however able it is in its affairs, pulling on every strand of the web, acting for vendor and purchaser, borrower and lender, and acting also as an estate agency as well as dealing with conveyancing and insurance. There must be some limitation. I should like to explain those limitations. It seems to me that the amendments proposed by the noble Lord, Lord Foot, Amendments Nos. 247 to 264, are sensible amendments that will allow the building societies to compete but will prevent the societies being in the conflict of interest position that I have outlined.
There is another factor to be taken into account from the point of view of the borrower and the lender. Nowadays one has to pay £80,000 for a house that was built at a cost of £800. It is the most important financial deal that any man enters upon. In most cases a purchaser or vendor will be well advised to consult a solicitor. One does not want to see solicitors thrown out of the window and everything taken over by building societies. The solicitor is about the only person who can say, "Do you really want to buy this house?", and "How will you get the money?" I know that the noble Lord says that a solicitor will act for a building society. Of course, he does. But he acts for several building societies. He is not wedded to one. Before acting for the building society on the conveyancing he sits down and considers with his client the pros and cons of whether to buy, how much to pay and everything else. He does more than that. He considers his client's matrimonial affairs, whether the property should be in the name of the wife, and whether the man should make a will. A good solicitor is under a duty to act as a father confessor and friend to his client. A good solicitor is worth his weight in gold. One does not want to see him eliminated altogether. The noble Lord looks cynical—
Lord Barnett: No.
6.15 p.m.
Lord Templeman: I am not here to defend each and every solicitor. There are 45,000 solicitors scattered throughout England, most of them in firms of three, four or five. Those in the country know the whole of the country. They know the people who live there and those they are dealing with. They know how to advise old ladies; they know how to advise the spendthrift.

1075
That is not the task of a building society. The building society is there to lend and to borrow. It is kind and gives certain advice. But it is not there to give the kind of family advice that a solicitor gives. It would be a very great pity if, in the interests of competition, conveyancing was taken over largely by building societies and small firms of solicitors ceased to be consulted, ceased to have that practice to the extent that they were put in great straits and ceased to carry out the services they perform now.
There is bound to be unfair competition in a certain way between building societies and solicitors. It is competition that solicitors must put up with. It is unfair in so far as the building societies have millions and millions of capital. The building society can afford to tell someone that it can do his conveyancing cheaply. The building society can afford to advertise. Most of the two-men or three-men solicitors do not possess the capital to do that. They cannot stand up to, or at least they will have difficulty in standing up to, the building society competition. I am not asking for this competition to be ruled out. It is something that Government and Parliament in their wisdom have said shall take place. So solicitors have to bear that competition. It must not, however, be unfair competition. When solicitors practise they are operating under certain rules in respect of accounts and behaviour. All those rules should be imposed on the building societies so that they are not in any better position than the solicitor. On reaching Amendment No. 105 and Amendments Nos. 247 to 264 the Committee will find that these provide that there shall be accorded to building societies the same limitations as those imposed on solicitors. The overriding limitation is that building societies should not be put into the kind of conflict of interest situation that I have mentioned.
I beg the noble Lord, Lord Barnett, to believe that this is not a plea. I have no brief on behalf of solicitors. I have never been a solicitor. I know a lot about solicitors. I have indulged in a good deal of criticism of solicitors. I have criticised more solicitors than I have building societies. I ask the noble Lord to believe that this is not a professional money-grabbing series of amendments. This is a very serious problem that we shall fudge at our peril. At the end of the day I should like to see solicitors still able to flourish, giving conveyancing advice and every other advice, and competing with building societies. I should, however, like to see building societies restrained from competing where there is a conflict of interest that operates against the interests of the public and where they might otherwise have an advantage over solicitors.
I make those observations because, owing to public and other duties, I shall be unable to stay to take part in the debates on all the amendments put forward by the noble Lord, Lord Foot. I pray earnestly that the Minister and the noble and learned Lord the Lord Chancellor, will not have regard to the question, "Shall we beat the solicitors over the head? Is this a favourable opportunity for getting the legal profession to yield up one of its restrictive practices?" I know that they will appreciate that we are not in that field at all. We are in the field of safety for the public and fairness to the solicitors' profession.
Lord Campbell of Croy: I intervene very briefly to make one point only and not to enter into the arguments that have been put so clearly on this amendment. I want to ask the noble Lord, Lord Barnett, whether he realises that this new clause is drafted to apply to England and Wales and not to Scotland, with its references to the Lord Chancellor, which would of course be the Secretary of State for Scotland where Scotland is concerned, and with its references to the Law Society, which would be the Law Society for Scotland.
There is an important fact relating to this amendment and it is a complicating one. In Scotland, there are not many estate agents and it is firms of solicitors who mostly carry out the tasks, such as advertising property and so on, which are done south of the Border by estate agents. That is a complicating factor and I simply wanted to register that what is being said about this clause would have different applications north of the Border.
Lord Jacques: For too long, consumers have suffered from the monopoly charges inflicted by solicitors for conveyancing—charges based upon the value of the property and not upon the work that is being done. The only excuse we have had for this charge in recent years is that it creates a fund from which there can be a cost subsidy to other work done by the solicitors. That may be so, but that is not the way in which the public should be charged.
What we need is a service for which the public are charged according to the value of the work which is done, and not according to the value of the property; work in which there is some competition to ensure that we get that. I believe that we can get that, or at least take a first step, by giving a power of conveyancing to building societies under proper control; and this amendment gives that kind of control. The conflict of interest in conveyancing is between buyer and seller, not so much between buyer and mortgagee. They are on the same side. In my opinion, that plea of conflict of interest is to a considerable extent an excuse and there is no great merit in it.
Lord Morris: With the greatest respect to the noble Lord, Lord Jacques, in this regard he is miles out of date. This practice was changed some years ago. I intervene at this stage, not because I support this amendment, for in many respects it has considerable lack of merit, but because I wish to support the noble and learned Lord, Lord Templeman, in his vigorous and most effective argument in regard to conflict of interest, when I come to my rather more draconian amendment at Schedule 8.
But I cannot fail to mention the point made by the noble Lord, Lord Barnett. With respect, I think he has missed the fundamental point here. He was quite right to point out that very often the purchaser's solicitor acts on behalf of the mortgage society on the acquisition of a property. But the point is that it is the mortgage society agreeing to use the purchaser's solicitor, and not the purchaser using the mortgage society's solicitor.
There is the very important point here that the interest of the lender is very much more restricted than the potential interest of the purchaser of the property.

1077
The interest of the lender of the funds is in the value and in security for the loan. The interest of the purchaser goes a great deal wider than that; for instance, and not least, the contract of sale itself in which the lender has no interest whatsoever. I do not want to develop the argument any more, but it is important to point that out to the noble Lord.
Lord Brabazon of Tara: We have had an interesting debate on this subject, which was debated at length in another place during the Committee stage. May I first say that my noble and learned friend the Lord Chancellor would have very much liked to reply to this debate, but owning to state duties in connection with the visit of the President of the Federal Republic of Germany he may not be able to stay until the end of it.
May I first deal with the suggestion of the noble Lord, Lord Barnett, that the Government have breached a commitment made to his honourable friend Mr. Mitchell? That is not the case. In February 1984, the Solicitor-General said in a Written Answer to Mr. Mitchell:
"we will shortly issue a Consultation Paper on how best to ensure that conflicts of interest and anti-competitive practices do not arise when solicitors employed by banks, building societies and other organisations are permitted to undertake conveyancing for their employers' customers. We hope to bring forward legislation committing building societies to offer this service next Session."
That quote was from Hansard of another place for 17th February 1984, col. 347.
That answer merely indicates the intention to proceed if the conflicts of interest could be avoided. It did not commit the Government to the introduction of a conveyancing free-for-all, come what may. What came out of that consultation was that there were genuine worries about the conflicts of interest that might arise. We paid careful heed to these comments and concluded that it would not at present be appropriate to allow institutions to offer conveyancing services to customers to whom they were also providing a loan.
Our consultations with the various interested parties did not produce any solutions. It would have been dishonourable to ignore these findings and to allow something which was so clearly against the public interest. Our commitment was to examine the possibility, in the hope that we could permit institutions to offer these services to their borrowers. That has not yet proved possible.
It has further been suggested that this Government are trying to protect the solicitors' profession against the prevailing spirit of competition. This Government's record of encouraging competition is second to none. Last Session's Administration of Justice Act brought forward the provisions needed to implement the Farrand Committee's recommendations on licensed conveyancers. The Council for Licensed Conveyancers has been meeting regularly and I understand it is making good progress.
This Bill will permit not merely building societies but banks, other financial institutions, subsidiary companies and estate agents to offer conveyancing services. Solicitors are now advertising their services and are competing vigorously with each other; and I
1078
say to the noble Lord, Lord Jacques, in particular, that the cost of conveyancing has dropped by one-third since this Government came into office. Where is the evidence to suggest that we are protecting the cosy monopolies of the solicitors' profession?
The Government are concerned, however, to protect the consumer from any adverse effects of this new spirit of competition. There must be safeguards which will be included in the recognition rules made under Schedule 21. Naturally my noble and learned friend the Lord Chancellor will consider what those safeguards must be, and ensure that they do not necessarily restrict competition while still protecting the interest of the consumer.
This new clause requires the commission, after consultation with the Lord Chancellor and the Director General of Fair Trading, to prepare, publish and administer a code of practice to cover the provision of conveyancing services by building societies. The chairman of the Building Societies Association has provided my noble and learned friend with a draft code of practice. The association suggests that this would be one way out of the difficulty. The code is clearly the product of much useful and conscientious thought.
However, my noble and learned friend said, in his reply to Mr. Cox on 17th May, that the Government are not satisfied that it meets our concerns. It sets out procedures that should be followed where there is a conflict and distinguishes between major and minor conflicts and precribes different procedures for each It is not clear when a conflict is minor and when it is major. Moreover, I doubt that it is right to leave the client without impartial advice in this situation. I he procedures envisaged will clearly lead to additional confusion and delay.
That is not to say, however, that no code will overcome the problem. If it can be overcome in the future—and, as my noble and learned friend the Lord Chancellor has said in his letter, he is always willing to consider further revisions—then a code could be incorporated easily within the provisions of Schedule 21. Noble Lords will have noted that Schedule 21 is drafted in wide and flexible terms. Recognition rules may easily be altered to include a code, should we be persuaded that it resolves our particular problem. This new clause is therefore unnecessary and inappropriate to institutions other than building societies. In the light of all that I have said and of the debate that has taken place I invite the noble Lord not to press the new clause.
6.30 p.m.
Lord Barnett: I say at once that I appreciate and understand why the noble and learned Lord the Lord Chancellor was unable to speak in the debate. I am glad that it did not prevent him intervening occasionally. It made me feel that I was back in another place. If I may say so, in another place I debated with lawyers long before they had reached the distinguished stage in their careers that they have reached when they arrive in this place. But I have enjoyed both.
I shall come in a moment to some of the points made by others in this brief debate. Let me say at once

1079
to the noble Lord, Lord Brabazon, that right at the outset of my remarks I conceded that, while the Government had been accused by some of a breach of faith—and, indeed, the Law Society sort of conceded that the commitment had been given—they did not introduce what they had implied at least to my honourable friend because they perfectly genuinely felt that they could not overcome the problem of conflict of interest. Indeed, for almost the whole of my remarks I dwelt on the issue of conflict of interest, on which it seems that we shall have to disagree.
Let me come right away to the points made by the noble and learned Lords, Lord Denning and Lord Templeman. It is difficult to have to disagree with two such distinguished lawyers, but their experience must be very different from that of the average purchaser of a small house, with the greatest possible respect to them. The noble and learned Lord, Lord Denning, said that there is normally a need for a separate solicitor. In most cases I go along with that all the way. When there is a vendor and a purchaser in commercial transactions of any kind I should never want to see a solicitor acting for both sides. But to say what he said is totally to misunderstand what happens today in the purchase of houses.
It is the perfectly normal, proper and ethical practice that a building society employs the purchaser's solicitor to prepare the mortgage deed. That is what happens in probably the vast majority of cases. That was conceded by the noble Lord, Lord Morris, who of course disagreed with me for different reasons. But there is no doubt that in that case solicitors act for both sides. As my noble friend Lord Jacques said, they do not act for the vendor and purchaser. That is an entirely different matter. Of course then there should be two separate solicitors. But we are not talking about that. We are talking about whether a building society should be able to act for the purchaser of a house when he takes out a mortgage—to draw up a mortgage deed and the rest.
The noble and learned Lord, Lord Templeman, dwelt upon the independence of solicitors. I was very moved by what he said. I know a lot of good family advisers. They are personal friends and have acted for me. But with the greatest respect to somebody as learned as the noble and learned Lord, the person who undertakes a legal conveyance does not sit at a table and ask, "Do you have a marriage problem? What about your children? How do you feel about this, that and the other?" A solicitor's clerk carries out the conveyancing. I doubt whether for one moment he ever contemplates discussing with the client his family problems. The client would probably not want to discuss them with him. Both noble and learned Lords were talking about something entirely different from what happens in the real world.
The Lord Chancellor: In the light of the noble Lord's reference to my difficulties, which have been acute because of the date on which the debate takes place, I thank him for giving way. Once the terms of the loan are agreed and the terms of the mortgage drawn up, the interests of the purchaser and of the proposed mortgagee are identical. At that stage they are concerned only with whether the vendor of the house,
1080
or whatever, can convey a good title. That has never been the point and that has never been the difficulty.
The difficulty consists in the fact that, if a person wants to borrow a sum of, say, £80,000, he requires advice, first of all, as to whether his financial circumstances make it appropriate; and it does not matter to the building society, which has a good security on the house, if the purchaser loses it. He has to inquire as to whether a building society, and if so which building society, is the appropriate lender, or whether the bank or his father-in-law would lend money on more favourable terms. It is at that stage that the conflict of interest is liable to exist. If the noble Lord would only concentrate his mind on the point, he might get somewhere.
Lord Barnett: With the greatest respect to the noble and learned Lord, he is attempting to draw us into an area which does not apply in the real world. What happens in practice is not what he would have us believe. Indeed, if he comes to my part of the world, he will not find many people seeking to borrow £80,000 or anything remotely like it.
If we are concerned with good title, it is at least as much in the interests of the building society as it is of the purchaser to ensure that there is a good title. Those who oppose the new clause, through the use of legal language, of which I am innocent, wish to convince me that I should drop the amendment because there would be a conflict of interest if a solicitor acted for both the building society and the borrower. I am not talking about the purchaser and the vendor, as I said, because there there would be separate solicitors—although I have known cases where there have not been; but I do not agree with that. We are talking about a very narrow area. Given the code of practice in the new clause and the Government's desire to extend competition as far as possible, I am surprised that they will not accept the new clause. In those circumstances I have no choice but to advise noble Lords not only on this side of the Committee but on the other side as well to support the new clause.
6.38 p.m.
On Question, Whether the said amendment (No. 7) shall be agreed to?
Their Lordships divided: Contents, 42; Not-Contents, 94.

DIVISION NO.2

CONTENTS

Ardwick, L.

Irving of Dartford, L.

Barnett, L.

Jacques, L.

Birk, B.

John-Mackie, L.

Boston of Faversham, L.

Kaldor, L.

Brockway, L.

Llewelyn-Davies of Hastoe, B.

Carmichael of Kelvingrove, L.

Lockwood, B.

David, B. [Teller.]

Longford, E.

Dean of Beswick, L.

Lovell-Davis, L.

Ennals, L.

Morton of Shuna, L.

Ewart-Biggs, B.

Mulley, L.

Falkender, B.

Nicol, B.

Gallacher, L.

Oram, L.

Graham of Edmonton, L.

Parry, L.

Hatch of Lusby, L.

Pitt of Hampstead, L.

Houghton of Sowerby, L.

Ponsonby of Shulbrede, L.

Howie of Troon, L.

[Teller.]

1081

Ross of Marnock, L.

Turner of Camden, B.

Scanlon, L.

Underhill, L.

Sefton of Garston, L.

Wallace of Coslany, L.

Serota, B.

Wells-Pestell, L.

Stoddart of Swindon, L.

Williams of Elvel, L.

Strabolgi, L.

NOT-CONTENTS

Airedale, L.

Long, V. [Teller.]

Allenby of Megiddo, V.

Lucas of Chilworth, L.

Alport, L.

Lyell, L.

Ampthill, L.

McFadzean, L.

Aylestone, L.

Macleod of Borve, B.

Beloff, L.

McNair, L.

Belstead, L.

Mancroft, L.

Bessborough, E.

Merrivale, L.

Brabazon of Tara, L.

Mersey, V.

Brentford, V.

Morris, L.

Broadbridge, L.

Munster, E.

Brougham and Vaux, L.

Murton of Lindisfarne, L.

Broxbourne, L.

Norfolk, D.

Caithness, E.

Onslow, E.

Cameron of Lochbroom, L.

Pender, L.

Campbell of Alloway, L.

Plummer of

Campbell of Croy, L.

St. Marylebone, L.

Carnock, L.

Portland, D.

Colville of Culross, V.

Rankeillour, L.

Colwyn, L.

Reigate, L.

Craigavon, V.

Renton, L.

Crawshaw of Aintree, L.

Renwick, L.

Davidson, V.

Ridley, V.

Denning, L.

St. John of Bletso, L.

Diamond, L.

Sandford, L.

Dundee, E.

Selkirk, E.

Elliot of Harwood, B.

Shrewsbury, E.

Elton, L.

Shuttleworth, L.

Faithfull, B.

Skelmersdale, L.

Ferrier, L.

Soames, L.

Foot, L.

Strathclyde, L.

Fraser of Kilmorack, L.

Stathcona and

Gardner of Parkes, B.

Mount Royal, L.

Gray of Contin, L.

Sudeley, L.

Grey, E.

Swansea, L.

Hailsham of Saint

Swinfen, L.

Marylebone, L.

Swinton, E. [Teller.]

Halsbury, E.

Templeman, L.

Hanworth, V.

Thorneycroft, L.

Harris of Greenwich, L.

Trenchard, V.

Henley, L.

Trumpington, B.

Hooper, B.

Ullswater, V.

Hylton-Foster, B.

Vaux of Harrowden, L.

Kilmarnock. L.

Vivian, L.

King of Wartnaby, L.

Whitelaw, V.

Lane-Fox, B.

Young, B.

Lawrence, L.

Young of Graffham, L.

Layton, L.

Zouche of Haryngworth, L.

Lindsey of Abingdon, E.

Resolved in the negative, and amendment disagreed to accordingly.
6.45 p.m.
Schedule 1 [The Building Societies Commission]:
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 8:
Page 171, line 15, at end insert
("though not for any period exceeding five years, which may be extended for a further period not exceeding five years").
The noble Lord said: This amendment can soon be disposed of. I am seeking to find out a little more about the conditions of service of the chairman and deputy chairman of the Building Societies Commission. In Schedule 1 to the Bill it says that there shall be an instrument of appointment. Is there no period to that instrument? Is there some standard form here? It is usual to indicate the tenure of office when making a
1082
public appointment of this kind, and whether it can be renewed. If the noble Lord tells me that this is all right, that this is what they usually do, I presume that later on we shall have to ask questions when the appointment is made—on what terms, and for how long?
I thought it not a bad idea to say that the appointment shall be not longer than five years to begin with, to be renewed for another five years, but not to exceed 10 altogether. That seemed reasonable. I am open to persuasion. I shall not spend further time on it. I beg to move.
Lord Brabazon of Tara: It is indeed the intention that the commissioners will have fixed-term appointments, and the period is likely to be in the range of three to five years. We would not therefore want to go as far as does the amendment of the noble Lord in putting in the statute exactly how long they should remain. We should like to retain flexibility so that the commission can retain expertise. It is possible to envisage circumstances in which a commissioner has been appointed originally for a fixed term, and has had his appointment extended for a further period. Then, because of the ill-health of another commissioner, it might be desirable to reappoint him for a further short period. We should like to retain the flexibility as it is. But I can give the information which the noble lord, Lord Houghton, seeks, that the period is likely to be within the range of three to five years. I hope that will satisfy him.
Lord Williams of Elvel: May I ask the Minister for certain clarification of what he has said? Do I understand him to say that the Government will publish a fixed term for the appointment of commissioners which is in the range of three to five years—and no doubt it will be something such as four years—or is he saying that there will be flexibility in the terms that one commissioner may be appointed for three years and another for five years, and that it will be extendable? What exactly is the Minister saying to my noble friend?
Lord Brabazon of Tara: Each individual appointment will be separately negotiated, so to speak, for a term of between three and five years. If I have any further information to give the noble Lord I shall write to him on that point.
Lord Harris of Greenwich: Perhaps the noble Lord will do so. It is very unusual to make public appointments on the basis that he is describing. They are normally for a fixed period. To take an illustration which is not particularly relevant to this area, when people were appointed to the parole board they were appointed for a specific number of years. If Ministers therefter wanted to appoint someone for a longer period then they re-appointed the individual. I find it very unusual to have this degree of uncertainty. I do not want to press the noble Lord today. It is not a matter of critical importance, but perhaps the noble Lord will look into it between now and the Report stage.
Lord Brabazon of Tara: Yes, I shall indeed do so if I cannot give an answer now. It will be a fixed period of between three and five years. Perhaps I may write to the noble Lord, Lord Harris of Greenwich, and let him have a copy of the letter. If I have been in any way unclear in my answer I shall certainly deal with the matter.
Lord Houghton of Sowerby: I take it that the appointment will be for a fixed term of between three and five years. That seems to be quite definite because it has been repeated so many times! For the time being I shall take the noble Lord's answer because I do not want to delay the Committee any longer on a matter of this kind. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 9:
Page 171, line 37, leave out paragraph 4.
The noble Lord said: I now come to a rather more serious matter. I rise in defence of men and women in the prime of life at the age of 70. My amendment would remove the slur upon them in paragraph 4 of Schedule 1 which says:
"No person who has attained the age of 70 years is eligible to be or to remain a part-time member of the Commission".
The history of the Halifax Building Society shows that the most notable personality in the whole movement was Sir Enoch Hill who served for 35 years and retired voluntarily at the age of 72 amid gratitude and appreciation of his long service and great ability. The elderly board of the Halifax Building Society pioneered the building society movement. Now we are told that no one over the age of 70 may,
"remain a part-time member of the Commission".
As regards building societies, the Bill says that directors over 70 shall be subject to annual election. I have no particular quarrel with that. I remember years ago sitting on a committee on the future of the Civil Service and the late Lord Woolton said that he would put all civil servants over 50 on an annual contract and that would stop them talking about promotion for the sake of how much it would add to their pensions! He would keep them on their toes in their late years. I have no real complaint against putting people on an annual engagement, but I do complain about banning them altogether.
The appointments will be in the hands of the Treasury and they can surely take care of appointing suitable people. Even my noble friend Lord Wilson of Rievaulx said that he was always ready to make room for an older man! I think that we are really quite stupid about age. Where does this 70 years come from? Is it what the doctors say or is it what the Bible says? I had an old uncle who when he reached 70 said, "I've now had my allotted span". He then began to moan about living on borrowed time. I said, "Who've you borrowed it from? You've never owed anybody a penny all your life and now you say that you are living on borrowed time". The idea of three score years and 10 is quite absurd. Surely I can appeal to your Lordships' House of all institutions to defend the right of able bodied people of 70 to do a job of work even on the Building Societies Commission.
I sincerely hope that the Government have not put the two young noble Lords on the Front Bench opposite to try and denounce the right of those able bodied people of 70 to continue in their work. I notice that the noble Lord, Lord Young, has moved away from those young people!
Seriously, I think that this quite unnecessary slur should be removed from the Bill. I need not say any more. I cannot believe that the Committee will endorse this vote of censure upon this House. Here we have the créme de la créme of wisdom and experience among senior citizens. Yet we are asked to sit here and endorse—indeed, to put into an Act of Parliament— that no person after the age of 70 shall be eligible for or to remain in (and that is the unkindest cut of all) the job. It is like cutting him off; as soon as he is on borrowed time, out he goes. No, those who look after these appointments can manage them very well without a prohibition of this kind in the Bill. I sincerely hope that if the Government do not take this paragraph out voluntarily, then all of those over 70 should go into the Lobby against it—and that will ensure that the amendment will be carried!
Lord Brabazon of Tara: I know that I am on touchy ground here. I think that the best I can do is to put the blame on the party opposite, because the Bill as originally drafted did not contain this provision. Indeed, it was only put into the Bill in response to an undertaking given in Committee to the honourable Member for Ipswich, who is a member of the party opposite. I am not allowed to quote verbatim what the honourable Member said, but he implied that Labour Members believe that an age limit must be part of the qualification for being a commissioner. He said that no one had said that beyond some arbitrary age someone has outlived his or her usefulness. He said that it is frequently the case that wisdom and experience go with age and that in public life people of very senior ages make major contributions to public decisions. That certainly is the case in this Chamber. He went on to say that he felt, however, that when one has reached the age of 70 it is time to let a younger person have a go, and I would endorse that particular aspect of what he said. To be fair to those of us below the age of 70, it is perhaps a good idea occasionally to let somebody below that age have a go at these things.
Therefore, if the noble Lord, Lord Houghton, were to call a Division at this moment, I do not know how the Committee would divide on the matter. I think that I might be on the losing side! Nevertheless, I am afraid that I cannot accept the amendment. I think that Members of another place of all parties who approved this measure would not wish me to do so at this moment.
Lord Houghton of Sowerby: I cannot withdraw the amendment. If noble Lords—young and old—feel disposed to keep this paragraph in the Bill, then it is their responsibility and not mine. I will not have it for myself and I do not wish it on anybody else. Youth will have its chance all right; the whole nation is waiting for a little more wisdom among young people because then we may be in better shape all round. I cannot withdraw the amendment, because it is quite unnecessary to put a limitation of this kind in the Bill. If people

1085
making appointments cannot exercise their own judgment and discretion, then I do not think that the law should be there to help them. It should come out of the Bill. I cannot withdraw the amendment. It is up to the Committee.
7 p.m.
On Question, Whether the said amendment (No. 9) shall be agreed to?
Their Lordships divided: Contents, 21; Not-Contents, 57.

DIVISION NO.3>

CONTENTS

Airedale, L.

Irving of Dartford, L.

Brockway, L.

Kaldor, L.

Carmichael of Kelvingrove, L.

Kilmarnock, L.

Carnock. L.

Mulley, L.

Crawshaw of Aintree, L.

Pitt of Hampstead, L.

[Teller.]

Plummer of

Diamond, L.

St. Marylebone, L.

Foot, L.

Rugby, L.

Grey, E.

Strabolgi, L.

Harris of Greenwich, L.

Underhill, L.

Hatch of Lusby, L.

Vickers, B.

Houghton of Sowerby, L.

[Teller.]

NOT-CONTENTS

Allenby of Megiddo, V.

Macleod of Borve, B.

Alport, L.

Maude of Stratford-upon -

Ampthill, L.

Avon, L.

Belstead, L.

Merrivale, L.

Bessborough, E.

Mersey, V.

Brabazon of Tara, L.

Morris, L.

Brougham and Vaux, L.

Mountgarret, V.

Caithness, E.

Murton of Lindisfarne, L.

Cameron of Lochbroom, L.

Onslow, E.

Colville of Culross, V.

Portland, D.

Colwyn, L.

Rankeillour, L.

Craigavon, V.

Reigate, L.

Davidson, V.

Renwick, L.

Denning, L.

Sandford, L.

Elton, L.

Shrewsbury, E.

Ferrier, L.

Shuttleworth, L.

Gardner of Parkes, B.

Skelmersdale, L.

Gray of Contin, L.

Strathclyde, L.

Hailsham of Saint

Strathcona and Mount Royal,

Marylebone, L.

L.

Henley, L.

Swansea, L.

Hooper, B.

Swinton, E. [Teller.]

Hylton-Foster, B.

Trenchard, V.

Lane-Fox, B.

Trumpington, B.

Layton, L.

Ullswater, V.

Lindsey and Abingdon, E.

Vivian, L.

Long, V. [Teller.]

Whitelaw, V.

Lucas of Chilworth, L.

Young, B.

Lyell, L.

Young of Graffham, L.

McFadzean, L.

Zouche of Haryngworth, L.

On Question, amendments agreed to.

Lord Skelmersdale: I think that perhaps we have got as far, if possibly not as fast, as we can on this Bill at the moment. In moving that the House do now resume, I suggest that we do not return to this Bill until at least eight o'clock. I beg to move that the House do now resume.
House resumed.

Lord Chancellor's Salary Order 1986
7.8 p.m.
The Secretary of State for Employment (Lord Young of Graffham)The Secretary of State for Employment (Lord Young of Graffham) rose to move, That the draft order laid before the House on 3rd June be approved. [25th Report from the Joint Committee].
The noble Lord said: My Lords, I beg to move that the draft Lord Chancellor's Salary Order 1986, which was laid before this House on 3rd June, be approved.
This order sets the salary level payable to the Lord Chancellor from 8th July at £79,400 per year compared with the existing level of £77,000 per year. It is needed in order to preserve the link between the Lord Chief Justice's salary and the Lord Chancellor's salary. The origin of this link is the 1983 Top Salaries Review Body's report which recommended that in recognition of the Lord Chancellor's position as head of the Judiciary he should have a salary higher than that paid to the Lord Chief Justice. The Government accepted that recommendation and it has been approved by Parliament.
The Lord Chancellor's lead was set at £2,000 in 1983 and it is proposed to keep it at that figure. In order to maintain the link between the two salaries it is necessary to bring forward to Parliament an order increasing the Lord Chancellor's salary whenever the salary of the Lord Chief Justice is increased. The Lord Chief Justice's salary has been increased from £75,000 to £77,400 from 1st July following the Government's decision on the TSRB's 1986 report. Consequently there is now a need to bring forward an order to increase the Lord Chancellor's salary by the same amount.
Your Lordship will recall that last year's debate on the order aroused considerable interest, not because of any challenge to the order itself but because the House took the opportunity to express its views about the TSRB's overall recommendations. This year I believe we are in a calmer situation, and without further ado I commend the order to your Lordships' House. I beg to move.
Moved, That the draft order laid before the House on 3rd June be approved. [25th Report from the Joint Committee].—(Lord Young of Graffham.)
Lord Barnett: My Lords, I was astonished to see the noble Lord sit down so soon. Normally, when you pay someone £77,400 you are entitled to say a few words. After the little debate I have just had with the noble and learned Lord the Lord Chancellor, I should not wish to stop him getting an increase in salary even if he is not taking it—and I gather he does not. I thank the noble Lord for explaining the link and the reason why this modest little increase is before us in this order.
Unlike the noble Lord, Lord Young, I should like to take the opportunity—and I hope that the Minister will take the opportunity to reply—to say a few words about public sector pay, for the Lord Chancellor's pay must be seen in the context of the consequences for others in the public sector, in the whole of the legal profession and, indeed, on a wider scale. Clearly one cannot criticise the present incumbent because he does not take anything like the amount he is entitled to take

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under this order or under previous orders. My noble and learned friend the former Lord Chancellor perhaps might be entitled to feel a little bitter about the present level of salary that the Lord Chancellor is allowed. When my noble and learned friend unfortunately left office in 1979 the salary was £20,000 a year. However fond we are of the present incumbent, I would personally much rather see my own noble and learned friend sitting on the Woolsack again.
The fact is that there are obvious consequences for others in the Lord Chancellor's department and elsewhere in the public sector flowing from the level of pay that is decided in this kind of order. As the noble Lord, Lord Young, said, when we debated this last year in a somewhat different context—the noble Lord said a "less calm atmosphere", though I am not sure I would necessarily say "less calm"—your Lordships kindly agreed to an amendment I moved. Your Lordships supported me in a very calm and rational way, and agreed with what I said in the amendment I put to your Lordships' House. But we were talking then of a 16·6 per cent. increase as opposed to a 3 per cent. increase now. It is a different situation. Nevertheless, it is also a fact that there are many in your Lordships' House, especially those who spoke last year, and outside the House on all sides, who recognise the unfairness of the policy that exists in this country in relation to incomes generally both in the public and private sectors and who believe that it is not the responsibility just of one party or of one Government but that it has existed for a long time.
This year, when this order was debated in another place, a small number voted against it, including one or two from the noble Lord's own party—or, at least, they abstained or spoke against it. They did so because they felt, as some of them made clear in the debate, that it was somehow wrong to be making available for one man £77,400, whereas others were having to make do with considerably less.
The plain fact is that anybody would have to accept, looking at public sector pay, that the policy that exists on public sector pay is a shambles. I want to make it quite clear that all parties have a responsibility in this sphere. Few have been able to find the solution to the shambles in relation to incomes, but the problem is serious. It is easy to simplify it by arguing that it is wrong to give increases to all those in the top salary brackets—which was a view taken by a few on both sides when this was debated in the other place. That, in my view, is a simplistic argument which ignores the real problem.
The heart of the problem is that the high salaries in parts of the private sector—not just at the top end of the private sector, but in the professions and in the City—make it extremely difficult to attract the right kind of people to the public sector initially and to enable movement to take place between the public and private sectors because of this disparity in incomes. For example, when the Government wanted a first-class man to go into the Ministry of Defence to run a very important part of that department, they were obliged to pay a very high salary of some £96,000.I make no criticism of that as such. I gather he is a most able man doing an excellent job, but that is an indication of the problems that we create for
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ourselves in this country with the level of pay that we try to impose and the inflexibility that inevitably applies in the public sector.
I have long felt that there is a great need for an interchange between the public and private sectors. We do it on a small scale in this country. Somehow, other countries manage it rather better. For example, in the United States many people are willing and able to come out of the private sector into the government sector to work for a few years and then go back again. We do not manage to do that in this country, and I find it rather sad because we have some excellent people in both the public sector and the private sector with contributions to make on both sides of the divide—and it is a shame it is a divide—which would help in the running of our country.
When the salary increase was debated in another place points were made about the unfairness of paying nearly £80,000 a year to the Lord Chancellor while there were so many low-paid, pensioners, unemployed and so on. We were being told that workers were pricing themselves out of jobs. That may be an understandable view to take, but it ignores the central problem that all Governments face. If we did not give the proper level of salary at the top it would solve nothing. Indeed, it would make the position much worse. When one of my honourable friends in another place said it would be much better to have flat rate increases so that then it would be fairer between the bottom and the top, my mind went back to the first of our pay policies in the last Labour Government, when we had a £6 a week pay increase across the board. Many of the low paid workers in my old constituency then received increases of a size that they have never had in their lives. But we could not continue it for another year, not because the Government did not want to but because it was narrowing differentials, and that was unacceptable to the trade union movement.
That narrowing of differentials is the problem that we create for ourselves all the time in the way we run our public sector pay policy; and no Government have been able on a long term permanent basis to get to grips with what is a most serious and difficult problem. I know the Government recognise that overall pay increases now—certainly not for everybody, but the general level of pay increases—are such as to be building up enormous problems for any economic management in this country.
I realise that this is not the time or the place for a major debate on how we can achieve a sensible incomes policy, but I think it is right that I should refer to it and bring it to the attention of your Lordships, and I hope even to a wider field. I think that the Lord Chancellor's proposed increase in this order simply highlights the nonsense of the way that successive governments have handled pay policy, or, rather, failed to handle pay policy. For myself, I can only hope that one day someone will face up to this most serious problem before the endless cycle of spiral increases in pay continues to such an extent that we ruin the economy that we all want to see improved.
Lord Young of Graffham: My Lords, I am, as ever, grateful to the noble Lord, Lord Barnett, for what I must take on balance to be his welcome of the Lord

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Chancellor's Salary Order 1986. Perhaps I may say to him that, by chance, I happen to be an example of one who moved from the private sector to the public sector before I was "translated"—if that is the correct word— to a third state. The noble Lord draws attention to a very real and very serious problem: how do a government manage public sector pay, and, indeed, what, I suppose, do Ministers say to the private sector who appear at times determined to pay what seem to be almost suicidal pay increaes? We live in a changing world, a world where we shall have to recondition ourselves to a different rate of inflation. I suppose that the simple truth is that for the last quarter century we have been used to substantial inflation and we have been used to annual pay rises. I can remember the time when that was not the norm, when we looked only for merit pay increases. Indeed, I recall during the last 10 or 15 years working in other countries where there were no pay increases and they waited until the cost of living increase had gone over 5 per cent. before that would even trigger a discussion on pay.
I suppose that it is a problem on which government have to set an example. In regard to the whole of this year's review board we have seen an endeavour, certainly in relation to the judiciary, the armed forces and the higher Civil Service, to achieve pay increases approximating to the rate of inflation. This is a difficult problem to solve. It is one which we had to solve in a world where, looking at the pay and tax increase, we required only 1·2 per cent. to maintain our living standards and where, in industry, we paid ourselves over 7·5 per cent.—adding more in real increase to labour costs than I suspect we have done in any year since the war.
The solutions are not easy. We have tried pay policies; we have tried exhortation. I suppose that the best and most effective way is to run an economy which keeps inflation down to zero. And the rate of inflation has been going down steadily. I hope very much that all will listen to the words of the noble Lord, Lord Barnett, and will look very carefully before coming to consider pay increases in the future. That is all that the Government can do today. I hope that all in your Lordships' House will look with favour on the draft Lord Chancellor's Salary Order 1986. I beg to move.

Crown Agents (Amendment) Bill
7.23 p.m.
Baroness Young: My Lords, I beg to move this Bill be now read a second time.
This Bill is a short and simple measure, amending the Crown Agents Act 1979. Its effect will be to extend until 1991 the period during which the Secretary of State has power to determine whether, and, if so, to what extent, the Crown Agents are required to pay interest on their commencing capital debt. Under existing legislation the power expires at the end of 1986.
The background to this Bill is as follows. The Crown Agents were founded more than 150 years ago, but it
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was not until 1st January 1980, following the Crown Agents Act 1979, that they were established as a statutory public corporation, controlled by a board appointed by the Secretary of State. The new corporation needed working capital, and the Act made provision for a commencing capital debt to be assumed by it. The amount of the debt, which was originally set at £30 million, has now through repayment been reduced to £17·8 million.
The Act requires that this debt be serviced, but Section 17 also empowered the Secretary of State to determine the amount, if any, of the interest paid, for an initial period of five years which would be extended to seven years by means of an order. The order was made and its effect expires on 31st December of the present year.
The Crown Agents paid some interest on the debt in the four years 1980 to 1983. In the latter year the loss of their Brunei business posed a major financial problem. The Board of Crown Agents took a hard look at the future of Crown Agents, both as regards its organisation and its finances. They drew up a comprehensive reorganisation plan, which involved substantial staff reductions and the sale of their headquarters offices in Westminster, followed by removal to Sutton. The Government endorsed these proposals in February 1984, with a view to privatisation in due course. In these circumstances we have agreed that no interest on the capital debt should be paid in 1984, 1985 and 1986.
The Crown Agents have carried out the reorganisation plan efficiently. They have moved their headquarters and reduced staff numbers from 1,200 to about 850. They continue to move towards privatisation, but no timetable has been set; enabling legislation would be required. We therefore need to continue the power to determine the extent to which Crown Agents should pay interest for a further limited period, until 1991. This is effective in Clause 1(a) of this short Bill. Clause 1(b) merely removes the necessity for any further order to be made to extend the power to waive interest, because the matter is fully covered by Clause 1 (a), where the limits are laid down.
I believe it to be to the general advantage that Crown Agents should continue to provide the services which it now provides both to its clients overseas and to this country, since very much of its business involves the export of British goods and services. This Bill will help to enable it to do so and I commend it to your Lordships.
Moved, That the Bill be now read a second time.—(Baroness Young.)
7.27 p.m.
Lord Oram: My Lords, I should like to thank the noble Baroness for explaining the Bill to us. As to its central purpose, there is nothing of a controversial nature, I think, between the two sides of the House. I notice that in another place when they reached the Committee stage they started at 10.30 in the morning and finished one minute later. I rather anticipate that when we reach the further stages in this House we can perhaps be even more expeditious.
We are this evening on the Second Reading and can therefore range somewhat wider in our consideration

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of the Bill. I should like to echo the words towards the end of the speech of the noble Baroness and the words which have been expressed in the other place commending the work that the Crown Agents do throughout the world. If one turns, for instance, to the last two pages of the annual report of the Crown Agents, one sees the great geographical spread and the great variety of activities as well as the very great number of the principals for which the Crown Agents act. One sees, too, earlier in the report the great variety and nature of the projects for which the Crown Agents offer their procurement services—all the way from postage stamps to equipment for power stations.
Clearly, therefore, it is in the interests of a great number of governments and a great proliferation of public and private institutions that this work should be facilitated. The noble Baroness has this evening explained that the financial progress of the organisation suffered a setback when Brunei decided no longer to use the services of the Crown Agents. They had been an important client of the Crown Agents. That, I understand, was, at least in part, the origin of this Bill and of the need to extend to 1991 the Government's power to waive interest on the Crown Agents' debt. We on this side acknowledge that that further facility is necessary.
I think that two more general observations are worth making, briefly. The chairman of the Crown Agents, in his report, pointed to the connection that there is between the business that his organisation achieves and the economic health of the developing countries which are its principals, many of them small and impoverished. It is clear that he would welcome an extended aid programme, which indirectly would bring greater business to the Crown Agents and to the many small firms in this country from which they make purchases on behalf of their clients.
My second observation is that I believe the confidence which so many governments place in the services of the Crown Agents is due in large part to the fact that they are dealing on a government-to-government basis. It is for that reason that we on these Benches view with apprehension the prospect which the noble Baroness has again repeated this evening: namely, the Government's proposal to privatise the Crown Agents. In my view, it will not benefit the organisation—it does not need privatisation—and it may well do it grave harm because of the breakdown in the confidence to which I have already referred.
The Minister for Overseas Development and the noble Baroness this evening have reiterated the Government's intention to privatise the Crown Agents, although we understand from the noble Baroness that no timetable has been set for that operation. I am not surprised, because the Crown Agents have been through a very difficult period. They are still building up their strength and, certainly from the market point of view, are not a prime apple to be picked. But that is for the future. One hopes we shall not get to that stage, but if and when the time does come we on this side will have a full opportunity for debating the matter and firmly resisting it. In the meantime, we are presented in this Bill with a much less provocative and significant proposition: the extension of the powers of the Government to waive
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interest if they think it appropriate. That is a proposition which we on our side can readily support.
7.32 p.m.
Baroness Young: My Lords, I should like to start by thanking the noble Lord, Lord Oram, for his support for the principle of this short, tactical Bill. I think the noble Lord accepts the point the Government have made, that this will be for the benefit of the Crown Agents. I was also glad to hear the tribute he paid to the work of the Crown Agents. I, too, looked at their last report; and what they have done in so many countries of the world is very impressive.
The noble Lord drew attention to a remark of the chairman of the Crown Agents on the connection between the amount of business achieved by British industries and the economic health of developing countries—the point being of course that the better off the developing country is the more likely it is to have more business with the United Kingdom—and to the chairman's statement that they would therefore welcome more aid.
As I think the noble Lord, Lord Oram, knows, there is increased provision for overseas aid, and this means that the real value of the aid programme should be more than maintained at its 1985–86 level, based on current estimates of inflation. It means in fact that aid will have maintained its real value since 1982–83. The planned increases over the 1985–86 level are by £57 million, £ 100 million and £ 140 million respectively in the next three financial years; so that the new total for 1986–87 will be £1,187 million.
The last point the noble Lord made was his concern about privatisation. He has noted the points made by my right honourable friend the Minister for Overseas Development in another place in regard to this Bill. I can do no more than reiterate the point he makes. I cannot anticipate the legislation that would bring about privatisation in due course. It is our intention that the Crown Agents should continue to move towards privatisation, but when we reach that point there would be legislation and of course there would be an opportunity for a full debate on the matter, as one would expect in respect of legislation. With those few remarks, I am very glad that the noble Lord, Lord Oram, has supported the principle of this short but useful Bill.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
Baroness Hooper: My Lords, I beg to move that this House do now adjourn during pleasure until eight o'clock.
[The Sitting was suspended from 7.36 to 8 p.m.]

Building Societies Bill
House again in Committee on Schedule 1.
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 10:
Page 172, leave out line 29.
The noble Lord said: Associated with Amendment No. 10 are Amendments Nos. 11 and 12, and it is tabled for the purpose of elucidation. I am a little confused about the whole of paragraph 11 and also paragraph 12, to which I shall come in a moment. The Minister has an amendment of his own in respect of paragraph 11 (2), to alter the word "orders" to the world "rules", which helps me a little.
What puzzles me is the impression given that the commission has some powers of laying statutory instruments. Am I right about that? Sub-paragraph (2) states:
"The Commission shall not delegate any power it has under this Act to make orders"'—
as it says now, but the Minister proposes to use instead the word "rules"—
"or regulations by statutory instrument".
It may be convenient for me to refer now to Amendment No. 14, which relates to paragraph 12. It states that:
"The Statutory Instruments Act 1946 shall apply to all powers of the Commission of making statutory instruments under this Act as if the Commission were a Minister of the Crown".
That is what puzzles me but probably it can be explained.
I have always understood that statutory instruments had to be laid before Parliament by a Minister. Will the commission be able to lay something on the Table of the House of Commons that will be subject to the negative procedure? I shall be glad if that point can be made clear. I do not want to carry on speaking until the noble Lord, Lord Skelmersdale, finds the answer, but I shall give him a minute. I shall be much obliged if I may hear a few words from the Minister.
Lord Brabazon of Tara: I am grateful for the opportunity given to me by the noble Lord, Lord Houghton, to offer an explanation. It is unusual to give a legislative power to an authority other than a Minister who, as a Member of Parliament, is directly answerable to Parliament. On constitutional grounds it can be argued that it is inappropariate to allow for the power to be exercised other than by the commission. From a policy viewpoint, it is desirable for the commission itself, which is a supervisory body being established under this legislation, to take decisions regarding any power it has to make orders, etc., by statutory instrument rather than allow for delegation. The expertise will be in the collectivity of the commission, and that is where the final authority should rest.
It is possible of course that individual commissioners may be unavailable at particular times; but that is not sufficient reason for removing the statutory requirement that the commission itself only has the power to make orders or regulations. If it proved necessary, the decision to make a particular order could be taken at more than one meeting, with those unable to attend the first attending the second.
The noble Lord's other amendment would remove the reference in brackets in paragraph 11. The words in brackets are necessary to make it clear that the full commission may delegate to a commissioner or commissioners the power on behalf of the commission
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to delegate commission functions; that is, sub-delegation. Without those words the position as to whether such a power would be delegated by authorisation will be uncertain.
There is no question that delegation of particular functions to an individual commissioner or group of commissioners is a necessity, given the range of matters that will fall to be determined by the commission. However, the power of sub-delegation is permitted only in so far as that is provided for in the original delegation by the commission. Thus, if the full commission considered that a matter ought to be dealt with by a particular commissioner and delegated its powers to him alone, the commissioner could not pass that responsibility to a colleague if, for example, he found himelf with a conflicting engagement on a particular day. The full commission would have to issue a fresh authority to the other commissioner. The commission may make and lay statutory instruments, and that is equivalent to a provision in the existing 1962 Act, whereby the chief registrar can do so, in Section 126(1) of that Act.
The noble Lord mentioned also his Amendment No. 14, which would disapply the provisions of the Statutory Instruments Act 1946. The purpose of the amendment is somewhat unclear to us. The Statutory Instruments Act provides for instruments to be printed and sold by the Stationery Office, and its sets out the negative and affirmative resolution procedures. The consequence of the amendment would be that there would be no need to make an instrument available for sale to the public; secondly, that the effect of the various provisions for instruments to be improved or subject to annulment would be made uncertain. I hope that with that explanation the situation will be somewhat clearer to the noble Lord.
Lord Plummer of St. Marylebone: I must say that I am not altogether clear. Can my noble friend say whether or not the commission has the power to delegate the making of orders or regulations by statutory instrument?
Lord Brabazon of Tara: Yes, I thought that I had answered that point. The commission may make and lay statutory instruments under the provisions of the Statutory Instruments Act 1946, which is equivalent to the provision currently in force in respect of the chief registrar under the 1962 Act.
The Earl of Selkirk: May I ask my noble friend whether the statutory instrument is laid by the commission and not by the Treasury? Am I correct in thinking that it is laid before Parliament but that Parliament does not either approve or disapprove of it? I just want to be clear about what precisely is the position of a so-called statutory instrument.
Lord Brabazon of Tara: It is a negative instrument. It would be laid by a Treasury Minister, I gather, but it would be laid on behalf of the commission.
Lord Barnett: I am glad to hear that explanation because I was beginning to be as worried as my noble friend and the noble Lord, that some commissioner acting alone or perhaps with one other, would have

1095
delegated powers to lay a statutory instrument that would immediately become law. Provided that it is properly understood that the statutory instrument would be laid before Parliament as a negative order, and that it would have to be prayed against, or could be prayed against, then I would not object—just so long as that is absolutely crystal clear.
Lord Brabazon of Tara: Yes, I hope that I have made that clear.
Lord Houghton of Sowerby: We were given the answer we have been waiting for right at the end of the Minister's comments, following the intervention of the noble Earl, Lord Selkirk. The position is now clear that a statutory instrument which is laid before Parliament, under either the negative or the affirmative procedure, will be laid by a Minister. I thought from the text of paragraph 12 that the commission itself had the power to lay an order.
As my noble friend Lord Barnett said, it would be unusual—I have never heard of it—were a person other than a Minister to lay an order on the Table of Parliament and for it to be dealt with according to the procedures on statutory instruments. We could pray against it. In fact, we could ask Her Majesty to annul it. I hope that when we read in Hansard what the Minister said we will all be much clearer about it. The point seemed to be worth exploring, but in the circumstances I beg leave to withdraw the amendment and I hope that I do not have to come back to it again.
Amendment, by leave, withdrawn.
[Amendments Nos. 11 and 12 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 13:
Page 172, line 35, after ("orders") insert (",rules").
The noble Lord said: This is purely a drafting amendment to clarify that the commission cannot delegate any of the legislative functions given to it under the Bill. I beg to move.
Lord Barnett: I appreciate that this is only a drafting amendment but I hope the Minister will understand that for the rest of us in the Committee—this certainly applies to the Opposition, and I imagine to others—when we see Government amendments of the size and quantity that we have in the case of this Bill (there are nearly 200 Government amendments) it takes us some time to check them to see whether they are drafting amendments.
I realise that this is a large Bill and that even at this late stage there is a need for some Government amendments. However, this is almost as if the Government are seeking to sabotage their own timetable. With nearly 200 amendments and new clauses it is extremely difficult. As the Minister knows, I have no wish to deliberately delay the passage of this Bill. Indeed, I generally welcome the Bill. However, there are no explanatory notes of any kind so we must go through every single amendment to ascertain what it is about.
The Minister says that this is a drafting amendment. I understand that but, with the greatest possible respect to him, this volume of amendments makes a mockery of the functions of the Committee. If we are to perform
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our proper role of scrutinising and revising Bills that come to us from another place—which inevitably come to us, whichever Government is in power, badly drafted, and are bad legislation, because of the political and time pressures—it means that with the number of amendments involved in this case it is an extremely difficult job to do.
I would imagine that we will need to obtain permission to consider tabling manuscript amendments of a probing nature to the Government's own amendments. We do not have time to do anything else. We do not have anybody to help us go through the amendments to decide which are drafting amendments and which are not. Therefore, although I accept that this is a drafting amendment, the Minister cannot expect us to rubber stamp a Bill even though we welcome it generally. I hope that the Minister will consider, before we reach the next stage of the Bill, that we can at least have notes as to what these Government amendments, this huge volume, are all about.
Lord Brabazon of Tara: I certainly accept the points made by the noble Lord, Lord Barnett. I must immediately say that a great many of these amendments are purely drafting amendments. As the Committee are aware, it is a very large Bill and there are many technical matters arising from it. Many other amendments are a result of the continuing process of consultation with interested parties and others arising from commitments made by the Government in another place. There are also a considerable number of amendments resulting from the consolidation of the Northern Ireland companies legislation and of the insolvency legislation which is presently going through Parliament. I believe that about 40 or 50 amendments relate to the Insolvency Bill. There are one or two amendments of substance, and when we reach those we shall debate them fully.
Lord Barnett: I am sure that the noble Lord will understand that without going through the 200 amendments one by one we cannot find out which are drafting amendments, which are minor amendments and which are substantial amendments. That is the problem. It is difficult for us to work in this way.
8.15 p.m.
Lord Brabazon of Tara: My noble friend and I will do our best to give a comprehensive explanation of the amendments as they are dealt with. I hope that we shall be able to give them the consideration they deserve. I certainly take the point made by the noble Lord, Lord Barnett, about the possibility of notes being available before the next stage, and I shall see what I can do. In the meantime, I certainly undertake that during the passage of this Committee stage we shall not try to slip anything through on the nod, so to speak, which could be of substance.
[Amendment No. 14 not moved.]
On Question, Whether Schedule 1, as amended, shall be agreed to?
Lord Houghton of Sowerby: I refer to paragraph 13, page 172, which we have just been dealing with. This

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is about the ombudsman. This paragraph inserts the name of the Building Societies Commission on the list of those offices and departments which are subject to the scrutiny of the Parliamentary Commissioner. I assume that in that one paragraph everything relating to the Parliamentary Commissioner and his rights of intervention in the work of the Building Societies Commission is fully covered.
The question I have is this. Is the Parliamentary Commissioner a person who should have any writ in the Building Societies Commission? It is not a Government department in the true sense of the term. Will he therefore be available to deal with the complaints from members of the building societies? I am not clear as to what the Parliamentary Commissioner is going to do in the Building Societies Commission.
I ask this question because in the Government which introduced the Parliamentary Commissioner I had an awful lot of fussing around in order to find out who would be and who wanted to be left out of the Parliamentary Commissioner's oversight. We tried to lay down some rules as to what the Parliamentary Commissioner should be doing. He is called an ombudsman but is a Parliamentary Commissioner and as such is answerable to a Select Committee of the House of Commons. I believe that in the health service they have a separate person, but, as I understand it, that person is not answerable to the Parliamentary Commissioner.
I wish this could be cleared up because it is an important function that is put at the disposal of another person appointed by the House of Commons and it is not clear to me what he is going to do and who he is going to listen to. "Maladministration" is the key word in the work of the Parliamentary Commissioner: not to put himself in the place of those whose discretion rests with them by statute, and not to interfere with the normal processes of administration and the use of authority, but maladministration. What maladministration will he look into? Is it maladministration of the Building Societies Commission, or maladministration in the building societies themselves?
Lord Brabazon of Tara: It is solely maladministration by the Building Societies Commission that he can look into.
Schedule 1, as amended, agreed to.
Clauses 2 and 3 agreed to.
Clause 4 [Annual and other reports]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 15:
Page 4, line 13, leave out ("section 39") and insert ("sections 39, 41, 42 and 43").
The noble Lord said: I beg to move Amendment No. 15. This clause refers to the annual reports which the commission will make, and our amendment is basically very simple. The Bill as drafted directs the commission to submit a report to Parliament, which shall be published, on the exercise of its powers under Section 39. It seems to us that there are other sections
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under which the commission should report, and those sections are in particular Sections 41, 42 and 43.
Perhaps I may refer the Committee to those particular sections. In fact, they cover some very important matters about which Parliament and the public have a right to be informed. Section 41 deals with the power to direct application to renew authorisation. That is an important power, and the commission's activities under that section should be reported annually. Section 42 deals with the imposition of conditions on current authorisation, which again is an important power, and the exercise of the power should be reported annually by the commission to Parliament. Section 43 deals with one of the most important of all the powers of the commission, which is revocation of authorisation. It seems only logical that if the commission is to report on the exercise of its powers under Section 39, then it should also report on the exercise of its powers under Sections 41, 42 and 43.
The noble Lord may say that this is covered in the Bill, in which case that is fine and there is no particular problem with it. However, it is a point that is worth raising because it is vitally important that Parliament should be informed annually by the commission exactly what it has done under the very important powers that this Bill is giving it. I beg to move.
Lord Brabazon of Tara: Of course it is entirely proper and necessary that decisions not to renew an authorisation under Clause 41 or to revoke authorisation under Clause 43 should be publicised when brought into effect; that is, after conclusion of any appeal proceedings. In fact, the Bill makes provision for placing a record of these events on the public file, and no doubt the commission would include information about such cases in the annual reports and make such other provision as it considers appropriate. There is no need for express statutory reference to this because it is covered by the words in Clause 4(1):
"report on the discharge of its functions".
There is not the same need to establish a formal body of case law in this area as there is in the area under Clause 39, so no further statutory provision is appropriate.
The position is slightly different in relation to Clause 42. Here, there is no provision for a record on the public file and it is not the intention to publicise any conditions that might be imposed, because publication might well adversely affect the protection of investors which the imposition of the conditions was aimed at protecting. Of course it may prove to be the case that the commission would wish to refer in a very general way to any cases involving the imposition of conditions in its annual reports. But in our opinion it would not be appropriate to go further than that. In brief, that is the difference between the Clause 39 determinations and those in Clauses 41 to 43. I hope that with that explanation the noble Lord will feel able to withdraw the amendment.
Lord Williams of Elvel: I am grateful to the noble Lord for his response to this amendment. I should like to make it clear—I hope I make it clear—that I understood exactly what he was saying: that the

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commission would—I think he used the word "would"—wish to report on the exercise of its powers under certain sections—that is, Sections 41 and 43; and I think he said "would no doubt", or words to that effect. If we can have "would no doubt" transformed into "will", that will meet the thrust of the amendment.
On the question of Section 42, it seems to me to be a matter of very great public importance that if there are any conditions imposed on the authorisation of a building society to conduct business, that should be known by Parliament and known by the public at large. I cannot see that the commission need have any problem about that. If it is to be left to the commission to decide whether or not in any particular circumstances it decides on Monday, Tuesday, Wednesday or Thursday that it will reveal this or that restriction, and on Friday it will not reveal it, then that seems to give us some sort of problem.
We are not asking for the commission to publicise immediately but we are asking for a report to be laid before Parliament on the exercise of powers. I am not entirely happy with the Minister's reply and I hope that he will be able to expand it.
Lord Brabazon of Tara: I can expand my reply on Clauses 41 and 43 by saying that instead of saying "no doubt would" I shall say "will", because I went on to say slightly further on that it was covered in Clause 4(1) on the report of the discharge of its functions.
As regards Clause 42, I do not think I can expand any further than I have already done at the moment. I have given the reasons why we do not think that it is necessarily right to publicise any conditions—that is, that it might adversely affect the protection of investors which the imposition of the conditions was aimed at protecting. I think that the noble Lord could possibly envisage circumstances in which that could apply.
Suppose it came to the attention of the commission that matters were not absolutely right with a building society but not sufficiently serious to warrant publica-tion of that fact, and perhaps the building society had undertaken or hoped to be able to put things right shortly, the worst thing that could happen would be that publicity should be given to that matter which could cause a run and the consequences which would result from it. I think that that is the sort of situation to which I am referring and therefore it would be right to leave things as they are. As I said earlier, if the commission so wished, it could refer in a general way to cases involving the imposing of conditions in its annual report, but I think that is the best way to leave it at the moment.
The Earl of Selkirk: Have I understood my noble friend to say that supposing there is a comment on the liquidity of a building society or something of that sort, he would not want this to be mentioned in the report? Is that the point that he is making? In other words, there would be some point at which the building societies were getting near a margin of some sort and he would say, "Please keep your reserves or liquidity up" and he would not want to report that in the annual report. I can understand that. Is that what the noble Lord is saying?
Lord Brabazon of Tara: Yes. That is the sort of point that I am making—to give everyone a chance to put themselves right without the kind of results that publicity could achieve at that particular moment.
Lord Williams of Elvel: I accept the point that there is a question of at what stage one gives publicity to what the commission has imposed on the "noodle" building society. Clearly that must be right. Nevertheless, the annual report of the commission to Parliament is a retrospective document. It is a record of what has happened—the exercise of the commission's powers over the year—which is covered by the annual report.
It does not seem to me to be at all improper, in the hypothetical case that the noble Earl, Lord Selkirk, mentioned, if the commission had to impose certain conditions on the current authorisation and if everything went right after that. There seems to be no problem whatsoever if the commission reported subsequently, probably several months after the event, that it had had to exercise its powers under Section 42—if you like, not even spelling out the problem but saying that it had had to exercise its powers and everything was all right. That does not seem to be a serious constraint. I accept what the noble Lord said about the immediacy of having to publish certain matters if conditions are imposed. I do not accept that there should be any restraint on the commission's retrospective reporting in its annual report to Parliament.
8.30 p.m.
Lord Plummer of St. Marylebone: I urge caution on this point. As I think was said just now, it is easy, as has been seen, for a run on a bank to start. The commission will have to be careful about what it reports in that respect. I shall not go into detail, but I can think of several circumstances where it might prove detrimental to the society concerned without there being good reason.
Lord Williams of Elvel: I accept what the noble Lord, Lord Plummer, says. I think we are arguing at cross-purposes. I am not arguing that the commission should state immediately at any one time what it proposes to do in the way of imposing conditions. I am saying that under Clause 42 the commission has many powers to impose conditions. There should be some mechanism for retrospective reporting—not that a run on a bank or building society will happen tomorrow or happened yesterday. A year later the commission will come forward and say that it imposed certain conditions and restrictions, and that, "The public should know about that, but everything is all right or everything is all wrong". That does not seem to be wholly unfair. It will not affect the building society's current status. It will add a further element of protection for the generality of investors in the building society.
I shall not press the point. I understand that the noble Lord, Lord Brabazon, has his difficulties with it. I shall merely look carefully at what he said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 agreed to.
Clause 5 [Establishment, constitution and powers]:
[Amendment No. 16 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 17:
Page 5, line 25, after ("meetings") insert (", postal ballots").
The noble Lord said: This is genuinely a drafting amendment to include postal ballots in the summary in Clause 5 of the contents of Part III of Schedule 2.
Clause 5, as amended, agreed to.
Schedule 2 [Establishment, incorporation and constitution of building societies]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 18:
Page 174, line 28, at beginning insert ("Subject to subparagraph (2A) below").
The noble Lord said: With the leave of the Committee, 1 shall speak also to Amendments Nos. 19, 20 and 21. These amendments provide for the manner in which Clause 18 and Clause 23 powers are to be covered in the society's memorandum. They clarify the source of powers of a society and ensure that any reduction in its powers is noted. I beg to move.
Lord Williams of Elvel: This is one of the cases where we cannot possibly comment on the amendment because we have not had time to digest the wording. It is complicated wording. I accept the noble Lord's assurance that he will let us have Notes on Clauses in due course. We shall be able to respond accordingly then.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 19:
Page 174, line 30, at end insert—
("(2A) For compliance with sub-paragraph (l)(c) above as respects the powers conferred by section 18 or under section 23, it shall be sufficient—

(a) in the case of section 18, to specify (as the case may be) the fact that the power of investment or support or both the powers of investment and support has or have been adopted in the case of companies, industrial and provident societies, corresponding European bodies and bodies included indesignation orders under that section respectively, specifying, in the case of designated bodies, or descriptions of designated bodies, the body or description of body in relation to which the power or powers is or are exercisable;

(b) in the case of section 23, to specify the power in terms of subsection (1) of that section.").

Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 20:
Page 174, line 31, after ("society") insert (", as read with the provisions of this Act as in force for the time being,").
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 21:
Page 174, line 38, at end insert—
("( ) Where any adoptable power conferred by virtue of an instrument under a provision of this Act ceases, by reason of the amendment or revocation of the instrument, to be available to building societies or building societies of any description, every society affected by the amendment or revocation shall annex to its memorandum a note of the fact that, as from the operative date of the instrument, it no longer has that power and shall send
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a copy of the note to the central office which shall keep the copy in the public file of the society.").
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 22:
Page 177, line 19, after ("may") insert ("not").
The noble Lord said: Paragraph 5 of the Schedule, on page 177, states:
"The rules of a building society may allow a person to become a member without holding a share in the society".
I am doubtful about what that means. On Second Reading the Minister said that he hoped to get Notes on Clauses for us. I am not aware that they have come out; I have seen nothing of them. No, I have not had the document that the Minister is holding. That is a great pity because it would have saved me a great deal of time.
Does the provision refer to the new status of what is called the "borrowing member"? If it does, I understand it because I have always thought that every borrower should be a member of the society. Normally, that means he should either be allotted a share or should acquire one. He should be a shareholder, if he thought that he was going to participate in the society's work, and it was agreed that he should. Under the Bill he does. He has a separate category of membership. Particular conditions relate to it, such as matters of transfer of mortgages, conversions and so forth. Will the Minister clear up that point?
My amendment says that the society may not allow a person to become a member without holding a share in the society. The clause clears the decks so that a borrower may become a borrowing member. Surely no one without a share can be called an investing shareholder. Can we have the confusion about membership cleared up? I beg to move.
Lord Brabazon of Tara: In one word, yes; the provision covers the situation of borrowing members. I gather that some societies insist that borrowers should be depositors as well. That is easily overcome by merely putting a pound or something like that into the society. Other societies do not insist that borrowers should have any share in the society. This covers borrowers.
Lord Houghton of Sowerby: I am much obliged for that answer. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 23:
Page 178, line 27, leave out ("94") and insert ("100")
The noble Lord said: With the leave of the Committee I shall speak also to Amendment No. 24. These are technical amendments to extend the provisions on joint shareholders to cover the approval of a conversion proposal. It is clearly appropriate that in the conversion procedure, as in other areas of the Bill, where shareholders have voting and other rights, only the representative joint shareholder among any group of joint shareholders should have those rights. The amendment therefore extends the list of rights applying only to the representative joint shareholder to

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cover the conversion provisions. Amendment No. 24 is a parallel. I beg to move.
Lord Williams of Elvel: I accept that these are technical amendments. We are waiting for the notes which will no doubt expand in greater detail what the noble Lord has said. We must accept the amendment; we have no option. We do not oppose it.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 24:
Page 179, line 22, leave out ("94") and insert ("100")
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 25:
Page 188, line 30, leave out ("ten") and insert ("twenty").
The noble Lord said: This amendment relates to Schedule 2, paragraph 25, on page 188 of the Bill, which deals with the right to demand a poll. Unless I am mistaken, a poll may be demanded by not less than 10 members having the right to vote at a meeting. Is this correct? I put down the figure of 20 thinking that, if this is a numbers game, 10 seems quite small and 20 is just twice that. Do I understand that 10 members can demand a poll? May I ask the Minister if he will reply to this?
Lord Brabazon of Tara: Basically, this is the number of members who, upon joining together, have an absolute right to force a question to be put to a vote at an annual general meeting. This in fact comes straight from the 1962 Act. There is no change.
While I am on this point, may I apologise to the noble Lord, Lord Houghton of Sowerby, for the fact that he did not have the Notes on Clauses. They have been available in the Printed Paper Office for a week. I should perhaps have written to the noble Lord and told him they were available.
Lord Houghton of Sowerby: I did not in fact know that they were in circulation or I would have asked for a copy. I think that the reason I did not was that I thought the Committee stage was beginning so soon after the Second Reading that probably there had been not time to get the very voluminous papers together; but I can assure the noble Lord that I did not receive the Notes on Clauses. I have been gathering together everything concerning building societies and this was not among those papers. These things do happen, but the noble Lord has given me the explanation I sought on this clause. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 26:
Page 189, line 34, leave out ("Act") and insert ("paragraph")
The noble Lord said: I beg to move Amendment No. 26 which is a drafting amendment. Clause 123 provides for different commencement dates for various parts of the Bill and it is therefore appropriate to make this amendment so that paragraph 29(4) refers to the commencement of this particular paragraph concerning borrowing members' resolution. I beg to move.
8.45 p.m.
Lord Houghton of Sowerby Lord Houghton of Sowerby moved Amendment No. 27:
Page 190, line 4, leave out ("on which not less than 20 per cent.").
The noble Lord said: In moving this amendment, I should also like to speak to Amendments Nos. 28, 29, 30 and 31. This concerns the very troublesome question of the conditions under which a building society may decide to convert itself into a public company, creating a special company for the purpose, or electing to join an existing company and not to form a company of its own. There are different conditions for the alternative courses. I will deal with the proposed conversion of a building society into a public company created specially for the purpose.
We are not, I believe, dealing with a matter which will affect very many building societies; but there are several very large ones which may find that even with this Bill and the added flexibility and the extension of the areas of activity that will not be enough to enable them to deal adequately with their enormous resources and their desire for extensive broadening of activities.
Looking at the history of building societies, it probably was a pity that those which are the size of the Halifax and the Abbey National ever came into being. When I hear noble Lords and others talking about building societies keeping their local interests, having friends in the locality and deriving their inspiration from the community in which they live, I believe that that is true of a great many building societies and it is a relationship to be cherished. However, the Halifax, which was the first building society to have branches extending its activities many years ago, has not stopped growing yet. The Abbey National is another example of this, although the Halifax is more identified with a locality than the Abbey National. Both of these societies had some very great men of vision and activity and drive to spur them on and their phenomenal success is the consequence of that.
The result is that at the present time these two largest societies, which are of national significance and supported by national advertising and who grant mortgages throughout the country, have more than enough assets to grant an adequate mortgage to every householder in the Halifax and then start again. We therefore have two building societies with something like from £20 billion to £24 billion in assets. The Nationwide comes third in that it is half the size of the two giants, and after that we come to the Leeds and the Woolwich which are only a quarter of the size of the two largest societies. Following those we have 11 societies which have from between £ 1 billion and £5 billion in assets. The approximate result of this is that 16 building societies have assets of £1 billion or more and its is in that area that we should think about conversion. The 140 societies which are below the first 16 have assets ranging from £1 billion downwards to £300,000, with a very small tail at the end, so we are not talking about matters which one would expect to affect a large number of building societies. However, it could affect very dramatically indeed some of the larger building societies who want to do a great deal more than the limitations of this Bill provide for.
All this has aroused a certain ideological controversy. In another place this matter was dealt with at great length at different times, and finally at Report stage a few weeks ago we saw two schools of thought emerging. There were those who were probably connected with the larger building societies or who were encouraged by them and who were in favour of reasonable conditions upon which a building society could convert into a limited company. On the other hand, there were those (mostly on the Opposition Benches in another place) who were rather against giving such facilities to building societies to enable them to desert their history and their heritage and to go into the big world of finance. At Report stage in another place there was still a tussle even on the modified proposals that are in the Bill at the moment between those wanting more room and those wanting less room for conversion to public companies. So the proposals in the Bill are there under considerable pressure of opinion and compromise. I understand that the building societies that were fairly strong in wanting better facilities to convert are reconciled to what is in the Bill. At any rate, their great anxiety is to get the Bill through and not to delay its passage by needless controversy in your Lordships' House.
Nevertheless, there are important considerations at stake. One is the doctrine of authority. That is my own definition for it. When an appeal is made to the final authority in any institution—a trade union, a learned society, a building society, a county council or the electorate in a parliamentary election—no condition should be laid down to frustrate reaching a conclusion. I feel strongly that this should be so; otherwise, you are playing ducks and drakes with the final authority. The final authority is the voice that you want to hear and, having heard it, say, "That is it".
A trade union ballot occupying the headlines yesterday and today has been that for a new general secretary of the Civil Service clerical union. It was a low poll and a narrow majority. But no one questions the authority of the decision, unless there is something wrong in the way it was reached—corruption, irregularity or whatever. If it is clean, that is the voice. And as Winston Churchill often said in the House of Commons, "In this place one vote is enough".
Here we have a proposition that in order for a building society to convert into a public company it must first pass a special resolution—this is common form in societies—which requires those who are voting to vote a certain way in respect of two-thirds of the members in order to make it effective. Following upon that there can be a poll. It is the poll that is in question there, not the conditions of the special resolution. On a special resolution members of the society who cannot get to the meeting can send proxies. There is no criticism to make of the conditions in the Bill for the reaching of decisions on a special resolution.
But when it goes to the poll—this is where the final authority is—the special resolution has to be passed on the ballot with at least 20 per cent. of those entitled to vote voting. So this is a ballot taken on a condition that a certain proportion of those entitled to vote in the ballot do vote. This means therefore that the decision may not be taken by those who vote but by those who
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do not. That involves another very bad principle. You do not reach a decision by voting; you reach it by staying at home, or, in the case of the postal ballot, by throwing the ballot paper in the waster paper basket. This is not the way, constitutionally speaking, that we settle things in this country.
On Second Reading the noble Lord the Minister said something about the Scottish devolution Bill. It was very late in his speech. It was also getting late in the day. I allowed it to pass. But those of us who remember the episode very clearly will recall that the Labour Government of the day did not stipulate, or wish to stipulate, any condition of this kind in the referendum on Scottish devolution. But some Members from both sides of the House, led by a certain Member, Mr. George Cunningham—
Lord Ross of Marnock: No longer a Member.
Lord Houghton of Sowerby:—erected a stratagem whereby in the last 40 minutes before the gullotine fell they moved a new clause which instructed the then Secretary of State for Scotland (who is, I think, sitting near me now) to require an order for the repeal of the Act unless at least 40 per cent. of the electorate—not just those voting but 40 per cent. of the electorate—voted "Yes" in the referendum. That new clause passed just as the chopper was about to fall. It was passed by 168 votes to 142. It was an excrescence on the whole process envisaged for the devolution legislation. I deal with it only because the noble Lord the Minister evidently had it in mind that it was a suitable precedent to quote if anyone referred to it in the debate on Second Reading. I have therefore given the explanation. It was never intended and it should never have been done from a constitutional point of view. There may have been other remedies if the vote was not satisfactory. But we went into the Common Market on a referendum with no such conditions. The fate, the destiny, of the nation was decided by that means.
I take the view that a condition requiring that 20 per cent. of those eligible to vote shall vote or the special resolution is ineffective is an unsatisfactory condition and should not be included. The Building Societies Association has issued numerous briefs to us on the Bill. These have been very useful. I must say that the association does its work extraordinarily well. Every single one of those briefs, in dealing with the conversion problem, has said that the conditions laid down are so harsh and so stiff that it is unlikely that they could be complied with to make any conversion effective. Certainly this could not be done in the case of conversion to an existing company because the conditions are stiffer still. One can understand that.
The fear is that someone may come along and buy up a building society. The greatest fear, of course, is that this will be done by foreign banks and other foreign money. I can quite understand that we do not want a picking of our building societies all over the country by vested financial interests who might come along and get the conversion procedure through with little difficulty. If a financial inducement could be offered to members to vote for the conversion, there would be little difficulty in getting 20 per cent. But the Bill prevents such inducement being offered. The most

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that can be offered on conversion is a possible bonus two years afterwards in respect of which conditions are laid down.
In the case of conversion to an existing company, there are some complicated conditions about the process on what amounts to liquidation of the building society in order to convert itself and hand itself over to another company. But I do not want to go into the complications of the different methods. I want to deal with the principle of the matter, because this is what really concerns me.
Are we justified in creating conditions which are alien to our concept of the operation of democracy in this country? Are we entitled to create, exceptionally, conditions relating to building societies in order to stop them from taking the course which quite legitimately they may wish to take? The noble Lord, Lord Campbell of Croy, referred at Second Reading to a ballot on a merger with which he was concerned in a building society. They had a 10 per cent. vote, which seems low, but we have to consider the nature of a very large proportion of the investing members in building societies and of a very large proportion of borrowing members. When you have nothing to offer them, when it is one man one vote, and in the case of borrowers at the present time no vote at all, how can you maintain any interest in the democratic process?
9 p.m.
Lord Campbell of Croy: I am grateful to the noble Lord for giving way. I was in fact supporting his point about how high a threshold of 20 per cent. is, because in the latest merger, which came into effect in October, I think that 2 million people were able to use proxies by post. Ten per cent. was about the number who voted and that is more or less what was optimistically expected. Incidentally, may I point out that in giving the sizes of societies earlier in his speech, the noble Lord overlooked that merger which has resulted in a different order of size.
Lord Houghton of Sowerby: I am sorry about that. I feel that I am entitled to make this speech, because it is an important question of principle in our affairs. I shall be told that the Building Societies Commission has power, as it has, to vary the percentage, but one wonders when the Building Societies Commission may consider varying it. One thing that is certain is that if a building society seeks to convert and goes through the process and then, in the end, fails to get the 20 per cent. vote to give effect to it, its morale will be seriously harmed, its reputation may be damaged, it may appear to be a huge liner which is rudderless and rocking about on the sea. It will not do anybody any good and will be a thoroughly unpleasant experience. So I do not think that it is any excuse to say "Ah, but the 20 per cent. can be varied, subject to Treasury consent, by the Building Societies Commission".
My final point is that if those who put this condition there firmly believe, as the Building Societies Association apparently does, that it is virtually impossible to fulfil, then it is humbug to put it in at all. I see no point in putting conditions in the statute law which look to be feasible but which in fact would probably be quite ineffective. Already the rules of building societies read rather like the constitution of
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the Soviet Union. It all looks nice and pretty in the rule book, but when you come to want to use your democratic rights you see how many you have got.
So I quite understand when the leadership of the Halifax Building Society ask, "Have you tried democracy among 8 million members of the society scattered all over the world?" To be honest, I have not. But then why pretend that we have these rights? This is why some building societies may feel that the only thing for them to do is to go public and have an entirely different format and wider opportunities. It is grossly unfair to stick to conditions which are practically useless in the hands of those who may wish to use them.
I am sorry to have detained the Committee for so long at this hour. In offering my apologies, I can only say that I think the time we are spending on Statements in this House, in the middle of important debates which are on the Order Paper as the business of the day, is becoming quite excessive. There were 55 minutes taken today on the Peacock Report, and the other day there were three Statements which took one hour and forty minutes out of the business of the day. But there is no Member sitting on the Front Bench opposite who can protect the business of the House—
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): Order!
Lord Houghton of Sowerby: I am raising a point of order, and I think I am entitled to do that.
Lord Belstead: No.
Lord Strabolgi: Why not?
Lord Houghton of Sowerby: If the noble Lord wants to shut me up, he had better try.
Lord Campbell of Croy: If the noble Lord will give way, perhaps I may say, as I was here at the time, that it was a Member on the Front Bench who eventually brought the debate on the Statement to an end when several Members on the opposite side were still getting up.
Lord Houghton of Sowerby: I am very grateful to the noble Lord, Lord Skelmersdale, for his great courage on that occasion, but it was half an hour too late.
I conclude, therefore, by saying that the Bill will surely have to go through the test of experience and the societies themselves will have to do the same. But I sincerely hope that we are not going to find this venture into the field of wider opportunity and activity giving rise to some very big problems of where the larger societies are to go in order to accomplish their legitimate ambitions. We are in a very restive state of financial activity throughout the world, as well as in this country. There is a new industry in financial transactions. The money that is now being made in this country is being made out of money. There is more money to be made out of money than there is to be made out of industry. It is money that will attract people who have it; it will not be industry.

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We should also bear in mind that the money is being made out of those who accept deposits from people and who hold them long enough to make use of them without paying interest to those who have deposited the money. Profits come out of transactions in that way. My banker friend has opened my eyes. I did not know that such a world existed. Why go to gambling casinos when you can go to the City? That will be the world in which the new building societies will operate.
I have said enough, so I shall sit down. I beg to move my amendment.
Viscount Ridley: I do not know what the noble Lord wants, after listening to him for 25 minutes with great patience, unless it be to torpedo the Bill, which I suspect he has effectively done. If that is his aim, I congratulate him, but I do not think that it is the desire of the Committee that we should stray so far from the point. As I am the first to speak on the amendment, let me say that I think that the conditions laid down in the Bill are correct. It should not be too easy to become a plc. It should be difficult; and it will be very difficult to get 20 per cent. of those eligible to vote. I hope very much that the Government will resist the amendment and try as hard as they can to get the Bill through.
Lord Campbell of Croy: As the noble Lord, Lord Houghton, mentioned me, let me add to what he kindly enabled me to say during an intervention. Although the threshold is high—and that seemed to be generally agreed in another place—there is the provision in paragraph 6, lower down in Schedule 2, which enables the percentage to be changed by a statutory instrument, subject to decisions of both Houses of Parliament. I hope that my noble friend on the Front Bench will point out that that means that in changing circumstances in the future the threshold could be lowered if it seemed to be the right thing to do then.
Lord Brabazon of Tara: I accept that the subject of conversion to public company status is an extremely important part of the Bill. We shall be returning to that, no doubt, in due course when we reach the main clause which it involves, which the noble Lord, Lord Barnett, has given notice to oppose.
The amendment would take away what the Government consider to be a crucial part of the machinery of conversion to company status. We consider that it is not enough for a three-quarters majority to be obtained on a special resolution, no matter how few members take part. It is essential that the poll should be a substantial one, for this is a substantial step that the building society would wish to take.
There are several reasons for that. First, conversion to company status would be a major and fundamental step for a society to take. It is right and proper that it should be allowed only if a sufficient proportion of the members assent. Secondly, it serves an important prudential purpose. Those members who express positive support for a conversion proposal by voting in its favour will be all the more likely to stay with the society after it becomes a company, both as customers and perhaps as shareholders. It is important for the
1110
company in its early days to be able to rely upon the continued support of its former members. But there is also a wider public interest. Building societies collectively play an important part in our national life, as many noble Lords reminded us on Second Reading and, indeed, again in Committee today. I believe that the public interest requires that they should not lightly be able to give up their present mutual status, but should do so only if substantial levels of membership support are forthcoming.
My noble friend Lord Campbell of Croy pointed out the paragraph in the schedule which allows those amounts to be altered by statutory instrument. No doubt if at some time in the future that proved to be necessary, that step could be taken. They are difficult hurdles to overcome, but we do not believe that they are impossible. For the reasons that I have given it may be an onerous task, but it should not be impossible. I think that we have the right balance. Similarly, on the second leg of the amendment, on the merger proposals, I think that we have achieved the right balance, and I cannot accept the amendment.
Lord Houghtonof Sowerby: I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 28 to 31 not moved.]
Lord Houghton of Sowerby Lord Houghton of Sowerby had given notice of his intention to move Amendment No. 32:
Page 195, line 17, leave out ("£100") and insert ("£1000").
The noble Lord said: I shall not move Amendments Nos. 32 or 33. With the leave of the Committee, I shall reserve them for a later stage in the Bill. I am sure that the Committee is getting weary of me, and I am certainly weary of the Committee.
[Amendments Nos. 32 and 33 not moved.]
Schedule 2, as amended, agreed to.
Clause 6 [Power to hold land etc. for purposes of its business]:
Lord Barnett Lord Barnett moved Amendment No. 34:
Page 5, line 41, after ("may") insert (", after consultation with the Commission,").
The noble Lord said: I shall try not to weary the Committee. This is an important part of the Bill relating to premises. I have no doubt that Members on all sides of the Committee will share my concern about the number of premises in high streets being used by building societies. The number seems to have grown in recent years. I have no statistical evidence. Indeed, the Building Societies Association says that the number has been decreasing. If they say this, I suppose that it must be true. Maybe it is decreasing in the sense that it is not increasing as fast as before.
I could not think of an amendment that would sensibly deal with this problem, for the fairly obvious reason that it would be unfair in terms of competition to restrict the right of one building society to open another shop in a high street, or wherever, if it was seeking to expand in a particular town where it did not have a shop. I am bound to say that when one goes to comparatively small towns one sees so many building

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societies to the exclusion of almost any other kind of shop. It does not make the high street look a more attractive place.
The only kind of amendment that I could think of was to add the words that I am now moving in Amendment No. 34 which provides that the building society should have to consult the commission. I recognise that that is not an ideal solution. I accept that when a building society wants to take additional premises—whether it be another shop or other premises for headquarters somewhere—it does not want the delay of further consultation. But I want to bring to the attention of noble Lords the feeling of many people who are unhappy about the number of building society premises in this country and the extent to which all these premises are advancing the cause of the building society movement.
I do not pretend for one moment that the amendment I am moving is ideal. If the Minister agrees with my worry and concern then with all the advantages of the huge department he has behind him, perhaps he will come up with a better amendment. I beg to move.
9.15 p.m.
Lord Campbell of Croy: I sympathise with what the noble Lord, Lord Barnett, has said. I declare an interest, being a director of one of the large building societies. I felt exactly the same when I saw what was happening in Scotland in the towns and cities there. So many new branches seemed to be appearing—I am talking about five or 10 years ago. But when one looked into it one found that much of the retail investment was coming in through those branches, off the street. A service was being provided for the ordinary citizen or housewife who appreciated being able to go into a building society to do business over the counter in a way which building societies could afford. Financially it was absolutely justified, and it was helping the citizen on the street. But the multiplication of these branches seemed very strange. However, at least they were able to pay the rates. Some of the shops were having to close down because they could not pay the rates, but the building societies were doing so well with these branches and the use that was being made of them that they could afford to be there. My society has made a small change in this. As a result of a merger some premises will not have to be used in the future.
Lord Brabazon of Tara: I am grateful to the noble Lord for raising this matter. It is one that has caused concern over the country as a whole and possibly in certain high streets—that every second shop seems to be a building society. But I think that my noble friend Lord Campbell of Croy has to some extent answered that question. I can confirm that the huge growth of the 1970s in the number of branches has now slowed down. Perhaps it will not go any further now that there is greater competition in the market and costs will have to be contained. However, I cannot accept this amendment which would require the commission to vet every application by a building society to open a branch. I think that that would be a very onerous task on the commission. I am sure that we want to see the commission not over-staffed but adequately staffed for
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the very important role it has. I suggest that to give it this further task would be to go a little beyond that.
I will say this. I shall draw the remarks of the noble Lord to the attention of the Secretary of State for the Environment who is responsible for planning laws. I gather that these kind of matters can come under the change of use regulations. It will probably be a local matter rather than one for the Secretary of State. Local councils can probably have some input in that. But that is as far as I can go.
Lord Barnett: I think that the Minister has probably gone too far anyway. He is quite right—it is a local planning permission matter; but it could go to the Secretary of State if whoever has been refused planning permission wants to appeal. That is my understanding.
However, as I made quite clear, it is the principle that I wanted the Committee to discuss because this is an important matter. I recognise exactly what the Minister has been saying about why he cannot accept the amendment as it now stands. As I have said, I am not sure whether or not he has already gone too far, but I shall not hold him to it. Building societies may begin to feel that there are some instructions coming down from on high that local authorities should refuse to give planning permission for new building society pemises. It may be a bit counterproductive with the present Secretary of State giving instructions to some local authorities because they may feel all the more that they should grant permission. However, I am assuming that the noble Lord had not consulted his right honourable friend when he made that remark.
Lord Brabazon of Tara: Before the noble Lord decides what to do with the amendment, perhaps I may retract a little of what I said. I withdraw the offer to bring the matter to the attention of my right honourable friend the Secretary of State. Perhaps the noble Lord woud like to refer particular cases to his own local authority where he feels that that is applicable.
Lord Barnett: I can imagine what the noble Lord's right honourable friend would have said. If the Committee thinks that we are sitting late, I point out that when I was taking Finance Bills through the other place the noble Lord's right honourable friend kept me up night after night until 8 o'clock the following morning. So if noble Lords think that they are being wearied tonight, it is as nothing to what the noble Lord's right honourable friend did to me. Indeed, as will be quite clear, I am not seeking to keep anybody up tonight. However, in the light of what has been said—
The Earl of Selkirk: The noble Lord rather suggests that building societies have offices for fun, for amusement. If the noble Lord examines the situation—and I have looked at this matter over a large number of years—he will find that every building society will say that each office is worthwhile. If anyone knows enough to deny that, then let him say so.
It is not merely a matter of simply putting offices somewhere for the fun of having their name in that

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place or purely for the purposes of advertising. That is not the case. I take the opposite line. One of the strengths of the building societies is their diversification throughout the country for the convenience of their members and their depositors. They do not simply sit in London and get their money from the general market there. There is a great deal to be said for having these offices which are of great convenience to the public.
Lord Barnett: I have no wish to delay the Committee, but if one took the noble Earl's remarks to their logical conclusion every shop on every high street would be a building society and I am not sure where we would get to then. However, I do not wish to pursue the subject. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 35 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 36:
Page 6, line 19, leave out from ("that") to ("shall") in line 22 and insert ("no part of the premises comes to be or, as the case may be, is any longer occupied for the conduct of the business of the society or a subsidiary or associated body").
The noble Lord said: I beg to move Amendment No. 36. This is a purely drafting amendment to remove any doubt about the intention of the provision.
Clause 6, as amended, agreed to.
Clause 7 [Power to raise funds and borrow money and limit on non- retail funds and borrowing]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 37:
Page 6, line 35, at end insert ("or (c) raise funds by the issue of debt instruments.")
The noble Lord said: I beg to move Amendment No. 37, and it may be for the convenience of the Committee if I speak also to Amendments Nos. 38, 39 and 40. This brings us back to a discussion which we had earlier today about the relationship between retail deposits of building societies and the wholesale market which is ready, and I think fairly willing, for building societies' use.
There are a number of slightly technical points that I should like to go through. However, essentially the thrust of these amendments is to give greater power to building societies to borrow in the wholesale market to complement—as we have established that they are primarily going to raise funds from their members—their faculty to raise money from their members.
I should like to spend a moment on Amendment No. 37. This may be an unnecessary point, but it is a clarifying amendment or, if you like, a probing amendment. The building societies should be allowed to raise funds by the issue of debt instruments. Amendment No. 38 refers to instruments which may not be transferable, and by that I mean private placements rather than public issues. One would not wish the building societies to be constricted in going to the private market and making a private placement of a debt instrument that is not in fact transferable.
Amendment No. 39 is again designed to make sure that there is greater leeway. I understand that the Bill, as drafted, allows greater leeway to be given by order of the Commission with the consent of the Treasury. However, it seems to us—and 1 am glad to see that the Building Societies Association is sympathetic to this—that the 40 per cent. limit should be one which is available immediately rather than being 20 per cent. subject to Treasury adjustment as necessary. Finally, Amendment No. 40 says that the 40 per cent. rule should not necessarily stand. It does not seem to us to be a condition of sensible and prudent building society management that they should not raise on the wholesale market more than 40 per cent. of their total funds.
I recognise that to a certain extent we are going over some of the ground covered earlier; but I believe that these amendments would give the building societies the flexibility we were trying to introduce earlier. The noble Lord, Lord Brabazon, in his reply to my earlier points, referred to the amendments that were coming up under this clause. These are the amendments, and I hope that the Government will see fit to accept them. I beg to move.
Lord Campbell of Croy: Perhaps I may say a word about this, because the noble Lord referred to me when this came up earlier this afternoon. The building societies moved into the wholesale market about five or six years ago, and my society was the first one. It has been controlled and restricted by the chief registrar whose policy, certainly up-to-date, has been less than 20 per cent. Therefore, 20 per cent. being put into the Bill seems to be following present prudential policy, but also giving further scope.
Speaking as someone in the movement, I think that we would like to have a higher limit, and in future we might want to go to more than 20 per cent. On the other hand, I see that building societies, being mutual institutions, are still expected to raise most of the funds on the retail side. We were talking about that just now and how much normally comes in from members throughout the country through the branch offices.
I sympathise with what the noble Lord has said. Certainly building societies would like to have the flexibility, but 40 per cent. seems to me higher than we would need at the moment in the building society movement. However, we would hope that if 20 per cent. seemed a bit restricted in the future, it would be possible for it to be lifted.
Viscount Ridley: Would not 30 per cent., or even 33⅓ per cent., meet the objections of everybody?
Lord Williams of Elvel: I am grateful to the noble Lord, Lord Campbell of Croy, for his intervention, because this is a point about which we had an exchange at Second Reading and we have had earlier debates on this matter. I think that there is a philosophical point, and it is something of a difference of opinion between myself and the noble Lord. Lord Campbell of Croy, on the future of building societies, looking over a 10 to 15 year span. My view is that the building societies—and this relates to the debate that has just taken place on the question of premises—will no longer be able to sustain the retail thrust that they

1115
have engaged in over the past few years, and that they will be more and more obliged to have recourse to sources of funds which are not from the retail side, or not from their members.
I believe that the format that a building society in, say, the year 2,000 will be taking will not necessarily be one of a number of retail outlets in the high street but will be much more like the German mortgage banks—which indeed we actually set up after the war—where there is access to the wholesale market, and the maturity of the borrowings corresponds more or less to the maturity of the loans that are made. I think building societies will have to move in that direction. Whether I am right or wrong, I do not wish to restrict the building societies if I am right.
This is the point I am trying to make, and a point I have made on a number of occasions. If it is right that building societies will have to move more and more into the wholesale market because of the competition for savings, then it is right on the face of the Bill to introduce the flexibility that allows building societies to do so. If it is right, as my noble friend Lord Barnett was saying, that retail outlets will perhaps become redundant in the same way as the retail outlets of banks have become redundant—with banks having to close down branches in the High Street and going more and more into the wholesale market for their funds—then it is right not to restrict building societies. That is the thrust of the amendment.
Lord Brabazon of Tara: I shall deal briefly with the first two amendments, Amendments Nos. 37 and 38. I can give the noble Lord an assurance that Amendment No. 37 is not necessary and that debt instruments would be covered by borrowing money in Clause 7(1)(b).
Regarding the kind of loans he talked about in Amendment No. 38, private placements, I think that these will cover any non-transferable wholesale instruments that societies might consider at the present time. Furthermore, there exists in subsection (9) the power to designate further instruments as wholesale for these purposes. If the noble Lord can think of any other kind of issue which might not be covered I should be grateful to hear and we should be interested to consider that.
On the more fundamental issue of the 20 per cent. and the 40 per cent. I find myself somewhat puzzled standing here. The noble Lord said that it seems to him that it would be a good idea to raise this to 40 per cent. My honourable friend the Economic Secretary in another place spent a great deal of time arguing with honourable Members from the Labour Party who sought to reduce these numbers. I find myself in the curious position of occupying the middle ground between noble Lords in the Labour Party here and honourable Members in another place.
Lord Williams of Elvel: As the noble Lords knows, we are a party of very rich contrasts. We can adopt
1116
different positions according to different requirements at different times. I hope the noble Lord will accept that.
Lord Brabazon of Tara: I am pleased to know about that flexibility and I hope that his honourable friends down the other end accept that same view.
We cannot accept this amendment. The building societies have gained experience in recent years with some notably successful forays into the wholesale markets. I think I am right in saying without checking that some societies have up to 10 per cent. of their money in wholesale funds at the moment, but we still think that there is a need for considerable caution. Raising funds on the money markets involves very different types of risks to raising it from ordinary depositors. Indeed, the wholesale markets can and have been much more fickle than the man in the street. I only give the noble Lord the example of the Continental Illinois bank in the States where they discovered recently to their cost what happened when wholesale depositors lost confidence.
We therefore believe that 20 per cent. is the right reasonable initial limit for societies. As the noble Lord and my noble friend Lord Campbell of Croy have mentioned, this could be raised to 40 per cent. if it was felt appropriate and consistent with building societies continuing to operate under their own legislation and in a form distinct from banks. Of course they can go a stage further than that and become plcs if they wish; but that is another debate again.
Lord Williams of Elvel: I am grateful to the noble Lord for his response. I understand—and I am grateful to him for the clarification—that Amendments Nos. 37 and 38 are redundant because their substance is covered under the Bill. If I read the Bill again and discover other methods of financing which are not covered, I shall certainly write to the noble Lord.
I think that we have had a debate on this topic; in fact, we have had two debates on it. I hope that the Committee recognises the strength of what I feel about the future of building societies, but I shall not pursue it at this late stage and therefore I beg leave to withdraw this amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 38 to 40 not moved.]
Clause 7 agreed to.
Clause 8 [Proportion of liabilities to be in form of shares]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 41:
Page 10, line 42, after ("or") insert ("rules under subsection").
The noble Lord said: I beg to move Amendment No. 41. This is genuinely a purely drafting amendment. I beg to move.
9.40 p.m.
On Question, Whether Clause 8, as amended, shall stand part of the Bill?
Lord Barnett: With the best will in the world, and much as one wants to make progress as fast as possible, there are certain parts of the Bill that need examination. It is bad enough being glared at by one's own Chief Whip, but to be glared at by the Government Chief Whip can be counterproductive. We in this Committee have some function to examine Bills. I am sorry, but we have a Bill of some 273 pages; and nearly 200 amendments have been put down by the Government. I have not in any way sought, as anybody who has been present in this debate will know, to delay this Bill. But we have a function, we have a role, to examine the Bill. Being glared at by the Government Chief Whip does not help us. Does the noble Lord wish to intervene? No? Then I shall continue.
Clause 8(1), to put it mildly, is somewhat unclear. If I read it, it will be clear why it is unclear. It reads:
"Subject to subsection (2) below, a building society shall secure that the amount of the principal of, and interest payable on, sums deposited with the society does not at any time exceed 50 per cent. of the aggregate of that amount and the principal value of, and interest payable on, shares in the society".
Perhaps the Minister can explain it.
Lord Brabazon of Tara: I can do little better than read out what it says in the Notes on Clauses, which I think makes the situation fairly clear.
"Clause 8 provides that at least 50 per cent. of a society's liabilities by way of shares, deposits and loans shall be in the form of shares. This provision replaces Section 39(2) of the 1962 Act, which provides that a society's total borrowings shall not exceed two-thirds of its mortgage assets, and also the provision in paragraph 2 of the Schedule to the Building Societies (Designation for Trustee Investment) Regulations 1972 that shares must account for at least 50 per cent. of liabilities if a society is to enjoy trustee status".
I hope that with that explanation the noble Lord will find the subsection a little clearer. I must say that I did not find any particular difficulty with it.
Clause 8, as amended, agreed to.
Clause 9 [Initial authorisation to raise funds and borrow money]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 42 and 43:
Page 12, line 3, at end insert—
("( ) if those matters are or include the matters specified in paragraphs (a) and (b), refuse to grant authorisation;").
Page 12, line 4. after ("(a)") insert ("in any other case,").
The noble Lord said: I beg to move Amendments Nos. 42 and 43. With them, I shall take Amendments Nos. 116 and 117. These are technical amendments to ensure that the provisions for authorisation and reauthorisation conform to the letter with the Community obligation under the first Council directive on credit institutions.
Clause 9, as amended, agreed to.
Clause 10 [Advances secured on land]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 44:
Page 14, line 11, after ("estate") insert ("or, as provided under subsection (6) below, an equitable interest").
The noble Lord said: I beg to move Amendment No. 44, and I shall speak also to Amendments Nos. 45, 46, 47, 48, 49, 50, 61 and 243. For the avoidance of doubt and the information of noble Lords opposite, I should say that the substantive amendment of this large block is Amendment No. 49. At present, Clause 10(6) allows a society to lend on equitable interest within class 1 or class 2 in addition —and this is the important point—to a loan on freehold or leasehold estate. This is to provide for shared ownership schemes where the tenant in effect owns part of the property and rents the remainder.
This amendment replaces that with a general order-making power for the commission to enable societies to lend on equitable interest in classes 1 or 2. The order could, for example, prescribe loans to builders who are parties to building-under-licence agreements under Sections 32 and 33 of the Housing Act 1985. Societies have been keen to see scope in the Bill for loans on such equitable interest to count as advances secured on land.
The amendment also makes it clear that the commission's order-making power includes the power to lay down how Clause 17(10) of the Bill is to operate. That subsection, to which a consequential amendment (No. 61) is proposed, provides at present for societies with less than £100 million of commercial assets to lend on equitable interest in certain cases, particularly shared ownership schemes. Until any orders were made, by virtue of Amendment No. 243, societies would be able to lend on equitable interest for shared ownership schemes in just the way that Clause 10(6) of the Bill currently envisages. The first part of that amendment repeats the substance of what is presently Clause 10(6), but it is moved to Schedule 20 since it would now be a transitional provision, falling away as soon as the commission used its order-making power. With those exceptions all the other amendments in this group are genuinely drafting or consequential amendments. I beg to move Amendment No. 44.
Lord Williams of Elvel: Perhaps I may speak to Amendment No. 49, if the noble Lord is going to move the amendments separately. I tried to follow the noble Lord, Lord Skelmersdale, in what he was saying about Amendment No. 49, which is the substantive amendment. I am not sure that I fully followed him, but no doubt I shall be able to read tomorrow in Hansard exactly what he said; and if there are any problems, we will come back at a later stage.
There is, however, one substantive problem on No. 49, and that concerns housing trusts which exist in Northern Ireland; and some of them are sponsored by building societies here. They will be expected to become wholly-owned subsidiaries once the new legislation allows. For instance, the Nationwide Housing Trust Limited in Northern Ireland is

1119
sponsored by the Nationwide Building Society. That company is involved in a wide range of development schemes, primarily aimed at the provision of what might be termed "social lending". One has to accept that as a possibly desirable expression in the context of Northern Ireland, and it includes sheltered housing for the aged and cost-sale developments in partnership with local authorities, usually for sale to local authority nominees.
Under existing law a building society can make a loan to a company such as the Nationwide Housing Trust Limited on the sole security of a contract to develop and purchase a site, which is the equitable interest. Housing thus financed is then sold off to ultimate purchasers without the need for the developer itself to have completed its own purchase of the land. Neither under the Bill as brought from another place nor under Amendment No. 49 will building societies, in the absence of an order satisfying this type of transaction, be able any more to lend on the security only of a development land purchase contract from a local authority in this way.
What we are therefore seeking is an assurance from the Minister that an order will be made specifically to allow this important category of social lending to be continued, and that would enable such schemes in partnership with local authorities to continue. We should like to have that assurance from the Minister if he would be kind enough to give it.
Lord Skelmersdale: The noble Lord could not have been more accurate or more succinct had he spoken from this Dispatch Box. The answers are: yes, yes and yes.
Lord Skelmersdale Lord Skelmersdale moved Amendments Nos. 45 to 49:
Page 14, line 19, after ("estate") insert ("or equitable interest").
Page 14, line 26, after ("is") insert ("or is").
Page 14, line 27, after ("by") insert ("that security or, as the case may be,").
Page 14, line 30, after ("constitutes") insert ("or will constitute").
Page 15, line 6, leave out from ("Ireland") to end of line 11 and insert:
("if the equitable interest is an equitable interest in land of a description and is created in circumstances prescribed in an order made by the Commission with the consent of the Treasury under this subsection and any conditions prescribed in the order are complied with.
( ) Any powers conferred on building societies by an order under subsection (6) above may be conferred on building societies of a description specified in the order or all building societies other than those of a description so specified.
( ) The power to make an order under subsection (6) above includes power—

(a) to prescribe the circumstances in which the power conferred by section 17(10) on building societies of the description specified therein is to be available to them; and

(b) to make such incidental, supplementary' and transitional provision as the Commission considers necessary or expedient.

( ) An instrument containing an order under subsection (6) above shall be subject to annulment in pursuance of a resolution of either House of Parliament.").
9.45 p.m.
On Question, Whether Clause 10, as amended, shall stand part of the Bill?
Lord Williams of Elvel: Perhaps I may ask the Minister to comment briefly on a matter that I raised on Second Reading concerning what I called, much to the objection of some noble Lords, securitised mortgages. We are talking here about advances made by building societies. Our concern is that advances may be in the form that will allow them to be tradeable. If that is not the case, and if the Bill as drafted and as enacted prohibits or inhibits such action, then I shall be perfectly happy with a ministerial assurance that that is so. However, if the Bill does not, then it raises a whole host of questions as to the circumstances in which such advances might be sold on to a third party and under what conditions that might be done. I shall be grateful if the Minister will give the Committee an indication of what the Bill says on that topic.
Lord Skelmersdale: Clause 10 should be read with Clause 11, which we have not yet reached, but I can say for the moment that the Department of the Environment and the Treasury are currently discussing the particular matter that the noble Lord has just raised with the building societies following the initiative of my honourable friend the Minister for Housing.
The intention is to devise in due course a code of guidance; but we have not gone that far as yet, and we shall not do so until the discussions are much nearer to completion.
Lord Williams of Elvel: Can the noble Lord give the Committee a rough timetable as to when those discussions will be brought to fruition? It is, as he will be aware, a matter of enormous importance not only in the context of what building societies can do with their assets but also to the public. It would be unwise for the Committee to consider this Bill as complete until we have received some response to the outcome of the discussions.
Lord Skelmersdale: As I have said, the discussions are in the process of happening. I am not able this evening, standing at this Dispatch Box, to give a date for the outcome of those discussions, but I shall make sure, following the noble Lord's request, that they are conducted as speedily as possible.
Clause 11 agreed to.
Clause 12 [Class 1 and class 2 advances: supplementary provisions]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 50:
Page 19, line 5, leave out subsection (5). On Question, amendment agreed to.
Clause 12, as amended, agreed to.
Clause 13 [Security for advances: valuation and supplementary and related provisions]:
Lord Campbell of Croy Lord Campbell of Croy moved Amendment No. 50A:
Page 21, line 7, leave out ("or saleability").
Lord Campbell of Croy: At the request of my noble friend Lord Kinnoull, I beg to move Amendment No. 50A standing in his name on the supplementary list. I understand that it makes a technical change to the Bill that has been agreed in discussions between the Royal Institution of Chartered Surveyors and the Government. 1 beg to move.
Lord Skelmersdale: I am glad to be as amenable to my noble friend Lord Kinnoull, and now to my noble friend Lord Campbell of Croy, as my noble friend Lord Brabazon was at the beginning of these proceedings. We are nothing if not even handed at this Dispatch Box this evening. Following representations from the profession, we accept that it is unrealistic to accept saleability as a concept that the valuer's expertise should cover. Therefore, I am very pleased to accept the amendment.
Clause 13, as amended, agreed to.
Schedule 4 agreed to.
Clause 14 [Power to make advances secured on land overseas]:
Lord Barnett Lord Barnett moved Amendment No. 51:
Page 22, line 43, leave out ("class 1 advances or").
The noble Lord said: I am not sure that the amendment means what I intended and I shall therefore tell the Committee what it is I did intend. I was confused by some notes from the Building Societies Association. The notes said that my amendment is to remove the requirement that where a society makes loans outside the UK, if they would be classified as class 2 loans, they should be so classified for the asset categories.
The amendment would certainly give societies more flexibility, although the amounts of such lending is likely to be very small. However, it would not seem logical to allow a society to lend, say, to the Channel Islands for rented property within class 1 while similar lending in the United Kingdom would be in class 2.
The purpose underlying my amendment was some concern about overseas lending in relation to the total lending of a building society. I should have thought that the whole Committee would be concerned to ensure that the main function of a building society in the United Kingdom should be what it always has been; namely, to use the bulk of its funds and its efforts to furthering the wellbeing of housing in the UK. If my amendment does not do what I was expecting it to do, perhaps the Minister will tell me. It is, in a sense, a probing amendment to enable me to express my concern that there should not be too great an amount of lending overseas. If the noble Lord agrees with me and shares my concern and can find a better way of wording an amendment, I shall be glad to hear from him. I beg to move.
Lord Skelmersdale: Before the noble Lord concludes, is he also speaking to Amendment No. 52?
Lord Barnett: Yes.
Lord Skelmersdale: The Government have indicated that the present intention is to make an early order under this clause to allow lending direct in the Channel Islands, Isle of Man and Gibraltar. But they have no intention at present to make an early order in respect of other countries—the noble Lord may be thinking, for example, of farm houses in France, or wherever.
I think it would be wrong in either case to deprive the authority making the order—likely in the first instance to be the commission—from allowing some loans to count in class 1. A society operating in the Channel Islands should surely not be restricted in its lending there by having to count it wholly towards the class 2 limit, even when the loans otherwise meet the criteria for class 1, as defined in Clause 11(2) and (4)—which I mentioned in error earlier on another amendment. If it is decided to allow societies to operate in other EC countries, it would be wrong if the Bill prevented a similar categorisation of the assets there as apply in the United Kingdom.
There is, of course, scope in the order-making power for the authority to ensure that the security required for a loan overseas to count in class 1 is comparable to what is required domestically. But, given that, I think it would be wrong to prevent the authority from allowing class 1 loans overseas once the order-making powers had been used.
As regards Amendment No. 52, where it occurs, for example, in Clause 15(7) and Clause 17(10) it is first provided for the assets to be of a certain class and then for them to count towards the relevant asset limits. Clause 14(l)(c) and (3) are therefore structured in a way consistent with these other similar provisions which I trust the Committee will agree is the right and proper way for societies' asset holdings to be structured. Their primary function—and we know how extraordinarily successful they have been over the years—is to lend to individual borrowers with the loans secured on land. I fail to see why it should be any different with overseas loans. I have perhaps gone slightly wider than the interpretation that the noble Lord put on his own amendment but, after all, he asked to leave out subsection (3).
Lord Barnett: I am obliged to the noble Lord the Minister. As he appreciates, the problem is that it is a complex Bill and with complex legislation it is very easy for someone without assistance to make mistakes in the drafting of amendments. I thank the noble Lord for his reply and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 52 not moved.]
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 53:
Page 23, line 30, at end insert—
("( ) An order under this section made as regards any of the relevant British overseas territories may make all or any of the

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powers conferred thereby exercisable by building societies without the need for adoption; but, in the absence of such a provision, any power conferred under this section must, in order to be exercisable by a building society, be adopted by the society.")
The noble Lord said: I beg to move Amendment No. 53. It is a general principle in this Bill that before a society takes on a major new power it should seek the approval of its members through the process of adoption under Schedule 2. That should clearly apply to a society which issued to lend overseas following an order under this clause, just as it does to the other new powers in the Bill. The amendment therefore provides for that, and I beg to move.
Lord Williams of Elvel: Perhaps I may raise a point for clarification, because this is the first time that we have really had a look at these amendments. The amendment says:
"in the absence of such a provision, any power conferred under this section must, in order to be exercisable by a building society, be adopted by the society".
Does that mean exactly what the noble Lord has been saying, that it is to be adopted in the absence of the provision in the order? I do not quite understand. Maybe I misunderstood what he was saying.
Lord Skelmersdale: The noble Lord is very quick. I was trying to save a little of the Committee's time. I should have added that a partial exception is given in the case of the Channel Islands, Isle of Man and Gibraltar, which we discussed in the last series of amendments. The commission, which would make any enabling order for these territories, would be given discretion to disapply the adoption requirement in these cases. This is because the Government regard lending in these territories simply as an extension of the power to lend on United Kingdom land and not as a new departure in itself. The detail has been delegated to a statutory instrument purely because there are complicated technical issues to be sorted out; there is no need on that account to make the power an adoptable one. I hope that that explanation will help the noble Lord.
Lord Williams of Elvel: I am most grateful to the noble Lord for reading out the rest of his brief on this amendment. I shall have to look at Hansard and see what all this means and perhaps come back at a later stage. I am sure that it is perfectly all right. I have no reason to think that it is not.
Clause 14, as amended, agreed to.
Clause 15 [Loans for mobile homes]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 54:
Page 24, line 15, after ("by"), insert ("—(a)").
The noble Lord said: I beg to move Amendment No. 54, and I should like also to speak to Amendments Nos. 55, 56, 57, 59 and 246. These are geographical drafting amendments to make it clear that money may be advanced on mobile homes whether they are situated in England and Wales, as the Bill currently
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provides, or in Scotland or Northern Ireland, which I think is only fair. I beg to move.
Lord Skelmersdale Lord Skelmersdale moved Amendments Nos. 55 to 57:
Page 24, line 16, after ("home") insert ("situated in England and Wales").
Page 24, line 16, at end insert ("; or (b) in the case of a mobile home situated in Scotland, such security as the Commission may, with the consent of the Treasury, prescribe by order in a statutory instrument").
Page 24, line 30, after ("home") insert ("or, as the case may be, no other security prescribed under subsection (2)(b) above").
The noble Lord said: I beg to move these amendments en bloc.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 58:
Page 25, line 3, at end insert—
("( ) Joint borrowers under this section shall be treated, for the purpose of the limit on loans under this section, as a single individual and any sums outstanding in respect of loans made under this section or section 16 by the society to any one of the joint borrowers is to be taken into account in determining the balance available for any further loan to him or to him and any joint borrower with him.").
The noble Lord said: The Committee may be surprised to hear that the limits on loans of £ 10,000 and £5,000 on non-mortgage loans under Clauses 15 and 16 respectively apply to loans "to any one individual" (in Clauses 15(6) and 16(7)) but not to joint borrowers. This is clearly a lacuna in the Bill that needs to be filled, and Amendments Nos. 58 and 60 do just that. I beg to move.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 59:
Page 25, line 25, leave out ("subsection") and insert ("subsections (2)(b) or ").
The noble Lord said: I spoke to this amendment with Amendment No. 54. I beg to move.
Clause 15, as amended, agreed to.
Clause 16 [Power to lend to individuals otherwise than by class 1 or class 2 advances]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 60:
Page 26, line 40, at end insert—
("( ) Joint borrowers under this section shall be treated, for the purpose of the limit on loans under this section, as a single individual and any sums outstanding in respect of loans made under this section or section 15 by the society to any one of the joint borrowers is to be taken into account in determining the balance available for any further loan to him or to him and any joint borrower with him.").
The noble Lord said: I spoke to this amendment with Amendment No. 58. I beg to move.
Clause 16, as amended, agreed to.
Clause 17 [Power to hold and develop land as commercial asset]:
10 p.m.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 61:
Page 29, line 3, leave out from ("advances") to ("section") in line 4 and insert ("on the security of equitable interests in the land in the circumstances authorised by an order under").
The noble Lord said: I believe that this amendment was spoken to with Amendment No. 44. I beg to move.
Clause 17, as amended, agreed to.
Clause 18 [Power to invest in subsidiaries and other associated bodies]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 62:
Page 31, line 27, leave out ("investment powers") and insert ("powers to invest in or support").
The noble Lord said: This is a drafting amendment to make it clear that the provisions of subsection (11) relate to Clause 18 as a whole.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 63:
Page 32, line 13, leave out ("Act (Northern Ireland) 1960") and insert ("(Northern Ireland) Order 1986").
The noble Lord said: With this it will be convenient to speak also to Amendments Nos. 131, 146, 148, 149, 150, 152, 208, 210, 216, 217, 219, 220, 221, 234, 235, 237, 240 and 242. These, as will be apparent from the wording of the first amendment, take account of the Northern Ireland Companies (Consolidation) Order 1986. I beg to move.
Clause 18, as amended, agreed to.
Clauses 19 and 20 agreed to.
Clause 21 [Liquid assets]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 64:
Page 36, leave out lines 8 and 9.
The noble Lord said: This is a probing amendment designed to discover why in the Bill as drafted there needs to be a limit upon the extent to which a building society can stay liquid. As far as I can see, there is no limitation on banks, commercial companies and other organisations staying liquid. I find it difficult to understand why building societies are not to be allowed to hold cash in large amounts in the same way as any other commercial organisation.
My second question is: why 33⅓ per cent.? Why not 20 per cent., 40 per cent., or any other percentage that the noble Lord wishes to pull out of the air? The amendment is designed to obtain a response from the Minister as to why it is there and what the motives are behind restricting the liquidity of building societies. I beg to move.
Lord Brabazon of Tara: The reason for the limit of 33⅓ per cent. of total assets is to ensure that societies apply the bulk of their funds for the purposes of the legislation; that is, to the building societies, not banks
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or commercial companies. Without such a provision a society might be able to raise funds merely to invest them in liquid form that would be contrary to the primary purpose of a society and likely to prove a less financially stable mode of operation than lending on security of mortgage. The limit in effect prevents them from becoming a different type of financial institution, perhaps a money fund, through the back door.
It is possible to envisage circumstances, such as the setting up of a new society, where it could be appropriate to provide for a limit different from the 33⅓ per cent. for a society for a specified period. That is covered under subsection (6).
Why 33⅓ per cent. rather than 20 per cent. or whatever the noble Lord mentioned? The proposal was in the Green Paper in July 1984. It has been generally accepted. I accept that it is a matter of judgment, but after considerable consultation we have arrived at that figure.
Lord Williams of Elvel: I am grateful to the noble Lord for that response. I understand that building societies are not meant to be money funds or anything else other than building societies; but I still have a problem about this. What happens if involuntarily a building society finds itself in a position where its liquid assets are 33·5 per cent. of the total balance sheet? It may be that they can do nothing about this and it simply happens because the timing of loans has gone wrong or it may have been engaged in a money market operation or have raised wholesale funds and has to keep those funds in cash balances. It seems rather extraordinary to put a limitation of such a precise amount without apparently having any way of granting exceptions to building societies who may find themselves temporarily in breach of this regulation. Perhaps the noble Lord the Minister can help me.
Lord Brabazon of Tara: I mentioned in my earlier remarks that subsection (6) allows the commission at any time, by notice to a building society, to direct that the limit in force under the section shall not, subject to any conditions specified in the notice, apply to the society during such period as the commission specifies. That may be part of the answer the noble Lord looks for. I doubt if it is the whole answer. The commission does have some discretion, as I have said. Perhaps I may write to the noble Lord throwing further light on this.
Lord Williams of Elvel: I am most grateful to the noble Lord. He is right in saying that it is only part of the answer. These things happen very suddenly and the commission may not be in a position to grant that sort of notice. If he can write to me shedding further light on this aspect, I should be most grateful. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 21 agreed to.
Clause 22 [Obligation to meet liabilities of associated bodies]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 65:
Page 37, line 26, after ("society") insert ("then, subject to subsection (1A) below,").
The noble Lord said: In moving Amendment No. 65 I should like to speak also to Amendment No. 66. These amendments make it clear that a society's statutory obligation to stand behind its associates does not extend to repaying debts owed by the associate to one of its other members. At Committee stage in another place the question was raised of the extent of the statutory obligation to stand behind a subsidiary or other associate. The Law Society have also suggested that the clause as it now stands could require a society to underwrite not only those who deal with its associates but also any minority shareholders. The Government have now had the opportunity to consider the point more fully. It would clearly be wrong if a society was obliged, for example, to repay a business partner for a loan he had made to the associate body, or indeed to protect his investment in the venture. That would in effect make a venture where a society was a majority shareholder risk free for its partners. The first amendment makes it clear that the statutory obligation does not extend that far. The second amendment is consequential upon that. I beg to move.
Lord Williams of Elvel: I understand the thrust of these amendments, and there is no particular problem although I should like to have a look in Hansard tomorrow and see what the noble Lord has said. However, on this general point on the obligation of building societies to associated bodies, can I briefly raise the question of protection of third parties dealing with building societies in good faith, whether they are associated bodies or members of associated bodies or dealing with associated bodies, when those transactions are ultra vires. In the Companies Act in Section 35 there is a very clear indemnity against people who are caught when an ultra vires transaction is entered into by a company. That is in the companies legislation and I take the opportunity of raising this. The noble Lord may wish to come back at a later stage and I do not wish to press it now but merely to put the matter on record. There is no provision, so far as I understand it, in this Bill for protection of those who are caught by ultra vires transactions, be they associated bodies or any other third party.
Lord Brabazon of Tara: I am grateful to the noble Lord for raising the point. It is not one which I had considered before. If I may, I shall look into what the noble Lord has said and write to him before the next stage.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 66:
Page 37, line 29, at end insert—
("(1A) The obligation so imposed does not extend to the liabilities of the associated body to its members other than the building society with which it is associated.").
Clause 22, as amended, agreed to.
Clause 23 [Power to hedge]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 67:
Page 37, line 35, after ("description") insert ("and of a non-speculative nature").
The noble Lord said: This is a particularly important amendment. It refers to a point that I raised on Second Reading—the ability of building societies under the new dispensation, if I may so describe it, to hedge their position either in foreign currencies, in interest rates or in other factors. I understand fully that building societies, if they are to provide the sort of services in the retail market and in the high street that a number of noble Lords wish them to perform, such as selling foreign currency for travel purposes, travellers' cheques or whatever, will have to cover forward when they make that transaction at the retail level.
The problem arises when large societies may feel that transactions—if I may talk, for the moment, about foreign currencies—in which they are engaged, even for individuals, are such as to require the services of a foreign exchange dealer. The societies may feel that the foreign exchange dealer—this is, by definition, how you make money on foreign exchange dealing—will start mismatching the currency transactions and the maturity of the currency transactions.
The same is true of interest rates. If you start allowing building societies to go into the financial futures market to hedge their interest rate obligations, there is a danger that they will start to hire some high-priced dealer and some high-priced American bank and that they will go in not just to cover some specific liability that they may have in doing business for individuals but that they will be doing business in their own right in the way that banks and other financial organisations do. This would seem to us to be an extremely dangerous development. It is something to which the Government may wish to pay attention.
I recognise that it is necessary to give building societies the ability to cover their forward positions. I start getting worried, however, when we begin to use the word "hedge" and phrases such as,
"reducing the risk of loss arising from changes in interest rates, currency rates or other factors".
I seek an assurance from the Minister that the intention that will be translated into executive action by the commission is that building societies should not attempt to become major players in the currency and the futures markets. That is the thrust of the amendment. I beg to move.
Lord Brabazon of Tara: Yes, I agree with everything that the noble Lord, Lord Williams, has said. We believe, however, that this is covered by use of the words,
"for the purpose of reducing the risk of loss arising from changes of interest rates".
The purpose of reducing the risk of loss means that building societies are given no power to use such instruments to seek profits but only to reduce the risk of loss. In other words, they are allowed to go in for hedging operations but not for speculation. Perhaps the noble Lord—
Lord Williams of Elvel: I am sorry, but here I must part company with the Minister. If you hedge for the avoidance of risk of loss, you hedge to make a profit. There is no difference in practice between the two. I do not understand how this wording covers the point that I was making. Perhaps the noble Lord, Lord Plummer, who has great experience, can help. I do not agree with the Minister.
Lord Brabazon of Tara: If the noble Lord had allowed me to finish the paragraph perhaps I could have provided a little more clarification. We believe that these words cover the point he raises. The commission may specify the conditions under which such contracts may be used and these could include any further restrictions that may be appropriate. Therefore, I think that the commission will be keeping a very close eye on the way in which these operations are conducted. I have a difficulty with the noble Lord's amendment, in that it might be difficult to operate in practice, since it requires the use of contracts which are of a non-speculative nature. That may, in practice, prove difficult, since any investment, of its very nature, carries some degree of risk, however slight, so that it could rule out virtually all the types of contract that we have in mind in this clause.
As I said at the beginning, I take seriously the noble Lord's concerns and I believe that we cover them by the use of the words I have described. I would also say that I have difficulty with the words which the noble Lord has described. I hope he will be satisfied with the explanation I have given. In the meantime, I will look again at this. I think that our intention is the same and I will see whether there is any possible improvement that could be made. But at the moment I am satisfied with the way it stands.
Lord Plummer of St. Marylebone: Perhaps consultation with Sporting Life might help.
10.15 p.m.
Lord Williams of Elvel: I am most grateful to the noble Lord and to the noble Lord, Lord Plummer, for his intervention, which was very well taken.
I think the noble Lord recognises the problem and is very sympathetic to it, and I am very grateful for that. I am afraid that I have to take issue with his view that the words in the Bill, as at present, satisfy what I am trying to do. I have no pride of authorship in the amendment. Indeed, my noble friend Lord Barnett and I spent a few minutes trying to find something better. It was simply devised to try to make the point we were wanting to make. If the noble Lord could go a little further and say that the commission not only has the power and will look at this but will take steps to ensure that transactions which are entered into on hedging are carefully controlled, then I would be perfectly satisfied and would be very happy to withdraw the amendment.
Lord Brabazon of Tara: At the moment, I do not think I can go much further than what I in fact said: that the commission may specify the conditions under which such contracts may be used, and these could
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include any further restrictions which might be appropriate. I think that would be sufficient to cover the point.
Lord Williams of Elvel: I note what the noble Lord said. I understand that it is perhaps not fair to ask him to be more specific at this point and at this stage of the Bill. I hope very much that we may be able to make a little more progress on this, which I think is an extremely important problem, as I believe the noble Lord recognises. But in the light of what he has said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 68:
Page 38, line 5, after ("regulate") insert (", or provide for the regulation of,").
The noble Lord said: I beg to move Amendment No. 68 and, at the same time, will speak to Amendment No. 69. These are technical amendments to enable the commission's order specifying hedging contracts to be permissible to societies to prescribe the names of persons or descriptions of persons with whom societies can enter into such a contract.
It may be useful, for instance, in allowing societies to enter into interest rate swaps, for the commission to be able to prescribe permissible counterparties or, in the case of financial futures, to specify which Exchange societies may trade in. These amendments give the commission that power. I beg to move.
Lord Williams of Elvel: May I just say I am very pleased that the Government are introducing these amendments, because it is an important part of the armoury of the commission, particularly when you get interest rate swaps in futures, because these are dangerous areas. So I certainly welcome these amendments.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 69:
Page 38, line 5, after ("which") insert (", the persons or descriptions of persons with whom,").
Clause 23, as amended, agreed to.
[Amendment No. 70 not moved.]
Clause 24 agreed to.
Schedule 5 [The Building Societies Investor Protection Board]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 71:
Page 205, line 28, leave out ("notice to the Treasury") and insert ("giving to the Treasury a signed notice stating that he resigns from that office.")
The noble Lord said: In moving Amendment No. 71, with the leave of the Committee I should like also to speak to Amendments Nos. 73, 74, 75, 77, 78, 79, 80, 81, 82, 83, 84, 86 and 87. The amendments in this group all make minor technical changes to the investor protection scheme. If there are any detailed points on them, I shall certainly be happy to deal with them when we reach the amendment concerned.
As the Committee will be aware, the scheme is modelled on that in the Banking Act 1979. Most of the

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amendments reflect points where it is proposed to modify the Banking Act scheme (for example, on client accounts; Amendments Nos. 81 to 83) or to reflect the differing structure of building society shares and deposits (for example, Amendment No. 75, dealing with people who have both deposits with and shares in the society). Amendment No. 78 exempts CDs and other negotiable instruments from the coverage of the scheme. Wholesale instruments issued by building societies are cushioned by the very high proportion of funds raised in the form of shares in a way which such instruments issued by banks are not. With that explanation of the amendments, I beg to move.
Schedule 5, as amended, agreed to.
Clause 25 agreed to.
Clause 26 [Power to levy contributions and to borrow money in event of insolvency]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 72:
Page 40, line 30, leave out from beginning to ("(effect") in line 31 and insert ("section 95 of the Insolvency Act 1986 or Article 541 of the Companies (Northern Ireland) Order 1986").
The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendments Nos. 85, 109, 195 to 202 inclusive, 212, 222, 226 and 227. Some Members of the Committee may remember a song sung by Maurice Chevalier in which the chorus went "C'est formidable", and so is the enormous list of amendments, comprising something like nine-and-a-half pages of the Marshalled List. I am glad to say that they are almost totally technical, stemming from the consolidation of the Insolvency Act 1985 and the relevant provisions of the Companies Act 1985, which has already been before your Lordships' House. In addition, the Northern Ireland companies legislation, as my noble friend Lord Brabazon said earlier this afternoon, is currently being consolidated.
The three new clauses replacing Clause 90 and the replacement Schedule 15 are essentially therefore a translation of the existing provisions in terms of those consolidation measures. The other amendments are consequential and tidying up or drafting. I should, however, say a word about the wholesale replacement of Schedule 15. The existing Schedule 15 adapts the provisions relating to the winding up of companies in Part XX of the Companies Act 1985, Part II of the Insolvency Act 1985 and corresponding provisions in Northern Ireland company law so as to apply in relation to building societies. However, winding-up provisions of the two 1986 Acts are now being consolidated in the Insolvency Bill, which has already been, as I said just a minute ago, before your Lordships' House, and the companies legislation relating to Northern Ireland is currently being consolidated in these provisions and those of the Companies (Northern Ireland) Order 1986.
The extent of the consolidation is such that it would not have been practicable to proceed by amendment to the existing schedule. It would have taken many hundreds of amendments to translate references to particular parts and sections of the insolvency and
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companies legislation and corresponding references to the Bill, whose structure is quite different. Such a forest of amendments would have been even more impossible to follow than these. The Committee can take that from me. I had a look at them originally, and I know that it is true.
It was decided that complete replacement of the schedule was the only practical option. If any noble Lord has a particular query, I shall do my best to answer it now. If not, perhaps any questions may be conducted by correspondence. I beg to move.
Lord Williams of Elvel: I understand that we are promised notes on these new amendments and I think that we must wait for those notes at a later stage of the Bill. In the meantime, I congratulate the noble Lord on having read through the schedule.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 73 and 74:
Page 40, line 40, leave out ("authorised").
Page 40, line 41, after ("society)") insert ("authorised on the date of the insolvency").
The noble Lord said: I have spoken to Amendments Nos. 73 and 74 with Amendment No. 71. With the leave of the Members of the Committee, I beg to move Amendments 73 and 74 together.
Clause 26, as amended, agreed to.
Clause 27 [Payments to investors]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 75:
Page 43, line 23, leave out from first ("has") to end of line and insert ("a deposit with, or a share").
The noble Lord said: This amendment was spoken to with Amendment No. 71.I beg to move.
Lord Strabolgi Lord Strabolgi moved Amendment No. 76:
Page 43, line 26, leave out ("£10,000") and insert ("£30,000").
The noble Lord said: I beg to move Amendment No. 76, standing in my name and in the name of my noble friend Lord Williams of Elvel. I should point out that there is a printers' mistake—a misprint—in the amendment as it appears on the Marshalled List. The second figure should read "£30,000".
The purpose of my amendment is to increase the level of protection to depositors from 90 per cent. of £10,000 to 90 per cent. of £30,000. This in our view is an important matter which I raised briefly on Second Reading. The noble Lord, Lord Brabazon, in his reply said that the sum of £ 10,000 is the same as that applied in the 1979 Banking Act. This may well be so, although I do not understand why this should be on the basis of the banks' existing scheme which was instituted in 1979. If the banks' scheme had been index-linked the figure surely would be nearer approximately £18,000 today. I understand that anyway the banks' scheme is to be reviewed soon.
The present voluntary scheme operated by the building societies is openended, although it is fair to say that when the scheme was first set up the total allowed for individual deposits was £30,000. Since then the Government have removed the limit altogether, a decision, I may say, which I support. However, this makes the amount of £9,000 even more unrealistic. The Government are trying to take two opposing courses, in my view. On the one hand, they lift the limit on investors and encourage small investors, rightly, to deposit with building societies. On the other hand, they limit the amount of compensation to what is surely a derisory figure.
No one likes losing money, but for a small investor, say with less than £40,000 of savings to lose, such a large proportion would surely be a calamity. Any sum less than, say, £50,000 is considered today to be too small for a Stock Exchange portfolio. There is not enough hedge if there is a slump. Indeed, any stockbroker will tell one that unofficially. Small investors are usually advised, unofficially, to seek other outlets, particularly building societies. That is why, in my submission, we need an adequate scheme.
I accept that it is not possible to have a statutory scheme that is openended. That is why I have put down the figure of £30,000 as a compromise which I hope will be acceptable to the Government. This figure is more or less in line with the compensation scheme proposed in the Financial Services Bill, which I believe is likely to give 90 per cent. protection up to a maximum of £30,000.I may say that my amendment is supported by the Consumers Association. It would have liked the figure to be rather more but it supports my amendment. It is also supported by the Building Societies Association, which has indicated that it would prefer a more generous level of protection than the £9,000 at present in the Bill. I hope therefore that my amendment will prove acceptable to the Government. I beg to move.
Lord Williams of Elvel: I should like to support the amendment moved by my noble friend Lord Strabolgi.
10.30 p.m.
Lord Brabazon of Tara: As the noble Lord, Lord Strabolgi, pointed out, the limit of £10,000 provides consistency with the comparable scheme for banks and licensed deposit takers under the Banking Act 1979. It also ensures that statutory investor protection is not set at an unduly generous level which removes an important discipline from investors and building society managements.
However, there are some particular points relating to the £ 10,000 limit. Its intention is to concentrate the protection under the scheme on small investors. We also need to ensure that the potential costs of the scheme—which of course fall to other building societies—should not be excessive. The amendment would have two effects. First, it could increase the potential costs of the scheme quite considerably. I would remind the Committee that that cost must ultimately be borne by members of building societies at large. But, secondly, it would greatly increase the level of protection available to larger and generally more sophisticated investors. These are the people
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who are best placed to judge the prudence of different investments, and are least in need of statutory protection. On the Building Societies Association's figures, only 4 per cent. of building society accounts exceed £10,000.
The noble Lord quoted the £30,000 maximum compensation which is proposed for the securities and investment board, under the financial services legislation. I must say to the noble Lord that these two schemes deal with slightly different situations. So long as an investment business conforms fully to the rules regarding the keeping of money in client accounts, the investor's money should be safe if the business became insolvent. While an insolvent business may have cut corners on the client account rules, they provide an extra layer of protection which is not available for building societies. And it needs to be remembered that the proposed limit for the SIB scheme is not prescribed in the Financial Services Bill. It is similarly open to the building societies, if they so wish, to go beyond the £10,000 figure here by setting up voluntary arrangements under Clause 31.
As I have explained, the Government regard the Banking Act scheme as a much closer analogy to the financial services scheme. If the figure for banks were reconsidered—although the White Paper on banking supervision last year proposed that the maximum should remain at £10,000 for now—the Bill provides powers to make a parallel change for building societies, and obviously that could be brought into effect. I am afraid that I cannot accept the noble Lord's amendment. We believe that £10,000 is the right amount for the reasons that I have given. I cannot accept the amendment.
Lord Williams of Elvel: Will the noble Lord elaborate on two points that he has made? First, he said that the protection was not in the Financial Services Bill as at present drafted and as it will come to your Lordships' House. Is there no provision in the re-writing of the Bill that I understand is at present taking place, for putting it in the Bill or in one of the schedules?
Secondly, can the noble Lord be a little firmer when he says that there is provision in this Bill for upping the ante, if I may put it like that? If the banking supervision legislation ups the ante in the banks, can the noble Lord go a little further and say that those provisions would be activated? If the banking supervision legislation provided for a higher figure, would the Government ensure that that higher figure was in the building societies' legislation?
Lord Brabazon of Tara: As regards the noble Lord's second point, I am able to say that if the Banking Act figure were changed, we would bring forward the necessary statutory instrument under that Act to put up the figure.
To clarify the point about the Financial Services Bill, it will not be prescribed in the Financial Services Bill as it stands at the moment; but that is perhaps a matter to which we could return when we come to that Bill.
Lord Strabolgi: I am grateful to the noble Lord, Lord Brabazon of Tara, for his explanation of the reasons why the Government do not wish to accept my amendment. The problem is: what is a small investor? I did not hear the percentage that the noble Lord gave of investors who had £10,000 or more in building societies, but I think it was fairly small. I happen to know that in my own building society over 60 per cent. of the investors have much more than this sum. This is particularly so in the smaller societies.
The trouble is that the Government are trying to equate this sum with a Bill of seven years ago. We are now legislating for some years ahead, and yet they are tying it down to a Bill in 1979. In other words, as I suspected, I do not think that this scheme has very much depth to it or very much value. Its purpose is largely cosmetic, as I said on Second Reading. It should really be called the part Protection of Investors Scheme, because it does not give full protection. And what is a small investor to do if he has not enough capital for the Stock Exchange, for reasons I gave earlier? If he puts it into a building society he is only going to get a small proportion back.
The only hope for the future is the next subsection, where, as the noble Lord said, the Treasury can by statutory instrument increase the sum to something which is rather more realistic. I hope that they will give this their attention at the earliest possible opportunity after the Bill becomes an Act. In the meantime, I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 77 to 80:
Page 43, line 44, leave out ("and").
Page 44, line 4 at end insert—
(", and
(c) any deposit which is evidenced by a certificate of deposit or other negotiable instrument.")
Page 44, line 4, at end insert—
("( ) In determining what is the protected investment of an investor, no account shall be taken of any liability unless proof of the debt or claim which gives rise to it has been lodged with the liquidator of the society.")
Page 44, line 22, leave out from beginning to ("shall") in line 23 and insert ("investments held by trustees or jointly or on clients' account,").
The noble Lord said: I spoke to Amendment No. 77 with Amendment No. 71, as I did with Nos. 78, 79 and 80.I beg to move all four en bloc.
Clause 27, as amended, agreed to.
Schedule 6 [Insolvency payments: trusts and joint holdings]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 81 to 83:
Page 206, line 38, after ("JOINT") insert ("OR CLIENT ACCOUNT").
Page 207, line 34, at end insert—
("4A. Where an investment is made by a person whose business is the provision of professional services with money held to the account of clients of his, each of them shall be treated as having a separate investment of an amount equal to so much of the amount of the investment as represents money held to his account as a client.").
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Page 207, line 43, at end insert ("or,
(d) that paragraph 4A above applies to an investment,").
The noble Lord said: Again, I spoke to Amendments Nos. 81, 82 and 83 with Amendment No. 71. With the leave of the Committee, I beg leave to move them en bloc.
Schedule 6, as amended, agreed to.
Clause 28 [Liability of insolvent society in respect of payments by Board]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 84 and 85:
Page 45, line 18, at end insert—
("(2A) Where the society's liability to the investor is referable to both shares and deposits, the amount equal to the insolvency payment to him shall, for the purposes of subsection (2)(b) above, be first applied in reduction of the liability referable to his shares then, if that amount exceeds that liability, in reduction of the liability referable to his deposits.")
Page 46, leave out lines 34 to 36 and insert—
("411 of the Insolvency Act 1986, and
(b) for Northern Ireland, under Article 613 of the Companies (Northern Ireland) Order 1986;").
The noble Lord said: I have spoken to Amendments Nos. 84 and 85 at an earlier stage. I beg leave to move these two together.
Clause 28, as amended, agreed to.
Clause 29 [Repayments in respect of contributions]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 86 and 87:
Page 47, line 35, after ("are") insert ("more than").
Page 47, line 37, leave out ("any") and insert ("the").
The noble Lord said: I have spoken to Amendments Nos. 86 and 87 with Amendment No. 71.I beg to move these two together.
Clause 29, as amended, agreed to.
Clauses 30 to 32 agreed to.
Schedule 7 agreed to.
Clause 33 agreed to.
Clause 34 [Powers to provide financial services or services relating to land]:
Lord Barnett Lord Barnett moved Amendment No. 88:
Page 50, line 40, leave out subsection (2).
The noble Lord said: I beg to move Amendment No. 88 standing in the names of my noble friend Lord Williams of Elvel and myself. It is effectively a probing amendment to see why it is necessary to have this order. In the helpful briefing notes we have had from the Building Societies Association they give a number of reasons why the subsection is necessary. I would be interested to know whether they coincide with the Government's view. I beg to move.
The Deputy Chairman of Committees (Lord Ampthill): I remind the Committee that if Amendment No. 88 is agreed to, I cannot call Amendment No. 89.
Lord Brabazon of Tara: I have not read that particu-lar part of the building societies brief; so we shall see whether it does. Briefly I can say that this merely provides the power to bring new provisions forward for the services which societies may wish to carry out. I could give one example—the provision of personal pensions within the meaning of the Social Security Bill. That could be one service which the building societies might wish to be allowed to take part in in the future. A second example might be investment business. I can say here that we intend to bring forward an amendment at the next stage of the Bill to provide for building societies to be able to do personal equity plans. Those are two examples of the sort of functions which we might wish to have included.
Lord Williams of Elvel: When shall we have a sight of this amendment allowing building societies to deal in personal equity plans, so that we can study it?
Lord Brabazon of Tara: As soon as possible.
Lord Barnett: It makes it very difficult for your Lordships, as I am sure you will appreciate, but I hope the Minister will be able to let us have a note of it. When he says "as soon as possible" I hope it will be in good time for us to check it before the next stage of the Bill. With that assurance, which I assume is there, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 89:
Page 50, line 40, leave out ("Treasury") and insert ("appropriate authority").
The noble Lord said: In moving Amendment No. 89 I shall speak at the same time to Amendments Nos. 90, 96, 97, 98, 99 and 100. These are amendments to amend the powers in Clause 34 to vary the Schedule 8 services that societies can provide. The power to change Part I of the schedule, which lists the services that societies may offer, would stay with the Treasury subject to the affirmative resolution procedure. The commission would, however, have the power to vary the other parts of the schedule subject to the negative resolution procedure. With that explanation I beg to move.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 90:
Page 51, line 4, leave out ("Treasury") and insert ("authority making the order").
The noble Lord said: I have already spoken to this amendment. I beg to move.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 91 to 95:s
Page 51, line 12, after ("subsidiary") insert ("or other associated body").
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Page 51, line 13, after ("subsidiary") insert ("or other associated body").
Page 51, line 13, after ("shares") insert ("or corresponding membership rights").
Page 51, line 13, after ("by") insert ("or which is linked by resolution to").
Page 51, line 16, after ("subsidiary") insert ("or other associated body").
The noble Lord said: With the leave of the Committee I shall move Amendments Nos. 91 to 95. The amendments allow for services provided by societies under Schedule 8 in future through other associated bodies as well as through subsidiaries as the Bill at present provides. As the Bill stands, societies can, for example, have estate agents as subsidiaries where the equity stake is more than 50 per cent., but could not have an associated estate agent if their stake was less. What these amendments will do is to give scope for powers under Schedule 8 to be made available to other associates as well as subsidiaries. They will not actually make any powers available to a society's other associates. I hope the Committee will agree that it is sensible to provide this flexibility. I beg to move the amendments en bloc.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 96 to 100:
Page 51, line 25, leave out ("Treasury") and insert ("authority making the order").
Page 51, line 27, at end insert—
("( ) The "appropriate authority" for the purpose of exercising the powers conferred by this section is the Treasury as regards any variation of Part I of Schedule 8 with or without other provision and the Commission in any other case.").
Page 51, line 29, leave out ("but") and insert ("and—
(a) in the case of an order varying Part I of Schedule 8 with or without other provision,")
Page 51, line 31, at end insert ("and
(b) in the case of any other order, the instrument containing it shall be subject to annulment in pursuance of a resolution of either House of Parliament.").
Page 51, line 33, leave out ("Treasury") and insert ("authority making the order").
The noble Lord said: I spoke to Amendments Nos. 97 to 100 at an earlier stage with Amendment No. 89. With the leave of the Committee I beg to move the amendments en bloc.
Lord Williams of Elvel: I am sorry to interrupt the noble Lord. Will he assure us that in Amendment No. 96 we are under the same principle that he announced when we were discussing the amendment moved by my noble friend Lord Houghton—that the authority making the order would place this order before Parliament through a Treasury Minister?
Lord Brabazon of Tara: Yes, I can give that assurance.
10.45 p.m.
On Question, Whether Clause 34, as amended, shall stand part of the Bill?
Lord Morris: My Lords, before we leave Clause 34, I should like to raise a very simple point. As we are

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well aware, Clause 34 empowers the building societies to provide a whole series of services. Among these services is arranging for the provision of insurance of any description. In the course of the Second Reading debate, (in col. 1229 of Hansard) my noble friend Lord Brabazon of Tara stated:
"We do not believe that the Bill would tend to diminish the role of small, independent professionals or that they will all have to become employees of building societies."
In addition, he said:
"In the Government's view the small business will continue to be able to offer a distinctive specialist service. It will be able to respond [that is. the small business] to competition from building societies; and although evolution of their markets is inevitable. I believe that they will continue to thrive."
I question that at this stage of the Bill because I think it is the right place to do it; because the dominance of the building societies in the market place is something that Her Majesty's Government themselves had admitted on numerous occasions. I went to the trouble of looking at the Government's position in the discussion on this issue in the Standing Committee stage in the House of Commons. Sir George Young said (at col. 244 of the Official Report of Standing Committee A on 6th February last):
"With the easy accessibility of their branches and the public esteem that they enjoy, the societies are well placed to bring share ownership within the reach of a much wider range of people".
This of course was on a specific issue of the provision of a specific service. On another occasion, he made it quite clear (at col. 263 of the same report):
"collectively, the building societies have a dominant position in the provision of first mortgages".
Later, in the same column, he said that Her Majesty's Government,
"recognise the unique position of the building societies".
I have had a lot of representations from insurance brokers—not agents, but brokers—who genuinely broke the service to the benefit of the public at large. They have no concerns whatsoever with regard to competition on the broking in the public interest of insurance services. What they are deeply concerned about is the position of the building societies at present who hold themselves out to be insurance brokers when so many of them are members of BIBA (the British Institute of Brokers' Association), and when in fact they are not fundamentally brokers at all. All that they are really acting for are one, two, three or four agents. It is this position I am concerned about.
The brokers' role is very simple. They are the buffer between the public (whom they are meant to be serving) and the markets available to benefit the public. The building societies—and indeed the banks—do not do that. They have a cosy relationship with certain—maybe two, three or four—of the large insurance companies.
Members of the public enter the office of the mortgage company—and I am talking about the real world and not the world that the Bill envisages. They are given the opportunity of taking advantage of the insurance services of the company with which the society is linked. The society contacts that insurance company and says, "We have a client who wishes to see one of your representatives". That is not broking. That is agency work.
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I am concerned about the small man. I am concerned very much about this. I have given notice to my noble friend to give substance to the fundamental premise that he made at Second Reading and I am taking this opportunity to ask him to do just that.
Lord Brabazon of Tara: I understand my noble friend's concern about small professional practices but, as I said during the Second Reading debate, I am sure that many will adapt to the new competition and thrive on it. We should not assume too readily that building societies will try to use their new powers in a monopolistic fashion, such as my noble friend seems to suggest. After all, first, they will not have the market share and strength in these new services to do so. Secondly, in general they will need to look to the new services as a means of generating profit in order to stay competitive in the mortgage and savings markets. There is a great threat of competition in that market at the moment.
Regarding the insurance broking activities, I am quite sure that if they have only a cosy relationship with two or three insurance companies, as my noble friend suggests, they should go further than that if they are going to act properly as insurances brokers and look further afield. I am sure that if their customers find they are not doing that, they will very soon lose their customers.
Lord Morris: I have listened to what my noble friend says, but it has a certain paucity about it. I do not wish to go further on the point at this late hour, and no doubt I shall dream up some opportunity of returning to this subject at Report stage. At this stage I shall say nothing more.
Clause 34, as amended, agreed to.
Schedule 8 (Powers to provide services]:
Lord Morris Lord Morris had given notice of his intention to move Amendment No. 101:
Page 209, leave out line 29.
The noble Lord said: I have considered the placing of this amendment at this particular place in Schedule 8 and I think it is wrong. It would be far better, because of the issues involved, if this point were taken up in the course of discussions on Schedule 21.
[Amendment No. 101 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendments Nos. 102 to 104:
Page 210, line 42, at end insert—
(" . For the power to provide estate agency services to be available to the subsidiary of a building society, the following conditions must be fulfilled as regards the subsidiary and its business, that is to say—

(a) the subsidiary must have been formed in one of the following countries or territories, that is to say, the United Kingdom, a relevant British overseas territory or another member State and the principal business of the society must, at the time the society forms or acquires the subsidiary, be conducted in that country or territory;

(b) 40 per cent. or more of its total income in any financial year (wherever arising) must be derived from estate agency work done in countries or territories in which the society, at any time in that year, carried on the business of making advances secured on land; and

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(c) its business must not include the lending of money, secured or unsecured, on its own account or the provision of any service which is a financial service for the purposes of this Schedule other than one which is for the time being specified in Part I of this Schedule.").

Page 212, line 23 at end insert—
(" "estate agency work" has the same meaning as in the Estate Agents Act 1979;").
Page 212, line 43, after ("1979") insert—
(" "relevant British overseas territory" means any of the Channel Islands, the Isle of Man and Gibraltar,").
The noble Lord said: With the leave of the Committee, I shall move these amendments together. They are detailed amendments to specify the conditions on which a building society's subsidiary may offer estate agency services. The present power in the Bill is for societies to offer estate agency services through subsidiaries. The Building Societies Association has represented to the Government that the term "estate agency services" could unduly restrict the range of estate agency businesses a society could acquire. I hope, with that explanation, that your Lordships will agree to these amendments.
Schedule 8, as amended, agreed to.
Lord Denham: I beg to move that this House do now resume.
Viscount Ridley: Before we take that Motion, may I ask my noble friend whether the failure to complete the Committee stage of this Bill tonight means that the Bill will probably not receive Royal Assent before the Summer Recess? I think that building societies will desperately want to know what the situation is.
Lord Denham: All I can say to my noble friend is that Her Majesty's Government are aware of this wish. We very much wanted to complete this Committee stage tonight. We are sitting at eleven o'clock tomorrow. I understand that the next amendment could take rather more than six minutes, and therefore this seemed to be the right stage at which to finish. But of course we are in the hands of your Lordships. I believe it would be right that we should get this Bill through before the Summer Recess if we possibly can; but it depends entirely on whether the time is available and at this stage in any session it is very difficult to find an extra day.
Lord Plummer of St. Marylebone: I think it should be fully realised that if time is not made for this, it will severely restrict the ability of building societies to compete in the market. This is a serious consequence for those of us who are at the sharp end of earning our living, and I think we must really appeal for further time to see this Bill through. There are a great number of people moving into the mortgage market, and if the building societies are unable to have the powers this Bill would give, it will tie their hands behind their backs.
Viscount Whitelaw: My noble friend the Chief Whip has explained the position. I note my noble friends' comments, but I have a duty to the House. My duty to the House is to make sure that when legislation comes
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forward it is properly discussed and properly considered. I have to fulfil that duty and of course I shall fulfil it.
If it is possible to combine those two duties and to succeed, that is my dearest wish. I can only say to the Committee that the fact that I have come here specifically to find out how the Bill has progressed tonight, and to do everything that I can to further this legislation, is evidence that I want to do all those things. However, I must be in the hands of the Committee and I must protect the Committee when a very large number of amendments—and that must be faced—have been put down. We shall do our best; that is all I can possibly say.
Lord Barnett: I thank the noble Viscount the Leader of the House for his comments. As he and everybody else who has been involved today knows, we have not in any way sought to delay the Bill. Indeed, we welcome the Bill, and if it is at all possible then we should like to get it on the statute book before the House rises for the Recess. However, as I have said before, it was not only us who put down amendments. The Government themselves have put down nearly 200 amendments. In fairness, if we do not have a role to play in examining a Bill of this size, then we in this place do not have a role at all. I hope that the Government will be able to find the time to get the Bill through. I entirely take the point of the noble Lord. Lord Plummer, and I hope we can still achieve what is required. Certainly we shall not do anything to delay the Bill.
House resumed.

West Glamorgan Bill [H.L.]
Bill recommitted to the Unopposed Bill Committee to whom it was first committed.
House adjourned at three minutes before eleven o'clock.