Lords Sitting of 9 June 1986

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

Nuclear-Free Zones and Radiation Levels
Lord Belhaven and Stenton: 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 levels of radiation were recorded in the local authority nuclear-free zones during the period of fallout from the Soviet reactor at Chernobyl.
The Minister of State, Department of the Environment (Lord Elton): My Lords, many measurements were made throughout the country during the Chernobyl incident, covering radioactivity in air, rainfall, water, milk and other foodstuffs. The estimated radiation doses to average members of the public resulting from the Chernobyl discharge were summarised in a bulletin published by my department, copies of which have been placed in the Library of the House. Her Majesty's Government did not monitor local authority nuclear-free zones separately. The radioactive material was carried by the wind, and experience does not suggest that declarations by local politicians are recognised or understood by the forces of nature.
Lord Belhaven and Stenton: My Lords, I thank my noble friend very much for that clear Answer. I do not suppose that he can do so, but can he explain in what sense, if any, the so-called nuclear-free zones are nuclear free; and, if there is no sense in which they are nuclear free, would he not agree that this is a very clear case of misrepresentation of the electorate or at any rate the more gullible members of the electorate? Can my noble friend also tell me whether any of these
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authorities made representations to the Foreign Office asking them to protest to the Soviet Government about the breach of their nuclear-free zones?
Lord Elton: My Lords, in the sense that a nuclear-free zone is a zone without any nuclear material in it, none of these zones would seem to qualify if, for instance, they have a hospital in them which uses nuclear products for medical purposes. I therefore think that they are nuclear free in the sense that a rain-free zone is a zone in which people do not carry umbrellas and get wet if it rains.

Channel Tunnel: Employment Opportunities
2.38 p.m.
Lord Brougham and Vaux: 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 they consider to be the benefits and employment opportunities resulting from the proposed Channel tunnel.
The Parliamentary Under-Secretary of State, Department of Transport (The Earl of Caithness): My Lords, the Channel tunnel will bring benefits and opportunities in both construction and operation. During construction, Eurotunnel expect to provide some 65,000 man-years of direct and indirect employment across Britain in construction and in the supply of equipment and materials. In operation, the tunnel, as well as generating long-term employment for some 4,000 people, will offer a fast, all-weather service for motorists and lorries and a dramatic improvement in international rail services for passengers and freight. These improvements will benefit the economy as a whole through reduced transportation costs and increased opportunities for British exporters to compete successfully in the large European market.
Lord Brougham and Vaux: My Lords, I should like to thank my noble friend for that very informative

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reply. Can he tell the House what is the likely value of orders to be generated in the United Kingdom by the scheme?
The Earl of Caithness: Yes, my Lords. The likely value of orders, as announced by Eurotunnel, and orders for major items of equipment placed by the Channel Tunnel Group, which is the UK arm of Eurotunnel, comes to about £700 million, That breaks down into £150 million on construction equipment, £240 million on civil and building materials, £150 million on mechanical and electrical equipment and £160 million on rolling stock and signalling.
Lord Ezra: My Lords, in view of the substantial benefits which this project will bring, would the noble Earl care to indicate how long the legislative process to approve the treaty will take in the light of the recent prolonged debates in another place?
The Earl of Caithness: No, my Lords.
Lord Bruce of Donington: My Lords, aside from the benefits arising directly from the construction of the proposed project, could the noble Earl inform the House whether the Government have made any detailed evaluation of the benefits to the United Kingdom once the Channel tunnel is completed; and have they taken into account in that appraisal any possible disadvantages that may arise to certain parts of the United Kingdom in particular?
The Earl of Caithness: Yes, my Lords. Detailed discussion and detailed inquiry into the benefits and disadvantages of the tunnel have been undertaken by the Government, a White Paper has been produced, and the matter has been debated on more than one occasion in both Houses of Parliament.
Baroness Faithfull: My Lords, may I ask my noble friend the Minister whether there will be enough workers in the Kent area or whether workers will have to be brought from other parts of England? And, if so, what about the housing of such workers? Has that been evaluated?
The Earl of Caithness: Yes, my Lords, there will be opportunities for construction workers in the Kent area, but, as I indicated in my earlier answers, there will be tremendous opportunity for those in the Midlands, the North and in Scotland to benefit from this project.
Lord Carmichael of Kelvingrove: My Lords, can the Minister say whether the figure of 4,000 operating jobs which he mentioned represents the net employment gain of the Channel tunnel if or when that link is built? Furthermore, does that figure of 4,000 jobs allow for the jobs that may be lost by workers at Dover and the other seaports involved? Does the figure refer only to job numbers on this, the British side of the Channel? Can he say whether the French will have an equal number of job gains? Finally, can he say how this will compare with the present number of French and British jobs associated with a sea link as against the number of future jobs likely to be associated with fixed link?
The Earl of Caithness: My Lords, the 4,000 long-term employment opportunities that I mentioned in my original Answer is a figure generated as a result of the construction of the Channel tunnel and its operation. As the noble Lord rightly points out, there will be some reduction in the labour force as a result of the possible effect on the ferries, but we understand this will be overtaken by increased further opportunities in Kent about the turn of the century.
Lord Elliott of Morpeth: My Lords, is my noble friend aware that there has been a highly successful conference organised by the North-East Development Council quite recently in Darlington on the work opportunities which the building of the tunnel represents? There is no doubt at all in that area, which is famed for its engineering, of the value of this project.
The Earl of Caithness: My Lords, I am grateful to my noble friend. As he rightly says, there are a lot of opportunities for those in the North-East and I hope we shall get tremendous support for this project from the workers there and also from those who work on the railways.
Lord Stewart of Fulham: My Lords, is the Minister aware that he does not seem to have answered the question put to him by the noble Baroness, Lady Faithfull? The question, if I understood it correctly, asked whether it was going to be necessary to bring people from outside Kent into that county and, if so, what was being done about housing them.
The Earl of Caithness: My Lords, further housing land will be made available. Obviously there will be opportunities during the course of construction for more people to be brought in or for those locally to change jobs.
Lord Wallace of Coslany: My Lords, the noble Earl outlined many advantages as a result of bringing in the Channel tunnel, but has he taken into account the desecration of Kent and the enormous amount of traffic that will ensue for the Kentish suburbs?
The Earl of Caithness: My Lords, Kent will not be desecrated. As the noble Lord might be aware, my honourable friend in another place, Mr. Mitchell, has had a lot of meetings with all the groups concerned about the future of Kent. We are very concerned about that matter, but I do not believe that Kent will be desecrated when the project is finished.

Post Codes: Inclusion in Telephone Directories
2.45 p.m.
Lord Annan: 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 will make representations to British Telecom to print in telephone directories the full post code of subscribers.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, it is for British Telecom to assess the case for including post codes in the light, inter alia, of views expressed to it by the Post Office and by telephone and postal users.
Lord Annan: My Lords, I thank the noble Lord for that Answer, which is very much in line with the answer which he gave to the noble Lord, Lord Beloff, when he asked about the provision of telephone directories in post offices. May I ask him this? Is he saying that the cost to British Telecom of performing this service would be excessive? If so, is that not rather odd in view of the very handsome profits which British Telecom is making from the sale of its services to a captive public? If he is saying that, does he not think that this disregard of the needs of the public and the apparent inability of the Post Office and British Telecom to co-operate, when once they were in the same organisation, justifies some of the criticisms made from the Opposition Benches of the privatisation of public monopolies?
Lord Lucas of Chilworth: My Lords, my Answer was very much in line with that which I gave to my noble friend Lord Gainford also on 6th March. These are matters for the commercial judgment of the company, and the cost to which the noble Lord, Lord Annan, refers is something like £5 million. It would also mean books some 25 per cent. to 30 per cent. bigger and thicker than they are now. These are not considered by British Telecom as being necessary for it to discharge its obligations to telephone users.
As to whether the Post Office should buy from British Telecom, that is in itself a matter for the Post Office, which also provides post code directories in the post offices and on demand. We must remember that the telephone directory is provided by British Telecom under the terms of its licence for the benefit of telephone users.
Lord Bruce of Donington: My Lords, when the noble Lord received the figure of £5 million as being the cost from British Telecom, did he take any steps to query it? Also, does he know how the figure of £5 million, which appears on the face of it to be rather large, is made up?
Lord Lucas of Chilworth: Yes, my Lords; that would be for production costs alone. A similar sum would be spent on completing and correcting post codes on the computer files; so we are talking in terms of something like £10 million, all of which of course would have to be borne by the users of the telephone service.
Lord Nugent of Guildford: My Lords, is my noble friend aware that this is a question I raised three or four years ago before British Telecom was privatised and when this was part of the general complex of the Post Office? Is he aware that I was then given a non-answer such as the noble Lord has given us today? There seems to be a strange lack of interest on the part of the Government in a measure which would have great benefit for the Post Office, because nothing would create greater efficiency and greater economy in the handling of letters. Is it not time that Ministers
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began to take a little initiative in getting the post code generally understood and used in this country?
Lord Lucas of Chilworth: My Lords, I am surprised that my noble friend Lord Nugent of Guildford should consider this to be a non-answer. It is a practical and commercial answer which I feel quite sure he will understand very well indeed. There are two separate businesses. Both of them have to fulfil, under statute, different roles. Both of them have to provide profit. It is for their commercial decision as to where they spend their money in the provision of those services.
I have indicated this afternoon and on other occasions in your Lordships' House that the telephone directory is for the use of telephone users; that the Post Office provides directories of post codes at over 80 Crown offices and in a number of urban and rural areas, and that there is adequate provision for people to find out about post codes. Although I do not wish to move the Question into the area of the Post Office, an average of 69 per cent. of all mail carries a post code and in business terms the figure is 80 per cent. The service is improving enormously in terms of both delivery and the use of codes.
Lord Marsh: My Lords, will the noble Lord accept that many of us who have the good fortune to be British Telecom shareholders would be very grateful if he would keep his representations to the absolute minimum, other than possibly pointing out the fact that we would all agree with any attempt it may make to keep a sharp eye on the odd £5 million that may be around?
Lord Lucas of Chilworth: My Lords, I am very grateful to the noble Lord, Lord Marsh, for that very pragmatic and helpful suggestion.
Lord Lloyd of Kilgerran: My Lords, the noble Lord the Minister has used the phrase "commercial advantage" on two occasions in his reply. I may have misunderstood him, but is not the general tenor of his reply to the effect that there is little commercial advantage at the present time for the efficiency of the Post Office in a more general use of these codes?
Lord Lucas of Chilworth: My Lords, I do not think that the noble Lord, Lord Lloyd of Kilgerran, has misunderstood me. I did refer to commercial advantages, and I think that if he looks at Hansard tomorrow he will see that I described some of the other benefits that are accruing.
Lord Molloy: My Lords, is the Minister aware that a number of Members of your Lordships' House were guests of the Post Office a fortnight or three weeks ago? We visited one of the major post offices in the country and we were shown the difference between what happens when a post code appears on a letter and when one does not. Therefore, the Post Office always recommends: please put in the post code. Can it not slowly but surely see that the post code is put into telephone directories? It cannot do it in one fell swoop, but it ought to be its policy ultimately to achieve that.
Lord Lucas of Chilworth: My Lords, this is absolutely a matter between the Post Office and British

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Telecom, and, as I have explained, both are discharging their relative duties as required by statute. Whether they mutually find it to be of benefit is entirely up to them. The sum of £5 million is a lot of money. The Post Office believes that it can spend its money better on giving better service to its customers than on currently inserting post codes in the telephone directory.
Lord Teviot: My Lords, my noble friend says that people can go to a local post office to get their information. Is the information in the post office of a local nature or do all post offices have post codes for the whole country?
Lord Lucas of Chilworth: My Lords, I explained that post code directories are available at the 80 Crown offices, some urban offices and some rural offices.
Lord Teviot: My Lords, my noble friend has not answered my question. Are the post codes in the 80 Crown offices for the local area or are they for everywhere in the British Isles?
Lord Lucas of Chilworth: My Lords, the information is available for the whole of the country, across the country, through 80 Crown offices and some other offices.
Lord Taylor of Blackburn: My Lords, the majority of people in this country were not interested in the post code when it first came out. The majority of people could not care less about it. It was therefore the responsibility of the Post Office to make a deal with British Telecom. May I ask the Minister—and this is what we are trying to get at—whether the Government will please use their good offices to get both parties together, so that it will be of benefit to everyone in the country?
Lord Lucas of Chilworth: My Lords, I am quite sure that the exchange of views expressed by your Lordships this afternoon will, by virtue of Hansard, be conveyed to both the Post Office and British Telecom.
Lady Saltoun of Abernethy: My Lords, does the Minister have time to go and queue at a busy Crown office every time he needs to find a post code which he does not know?
Lord Lucas of Chilworth: My Lords, like the noble Lady, I have very little time, spending most of it in the service of your Lordships. However, I satisfy myself that those people with whom I wish to communicate advise me of their post code. There are a number of ways in which they can do that.
Lord Diamond: My Lords, can the noble Lord say what he regards as the Government's responsibility in relation to the policy of British Telecom in printing telephone directories?
Lord Lucas of Chilworth: My Lords, the Government do not have a responsibility, in so far as British Telecom is concerned, as regards the printing
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of telephone directories. However, we are obliged, through the Director of Oftel, to ensure that BT undertakes the provisions in its licence issued under the Telecommunications Act 1984 to operate a universal telephone service, which includes directory services which help customers to find the numbers they want.

London-Bournemouth: Rail Service
2.56 p.m.
Lord O'Neill of the Maine: 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 will make funds available to British Rail to enable them to bring their London to Bournemouth InterCity service up to the standard of other InterCity services in the country.
The Earl of Caithness: No, my Lords. Although there is to be considerable investment in this London and South-East sector express service, there are no plans for it to be transferred to the InterCity sector.
Lord O'Neill of the Maine: My Lords, I thank the noble Earl for that reply. May I ask him whether he is aware that those of us who live on the Bournemouth line and have the opportunity of going north from London and, even more, west from London are astonished by the comfort of the carriages and the smoothness of the rails, whereas on this particular line, in order to achieve the laudable objective of Southampton in 110 minutes, we have to be rattled along on old rolling stock and on rails which are far from smooth?
The Earl of Caithness: My Lords, the noble Lord will not have to wait much longer, because the Government have recently authorised the expenditure by BR of some £28 million for 24 new electric multiple units to be used on that line.
Viscount Buckmaster: My Lords, will the noble Earl the Minister agree that of the total distance of 108A miles from Waterloo to Bournemouth, about 61 miles are almost dead straight and therefore ideal for highspeed running? Does this not constitute a case for raising the speed limit on these fast stretches from 90 to 100 or even 125 mph, given the provision of adequate motive power and bearing in mind that many trains already exceed 95 mph on these stretches?
The Earl of Caithness: My Lords, I am sure that the noble Viscount, Lord Buckmaster, is right about the mileages, but I should not like to comment on increasing the speed limit without further reference to BR on the safety aspect. However, I can tell the House that when the new locomotives are in place the journey to Weymouth will be reduced by 17 minutes.
Lord Maybray-King: My Lords, is the noble Earl aware that, as one who has used this line regularly for over 50 years, I can confirm every syllable of every word said by my noble friend Lord O'Neill?
The Earl of Caithness: My Lords, I hope that the noble Lord will soon have a more comfortable carriage to sit in and a faster and better service.
Lord Carmichael of Kelvingrove: My Lords, while we are glad that there will be new locomotives on the line, and we hope that the noble Lord, Lord O'Neill, will get a smoother ride fairly soon, is the Minister aware that there is a growing feeling that reliability on both the express and InterCity lines all over the country is not very good? Has he any figures showing the punctuality of InterCity and express services over the last two or three years?
Does he not agree that a very large amount of investment will be required if we are to bring all the services up to the standard that the railways wish? Does he not further agree that the bids by the chairman of British Rail which the noble Earl said last week had been largely met by the Government are only one-third of those asked for by the previous chairman of British Rail? In other words, one chairman was asking for what was required and the other chairman is asking for what he thinks he can get.
The Earl of Caithness: My Lords, I cannot comment on the punctuality of trains because that is rather wide of the Question on the Order Paper, but if the noble Lord wishes to put down a Question on that subject, I shall make the information available to him.
On the question of British Rail investment being too low, since 1983 British Rail have adopted a management structure based on business sectors. The investment proposals are what the sector managers believe they need to meet their objectives.

Business
3 p.m.
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Committee stage of the Dockyard Services Bill will be adjourned at approximately 7 p.m. for approximately one hour and that during this adjournment the Committee stage of the British Shipbuilders (Borrowing Powers) Bill, the Second Reading of the Consumer Safety (Amendment) Bill and the Cutlery and Stainless Steel Flatware Industry (Scientific Research Levy) (Abolition) Order 1986 will be taken.

Public Trustee and Administration of Funds Bill [H.L.]
Bill read a third time; an amendment (privilege) made; Bill passed, and sent to the Commons.

Family Law Bill [H.L.]
3.2 p.m.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): 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.—( The Lord Chancellor.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clauses 1 to 63 agreed to.
Clause 64 [Family proceedings rules]:
Lord Elwyn-Jones Lord Elwyn-Jones moved Amendment No. 1:
Page 38, line 30, leave out from ("rules") to end of line 2 on page 39.
The noble and learned Lord said: I think it has been agreed that it would be convenient for us to take together Amendments Nos. 1 and 2 and the Motion relating to clause stand part in the name of the noble Lord, Lord Meston. They all arise out of the same matter—namely, Clause 64 of the Bill.
We had a preliminary run, if that is the right way of describing the matter, over this ground at Second Reading of the Bill. There it became apparent that Clause 64 stood out like the proverbial sore thumb in a Bill which was otherwise substantially approved in all parts of the Chamber, giving effect as it does to three admirable reports of the Law Commission. Clause 64 plays no part in those reports. It arises from the intention to reduce legal aid costs in a way which I submit is arbitrary and likely to cause more damage than benefit.
I made some contribution towards reducing the cost of legal aid in the matrimonial field when the Government of which I was a member introduced legislation to simplify undefended divorce cases; and, indeed, save where issues arise in regard to custody and access to children and financial provisions, courts are now enabled to grant decrees of divorce without the need of any legal representation at all. That enabled useful savings to be made which were used in the legal field in other directions.
Clause 64 seeks to take the matter of the saving of legal aid costs in two ways. First of all, as the Committee will see from Clause 64(1)(a), the matrimonial rule committee,
"may amend or repeal any statutory provision relating to the practice and procedure of the Supreme Court or county courts so far as may be necessary in consequence of provision made by the rules".
It is a remarkable power given to a rule committee. There is one precedent in a less significant field for this to be done, but this power to amend the law or repeal previous Acts of Parliament in the highly sensitive field of family and domestic relations is one which I submit should be resisted.
The alteration of the law in that important field should be a matter for Parliament. Such power should not be given to a rule committee. It is suggested by those who are afeared by what is proposed that it might, for instance, encourage and enable the rule committee to determine that matrimonial cases should be heard by divorce registrars, or embark within the wide ambit of the power given by Clause 64(1)(a) to the relevant rule committee to amend the relevant law. That is our first ground of objection which is embodied in the amendments and will no doubt be referred to by the noble Lord, Lord Meston, in his speech on the clause as a whole.
The second significant feature is in Clause 64(1)(b), which provides that the rules,
"so far as relating to the costs of proceedings, may make different provision for different cases or descriptions of cases, for different circumstances or for different areas".
Here, again, there is a considerable power: what principles are to apply in regard to the decision with regard to different cases or, indeed, different areas. That does not appear from the clause although it may well be said that those matters will be clarified in the rules in due course. But they certainly do not appear on the face of the clause as it stands.
The matter which has raised considerable concern is that it will be possible if these provisions are carried out to have a different method of remuneration and of costing in regard to legal aid cases from that which applies in cases which are privately financed. Here again, we come up against a risk that was ventilated by several noble and learned Lords and by others in last Wednesday's debate on criminal legal aid; that of creating a two-tier profession—those who will and those who will not take on legal aid work. As my noble friend Lord Mishcon said in the Second Reading debate, more law firms will be likely to close their legal aid departments if there are further reductions in legal aid cost provisions, because they simply cannot keep them going.
The method proposed in Clause 64 is to ask the Matrimonial Causes Rule Committee to prescribe fixed rates of payment for work done by solicitors and barristers in respect of legal aid cases. It therefore gives the rule committee the power to discriminate between legally-aided and privately-funded work. That would make a significant change to the present provisions. At the present time taxing masters and registrars fix fair remuneration for the payment of lawyers' fees in the light of local conditions and the circumstances of the case. Good work is rewarded and bad work is penalised. I submit that that system has worked pretty well since legal aid was introduced.
However, the system of fixed rates that is now proposed by this clause, by which mechanical assessment of hours worked will replace qualitative assessment of the work done, will, it is feared, reduce the quality of the service provided and discourage efficiency. There will be a risk of a first-class service for privately-financed litigation and of a second-class service for those who proceed on legal aid. I submit that that would be contrary to the basic principle of the legal aid scheme. I hope therefore that in the interval since we last discussed this matter, when it fell to the noble and learned Lord the Lord Advocate to deal with the question, perhaps the noble and learned Lord, in the light of the observations made on that occasion, will be able to take a different view which is taken seriously by both branches of the legal profession. I beg to move.
3.15 p.m.
Lord Campbell of Alloway: The noble and learned Lord, Lord Elwyn-Jones, has referred to this clause as the proverbial sore thumb, and perhaps some Members of the Committee will regard it as an unwelcome appendix; indeed, at this particular time as a grumbling appendix. It is one that, in accordance
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with the broad proposal of the amendment, ought now to be excised because it affects the question of reasonable remuneration for work done by the Bar and solicitors under legal aid, albeit in this instance in family proceedings. The question is, in its broadest form, sub-judice. In relation to criminal legal aid, much the same basic considerations must apply.
Surely there is a case, as the noble and learned Lord, Lord Elwyn-Jones, has suggested on this occasion, as at Second Reading, for dealing with this whole matter by specific legislation, by amendment to the Legal Aid Act. Surely it is not appropriate to introduce this question, albeit part of a much larger question, and one that in no way impinges upon the principles of the Bill, and which is wholly devoid of any political significance, as an appendix to this Bill. In the long run can there be any doubt that one day, when the present unfortunate dispute has been resolved—and it will be resolved—a broad, independent body (call it what you may) will in effect deal with the whole subject of reasonable remuneration as regards legal aid?
Therefore, as regards a concept that was as I understood it—and if I am wrong, I will be corrected by my noble and learned friend the Lord Chancellor—half-welcomed by the noble and learned Lord when he wound up in that interesting debate on the amendment of the noble Lord, Lord Benson, and as regards this particular Bill, is it necessary and is it sensible that we should deal with that aspect in the way that is proposed at this time?
When the Bill was before the House on Second Reading my noble and learned friend the Lord Chancellor, in moving the Second Reading, said that:
"Clause 64 enlarges the rule-making powers of the Matrimonial Causes Rule Committee. A greater degree of flexibility … to distinguish between different cases and different circumstances will in future be possible".—[Official Report, 22/4/86; col. 1083.]
With the greatest respect to my noble and learned friend, although that may be the intention, one wonders whether it could in practice ever be the situation.
So far as that relates to Clause 64(1)(a), it is of course possible and wholly acceptable. But in so far as it could give rise to the disparity of treatment to which the noble and learned Lord, Lord Elwyn-Jones, has referred, surely it is not acceptable. The answer to the first question that I raised on Second Reading, as to whether there would be disparity between privately-funded work and legal aid work, when dealt with by my noble and learned friend Lord Cameron of Lochbroom, was, as I understood it, that, yes, there is to be disparity. On the second question—which was, if so, what machinery would be established to ensure that expectation of reasonable remuneration would be fulfilled?—the answer, as I understood it, was that no machinery was contemplated. On the third question that I raised, as to whether it was right, if the fundamental principle of legal aid were to be abrogated, that it should be left to a rule-making body as distinct from Parliament, the answer appeared to be that, yes, it was appropriate that it should be left to a rule-making body.
This morning it so happens that I received another letter from the Bristol Law Society, to which I referred on Second Reading, expressing its continuing and

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grave concern. It took the view that any facility to depart from fixed rates or scales on taxation, although on paper attractive, would really be wholly unworkable in practice and wholly unrealistic. In practice the fixed scale becomes the fee, which is not related to the type of work done or the worth of the work. Again, the view is taken that this is really a matter for Parliament. In all those circumstances one wonders whether it would not be possible to allow this Bill to go forward in its excellent and wholly uncontroversial form without introducing this element which, at this time, raises all sorts of questions which some Members of the Committee may think are better left for resolution in consultation and in a more leisurely atmosphere.
Lord Denning: I am against this amendment. Like other noble Lords, I have received communications from law societies. I think that their fears are not well founded. The important words in the clause are:
"may amend or repeal any statutory provision relating to the practice and procedure of the Supreme Court or county courts".
I repeat, "relating to the practice and procedure". We have often had to consider those words. The important thing is that it does not affect the rights of the parties. Practice and procedure are for the lawyers. We have the Rules of the Supreme Court, and so on. We have rule committees to draw them up and to vary them. They cannot affect the rights of the parties. It is very sensible to have a rule-making body to deal with practice and procedure in order to keep it up to date when any faults or flaws arise.
It is right that there should be different costs available by rules in different descriptions of cases. As to legal aid, we must be very careful to see how it is restricted, with power to make different provisions according to whether or not any of the parties are entitled to legal aid. That is only the procedure in that regard. It cannot affect the rights of the parties. I am interested to note in the latest communication I received that the Law Society consulted leading counsel, who advised that Clause 64(2) is unlikely to empower the rule committee to discriminate against legal aid by prescribing rates of payment for legal aid work or permit the committee to have regard to the Government's public expenditure policy when regulating costs. I think that is quite right. I agree with that leading counsel. I think the fears are misconceived and I see no cause for the amendment.
Lord Elwyn-Jones: Perhaps the noble and learned Lord will permit me to intervene. Has he applied his distinguished mind to the provisions of Clause 64(1)(b), which enable the rule committee, in respect of the costs of proceedings, to make different provision for different cases, or descriptions of cases, or for different circumstances, or different areas? Surely the individual litigant will be directly affected by decisions of that kind.
Lord Denning: We have codes A, B, C and D according to the amount involved, and so on. No; it is good that the rule committee should regulate matters of that kind.
Lord Meston: I support this amendment. On Second Reading noble Lords on all sides were
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unhappy about Clause 64 as a whole. Their dislike of subsection (1)(a) was on constitutional grounds in that it would allow a rule committee to alter any statutory legislation including, as I understood it, the schedule to the Legal Aid Act dealing with remuneration. I am happy to be told by the noble and learned Lord, Lord Denning, that I may be wrong on that, but I would certainly need to think about it. Likewise there was, and is, dislike of subsection (1)(b) and subsection (2). I shall try not to repeat the arguments at length. Indeed, many of them were echoed very authoritatively in the debate last Wednesday on criminal legal aid.
Family law work is important. Much of it is concerned with the protection and future welfare of children afflicted by the breakdown of marriage. Much of it is concerned with fairly reallocating limited capital and income resources following the breakdown of marriage. In family law work there are not always easy answers. What is best for a child during and after divorce is seldom straightforward. What is a fair allocation of finance and property depends on a host of sometimes competing factors which have to be considered and assessed. Thorough preparation by the lawyers, essential in all litigation, is vital and can save time and money in the long run. It is vital if a case is to be conducted efficiently. It is vital if the case is to be settled fairly without the necessity for a court hearing.
For years, private practitioners have taken on legal aid work on the basis of fair and reasonable remuneration, independently assessed by taxation. In the High Court, of course, it is reduced to 90 per cent. of the fair and reasonable remuneration—the 10 per cent. difference often being regarded as the legal profession's contribution to the system or a discount for the certainty of receipt. But the spirit and intention of the legal aid scheme has always been to ensure that, so far as possible, the client should not be at a disadvantage through lack of funds and that there should he no distinction between the private client and the legally aided client.
Clause 64 is intended to pave the way for fixed standardised fees. In so doing, it undermines the spirit and intention of the legal aid scheme. It overtly distinguishes between the legally aided client and the non-legally aided client. The practical consequences are that lawyers who can afford to do so will give up legal aid work. Alternatively, the work will be increasingly delegated to inexperienced or unqualified practitioners. The temptation to cut corners will grow and legal aid will come to be seen as second-rate work for second-rate lawyers.
Private solicitors in poorer areas, already under pressure in respect of their conveyancing work which provided a measure of subsidisation to litigation, will move to richer pastures. The burden will fall on the sparse and hard-pressed law centres or on the Citizens Advice Bureaux. One consequence I had in mind on Second Reading (and I respectfully remind the Committee of it) is this. A privately paying client who runs out of funds half-way through litigation will find himself being told by his solicitor, "I am sorry, we do not do legal aid work. You are entitled to legal aid but you cannot continue to pay our bills and you must find another solicitor". Therefore the client will have to go to another solicitor who does accept legally aided

15
work. Much of the work will have to be duplicated and the other party to the procedures will probably suffer delays as a result.
The Bar recognises the alarm at the increase in the matrimonial legal aid costs. The Bar recognises that any Lord Chancellor would be anxious to control it. The courts and the responsible practitioners in this area have become more and more cost-conscious. There is always a pressure for the taxpayers' sake and for the clients' sake to save them the cost and the bitterness of litigation. I remind the Committee that this is an area where legal aid is not free legal aid. The client often has to make a contribution and the balance of the costs is often clawed back by the procedure known as the Law Society's statutory charge.
The Bar and, if I may say so, especially the Family Law Bar Association, makes constant suggestions to improve procedures, not least in the context of the Booth Committee's proposals which have recently been published. The Bar, as the noble and learned Lord the Lord Chancellor will know from his officials, has been engaged in constructive negotiations as to matrimonial legal aid fees, subject to its underlying dislike of the principle of a standardised fee. I suggest that standardisation is quite inappropriate for the variety of work in this area of the law. We all want to save costs, but Clause 64 is not the route, and I support this amendment.
3.30 p.m.
The Lord Chancellor: Perhaps I may intervene at this point. I really think that some degree of reality ought to be brought into this debate. Every speaker who has supported this amendment so far has wholly misunderstood the current position and the purpose of Clause 64 and its effect. I know that the noble and learned Lord, Lord Elwyn-Jones, is aware of how much I respect and like him and my words are not intended in any way to wound, but he spoke, as I think did three noble Lords on Second Reading, as if the taxing authority at the moment can and ought to fix the amount which is allowed on taxation. That is wholly wrong.
I do not know whether the noble and learned Lord has looked recently at the existing Matrimonial Causes (Costs) Rules. They are contained in rules of 1979. I do not know whether the noble Lord, Lord Meston, who is usually so well informed on this subject, has ever read these rules, or whether my noble friend Lord Campbell of Alloway has read them, but in fact they provide a fixed set of costs for all matrimonial work.
I shall not read all of the paragraph, but on a taxation of costs for matrimonial proceedings in the High Court—and the Committee may take it from me that there are similar rules for the county court—it says that the amounts to be allowed shall be in accordance with column 1 of the matrimonial scale. If one turns to the matrimonial scale which is contained in the appendix to Rule 6, one will find that in column 1 all the amounts are precisely laid down by the schedule. The Committee may be interested to read some of them. For instance, in regard to counsel, counsel's fees in connection with proceedings in a
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divorce in the county court may be £5.50 to £30. There are similarly low fees available in the High Court.
The curious result has been that in the seven years which have passed since 1979 those fixed, prescribed scales have become wholly obsolete because they are so low. The taxing authority has had to disregard them, not because they are not here but because they are wholly obsolete. One of the curious by-products of this situation is that the solicitors' profession, if the noble Lord, Lord Meston, is to be believed, has forgotten that the fees are all laid down on a fixed scale already and that the only reason that they are disregarded now is that they are so low. The profession seems to think, as the noble and learned Lord, Lord Elwyn-Jones, said, that ever since legal aid has been instituted it has worked on the principle that the taxing authority should prescribe the actual costs to be allowed on merit alone.
I am sorry to take some little time on this matter, but it is important that people should understand what has happened. The original rules contained an escape clause. It was intended always to be exceptional and I think the rules provided originally that the escape clause should allow the taxing authority to reduce below the fixed amount or exceed the fixed amount; and because the scales laid down in the existing rules are so utterly unrealistic, in practice what has happened over the intervening seven years (which is quite a short time) is that the profession has quietly assumed that ever since the legal aid system was introduced there has been a purely discretionary right for the taxing authority to prescribe what it thinks suitable and that it has always existed and has worked well.
Once you have said that, it is obvious that it is totally wrong to suppose that one can keep in existence rules which state that there should be a prescribed scale that may occasionally be departed from and in fact to allow departure from it on every single occasion, which is what is happening now. That is the first point I want to make.
The second point is that the prescribed scales are unrealistic for a totally different reason: they apply right across the board in all parts of the country, strange as it may seem. This again is wholly unrealistic. It means that in matrimonial work if there are two unassisted litigants—which is very much the exception—they can each appoint two or three counsel; and they then find themselves limited by this extraordinary prescribed scale. What has happened is something quite different from what was described at the beginning. As some members of the Committee will know, over the field of litigation it has been a constant source of complaint (I think until I undertook certain reforms which it will be necessary to explain) that when a party wins a case—and I am talking now about unassisted parties and assisted parties if they win—he or she receives only party and party costs, as they have been called since I was a child, and that means that he or she receives only shall we say about two-thirds of what has actually been spent, and perhaps he or she is lucky to get that.
The Rule Committee of the Supreme Court, which is not the same as the committee that we are talking about here, decided that we would destroy the four

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existing bases on which costs would be taxed; namely, party and party, common fund, trustee, solicitor and own client. We decided that we would substitute two simple bases: the standard basis, which is virtually the old common fund basis and which is a great deal more generous than party and party; and the indemnity basis, which is the highest basis of all and corresponds to the solicitor and own client basis. This proposal passed through the Rule Committee of the Supreme Court without a murmur, and the Rule Committee of the Supreme Court is a highly independent body, as is the Matrimonial Rules Committee. In addition to myself, it consists of the Lord Chief Justice, the Master of the Rolls, the President of the Family Division, the Vice-Chancellor, Lord Justice Dillon, Mr. Justice Hirst, Mr. Justice Steyn, Mr. Cherryman, QC, Mr. Aikens, barrister, and Messrs Howells and Crush, members of the solicitors' profession. That was a wholly beneficial reform that was introduced into all the Supreme Court actions except matrimonial actions.
Why not matrimonial? The answer is because the Rule Committee of the Supreme Court does not have jurisdiction over matrimonial work. The first reason why it is necessary to have Clause 64 in this Bill is that it is badly needed in order that matrimonial work, from having the status of a poor relation, a second-class citizen, can be brought into line with the rest of the Supreme Court, and of course that involves changes to matrimonial work in the county court also. In other words, if this clause is not allowed into the Bill, matrimonial work will continue to attract party and party costs, the old and obsolete party and party costs, if the client wins; and it will be constrained to retain a system which is wholly obsolete and which quite rightly has been changed for the whole of the rest of the Supreme Court. Is not that rather funny? We did not hear a word about it in any of the speeches.
Let us take that a little further before I come down to some of the arguments. First of all, I would submit that where you have two unassisted clients (which is a very rare case), it is wholly wrong to try to prescribe fees for them at all, as the existing rules do. It is out of place. If they choose to go to two or three counsel each, they can do so. If one wins, taxation will take place on the standard basis—the old common fund basis.
Let us suppose that an assisted client, which is the common case where a wife petitioner is petitioning, succeeds against an unassisted husband, either originally or, as is much more common nowadays, on access, custody or maintenance. If the Bill does not contain Clause 64, that successful litigant will only be able to get out of the unassisted and losing party the old party-and-party costs, because the new basis will not he applicable. The legal aid fund will be the poorer; so, I suppose, would be the practitioner who worked under the legal aid fund. If this clause is in, costs would be charged on the new standard basis; namely, the old common fund basis.
Or suppose we get a case where an unassisted litigant is taxing his own bill of costs against his own solicitor and counsel. That is not an uncommon situation. It cannot be done without Clause 64. The existing rules insist that the whole of the matrimonial work shall be dealt with in the same way and that you cannot differentiate among the parts of it.
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The noble and learned Lord was wholly wrong when he thought that the object of this was to enable costs to be saved on legal aid. There is no basis in that at all, subject to one point which I am about to make. If the taxpayer is to pay for the legal aid, he is entitled to have something to say about how much the cost should be. With great respect to my noble friend Lord Campbell of Alloway, the recent debate that we had about criminal legal aid has nothing whatever to do with this, nor has the proposed independent body. That is either a good thing or a bad thing, but it has nothing whatever to do with this amendment.
It is obvious that in one way or another, if the legal aid fund is to be met by the taxpayer, somebody on behalf of the taxpayer must have some control over what is paid. What at the moment is suggested is that it should be in the discretion of the individual taxing master in the individual case. That is not on. It may be that an independent body of some kind could be erected; there is something for that and something against it. We argued about that the other day. But somebody has to be able to say as for the whole country or parts of it that the taxpayer is entitled to be represented as to the kind of scale upon which remuneration should be made. It may be that the Lord Chancellor is the right body; it may be not.
But this clause has nothing whatever to do with the Lord Chancellor, which is something that the noble Lord, Lord Meston, had not taken on board. It is the Matrimonial Causes Rule Committee with which the clause is concerned and not any ultimate decision about rates for legal aid. It is the Matrimonial Causes Rule Committee which is being given that power. This is no poodle of the Lord Chancellor.
I read out the composition of the Supreme Court Rule Committee. Now let us look at the composition of the Matrimonial Causes Rule Committee: the Lord Chancellor, the President of the Family Division, Mr. Justice Ewbank, Her Honour Judge Counsell, His Honour Judge Wilson, Mr. Registrar Tickle, Mr. Registrar Lowis, T. A. C. Coningsby QC, and Messrs. Wickerson and Cleary of the solicitors' profession. They all have separate votes. The Lord Chancellor has one vote, but he cannot tell the President of the Family Division or even Mr. Wickerson how they are to vote. He is in a minority of one.
This has nothing whatever to do with the regulation of legal aid amounts, except that the rule committee will have power, as the noble and learned Lord, Lord Denning, pointed out in his contribution (which was the only one, it seemed to me, that had much relation to what this is about), to make prescriptions for different parts of the country and for different classes of work.
Incidentally, the rule that it makes is subject to parliamentary control by negative resolution. I shall be coming back to that point when I come to deal with subsection (1)(a). But the rule committee and not the Lord Chancellor or any other regulating body is that with which the clause is concerned. And the clause only gives it power to legislate for different classes of case—and I hope that I have satisfied the Committee that there are different classes of case, several of them—and for different parts of the country.

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One of the deplorable results of the anarchy which has come to pass in this field as a result of the obsolescence of the 1979 rules, although they are still in force, is that there is complete lack of consistency among individual registrars and among different areas of the country. That cannot be allowed to continue on any view. It is not only bad administration and bad finance; it is grossly unfair to the practitioner.
Incidentally, the Law Society is responsible for most of the misinformation fed into the Committee by four speakers, especially in its Bristol manifestation, which is rather less than Swindon fashion, if I may be allowed to derive my analogy from the Great Western Railway. The thing which has been pressed upon me very much by the Law Society is that there should be favourable London weighting. I dare say that that is a good thing. I should like to see it, but without the clause you will not get it. This clause is the clause that will enable London weighting to be put forward and enable consistency to reign once more throughout the country. If there is anything wrong with what is proposed, the rule committee will not pass it to begin with, and, secondly, Parliament will put in a negative resolution to go on with. There is complete control of the operation that is suggested.
It may now be time for me to deal with the alleged constitutional point. It is this. Clause 64(1) says that the rule-making authority:
"may amend or repeal any statutory provision relating to the practice and procedure of the Supreme Court or county courts so far as may be necessary in consequence of provision made by the rules".
The noble and learned Lord, Lord Denning, is quite right to indicate the limited extent to which that is possible.
The noble and learned Lord, Lord Elwyn-Jones, said on Second Reading, but did not make plain today, that that is mutatis mutandis verbatim the same as the parallel provision in the Supreme Court Act.
Lord Elwyn-Jones: My Lords, I mentioned it today without specifying it and I made a distinction between that provision and one affecting the family scene.
The Lord Chancellor: Let me pursue that point, because I think it is worth saying that the Supreme Court Act 1981 contains exactly the same provisions. It is only one of many Acts which does so. On Second Reading, the noble and learned Lord said, "Oh, it has been going on since 1981. That is not long enough". In fact, the same provision, verbatim, goes back to 1925–60 years. So far as I know, it has not given rise to one complaint. That is not surprising considering that the rule committees are composed as I have said, and considering that Parliament is in control, as I have also said.
It must be obvious—I am astonished that the noble and learned Lord, with all his experience of my office, has not been the first to point it out—that with an ongoing institution such as the Supreme Court and a constantly evolving and changing system of rules for its practice and procedure, we shall from time to time have to alter the statutory provisions relating to the practice and procedure in the statute. That is constantly done. The idea that we can go on with a rule committee which does not have that power which is to
20
go on from year to year and that Parliament must be invoked by primary legislation every time is absolute nonsense.
What makes that even more astonishing nonsense is that as part of the reform of costs regulations in the new Order 62, which embodies the changes that I sought to introduce and did introduce through the Supreme Court Rule Committee only this year, the actual power was in fact necessary to be used and was used. It repealed and amended the schedule to the Legal Aid Act 1974, no less in order to provide for the dual system of standard basis and indemnity basis, which substituted the fourfold system of party and party, common fund, trustee and solicitor and own client. As recently as within the past 12 months that has been used without a squeak of opposition from the Law Society, the Bristol Law Society, the noble and learned Lord or anybody else. It is the most arrant nonsense that the Law Society has been talking. I am very sorry that it has been talking it in that way. Nobody could be more determined than I am to ensure that the legal aid system should continue to reward solicitors and counsel adequately.
In passing, may I say that the least worthy of my motives may be that my daughter derives a very large proportion of her income from the matrimonial work which she does from day to day in the Supreme Court and the county courts? So I do know something about what I am talking about. I should not be allowed to forget it for an instant. I am afraid that noble Lords who have spoken do not, and I therefore invite the Committee to reject the amendment.
Lord Elwyn-Jones: I confess that the scene is very remarkable. I receive passionate letters from the Law Society wholly controverting what the noble and learned Lord has said. I greatly regret that my noble friend Lord Mishcon, who spoke with a stronger knowledge of the solicitors' position than I have, has left—I shall not say he has fled the country—to avoid the anger of the noble and learned Lord. If he knew what was coming, I should not blame him if he had.
The communication I received from the Law Society shows that the noble and learned Lord has a certain amount of education work to do. It ends:
"The Law Society proposes that Clause 64(2) should be deleted and replaced by the following: 'for the avoidance of doubt it is declared that the power conferred by paragraph (b) does not include the power to make different provisions according to whether each or any of the parties is entitled to legal aid in connection with the proceedings"'.
The noble and learned Lord says that that is completely unnecessary and that there is no intention of having such a provision. I am also informed that at one stage the noble and learned Lord sought to give effect to the change of policy so that prescribing fixed rates for legal aid cases would replace the existing system under which independent taxing masters and registrars of the court assess the amount to be paid. The noble and learned Lord sought to give effect to that change of policy by drafting matrimonial causes costs rules. He had to withdraw from his intention to ask the rule committee to make such rules when it became apparent to him that the committee had no power to make rules which discriminated between work done for persons requiring legal aid and those who could afford to pay privately.

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I ask the direct question: is there now a power to discriminate in the matter of taxation and the award of appropriate costs between work done for persons requiring legal aid and those who can afford to pay privately? Are they both to be dealt with on exactly the same basis in relation to the same scales in respect of the same class of work? If the noble and learned Lord were to give that undertaking then not only should I not press my amendment but I should write some interesting letters to the Law Society.
The Lord Chancellor: The noble and learned Lord is correct to ask me the direct question, and I shall try to anwer it. Of course, the intention is that, unlike the present rules, any future rules will allow unassisted litigants to have their costs taxed by the taxing master, because there will be no prescribed scales for them at all. If they choose to employ three counsel, let them do so. I have no interest in what they charge, nor should I have; nor have I in relation to any other class of work.
I have no doubt whatever that some mechanism for representing the taxpayer in respect of legally aided work is necessary and will be in place. I have no doubt whatever that that mechanism will involve a different prescription in relation to legally aided work along the lines of all other legally aided work in the civil field. Exactly what the prescription will be and how it will affect the drafting of rules, I cannot say. The only difference between the status quo and the status after the passage, as I hope, of Clause 64 will be that the various classes of work in different parts of the country, with London weighting in one part and without it in another, and cases where clients can tax against own solicitor, will be separately dealt with. That is part of the scheme.
The control mechanism for the taxpayer cannot rest entirely on the Matrimonial Causes Rule Committee because it is not directly responsible to Parliament. There must be some other control. Obviously, if we are going to have legal aid taxation between two legally aided clients—that, I think, represents the standard case in matrimonial work—there will have to be a different order for costs from that which would operate as between two unassisted parties or as between the legal aid fund, on behalf of a successful assisted party, against an unsuccessful unassisted party. Those require separate prescriptions. They receive them in every other part of the Supreme Court and in county courts. We are merely putting the civil proceedings for the two kinds of jurisdiction—matrimonial and, let us say, personal injuries—on exactly the same footing.
There is no desire to discriminate against legal aid by those means. It is a pure question of defeating that unacceptable situation in which the 1979 rules have caused us to flounder and to substitute a more flexible and effective method within which the Matrimonial Causes Rule Committee can operate. If the Law Society wants to argue with me as to the basis upon which civil legal aid should be remunerated, we can no doubt enter into fruitful discussions. But this particular clause is needed whether they are fruitful or not.
4 p.m.
Lord Elwyn-Jones: With great respect to the sound a fury, we are still left—
The Lord Chancellor: Sound.
Lord Elwyn-Jones: Very well; sound will do for the purposes of my observations. I have never succeeded in quarrelling with the noble and learned Lord for long, and I do not propose to start at this advanced stage in our respective lives and careers. However, it appears that at the end of the day there will be a difference in the form of taxation. All that I can say at this stage is that I shall now take advice from the Law Society and from the Bar itself. I am sorry to be responsible for yet another shadow over the troubled life and world of the noble and learned Lord the Lord Chancellor, but the shadow must remain until I see whether there is any light which gives any benefit to him and which justifies me in not pressing the matter further. In the circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 2 not moved.]
On Question, Whether Clause 64 shall stand part of the Bill?
Lord Meston: I do not intend to press the Motion that Clause 64 should not stand part. Indeed, I should like to say that I am particularly grateful to the noble and learned Lord the Lord Chancellor for his full and detailed response to Clause 64, which, as he will know, has caused considerable concern in both branches of the profession.
The noble and learned Lord mentioned the 1979 scales, how they have become out of date and how the taxing registrars have had to fall back on the discretion or escape clause. One can hardly quarel with a provision which allows for what he called consistency but which I would prefer to call reasoned inconsistency in different areas throughout the country, but the noble and learned Lord will understand that alarm has been caused by a provision that refers to distinguishing between legal aid proceedings and proceedings in which there is no legal aid. He will certainly understand if I express the concern that is perceived that it may happen all over again—in other words, that new standardised scales will be fixed which will again fall out of date and that the taxing authorities will again have to fall back on discretion and will find themselves, under new rules, confronted with a more limited escape clause. That is a matter of concern. We are, however, grateful for the noble and learned Lord's full and detailed response, and I do not propose to press matters further.
The Lord Chancellor: I should like to detain the Committee for a couple of sentences to deal with the remarks of the noble Lord, Lord Meston. Of coure, if the clause is accepted it will be open to whatever mechanism ultimately emerges to have annual up-ratings. The fear that the noble Lord expresses that the thing will be stuck in the way that the 1979 rules are stuck is, I believe, without foundation, and certainly it will not be stuck while I am here.
Lord Campbell of Alloway: I should like briefly to thank my noble and learned friend for his detailed explanation, to which I listened with great care and which I found wholly convincing without

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qualification. Irrespective of whether or not the Bristol Law Society finds it convincing I feel it right to say that I do, and without qualification. I am extremely grateful.
Lord Morris: I should like to ask my noble and learned friend a simple question in order to clarify my own mind. It is so simple as to be positively naive. My noble and learned friend laid much weight upon the great authority of the rule-making authorities in the course of his splendid and fascinating argument. Who appoints those rule-making authorities, and who ratifies the appointment of those rule-making authorities?
The Lord Chancellor: Certain members are ex officio. I speak in the presence of the noble and learned Lord. I am likely to be wrong in detail, and I shall be corrected if I am. Certain members, as I say, are ex officio. The Family Division president is an obvious case. There has, I believe, to be one High Court judge, two circuit judges, two registrars, two members of the Bar and two members of the solicitors' profession who are sent up from the Bar. Whether or not I have some veto over them, I do not know because I have never exercised it.
Lord Elwyn-Jones: I do not think so. They are a very highly respectable body, and I say nothing against them.
Lord Meston: I had intended to mention to the noble and learned Lord that I speak, I am sure, for the whole family Bar when I say that we would hate to be deprived of the pleasure of litigating against his daughter.
Clause 64 agreed to.
Remaining clauses and schedules agreed to.
House resumed: Bill reported without amendment.

Dockyard Services Bill
4.7 p.m.
The Minister of State for Defence Procurement (Lord Trefgarne): 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 Trefgarne.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 1 [Transfer of persons engaged in dockyard services transferred to private sector]:
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 1:
Page 1, line 5, after ("services") insert ("excluding any work with either radiological or nuclear implications").
The noble Lord said: If this amendment were to be accepted, the clause would read:
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"This section applies in relation to such services excluding any work with either radiological or nuclear implications for or in connection with ships or vessels",
etc. The note in the margin relating to this clause is also helpful. It reads:
"Transfer of persons engaged in dockyard services transferred to private sector".
Our purpose in this amendment is to say to the Government that whatever else they feel is best for the management of our dockyards, we believe that they should leave well alone so far as the nuclear aspects are concerned. Although the debate takes place in the shadow of Chernobyl, it is right, in the national interest, that we should debate the whole issue of radiological and nuclear safety. The Government may very well say that that is part of a piece and that the dockyards are the dockyards. They may argue that they want the dockyards to be managed differently and that it is not possible to separate the management of a part from the whole. I believe, however, that there is a powerful case for saying that the Government should think seriously about the matter.
We need to look at the kind of arrangements which the Government have felt proper and necessary in order to satisfy not only their own standards but also the civil population who live primarily in the Devonport and Plymouth areas, and of course at Rosyth. This is the present position. Take Devonport, for instance. Devonport is the home port and operating base for some 40 service ships, 10 nuclear submarines and numerous small craft. It provides a full range of support services for these vessels, ranging from accommodation, logistic support and recreational facilities to maintenance, refit and repair facilities. With the presence of nuclear submarine reactor plants it is necessary to ensure that the conduct of these diverse activities in the naval base does not have adverse implications for nuclear and radiological safety.
The essence of nuclear and radiological safety requires that there shall be, at present, in situ, a structured organisation with clearly defined responsibilities and lines of responsibility for the various aspects of nuclear and radiological safety; and awareness and understanding on the part of the members of the organisation of their responsibilities for nuclear and radiological safety; full administrative control of the tasks, with the requirements clearly defined in authoritative documents; and complete adherence to those administrative controls by the members of the organisation when executing tasks with nuclear and radiological safety implications. It requires an adequately manned organisation in which members' training, briefing and experience makes them competent to fulfil their responsibilities. I stress the last point.
The authorities within the nuclear base mainly involved in the operation, maintenance and repair of nuclear submarines are the captain, second submarine squadron; the captain, fleet maintenance; and the dockyard company. In addition, the captain of the port and the principal supply and transport officer provide support to nuclear submarines. All share nuclear submarine support facilities within the naval base, which comprise four fully-equipped tidal experts for the support of up to eight operational submarines,

25
the north lock facility and the submarine refit complex. Can the Minister satisfy the Committee that by changing the arrangements for the management of the dockyards he is satisfied that the safety of those who live and work there can be assured? Unless this amendment is carried there will be literally no change. If there is to be no change then the question has to be asked: how can the Government be satisfied that those who will take on the new management responsibilities will be able to add to their experience the additional veneer needed to do this?
There is a definition of nuclear and radiological safety. Nuclear safety is defined as the state achieved when both probability and potential consequences of a nuclear accident have been reduced to acceptably low levels by sound organisation and good disciplines in design, construction, operation, maintenance, repair and training. Radiological safety, for the purpose of this situation, is defined as the establishment and maintenance of a safe environment and working conditions where there is potential for exposure to ionising radiations. I want the Minister in his response, and anyone else who will deal with this, to explain to me why it is necessary to transfer out of the existing arrangements those employees who are currently undertaking this crucial aspect of national safety. Why do they need to be included in this?
There is a very real basic issue here. At the moment in this country the people rest assured that when it comes to matters nuclear they are best left in the hands of the Government. I may have got this wrong, as I do from time to time, but I should like the Minister to tell the Committee whether he is satisfied that the arrangements for the change are such that whoever will become the recipient of the contract is able to fulfil the kind of obligations and responsibilities that I have outlined.
In a year or two we may have someone with responsibility—and that must be the Government—and someone, once removed, who is the managing company, with the job of managing the undertaking. I want the Minister to tell us how he has resolved the possibilities of conflict. There are possibilities of conflict not only in communication—where there is misunderstanding and the terrible accidents that we hear about in the nuclear field—but, sadly, in the breakdown of communications and understanding. As well as wanting to pin down who should be doing what, there is the question of the manner in which people are made aware of their responsibilities.
I also want the Minister to say something about the steps that he and his colleagues are taking to ensure that those who are tendering are competent to carry out these enormous responsibilities. I raised the point at Second Reading, but the Minister was unable to deal with that directly. However, I had been told that one of the potential tenderers had in effect sought from the MoD ways in which some kind of a crash programme might be provided for their employees to make sure that they were competent in the safety aspects of nuclear matters. We do not want crash or hurried programmes. The people of this country are entitled to be assured about whatever political imperatives the Government seek to serve by this change. I should have thought that there could be
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much argument on the political issues as to whether the past management has been successful, whether there has been waste, or whether matters can be done in a better way. We want some answers to those questions.
I have raised the issue about how nuclear safety is achieved in the bases at present. I want the Minister to tell us whether he can see any changes. It can be achieved by clearly defined individual responsibilities, matched where appropriate by the necessary authority; co-ordination to avoid concurrent activities which are incompatible for reasons of nuclear safety; comprehensive controls on all work and other activities with a bearing on nuclear safety; nuclear submarine support facilities for which the standards of design, operation and maintenance are adequate for nuclear safety; assessment of nuclear submarine berths to ensure that they are acceptable for public safety in the very unlikely event of a nuclear accident; adequately qualified and experienced personnel in all positions of responsibility with a bearing on nuclear safety; and an adequate standard of management including verification by managers of nuclear safety standards in their organisation, department, division or branch.
Therefore, I hope that I have raised the amendment in a properly serious tone, without causing too much alarm. In transferring management there is a major inbuilt separate area. I do not think that the Minister has paid sufficient attention (clearly, he has had little opportunity to do so until this Committee stage) to telling us that he is satisfied that future arrangements will be at least as adequate as those which we already have. If he tells us that in some way or another this amendment is either defective or unnecessary, I shall be very well satisfied with that answer. However if he simply tell us that he has his fingers crossed, and that he hopes—
Lord Trefgarne: Come on!
Lord Graham of Edmonton: The Minister says "Come on". If the noble Lord is able to assure the Committee that, with the arrangements that he and his colleagues have in mind, there is not the slightest possibility that in future the management of nuclear and radiological safety will not be as satisfactory as it has been in the past, I believe that many people, including myself, will at least be satisfied with that aspect of the Bill. I beg to move.
Lord Denning: I would not support this amendment. In its width it takes out pretty well the whole work of the dockyards. Let me take, first, work with nuclear implications; that would cut out all the work on nuclear submarines, which are one of the most important parts of a dockyard's work. To take out radiological implications would cut out radar, exocets and missiles, all of which have radiological implications. If you take out that work, you take out a great deal of a dockyard's work. So I believe that this amendment goes much too far.
If one looks at the contract proposed, whatever company takes it over, one sees that there are areas which exclude plant and so forth, which have no doubt been well thought out by the ministry, so any really

27
dangerous work can be cut out. However, there is ample provision in the contract for that, and I should have thought that this amendment goes much too far.
Lord Mayhew: I think that there is a great deal of logic in what the noble and learned Lord has just said. Indeed, this would be a savage blow to Devonport. Nevertheless, I am still very grateful to the noble Lord, Lord Graham, for raising this question, for asking for assurances from the Minister and for elucidating a number of points on the question of safety and the qualifications of the would-be contractors.
There seem to be two different subjects here. There is the subject of safety and there is the subject of qualifications for refitting nuclear submarines. On the question of safety, if I understand it right, there will be no change. I should like an assurance from the Minister that the same people will be enforcing the strictest possible safety measures in the future as was the case before.
On the question of the qualifications of would-be contractors, it seems to me that the noble Lord, Lord Graham, is perfectly right: we need to be absolutely sure that those who are taking over this contract have experience in this field. I imagine that the very great majority of those who are now working in the nuclear field in the dockyard will remain. I see nothing in the Bill which would lead to any of them losing their jobs; at least, only a minute and insignificant number of them may lose their jobs. However, what is introduced is top management. I am sure that we would all like to be quite specifically assured by the Minister that no contract will be given to any would-be contractor who does not have experience and a good record in handling either nuclear weapons or nuclear propulsion. Otherwise, it would be wholly anomalous. I am grateful to the noble Lord, Lord Graham, for putting down this amendment in order that the Minister may explain the Government's position.
Baroness Vickers: I also am grateful to the noble Lord, Lord Graham, for tabling this amendment, and to the noble and learned Lord, Lord Denning. The noble and learned Lord took the trouble to visit Devonport and to see for himself exactly what was going on; he listened to lectures and asked a great many questions. Therefore, he is fully informed about that dockyard anyhow. This makes a lot of difference to Devonport, which has been in existence for 300 years and which has provided the livelihood not only of the people who work there, but of the whole City of Plymouth. The difference between Rosyth and Devonport is that Rosyth has a separate area for the Navy and a separate area for the dockyard. That does not apply to Devonport, which is a very much more complicated area. It is very big organisation, stretching over three miles, and that is something which people have to take into consideration when they think of tendering for this contract.
I am afraid that I do not agree with the noble Lord, Lord Graham. I do not believe that it is possible to exclude radiological and nuclear work from the remit of this Bill. No modern dockyard can manage without some high technology. However, I think that the Government owe it to the Committee, the Navy and
28
the people of Plymouth and Rosyth to ensure that, as the noble Lord said, they proceed with an agency management team and that the incoming managers have the necessary expertise to take over this highly complex side of the dockyard's work. I agree with the noble Lord on that. For this reason, I believe that the Government should give serious consideration to the bid for the management contract for the Devonport dockyard by the existing management team. They are the people who really know what is going on and who have been working this dockyard for several years; they have the expertise. The organisation is at present led by the managing director, David Johnston, and he and his team obviously possess the necessary expertise to do this. Although I should prefer to see the running of the dockyard as a Government-owned plc, I firmly believe that they present the best choice for the future of Devonport.
I know that there is another amendment which deals with this particular matter, but this amendment calls in question the involvement of foreign companies making bids for the dockyard. I do not wish to see the American Foster Wheeler company take over the radiological and nuclear work that is carried out in the dockyard unless they can prove to us, to the Minister and to the Navy itself, that they really are expert in this work.
4.30 p.m.
Lord Mulley: I should like to support the amendment and the views of my noble friend Lord Graham. I accept at once that this would mean a dramatic change in the nature of the Bill and in what the Government propose. It is because I want to see a dramatic change in the Government's attitude that I support this amendment. Having regard to the problems that we have seen in the Soviet Union, quite apart from the military aspects of nuclear weapons, which are dealt with by the dockyard in Rosyth, one can assume that this could safely be given to a commercial contractor only if the people who are now doing the job continue to do it.
As noble Lords will know, at the end of each particular journey a Polaris submarine is dealt with by civil personnel. I think that we are unique in being the only power with nuclear weaponry which is in the charge of civilian employees. The uniformed services in the United States and France deal with nuclear weaponry. I cannot speak from knowledge of what is done in the Soviet Union, but I should be very surprised indeed if they do not exercise the utmost safety with regard to their military nuclear weapons.
It can make sense to go forward with these commercial contracts only if the same personnel, the same management and the same arrangements continue as now. If that is the case, why are we having the Bill? Why are we having all these arrangements? There is no reason to assume that in the new circumstances the same dedicated and skilled personnel on whom we have depended for so long will not continue to be there. I remember having difficulty myself for a short time when there was industrial action and I had to put the sailors in to deal with the temporary situation of a Polaris in order to maintain the position of always having one boat on duty.

29
Of course, it is a matter of great discussion and dispute as to whether we will continue in the military nuclear role in that way, but we must assume that that is at least a possibility. I do not think anyone would expect nuclear propulsion to end. Nuclear-powered submarines in any event will continue—or so I imagine.
While I do not take the view that because of the tragedy in the Soviet Union at Chernobyl we should immediately stop all nuclear activity, I do believe—and I always have believed—that because of the enormous risks involved with radiological leakage and possible accidents through incompetence it may well happen that problems will arise, even with all the best safety measures. Certainly the prospect of a contractor being satisfied, as my noble friend said on Second Reading, with sending his people on a two-week course would terrify me if I thought that the nuclear refits, the nuclear weapons of the Navy, were going to be entrusted to people with two weeks' training in how to handle these very dangerous things. Admittedly, it would make a nonsense of what the Government propose. We accept that, and we have proposals to make better arrangements, I suggest, than, those now proposed. Unless we get an assurance, which I cannot see being given, that the same people will continue to do the same work (otherwise, why have the Bill?) I urge the Committee to support this amendment.
Lord Ironside: I am one of those who do not support the amendment, but before saying something about it I have an interest to declare in that I am connected with one of the companies which was invited to tender. As the noble and learned Lord, Lord Denning, said, I think, the nuclear submarine refit complexes in a dockyard are in fact a major part of ship repair, maintenance and servicing, and one has only to go to Devonport to see this. We live in the time of the submarine and of anti-submarine warfare.
At Devonport I spent something like eight hours in the refit centre, because I was locked in with the rest of the party from the industry who visited the dockyard to see what the management structure was like, what the facilities were like and what the prospects of the contract were. As the noble and learned Lord said, there is adequate provision in the Term Contract, and in the conditions of contract for the Government to be satisfied that the contractor they choose will be competent. There are companies in this country who are competent in nuclear design, in installation, in handling, in decontamination, and in nuclear health physics.
The company I am connected with have had the task of decontaminating HM Dockyard in Chatham, and I believe that this has been done successfully. I hope that the company will be accorded a degree of success in having done this and in having shown that the dockyard has been cleared of contamination.
I am sure that the company which is chosen as the winner at each of the dockyards, therefore, will be able to satisfy the Government that it is competent. I do not set much store by this story that one of the companies—perhaps a company in one of the consortia which have been set up—wanted to have a crash programme in nuclear physics, and that sort of
30
thing. All I can say is that probably the company was seeking some advice to see what detail was involved within the dockyard and within the submarine refit complex, to assure itself that it would be able to comply.
Personally, I am very happy to leave this issue in the hands of the Government when they come round to selecting the contractor. Therefore, I see no need to support this particular amendment.
Lord Trefgarne: The effect of the amendment would, I suggest, be twofold. It would rule out refits of nuclear submarines not only by a commercially managed dockyard company but also, of course, by the government-owned public limited company if for any reason that option were adopted by the Government. That cannot be either sensible or what the noble Lord, or any other noble Lord who supports that option, would actually want. Alternatively, it would be necessary if the amendment were accepted either for nuclear work to be carried out by the only other contender, Vickers of Barrow, or for each dockyard to be split up, with responsibility for the nuclear work remaining under direct government operation while the remainder of the work (which the noble Lord is not suggesting should be similarly denied to the dockyard company) would be under commercial management.
I have to tell the noble Lord, Lord Graham of Edmonton, that concern has always been expressed by the Opposition in another place and by the trade unions representing employees in the Ministry of Defence that the dockyards should not be split into several units. For our part we have said that under our proposals we have no such intentions.
That said, I can of course understand why nuclear-related work should be a matter of particular concern. It is right that it should be. With your Lordships' permission, therefore, I will outline the arrangements which will be made, and I hope I shall be able to satisfy your Lordships that nuclear safety will be as high a priority under commercial management as it is now.
Perhaps the most important point is that the companies managing the dockyards will be required to operate under a nuclear site licence. As we have said before, that is not some sort of gentleman's agreement. It is a requirement imposed upon the company under the Nuclear Installations Act 1965. My department has been involved in very detailed discussions with the Nuclear Installations Inspectorate on this matter. The dockyard contractors will be responsible to the Health and Safety Executive for ensuring that the requirements in connection with radiation protection for the dockyard workforce are fully met under the terms of the Ionising Radiations Regulations 1985.
It has been said by those who are opposed in principle to the Government's plans that none of the companies which have expressed an interest in managing the dockyards has any experience in nuclear matters. I think my noble friend Lord Ironside countered that proposition. But perhaps I may add that Vickers Shipbuilding and Engineering Limited actually construct nuclear submarines. Foster Wheeler, who were in the mind of my noble friend Lady Vickers, have, as a member of Rolls-Royce and Associates, been associated with nuclear propulsion

31
systems. Babcock, the nuclear plant engineers, have been associated with the Trident weapon system. Balfour Beatty have constructed nuclear power stations, and have been responsible for nuclear waste management. The Weir Group have experience of steam and water systems for nuclear plants. Devonport Dockyard Limited—again much in the mind of my noble friend—are the company formed by senior managers at the dockyard, and their experience is not in question.
It is easy for people to suggest that nuclear work should be in government hands. But the facts I have given speak for themselves, and we should not forget the experience of other parts of industry—British Aerospace, GEC, NEI and others—which have experience in nuclear matters. When considering the dockyards it is important not to forget that the workforce which at present refits and repairs nuclear submarines will still do so after April 1987. It is commercial management that we are proposing to introduce.
I should say that the port admirals (or the naval base commanders, as they will be known) will be responsible for ensuring that the necessary standards of nuclear safety that are maintained throughout the naval base will continue unchanged. The current roles of the director-general, submarines, both as design authority and central plant control authority, and the role of chairman, naval nuclear technical safety panel, will continue unchanged. My department will retain responsibility for the transportation of new and used reactor cores and will retain existing approvals for disposal of radioactive waste.
In summary, in areas where my department retains responsibility the current high standards will continue. In areas where the contractors are to be responsible the current high standards will still be maintained, but they will be answerable to the Nuclear Installation Inspectorate of the Health and Safety Executive, and will be subject to the laws of the land.
For all those reasons, quite apart from the doubts I expressed earlier about the noble Lord's amendment meaning that even a government-owned plc could not refit nuclear submarines and that it could mean splitting up the dockyards, which of course nobody wants to see, I hope that the noble Lord will feel reassured and so will not wish to press his amendment.
Lord Lloyd of Kilgerran: I listened carefully to the arguments produced by the Minister in regard to this matter, and I wondered whether he has given full consideration to the scope of this Bill. The Title of the Bill says that this is,
"An Act to make provision in connection with any arrangements that may be made by the Secretary of State for or with a view to the provision by contractors"—
and now I come to the important words—
"of certain dockyard services".
The Explanatory Memorandum in its third line says:
"This Bill concerns arrangements which the Secretary of State may make for certain services carried out at the dockyards of Devonport and Rosyth to be provided under contract".
32
The argument of the Minister, so far as I understand it, is that the word "certain" in relation to certain dockyard services means that the whole of the dockyard services will be assigned to be dealt with by contractors. If one reads the Bill, one sees that the Government themselves have in mind some limitation, so that some of those services now undertaken in the dockyards should be reserved in some way to the dockyards as they are now.
Having regard to the vital importance, for both safety and marketing reasons, of nuclear and radiological matters, surely these are some of the services about which at any rate in the initial operation of this Bill the Government should be careful before handing over to contractors. However good the contractor with which the noble Lord, Lord Ironside, is concerned, and however wide the contractor's experience in this matter, there are large numbers of applications by contractors who have no knowledge of this important aspect.
I have had the privilege of travelling under water in a hunter submarine driven by nuclear power. These hunter submarines have been driven by nuclear power for 15 years, or even longer. Dealing with nuclear power, nuclear engines, and developments in nuclear engines is one of the aspects of services which the Government would not want the dockyards just to hand over to contractors without the great safety regulations which they have called to mind—the 1965 nuclear licence and of course the ionisation regulations of 1985.
The Government themselves visualise in this Bill that only certain services will be handed over to contractors. Is not this aspect of radiological work and certainly work with nuclear implications the kind of work that at any rate at the beginning of carrying the Bill into effect—say, for two or three years—should still be reserved to the dockyards, as this amendment suggests? I support the amendment on those grounds.
4.45 p.m.
Viscount Trenchard: The noble Lord, Lord Lloyd of Kilgerran, prompts me to say that, certainly in the years during which I had any experience, it was not by any means always true that either service personnel or civil servants in the Ministry of Defence proved that their reliability in maintenance was greater than that of many of those who had actually made the equipment. The Minister has mentioned the number of contractors who have experience in this field.
I should not like to argue the toss on a monopoly of great care being on the side of public civil servants or service personnel. I am not in any way condemning them; they are conscientious people—but so are companies which are subject to the controls that my noble friend the Minister mentioned. That alone satisfies me. But in addition to the controls he has specifically mentioned, and the things which the navy will continue to control, I would point out to the noble Lord, Lord Loyd of Kilgerran, that the whole aspect of product liability, of commercial liability, in every field has changed out of all recognition in the past 10 years, as well he knows. No commercial company in any field today can afford to take a single risk that may affect innocent workers, consumers, or what have you.
Lord Lloyd of Kilgerran: Perhaps I may say what a privilege it is to have inspired the noble Viscount, Lord Trenchard, to enter into this debate at Committee stage. May I say, with great respect to him, that what he is saying, in effect, is that the dockyards at present dealing with nuclear matters are not as efficient as British industry? With great respect, that is a generalisation to which I am sure the noble Viscount would not wish to adhere.
Viscount Trenchard: With great respect, if the noble Lord will read Hansard, he will see that I said nothing of the kind.
Lord Lloyd of Kilgerran: I am obliged to the noble Viscount for clarifying that position. I thought he was making a great case for the effectiveness of British industry in this field, and that therefore the Government are satisfied that by this transfer the implications raised by the noble Lord, Lord Graham, are irrelevant.
I come back to my main point. The Government had in mind transferring only certain services, and I should have thought that the services related to nuclear matters, which the dockyards are carrying out with such efficiency at the present time, should remain with the dockyards, as implied by the amendment of the noble Lord, Lord Graham.
Lord Crawshaw of Aintree: The amendment moved by the noble Lord, Lord Graham, is important. It involves nuclear measures, and not everyone is an expert on them. If the amendment were passed, and we faced the alternative that the Minister has given of the possibility of such things having to be done elsewhere, of course that would be a tragedy for Devonport. If there is any possibility of that happening, I certainly could not support it, because there are so many implications of this Bill which are not going to be to the benefit of Devonport that I do not want to add another one to them.
I believe that the point that has been raised is important because there is no guarantee that we will have continuity of service with people who have been transferred. If we do not get continuity of service, it may well be that we do not have the expertise and it may well he necessary to send ships to other places for refits. In those circumstances, I could not possibly support this amendment if it brings any danger at all of this work being moved from Devonport.
Lord Graham of Edmonton: I am grateful to all noble Lords who have contributed. Perhaps I did not take sufficient care in my opening speech to say in essence what it was we were seeking to achieve by this amendment. In essence, whatever other changes are envisaged in the Bill, this amendment seeks to leave untouched the arrangements in the dockyards for servicing our nuclear and radiological installations. In other words (and the noble Lord makes a fair point) that means splitting up the dockyards. That is right. What I am saying is that it is preferable to split up the dockyards than to transfer to a non-governmental agency the control, supervision and management of nuclear and radiological safety.
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I understand the Minister and his noble friends saying, "Be assured! There are no problems". I certainly did not take (as did the noble Lord. Lord Lloyd of Kilgerran) the remarks of the noble Viscount, Lord Trenchard, as in any way casting aspersions on the integrity or the ability of public servants. I stand on the fact that their record in this matter, as I know it, is impeccable. But the noble Viscount, Lord Trenchard, from his own experience introduced a nuance for a purpose; and that was simply to say that if I was introducing uncertainty as to whether I would put all of these eggs in the private contractor's basket, he was entitled to say that all may not have been well in the previous arrangements.
He did not specify, and I understand that. It is absolutely true. You have only to watch the current space programme, or the tragedies in Russia, in a tightly government-controlled nuclear situation. There is no guarantee whatever of the form of management or control. I have here a long list of the ways in which those responsible will be dealing with these matters. I have Annexe 2 to Annexe 9.1 in relation to nuclear safety at Devonport. There are a mass of provisions under which people who will become involved in taking over these things will have to satisfy the Government, the various levels and tiers, and so forth. I understand that. The first contribution that was made was that the noble Lord was satisfied that the Government would make sure that in the contract there were sufficient controls and disciplines so that the Government could satisfy us that they had taken all reasonable precautions.
I think that we have simply got to introduce the vexed question of nexus. The prime nexus in these matters of the people that we shall be dealing with is profit. That is their prime nexus. The reason they are in business is to make money. The reason we are in business is to try to look after the safety of the nation. If I am told that, given a choice between safety or making money, it always will be losing money and maintaining safety, I should be astounded; because these are calculations. Calculations are made. They are called commercial judgments. And there will be opportunities where, because the cash nexus comes in, that consideration in the future will be present whereas it was not present in the past. You might say that that was a wrong thing; that there ought to have been more efficiency, more discipline; that there ought to have been more concern about the costs in these things. And that may be a fair point.
What I am arguing for is that it is not right and proper to take away from an existing arrangement; and that is the servicing, control and management of our radiological and nuclear installations being as they are. I do not make a case in general for maintaining, as we shall on later amendments, that we should make no change whatsoever. We are opposed to the Bill but we are trying to alter it in various ways by other amendments and we shall come to those.
I simply say that, so far as nuclear and radiological installations are concerned, there is a different situation. Of course, the last thing I would want to decry is the efforts of companies—and I made a quick note: Vickers, Wheelers, the Weir Group and Babcock. They are all highly respectable and very efficient, very cost-conscious and very safety-

35
conscious people. They have some experience. But no one has the collective experience of the Government. They all have a little bit of a little bit and they may be the experts in parts, but no one has the experience of doing what we are talking about in this amendment that the Government and the MoD have. No one has it, although they may aspire to it. In the meantime, I repeat that we must keep our fingers crossed. If there is to be insistence, then there could be delay and procrastination. I am satisfied that this is a proper amendment.
4.56 p.m.
On Question, Whether the said Amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 50; Not-Contents, 101.

DIVISION NO. 1

CONTENTS

Ardwick, L.

Jenkins of Putney, L.

Barnett, L.

John-Mackie, L.

Birk, B.

Kilbracken, L.

Blyton, L.

Listowel, E.

Bottomley, L.

Llewelyn-Davies of Hastoe, B.

Brockway, L.

Longford, E.

Bruce of Donington, L.

Lovell-Davis, L.

Caradon, L.

Melchett, L.

Carmichael of Kelvingrove, L.

Molloy, L.

Cledwyn of Penrhos, L.

Mulley, L.

David, B. [Teller.]

Nicol, B.

Davies of Penrhys, L.

Oram, L.

Dean of Beswick, L.

Phillips, B.

Denington, B.

Pitt of Hampstead, L.

Elwyn-Jones, L.

Ponsonby of Shulbrede, L. [Teller.]

Ennals, L.

Ewart-Biggs, B.

Shepherd, L.

Falkender, B.

Stallard, L.

Fisher of Rednal, B.

Stewart of Fulham, L.

Gallacher, L.

Stoddart of Swindon, L.

Graham of Edmonton, L.

Strabolgi, L.

Hatch of Lusby, L.

Taylor of Mansfield, L.

Hughes, L.

Underhill, L.

Irving of Dartford, L.

Wallace of Coslany, L.

Jacques, L.

Wells-Pestell, L.

Jeger, B.

NOT-CONTENTS

Aldington, L.

Drumalbyn, L.

Ampthill, L.

Dundee, E.

Auckland, L.

Eccles, V.

Belhaven and Stenton, L.

Ellenborough, L.

Belstead, L.

Elliott of Morpeth, L.

Birdwood, L.

Elton, L.

Boyd-Carpenter, L.

Faithfull, B.

Brabazon of Tara, L.

Fanshawe of Richmond, L.

Brookes, L.

Fortescue, E.

Brougham and Vaux, L.

Fraser of Kilmorack, L.

Broxbourne, L.

Gainford, L.

Butterworth, L.

Gardner of Parkes, B.

Caithness, E.

Gibson-Watt, L.

Cameron of Lochbroom, L.

Glanusk, L.

Campbell of Alloway, L.

Glenarthur, L.

Campbell of Croy, L.

Halisham of Saint Marylebone, L.

Coleraine, L.

Constantine of Stanmore, L.

Holderness, L.

Cox, B.

Home of the Hirsel, L.

Cullen of Ashbourne, L.

Hooper, B.

Dacre of Glanton, L.

Hylton-Foster, B.

Davidson, V.

Ironside, L.

De Freyne, L.

Killearn, L.

Denham, L. [Teller.]

Kimball, L.

Denning, L.

Kinloss, Ly.

Dilhorne, V.

Kinnaird, L.

36

Layton, L.

Romney, E.

Long, V.

St. Aldwyn, E.

Lurgan, L.

St. Davids, V.

McAlpine of Moffat, L.

Sandford, L.

Macleod of Borve, B.

Seebohm, L.

Mancroft, L.

Selkirk, E.

Manton, L.

Sempill, Ly.

Margadale, L.

Shannon, E.

Marley, L.

Skelmersdale, L.

Massereene and Ferrard, V.

Strathspey, L.

Maude of Stratford-upon-

Sudeley, L.

Avon, L.

Swinton, E. [Teller.]

Merrivale, L.

Thorneycroft, L.

Mersey, V.

Trefgarne, L.

Middleton, L.

Trenchard, V.

Molson, L.

Trumpington, B.

Morris, L.

Ullswater, V.

Newall, L.

Vaux of Harrowden, L.

Pender, L.

Vickers, B.

Peyton of Yeovil, L.

Vinson, L.

Porritt, L.

Vivian, L.

Portland, D.

Ward of Witley, V.

Rankeillour, L.

Westbury, L.

Rawlinson of Ewell, L.

Young, B.

Reigate, L.

Ypres, E.

Renton, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.4 p.m.
Lord Mulley Lord Mulley moved Amendment No. 2:
Page 1, line 17, at end insert—
("( ) An order under subsection (1) above shall not be made until the Secretary of State has established a scheme to operate such dockyards under a trading fund and such a fund has been in operation for two years.").
The noble Lord said: I beg to move Amendment No. 2. With it, it may be convenient to discuss the consequential amendment, No. 21, which simply defines what is meant by the trading fund. We established for the Royal Ordnance factories the very satisfactory system of a trading fund, and I personally much regret that the Government, with their passion for privatising everything they can lay their hands on, have seen fit at least to prepare for the privatisation of our Ordnance factories, some of which go back several hundred years. I think we must be the only country which is going to put the whole of our faith on the supplying of our armed forces on international contracts. Perhaps it is fortunate that Argentina seems to have done that and that therefore several of our ships are still in service, whereas if the explosives had worked they would not have been.
Frankly I think it is an impossible situation for the basic support of our services, whether it is the provision of small arms in the ordnance factories or, very significantly, the servicing and refitting of our Royal Navy. That is a vital matter for the defence of the nation; and to take the kinds of risks involved in any arrangement that puts it outside governmental control is in my view to be opposed and regretted.
The trading fund concept, as I said, has worked in the Royal Ordnance factories by giving a commercial standard and having commercial management. I accept that it is much easier in that context because the Royal Ordnance factories were able to quote for a contract for producing so many weapons or so many rounds of ammunition and so on, whereas the nature of the dockyards is more complicated.
As was explained by several speakers on Second Reading, until the actual ship or submarine goes to the dockyard and is taken apart it is not at all clear what the full extent of the necessary repairs is likely to be. First, there has to be the stripping down of the necessary parts of the ship or submarine, and then someone has to come in and give a certificate of what has to be done. Then there has to be an estimate given for that. So I think it is going to be a very lengthy and, it seems to me, commercially unsatisfactory procedure. On the other hand, with a government-owned organisation such as the trading fund you would have the commercial management and yet there would not be the element of having to have a price in advance for every aspect of the work which is likely to be involved.
In the same way, as I mentioned on Second Reading, if you have faith in your garage mechanic who services your car you do not have to get an independent estimate if he rings you up and says, "Frankly, it is not just a service that you need; you will soon need a new clutch". You do not then get someone in to give an estimate of the extent of the work and ask for the price, and then go round to get a price from somebody else. You would never get your car back in service if you did that. If you cannot trust the garage you find a garage that you can trust, and if you have your own garage—which is really what the Government would have if they had their own trading fund—that would seem to me to be a much more satisfactory basis.
Of course I accept that it would be rather better perhaps not to have a trading fund but to have a government organisation, such as, say, the Manpower Services Commission or something else, if they want to get the organisation of the dockyards subject to public control—and the Public Accounts Committee have had some very forthright words to say about the lack of public accountability that may stem from the proposals in this Bill—but an organisation removed from the restrictions of the Civil Service regulations. That is one of the problems where you have highly skilled people dealing with radiological and nuclear matters. I could not have voted for the first amendment, if I had not been satisfied that by a trading fund, or something similar we could make a proper arrangement and separate management from Civil Service restraints, although you never completely get the dockyards away from either the Treasury or the Navy. That is because the Navy has to get its money from the Treasury and the amount that it will have to spend in a year will be governed by the Ministry of Defence Vote.
There have been all the problems that have arisen over the years, because of Treasury control, the rates of particular grades of the Civil Service and also, if I may be blunt, the decisions of the Navy, often for very good operational reasons, whereby a ship that is in the plan, for which spares and manpower have been set aside to do a particular job, is withdrawn at the last minute, or indeed another ship which urgently and unexpectedly requires attention is brought in and asked to have priority. You cannot run a commercial organisation on that kind of basis. But if the commercial considerations are coming first, the Royal Navy and the defence of the realm will have to take
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second place, which is not a proposition that I find at all attractive. For that reason, I beg to move.
Lord Denning: The trading fund is only one of several options your Lordships have to consider, and I hope you will bear with me if I tell you something of the other options, because your Lordships will have to decide which option should be accepted. May I say that the Bill gives no clue whatever to the options. As I said on Second Reading, it is very obscure. None of your Lordships reading the Bill or, I venture to think, reading any of the amendments could understand in the least what the options are which your Lordships have to consider. The Bill is concerned with only one thing—the compulsory transfer of the workforce against their will to a new organisation. All its provisions apply to the compulsory transfer of the workforce to a new organisation.
I should like to tell the Committee why the Bill is so confined. It is because of the constitutional position of the Royal Navy and the royal dockyards, too. Their constitutional position is that they depend not on the will of Parliament. They are owned, run and managed by the Crown, under the Royal prerogative of the Crown as it has come down through the centuries. That is why it is called the Royal Navy. That is why it is called the Royal Dockyard. May I just say that the Royal prerogative gives great power to the Crown, and by that I mean the Ministry of Defence. They own all the assets. They own the quays, the plants, the jetties and everything else in the dockyards and, by virtue of that Royal prerogative, they can sell, lease or lend whatever they like of those assets.
One qualification in ancient days, in the time of Charles I, was that he claimed that the Royal prerogative in respect of the fleet extended not only to maintaining and running our fleet, but also to levying taxes himself. In order to run the fleet, he sought to levy a tax which was called Ship Money. A great Member of the other House, John Hampden, objected to that. He said that even the Crown could not levy taxes on its own authority. That could be done only by the authority of Parliament. I am afraid that John Hampden's contention was over-ruled. The judges of that day held that the Royal prerogative extended even to levying money for the defence of the realm for the fleet. It was only some 200 years later that the Bill of Rights said, "No, not even the Crown can levy money without the authority of Parliament". That is why, to this day, if the Ministry of Defence need money, they have to get it on the Vote of the Commons. It is the Commons who eventually pay money and tell the Ministry of Defence, "You can have this money for the defence of the realm".
5.15 p.m.
But there is one other exception to the prerogative, and that relates to the workforce. On that, I go back to a modern case in the common law which says that none of the workforce can be transferred to another employer without their consent. That was made clear by Lord Aitken in the great case of Nokes v. Doncaster Colliery in 1940 Appeal Cases at page 1014. He said:
"Every person has the right to choose for himself whom he will serve. That right of choice constitutes the main difference between a servant and a serf".

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So there even the Crown cannot transfer the workforce of the Royal Dockyard compulsorily, unless Parliament approves of that transfer.
It is for that reason that the Bill is brought before this House, to enable the Crown to transfer the men compulsorily without their consent to a new employer. Let us face it—that is the reason for the Bill, and it is especially appropriate in regard to the workforce at the Royal Dockyard at Devonport. I have been there and I know that from generation to generation for the last 200 years they have been in the service of the Crown, and proud they are of it. They told me that their fathers and grandfathers have worked in the Royal Dockyard, and how proud they are of it. They are not to be transferred to another employer, such as a company under the Companies Act, without their consent unless it is done by the authority of Parliament. That is why the Bill has to come to this House. The sole reason is to enable the Government to transfer them to a new company without their consent.
I have stated the basic constitutional position. There are four options which arise under the discussions, and maybe under the Bill, as to when and how this compulsory transfer is to be made. The first option is outright privatisation by selling the whole of the dockyard to a purchasing company and transferring all the workforce to that company. That is open to the Government and to the Bill as it stands, but it should be ruled out absolutely for both strategic and national reasons. If the Crown should contemplate it, I would quote against them the words which Shakespeare put into the mouth of John of Gaunt:
"This land of such dear souls, this dear dear land …
Is now leased out, I die pronouncing it,
Like to a tenement or pelting farm".
We must rule out altogether outright privatisation. We must rule out the Government being able to sell our great royal dockyards lock, stock and barrel to someone else.
The second option is what we have under this amendment—the trading fund. That is a very attractive submission because a trading fund does not involve any transfer of the workforce. A trading fund is set up under the trading funds legislation of 1971. It has been done in regard to the ordnance people. It involves accounting or financing. You have, so to speak, a loan to the fund out of which the fund pays the expenses and then the fund organises the dockyard so far as it can on a customer-supplier basis. It pays out and makes the accounts. The essential thing is that it is run as it was before but managed as far as it can be commercially. The important thing is that the men remain servants of the Crown or, as is sometimes said, civil servants.
That is a very attractive proposition because you do not need to transfer the workforce at all. You do not need to do anything without their consent. You can get it done commercially. It is a most attractive proposition. But it has been ruled out by the Government, and I can understand why—and I have been down to Devonport. It is because the civil servant's hand is almost a dead hand on development and enterprise in a dockyard. I am afraid that it is all the red tape and the rules that we have been used to all the time. I
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sympathise with the Government. Although the trading fund has its attractions, especially in regard to the workforce, nevertheless if the dockyards are to progress the Government take the view—and there is a lot to be said for it—that we cannot go along with that old civil servant machinery. All those I have spoken to agree that change is necessary. We must get away from the Civil Service attitude. The Government say that it must be reorganised and there must be a restructuring. As my noble friend Lord Trefgarne said on Second Reading, fundamental change in the dockyards is necessary if their long-term future is to be assured. "Fundamental change"—and I am afraid that the trading fund is not sufficiently fundamental enough. That is only the second option.
I go to the third. This has the forefront in the Bill. It is to have what I may call a two-tier structure of limited companies. One company will take the assets—all the cranes and jibs. It will have a licence for perhaps seven years to operate all that plant and equipment. It would be a licence quite often determinable earlier on, but that is all the company which operates the assets would have. There would be another company the only function of which would be to employ the workforce not merely on licence for seven years but permanently, indefinitely. I shall bring in later amendments, but I think that this proposal, this third option, is not in accordance with Community law. I shall develop that point when I come to move my amendments.
But I want to tell the Committee of that third option not only to say that I object to it in point of law but also to say this—and I give this parallel. They are really seeking to separate the company which runs and operates the dockyard from the workforce. I say that they are both one undertaking—the assets and the plant and the men who work it. How can you separate it? Both must be transferred to one company and to no one else. As I said in my illustration, it is like a beehive. It must be transferred as a whole, or not at all. You cannot transfer the hive to one beekeeper and the bees to another. You must transfer bees and hive together to one beekeeper. That third option of a transfer of the assets to one company and the servants, the workforce, to another is out in my opinion, and I hope to show it when I come to my amendments. If so, I come to the fourth option, which is much simpler.
The fourth option is to have only one company—a commercial company—to take over the dockyard undertaking. That is much desired and advocated by the Government. Let there be one company. The Goverment say, "We are not going to transfer any of the assets to that company. We are not going to sell them the assets. We are not going to let them own it. We are not even going to give them a lease". The Government, quite rightly for strategic reasons, say "We are only giving them a licence, a licence to operate the plant and so on, and also to employ the men for the period of the licence." There it is. It is not at all a bad proposition. The licence would be for seven years at most. It could easily be determinable earlier if there was any emergency or the threat of it, or if the contractor did not refit the ship in time.
In a way, it is almost an experiment. When the licence comes to an end, the workforce simply reverts to where it was before. That is the fourth option. It has

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advantages. It would enable the Government to try it out for a number of years. If successful, the licence can be extended indefinitely to that one company or to a successor company. If it is not successful, the workforce would be protected by reverting to government service. That is the fourth option, and I shall come back to it later.
The fourth option has the advantage of there being one company. It is most vital, if you can, to get the workforce to co-operate. If any of these options are not accepted by the workforce, it can disrupt enormously the work in the dockyard. The workforce can delay it. The ship would not be refitted to time, and the like. As far as it is possible, any option ought at least to have the acquiescence of the workforce; otherwise, it is bound to disrupt the whole option.
To secure as much co-operation as one can from the workforce, would it not be as well to go to that modern but very well-tried device of worker shares? One remembers how, in the case of the National Freight Corporation, people protested at the beginning, but how successful it was! The workers have a stake in the company itself and they have an incentive to work hard and to make profit. It has not only been proved by experience, but also it has been encouraged by the Companies Act. In provision after provision in the Companies Act it is provided that the directors shall do all that they can to involve the workforce in the policies and affairs of the company, in particular by the issuing of shares.
If one has the fourth option of one company taking over for a licensed period, and one has worker shares, one may achieve if not full co-operation, then at least the acquiescence of the workforce. It is essential to achieve that; otherwise they will not go with the scheme and the whole thing will fail. I suggest therefore that the fourth option needs consideration.
I shall return to that point when we reach my own amendments, but I may say that all the later amendments make sense with the fourth option. Indeed, the very next amendment is about worker shares. There are other amendments on the question of whether or not the company should be government owned. All those matters will be dealt with in later amendments, but I stress that the proper option to be taken is not the two-tier option that the Government are advocating in this Bill but the fourth option of one Companies Act company taking over for a licensed period. We can talk later about how that company is to be controlled, whether it is to be Government-controlled, or whether there are to be worker shares. All that can be decided later.
I have outlined the whole problem, and I am afraid that I have to say to the noble Lord, Lord Graham, that as much as I sympathise with the suggestion of a trading fund, and although there is much to commend it, I feel that the Government's reasonings against it may prevail. At all events I am afraid that I would not support the amendment, as it stands, to go over to a trading fund.
5.30 p.m.
Lord Trefgarne: Under this amendment the dockyards would have to be operated under a trading fund for at least two years before the provisions of the
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Dockyard Services Bill could be put into force. The trading fund was, of course, one of the options that we set out in the open government document that we issued in April 1985. As the other amendment suggests, the trading fund concept, which is essentially a financial arrangement, was created by the Government Trading Funds Act 1973. As the Committee may know, that Act specifically refers to the Royal Dockyards. No other legislation would, therefore, have been required to create a dockyard trading fund.
Since successive reports over the past 15 or more years have agreed that fundamental change was needed in the way that the dockyards are run, one surely has the right to wonder why the previous Government did not introduce the trading fund concept in the dockyards over the years 1973 to 1979. Why, if they decided not to do so then, do they propose it now? We know, of course, that it is the option preferred by the trade unions; it is certainly the option that involves the least change from the present arrangements and one that ensures that the workforce remains in the Civil Service.
I do not for one moment suggest that the trading fund concept is flawed. I do, however, say that in the context of the dockyards it is not sensible for the organisation to have to operate within the Civil Service. The Committee will recall that in moving the Second Reading I said that the annual trading turnover of the dockyards is £400 million; that, by anyone's reckoning, that is an enormous industrial undertaking; and that it is not one that lends itself to working within the restrictions that the Civil Service machine necessarily imposes.
During the Second Reading debate the noble and gallant Lords, Lord Lewin and Lord Hill-Norton, were as one in arguing against the dockyard workforce remaining in the Civil Service. The noble and learned Lord, Lord Denning, agreed with those sentiments then and has agreed with them today, and the option preferred by my noble friend Lady Vickers, who has not yet spoken, would entail a workforce outside the Civil Service.
The amendment continues to propose the line of least change—a trading fund—with the workforce necessarily remaining inside the Civil Service. But under this amendment we would have another two years (to add to all the earlier ones) when management would not have full local autonomy; another two years when the dockyards would not have the full benefit of a commercially disciplined environment; another two years when the relationship between customer and supplier, though perhaps sharper than at present, would not be on a contractual basis; another two years without the structure to encourage diversification and entrepreneurial zeal to attract new work; and another two years working under the restraints necessarily imposed by operating within the Civil Service.
I hope that the noble and learned Lord, Lord Denning, will forgive me if I do not at this moment deal with the details of the four options that he put to the Committee. I will be ready to respond in a little while, when we reach the relevant amendments. In the meantime I hope that the Committee will reject the present proposal.
Lord Mayhew: The noble Lord the Minister says correctly that this is the option that involves the least change. That is certainly true. The amendment is also put forward with a reference to two years, in the sense that it is something that one might try without necessarily prejudicing, for instance, the fourth option that the noble and learned Lord, Lord Denning, has so eloquently recommended to the Committee.
Is it necessarily foolish to suggest a period in which we apply to the dockyards the same system that worked with remarkable success wth the ROFs? It would to some degree increase the distance between the customer and the supplier. It would to some degree increase accountability, and it would to some degree increase freedom of management. It would involve some of the changes involved in the other options; for example, a new system of accounting management.
It seems to me not necessarily foolish to proceed on that well-known and recommended (by a number of reports) option, without prejudicing a later decision. Judging by experience, I thought that it was good Conservative philosophy that I was preaching, that one should not go first of all for the most drastic solution—the fourth option—but that one would experiment and go empirically. We have a lot of experience of the trading funds.
I would say this, too. It would be easier to judge between the options if the Government would only give some indication of their comparative costs. We still do not know what would be the savings and the extra costs of the government scheme. We have not been told. Therefore we cannot make a comparison if we are not told the cost of the alternative, the trading fund scheme. Why should not the Government estimate the savings of the trading fund? We have had a lot of experience. After all, the Government are making their case for this Bill on efficiency and cost saving and yet say they cannot judge between these different options on the basis of cost because they cannot work out the costs. We shall come to this point again on a further amendment relating to cost.
In the meantime, I think my noble friends would wish me to say that we do not necessarily regard this amendment as the best solution but we do not see any harm in starting this way without prejudicing option four which the noble and learned Lord, Lord Denning, recommended.
Lord Crawshaw: My solution would be a plc, but that does not seem possible at the moment. This amendment has some merit in it. I certainly would be prepared to support it and I urge my colleagues to do the same. Possibly it seems to have more merit because it has so many more attractions than the scheme the Government are putting forward. I must say that it appals me to think that the company will be comprised of bodies and nothing else. There was a time in Liverpool when we ran the docks on bodies—the "welt" system in which people went round and hired men day by day. This will not be day by day but the fact remains that the Government's legislation means that from time to time these people will be taken over, or possibly taken over, by someone else. I cannot for the life of me think that that will result in a settled workforce.
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Of what exactly is this company to comprise? It is apparently to be a company of people without assets, because those will be in the principal company, the contracting company. That has already been pointed out and the noble Lord, Lord Trefgarne, has discussed this matter with the noble and learned Lord, Lord Denning. There are complications because the legislation might be cutting across European Community legislation. It may well be that some of the matters we are assuming will not apply. I believe there will be a lot of confusion arising from the manner in which the Government are putting this project into operation.
While the amendment before us is not my idea of a solution, it is certainly an improvement on the Government's proposals. It would certainly bring less trouble to the dockyards. I urge the Minister to realise that. I know that the noble Lord the Minister has tried to satisfy the fears of the dock workers, but they are not satisfied. I cannot think of anything worse than going into an enterprise with people who feel that their interests have not been safeguarded. The system that the Government are using is open to doubt. The amendment has been proposed to tell us that something does not exist; and we have to pretend that it does exist. Whether that is a contravention of European legislation which deals with the transfer of people in industry I am not 100 per cent. certain, but it certainly opens up the possibility that there might be objection in the courts to the manner in which the Government are implementing this Bill.
Although I am not 100 per cent. behind the amendment, I certainly support it in preference to what the Government are proposing. There is not the slightest reason why it should be on a permanent basis. Why not give the scheme a couple of years to see how it operates and to see what changes are required and whether a plc would be the answer? It is an option worth considering and I urge my colleagues to support the amendment.
Viscount Trenchard: May I briefly, with two years' experience of the Royal Ordnance factories working under a trading fund, complicate the problem by saying that this is certainly not a perfect option? The noble and learned Lord, Lord Denning, put his finger on the problems of the trading fund. I certainly have experience that those problems existed in a changing age. The safety, wellbeing and future of the Royal Ordnance factories and of the equipment they supply—and, thus, of the services; the army in particular—would not be safeguarded under the continuity of the trading fund operation.
I say to the noble Lord, Lord Mulley, that I understand and sympathise with his car analogy, where the car firm tells him that something needs repairing but he does not know whether it does. I am frequently in the same position. I am told that my brake linings are down to 80 per cent. but sometimes I do not have them done and I find that they are still 80 per cent. worn on the next service.
However, we are not talking about that aspect. The continuity people in the MoD are there, The technical staff of the Royal Navy are there. I had a lot to criticise when I was at the MoD about the lack of continuity of key staff in the procurement executive and

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elsewhere—both service officers and civil servants. Those who have sung the praises of the existing system—and by no means everyone has—should realise that people in key jobs who actually control quality and safety are, on average, there for three years. I believe that on the whole private enterprise has a greater record in the area of continuity in key skilled positions. I mention that in passing but I intervened on this amendment on the trading fund to say that, for the reasons advanced by the noble and learned Lord, Lord Denning, I do not believe that the trading fund option is a sound option.
5.45 p.m.
Lord Graham of Edmonton: I have only a few comments before my noble friend reaches his final conclusion. The Minister made a fair point as to why, given the authority of the 1973 Act, we did not come quicker to the concept that a trading fund solution for the dockyards was the answer. Surely the Minister must acknowledge that the first experiment, or experience, was the Royal Ordnance factories which came following the 1973 Act. The period up to 1979 was not a long period—
Lord Trefgarne: It seemed long.
Lord Graham of Edmonton: It may have seemed long to the Minister, but not half as long as the subsequent period has been to me. We now have a situation where the options are open. The noble and learned Lord, Lord Denning, quite fairly and comprehensively told us what are those options. The Minister fairly referred to the workforce. The noble and learned Lord, Lord Denning, pointed out how crucial is the workforce. It is not that the workforce would be unhappy with any other solution. The workers are realistic and are saying that their preferred solution would be the trading fund. In other words, given that there has to be change of a fundamental nature and I say it should be to a trading fund. Although people are pooh-poohing how fundamental it is, it is a fundamental change from the present.
Not only is the workforce on this side, but I have here a transcript of a presentation by Plymouth City Council to the Defence Standing Committee on 5th February. The concluding remarks by Councillor Creber, who is the leader of Plymouth City Council, were:
"We believe that the introduction of a commercial accounting concept coupled with the separation of client and contractor—along the lines of the DLO legislation for local authorities—and a more vigorous marketing approach would place the dockyards on a firm platform that will carry us through to the next century and ensure that the Defence of the Nation is not in any way placed at risk. Failing this approach we could support the Trading Fund concept as the forerunner to the establishment of a Companies Act company".
Overall we are opposed to commercial management for the reasons we have outlined. We could all support the trading fund concept. It was the result of a deputation from all the political interests and many others. But if the Minister wishes, not disrespectfully, to put aside the views of the workforce and the local community, so be it. There are other powerful reasons which no doubt he will advance. When his colleague the noble Earl, Lord Gowrie, introduced the Government Trading Funds Bill on 26th July 1973,
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the noble Earl explained why the Royal dockyards were a candidate for trading fund status and why this was written on the face of the 1973 Bill:
"The Government consider that trading funds may be appropriate for organisations which have two principal characteristics. The first would be in situations where trading activities form a significant part of their functions, as in the examples I gave; secondly, where the nature of their activities overall is such that the Government consider that they ought nevertheless to remain the direct responsibility of Ministers and not be hived-off as statutorily distinct bodies … But we thought that it would help Parliament if we named on the face of the Bill the organisations for which trading funds are being seriously considered".—[Official Report, 26/7/73; cols. 1951–52.]
To be fair, the Minister did not dismiss the concept of a trading fund; he declined it in the circumstances prevailing at that time. I simply remind the Committee that the former Secretary of State Mr. Michael Heseltine also spoke about the future operation of the dockyards, and a trading fund would meet the three criteria which he outlined: it would establish a proper customer-supplier relationship between the dockyard and the Navy; it would mean that managers could be given the freedom to manage; and it would ensure the introduction of improved accounting procedures. It would also mean that the vital strategic assets of the dockyards could be retained under direct parliamentary control. Those are all powerful reasons which are enshrined in the concept of the trading fund.
Lord Mulley: I think that there is a lot of misunderstanding about what the amendment actually proposes. First of all, it proposes only that there shall be the experiment of a trading fund. As my noble friend Lord Graham of Edmonton has just underlined, a trading fund was proposed under an Act brought forward by an earlier Conservative Government. The noble Lord the Minister asked why the Labour Administration did not introduce such a measure in the royal dockyards, and certainly in my time we did not. I accept that we did not. It is not an ideal arrangement; but we did not propose to give away the control of the Royal Navy's servicing and support of the fleet. What would have been the situation at the time of the Falklands if we had had this kind of half-baked scheme, which I think no one but the former Secretary of State could possibly have devised. I think I said at Second Reading of the Bill that it was not perhaps insignificant that none of the Members in the other place who had held office in the Ministry of Defence, including the former Secretary of State himself, had found it convenient to be there to support the Third Reading of the Bill. Certainly former Navy Ministers spoke and voted against it.
In my view the Government's proposal is not workable. I venture to repeat the analogy with the garage. The nature of the work that the Royal dockyards are often called upon to do is not dissimilar. If one has the misfortune to have to take one's car to a garage because of an accident and there is a claim to be made against an insurance company, one encounters the familiar procedure whereby the car has to be prepared for an independent examination by an independent assessor, and that of course costs the insurance company a fee. There is also a tremendous delay. The procedure is not really thought to be satisfactory either by the garage trade or by the

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motorist. I have never yet heard anyone suggest that as a result of this marvellous arrangement the insurance companies find that repairs are carried out more economically and more efficiently than they would be if the individual motorist had taken his car into the garage under his own steam. In fact, I have often heard it suggested that the insurance companies are taken to the cleaners. I am wondering whether that may be the case under these commercial arrangements that are proposed in the Bill.
I paid great regard to what the noble and learned Lord, Lord Denning, said. Perhaps I may be blunt with him: if he waits and votes only for his own preferred alternative and does not support any of the other amendments, he might find that when he puts his own amendment to the test, he does not have many friends. I can give him an absolute undertaking that if, as I hope, the Committee approves this amendment but subsequently the Government give enthusiastic approval and support to the proposal of the noble Lord, Lord Denning, (which I certainly shall support whatever the noble Lord may do in the meantime) for a company that is owned 51 per cent. by the Government and 49 per cent. by the dockyard workers, and if the Committee accepts that proposal, I shall immediately undertake to table an amendment on Report to remove the amendment that will now be carried. So the noble and learned Lord should not be concerned that this will in any way stand in the way of the Committee's consideration of other matters. It is the strange way, oddly enough, that we do business. We have to consider the options one by one as they come along.
Lord Graham of Edmonton: It is a fair offer.
Lord Mulley: It is quite clear that there are risks in having to have a price for everything. I do not see how a contractor can reasonably be expected to undertake to service a submarine or a ship without having a contract price. Certainly we have not been told of the savings, and under the trading fund I am certain that there will be savings.
I am sorry to differ from the noble Viscount, Lord Trenchard, but it is not true that the trading fund arrangements for the Royal Ordnance factories were unsatisfactory. They operated not only commercially with regard to their relationships with the Ministry of Defence, but in the face of competition they also secured very substantial overseas contracts for ammunition, for example. There was also of course the very notable contract, which events in Iran prematurely terminated, which was one of the biggest overseas contracts that has ever been obtained by British industry.
In fact, if the Royal dockyards remain Civil Service managed and subject to bureaucracy, that is the responsibility of the Ministers at present. They could change that situation tomorrow if they wanted to. They do not have to wait for an Act of Parliament or to set up companies, or whatever. In fact, as was done in the Royal Ordnance factories, they can insist on proper commercial management; and if need he without any Acts of Parliament they can have a different system of industrial wage control, just as was
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done in the Royal Ordnance factories. They do not need to shelter behind Civil Service red tape as a basis for bringing forward this scheme.
Like everyone else, I agree that changes in the operation of the Royal dockyards are desirable and that the Royal dockyards are not as efficient as they might be. It is also true to say that they did not know—just as the Ministry of Defence does not know—sometimes from one month to the next the amount of money that was available for the current financial year, and that the navy, probably for good reason, changed its mind about the kind of work that it sent. It means that people are standing about because they have been organised to be ready to do a job and that job has been taken away from them because the ship has not turned up.
It is not true that the dockyards are grossly inefficient. As I said on Second Reading in the presence of the former Chief of Naval Staff, the noble and gallant Lord, Lord Lewin, we agreed to send some submarines out to commercial yards for refit because at that time the dockyards were heavily overloaded. We had to pay substantially more—almost double, I think, but I should not like to be specific on the amount—to the commercial yards for the refit of a submarine of a particular class. The royal dockyards have not been the most perfect undertaking, but they have also been greatly maligned.
The trading fund is worth trying. As I said, it is only a limited experiment. We can go forward and perhaps prescribe what your Lordships may feel is a better or an ideal solution. That could be ready to be put into operation in place of the amendment or after that proposal had been given a two-year trial. For those reasons I ask the Committee to support the amendment.
Viscount Trenchard: Just before the Committee comes to a decision, let me say to the noble Lords, Lord Mulley and Lord Graham, that at the end of my period the management of the ROFs, one and all, were saying that there were restraints—restraints on employment and on commercial activities of one kind and another. I in no way meant to reflect adversely on the success of the ROFs in selling British equipment in various parts of the world. I can only plead to the noble Lord, Lord Mulley, that, in spite of trying quite hard, I was unable to remove the dead hand of the Civil Service rules in relation to a trading fund and was unable to satisfy the management of the ROFs and to give them the freedom which I believe that in the case of the dockyards the Government's arrangements will do.
Lord Mulley: The noble Viscount must also share some of the responsibility for imposing the restraints. It does not need an Act of Parliament. I know that there are problems, but if Civil Service or Treasury rules stand in the way, they can be changed.
6.2 p.m.
On Question, Whether the said amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 78; Not-Contents, 101.

DIVISION NO. 2

CONTENTS

Airedale, L.

John-Mackie, L.

Ardwick, L.

Kilmarnock, L.

Attlee, E.

Kirkhill, L.

Banks, L.

Listowel, E.

Barnett, L.

Llewelyn-Davies of Hastoe, B.

Birk, B.

Lloyd of Kilgerran, L.

Blyton, L.

Longford, E.

Brockway, L.

Lovell-Davis, L.

Bruce of Donington, L.

McIntosh of Haringey, L.

Carmichael of Kelvingrove, L.

McNair, L.

Chitnis, L.

Mayhew, L.

Cledwyn of Penrhos, L.

Melchett, L.

Crawshaw of Aintree, L.

Mulley, L.

David, B. [Teller.]

Nicol, B.

Davies of Penrhys, L.

Northfield, L.

Dean of Beswick, L.

Oram, L.

Denington, B.

Phillips, B.

Diamond, L.

Pitt of Hampstead, L.

Donoughue, L.

Ponsonby of Shulbrede, L. [Teller.]

Elwyn-Jones, L.

Ennals, L.

Seear, B.

Ewart-Biggs, B.

Shepherd, L.

Ezra, L.

Stallard, L.

Falkender, B.

Stedman, B.

Fisher of Rednal, B.

Stewart of Fulham, L.

Gallacher, L.

Stoddart of Swindon, L.

Gladwyn, L.

Strabolgi, L.

Graham of Edmonton, L.

Taylor of Blackburn, L.

Grey, E.

Taylor of Gryfe, L.

Grimond, L.

Taylor of Mansfield, L.

Hampton, L.

Underhill, L.

Hanworth, V.

Wells-Pestell, L.

Harris of Greenwich, L.

Whaddon, L.

Hatch of Lusby, L.

White, B.

Houghton of Sowerby, L.

Wigoder, L.

Hughes, L.

Williams of Elvel, L.

Irving of Dartford, L.

Winchilsea and Nottingham, E.

Jacques, L.

Jeger, B.

Young of Darlington, L.

Jenkins of Putney, L.

Ypres, E.

NOT-CONTENTS

Ailesbury, M.

Gardner of Parkes, B.

Aldington, L.

Gibson-Watt, L.

Ashbourne, L.

Glanusk, L.

Belhaven and Stenton, L.

Glenarthur, L.

Belstead, L.

Grimston of Westbury, L.

Boyd-Carpenter, L.

Hailsham of Saint Marylebone, L.

Brabazon of Tara, L.

Brookes, L.

Henderson of Brompton, L.

Brougham and Vaux, L.

Holderness, L.

Broxbourne, L.

Home of the Hirsel, L.

Butterworth, L.

Hooper, B.

Caithness, E.

Hylton-Foster, B.

Campbell of Alloway, L.

Ironside, L.

Cathcart, E.

Kaberry of Adel, L.

Carthcart, E.

Kimball, L.

Coleraine, L.

Kinloss, Ly.

Colville of Culross, V.

Layton, L.

Constantine of Stanmore, L.

Lindsey and Abingdon, E.

Cox, B.

Long, V.

Craigavon, V.

Lyell, L.

Craigmyle, L.

McAlpine of Moffat, L.

Cullen of Ashbourne, L.

Macleod of Borve, B.

Dacre of Glanton, L.

Mancroft, L.

Davidson, V.

Margadale, L.

Denham, L. [Teller.]

Marley, L.

Denning, L.

Marshall of Leeds, L.

Derwent, L.

Massereene and Ferrard, V.

Dilhorne, V.

Merrivale, L.

Drumalbyn, L.

Mersey, V.

Elliot of Harwood, B.

Middleton, L.

Elliott of Morpeth, L.

Molson, L.

Elton, L.

Morris, L.

Faithfull, B.

Mottistone, L.

Fortescue, E.

Mountevans, L.

Fraser of Kilmorack, L.

Munster, E.

50

Newall, L.

Strathclyde, L.

Orr-Ewing, L.

Sudeley, L.

Pender, L.

Swansea, L.

Peyton of Yeovil, L.

Swinfen, L.

Rankeillour, L.

Swinton, E. [Teller.]

Reigate, L.

Thomas of Swynnerton, L.

Renton, L.

Thorneycroft, L.

Romney, E.

Trefgarne, L.

St. Aldwyn, E.

Trenchard, V.

St. Davids, V.

Trumpington, B.

Saltoun of Abernethy, Ly.

Ullswater, V.

Sanderson of Bowden, L.

Vaux of Harrowden, L.

Sandford, L.

Vickers, B.

Selkirk, E.

Vivian, L.

Shannon, E.

Ward of Witley, V.

Skelmersdale, L.

Westbury, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.10 p.m.
Lord Crawshaw of Aintree Lord Crawshaw of Aintree moved Amendment No. 3:
Page 2, line 6, after ("apply") insert ("and in which the Secretary of State shall have a majority shareholding, with no less than 50% of the remaining shares to be sold and or given to the qualified dockyard service employees,").
The noble Lord said: With this amendment, we are taking Amendments Nos. 6, 7 and 8. The object of the amendment is to try to give the workforce a special interest in the place in which it works. It is the type of argument that goes on in most political parties; it is not confined to one. It makes sense to let people be shareholders in the company in which they are employed. There is no doubt that whatever arrangements are made for the dockyards there will be a certain lowering of morale. I feel we must make every effort to restore that morale and ensure we have a competent and reliable workforce.
There have been many arguments about whether the workforce has been competent and reliable, but I do not go along with them. I am a great believer in what is said about the army: there are only bad officers; there are no bad men. I think that much of our industrial trouble is caused by management and not by the workforce.
This is one of several amendments on the same lines which have been moved. There are as many permutations as there are noble Lords in the Committee as to how the objective could be achieved. I suggest that the Secretary of State should have the majority shareholding and that not less than 50 per cent. of the remaining shares should be sold or given to qualified dockyard service employees. Some people feel that such shares should be given. There is a place for that idea as well. I think that they can be given in certain circumstances, but I also believe there should be an opportunity for people in an industry to purchase shares so that they have a vested interest in the industry. There is a third element, because shares would be available to the general public.
From my experience in industry, I feel that all too often businesses fail because the workforce has insufficient motivation. One way to give motivation is to make people feel that their industry will be profitable, not necessarily only through the wages that the employees take but in the investments that they may have in the industry. I have in mind companies which have done just that over many years. I may lose

51
votes in the Lobby if I say that this is one of the planks of both the Liberal and the Social Democratic parties' platforms. I think that the idea extends to the other side of the Committee as well. I say that because the proposal is reasonable. It is one that should be accepted on both sides of the Committee. People are likely to be more motivated if they have a personal stake in the industry in which they work. All too often they are cogs in a wheel. The amendment seeks to restore some of the lowered morale which I am certain will result from the legislation. I beg to move.
Lord Denning: This is an important point. It proceeds on the basis of the fourth option that I mentioned—that there should be one company which should have the assets, have the use of the assets and also employ the workforce. I do not mind for the moment whether or not the company is government-owned. The important point of principle is that there should be workers' shares because then the workers would be much more likely to co-operate in the transfer. It will give them a stake in the company and an incentive for which to work.
I shall repeat what was said by Mr. Redwood in his statement about the National Freight Corporation:
"The National Freight Corporation showed that ordinary groups of employees were interested in acquiring a stake in their business: and once they had acquired it attitudes began to change and they felt the excitement and responsibility which shared ownership can bring".
Is that not particularly applicable here where the workforce has been in the dockyard for centuries? Fathers and grandfathers worked there. The workforce is being compulsorily transferred to a new company. Surely we should do everything that we can to get the workforce on the company's side and to co-operate; otherwise by disruptive action of one kind or another it can make the continuance of that company almost impossible. The Government have expressed no view on the proposal. I hope that the Government will ensure that there is a substantial proportion of workers' shares, however the company is formed.
Another point which arises on the amendments is whether the company should be government-owned. In other words, should the Government own the majority of the shares and the workers the rest or should a great outside company such as Vickers own the shares? That is a very nice point. If possible, I should prefer the company to be government-owned. We are much more likely to obtain the co-operation of the workforce in those circumstances. However, I shall not prejudge that point at the moment.
The Government are going to consider tenders from outside companies and see whether they will come in with an appropriate tender. I am prepared to let that go forward to see whether companies will tender. I hope that a condition of the tenderer will be that, whatever new company is formed by the parent company, there should be a substantial number of workers' shares. A substantial number should be given free but there should also be preference shares so that in this big change the company will get the workforce on its side.
I support all the amendments. I should be grateful if the Government would say that they will carefully
52
consider including a stipulation that there should be a substantial proportion of workers' shares in any proposed company. There is also the question of government control versus that of an outside company.
Lord Grimond: I support the amendments moved by my noble friend. The arguments in support of employee ownership are widely known and have often been rehearsed in the Chamber. I do not think that it is necessary to add much to the speech of my noble friend or to go over the arguments again.
I should like, however, to mention three points. The first is that these Bills concerned with the denationalisation of industries in government control provide an admirable opportunity for spreading wealth, ownership and interest in industry—an opportunity, I regret to say, that the Government have by no means always taken. Secondly, modern technology is resulting in a concentration of wealth and in the accumulation of wealth by the owners of capital, to some extent to the disadvantage of labour. It is extremely important, if we are to have a successful industrial society, that everyone should share in the increasing rewards of capital ownership, more particularly those working in the services and the industries.
Thirdly, if the Government, as they constantly say, regard wage restraint as being all-important to the running of the economy, not only have they to exercise restraint at the top—it has, I may say, been notably absent—but they have also to look at means of remunerating labour other than through annual automatic increases in wages. For those three reasons and for many other reasons, some of them advanced by my noble friend and others that are well known to the Government, I would urge the Government to accept the amendment.
Lord Graham of Edmonton: I would simply say to the noble Lord the Minister that the thrust of the amendment certainly commends itself to those on these Benches. The Minister is in fact invited to consider ways in which the workforce can feel even more that they are part of the action than they have been in the past. That is an laudable objective.
Lord Trefgarne: It is an objective, if I may say so at the outset, that I very much share. I too am greatly attracted to the notion that workers should have a share in the enterprise for which they work for all the reasons that have been enumerated this evening and on other occasions.
The noble Lord, Lord Crawshaw, proposed in his amendment, as I understand it, that the workers should have a share in what are in effect the physical assets of the dockyard. That is not quite the method that we have chosen in bringing forward this scheme. We have taken the view that the assets—that is to say, the docks, the cranes, the jetties and all the equipment that goes to make up the dockyards—should remain in public ownership because of the strategic importance that they represent to the maintenance of the fleet and to its effectiveness. For that reason, we have not proposed that shares in the physical assets, if I can so describe them, should be offered to anyone, including the workforce, any more than we have ever proposed that there should be shares in the very ships of the

53
Royal Navy. That is not something that we would contemplate.
I now turn to the remarks of the noble and learned Lord, Lord Denning, made on this amendment and earlier. The noble and learned Lord will, I dare say, on a later amendment deploy in more detail his concern about the two-company concept contained in the provisions of the Bill as presently drafted. I must confess that having listened to the noble and learned Lord in private, I have been able to give the matter a little thought. I find considerable force in the arguments that the noble and learned Lord has deployed in connection with the two-company or one-company concept. That is not to say that I find any flaws in what the Government are proposing. Nonetheless, I feel that the alternative proposals enshrined in the amendments of the noble and learned Lord deserve examination. At an appropriate moment I shall be willing to undertake that that examination should take place between now and the next stage, the Report stage, of the Bill.
As to whether the company, be it one or two, should be government owned or contractor owned, that is a slightly different point. The government view has always been that we would prefer to see this a contractor operated enterprise but that the government operated alternative is one that we would be prepared to consider if we did not receive satisfactory bids in the competition that we propose to conduct. If we were to move, in the fullness of time, to a single company structure, then I can certainly give an assurance that we would want to make sure that the employees in the dockyard had a proper share in that enterprise. I hope that this will reassure the noble Lord, Lord Crawshaw, and other noble Lords who have set their names to other amendments on a similar theme in this grouping.
I had understood that it would be for the Committee's convenience if we were to be now considering Amendments Nos. 3, 6 and 8 along with Amendment No. 7 of the noble and learned Lord, Lord Denning, more or less simultaneously. On the basis that we are discussing those four amendments, I do not think that the precise proposal contained in those amendments is directly appropriate if we are to sustain the two-company structure that is presently enshrined in the Bill. But if, in the fullness of time and in consultation with the noble and learned Lord, Lord Denning, we can move to a single company structure—I do not reject that proposition out of hand—I shall certainly undertake that there is proper provision in that single company structure for a share to be held by the employees.
Lord Crawshaw of Aintree: The noble Lord the Minister is always courteous. He is even more courteous when offering at least something in response to the debate. Having regard to the helpful remarks that the Minister has made, I would ask leave to withdraw the amendment.
Lord Denning: I should just like to say how much I welcome what the noble Lord the Minister has said. In a way workers' shares depend, as the noble Lord, Lord Trefgarne, says, on there being one company. If one company is to take the licence and make profits, the
54
Government will consider very favourably the scheme whereby preference is given to workers' shares. I am most grateful for that. I look forward to seeing what the proposition really comes to. As to whether it should be government owned or under outside ownership, I agreed that I would not insist one way or the other at the moment, so long as we have one company. That matter will be reached on a later amendment.
Baroness Seear: Since we on these Benches have been advocating these schemes for the past 60 years, we find it extremely gratifying that the Conservative Benches have at last seen the light. I also wish to say what a relief it is to hear from the lips of the Minister himself, and to have it on the record, that the Government do not intend to sell the Royal Navy.
Amendment, by leave, withdrawn.
6.30 p.m.
Lord Denning Lord Denning moved Amendment No. 4:
Page 2, line 9, leave out ("(disregarding their services for this purpose)").
The noble and learned Lord said: We come now to the real difficulty in point of law. I do not know how far the Committee will bear with me. I shall try to make it a simple as I can. It really depends on the question of two companies. The two-company business is found at line 9 on page 2. When arrangements are made for the transfer of the dockyard undertaking, the words of the Bill are,
"disregarding their services for this purpose".
In other words, one disposes of the dockyard undertaking without disposing of the services. This shows that two companies are in mind.
When it comes to the transfer of services—I do not know whether the Committee will understand this—subsection (4), at lines 22 and 23, states that,
"the services of any of the qualified dockyard service employees without more".
Let me explain. It is proposed to have one company that will operate the dockyard and take a licence of the assets for seven years or less. That is determinable. They will have another company which will employ the workforce and in a way do nothing else but employ the workforce. Clearly, if this goes forward, the workforce cannot operate at all because the one company would have only the assets, and the other company the employment. The option would not work.
Perhaps I may turn to the legal point. At first, and throughout, the Government have thought that this would be governed by the terms and conditions of employment regulations under the Transfer of Undertakings (Protection of Employment) Regulations 1981. They assumed that that would apply to this transfer. I do not know whether they can even have read this regulation. It says:
" 'Undertaking' includes any trade or business but does not include any undertaking or part of an undertaking which is not in the nature of a commercial venture".
Is one going to say that this dockyard at Devonport was of a commercial nature? The explanatory note talks of the fact that these regulations apply to transfers of commercial undertakings. What is plain is that the

55
dockyard at Plymouth was not a commercial undertaking. It was not in the nature of a commercial venture. Those regulations do not apply at all in my view. I challenge any lawyer to say to the contrary. I am quite sure that the dockyard was "not in the nature of a commercial venture" as I know its meaning. Those 1981 regulations do not apply at all.
However, in the amendment, and in the one which will be put forward by my noble friend Lord Trefgarne, they try to get over that by making all kinds of alterations about the services of this workforce. They include the words "without more", and say that should be capable of being a business—how absurd, I say—and capable of being transferred. I say that that is almost nonsense.
However, my point against this amendment is with regard to our European Community law. By the 1972 Act that is now part of our law. It is all contained in Council Directive 77/187. That makes it quite plain that it applies to a transfer of an undertaking. It does not apply to a part of it that is severed off. When an undertaking is transferred it is quite clear that it must mean the whole. I shall not go into the details of it but that directive governs, and if anything in our law is inconsistent with it, the directive takes precedence. That was established earlier this year. Noble Lords will remember that we used to have differing pensions for men and women at the ages of 65 and 60. The European Commission issued a directive about equal treatment for men and women. The European Court held that our law was inconsistent with the directive and therefore the directive governed. That was the trouble about which we read in the papers: we have to adjust matters so that men and women are entitled to have pensions at the same age. That is the European Community law.
My point is that these attempts by the Government in these amendments are contrary to the European directive. The European directive will govern and will make it quite plain that when these men are transferred in this way they are transferred to the one undertaking. That is a legal point.
Baroness Seear: For the record, may I ask the noble and learned Lord to tell us whether the European Court findings had to deal with the compulsory retirement ages of men and women, or with the age of pensions—because it is not the same? I think that the noble and learned Lord referred to the pension age.
Lord Denning: I think that it deals with retirement ages but I do not have the report with me. I have studied it very carefully. From my point of view the important matter is that the European directive takes precedence over anything in our law, even on our statute, which is inconsistent with it. That is plainly the result of that case. I have read the judgment. The European directive which I have quoted takes precedence even over the 1981 regulations, or whatever the Government include. I therefore say that on the European directive the only matter that can be transferred is the whole undertaking, and one part of it cannot be transferred without the other. It is very much a legal argument.
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I would only add that this European directive and its provisions can be enforced by any individual applying to our own national courts. I must warn the Government that if they go ahead with this two-company structure with these provisions which I think are inconsistent with the European directive, any trade union or employee could go to the courts and say, "You are not obeying the directive," and could put a cat among the pigeons with regard to the Government and this Bill.
In private conversations with the Minister I have indicated these points. In view of the difficulties I was glad to hear him say that they will give careful consideration as to whether they will stick to the new company structure, or consider the one-company structure. The arguments are very much legal ones, but those are my submissions. I should like to know what the Minister says about them.
Lord Trefgarne: It seems to me that this group of amendments—Amendments Nos. 4, 5 and 15—proposed by the noble and learned Lord have two propositions at their basis. The first proposition is that because of the two-company structure that we propose the applicability of the European Council directive is called into question. I am bound to say that I do not share that view. However, for that, and in particular for other reasons, I have been considering, as I have already indicated, whether we should not look more carefully at a single company structure. If we were to do that I think that the noble and learned Lord would agree that his anxiety about the applicability of the European Council directive would fall away.
Lord Denning: I quite agree that, if we had the one-company structure, all would be well and good.
Lord Trefgarne: I am reassured to hear that. That will certainly be one of the factors I take into account in deciding whether we should proceed in that direction. Let me say at once that I am attracted to what the noble and learned Lord says about a one-company structure. I shall be considering it in that frame of mind.
The other proposition which is enshrined in these amendments is the applicability of the so-called TUPE Regulations of 1981. The noble and learned Lord's anxiety on that point stemmed from his doubts as to whether the dockyards in their present guise were a commercial undertaking in the true sense of that expression.
The purpose of our wanting to apply these regulations is to ensure that when the dockyard workers transfer to the new enterprise, whether it is in a one-company or a two-company structure, they enjoy proper terms and conditions in their new employment. It was in their interests that we thought it right that these arrangements should apply. Therefore, I hope that the noble and learned Lord, Lord Denning, will be reassured by the amendment which in due course I shall propose as Amendment No. 14, which I hope will get over the difficulty in that particular regard.
I believe that there was also some doubt in the noble and learned Lord's mind as to whether the two-company structure did not contribute to the difficulties

57
about the relevance of the TUPE Regulations. Therefore, if we move to the one-company structure, and if at the same time I speak to Amendment No. 14 on the Marshalled List, which is to be moved in due course, I hope that I shall also have dispelled the noble and learned Lord's doubts on that score.
Lord Denning: I should like to say that I am very gratified by what the Minister has just said. It seems to me that a one-company structure is the only permissible one in law, and if that takes place I think that the transfer of undertakings can be operated accordingly. I am not sure about the wording of the amendment as it stands at the moment because it may need variation.
Lord Trefgarne: If the Committee will allow me to move Amendment No. 14 and in due course accept it, and if it then proves to be inappropriate, we could change it when we came to change the structure arrangements, if that is what is decided upon.
The Deputy Chairman of Committees (Lord Renton): Does the noble and learned Lord seek leave to withdraw his amendment?
Lord Denning: I beg leave to withdraw the amendment because of the undertaking which the Minister has given.
Amendment, by leave, withdrawn.
[Amendments Nos. 5 to 8 not moved.]
Baroness Vickers Baroness Vickers moved Amendment No. 9:
Page 2, line 14, at end insert—
("( ) A contract under which a company provides designated dockyard services at a dockyard shall be for a period not less than fifteen years.").
The noble Baroness said: This amendment seeks to enforce a longer contract period than that proposed by the Government. Although I do not believe that the agency management scheme represents the best possible option for the future control of the royal dockyards, I feel that if the Government cannot be persuaded to decide now to adopt their fall-back option of a plc then the only alternative is to lengthen the contract period to permit some stability and long-term planning at the dockyards.
The Government wish to review the contract after five years, and there is no reason why a 15-year term cannot be reviewed at five-year intervals. It is difficult to understand how an industrial site as large and complicated as Devonport dockyard can be managed on a seven-year contract when there will obviously be an enormous amount of work which will overlap such a short period.
Furthermore, since I do not believe that managing the dockyard on an agency contract will offer the best service for the navy, the people of Plymouth or the country as a whole, I hope that the Government will accept this amendment so that if they insist on pursuing this option in the Bill they will at least allow the, new commercial managers to take a more longterm view of the scheme and not to think solely of short-term profitability. I beg to move.
Lord Denning: From my point of view this is really a probing amendment because of the anxiety to know what the licence will be for. At the moment the Government propose that it should be seven years, determinable in appropriate circumstances. Is that too short a time to enable the contractor to come in and see whether the experiment has worked? On the other hand, will 15 years be too long? After all, this is rather experimental. We want to see whether or not the experiment will be successful. Apparently the Government have opted for seven years. If the Government have convincing reasons for seven years, all well and good. However, this is a difficult problem. The Government must keep control. The licence mist be determinable; the Government have to see how it works. Whether it should be 15 years, seven years or even less than seven years is almost a matter of judgment. I should like to suggest 15 years but I should like to know why the Government think that a period of seven years is best.
6.45 p.m.
Lord Ironside: I should like to make some comments on this amendment. I was surprised at this very long period of 15 years being suggested, because in fact one introduces more risk elements into this longer period and therefore certainly one would need a trial period to begin with to see how the operation fared. We are treading new territory here with the dockyards after such a long saga of knowing them as they have been, and I think that we are somewhat inspired by the American experience, which has existed with the GOCO contracts—the government-owned contractor operated schemes—which run pretty well over there. They have their troubles as well, and new territory is being trodden there.
However, I should have said that five years is too short a period. I think that seven years is a compromise, but as an industrialist I should like to have seen a longer period, with perhaps an introductory trial period which would involve certain non-risk elements of the contract being put to trial. Then, perhaps after two years, the successful contractor could commit himself on a risk-basis for the rest of the time. However, I do not think it is necessary here to stipulate the length of the contract or the Term Contract in the enabling Bill. I believe that that needs to be specified elsewhere: in the invitation to tender and in the regulations for the terms of the contract; but it is not necessary to specify it in the enabling legislation.
Lord Graham of Edmonton: I know that the Minister will tell the Committee how the magic figure of seven years was chosen as opposed to five or nine years. Clearly, there must have been factors which led to that decision: experience, consultation, or even a hunch must all have come into the consideration. However, someone must have said that seven years was right, taking into account a number of factors, because, although the contractor will not have to provide an enormous amount of fixed stock and fixed assets, he will have to do a lot of planning, find a lot of money and go to a lot of trouble.
Although I respect the comments of the previous speaker, that from his experience more risks will be

59
introduced if it were a 15-year period, the noble Lord did say that he thought a period in excess of seven years was preferable to seven years—in other words, seven years must be a compromise between a longer period and a shorter period. Therefore, from the noble Lord's experience, judgment and nous he has in mind an optimum figure. I hope that the Minister will tell us the raison d'être for the seven years.
However, at the end of the day the proof of the pudding is in the eating. Perhaps the Minister will tell us how many people nibbled or, to put it mildly, how many people have shown an interest. Can the noble Lord the Minister tell us whether the period of the contract has been a material factor, or whether some people have said to him "If it were longer or shorter, I would be more interested"? I wonder whether the noble Lord the Minister in fact can tell us if people have shown an interest and then, later in the day, have pulled out; in other words, have not proceeded with their interest. Can it be that they have been shown more or have seen more than the public? Is what is available to us in the Library the totality of what is available to those who participate? Are there any secret annexes, for instance, or any silent memoranda that others know about but we do not?
Can the noble Lord tell us whether there are factors militating against people proceeding, which I could understand from a commercial point of view but cannot understand unless I know about them? I take the points made by those who represent the city of Plymouth. The noble Baroness, Lady Vickers, quite rightly pointed out that it is not only a question of the contractor having stability but of the community having some stability. We are talking in terms of seven years as being the right figure, but the noble Baroness has told us that she feels—and I am sure she has been advised—there are those who think longer than seven years would be a better period. I am not able, as others are, to apply commercial experience, because I do not have the same commercial experience as they have. But I would have thought that once the noble Lord the Minister and his colleagues, by whatever yardstick they use, can come to the view that some consortium has as much of the right things as is possible, you can then say, "We put our trust in you with all the various documents and controls we have got, so away you go". I am tempted to believe that this amendment has a great deal of merit in it, and I will listen very carefully to what the noble Lord the Minister has to say.
Lord Ashbourne: Before the noble Lord the Minister replies, I should like to support this amendment. If this Bill becomes law in the form that the Government clearly envisage, I feel that seven years is much too short a period. Running a dockyard is not like running a commercial enterprise or commercial shipyard, and never will be, because there is the defence of the realm at stake and all the arguments which are well known in this Committee.
I made a lot of inquiries on Friday evening of senior dockyard personnel, who were all unanimous in their view that a period of 15 or 20 years, or something of that nature, was very much more appropriate than the seven years proposed in this Bill. It would take any commercial enterprise two or three years to get into
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the machinations of running a dockyard; then there would be three years of running it, hopefully in an efficient manner; and then maybe in the last two years they would be running down as they saw the end of the line coming. Maybe they would not think of tendering again for a second period. So I believe that if the Bill goes through in the way the Government are envisaging, then a longer period than seven years, a period in the nature of 15 to 20 years, would be greatly to be commended.
Lord Trefgarne: Perhaps I might explain why we have felt it right to set the length of the initial contract at each dockyard at seven years. Originally, we had thought of a five-year contract, but on reflection we felt that, after a necessary settling-in period during which time the commercial managers would be familiarising themselves with the system, making improvements in the way the dockyards operate and generally increasing efficiency (for which most people feel there is ample scope), the company should be allowed a full five-year period to consolidate their plans. For our part we expect increasingly to negotiate work on a fixed price basis, and we are confident that over the seven-year contract the benefits to the Royal Navy in terms of an improved service and to the taxpayer in terms of costs will be obvious to all.
During the term of their contracts with the department the companies at the dockyards will be competing with each other and with other ship repair companies for an increasing non-core naval programme. But the two dockyards will be, as it were, guaranteed a substantial amount of non-competitive work—the "core programme", as it is known. While my department will be ensuring tight contracts for this work, it will be, as I have said, non-competitive. It is, therefore, important that the Government should be able to consider a fresh competition every so often for the term contract. This should ensure that even for the non-competitive work the companies will negotiate realistic prices. They will have to consider that if they do not or if they are not able to provide as good a service as we believe they could, they could lose the contract at the break point.
The Government believe that a seven-year renewable contract strikes the right balance for the companies and for the Royal Navy. Before I ask the noble and learned Lord to withdraw the amendment, may I reply to the point put to me by the noble Lord, Lord Graham of Edmonton, when he asked which companies were interested in tendering for these dockyard contracts. The firms are the Devonport Dockyard Limited, Foster Wheeler in association with BSEL, Babcock and Thorn in association, Balfour Beattie and the Weir Group in association, and Press Offshore. As the noble Lord will be aware, Trafalgar House in association with Plessey and A and P Appledore have withdrawn for commercial reasons, as have NEI. I should say there is no pressure for more than seven years from these interested parties but strong pressure to offer a little more than five, and that is what we have done.
Lord Denning: In view of what the noble Lord the Minister has said, it seems quite right to withdraw the amendment. The reasons in favour of seven years are

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good. I would not say they are compelling but, on the other hand, they are quite sufficient, so I will not press the amendment.
Lord Graham of Edmonton: Before we proceed, may I say that my attention was momentarily distracted when I believe the noble Lord the Minister answered one of my points; namely, whether any contractors who had originally showed some interest and had made progress had decided to withdraw late in the day. I was given, and appreciate, a list of those still in, and I took the point that they wanted more than five years, which is why we have seven years; but was there anyone actually involved who decided to withdraw late in the day?
Lord Trefgarne: Yes. As is well known, I think, NEI and the Trafalgar House Group, together with Plessey and A and P Appledore, have withdrawn.
Amendment, by leave, withdrawn.
Lord Denham: I beg to move that the House do now resume. I think it will be helpful if I say that we shall not come back to this particular Bill before 7.45.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Building Societies Bill
Brought from the Commons; read a first time, and to be printed.

British Shipbuilders (Borrowing Powers) Bill
Lord Lucas of Chilworth: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.
Moved, That the order of commitment be discharged.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to.

Consumer Safety (Amendment) Bill
6.59 p.m.
Baroness Gardner of Parkes: My Lords, I beg to move that the Bill be now read a second time.
The safety of the people is one of the most important concerns of any Government. This Bill sets out to extend the scope of consumer protection in relation to unsafe and dangerous products by providing the appropriate enforcement authorities with increased powers. The purpose is to ensure that potentially dangerous goods are intercepted before they reach the shops.
I am sure that your Lordships will have seen many reports of the dreadful accidents that have befallen children and adults as a result of dangerous products. Many of these need not have happened. Each year
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some 3 million people require hospital treatment for injuries sustained in accidents in the home, and about 7,000 of them die. Many of these accidents, like the death in Leeds last Christmas of a five-month-old child who died from playing with an imported toy pony, are avoidable.
The Government themselves recognise the seriousness of the situation. They are committed to bringing in far-reaching reforms, including a general duty to trade safely. These were outlined in the 1984 White Paper, The Safety of Goods. Unfortunately sufficient parliamentary time has not yet been found to introduce these measures, although it is hoped that there will be an announcement in the next Queen's Speech.
The Consumer Safety (Amendment) Bill was introduced in the other place by the honourable Member for York, Mr. Conal Gregory. I am sure that your Lordships would wish to join me in paying tribute to his campaign to raise general standards of product safety in the United Kingdom, and in particular to his success in carrying forward this Bill through all its parliamentary stages in the other place.
The Bill would have the effect of implementing those sections of the White Paper most suited to a Private Member's Bill, and would do so in time to catch the Christmas trade this year. It has the support of the National Consumer Council and a wide range of consumer and business organisations; the National Federation of Consumer Groups; the British Standards Institution; the Confederation of British Industry; the Consumers Association; the Welsh Consumer Council; the Scottish Consumer Council; the General Consumer Council for Northern Ireland; the Institute of Trading Standards Association; the Association of County Councils; the Association of Metropolitan Authorities; and the British Toy and Hobby Manufacturers Association. That is quite a long and strong supportive list. The Bill has also received the active support of the Parliamentary Under-Secretary for Corporate and Consumer Affairs, Mr. Michael Howard.
During the passage of this Bill through the other place a great deal of effort went into fashioning a set of provisions which will bring significant benefits to both consumers and reputable traders. Extensive consultations were conducted to this end. I believe that this Bill, as amended by the other place, strikes a proper balance between the requirements of good business practice on the one hand and effective consumer protection on the other.
I realise the complexity of such a Bill. It contains 17 clauses and two schedules. It embraces not just toys, but all goods which are covered by existing consumer safety regulations, from faulty electrical products to children's nightware and cosmetics. It seeks to create new powers to enable enforcement authorities to act against unsafe goods at the factory gate or at the point of entry into the country. Instead of trading standards officers having to scour the shops to track down suspected goods, as happens at present, they will be able to prevent such goods from getting there in the first place.
Clause 1 gives Customs and Excise officials the power to inform enforcement authorities of incoming

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consignments of consumer goods as they enter the country. Clause 2 enables them to detain goods up to 48 hours to allow the enforcement authorities time to examine the test goods and, if necessary, to use their wider powers to detain or seize goods. Clause 3 provides that where a trading standards officer has reasonable cause to believe that safety regulations are being contravened he may serve the trader with a suspension notice prohibiting him from putting the goods on the market.
Clauses 4 and 5 set out appeal procedures that a trader who has been served with a suspension notice can use. Clauses 6, 7 and 8 allow a court to order the forfeiture or disposal of goods proved to have contravened safety regulations. Clauses 9 and 10 provide for further appeal against decisions concerning suspension notices, seizures, and forfeitures. Clause 11 sets out under what circumstances information obtained under powers provided in the Bill can be disclosed. Clause 12 prevents traders from disclaiming liability for unsafe products by invoking the defence of due diligence without just cause.
Clause 13 lays down the circumstances under which the enforcement authority can be reimbursed for the costs incurred in seizing, destroying, or detaining goods. Clause 14 and Schedule 1 allow for the seizure of newly manufactured or imported goods for testing, and allow trading standards officers to seize any goods they reasonably suspect of contravening safety requirements. The schedule contains new provisions for compensation if, in the event of goods being seized or suspended, these do not contravene safety regulations.
I hope that your Lordships will support this Bill. It is recognised on all sides that more will need to be done. It is a beginning. The general duty proposed by the Government and supported by the Opposition awaits parliamentary scrutiny and approval. The Bill is not over-ambitious, but neither is it excessively modest. It expresses the view that where regulations exist in the public interest they should be enforced. Enforcement authorities need strong but reasonable powers if the consumer is indeed to be protected. I commend the Bill to your Lordships' House. I beg to move.
Moved, That the Bill be now read a second time.—(Baroness Gardner of Parkes.)
7.7 p.m.
Lord Airedale: My Lords, we are grateful to the noble Baroness for introducing this Bill to us and for explaining it so lucidly. She put into our minds the question, why should a Private Member's Bill, modest in scope like this, have to occupy 17 clauses, two schedules, and be destined to occupy 17 pages of the statute book? Is this because the parliamentary draftsman is unduly verbose and ought to be taught to express himself more concisely?
I do not think that that would be really a fair criticism. Most Bills of this kind contain matter ancillary to its main purpose—things like appeal procedures, non-disclosure of confidential information, the defence of due diligence, and so on. I suppose we might have a standard clauses Bill on the lines of the Interpretation Act. Then each Bill could say, when
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it came to the ancillary matters, "Standard Clauses 3, 7, 18 and 24", or whatever it was, "shall apply to this Bill".
That would shorten the Bill and the statute book, but the objection to that would be that the reader would have to look in two places instead of one, and up to now we have always had all the ancillary matter separately stated in each Bill; and so we get a fat statute book at the end of the year. But it is not all the fault of the parliamentary draftsmen.
Coming to the Bill itself, the maxim caveat emptor is no longer the answer to nearly all of the problems about the sale of goods. This is because goods nowadays are becoming more and more sophisticated. It is quite impossible for the shopper to examine an electrical appliance in the shop and come to an opinion about its safety. That work has to be done for him before the appliance arrives in the shop.
There has been some discussion about the compensation provision in Schedule I—quite understandably so. The enforcement officer feels entitled to say, "If I am acting on well-founded suspicion, I do not expect to have to pay compensation even if the goods do turn out to be perfectly safe". On the other hand, the trader feels that he is entitled to say, "Why, owing to the interference of the enforcement officer, should I be put to expense over goods which are perfectly safe?" I think that in practice the compensation provisions will work satisfactorily because presumably in most cases the goods will eventually be sold normally and there will be no claim or very little claim to compensation. But if we have an exceptional case where a good deal of compensation is going to be claimed, it will be for the trader to warn the enforcement officer about this and it will count against him if he does not.
Then presumably the enforcement officer will act with due speed to try to minimise the compensation which is going to be payable; so that I think that that probably will work out all right in practice after a bit of experience. Subject to that, I think that this is a good Bill and I wish it well.
7.11 p.m.
Baroness Stedman: My Lords, I too should like to thank the noble Baroness for the clear way in which she introduced the Bill. I welcome the intentions behind the Bill because I believe that we need to have a balance between the interests of the owners of the goods and those of the public at large and that we have to ensure that neither an innocent trader nor the trading standards authority acting in good faith should be penalised by anything in this Bill. If legislation is to be enforced it has to be based upon a reasonableness of action by the enforcement authority.
I have received representations from the Association of County Councils, of which I am a vice-president, and also from some of the individual authorities. They all want to see improvements in legislation to enable dangerous goods to be kept off the market. They, all of them, accept very willingly that there is an urgent need for a general duty to trade safely which would cover all the dangerous goods. Their concern lies specifically with two amendments that were made to the Bill in another place which they

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believe are likely to prejudice the effectiveness of the legislation now before us. I hope to return to those in more detail at Committee stage.
The first concern is about the compensation provisions in Schedule 1, paragraph 14. If a trading standards officer is faced with goods whose appearance and origin seem to be similar to those of goods which had previously been found to be unsafe, and with no further information, I would not consider it unreasonable for that trading standards officer to require that those goods be detained for testing. Under the present provisions, such action could be penalised by the compensation payment if the goods turned out to be satisfactory. My noble friend Lord Airedale has already referred to that.
Compensation will be payable by an authority where the supply of goods turns out to be safe whether or not the action in suspending them was reasonable. Officers might be faced with a very large consignment of goods of a type or from a source which has been shown previously to be unsafe. Where the importer has neither carried out the tests nor checked with the supplier that testing has been done then surely, with the Bill as it now stands, no authority would be prepared to place itself at risk of paying high compensation should those goods turn out to be safe.
The Bill as it stands seems to be taking account only of the traders' interests. If the legislation is to work it has to be based upon reasonableness of action by the enforecment authority. I believe that if the onus were to be placed on the enforcement authority to prove that its officer had acted reasonably in suspending the supply of goods, that might well overcome the difficulties of proof which were raised by respresentatives of trade interests. Whatever the final outcome, legislation that is enforceable is in the interests both of British industry and of the consumers. The trading standards authorities, the local authorities, take the view that the original period of 72 hours for the detention of goods is essential if effective action is to be taken to check imported goods or to prevent unsafe goods being put on the market. They feel very strongly that the 48 hours put into the Bill by the amendment is insufficient and could deter enforcement action by the trading standards officers.
I hope that the Government and the noble Baroness may be persuaded to revert to 72 hours in Clause 2(1). I believe that the 72 hours' detention originally specified would recognise the problems of obtaining information either at home or abroad, at weekends or on public holidays. The enforcement officers must be given time to check with the importer whether the goods have been tested; because Customs and Excise may not be willing to use their powers to seize the goods unless this information is available. I understand that the reason given in another place for reducing the period from 72 to 48 hours was that it was in the interests of safeguarding the measure as a whole from successful challenge in the European Court.
Can the noble Baroness or the Minister tell the House whether any check has been made with the European Commission as to whether 72 hours or 48 hours would be acceptable or unacceptable? It seems to me that perhaps Article 36 of the Treaty of Rome allows for restrictions on health and safety grounds. Is
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it not a fact, as the noble Baroness has said, that the British Toy Manufacturers' Association not only supports this Bill but also gives its full support to a 72-hour detention period? I hope that at Committee stage the noble Baroness may accept that 72 hours would be preferable to 48 hours, and I hope also that the requirement for reasonableness of action by the enforcement authority and its officers may be reinserted.
7.18 p.m.
Baroness Fisher of Rednal: My Lords, I have already spoken to the noble Baroness, Lady Gardner of Parkes, to say that I was going to intervene. It will not be at great length. I too welcome the Bill. I just want to draw attention to the powers that will be given to the Customs and Excise officers at ports of entry to disclose information. Presumably the disclosure of the information will be to the trading standards officers in the area. Therefore I can see that there is going to be a great need for a closer working relationship between the Customs and Excise and the trading standards officers (or the duly authorised people if they do not have trading standards officers) who are in the areas where goods are being brought into the country.
Unless that closer working relationship takes place, we shall not see the outcome of this Bill that is desirable. As the noble Baroness has already outlined, if this co-operation can be achieved obviously it lessens the work of the trading standards officers in trying to track down what are unsafe goods that can be distributed in so many outlets throughout the length and breadth of the country. Many of those unsafe goods find themselves not in what we call the recognised shops but in many markets in various localities up and down the country into which people are moving from day to day.
As the noble Baroness has said and as we all know, there is a particular problem at Christmastime with toys, as in the very serious case that she outlined. However, electrical goods—hair dryers, hair curlers, irons and those kinds of things—are constantly coming into the country as imports. I feel that perhaps the Bill does not go far enough; because our own manufacturers in this country have to conform very strictly either to British Standards Institution standards or to British electrical standards. They are in the unfortunate position, because they conform to our high standards so that we do not have unsafe goods, of having to compete against cheap imports which very often are proved to be unsafe. Obviously that does not help our own manufactured goods. So one would hope that in the foreseeable future we shall get safety of goods legislation which covers not only goods of British manufacture but also goods which are imported into the country.
7.21 p.m.
Lord Bruce of Donington: My Lords, we on this side of the House are grateful to the noble Baroness, Lady Gardner of Parkes, and indeed to her colleague in another place, for having brought the Bill before us. To the formidable list of supporters that the noble Baroness was good enough to recount to us when she introduced the Bill there must now be added the supreme accolade of the support of Her Majesty's Opposition.

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I listened with very great interest to the remarks that fell from the lips of the noble Lord, Lord Airedale. I, too, have several reservations about the drafting of the Bill, but I am due to encounter parliamentary draftsmen in the course of debates on other and more contentious Bills and I do not wish at this stage to get their backs up in any way by adding any criticisms further to those which have already been uttered, albeit indirectly, by the noble Lord, Lord Airedale.
The best support we can give to the noble Baroness in connection with this Bill is to ensure that when it reaches the statute book Her Majesty's Government themselves have adequate powers, in terms of personnel, to enforce its provisions. Therefore, I have a question to ask of the noble Lord, Lord Lucas of Chilworth—it is quite a direct one and is capable of being answered either in the affirmative or the negative without any qualification—as to whether he is satisfied that the enforcement officers themselves have sufficient resources at their disposal to enable proper enforcement of the provisions of the Bill. That is the first question.
The second question arises on the regulations that are already in force in regard to the safety of goods. The noble Lord, Lord Lucas, will remember that he and I have exchanged views across the Floor of the House concerning the enforcement provisions of the many regulations that have passed through this House over the last couple of years. As the noble Lord will know, each of the regulations makes its own provision as to the method of enforcement or in respect of the periods of delay which may be involved in connection with enforcement. What I should like to know from the noble Lord is the fate of the existing regulations which make provision for enforcement on terms rather more lax than those that are contained in the Bill. Is it the noble Lord's intention to produce further regulations under the provisions of this Bill in amendment of the regulations already in force which may be far less stringent? That is something about which I believe the House ought to be informed.
I should like also to add my support to the suggestion made by the noble Baroness, Lady Stedman, concerning extending the period from 48 hours to 72. Our Customs officers in the United Kingdom may be the most skilled, intelligent and perceptive officials on the face of the earth, but even they require expert opinion from time to time. If it be the case, and only if it be the case, that 72 hours would make them more effective, I would unhesitatingly support the suggestion put forward by the noble Baroness. However, that is presumably a matter which can be dealt with at the Committee stage.
As I say, this is only the Second Reading, and there may be points to put in Committee. One hopes that there will be contributions from all sides of the Chamber which may make for constructive detailed improvement of the Bill. In the meantime we on this side are all in favour of any endeavours that can be made, particularly in the light of the Government's comprehensive White Paper, to improve the safety of goods and to reduce the quite unnecessary and very often ghastly toll of injury and death which takes place when shoddy and unsafe goods get on to the market.
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We welcome the Bill and reiterate our thanks to the noble Baroness for introducing it this evening.
7.26 p.m.
Lord Lucas of Chilworth: My Lords, I am most grateful to my noble friend, Lady Gardner of Parkes for having taken up the cause of consumer safety in introducing this Bill to your Lordships this evening. Let me say straight away that this measure, though not a Government Bill, has the full support of the Government. It seeks to implement in part some of the proposals we put foward in July 1984 in our White Paper on the safety of goods. These are important proposals to improve the effectiveness and efficiency of the enforcement of existing safety regulations.
This Bill now before your Lordships contains important new powers enabling Customs and Excise officers to co-operate with trading standards officers in identifying and, if necessary, halting the supply of potentially dangerous imports. It enables trading standards officers to suspend the supply of goods which they suspect of being unsafe or, if necessary, to seize those goods pending further examination and/or prosecution. It also empowers the courts to make orders for the forfeiture of goods where those goods have been found to contravene safety requirements.
In endorsing these new powers the Government have not forgotten the essential principle that regulations should be kept to the minimum necessary to ensure fair and safe trading and, in particular, that the innocent trader who suffers as a result of the use of such powers should be fully compensated for any loss he has incurred. I shall return to the question of compensation in a moment; but perhaps I may say that we have therefore insisted that the promoters of the Bill, as a condition of our support, see to it that there is a fair provision for compensation in the event that goods suspended or seized by enforcement officers turn out to be perfectly safe. We are satisfied that, with the compensation provision, the Bill as a whole is a balanced package which will certainly ease current problems of enforcement without creating any significant new burdens on traders.
The question of the other major proposals in our White Paper on safety of goods has been raised, particularly regarding the confirmation of the position at this moment. I can assure your Lordships' House that the proposal to introduce a general safety duty will be included in legislation to which the Government are committed. However, I have to say to my noble friend that I cannot go quite so firmly as she did in so far as the date is concerned when she offered the thought that perhaps there might be an announcement in the Queen's Speech. I can only say at this moment that it will be brought forward with other measures on the consumer front as soon as parliamentary time permits.
Perhaps I may touch on those very few questions which noble Lords have addressed to me, rather than to my noble friend. I note the point that the noble Lord, Lord Airedale, made with regard to compensation which, very broadly, is exactly the same point that the noble Baroness, Lady Stedman, raised, although she also asked about the Customs' detention power, as did the noble Lord, Lord Bruce of Donington.

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It is vital to put a strict time limit on this power of Customs officers to detain goods, in order to reduce the risk of successful challenge to the Bill under Article 30 of the Treaty of Rome. That article prohibits measures which have the effect of restricting imports, and although Article 36 of the treaty to which the noble Baroness referred permits exceptions to this rule on the grounds of health and safety, any measures taken on these grounds must be strictly proportionate to the health and safety risk in question. There is no black and white answer to the question of how long a period of detention would be considered proportionate, but we have essentially in this Bill to look at the purpose of the detention provision.
The noble Baroness, Lady Fisher of Rednal, raised a point on the disclosure of information. Perhaps I may just say to her at this stage that we consider it an important principle that public authorities should not be allowed very wide access to information about business and businessmen, as they are under this Bill, without imposing clear penalties in the event that this authority is abused. The provision in this Bill restricting disclosure of information is based closely on the tried and tested provisions in the Consumer Safety Act 1978 and the related legislation. This provision makes it an offence, subject to certain specified exceptions, to disclose any information falling into certain closely defined categories. It is not widely understood that the categories of information, disclosure of which is made an offence, are very restricted in scope.
The noble Lord, Lord Bruce of Donington, asked me specifically whether we were satisfied that when this Bill, to which he has given his support, becomes an Act the Customs and Excise authorities on the one hand, and the trading standards officers on the other, will have enough resource to meet the new commitment. Yes, my Lords, we believe that they will. The noble Lord will recall that it is the local authorities' responsibility in so far as trading standards officers are concerned.
But, in general, perhaps I may suggest to the House that the Bill will make enforcement more efficient and more effective, in so far as more can be done within the current level of resource, because it enables the enforcement officers on both sides of the fence, as it were, to carry out their duties at the point of first supply rather than, as at present, chasing around the country to thousands and thousands of retail and wholesale outlets.
The noble Lord asked a second fairly straightforward question: what will happen to the enforcement arrangements so far as existing regulations are concerned? The arrangements set out in this Bill override the previous arrangements for enforcement of regulations under the Act of 1961 and the Consumer Safety Act 1978.
I think that I have answered the questions directly put to me. We are quite sure that this legislation will make a large contribution towards the general safety of goods, particularly toys and those seasonal goods such as swimming pools, Christmas tree lights and so on, which I think is what my noble friend is seeking, and will most certainly be complementary to the wider consumer protection legislation which, as I have
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already indicated, the Government expect to introduce into Parliament as soon as time permits. I commend this Bill to your Lordships.
7.35 p.m.
Baroness Gardner of Parkes: My Lords, I thank noble Lords who have taken part in this Second Reading debate and who have made their points so clearly and succinctly. It is clear that we shall have quite a lot to discuss at the Committee stage in terms of compensation.
I thought that the case made by the noble Baroness was most interesting, as was the question of the period of time for which goods can be detained. Obviously there is much to consider on that. I thought that the two interests might be slightly in conflict, but perhaps the longer the detention proposed the less strong the case against compensation; and of those two I personally favour the compensation case made by the noble Baroness. We must look carefully into these matters. Meanwhile, I thank my noble friend the Minister for giving such a good reply and putting the Government's position so clearly for us, and I also thank those who have taken part in the debate.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Cutlery and Stainless Steel Flatware Industry (Scientific Research Levy) (Abolition) Order 1986
7.37 p.m.
Lord Lucas of Chilworth Lord Lucas of Chilworth rose to move, That the draft order laid before the House on 30th April be approved. [22nd Report from the Joint Committee.]
The noble Lord said: My Lords, I beg to move that the Cutlery and Stainless Steel Flatware Industry (Scientific Research Levy) (Abolition) Order 1986, which was laid before the House on 30th April, be approved. The effect of the order would be to abolish the statutory levy on the cutlery and stainless steel flatwear industry, which contributes towards the funding of the Cutlery and Allied Trades Research Association—CATRA for short. The levy was last reviewed in 1980 as part of a government review of all statutory levies, when there was a narrow majority in favour of its retention. Since that time, however, the costs in staff time involved in administering the levy have increased, whereas the number of companies paying it has fallen. The effect of this has been that these costs, which the Department of Trade and Industry cannot recover, now represent about one-quarter of the total levy money collected.
In view of this, the department undertook a further review in 1985. Representative bodies of both employers and employees in the industry were consulted and the levy-paying firms were balloted on two alternative propositions. The first proposition was to abolish the levy and the second was to raise the minimum qualifying turnover from its present £3,000 per annum to £100,000 per annum. This would of course have helped to reduce collection costs by exempting some of the smaller companies from liability to pay the levy. The results of this review

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indicated that their unequivocal support for the continuation of the levy did not exist. Given these findings and the disproportionate costs of collection, the conclusion drawn, therefore, is that it can no longer be justified.
The Cutlery and Allied Trades Research Association was also consulted and I myself met representatives of CATRA to hear their views. Indeed, I visited the research association's premises in Sheffield to see what was being done before there was a final decision. The research association has been kept fully informed of the outcome of the review and the proposal to abolish the levy. Indeed, I now understand that the association has accepted the proposal to end the levy and is setting about the task of developing other sources of income. I commend the Cutlery and Allied Trades Research Association for the pragmatism which it has shown and the realism which it has demonstrated in this approach.
In 1984, the levy collected amounted to only 27 per cent. of CATRA's total income, compared with 40 per cent. in 1979. On the other hand, CATRA's commercial performance has improved considerably in recent years, with income from private sector clients rising from 8 per cent. of total income in 1982 to 40 per cent. in 1984. In order therefore that CATRA can adjust to the loss of the levy income it is proposed that the termination of the levy should be delayed until the end of 1987.
In conclusion, I emphasise that this order is intended to remove a requirement which the cutlery industry has demonstrated no strong desire to have retained and which has become disproportionately expensive to administer. With that explanation, I commend the order to the House.
Moved, that the draft order laid before the House on 30th April be approved. [22nd Report from the Joint Committee.]—(Lord Lucas of Chilworth.)
Lord Bruce of Donington: My Lords, we are grateful to the noble Lord for having introduced this draft instrument this evening. Perhaps we ought to say how remarkable it is that all non-contentious items seem to come before us for affirmative resolution and that only the controversial ones seem to require the negative procedure. But that is neither here nor here on this instrument. We on this side of the House do not see any reason why we should do anything other than support the Government in the matter.
There is one minor point which the noble Lord may care to clear up. He said that the association accepted the proposals. There is a world of difference between acceptance and support. I take it that we can have the noble Lord's assurance that the association's arm was in no way twisted in this matter and that what he really meant was that the association entirely supported the proposals. Subject to the noble Lord's satisfactory reply to that query, we on this side of the House have no reason to do anything other than support the passing of the order.
Lord Lucas of Chilworth: My Lords, I took note of what the noble Lord, Lord Bruce of Donington, said in the earlier part of his response, over which I shall also
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pass. He asked me a specific question. The answer is, no. The research association did not have its arm twisted, but no research association receiving a percentage of its income by virtue of a levy likes to see that removed. Nevertheless, when we pointed out to the association the costs and the relative decline of that source of income and when we offered some two years to find additional sources, it accepted the wisdom of our approach in the best interests of its own industry. So I can say quite fairly to the noble Lord that its acceptance is alongside its support.
On Question, Motion agreed to.
Lord Brabazon of Tara: My Lords, in view of the fact that we are due to return to the Dockyard Services Bill in one minute, and as I think that all noble Lords who wish to take part in the Committee stage are present at the moment, I see no reason to adjourn the House.

Dockyard Services Bill
7.44 p.m.
House again in Committee on Clause 1.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 10:
Page 2, line 18, at end insert ("but no company formed under this subsection will have any title to the intellectual property rights currently held in the Dockyards, and all such rights will remain the property of the Ministry of Defence.")
The noble Lord said: I must make a confession, in that in the discussions outside the Committee I was responsible for this amendment. I am so sorry that my name was not put on it. In view of my experience of intellectual property—I must remind Members of the Committee that intellectual property is rather a pompous term for patents, trademarks, know-how, copyright and designs—it seemed to me that the Government might get themselves into difficulties in relation to these rights if they attempted to assign those rights at this stage to a company. They may be in respect of patent rights, they may be secret patents, they may be licences where there are a lot of commercial firms and where difficulties may arise. There will be thousands of drawings in the hands of the dockyards, and copyright questions will arise.
I do not think that I need go on much longer in moving this amendment. I could explain further details and further difficulties but as the amendment is really a probing amendment I should just like to know what the Government are presuming to do in regard to all these intellectual property rights and whether they will agree that it would be preferable, at least at the present time, to have the property remain in the hands of the Ministry of Defence. I beg to move.
Lord Denning: This amendment is admirably designed but I am afraid that it is unnecessary. I have examined the contract—goodness knows how many pages there are. There are three or four pages to protect these intellectual property rights both existing property rights and future ones. I cannot say that I have studied every detail but it seems to me that the contract protects the Government, the authority and

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all concerned very well in regard to intellectual property rights. I think that this is probably unnecessary.
Lord Trefgarne: I am beginning to feel a little redundant because the noble and learned Lord is quite right. One that basis, I hope that the noble Lord will feel able to withdraw the amendment.
Lord Lloyd of Kilgerran: In view of the speech made by the noble and learned Lord, I must make another confession. I had not read the licence and did not realise that that was in the licence and that the matter was covered. I therefore ask the leave of the Committee to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 11:
Page 2, line 18, at end insert—
("( ) A company formed under subsection (3) above shall maintain a system of apprentice training at a level of quality and quantity as determined by the Secretary of State.").
The noble Lord said: This amendment, standing in the name of the noble Lord, Lord Crawshaw of Aintree, and myself, deals with a very important aspect of the situation. We are all concerned about apprenticeships. Sadly, it is a declining industry. At one time most crafts and trades and many that perhaps did not aspire to that title were keen to ensure that apprenticeships were available. The Minister may seek to assure us that there is no need to be so specific and visible in our desire but in the dockyards there has been a strong and proud record of providing apprenticeships.
A dockyard apprenticeship has always been a prized training; it is not merely prized by the apprentice himself but it is looked upon by the community, certainly in Plymouth, with a great deal of pride and satisfaction. The record shows that many ex-apprentices are at the top of the tree that they sought to climb once they had served their time.
The apprenticeship system has undergone a change. At one time it lasted for seven years but now, by and large, the average term of an apprenticeship is four years. From the document that I have before me, I am informed that there are still a great many skills that are currently the subject of apprenticeships. They include electrical fitter, engine fitter, turner, shipwright, plumber, boilermaker, riveter, coppersmith, painter, founder, smith, hosemaker, pattern maker, mason, saltmaker, colour maker, joiner, welder, burner and caulker.
Those are clearly all seen by the admiralty as being trades and skills that need to be maintained. The purpose of this simple amendment is to ask the Minister what steps the Government are taking, and what steps they could be willing to take, to ensure that devotion to the maintenance of quality will be written into the arrangements for the future.
I may say that it is not just a question of the management's wishes because the trade unions themselves, which have undergone a sea change in their structure and organisation over the past 30 or 40 years, are as jealous as anybody else about the need to maintain the present situation. I am told that the
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number of apprentices who are to be trained in any given period is not merely determined arbitrarily by the management or by the Admiralty, or even by taking a look at the dole queue. The number chosen is the result of sensible and realistic negotiations between the trade unions and the MoD.
In this amendment, we are seeking to maintain the standing and stature of the naval dockyards. That is to say, whatever may happen to them managerially, we want them to be places in which people will not only be proud to work but will be proud to say they were trained. We are also concerned that the chosen companies will undertake that responsibility.
I am sorry to have to say that my experience in the sphere of building, for instance, was that the large companies had a poorer record by comparison with the smaller companies in their devotion to finding apprentices. In other words, the large companies tend to say, "Somebody else can train them but we will pay them, and pay them well, and look after them". If that were to happen in this case, not only would it be sad from the point of view from the industry but it would also be sad for the nation. There are considerations other than simply the viability or the economcs of the situation. I hope that the Minister will be able to say something helpful. I beg to move.
Lord Denning: This aspect, too, is covered by the contract. There are several pages—it is a very long document—but, summarised, it comes to this. The contractor will be required to complete all existing apprenticeships that are running on vesting day. The contractor will also be required to sustain apprentice training to levels and standards that will retain a viable dockyard workforce here and provide the Ministry with a supply of engineers and technicians. It takes several pages of the contract to say that, but it probably covers the position.
Lord Ironside: The noble and learned Lord, Lord Denning, has already made some of the points that I was going to make. In fact, I see that the matter is laid down in the invitation to tender documents. I see also that the requirement at Devonport will be 200 apprentices and about 150 at Rosyth. That is somewhat smaller than the requirements as they exist at present.
Negotiations will take place between the MoD and the succesful contractor on the size of the intake for the future. I am wondering how serious those negotiations will be. I see also that there are certain apprentices who are trained under the Ministry's deeds of appenticeship.Those apprentices meet the particular requirements of the Ministry of Defence. Will my noble friend the Minister say a little bit more about that aspect of the apprenticeship scheme?
Baroness Vickers: For over 30 years I have been working to get apprentices more and more accepted in the dockyard. We have been very successful in getting girls accepted there. In fact, one of them is now a manager. She has a very interesting history. She came from Uganda as a refugee and went into Chatham dockyard. She then got married and went down to Devonport, and has now become a manager. They really have proved their worth.

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One point that worries me is whether the dockyard will recruit just enough people to work there. Previously, the dockyard trained more than it needed because the apprentices could then get jobs anywhere in Great Britain. It is thought that if the dockyard does train more apprentices than it needs, then those apprentices could eventually set up small businesses in the area of Devon and Cornwall, where small businesses are very badly needed. I suggest that the apprentices are not limited to a certain number. There should be the number required for the dockyard, and then some more should be well trained, as they used to be in the old days, so that they may go out and set up businesses for themselves.
Lord Crawshaw of Aintree: I was very concerned about apprenticeship training, having regard for the fact that it has a tremendous impact on the workforce in the areas affected, because they are areas of high unemployment. When I set down the amendment that is in my name and that of my noble friend, I had not had an opportunity to study Annex 12, which deals with apprenticeship training. It sets out all the different skills in which the dockyards will be required to train people. It satisfies me that provision is made there for the required people. However, the amendment makes mention of,
"A level of quality and quantity as determined by the Secretary of State".
The annex uses the wording,
"would agree with the authority from time to time".
Will the Minister say what might happen if the authority considers that there ought to be more apprentices training in a particular skill whereas the people who are actually running the enterprise do not agree? There is also the point that at the end of the seven-year period, it will be just as important to ensure the continuity of apprenticeships. The apprentices are of course not only required for the yards themselves but also for other areas of the MoD.
Lord Trefgarne: Not for the first time the noble and learned Lord, Lord Denning, has got it right, when he told the Committee that this is essentially a matter for the contract, as the noble Lord, Lord Crawshaw, has recognised. The numbers will primarily be determined by the contractors and will relate to the requirements of the contract of work that they have. They will also have to be to the satisfaction of the Secretary of State. So if the contractors try to use too few, then the Secretary of State will clearly prevail.
The noble Lord, Lord Crawshaw, touched on another point. It is also the case that such apprentices are often required in other parts of the Ministry of Defence. We hope and expect that apprentices will continue to be trained in the dockyards, and it will of course be for the Ministry of Defence to meet the additional costs of those particular apprentices. In the light of those assurances, I hope it will be recognised that the amendment is unnecessary.
8 p.m.
Lord Graham of Edmonton: I am grateful to the Minister and in particular to the noble and learned
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Lord, Lord Denning, for drawing attention to that fact. However, can the Minister tell us what is the status of the contract from the point of view of enforceability? If someone accepts a contract which clearly lays down that there needs to be a programme of apprentice training and then for one reason or another does not fulfil it, what will then happen? This could be due to the unsuitability of possible applicants, a change in the labour market, the wages that are offered; all sorts of reasons can militate. Not least of these could be the lack of desire on the part of the contractor to take on apprentices and spend the money because apprentices, although lowly paid, cost the employer a great deal of money. I am simply saying to the Minister that, having got it right at the beginning by putting in the terms of a contract, what will happen if subsequently the person who signed the contract is unable or unwilling to fulfil it?
Lord Trefgarne: The ultimate sanction in the possession of the Ministry of Defence is to terminate the contract, although I am not suggesting that that would be the right course on a comparatively small matter. I do not think there will be any difficulty. I am sure that the Government's view is shared throughout the Committee—that we should have the maximum number of apprentices that we can afford and are appropriate. There will be additional apprentices in the dockyards for eventual work in other parts of the Ministry of Defence who will be paid for separately under the contractual arrangements to which I have referred. In addition to the terms of the contract the annual intake of apprentices will also be a matter on which the Secretary of State's view will be relevant, and so I do not believe that there is any cause for concern.
Baroness Seear: I am sure that the Minister will bear in mind that some of the old-fashioned apprenticeship schemes are not necessarily what is required in the light of modern needs and modern training programmes. In fact, a great many people would rather see a much revised form of training than the perpetuation of old-style aprenticeships.
Lord Trefgarne: The noble Baroness, Lady Seear, puts her finger on a useful point, but I was addressing my reply to the amendment on the Marshalled List.
Lord Graham of Edmonton: The noble Lord the Minister satisfies me substantially, but my understanding is that each trade specification is assessed jointly by management and the trade unions concerned. Can the Minister tell the Committee whether in the future there is a part to be played by established trade union machinery? I am not referring to negotiations and wages, but there must be some kind of current raison d'être for these things. Can the Minister tell the Committee whether, in his mind, that kind of arrangement will continue where the trade unions have an input? I am talking not about control or negotiation but about discussion because clearly the unions will have to be realistic and they will have something to say.
Lord Trefgarne: Yes, I am certain that in reaching a view on the number of apprentices that are appropri-

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ate, either initially or in respect of the annual intake, the views of the trade unions will very much be taken into account.
The Earl of Selkirk: I make one observation. Of all the arrangements in our country today apprentice training is one of the greatest lacks; there is a terrible lack of apprentice training. My noble friend the Minister says that it goes into the contract and the noble and learned Lord said the same. But would it not be worthwhile saying that Parliament regards this as an integral and essential element? That would give it a status. As was said, what happens if they do not do it? Will the ministry break off the whole contract because there are too few apprentices? I can see that there is a perfectly good answer in that it is all in the contract, but people do not always fulfil contracts. There is a status in this. Apprentice training is of vital importance and it is deeply lacking at present.
Lord Trefgarne: I do not disagree with my noble friend about the importance of this matter, but I suggest to him that we need to maintain a degree of flexibility and to write these things in concrete in the statute is not necessarily the best way to achieve that. The contract is a matter which will be discussed between the two parties from time to time. It will run for a period of seven years, as we have already discussed, and will therefore be amenable to change in the light of the circumstances prevailing at the time it is renewed. I hope that, on reflection, my noble friend will agree that to set this in statute would be a departure from the necessary flexibility we are aiming to achieve in these arrangements.
I have given some clear assurances about what will be in the contract. I have made it clear that the views of my right honourable friend the Secretary of State, ors whoever may be the Secretary of State, will in the end determine the number of apprentices taken into the dockyards in this way. I hope my noble friend will be satisfied with that.
Lord Graham of Edmonton: So far as I am concerned I take the Minister's assurances at their face value. He understands that there is every intention on the part of those who are concerned with scrutinising the contract that it will be fulfilled and met. If it is met, there is no problem. However, I have already pointed out a number of ways in which problems can arise. Ministers are always loath to write on the face of a Bill what are small commitments compared to the totality of the Bill. Of course, it begins to look a hotch-potch. I am anxious that those who are concerned in Plymouth and Rosyth, and particularly in the trade unions affected, will carefully read what the Minister said, and if they are not satisfied, and I understand that dissatisfaction, I shall certainly come back with a comparable amendment on Report. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 12 not moved.]
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 13:
Page 2, line 18, at end insert—
(" ( ) A company formed under subsection (2) above shall have a duty to consult and agree with the recognised trade unions as to
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the setting up and maintenance of suitable machinery to negotiate upon and settle terms and conditions of employment, to provide reference to arbitration in default of settlement and to discuss other matters of mutual interest to the company and their employees.")
The noble Lord said: Again, this amendment may be seen by the Minister to be one that need not be written on the face of the Bill because he is satisfied that somewhere, even in the contract, there is something that takes it into account. Our concern here is that as part of the Ministry of Defence within the Civil Service the Royal dockyards are covered by the Whitley arrangements. The amendment seeks to ensure that suitable and acceptable joint negotiating and consulting machinery is established by the new company or companies after commercial management is introduced. The present Whitley arrangements ensure that management and recognised trade unions, both industrial and non-industrial, meet on a regular basis to consider problems of mutual concern and to deliberate on their resolution.
These meetings not only discuss a range of matters which are fairly well known but are also concerned with such matters as health and safety. We are not talking only about formal arrangements. The amendment refers to "consult and agree" and "suitable machinery", and this can often be informal as well as formal. We are not concerned about the arbitration agreements because those are fairly heavily bound inside Civil Service procedures.
Ministers have said that there are negotiating and consulting arrangements, particularly with the transfer under TUPE '81, and we have already had a go at that. We have seen how that has had to be revised in the light of our earlier debates. What we seek is to satisfy the trade unions, and I make no bones about that. The trade unions are worried that in the future something which they have now—settled, joint negotiating, consultative and arbitration machinery—is somehow at risk.
If the Minister can satisfy me that he understands their anxieties and will also assure them that there are arrangements enshrined in documents (which I ought to have seen but have not) or set out in some other way, then I am absolutely certain that they will be relieved at least about the point that I am seeking to make in this amendment. I beg to move.
Lord Denning: I should like to say just a few words. This provision is very desirable in practice, but I doubt whether it is necessary to write it into a statute, because under the provisions of the Transfer of Undertaking Regulations the collective agreements are continued after the transfer; and if they are continued subject to any negotiation, it follows that in order to be varied at all there must be consultation and machinery for consultation. It is a desirable provision but I doubt whether it is necessary to put it in the statute.
The Parliamentary Under-Secretary of State, Home Office (Lord Glenarthur): The Government are of course conscious of the concern expressed by the workforce and their union representatives about the future machinery for industrial relations in the new companies, and I think that has been made clear at a number of discussions at all levels in the Ministry of Defence. The machinery for consultation in the Civil

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Service is comprehensive and well established. It is quite understandable that the unions and staff should wish to see a continuation of that machinery in the new dockyard companies; but there will have to be some changes, and I doubt whether anyone imagines for one minute that this will not be the case.
The present Civil Service machinery for negotiation and consultation to which the noble Lord has referred—the Whitley system—is quite highly centralised and structured. Pay and conditions are negotiated centrally with the Treasury and the MPO for both industrial and non-industrial civil servants. Within the Ministry of Defence the Whitley structure centres on the two major departmental committees for the industrial and non-industrial staffs. In the dockyards the naval base Whitley structures play an important role, as do the two major functional committees. Under commercial management these links will no longer exist and there will be a need for wider discussions in the dockyard companies about pay and other major terms and conditions. These matters will no longer depend on central agreements concluded in London.
Yet it is certainly the Government's wish to see proper industrial relations machinery operating in the new companies. That is why we have expressly included in the invitation to tender which was issued to the companies in April (a copy of which is available in the Library) an indication that the contractor will be expected, in consultation with the existing recognised trades unions, to adapt the existing Civil Service machinery to obtain the most appropriate structure for the new organisation and to maintain that structure in being; and when tenders are submitted and are being evaluated within the Ministry, bidders' proposals for industrial relations policy and machinery will be assessed and will play a significant part in that evaluation. So I hope that the noble Lord will be in no doubt that the Government wish to see the new companies with proper, workable industrial relations policies and practices, and that they should be in place by vesting day.
I understand and have some sympathy with the spirit behind this amendment. Just as much as the noble Lord, we wish to see a company with good, workable and working industrial relations policy and practice; but, equally, I cannot readily agree to the form in which that spirit is expressed in this amendment. It is our firm view that good industrial relations must grow out of discussion, consultation and negotiation between managers and trades unions—rather in the way that the noble and learned Lord, Lord Denning, suggested that they should—and not from a formulation of duty embodied in an Act of Parliament.
I think that that gives some assurance. Certainly I think it adds to what the noble and learned Lord has just said, and I hope that the noble Lord will feel able to withdraw his Amendment.
8.15 p.m.
Lord Mulley: There seems to be some confusion here because the noble and learned Lord, Lord Denning, said that as a matter of automaticity the
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existing agreements would carry forward. I am afraid that in my view the noble and learned Lord is mistaken, and that has been confirmed by the Minister. They will not. The existing agreements will not become part of the new arrangement by virtue of the fact that they are in some tender documents.
It is quite clear that the Government, happily, will do the right thing and insist that proper negotiations, and so on, should take place. I do not understand why all this has to be done in such a hole-in-the-corner way. If the intentions are as good and laudable as they sound, why on earth can they not be put in the statute? As it happens, I agree with the noble Lord in believing that the best way to get good industrial relations is by negotiation between the workpeople, their representatives and the employers; but that is not the way that the present Government have dealt with industrial relations. There is no strike of more than about three people that probably will not end up in a court of law—and judging by the decisions that some of the judges have been giving, any darned thing can happen as a consequence of these procedures. Practically every industrial relations dispute now goes to the courts.
Therefore, it is important that the courts should at least have some definite status derived from statute, as otherwise it will happen as we have just seen in another matter concerning hippies, where a judge appeared to be saying that the hippies could stay where they were for seven days and then, after a press conference, saying that he did not mean seven days but that they should leave tomorrow. That is the same sort of situation that is developing in the field of industrial relations. If it gets into the judiciary, goodness knows what will happen. Therefore, I think we need a clear statement about this matter. If these words are not right, then perhaps the noble Lord the Minister will give an undertaking to produce a version of his own at the next stage of the Bill, and then I expect that my noble friend will agree. I hope that the noble Minister will say that his excellent words can be incorporated in a suitable amendment to the Bill.
Lord Graham of Edmonton: I am grateful to the Members of the Committee who have spoken, and to the Minister. I accept his understanding absolutely. The problem is that two years ago the Minister who is now sitting next to him gave comparable assurances when we were dealing with the privatisation of the Royal Ordnance factories. They were the same kind of assurances: that discussions were in train between management and trades unions which were certain to lead to understandings and agreements. I have to tell the Minister that two years later no such agreements on procedure, machinery and consultation have yet been reached.
The Minister is asking us to understand that when he says, "It is our intention and our endeavour, and we understand …", we have to contemplate the possibility that two or three years later there will be no agreement on how to set about it. I say to the Minister that this is not a matter on which we intend to divide the Committee tonight. But, interestingly, the noble and learned Lord, Lord Denning, says that everything that is currently in vogue will automatically be enshrined under the assurances tonight because of the 1981 TUPE Regulations. Clearly the Minister has his

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brief. He pointed out that there would need to be negotiations, and everyone accepted that some things would have to be changed. But whatever are the things that the Minister might accept have to be changed may not necessarily be the same things as the trade unions accept will have to be changed, and vice versa. Unhappily, we are in an area where we cannot negotiate. We cannot negotiate across the Floor of this Chamber between trades unions and management. Of course we cannot. All that we can do is to use the opportunity that we have been given tonight and will have in the two subsequent stages to the Bill.
I say to the Minister that in my view the suggestion of the noble Lord, Lord Mulley, is one that needs to be considered. It is something very important, but which is no more than something which has the validity and status of a communication from the appropriate Minister (or his senior civil servant) to the body which looks after the combined trade union interests stating the Government's intentions. That, at least, will be something more than they have now. I hope that the Minister will say something helpful before we move on.
Lord Glenarthur: I note the noble Lord's point of view. As I said, the intention is that the modifications to which I referred should be the minimum to reflect the structural change. Should the new employer wish to change the machinery significantly, he will have to negotiate and he will have to negotiate with the trade unions.
It is the Government's view that the conduct of industrial relations within a dockyard company is a matter for that company—for its managers, its unions and its employees. It must be clear to the noble Lord that the driving thrust behind the introduction of commercial management is the need to free the dockyards from the centralised constraining restrictions of the Civil Service system. To seek to base the industrial relations machinery and policy in statute, as the amendment does, would effectively be a continuation of those restrictions. I believe that there is logic in what I have said. There is a need to negotiate if substantial, change is contemplated, and that is precisely what would take place. But I do not believe that it is necessary to go so far as both noble Lords have suggested.
Lord Graham of Edmonton: We have only asked the Minister to write or to authorise a letter to spell this out. People outside the House can read in Hansard what he said, but we need more than that to satisfy the anxiety of the trade unions.
Lord Mulley: I am sure that my noble friend is aware that when a matter comes before the courts, as all too unhappily industrial relations matters do now, what a Minister says in this House or in another place is of no relevance. The judges are concerned only with the statute as it emanates from Royal Assent. If there is nothing in the statute, what the Minister may say in a letter or on the Floor of the Chamber is of no relevance and no help at all.
Lord Glenarthur: If a letter will make a substantial difference—I cannot believe that it—
Lord Mulley: No, It will not.
Lord Glenarthur: The noble Lord says that it will not. I rather agree with him. What is said here is as much as can be put in a letter. If the noble Lord, Lord Graham, would like to discuss this, I can facilitate an arrangement whereby the terms of such a letter can be discussed. Beyond that, I cannot go.
Lord Graham of Edmonton: I assure the Minister that it is not my intention tonight to press this amendment. But those outside the Chamber advise me that the matter should be taken further. We understand the reality of parliamentary arithmetic and we shall not waste the time of the Committee or do anything which at the end of the day may be counterproductive. A sensible atmosphere has pervaded the Committee this evening. We wish to demonstrate that we are as full of good intentions as is the Minister. I accept his offer that, so far as he can—and I realise there are limits to how far he can go—he will attempt to satisfy the worries of those outside the Chamber by a letter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Trefgarne Lord Trefgarne moved Amendment No. 14:
Page 2, line 19, leave out subsection (4) and insert—
("(4) The Transfer of Undertakings (Protection of Employment) Regulations 1981 shall apply to the transfer of the dockyard undertaking or any part of it whether or not, apart from this provision, the undertaking would be treated as an undertaking in the nature of a commercial venture for the purposes of those Regulations, and, for those purposes, the services of the qualified dockyard service employees without more shall be treated as a part of that undertaking capable of being transferred as a business whether or not the company which is to become their employer also provides designated dockyard services.").
The noble Lord said: Earlier when we discussed the applicability of the Transfer of Undertakings (Protection of Employment) Regulations 1981, the noble and learned Lord, Lord Denning, indicated that he was not entirely happy that they were applicable as they stood. I am bound to say that the Government do not share that view, but I accept that there is room for more than one respectable view on the matter. In order to assuage his anxieties and I dare say those of others, I agreed to bring forward this amendment to put the matter beyond any possible doubt. I beg to move.
Lord Denning: In view of our previous discussion we are, I hope, in future to deal with one company and not two. In those circumstances, although I do not object to the principle underlying the amendment it will have to be varied. The words,
"the services of the qualified dockyard service employees without more"
still bring in the concept of two companies, one for the employees and the other for the assets. I do not object to the motive underlying the amendment. I hope that it will be amended accordingly so as to deal with what I hope will be the new situation of one company.
Lord Mulley: Can the Minister give us a firm undertaking now that he is to introduce amendments for one company only? That will facilitate our consideration of what we might wish to put down at the next stage of the Bill.
Lord Trefgarne: I have not yet given that assurance in terms, but I have said that I am attracted to the argument deployed by the noble and learned Lord. I need still to overcome one or two difficulties before we can proceed in that way, but I hope to be able to do that, and I shall certainly want to do so in consultation with the noble and learned Lord.
Lord Mulley: We have great faith in the Minister's ability to overcome such difficulties. He seems to have his mind and heart set in the right direction, and I am sure that he will get there in the end.
The Earl of Selkirk: The amendment seems particularly to satisfy the noble and learned Lord, but one aspect is not mentioned. What about the Royal Corps of Naval Constructors? Where do they stand in all this? They serve the Ministry of Defence; they serve in Bath, in the dockyards and sometimes at sea. Will they be transferred if they have an appointment in the dockyards; or how do they stand? They are probably the most highly educated people as a body in this country. They are the core of the naval constructors. They are where the bases work from. Where do they stand? Neither the Bill nor anything else mentions them. Can the noble Lord tell us something about them?
Lord Trefgarne: The Bill says nothing about them because they are in no way affected by it.
The Earl of Selkirk: May I ask what that means? Does it mean that if they are working in the dockyards they will be transferred or that they are excepted from transfer? I think that we really ought to know that.
Lord Trefgarne: The Royal Corps of Naval Constructors are civil servants and they are not affected by the Bill.
The Earl of Selkirk: The dockyard workers, of course, are also civil servants.
Lord Trefgarne: They are affected.
Lord Denning: May I suggest a way out? Why not at the moment withdraw Amendments Nos. 14 and 15 and let appropriate new amendments be put in when we are considering the new set-up?
Lord Trefgarne: If the Committee is content, I should prefer the amendment to be agreed to as is proposed. I recognise that it may need changing, but at least I shall have something in the Bill which gets us a little way down the road.
Lord Denning: Very well; I shall not object furthes.
On Question, amendment agreed to.
Lord Denning Lord Denning moved Amendment No. 15:
Page 2, line 19, leave out subsection (4) and insert—
("(4) The provision of European Community Law contained in Council Directive 77/187 shall apply to the transfer of the dockyard undertaking to another company; and shall take precedence over any regulation or enactment which fails to implement the Directive correctly.")
The noble and learned Lord said: In view of what the Minister said, I should rather like this amendment to go in too, because I am only stating in it what is the law of the land:
"The provision of European Community Law contained in Council Directive 77/187 shall apply to the transfer of the dockyard undertaking to another company; and shall take precedence over any regulation or enactment which fails to implement the Directive correctly".
That is simply a statement of the law as I understand it to be. If the Minister is going on with his Amendment No. 14, I should like to go on with my Amendment No. 15 for the time being until we see the new procedure. I beg to move.
Lord Trefgarne: To be truthful, I am not fully briefed to counter the amendment of the noble and learned Lord. I am therefore inclined to suggest that, the Committee having accepted my amendment, it ought to accept that of the noble and learned Lord, but with the same proviso as he attached to mine: namely, that we may need to change it.
Lord Denning: That is a very acceptable solution.
Lord Mulley: The amendment underlines the point that I was trying to put earlier: it puts industrial relations in the dockyards in the lap of the courts because only the courts can decide whether this or that was done correctly.
Lord Trefgarne: I have not for a moment indicated satisfaction with the amendment moved by the noble and learned Lord, but in the interests of harmony and in sweetness and light I thought that the best thing to do at this stage was to agree with what the noble and learned Lord proposed with the proviso that we may well have to look at it again when we get to the next stage, in the light of whatever other arrangements we may then propose.
Lord Denning: I quite agree.
On Question, amendment agreed to.
8.30 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 16:
Page 2, line 26, at end insert ("and all employees of the company or any future company shall be employed on terms and conditions no less favourable than those applicable to the civil service of the Crown.").
The noble Lord said: The noble Lord the Minister may feel that this amendment is unnecessary because the Government are full of good intentions. The Bill is short on clauses and subsections but it is full of good intentions. The purpose of the amendment is to seek to ensure that the terms and conditions of service of dockyard employees are not worsened as a result of privatisation.
The noble Lord the Minister has already pointed out that once the Government disappear as a direct negotiator with dockyard workers, terms and conditions of service are matters for discussion and determination between the employer—the contractor—and the employee—the trade unions. TUPE '81 will apply only on vesting day. As the noble Lord has pointed out, after vesting day we are into a new ball game. The trade unions and the workforce want some guarantees from the Government that they will not be at the contractors' mercy.
If the Committee trusts the contractors to be good employers, nine times out of ten it will be right. If a contractor in the Royal dockyards once gets it wrong we may be in serious difficulties. We are talking about pay, overtime, shift work payments, the age of retirement, travel and subsistence payments, leave and holiday entitlements, working hours and recruitment, promotion and appointment procedures. The trade unions see all those things as part of what is categorised as "terms and conditions".
We want to hear from the Minister how he sees the future after vesting day for the people who serve him, the dockyards and the nation so well. It has been suggested that TUPE 1981 may not be applicable on the changeover of a contract. The main criteria for deciding which company is to win a new contract will be the lowest pay and the fewest employees, or possibly both.
The amendment is necessary to set a minimum level for conditions of service in that respect. These are the genuine and heartfelt worries of a group of people who are realists. In Plymouth, where the workforce has suffered catastrophic losses, they need to be. The community has suffered from tens of thousands of people being made unemployed. People are realists, but they are asking their present employers, "Will you try to ensure that after you have gone our pay and conditions are not worsened?" I beg to move.
Lord Glenarthur: Once again, the noble Lord, Lord Graham, has put forward an amendment which he has argued is in the best interests of the workforce and which may, on the face of it, appear to be a proper step to take in the protection of its interests. The Government are well aware of the concerns of the dockyard employees. A major aspect of the apprehension that the employees feel is the future prospects for their terms and conditions of employment—the type of matter to which the noble Lord referred.
I shall briefly outline the position. Under TUPE, the terms and conditions of service which have been built up over the years will not be lost because of the change
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to commercial management. They will transfer to the new companies with the exception of some terms and conditions, for example, restrictions on political activities specific to Crown service.
On vesting day, the terms and conditions of the new companies will, to all intents and purposes, be those applying immediately before. TUPE also provides for continuity of employment, collective agreements and trade union recognition to transfer to the new employer. The regulations also provide that all employees in employment transfer. The new employer cannot pick and choose whom he wishes to take on. The regulations provide a very real degree of protection for employees and their terms and conditions of service at the time of transfer.
The point has been made that the regulations provide no lasting guarantee or protection of terms and conditions of service. That was very much the thrust of the noble Lord's concern. They do not and, indeed, they are not designed to do so. It would be a strange organisation where the whole basis of the employment contract was subject to an overriding limitation on its development and action, and yet that is what the noble Lord's amendment seeks to do. It does not only place a limitation, it makes that limitation a statutory one.
After vesting day, the dockyards will no longer be part of the Civil Service. It would be absurd to link their terms and conditions of employment to a previous organisation's structure, particularly to one which I believe is unsuitable because it exerts restraints militating against the operation of the organisation and its full potential.
Irrespective of the understandable intentions behind it, the amendment would impose upon the dockyards the self same centralised constraints from which they need to be released. In the new dockyard companies, as in any other, it is for the managers of the company to manage all aspects of their enterprise with the fullest possible responsibility and authority. The amendment would erode and limit that authority—that right to manage—by imposing a statutory link with an organisation of which the company is no longer a part. It cuts across the fundamental tenet of commercial management, and it could be a most rigorous straitjacket upon the new companies which would ultimately work to their disadvantage and to the disadvantage of those who work for them.
I hope that that is helpful to the noble Lord. When he said that TUPE was not applicable for changeover of contract—I think that those were the words he used—
Lord Graham of Edmonton: Yes.
Lord Glenarthur:—he is correct. There is no transfer of undertaking when contracts change and the employer—that is to say, the company—remains the same. I hope that the noble Lord will see the force of that argument and will not press his amendment.
Lord Denning: I should like to endorse all that the noble Lord the Minister has said except that instead of

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the word "TUPE"—I hate that word—it should be the Community law directive, which comes to the same thing. Whichever it is, the employee's position should be protected as far as possible by the regulations or the directive. We do not need this amendment.
Lord Graham of Edmonton: The noble Lord the Minister rests his case on the right of future management to manage. I have listed the matters upon which the current management has felt it proper to have agreements with the trade unions—pay, overtime, and travel to work. I do not believe that we are contemplating an enhancement of those terms when future management has the right to manage. The right to manage means, if not a licence to reduce, certainly the freedom to reduce. Without the guarantee that I am seeking to put into the Bill, the workers' conditions are worth nothing. I intend to press the amendment.
8.40 p.m.
On Question, Whether the said amendment (No. 16) shall be agreed to?
Their Lordships divided: Contents, 24; Not-Contents, 54.

DIVISION NO. 3

CONTENTS

Airedale, L.

McNair, L.

Barnett, L.

Mayhew, L.

Brockway, L.

Mulley, L.

Brooks of Tremorfa, L.

Nicol, B. [Teller.]

Carmichael of Kelvingrove, L.

Pitt of Hampstead, L.

Crawshaw of Aintree, L.

Prys-Davies, L.

Elwyn-Jones, L.

Seear, B.

Graham of Edmonton, L. [Teller.]

Stewart of Fulham, L.

Stoddart of Swindon, L.

Hatch of Lusby, L.

Strabolgi, L.

Jeger, B.

Underhill, L.

John-Mackie, L.

Ypres, E.

Kilmarnock, L.

NOT-CONTENTS

Ashbourne, L.

Hailsham of Saint Marylebone, L.

Belstead, L.

Brabazon of Tara, L.

Hooper, B.

Brookes, L.

Lawrence, L.

Brougham and Vaux, L.

Layton, L.

Butterworth, L.

Lindsey and Abingdon, E.

Caithness, E.

Long, V.

Cameron of Lochbroom, L.

Lucas of Chilworth, L.

Cathcart, E.

Lyell, L.

Craigavon, V.

Margadale, L.

Craigmyle, L.

Middleton, L.

Cullen of Ashbourne, L.

Morris, L.

Davidson, V.

Mottistone, L.

Denham, L. [Teller.]

Mountevans, L.

Denning, L.

Mountgarret, V.

Elliot of Harwood, B.

Napier and Ettrick, L.

Elliott of Morpeth, L.

Norrie, L.

Elton, L.

Orkney, E.

Faithfull, B.

Peyton of Yeovil, L.

Ferrers, E.

Rankeillour, L.

Gibson-Watt, L.

Renton, L.

Glenarthur, L.

Saltoun of Abernethy, Ly.

Greenway, L.

Sanderson of Bowden, L.

Grimston of Westbury, L.

Selkirk, E.

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Skelmersdale, L.

Vaux of Harrowden, L.

Swinton, E. [Teller.]

Vickers, B.

Trefgarne, L.

Vinson, L.

Trumpington, B.

Resolved in the negative, and amendment disagreed to accordingly.
8.47 p.m.
Baroness Vickers Baroness Vickers moved Amendment No. 17:
Page 2, line 40, at end insert—
("( ) The power to make an order under subsection (1) above shall not be exercised by the Secretary of State in respect of any dockyard and any services until not less than five years have elapsed from the date on which, in respect of that dockyard and those services, he has concluded the experiment of forming a company under the Companies Acts and conferring on that company powers to operate such services at that dockyard.").
The noble Baroness said: This amendment is designed to delay the introduction of the agency management scheme until the dockyards have been run as plcs for a five-year period. I hope that this would be sufficient time for the Government to realise some of the potential gains of this scheme in terms of improved efficiency, commercial management and accounting practices, and most importantly the increased motivation of the workforce if they were to be offered a share in the new company.
Therefore, this amendment does not seek to change the Bill drastically. It aims purely to allow for the running of the dockyards under a proven commercial scheme before the Government look at their experimental agency management scheme.
The management of the dockyards as Companies Acts companies—plcs—is a proposal which I believe the Government should look at seriously in view of the weight of evidence in favour of it. The amount of support which this proposal attracted at Second Reading from such eminent and noble Lords as the noble and learned Lord, Lord Denning, and the noble and gallant Lord, Lord Hill-Norton, will, I hope, have demonstrated to the Government that the majority of people who have studied the effects of this Bill in detail have concluded that the plc option offers by far the best solution. I beg to move.
Lord Denning: I am sorry in a way that my name appears on the amendment, now that I have read it carefully. Look at the last words. The amendment contemplates the experiment of forming a company and conferring upon that company powers for five years. But that cannot be done until the Secretary of State has made an order. Therefore, the opening words providing that he shall not make an order unless certain conditions are satisfied do not apply in relation to the closing words. I am afraid that the experiment is already provided for in what we have heard. Let there be the licence by the company for the seven years. That is the experiment. I am afraid, therefore, that although my name is attached to the amendment I cannot support it.
Lord Trefgarne: I am afraid that I can only reiterate what the noble and learned Lord has said. This

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amendment suffers from a fatal flaw. In those circumstances I hope that my noble friend will withdraw it.
Baroness Vickers: I thought that perhaps the other two noble Lords whose names are attached to the amendment might have wished to say something. I now wish to withdraw the amendment. I regret to say that I feel very let down.
Amendment, by leave, withdrawn.
Lord Mayhew Lord Mayhew moved Amendment No. 18:
Page 2, line 41, leave out from beginning to ("the") in line 43 and insert—
("( ) No order shall be made under subsection (1) above unless a draft of the order has been laid before and approved by a resolution of both Houses of Parliament.
( )").
The noble Lord said: This Bill allows the Secretary of State to do anything he likes with the £700 million worth of public property. He can form an employment company, an operating company, or a single government-owned plc. It is obviously right that Parliament should have another look at the decision of the Government in this field before they act.
We have had a very encouraging series of comments by the Minister about his feelings for the future. We have had the undertakings that he will think very carefully again about having a single company. I believe he said that he will discuss this with the fount of all wisdom—the noble and learned Lord, Lord Denning.
However, as I understand it, according to the Bill, the Minister could have his discussion with the noble and learned Lord and decide on a quite different approach involving a single government-owned company. According to the Bill, he could go off and do it without even informing us—although he is too courteous to do that. But obviously Parliament should have another look at this before the Government act on it. We have therefore put down this amendment for the purpose of saying that no order under the subsection shall have effect until approved by resolution of each House. This seems to me absolutely necessary, normal, and acceptable in the circumstances. I hope that the noble Lord will look favourably at it. I beg to move.
Lord Denning: My name is attached to the next amendment which is on the same lines. This is an important amendment because noble Lords can see what will happen. The Government have to decide which option they will take. In particular, I hope that they will decide on the one-company option, taking a licence for seven years, with the workforce affected accordingly.
There is an important question still to be resolved by the Government: is it to be a government-owned company or an outside, perhaps a very strong, commercial company? The effect on the workforce will be great. One wants a company which will carry the workforce with it. Therefore, before Parliament
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gives its assent to the option which is exercised, or to the company which will carry out the contract—in other words, before the whole procedure is set in motion—surely Parliament itself, not the Secretary of State, should decide the issue.
I would suggest that it can be reported to Parliament. For instance, the Secretary of State could make a draft order always provided that Parliament has been previously informed of the nature of the project, which would transfer the workforce to the new company. The workforce and Parliament ought to know whether it is to be a government-owned company or whether it is not to be government owned but an outside company. The workforce which is being transferred ought to know, and in those circumstances the information ought to be given to the House before the order is made. I would therefore support both Amendments Nos. 18 and 19.
Lord Graham of Edmonton: I hope that the Minister will accept the sense of what we are trying to say. The methods of procedure followed in this Chamber primarily involve majorities and not necessarily force of argument, and if the Government have got this right and have the parliamentary approval that they need, what we say to the Minister is, "Before you proceed, tell us what you have done with the authority that we have given you". The noble and learned Lord, Lord Denning—as he very often does—perceptively drew attention to one or two areas about which we need to be satisfied. The Secretary of State will then be able to persuade us in presenting the orders that he has faithfully kept to the provisions of the Bill, the undertakings, the contract and so on.
We are saying: treat those who serve in Parliament as parliamentarians with a part to play. We are not simply here to vote something through, but also to approve that which has been done. The Minister may very well say that if every Bill has to come back, every time there is a trigger mechanism, to get approval, it will take a long time. If it takes a long time, it is a question of business management. We are not talking about a tuppeny-ha'penny undertaking. We are talking about the Royal dockyards, thousands of people's employment, and the safety of the nation. We are saying to the Minister, "Come back and let both Houses see what you have done. If what you have done is in accordance with the remit that you have sought, we should imagine that you would get approval".
9 p.m.
Lord Trefgarne: With the Committee's permission I shall speak to Amendments Nos. 18 and 19. These amendments seek to provide that any order made under Clause 1(1) of the Bill should be subject to an affirmative resolution of both Houses of Parliament. It may be helpful to the Committee if I set out what we intend that such an order will contain and why therefore I believe that these two amendments are unnecessary.
We intend that orders—one in respect of each dockyard—will, subject to the Bill receiving Royal

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Assent, be laid before Parliament in the autumn. These orders will first designate the dockyards to which the arrangements for which this Bill provides will apply; that is, the Royal dockyards at Devonport and Rosyth.
The orders will also designate the services,
"for or in connection with ships or vessels or related establishments in the service of the Crown",
provided at the dockyards. These are the services which we intend will be provided by a company under contract with the Secretary of State. There is no particular mystery about what these services will be. If I may, I shall remind the Committee of a Written Answer given in another place by my right honourable friend the Under-Secretary of State for Defence Procurement on 20th December which set out the main categories of services provided by the dockyards.
My honourable friend listed five main categories as follows: the refit, repair, maintenance and modernisation of Royal Navy vessels; the overhaul and testing of naval equipments including those to be returned to the Director General of Stores and Transport (Navy) for stock and subsequent issue to the Royal Navy; the installation and maintenance of machinery and equipment in naval establishments; the provision of utility services to Royal Navy vessels alongside in the naval base and to adjacent naval shore establishments; and manufacture of some items of ships' equipment. It is our intention that the orders will designate the dockyard services in terms similar to those.
The designation of dockyard services in this way will, by implication, also provide a definition of the "qualified dockyard service employees" to which Clause 1(1) also refers. They are those employed in, or in connection with, the provision by the Crown of designated dockyard services at the dockyard on a particular day, which would be the vesting day, in April 1987.
At this point may I, in parenthesis, correct something which I said to my noble friend Lord Selkirk a few moments ago when he asked about the position of the members of the Royal Corps of Naval Constructors? As I said in answer to my noble friend, generally speaking the members of the corps are not affected by the provisions of this Bill, but it happens that there are a small number of them working in the dockyards, and they will be treated in the same way as other dockyard employees when and if the Bill receives its Royal Assent.
Therefore the message is a very simple one. Although the orders which will be made will be a formal step in the implementation of the policy set out in the Bill, they will contain very little information of which the Committee is not already aware. Therefore it would simply not make sense to provide in the Bill that the orders must be subject to an affirmative resolution of both Houses. These amendments are therefore unnecessary, given the procedures which already exist for noble Lords to consider such orders, and I hope that they will not be pressed.
Lord Mayhew: I think that this is probably a matter to which we can return on Report when we know what the Government's position is. A number of these amendments which we are now discussing have, I think, a slightly hypothetical and academic feel about them. If the noble Lord, Lord Graham, is of the same mind, my feeling would be that we might come back to this on Report.
The Earl of Selkirk: Perhaps I may ask my noble friend one question. In the list of duties of a dockyard he did not mention the construction of ships. In future, is it the intention that dockyards should never construct ships? I am not objecting to it; I am only asking for information.
Lord Trefgarne: I am certainly not aware of any circumstances in which it would be thought appropriate to construct ships in the dockyards. After all, we have a considerable range of naval shipbuilding enterprises, which are more than able and willing to fulfil our requirements in this area. Therefore, without taking further advice, I think the answer is that we have no intention that such a thing should happen.
The Earl of Selkirk: I must express the view that until quite recently ships have been constructed in dockyards.
Lord Mayhew: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees (Earl Cathcart)The Deputy Chairman of Committees (Earl Cathcart): I understand that Amendment No. 19 is not moved.
Baroness Vickers: No; I am moving it.
Baroness Vickers Baroness Vickers had given notice of her intention to move Amendment No. 19:
Page 2, line 41, leave out from beginning to ("House") in line 43 and insert—
("( ) No order under this section shall have effect until approved by a resolution of each").
The noble Baroness said: I hope that I do not get into such trouble as I did over the previous amendment. This amendment seeks to take away from the Secretary of State the choice as to which option the Government decide upon within this Bill.
Lord Trefgarne: I hope that my noble friend will not mind being interrupted, but I said just now that I was replying to both amendments and I had understood it to have been agreed that both Amendments Nos. 18 and 19 would be taken together.
Lord Denning: Yes: I am afraid that I too understood that.
[Amendment No. 19 not moved.]
Lord Denning Lord Denning moved Amendment No. 20:
Page 3, line 3, at end insert—
("( ) Before making an order under this section the Secretary of State shall consult those persons or bodies appearing to him to be representative of those having an interest in the provision of dockyard services.").
The noble and learned Lord said: I just want to say a few words on this amendment. Up to this stage there has been good consultation between the Government, the trade unions and all those concerned. There was an excellent document issued by the Government on consulting them.
On the other hand, one would suggest that before the actual order is made it would be desirable particularly to consult the workforce as to the proposals to make an order, telling the workforce in particular the nature of the company to which they would be compulsorily transferred, the nature of the shareholding which they would have, and so forth, and consulting them about it so as to get their cooperation. It may be that the Secretary of State would do all that without provision in the statute. However, I should be glad if we could be given some assurance that there would be consultations on all material points right up to the time when an order is made. I beg to move.
Lord Glenarthur: As the noble and learned Lord has described, this amendment seeks to require the Secretary of State to consult persons or bodies before making an order under the Bill. No one could argue with the proposition that those involved should be consulted before a change of this significance is introduced—particularly those who work in the organisations affected.
However, as the noble and learned Lord has indicated, this is precisely what has happened since the proposals were announced to change the way in which the Royal Dockyards are managed. Perhaps I may describe in a little detail the consultation which has taken place.
When my right honourable friend the then Secretary of State first announced his intention to introduce new management methods into the dockyards in April last year, a consultative document was issued to the trade unions and to every employee at the dockyards. Also, an open government document was published, available to all. These documents described the three options which the Government were considering—full privatisation, commercial management, the favoured option, and the setting up of a trading fund—and made it clear that the Government invited comments from all those who wished to make their views known.
Three months were set aside for comments to be sent to the Ministry of Defence, and it was only after this period had elapsed that, in the light of the
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comments received, a final decision was made to proceed with commercial management; that decision was announced in July 1985.
Since that time considerable emphasis has been laid on the need to consult the trade unions in the Ministry of Defence. A number of working groups were constituted to examine specific aspects of commercial management, and when they had reported a comprehensive consultative document was issued on their findings and recommendations. In addition to this, a number of consultative documents have been published on individual issues, including, for example, pensions and staff records; and others are in course of preparation.
We have also consistently offered consultative meetings with the unions. The non-industrial trade unions have talked with MoD management on occasion, but it is a matter of regret to the Government that the industrial unions have repeatedly declined to sit round the table. But even so there has been discussion other than at the central Ministry of Defence level. Management and unions have met at the local Whitley committees in the dockyards at Rosyth and Devonport, and at the Ministry of Defence and Civil Service functional committees in Bath. We have also made sure that information has been given to the workforce. Regular articles have appeared in the dockyard newspapers, and a bulletin is published, available to all dockyard employees, specifically devoted to reporting developments in the move towards commercial management.
I have devoted some time to the detail of the consultative procedures we have followed, and to their substance. But I hope that this has served to illustrate the attention which has been devoted to what I agree is an important aspect of the introduction of commercial management into the dockyards.
The amendment asks us to institute the very practice that we have sought diligently to undertake since the proposals were first set out, and it asks the Secretary of State to consult representatives of (I quote from the amendment),
"those having an interest in the provision of dockyard services."
Who are those who have such an interest? Not, I think, just the unions. But who else is included in the group of those who have an interest in the dockyard services—contractors, the shipbuilding industry, our NATO allies? No. In our open government document, we have sought a broad spectrum of comments, and have taken a considered view on the way ahead for this vital element of the support of the defence effort. That way ahead is management outside the Civil Service.
The Government have sought to consult interested parties throughout this period of transition and will continue to ensure that the workforce is kept informed of progress and that its representatives, the unions, are properly consulted. However, to place on the statute book a specific duty to consult the unions is, as I have described, unnecessary. To extend that duty to an essentially undefined group of interests, which is what would be achieved by this amendment, is, I suggest to

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the noble and learned Lord, undesirable, and I hope that he will see fit to withdraw his amendment.
Lord Denning: I am very grateful for what the noble Lord the Minister has said. I readily acknowledge that there has been full and good consultation up to this point. I am equally glad of the assurance that this will continue. Good consultation on all material matters which are developing should continue right up to the moment when the order is made, so far as is necessary. So while I withdraw the amendment, I am glad of the assurance which the noble Lord the Minister has given.
Amendment, by leave, withdrawn.
[Amendment No. 21 not moved.]
Clause 1, as amended, agreed to.
Lord Barnett Lord Barnett moved Amendment No. 22:
After Clause 1, insert the following new clause:
("Inspection of accounts by Comptroller and Auditor General.
.—(1) Subject to subsection (2) below the accounts of a dockyard contractor shall be open to the inspection of the Comptroller and Auditor General.
(2) Subsection (1) above applies in respect of the accounts of a dockyard contractor only so far as those accounts relate to—

(a) the provision of designated dockyard services at a designated dockyard under contract with the Secretary of State; or

(b) the employment of the qualified dockyard service employees under section 1 above so as to enable those services to be provided, whether by a company or by the Secretary of State.").

The noble Lord said: I beg to move Amendment No. 22, standing in my name. I am grateful to the noble Baroness, Lady Vickers, and the noble Lord, Lord Mayhew, for adding their names to the amendment.
I should make it clear that, while I speak from the Opposition Dispatch Box, I do so to an amendment which is entirely non-party political, and stems from a recommendation—I do not know why the noble Lord the Minister said "Tsch", or whatever it was he said—from the all-party Public Accounts Committee, on which I had the honour and privilege to serve as chairman for four years. As the Public Accounts Committee has made clear, it is concerned with value for money with which not only the Public Accounts Committee and I myself, but I hope also your Lordship's Committee and indeed the Government, are equally concerned. The fact is that, like the Public Accounts Committee, I make no comment about the government proposals in the Bill as such but refer to the proposed arrangements for the commercial management as set out in the Bill: that is to say that, under present arrangements, while the assets of the Royal dockyard should remain in public ownership, they should be managed by private companies contracting to employ the staff and provide dockyard services.
Under present arrangements, the Comptroller and Auditor General has full access to all the books of account and the costing records of the Royal dockyard. In future, under the terms of the Bill, he will
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have access, first to the MoD records of contract negotiations and performance; secondly, to MoD records relating to publicly owned assets maintained by the contractors; and thirdly, to the contractors' records relevant to the custody and protection of those assets.
The existing access of the Comptroller and Auditor General and his proposed access flow from his responsibility to audit the appropriation accounts, which, in turn, through Section 6(3)(a) of the National Audit Act, 1983, gives him power to conduct valuefor-money audit under Section 6(1) of the 1983 Act. Access in future will be by agreement with the contractor according to a standard form relating to access to records of publicly owned assets. Under the proposed arrangements the Comptroller and Auditor General would not have access to the commercial managers' books of accounts and costing records. Therefore, he would be unable to provide direct assurance to Parliament on the management and use of resources in the yards, the actual costs of individual refits or the reasons for any cost increases or delays. He would not be able to present to Parliament the type of report he made in 1984 under House of Commons Paper 277 of the 1983–84 on the Control of Dockyard Operations and Manpower which led to the present interest of the Public Accounts Committee in dockyard matters, including the results of the National Audit Office examination of use of labour in the dockyards, control of overtime, productivity, deficiencies in management, control of work, and management information.
Accordingly, my objective in the amendment is to secure power for the Comptroller and Auditor General to inspect the accounts and costing records of any company to which Clause 1 of the Bill applies so that he may be able to report to Parliament on the economy, efficiency and effectiveness with which such a company has used public resources, both capital and current, in the provision of dockyard services, and current resources would include payments made by the Ministry of Defence for work done.
As I understand it, the Ministry of Defence case is that the Comptroller and Auditor General would have access to all the Ministry of Defence records and the contractors' records relevant to the custody and protection of publicly-owned assets. The Ministry of Defence believe—and I am assuming that this is the Government case—that the Comptroller and Auditor General will therefore be able to give Parliament a full assurance. But the all-party Public Accounts Committee take a different view, and it is worth reporting to the Committee just what this all-party committee said. I refer to the 21st Report of Session 1985–86 issued on 21st April, 1986, paragraphs 24, 25 and 26:
"The Committee, however, look very unfavourably upon access to records at one remove which will make them much more dependent on the Ministry of Defence rather than the original sources of information. We therefore asked the Comptroller and Auditor General what he could do under the current arrangements to provide direct assurance to Parliament on Dockyard operations that he will not be able to do under the commercial management arrangements. He told us that the extent of his assurance would depend very much on the effectiveness of the Ministry of Defence's

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own monitoring and the extent to which they achieve true competition in fixing prices."
In other words, as I said,
"He would no longer have full access to the books of accounts and costing records of the yards and would therefore not be able to give any direct assurance on the management and use of resources, the actual cost of refits and the reasons for delays or increases in costs."
That is the Public Accounts Committee's view. They go on to say:
"While noting the Ministry of Defence's views based on the analogy of the existing arrangements for access to defence contractors' records, we regard the change to commercial management in the dockyards as creating a new situation which falls far short of privatisation. MoD will retain ownership of the assets and there will be only a limited amount of true competition. We are also not convinced by the Ministry of Defence argument that the Comptroller and Auditor General's access would deter potential contractors from taking further interest in the business because of the prospect of Parliament becoming much more closely involved in the day-to-day details of their operations than is the case now."
They go on to say:
"In this respect, we consider it relevant that in the United States the General Accounting Office, the United States equivalent of the National Audit Office, has for many years had access to defence contractors' records relating to contracts placed without competition. We are not aware that there is any shortage of contractors willing to accept United States Government contracts."
It is hardly surprising, as we know.
We come finally to paragraph 26 of the report, where the Public Accounts Committee say:
"We therefore remain convinced that it is essential for the Comptroller and Auditor General to have access to the contractors' accounts and costing records to provide Parliament with an independent assessment of the success or otherwise of commercial management in securing value for money. We think this could be best achieved by allowing the C and AG access to contractors' books of accounts and costing records so that he can report to Parliament on the economy, efficiency and effectiveness with which public resources, both capital and current, have been used in the provision of Dockyard services. Accordingly, we recommend that the Dockyard Services Bill currently before Parliament should be suitably amended to make provision for the C and AG to inspect the relevant accounts and costing records of any company to which Clause 1 of the Bill applies."
As I understand it, the Bill was brought through rather quickly in the House of Commons and members of the Public Accounts Committee and the chairman did not have an opportunity of moving the amendment I now move this evening. Whether or not that be true, the fact is that what I move tonight has the unanimous support of the all-party Public Accounts Committee. It is clear that the Public Accounts Committee take a very different view from that of the Government. I hope that the Government will not stick to the somewhat rigid and inflexible view that they have taken in the past.
As I said at the outset, this is not a party political matter. I hope that the Committee and the Government will agree with the Public Accounts Committee and that the case of the Public Accounts Committee for this amendment applies whatever the Government do about the company and who controls the company. We are not talking about that kind of matter. We are talking about how Parliament should have proper access through the Comptroller and Auditor General as to whether we, on behalf of the public, are getting full value for money in this particular regard. I hope that the Committee and the Government will accept the amendment. I beg to move.
Lord Trefgarne: The principal aim of this Bill is to introduce commercial practice into the royal dockyards. While your Lordships may have different ideas on how such changes should be made, the common thread which has run through the debates here, in another place and during the consultation phase has been that the dockyards must adopt a more commercial approach. Under our proposals, the management of the dockyards would be procured from the private sector under contract with my right honourable friend, and it would be appropriate in these circumstances for the accounting and auditing arrangements to follow as far as possible those for any other item or service purchased by the Ministry of Defence.
We wish to treat the commercial managers of the dockyards as any other defence contractor. The amendment proposed by the noble Lord, Lord Barnett, would allow the Comptroller and Auditor General—the C and AG, as he is usually known—access to the books and records of the commercial companies managing the dockyards, and any information which he obtained as a result presumably would be used as the basis of a report to Parliament.
This would be an entirely new departure in terms of the relationship between the Government and their contractors, and is one to which the Government are firmly opposed. The C and AG does not normally have access to the books and records of Government contractors but relies on the information he is able to obtain from his examination of the books and records of the relevant Government department. In the view of the Government, access by the C and AG to the books and records of contractors would have a deterrent effect on those contractors, who would face the possiblity of Parliament inquiring into matters which the company would regard as entirely its own commercial concern. Such an arrangement would be wholly inconsistent with the introduction of commercial practices.
The Government recognise the concern expressed by the Public Accounts Committee in their 21st Report, but we do not agree that effective accountability to Parliament requires access by the C and AG to the books of the commercial managers of the dockyards. The Ministry of Defence will need for its own planning and monitoring purposes to obtain information about the commercial managers' performance. For example, my department's files will contain details of contracts left with the dockyards, including full information on pricing for all noncompetitive work.
Our files will also contain full information about Ministry of Defence assets used by the dockyards and information obtained from the commercial managers about their stores accounts. The C and AG will have full access to all this information through his inspection of the Ministry of Defence files, which will contain as much, if no more, information about the dockyards as about any other defence contractor. He will be able to examine everything for which the Ministry of Defence will be accountable, including the effectiveness of the Ministry's own monitoring

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arrangements. But this does not extend to examination of the contractors' pursuit of their own and their shareholders' interests in their contract with the Ministry of Defence. Nor should it.
In conclusion, I must emphasise that the whole point of this Bill is to change the nature of dockyard management. As part of the change, arrangements for the Comptroller and Auditor General's access will change from those which are appropriate for Ministry of Defence management to those which are appropriate for private sector management in a contractual relationship with the MoD. This does not mean secondhand, second-class access: it simply means the same access as in the case of any other defence contractor. The CAG will continue to have access to my department's files and these will contain detailed information about the use of Ministry of Defence assets and the pricing of non-competitive contracts in which the Public Accounts Committee has expressed particular interest. In the light of those considerations I hope that the noble Lord will not wish to press his amendment.
Lord Mayhew: The noble Lord has assumed, as did the noble Lord, Lord Barnett, that the Government were going to proceed in the manner in which they have so far intended to proceed; namely, by offering contracts to a commercial manager to manage the dockyards. I am not sure that I was wholly with the noble Lord, Lord Barnett, when he said that the complaints which he very justly advanced in respect of the arrangements for public supervision of a management company would not need to be different for, in the case of a single company, a single government-owned company. I think in fact they would be different. Nevertheless, the argument so far has been on the basis of the need for CAG supervision of a management agency with a contract with the MoD.
Here I was not persuaded by the Minister. I do not think it is right to say that the arrangements should be the same as for any other defence contractor because we are in a quite different situation with huge amounts of public property being used—£700 million worth of assets. It is not just the same as public accountability for any other defence contractor. The Minister is at odds here with both the Comptroller and Auditor General and the Public Accounts Committee. I do not need to quote all of it, but the CAG complains as follows:
"I would have access only to the details of performance on individual contracts and to records of publicly-owned assets which DGSR will maintain. I should not, however, have access to the contractor's books of account and costing records, as suggested by the Committee".
I do not see why the Minister should not accede to the very reasonable requests of the Public Accounts Committee, the Comptroller and Auditor General and of all three Opposition parties in the Committee. It seems to be a reasonable request and I think he should accept the amendment.
Lord Mulley: I, too, was surprised by the Minister's response. I should have thought that in any event the
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situation will be changed if, as we hope and believe, we are going to have one company instead of two. But apart from that consideration—if I may have the Minister's attention—I should like to put to him the proposition that the defence of the realm, the support for the Royal Navy, is a rather more important matter than following the normal commercial accountancy practices of the private sector, not least because this is a unique case where the Government are providing and financing all the assets by means of which the services are to be provided. Certainly, if there is going to be one company, maybe the whole situation in any case will be changed, and if the Government have a holding in it, the Comptroller and Auditor General will have access to the company records where the Government hold a majority shareholding, as we understand may be the case when the Minister brings forward his new amendments.
I would ask in any event, even if he can go no further tonight, that at least before taking on board a total opposition to the all-party Public Accounts Committee, the Comptroller and Auditor General and, I suspect, a large body of opinion in this Committee, the noble Lord the Minister will give an undertaking that he will consider the whole of this question again.
Lord Barnett: I must say, to put it mildly, that I was somewhat disappointed at the Minister's reply, I thought I had already quoted extensively, in advance, what he was going to say. I had not seen his brief. It is rather a pity that he then proceeded to read it out after I quoted what I expected him to say, and then quoted the Public Accounts Committee response at the time. The Minister talked about introducing commercial practice and said that it would therefore be wrong to accept this amendment. But I made it absolutely crystal clear that neither I, nor, I imagine, the noble Lord and the noble Baroness who supported my amendment, in any way wanted to do anything about the principle of the Government's Bill in relation to commercial practice.
We were not talking about that. We were talking about the whole question of whether on an important matter like this, where a major and substantial all-party Committee in another place has recommended unanimously that there should be access by the Comptroller and Auditor General, in the interests of value for money, effectiveness and economy in this important field, that should be acceptable to the Government.
The Minister said here this evening that the C and AG would not normally have access, but, with the greatest possible respect to the Minister, this is not a normal situation. Whether or not you have a single company with majority interests or minority interests, the principle involved here is that Parliament, through the Comptroller and Auditor General and the Public Accounts Committee, should be able to obtain satisfactory assurances as to whether there is value for money, economy and efficiency in this vital area. That is all that is being asked. It has nothing to do with whether or not the commercial practice should apply as the Bill wants it to do.
Indeed, I quoted from the Public Accounts Committee's report that stated that in the United

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States, the General Accounting Office—and there is no better example of a country where they are concerned with best commercial practice—the equivalent of the Comptroller and Auditor General has for many years had access to the records of contracts placed without competition, and in no way did that affect contractors applying for contracts. In no way did it inhibit anybody in the private sector from applying to obtain contracts in the best commercial practice.
So I am very surprised that the Minister read his brief without throwing it out himself. But, as he was not prepared to throw it out, whatever the situation in relation to a company—whether the Government in due course have a majority or a minority interest—if the Committee accepts the principle of this amendment, as I hope it will, then, whatever happens hereafter, the Government will be compelled to accept the important recommendations of the Public Accounts Committee, and there will be proper access for the Comptroller and Auditor General so that Parliament can properly assess with confidence and give a proper assurance. Therefore, in no way would I wish to withdraw this amendment.
9.33 p.m.
On Question, Whether the said amendment (No. 22) shall be agreed to?
Their Lordships divided: Contents, 18; Not-Contents, 37.

DIVISION NO. 4

CONTENTS

Airedale, L.

McNair, L.

Barnett, L.

Mayhew, L.

Brockway, L.

Mulley, L.

Crawshaw of Aintree, L.

Pitt of Hampstead, L.

Dean of Beswick, L. [Teller.]

Prys-Davies, L.

Denning, L.

Stoddart of Swindon, L. [Teller.]

Elwyn-Jones, L.

Graham of Edmonton, L.

White, B.

Greenway, L.

Ypres, E.

Houghton of Sowerby, L.

NOT-CONTENTS

Belstead, L.

Hooper, B.

Brabazon of Tara, L.

Layton, L.

Brougham and Vaux, L.

Lindsey and Abingdon, E.

Butterworth, L.

Long, V.

Caithness, E.

Lucas of Chilworth, L.

Cameron of Lochbroom, L.

Lyell, L.

Cathcart, E.

Margadale, L.

Craigavon, V.

Morris, L.

Craigmyle, L.

Mountgarret, V.

Cullen of Ashbourne, L.

Peyton of Yeovil, L.

Davidson, V.

Renton, L.

Denham, L. [Teller.]

Saltoun of Abernethy, Ly.

Elliot of Harwood, B.

Selkirk, E.

Elliott of Morpeth, L.

Skelmersdale, L.

Elton, L.

Swinton, E. [Teller.]

Ferrers, E.

Trefgarne, L.

Gibson-Watt, L.

Trumpington, B.

Glenarthur, L.

Vaux of Harrowden, L.

Grimston of Westbury, L.

Resolved in the negative, and amendment disagreed to accordingly.
9.41 p.m.
Lord Denning Lord Denning moved Amendment No. 23:
After Clause 1, insert the following new clause:
("Annual balance sheet etc.
.—(1) Every company which in any financial year provides any of the designated dockyard services shall prepare the documents mentioned in subsection (2) below not later than 30th September in the financial year following that year.
(2) The documents are—

(a) a balance sheet;

(b) a revenue account;

(c) a statement of rate of return.

(3) The balance sheet must show a true and fair view of the state of affairs of the company at the end of the financial year to which it relates, in respect of designated dockyard services provided by them in that year.
(4) A revenue account must show a true and fair view of the financial result of the company having undertaken, in the financial year to which it relates, each description of designated dockyard services to which it relates.
(5) A statement of rate of return must give such information as is necessary to show whether, in respect of the financial year to which it relates, the company have complied with section (Rate of return) below.").
The noble and learned Lord said: Perhaps I may speak also to Amendments Nos. 24 and 25. The object of all the amendments is to secure annual returns and that the contractors do not make too much money out of the Government during the experimental period.
I will give the Committee an illustration. Seventy per cent. of the work that is to be done in the dockyard is what is called the core programme, which the navy is bound to give to the dockyard, whatever may be the price, for the repair and refitting of ships. So although they may pass accounts as between customer and supplier, there is no competition. The navy must have 70 per cent. of the work done at the price stipulated by the contractor. There is then the other 30 per cent. of the work, which may be competed for outside.
Just think of the temptation on those contractors when they are making out their returns. They have to pay £23 million a year in licence fees. They may say, "It is easy to get that back, by charging the navy for the core contract. We will get all that licence fee repaid by the navy or the Ministry out of the core contract. We will then make our profit by undercutting the others on the 30 per cent. of the work for which they can tender".
I suggest that in order to secure that the navy or the Ministry does not pay too much during the experimental period, it would be an excellent arrangement to have annual returns showing the balance sheet and the rate of return, which will reveal to the Ministry exactly what is happening and ensure the the navy is not paying too much for its core programme. That is my submission: during an experimental period, why not have annual returns? I beg to move.
Baroness Vickers: I support the noble and learned Lord with regard to these amendments. They are intended to enforce open book accounting procedures on the agency management company. It is common practice for nationalised industries and direct labour organisations to produce an annual balance sheet, a revenue account, and a statement of a rate of return. It is essential that that rate of return should be positive when compared with the capital employed for carrying
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out the work at the dockyards. It is only by allowing public scrutiny of the agency manager's accounts that Parliament will be able to judge the success of the experimental scheme.
Lord Trefgarne: These three clauses are somewhat lengthy and detailed. I am not sure whether their wording owes its existence to some other Bill or whether it has been tailor-made for this particular one. Whatever it may be, I believe they are largely unnecessary. Whatever type of company is set up by my right honourable friend the Secretary of State, it would be under the authority of Clause 1(3) of this Bill; and as the Committee will see, the word "company" in this context is defined in Clause 1(8) as,
"a company formed under the Companies Acts".
The Companies Acts require all companies to provide financial information of the kind covered in the first of these three new clauses, though not in the specific form in which the first (or the third) new clause suggests. If the Companies Acts are proper for all other Companies Acts companies (many of which are engaged in defence work just as vital for our security as the dockyards) they should similarly be good for the companies managing the dockyards. That is, I believe, a fundamental objection to the greater part of these new clauses.
It goes without saying that my department will be negotiating contracts for individual ship refits or repair work which are as advantageous to the taxpayer as possible. For much of the non-competitive work my department will, as I said earlier in connection with another amendment, have access to the accounts of the contractor, and profit margins and rates of return will be known. And what is known to my department will be known to Parliament—either by virtue of the Comptroller and Auditor General or through the medium of an annual report which will be produced by my department on the previous year's dealings with the various ship refit and repair companies. For noncompetitive contracts, there are agreed profit formulae.
My other concern relates to the second of this group of new clauses, which provides that companies providing designated dockyard services shall secure from those services whatever positive rate of return is set by the Secretary of State. Again, I have to return to the question of a commercial approach. It would be most unusual for the Secretary of State to prescribe a rate of return on what would be a private company's operations. While it may well be reasonable in certain circumstances for the rate of return of a company to be based, as it were, on capital employed, that would not be particularly appropriate for the dockyards, where the Government will retain ownership of the assets with the contractor using them under licence.
Finally on this group of new clauses I should say that even if for any reason the Government decided to adopt their fall-back option of a Government-owned plc at each or either dockyard, these new clauses would still not be relevant because we would still replicate a commercial contractor as closely as possible. Any controls and targets set for the Government-owned plc would be drawn up in the form of a memorandum of

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understanding between the Secretary of State and the chairman of the Government-owned plc.
These are complicated issues. I have tried to set out what I see as fundamental objections to the provisions of these new clauses. I hope that in the light of what I have said the noble and learned Lord, Lord Denning, my noble friend Lady Vickers and other noble Lords will agree that these new clauses should not be pressed.
Lord Denning: I thank the Minister for his explanation. In the circumstances, I will not press the amendment any further.
The Earl of Selkirk: May I ask one question? My noble friend the Minister used two phrases. He referred to "private company" and to "public limited company". The returns from these two types of company are very different indeed. The publicity for the accounts of a public limited company is much wider than for a private company. Does my noble friend intend that it should be a public limited company or a private company?
Lord Trefgarne: If we are speaking about the contractor it depends on which contractor is sucessful in the competition and is awarded the contract. I would expect it to be a plc, a public limited company, but I could not rule out the possibility that it might not be.
Lord Denning: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 24 and 25 not moved.]
Clause 2 [Provisions as regards premises used for transferred services]:
[Amendment No. 26 not moved.]
Clause 2 agreed to.
9.45 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 27:
After Clause 2, insert the following new clause:
("Pension Rights
. Where in pursuance of the arrangements made under section 1(2) above a qualified dockyard service employee ceases to be employed in the civil service of the Crown and becomes employed by a company, all pension arrangements made by such a company shall be equivalent in all respects to such pension arrangements as applied in the civil service of the Crown and shall be applicable to all dockyard company employees.")
The noble Lord said: The Committee will be aware of the anxieties which are in the minds of employees in the dockyards and which we have sought to put before the Committee. None of these can be better illustrated than in the question of pension rights. The purpose of this amendment is to ensure that dockyard employees who are compulsorily transferred from the Civil Service to the new dockyard companies will have pension benefits which are no less favourable than those that are provided under the principal Civil Service pension scheme. We want to see this matter enshrined in the Bill itself.
Some two years ago we had the experience of the ROF Bill, when the Minister and I had long tussles. Far from satisfactory situations have arisen. For instance, when these matters were debated in relation to the Royal Ordnance factories, somewhat substantially along these lines, we were told that the employees would be offered the same benefits as in the Civil Service and that they would not suffer any detriment. I now understand that the Government admit that they will suffer some detriment. I am told that an ex gratia payment of £100 per man has been mentioned. I appreciate that the Minister may need some advice on this point which has now emerged. I simply ask him and his advisers to take on board the experience of the trade unions which look after civil servants in the dockyards. They are the same trade unions as those which look after their members in the Royal Ordnance factories, and they will have some very unhappy memories and experiences to guide them when they come to this situation.
The Minister needs to say a great deal more about how TUPE 1981 will be applicable here, because I understand that it does not apply to pensions. We already have our queries about the exact weight and worth of TUPE 1981, but I shall not raise that matter at the moment. However, if in fact TUPE 1981 does not apply to pensions and that is the position, I think we are entitled to some answers from the Minister. The Minister said that there will be a separate new entrants scheme in the dockyard companies. The intention is to set up an inferior pension scheme for new recruits. The trade unions which will be representing all dockyard employees after privatisation strongly oppose the notion of two pension schemes for staff who will largely have the same terms and conditions of employment and who will be working alongside each other and doing the same work.
We also think that it is of crucial importance to ensure that the pensions of those who will retire after privatisation are protected. The means of doing so is through application of the index linking provisions of the 1971 Pensions (Increase) Act. The 1971 Act, which was introduced with all-party support, applies to a wide range of public sector employees: police, the armed forces, teachers, nurses, judges and, indeed, Members of Parliament. We do not want two standards. Certainly we do not want to deny the same benefits to employees of the Crown—which is what dockyard workers are—or to give them benefits inferior to those that are enjoyed by Members of Parliament, for instance.
I very much hope that the Minister will be able to accept the amendment, or at least be able to satisfy those outside the Chamber that there is a parity guarantee for the new pension rights. Otherwise the people affected will lose out, and we do not want anyone to feel that he has lost out.
We are talking about hard-working and comparatively low-paid people, for whom I think a pension figures large. We are all concerned about our pension entitlement, but the pension rights of people at that level of income and standard of living are more important than they may be to others. If the Minister is concerned that the changeover, however and whenever it comes, is in the best spirit, he needs to

107
apply himself to the worries that the workers have about protecting their pension rights. I beg to move.
Lord Crawshaw of Aintree: I have here Annexe 6/3 which deals with pensions and there are one or two questions that I should like the Minister to answer when he replies. Two schemes are to be set up. I take it that one is to deal with the civil servants who are transferring, and that will be funded. I also take it that people who come into the employment subsequently will be funded by themselves and by the company. But I am a little confused by paragraph 13:
"Terms of Scheme for New Entrants".
I rather thought that they would be completely different—different scales and all the rest—but the provision reads:
"The terms of the New Entrant scheme shall be consistent as far as possible with those of other employees of the Contractor".
If that is so, I cannot quite understand why we have two schemes. Are we setting up two schemes, one inferior to the other, as my noble friend indicated? That provision seems to suggest that anybody coming into the scheme the day after vesting day will have the same terms as the other employees of the contractor. At that stage the other employees would be funded for what they had already paid into the pension fund and that would be transferred into the new fund. That is the first question.
My second question is also about index linking. I also want to know whether index linking will apply to those who retire after the transfer. My other question is this. What is the situation if there is a default by the employer on funding the pension scheme? That can happen, but we are dealing with people who are being severed from their employment and in ordinary circumstances they would have been paid redundancy or something else. But they are not getting that. It is therefore most important to ensure that if an employer defaults, that money is made up. If it is not, it will be an injustice to the people who had served previously and were being transferred to the new company. I cannot keep going any longer; I think that the answers are arriving.
Lord Glenarthur: The proposed new clause seeks to link the pension arrangements for the new companies permanently to the Principal Civil Service Pension Scheme. Let me make the position on pensions quite clear. Employees who transfer into the new companies will on vesting day no longer be civil servants and so will have to leave the Principal Civil Service Pension Scheme, which I think that the noble Lord, Lord Crawshaw, understands.
As was the case in the privatisation of the ROFs, the Government have undertaken to set up pension schemes for employees transferring from the dockyards which replicate as closely as possible the provisions of the Principal Civil Service Pension Scheme. That means that the schemes—and there will be one for each dockyard—will have the same retirement age, benefit calculation and index linking as the PCSPS.
As is common practice in the private sector, the funds will be managed by boards of trustees with
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representatives from the company and the employees and also a government nominee. The board of trustees will have the responsibility for managing the fund and will make desisions about investment policy, benefits and the rules of the scheme.
The new clause seeks to cut across the duties of the trustees by placing upon them a statutory requirement to keep the benefits of the schemes at a certain level. That is not compatible with a private sector pension scheme nor with the Government's intention to allow the dockyard companies to function as independent commercial organisations. No one should think that we do not recognise the need to make provision for the pension arrangements of the dockyard workforce. We intend to see that the pension schemes are set up with funding arrangements that are sufficient to meet their liabilities, but we do not propose, as we did not with the Royal Ordnance plc, to guarantee or underwrite their funds. We intend that they should be run in the same way as other private sector funds.
The noble Lord, Lord Graham of Edmonton, asked about the f100 figure. That offer of an ex gratia payment does not imply detriment. It is—and the unions are well aware of this—a sum in recognition of a remote risk. We do not accept that there is detriment in the Royal Ordnance plc scheme.
If I may expand a little for the noble Lord, Lord Crawshaw of Aintree, I would say that there will be four schemes. There will be two at each yard—one for transferred ex-civil servants and one for new entrants. I hope that that clarifies the point for the noble Lord. The transferred scheme will be index-linked in the same way as is the PCSPS. I hope that that is a measure of reassurance for him.
We are convinced that the dockyards should be properly run as private sector companies outside the Civil Service. Maintaining links with the Civil Service in the explicit manner that the amendment tries to do would run entirely counter to that intention. I cannot therefore accept the new clause. I hope that the noble Lord will see fit to withdraw it.
10 p.m.
Lord Graham of Edmonton: I intend to withdraw the amendment. Will the noble Lord the Minister confirm the point made by the noble Lord, Lord Crawshaw, and myself: there will be two different forms of pension scheme, one superior and one inferior? New employees will be members of a fund which is different from that of those who have transferred. If that is to be the position, one assumes that people making the same contributions, doing the same work, and having the same skills will receive different pensions because they are members of two different funds.
We received an assurance two years ago about the Royal Ordnance factories. It was not a guarantee, but a "no detriment" assurance. It resulted in a payment of £100, which was called a "remote risk" payment. The noble Lord the Minister may use whatever terms he likes, but the people who are affected see it as an attempt to make up a shortfall from that about which the noble Lord and his colleagues gave an assurance. It was not a cast-iron assurance, but they said there would be no detriment. I should like the noble Lord's observations on those two points.
Lord Glenarthur: Obviously those workers who join later cannot join under the original scheme; it would not be feasible for them to do so. The employees transferring will, as I have said, have to leave the PCSPS. They will have the option, in the way that I have described, of leaving their accrued pensions in the PCSPS or transferring them to the new scheme in their dockyard. For those who choose the latter course, a transfer payment covering past service will be made from the PCSPS into the new scheme. Thereafter, those schemes will be funded by contributions, probably jointly, from employer and employee.
The overall intention is that the schemes will be set up with rules and benefits as close as possible to the PCSPS with an initial transfer value and a contribution rate sufficient to meet the liabilities placed upon them. Thereafter, the management of the scheme, in the way that I have described, will, as is the case generally in the private sector, be for the trustees. It is they who will be responsible for the investment policies, the benefits, the rules and all that type of thing. I do not believe that the noble Lord need have a concern about that. There are those who will join after. They will be as closely allied to the PCSPS as is possible. I hope that that will meet his concern.
Lord Graham of Edmonton: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 28:
After Clause 2, insert the following new clause:
("Redundancy fund.
. In pursuance of the arrangements made under section 1(2) above the Secretary of State shall ensure that the redundancy provisions applicable to all employees of any dockyard company shall be equivalent to those presently embodied in the Principal Civil Service Pension Scheme and will set up out of moneys provided by Parliament a redundancy fund for the benefit of all qualified dockyard employees declared redundant after the transfer of the dockyard undertaking.")
The noble Lord said: This amendment deals with the arrangements for redundancy. The Minister who dealt with these matters in another place, Mr. Norman Lamont, said on 8th April that,
"the overall intention will be to set up a scheme paying redundancy benefits either exactly the same or of equivalent value, and reckonable service accrued under the Crown will not be lost".—[Official Report, Commons 8/4/86, col. 106.]
The amendment seeks to enshrine the assurance of the Minister in the Bill. Ministers have repeatedly said that they want to introduce risk pricing for contracts to refit warships in the dockyards. This must mean that the dockyard companies could get into financial difficulties. The Minister and his advisers can confirm what I have been told—that the redundancy fund set up in the Royal Ordnance factories is now bankrupt. The fund cannot afford to make non-industrial workers redundant. To the extent that one wishes to see people kept in work, that is fine. The redundancy option these days is a fact of life. So if in the overall package of a sale to the workforce there is a redundancy option, dockyard workers want to know exactly what it is. I shall be glad therefore if the Minister will confirm what has happened in the case of
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the ROF's. Frankly, we cannot ignore what has happened. There is so much from which we can gain experience.
The Ministry of Defence has also given evidence to the Public Accounts Committee suggesting a further reduction in the number of dockyard employees following privatisation. Without a guarantee in the Bill, it is possible that redundancy compensation would be at reduced levels. We know from discussion on the Wages Bill, in which some of us took part last Friday and therefore know all about, that the Government are not beyond making alterations to redundancy payments. In that instance, they took away the contribution by the Government to a percentage of the amount and left this to employers. There are rights, but there is no underwritten sum of money from the Government.
The dockyard workers are saying that they need better assurances. Without those, there is little that they can do except scream blue murder and get Members of your Lordships' House to make a nuisance of themselves with the Minister. We are not unmindful of the limits of our powers. If, however, the Minister wants satisfactory industrial relations in the dockyards, he needs to deal with this point.
The crucial factor is the ability of the contractor to pay redundancy compensation at present levels. I would be glad if the Minister can tell us how he proposes, in a long list of things that he says the contractor will have to do, to get the contractor to take on his obligations as a fair-minded employer in respect of redundancy. I beg to move.
Lord Crawshaw of Aintree: In supporting the noble Lord, I shall be brief. We shall be dealing with people, for the most part, who have been transferred from one undertaking to another and who, in ordinary circumstances, would possibly have been entitled to redundancy payment. Having regard to the fact that they will not be getting redundancy payment, I think it behoves this Committee to make sure that if they require that redundancy payment at any future time the funds will be there to meet it. We know that it will be a cut price business running these dockyards. It is a commercial enterprise, and people can lose money. The situation may well arise where redundancy payments have to be reduced. I think that would be iniquitous, particularly in respect of those who at the present time would be guaranteed those redundancy payments if they were made redundant.
Lord Glenarthur: Of all the changes facing the workforce, the Government are certainly aware that the question of redundancy arrangements figures prominently as a matter of concern for them. Before turning to the question of funding, let me set out the position regarding the redundancy arrangements in the new companies. Under the TUPE regulations the Ministry of Defence redundancy procedures will transfer to the new company. These cover such matters as periods of notice, orders of discharge, and so on, although there will have to be some changes —for instance, in respect of the field of redundancy—to reflect the fact that the companies are separate entities outside the Civil Service.

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The invitation to tender refers to the procedures, to their transfer, and sets out the Ministry of Defence manuals in which those procedures are contained. The invitation to tender also makes it clear that the company will have to pay redundancy compensation which is of at least equivalent value to that payable under the present Civil Service arrangements. Any changes that the contractor might wish to make will have to be in consultation with the unions. The prospective contractors are in no doubt about their obligations in this matter. There will need to be changes in the funding arrangements. Currently the Civil Service redundancy scheme is embodied in the Principal Civil Service Pensions Scheme. Inland Revenue regulations prohibit the payment of redundancy compensation from private pension schemes. Therefore, as is the case in the private sector, redundancy payments in the new companies will have to be made from company funds to any staff made redundant after vesting day.
It is the Government's intention that the dockyard companies should behave as fully commercial organisations, as has been made clear on many occasions. But they should be subject as far as possible to the full range of commercial disciplines. In considering, therefore, the need for any redundancies they should assess and balance the costs of savings and incorporate these projections in their business planning.
The noble Lord, Lord Graham, referred to what he called the Royal Ordnance factories' redundancy funds. There was, and there is, no redundancy fund for our Royal Ordnance plc. The company was capitalised to take account of its forecast liabilities and assets, and redundancies paid from revenue was a factor included in this assessment. The same kind of thing would apply to those companies which may at the end of the day be responsible for the dockyards. That would also be taken into account in assessment of the tenders.
The costs to which I referred will be included as overhead charges in their price to the customers, and hence to the Ministry of Defence. But it is essential that the assessment of any future redundancies is carried out on commercial grounds against the background of their overall business plan. For this reason I cannot agree that the new clause is appropriate. First, it attempts to bind the redundancy arrangements in the new companies statutorily to those of the Civil Service. This is another example of a measure which would restrict the responsibility of the new management to manage the terms and conditions of their company. The same is true of the second aspect of the new clause. The setting up of a redundancy fund, as envisaged, would represent a Government underwriting which, no matter how laudable the intentions behind it, would cut across the need for the dockyard companies to act as commercial organisations separate from the Government and from the Civil Service machine. Accordingly, I hope that the noble Lord will not press his amendment.
Lord Graham of Edmonton: I do not intend to press my amendment, not least because there are matters upon which the Committee will await with interest the actions of the Minister concerning amendments which
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we expect to table at the Report stage. There could very well be aspects of this which we would want to raise then.
I am bound to say that the Minister has done nothing to assuage the fears of the workers that they will be in a worse position in the future in comparison with the rights and perhaps privileges which they enjoy at present as civil servants. However, there is no point in delaying the matter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 29 and 30 not moved.]
Clauses 3 and 4 agreed to.
House resumed: Bill reported with amendments.

Dyfed Bill [H.L.]
Committed to a Select Committee.
House adjourned at seventeen minutes past ten o'clock.