HL Deb 31 January 1989 vol 503 cc995-1001

3.20 p.m.

Lord Strathclyde

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Strathclyde.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clause 18 [Power to alter accounting requirements]:

Lord Mottistone moved Amendment No. 155: Page 31, leave out from beginning of line 43 to ("or") in line 44.

The noble Lord said: This is a probing amendment to ask the Government why they have allocated to the Secretary of State the broad powers contained in this paragraph. At present the Secretary of State has powers assigned to him by Schedule 4 of the Companies Act 1985 but those do not seem to be as wide as the powers we are discussing at this moment. I beg to move.

Lord Strathclyde

The Government's view is that, as under the existing Act, any regulations which impose more onerous duties on companies should be subject to positive resolution procedure.

The noble Lord's amendment would introduce an exception to this principle. If the Committee as a whole considers the principle to be wrong, or accepts that there are strong grounds for departing from it when the more onerous duty consisted of adding to the material to be included in the accounts and the directors' report, then the Government would be prepared to reconsider. But as things stand we believe we have the balance the right way round.

Lord Mottistone

I thank my noble friend for that reply. I shall study what he said. This was a probing amendment and I may come back with it at a later stage. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 18 shall stand part of the Bill?

Lord Bruce of Donington

Clause 18 is the kind of clause that one finds only too frequently in Bills. I refer to the provisions whereby, notwithstanding anything already in the Bill, the Secretary of State reserves the right to introduce all kinds of regulations. We are well familiar with this. In Section 256 of the Companies Act 1985 there are already extensive powers for the Secretary of State to make regulations. We accept the noble Lord's point that such regulations as the Secretary of State brings before Parliament must be assented to by affirmative resolution. That is at any rate something.

I wonder why in this instance the Secretary of State needs these additional powers. The Bill states that the regulations can be limited to those that add to the class of documents required to be prepared, those that restrict the classes of company which have the benefit of any exemption or otherwise render the requirements of the part more onerous. There have been divisions in the Committee. Some noble Lords, mainly perhaps on the other side, although I do not insist on that point, think that the requirements are already too onerous; other noble Lords think that they are not onerous enough. Would it not be better if the Secretary of State indicated what kind of regulations he had in mind and what impelled him to take the extra powers in the Bill?

Subsection (4) of the clause states: "Regulations under this section may— (c) contain such incidental and supplementary provisions as the Secretary of State thinks fit". These are extensive powers to give to a Secretary of State. They may even depend on his subjective state of mind. Are we quite sure that we want to give the Secretary of State powers on this scale when during our discussions in Committee we have already gone into tremendous detail after considerable debate? Surely we can have a little more from the noble Lord on exactly what he has in mind.

This is not to say that we on this side of the Committee want to restrict unreasonably the powers or the Secretary of State. We well realise that, with the passage of time and with the coming into operation of the provisions of the Bill, circumstances may change. New factors may emerge which necessitate regulations being issued. Under the freedoms so eloquently enunciated by the Secretary of State the patterns of commercial and financial activities arc forever changing. We do not want to restrict him unreasonably but we should like a little more idea of exactly what he had in mind when this clause was put into the Bill.

Lord Strathclyde

The noble Lord, Lord Bruce, believes that any government who give themselves powers to change primary legislation by statutory instrument must be treated with the maximum of suspicion. I wonder whether any government could escape his disapproval on that basis.

Lord Bruce of Donington

No.

Lord Strathclyde

The noble Lord shakes his head in agreement.

The power contained in Section 256 of the 1985 Act, on which this clause is based, has existed since the Companies Act 1948. This, and other powers to alter parts of the principal Act, have been re-enacted with amendments in 1976, 1980 and 1981. They are all powers to change primary legislation. Moreover, there are notable examples of powers to amend or extend primary legislation by regulations in other areas.

I readily agree that the present clause contains a slightly wider power than the corresponding provision of the 1985 Act. But the power is not unlimited. It is only a power to modify and, moreover, can be exercised only within the four corners of the primary legislation. The result of these limitations is that the power is confined to matters relating to the accounts of companies and their audit; it cannot be used to replace the original provisions with radically different provisions, nor to introduce completely extraneous subject matter.

We all have a deep respect for the primary legislative process and for the role which noble Lords play in creating it. But we need to be realistic. Technical legislation of the kind we are discussing is not about high principles: it is about detailed rules. Much of the substance of these rules lies in the precise way in which they are expressed. Much of the expertise in these areas lies outside the Government and indeed perhaps outside this Chamber. To secure the best possible legislation, therefore, it is highly desirable to circulate a text in good time for interested parties to study and comment on it. In the real world, and with the best will in the world, it is not usually easy to follow this prescription when producing primary legislation. I believe that that has been the experience of successive governments. However, it is much easier to circulate draft regulations in good time for comments to be received and the regulations to be amended, if necessary, before they are discussed in Parliament.

The noble Lord, Lord Bruce of Donington, asked me for some examples. As I said, this power is designed to enable the legislation to be kept up to date in a highly technical area. We hope that the Bill has got it right for the present, but we may on occasion need to change it. For example, we intend to use the power to assist in the implementation of the bank accounts directive which is due for implementation next year.

We have extended the power to enable the whole or part of Part VII of the 1985 Act to be kept right up to date rather than just the contents of accounts. It is a highly technical area which is subject to continual developments. Therefore I hope that the noble Lord will sympathise. I also hope what I have said has shown that the power sought in Clause 18 is not at all unreasonable and is not unprecedented. We cannot expect to have a new Companies Bill every time we wish to make a technical amendment.

The use of the power conferred by the clause will be confined to matters already covered by Part 1 of the Bill, and any regulations made will be subject to parliamentary procedures. I believe that that provides an appropriate means of keeping this technical area of company law up to date in the future. I beg to move that Clause 18 stand part of the Bill.

3.30 p.m.

Lord Lloyd of Kilgerran

I entirely agree with what the Minister said. When one sees a clause in a Bill of this kind, especially a somewhat technical Bill such as this, one has to be suspicious of giving more powers to the Secretary of State to legislate in that way. My suspicions about the clause were somewhat diluted by the observations made by the Minister when we were considering the amendment moved by the noble Viscount, Lord Caldecote, which put forward the proposal that references to research and development should be introduced into the accounts. Therefore I wonder whether the Minister can say, without any commitment, that generally such an amendment would be suitable and would be received sympathetically by the Government for legislation by regulation.

I am worried that such a proposal might fall because of the words contained in subsection (2)(d). It refers to regulations which, otherwise render the requirements of this Part more onerous". Would not the introduction of more facts into, for instance, statements of account be more onerous? They might be matters such as those mentioned by the noble Viscount, Lord Caldecote, which had great support throughout the Committee. Further, it might be in the public interest that there should be information in the accounts about the energy efficiency of firms or the amount of expenditure in relation to energy matters. As 1 said, would that not be onerous?

It is therefore most difficult to give support to the Bill before having further indication about what is meant by "more onerous". I have also had difficulties about the word "classes". Subsection (2)(a) refers to "classes of documents". Those words are simple to understand. In subsection (2)(b) it says "classes of company". I think that I also understand what that means. However, in subsection (2)(b) it says: require additional matter to be included in a document of any class". I cannot quite understand what is meant by "any class" in that context. Perhaps the noble Lord can help us a little further as regards the matters raised by the noble Lord, Lord Bruce of Donington, and those to which I have just referred regarding the wording of this new section.

Viscount Caldecote

At the end of the debate which we had upon the amendment in which I proposed to include R&D expenditure in company accounts, my noble friend Lord Strathclyde gave an assurance that Clause 18(2)(c) would enable the Secretary of State to make an order requiring research and development expenditure to be included in company accounts. Can he confirm that the "document of any class" includes company accounts? Further, can he also confirm that what he said yesterday is still the case after he has given the matter further consideration?

Lord Williams of Elvel

Perhaps I may just add my voice to that of my noble friend Lord Bruce of Donington and those of the noble Lord, Lord Lloyd of Kilgerran, and the noble Viscount, Lord Caldecote. In his first reply to my noble friend the noble Lord mentioned the problem of bank accounts. As he will know, last night, if I may put it that way, 1 did not move a series of amendments dealing with banking companies. However, will the provisions under this section deal with bank accounts and the bank problem that I foreshadowed on Second Reading and raised again last night but did not press? If that is the case, why do we not simply pass a Bill saying that the Secretary of State shall do whatever he feels necessary to make whatever regulations he feels appropriate for any company to do whatever it likes in accounts? It seems to me that if we are going to do this, we must make the primary legislation a little more specific than the Government have at present.

Lord Strathclyde

Many Members of the Committee have asked detailed questions on this clause. Perhaps I may first turn to the remarks of the noble Lord, Lord Lloyd of Kilgerran. He asked whether this "more onerous" provision would work within this meaning. "More onerous" governs parliamentary procedure, not ability to use the regulations. Therefore the words "more onerous" add to the requirements. For instance, documents can be changed in accounts and reports.

As regards the question of my noble friend Lord Caldecote—which he raised yesterda and upon which I gave him an assurance that we would come back to the matter—I say this. It is precisely such matters which could be changed by using this clause. Therefore I hope that he will feel happier with the provisions of the Bill as a whole.

The noble Lord, Lord Williams of Elvel, asked whether the regulations would be used for bank accounts. The answer is that they can be. This regulation, or the regulations arising out of this clause, can be used to change the matters he raised yesterday.

Lord Williams of Elvel

I do not want to prolong the debate because I am most grateful to the noble Lord for what he said. However, does that mean that all the amendments I tabled on the question of bank accounts, transfers of any reserves and a true and fair view of banks are otiose because the Government have power to do whatever they want under the Bill as drafted?

Lord Strathclyde

I must return to what I said in my opening words: the principal point of the clause is to deal with a highly technical piece of company legislation. It can be used for some of the points which the noble Lord, Lord Williams, raised. Indeed, I do not think that I need add to that.

Lord Williams of Elvel

I am grateful the noble Lord and again I must say that I do not wish to prolong the debate. However, it seems to me that changing the status of banks as to whether they should provide a true and fair view in their accounts as opposed to their accounts being in conformity with the legislation, is a major change. If the Secretary of State wishes to take those powers, we ought to know about it.

Perhaps I may ask the noble Lord whether he would be prepared in the light of this discussion to give an undertaking on behalf of the Government that the orders which this section envisages should not only be discussed widely in the various professions which are implicated but also be circulated before they come to this Chamber in printed draft to other noble Lords who are interested so that we may also have our input. As he well knows, we cannot amend orders in this place. We should like to have our input before we reach the point of having to debate the order.

Lord Strathclyde

That is what we are doing now. We are discussing what is going into the primary legislation. As I said, that is to enable us to adjust technical points. We set out our present intentions in the Bill, but we reserve the right to change technical points after a great deal of consultation with the industry and after taking into account the comments which were made in Committee yesterday and which will be made today and what the noble Lord has just said. I cannot see why the noble Lord continues to object to the point.

Lord Williams of Elvel

The point that I am trying to impress upon the noble Lord is that we on this side—I believe that I speak not only for the Opposition but for noble Lords in other parts of the Committee—would like to have the same privilege as professional associations and others when a draft order is put out for consultation by the department.

We do not want to be presented with an order upon which the Institute of Bankers, the CBI and the Law Society have commented and we find that we have not received a copy of that draft order. That has been the case over and over again with draft Bills and orders. I repeatedly receive telephone calls from people in those institutions who say that they have received an interesting draft of a consumer protection Bill or something else on which they would like to have my opinion. The Opposition have not received the draft. May we have an assurance that we will receive the drafts when they are circulated to the associations in question?

Lord Boyd-Carpenter

I hope that my noble friend will not dismiss the point that the noble Lord, Lord Williams of Elvel, has put to him because it raises an echo in my mind and, I guess, that of a number of my noble friends. Outside consultation is a good thing, but it happens from time to time, I am afraid, that on technical issues where there has been full outside consultation noble Lords in all parts of this place are not consulted but are faced with approving or disapproving—in most cases the conventionally cannot disapprove—an order.

I should welcome—I do not know whether my noble friend feels able to give it but his noble friend Lord Young of Graffham who is sitting beside him would be in a position to give it—some indication, although not in all cases because that would be a wearisome prolongation of discussion, that in cases where difficult or important points will arise, consultation with outside interests will be followed by consultation with at any rate some noble Lords in this place who have shown some interest in the subject matter. I do not believe that that is an unreasonable request.

Lord Strathclyde

I fully appreciate the concern of the noble Lord, Lord Williams of Elvel, and my noble friend Lord Boyd-Carpenter who spoke clearly on the subject. I am therefore more than happy to give the undertaking that such draft orders will be circulated so that we can have noble Lords' informed comment before we put them to this place, subject, of course, to parliamentary proprieties. In principle, I must confirm my undertaking that noble Lords will be included in all consultations.

Clause 18 agreed to.

Lord Strathclyde

I beg to move that the House do now resume.

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

House resumed.