Sitting of 22 November 1966

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  TECHNOLOGY

    Machine Tools
    Mr. Biffenasked the Minister of Technology what is the forecast value of net new home orders for machine tools during 1967; and how much of this is accounted for by expected public sector purchasing.
    The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Peter Shore): Forecasts of this kind, for obvious reasons, can only be very tentative and it has not been the practice to make them. However, such information as we have suggests that home orders for machine tools in 1967 should not be significantly lower than in the present year.
    Mr. Biffen: Is not that an extraordinarily disappointing Answer in view of the Government's oft-declared target that one should raise manufacturing investment? What is the hon. Gentleman doing in his sponsoring capacity to try to ensure me a rather better answer and more generous figures?
    Mr. Shore: We are carrying out a wide range of measures in order to encourage and maintain investment in machine tools, and we are also prepared to consider measures to sustain, should this be necessary, the level of machine tool demand. I would remind the hon. Gentleman that the industry's order books are at a very high level—indeed, almost a record level.
    Mr. David Price: How does the hon. Gentleman's main Answer tie up with the Government's estimate in the National Plan that machine tool production should
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    increase by an average of 7·8 per cent. between 1964 and 1970?
    Mr. Shore: It ties up perfectly well, because it is the essence of a national plan that one is forecasting over a five-year period what one considers to be the growth of production and output of a particular industry. It is precisely the need to do this, balanced against the often short term fluctuations of demand for an industry, which makes planning so particularly valuable.

    Plymouth (Industrial Development)
    Dr. David Owenasked the Minister of Technology whether he proposes to take steps to help to develop new industry in and around Plymouth, as recommended in the recent Associated Industrial Consultants report, a copy of which has been sent to him.
    The Minister of Technology (Mr. Anthony Wedgwood Benn): When the councils concerned have considered the report, they will no doubt be discussing it with the regional council and the planning board on which my Department is represented. Last July I established an industrial liaison centre in Plymouth.
    Dr. Owen: I am grateful for that Reply. Would my right hon. Friend ensure that when those policy decisions are made full consultation will take place with the Service Departments, particularly the Navy Department?
    Mr. Benn: Yes, Sir, although, since the consultants' report has not yet been considered by the people who are to consider it, it is a little early for me to say any more than that.

    Institute of Advanced Machine Tool and Control Technology
    Mr. William Hamiltonasked the Minister of Technology what plans he has for establishing an institute of advanced machine tool and control technology.
    Mr. Dalyellasked the Minister of Technology when work is scheduled to start on the Institute of Machine Tool and Control Technology at East Kilbride.
    Mr. Shore: The institution will begin work as soon as the director has been appointed.
    Mr. Hamilton: Can my hon. Friend give an idea as to when that will be? When will the institute start operations?
    Mr. Shore: The appointments will take place just as soon as the ordinary selection procedures can be completed. As my hon. Friend will be aware, in the opening stages the institute will make use of the facilities now available both at the N.E.L. and at Strathclyde University.
    Mr. Dalyell: Will consideration be given to the directors including one representative of the motor industry in Scotland?
    Mr. Shore: That is an interesting suggestion and we will certainly consider it.

    Television Rentals
    Mr. Mappasked the Minister of Technology if he will make a statement on the action he has taken in regard to the proposed television rental increase from 5s. per week to 7s. as from 26th July by Messrs. Sedgley Rentals Limited, Droylsden, Manchester.
    The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Edmund Dell): The Ministry of Technology is examining this case on the basis of information received from the Company. My right hon. Friend has not yet reached a decision, but when he has he will communicate with my hon. Friend.
    Mr. Mapp: Is my hon. Friend aware that this Reply is not dissimilar from what I was told on 11th August? Does not he appreciate that a 14 per cent. increase of this nature for old-age pensioners contrasts unfavourably with what happens in the salary and wages sector? It is about time that we were much firmer in the prices sector.
    Mr. Dell: My right hon. Friend will try to expedite his decision and I do not want to make any further comment until then.
    Sir R. Cary: In fairness to the firm named in the Question, may I ask whether, as a service, it is not covered by the Selective Employment Tax?
    Mr. Dell: Yes, Sir. The Selective Employment Tax applies in this case.

    Motor Industry
    Mr. Hattersleyasked the Minister of Technology what is his latest estimate of the total production of motor vehicles in Great Britain during 1967; and how much of the total production he expects to be sold abroad.
    Mr. Christopher Priceasked the Minister of Technology how many staff in his Department are concerned with the motor manufacturing industry.
    Mr. Chapmanasked the Minister of Technology how many staff he has working on the present and future prospects of the motor industry and the impact of Government policy on it; what are their qualifications; and what forecasts are being prepared of this industry's output and exports in the years ahead.
    Mr. Benn: Seventeen staff at Headquarters are engaged on problems concerned with the motor industry, eight full time and the rest for a substantial part of their time. Of the total of 17, nine joined the Department with relevant experience in the Board of Trade, and four others have qualifications in engineering or economics.
    No firm forecasts of the industry's output and exports are possible, but on the basis of current policies I expect total output in 1967 would be slightly lower than in 1966; although exports particularly of commercial vehicles, parts and components, are expected to rise.
    Mr. Hattersley: Will my right hon. Friend agree that exports of private cars will fall in 1967? Would he also agree that the correlation between domestic demand and export sales has been so precise that that reduction in exports is in no small part due to the squeeze which has fallen disproportionately on the motor car industry?
    Mr. Benn: I do not agree that exports of cars will fall next year and, therefore, the second part of the question does not arise. In fact, the correlation between exports and home demand is not a fixed feature of motor car manufacture.
    Mr. Price: Is my right hon. Friend satisfied that the staff he has mentioned has the right sort of experience as well as the qualifications to tackle the job?

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    Is its job simply forecasting and preparing statistics in consultation with the motor firms, or the more positive job of trying to jerk particularly B.M.C. into an era of better labour relations and more sustained growth in output?
    Mr. Benn: Labour relations is a matter not for me but for the Ministry of Labour, but that reminds me to tell my hon. Friend that, of course, a number of other Departments are concerned with the motor car industry and that other Departments of my own Ministry, for example, the N.E.L., are doing work which has some bearing on the motor car industry. But I am still not satisfied with the arrangements inside the Ministry, and I shall be taking steps to strengthen the staff.
    Mr. Chapman: As this industry exports about £500 million or more worth of goods, is it not about time that we either had a "Little Neddy" for it, or something like a "Little Neddy" for each of the five main producers, so that we could start at last some purposive future planning of the industry?
    Mr. Benn: I well appreciate what my hon. Friend is saying. In fact, N.A.C.M.M.I., which has been going for a very long time, has done much of the work which in other industries is done by "Little Neddies", but consideration is being given to the establishment of a "Little Neddy" and a Question to the First Secretary would be appropriate.
    Mr. Biffen: Does not the right hon. Gentleman recognise that output this year is going much below last year's levels? He now says that output for next year will probably not be up to this year's level. Is not that an extraordinary commentary on a party which came to power on its supposed ability to provide for steady growth?
    Mr. Benn: The hon. Gentleman knows very well that the Measures taken in July were designed to curtail home demand. What is interesting is that the motor car industry is likely to be able to produce the same number of cars next year with a reduced labour force, and that, of course, is what productivity is all about.
    Mr. Chapmanasked the Minister of Technology what forecast he makes of
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    the motor industry's output in the year ending August 1967; and how this compares with the preceding year.
    Mr. Shore: In the year ending 31st July, 1966, the industry produced 1,718,172 cars and 451,969 commercial vehicles. The Ministry of Technology cannot forecast the industry's output for the current year to 31st July, 1967, since this will depend on many factors that cannot at present be foreseen, but we expect it to be lower than in the previous period.
    Mr. Chapman: Is it not about time that we had some planning so that we could have a better idea of what output in the next twelve months will be? As this industry is almost an indicator of the whole economy, and as this figure could mean that B.M.C., for example, will be producing 70 per cent. or less of capacity for the next twelve months, is that a very good thing?
    Mr. Shore: I would not like to estimate at what percentage of capacity B.M.C. or any other car manufacturer will be running during the coming year because so much depends on the capacity to raise exports. I do not accept that exports are a fixed proportion of total output. I believe that exports are something which lies very much within the powers of firms.
    Mr. David Price: If the Parliamentary Secretary cannot forecast the output of the motor car industry for next year, how in the name of common sense do the Government attempt to forecast it to the end of 1970, as they do in the National Plan, in which the rate is given as 4·6 per cent.?
    Mr. Shore: The hon. Gentleman is making precisely the same error in relation to the motor car industry which he made a few minutes ago in relation to the machine tool industry. It is the very essence of national planning that meaningful estimates can be made of what demand will be over a period of years, estimates which could not be hoped to be made over a few months or twelve months. That is the essence of the difference between us.
    Sir G. Nabarro: In view of the Minister's statement that next year's

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    exports will be better, how does the Parliamentary Secretary expect exports to go up when price competitiveness abroad depends absolutely on a healthy home market which is rapidly diminishing?
    Mr. Shore: I do not accept that price competitiveness depends wholly on the degree of sales which can be made at home, or on a percentage of sales or volume of output at home. It depends on other factors which enter into productivity, including labour costs. In this respect, as the hon. Gentleman will be aware, the Government have made a positive contribution through S.E.T., the export rebate scheme and in other ways.
    Mr. Hattersleyasked the Minister of Technology what information he has received about revised investment and expansion programmes within the motor manufacturing industry resulting from the reduction in domestic demand for motor vehicles.
    Mr. Benn: The President of the Society of Motor Manufacturers and Traders, Sir Patrick Hennessy, indicated to my right hon. Friend the Chancellor of the Exchequer on 31st October last that the motor industry expected to reduce by 30 per cent. its planned expenditure on investment in the coming year. According to my information, this will probably take the form of reduced expenditure on replacement equipment, rather than curtailment of expansion plans.
    Mr. Hattersley: Will my right hon. Friend confirm that the only manufacturing company which is not reducing its investment programme is the British Motor Corporation which is increasing investment in order to increase its production through more productivity? Will he therefore confirm that both reductions in investment in three-quarters of the industry and increase in investment in one small part of it will result in reductions of the labour force throughout the industry?
    Mr. Benn: The figures given by Sir Patrick Hennessy were given in his capacity as President of the S.M.M.T. If my hon. Friend wants to put down a Question about particular firms, I will see whether it can be answered, but in practice the possibility of increasing exports holds for the industry now its
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    great opportunity to utilise its capacity and stimulate its own investment.
    Mr. David Price: Has the right hon. Gentleman considered the secondary effects of that 30 per cent. reduction of investment in the motor car industry, the effects on the secondary industries which supply the industry with both capital goods and components?
    Mr. Benn: As the hon. Gentleman probably knows, exports of components are going ahead very rapidly now and for the October figure we had a 19 per cent. increase over that of last year.
    Mr. Christopher Priceasked the Minister of Technology what steps his Department is taking to improve the managerial efficiency and export potential of the motor manufacturing industry.
    Mr. Benn: The motor industry has already set itself these objectives and everything my Department is doing in this matter is designed to help it.
    Mr. Price: Could I press my right hon. Friend further on the question of a "Little Neddy" for the motor industry? Is he aware that many of us believe that this job would be far better left to a body set up by the industry, like a "Little Neddy", rather than by a Government Department, such as the Ministry of Technology? Would he give us some sort of date when we can expect a "Little Neddy" for this industry?
    Mr. Benn: The question of a "Little" E.D.C. is for the First Secretary. This is not a conflict between a "Little Neddy" and the Ministry of Technology. In so far as there is any difficulty here it is where a "Little Neddy" would fit into the N.A.C.M.M.I., which brings leaders on both sides of industry and other Government Departments together under my chairmanship.
    Mr. Hattersley: Notwithstanding the earlier Answer given by my right hon. Friend, would he not agree, on reflection, that the export potential of the industry referred to in this Question would best be improved by—if the record of 1963–64–65 is anything to go on—stimulating home demand as well as exports?
    Mr. Benn: My hon. Friend keeps returning to the idea that there is a fixed

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    ratio between home demand and exports, and neither the evidence of this country's motor industry nor of other countries' motor industries confirms this. In the case of tractors and commercial vehicles, the ratio is quite different. Therefore my hon. Friend should not press this point beyond a certain degree.

    National Computing Centre
    Mr. Hordernasked the Minister of Technology what proposals he has for expanding the scale of the National Computing Centre; and whether he will make a statement.
    Mr. Dell: I would refer the hon. Member to the reply given to the hon. Members for the Isle of Ely (Sir H. Legge-Bourke) and Sheffield, Hallam (Mr. J. H. Osborn) on 18th October.—[Vol. 734, c. 9–11.]
    Mr. Hordern: Does the hon. Gentleman realise that his colleague Lord Snow, in another place earlier this year, when he was a member of the Ministry, forecast that there would be a requirement for 15,000 systems analysts by 1970? As there are only 5,000 today, does the hon. Gentleman mean that he has no proposals for the expansion of the National Computing Centre in view of this vast gap?
    Mr. Dell: On the contrary, one important matter with which the National Computing Centre and the Government as a whole are concerned is the supply of systems analysts.

    Scientists and Engineers (Emigration)
    Mr. Moonmanasked the Minister of Technology when the statistics of the number of qualified British scientists and engineers who have emigrated to the United States of America since 1963 will be available.
    Mr. Dell: Complete figures are not available for years since 1963 when certain statistical returns on emigration were discontinued. My right hon. Friend has been looking into whether any useful estimates can be made from other sources.
    Mr. Moonman: I appreciate that Answer. Does my hon. Friend recognise that it is extremely difficult for companies
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    to plan long and short term if these figures are not available? Can he say whether he maintains a register of the reasons given for emigration and, if not, will he consider doing so?
    Mr. Dell: I appreciate that it is most important that we have these figures, and it is for this reason that we are making efforts to obtain at any rate good estimates of them. I will consider my hon. Friend's suggestion about a register.
    Mr. Lubbock: Has the hon. Gentleman considered using the resources of the professional engineering institutions to obtain this information, since they have the addresses of all their members and would be able to supply him with the numbers of those who have gone abroad?
    Mr. Dell: The resources of the professional engineering institutions are certainly one of the sources which we are trying to tap.
    Mr. David Price: Would the hon. Gentleman recognise that on both sides of the House this problem is taken extremely seriously? Will he consider in conjunction with his right hon. Friend an early social survey into the reasons why the emigration rate of scientists and engineers is rising?
    Mr. Dell: We certainly regard this as a matter of the utmost importance, and the Committee on Manpower Resources for Science and Technology has set up a working group on emigration under Dr. F. E. Jones, managing director of Mullard, which will take all these matters into consideration and make proposals.

    Bio-Engineering
    Mr. Dalyellasked the Minister of Technology what representations were received from the Scottish Council by his predecessor on the subject of bio-engineering; and what action is being taken.
    Mr. Dell: The Scottish Council suggested that bio-engineering could become a growth industry of interest to my right hon. Friend's Department. The Ministry of Technology is discussing with the Health Departments and the Medical Research Council the possibility of establishing an institute to provide a link between research and technology in this

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    sphere. We and the Health Departments are identifying user needs for discussion with industry.
    Mr. Dalyell: When is it hoped to get results from this?
    Mr. Dell: These discussions are going forward, but I would not like at this stage to give my hon. Friend a date.

    Institutes of Technology
    Mr. J. H. Osbornasked the Minister of Technology how many institutes of technology he has set up in universities, colleges of advanced technology, and elsewhere, respectively; for what purpose they were set up; how they have been financed; and what has been the cost borne by his Department.
    Mr. Shore: None yet, Sir. Preparatory work is in hand and the first institute, at East Kilbride, will begin as soon as the appropriate appointments are made.
    Mr. Osborn: Can the hon. Gentleman say what number is envisaged and whether arrangements will be made to explain to us what his proposals are, because these institutes are neither research associations, universities, nor colleges of technology? They seem to be a new breed of activity for scientific development. Would the Minister make a statement about his proposals for the future of the institutes?
    Mr. Shore: I will ask my right hon. Friend to consider this. These institutes in a sense fill a gap between existing research stations and universities and, to some extent, they are hybrid. Their origin can be traced back to the Fielden Report, which the hon. Gentleman will remember. There are a number of proposals at present being considered for new institutes, but we are not yet ready to make a statement.
    Mr. David Price: Would the hon. Gentleman agree that for a large number of reasons it is very much better that these institutes should be set up within a university campus rather than being set up in isolation?
    Mr. Shore: Yes, I would agree with that, and I am sure that wherever possible this will be the pattern.

    Advisory Council on Technology
    Mr. J. H. Osbornasked the Minister of Technology whether, in view of the setting up of an advisory committee on science and technology under Sir Solly Zuckerman, he will make a statement about the future rôle and work of the Advisory Council on Technology.
    Mr. Benn: The setting up of the new Advisory Committee does not call for any change in the rôle and work of the Advisory Council on Technology.
    Mr. Osborn: Can the Minister say to what extent he will be able to determine policy and to what extent it has now been taken out of his hands?
    Mr. Benn: As my right hon. Friend the Prime Minister made absolutely clear when he announced the new Committee, its rôle is a strategic one, covering the whole range of our national effort, whereas the Advisory Council on Technology brings into the Ministry of Technology some of the most distinguished industrialists and academics in the country who will advise me on the work that I do. There is no conflict whatever here.
    Mr. Hogg: In spite of the rather confusing announcement made by the Prime Minister on this subject, will the right hon. Gentleman draw his right hon. Friend's attention to the fact that the reception of this new Committee has been distinctly cool in the scientific Press?
    Mr. Benn: In this case confusion, like beauty, is in the mind of the beholder.

    Computer Systems
    Mr. David Priceasked the Minister of Technology what steps he is taking to ensure that Ministers and their senior advisers are made aware of the potentialities of computer systems for forward planning, model building and decision-taking, as distinct from routine data processing.
    Mr. Benn: Computers offer a most valuable aid to management. My right hon. Friend the Chancellor of the Exchequer is responsible for Civil Service training in this area. My Department's rôle is advisory.
    Mr. Price: Will the right hon. Gentleman agree that in the public sector, as,

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    to be perfectly fair, in the private sector, the vast majority of computers are at present being used for routine data processing work and that their potentialities for decision-making, model building and general forward thinking have been grossly underestimated?
    Mr. Benn: I absolutely agree. In the Post Office we were using computers for the optimum deployment of Post Office vans in London and even for the optimum deployment of postmen going on their rounds in Norwich. There is no doubt that in the long run, full scale computerisation of Government operations will not only enable us to reduce the number of administrators, but will provide much-needed help for decision-making in Government, which is very difficult.
    Mr. Edwin Wainwright: Will my right hon. Friend use all the pressure he can to ensure that industry makes use of computers?
    Mr. Benn: The problems in Government and industry are curiously similar—both want to be relieved of slave clerical labour and to get assistance in forecasting for good decision-making.

    International Research and Development Company, Newcastle
    Mr. Rhodesasked the Minister of Technology what contribution Her Majesty's Government make to the International Research and Development Company in Newcastle; what proposals there are for further backing in the immediate future; and whether he will make a statement.
    Mr. Dell: As part of the superconductivity project the Ministry of Technology is currently supporting work under contract with the company to a total amount of £43,000. Proposals for support in other areas are at present being examined by the Department.
    Mr. Rhodes: Is my hon. Friend aware that during the three-year life of this research organisation it has received the backing of foreign Governments as much as it has received backing from our own Government? Is it not utterly crazy that this organisation is now having to hawk its wares around North America in order to survive? Surely we can stimulate
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    British industry to use its products and research?
    Mr. Dell: I very much hope that the services of this company will be found of use to British industry, but my hon. Friend would agree that I.R.D. has had considerable support from the Government.

  NATIONAL FINANCE

    Sporting Organisations
    Mr. Roseasked the Chancellor of the Exchequer whether he will review the present anomalous position of sporting organisations with regard to their recognition as charities.
    The Chief Secretary to the Treasury (Mr. John Diamond): I do not know what anomalies my hon. Friend has in mind. In order to be recognised as charities, sporting organisations, like any other bodies, have to show that they are established for charitable purposes only.
    Mr. Rose: Is my right hon. Friend aware that the classification in respect of charities concerning sporting organisations is hopelessly outmoded? Will he look into this with a view to stimulating participation in the amateur sports other than riding and shooting?
    Mr. Diamond: I cannot share my hon. Friend's view, which I would like to. As an ex-Member for Blackley, I would like to support everything that my hon. Friend says. I cannot share his view that this is outmoded. The Recreational Charities Act, 1958, which deals with these matters, is a fairly recent piece of legislation.
    Mr. Philip Noel-Baker: Will my right hon. Friend represent to the Chancellor that many sporting organisations are gravely embarrassed by present taxation, and that this is defeating the whole policy of the Government over sport, to which we give such strong support?
    Mr. Diamond: It is right that we should support sport and that we should do it in the way in which we are doing it, namely, by direct grants. Giving support by way of Income Tax relief on the grounds that it is a charity is an entirely different matter.
    Mr. Lubbock: Can the right hon. Gentleman say what representations have been made to the Government by the Sports Council about the effect of S.E.T. and whether the increase in grant made in the present year is more than sufficient to offset the increase in costs imposed by this new tax?
    Mr. Diamond: No such representations have been brought to my attention.

    National Savings
    Mr. Alan Lee Williamsasked the Chancellor of the Exchequer, in view of the importance of national savings in the present economic difficulties, if he will set up an inquiry into the work and structure of the National Savings Movement, and include in its terms of reference the possibility of handing over the work of national savings to the new Public Corporation which is to be responsible for the work of the General Post Office.
    The Chancellor of the Exchequer (Mr. James Callaghan): I do not think that a specific inquiry into the work of the National Savings movement is called for. My right hon. Friend the Postmaster-General made a statement on 15th November about the future of the Post Office Savings Department.
    Mr. Williams: Would my right hon. Friend agree that the great bulk of national saving is done through trustee savings banks and the General Post Office? Is there any need to have a separate Government Department employing many people responsible for national savings? Should not my right hon. Friend be encouraging the voluntary element?
    Mr. Callaghan: The National Savings Movement is largely a voluntary element, and I think that it commands widespread praise for the ability with which it has adapted itself to changing conditions. I do not think that my hon. Friend would cast any aspersions on the work which it is doing.
    Sir C. Osborne: Would the right hon. Gentleman agree that the best way in which he can help the National Savings Movement would be to tie repayment to the cost of living and so offset the evil effects of inflation on savers?
    Mr. Callaghan: No, that would be a quite wrong thing to do. Our object as a nation should be to overcome inflation and not relate increasing payments to the possibility of it.
    Mr. William Hamiltonasked the Chancellor of the Exchequer if he is satisfied with the current rate of savings; and if he will make a statement on future policy.
    Mr. Callaghan: The general level of savings in the first half of the year remains high. As I attach great importance to this I am always ready to consider ways of increasing the flow.
    Mr. Hamilton: Is my right hon. Friend satisfied that all sources of small savings are being tapped and that the institution of a State public unit trust would not tap this source, which is probably quite large?
    Mr. Callaghan: The question of a State unit trust has been frequently considered, and by the National Savings Movement, and I understand that views about its efficacy are changing. I am ready to keep it under consideration, but I would not want to reach a final conclusion or, it now. There is evidence that small savings are forthcoming to a large extent through the medium of National Savings and also the Post Office savings investment accounts.
    Captain W. Elliot: Would not the Chancellor agree that even if current savings are high they are very much lower than they were? Does he not think that urgent action should be taken to rectify this?
    Mr. Callaghan: I am not sure about that. I do not think that they have fallen away very much. [HON. MEMBERS: "Oh."] Let us wait and see. My own recollection is that national savings are keeping up quite as well as they have been over recent years.

    £ Sterling
    Mr. Winnickasked the Chancellor of the Exchequer whether he will introduce legislation to enable Her Majesty's Government to take action against those British companies which sold sterling in large quantities earlier this year and thus created the run on the £ sterling.
    Mr. Callaghan: No, Sir.
    Mr. Winnick: Is it not a fact that it was British companies which in the main sold hundreds of millions of £s earlier this year and not so much Continental firms'? Would not my right hon. Friend agree that at a time when British workers are refused wage increases because of the national interest they should know that there are numerous British banking firms which sold Britain short a few months ago?
    Mr. Callaghan: No, that is not my information. United Kingdom residents cannot indulge in outright speculation. Their spot transactions are strictly limited by exchange control. They are allowed to buy or sell forward only in order to cover general trading or commercial transactions. [Interruption.] I would get on much better without your help.
    Mr. Speaker: Order. I am not trying to help the right hon. Gentleman.
    Mr. Callaghan: You are invaluable, Sir.
    I have had a careful examination made into this, and, although there have been strong reports to the contrary in the newspapers, it is not my information that this selling took place to any large extent by British residents. [Interruption.] My hon. Friend may not agree, but I have examined the facts; I am not aware that he has. We do not get anywhere by pursuing will o' the wisps which do not exist.

    Government Expenditure
    Mr. Ridsdaleasked the Chancellor of the Exchequer what action he is taking to reduce the growth of Government spending.
    Sir J. Edenasked the Chancellor of the Exchequer what directives he has given to Government Departments to undertake a specific and formal cost reduction programme.
    Mr. Callaghan: Departments have been instructed to conduct a searching reconsideration of the need for every part of their proposals for inclusion in the Estimates for 1967–68, which I shall lay before the House in due course.
    Mr. Ridsdale: But why are the Government continuously trying to kill the goose
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    which lays the golden egg? Surely the high level of Government spending is a direct cause of the fall in industrial production. How can we have new wealth for the social needs unless we are able to increase industrial production? Will the right hon. Gentleman stop being so complacent about this?
    Mr. Callaghan: That comes very ill from a former Minister in a Government under which defence spending was quite unrestrained. We have succeeded in curbing and reining back unnecessary expenditure to a degree never undertaken by our predecessors. It is not right to say that the general level of taxation is higher than it is in other countries. The average level of taxation in this country is well in line with that of our competitors overseas.
    Mr. Orme: Would my right hon. Friend recognise that any attack which he makes, particularly on Government military expenditure overseas, will have the fullest support of many Members on this side of the House?
    Mr. Callaghan: It is the Government's declared policy to reduce overseas military expenditure, which has been too high in relation to the total burdens which we carry, and we shall continue to pursue that aim.
    Mrs. Thatcher: Would the right hon. Gentleman say whether at the level of Government expenditure which he is contemplating for next year he will have to lake an increasing proportion of the gross national product in total taxation?
    Mr. Callaghan: When the Estimates are laid, I am sure that the hon. Lady will want to examine them. But I can tell her that we have been able to prune back a great deal of the luxuriant expenditure which her Government left behind.

    Public Employees
    Mr. Ridsdaleasked the Chancellor of the Exchequer what has been the increase in numbers of public employees in both Government and local government service since 15th October, 1964.
    Mr. Diamond: The increase in the Civil Service, both industrial and non-industrial, excluding the Post Office, between 1st October, 1964, and 1st July, 1966, was 9,000. Including the Post

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    Office, the increase was 26,000. As regards local government, there was a rise of 159,047 in the two years.
    Mr. Ridsdale: As these are such serious figures, would the right hon. Gentleman say what the increase in Government spending is to pay for these additional employees?
    Mr. Diamond: The simplest way of calculating the figure is to allow about £1,000 per civil servant. But in order to put the figures in perspective, I should say that the proportionate increase among centrally employed civil servants in the last nearly two years is broadly in line with the increase over the first four years of this decade.
    Mr. Frank Allaun: While appreciating that if we increase the social services we need more civil servants, is it not wrong that with 440,000 men in the Forces we have 350,000 civil servants looking after them?
    Mr. Diamond: My hon. Friend rightly points out that if we increase services we have to increase our manpower to carry them. The House will recollect that, in addition to increased work, there has been a reduction in Civil Service hours of work.
    Mr. Hogg: Do not the figures given by the right hon. Gentleman reveal a certain amount of luxuriant growth which might be a suitable subject of pruning?
    Mr. Diamond: I am grateful for what the right hon. and learned Gentleman has said in relation to the figure which I gave for increases in the number of local government employees. This is a matter which one should look into very carefully.
    Mr. Shinwell: Is there any indication that when we have a sufficient supply of computers we shall have fewer civil servants?
    Mr. Diamond: I think that that is a rather different question.

    Customs and Excise Officers
    Mr. Mathewasked the Chancellor of the Exchequer if he will review the sight standards for applicants seeking to be appointed as officers of Customs and Excise.
    Mr. Diamond: A review is already in train. I will write to the hon. Member as soon as a conclusion is reached.

    Civil Servants (Drawing Office Grades)
    Mr. Dribergasked the Chancellor of the Exchequer how soon negotiations with civil servants in the various drawing office grades are to be resumed and completed, in accordance with the assurance contained in a letter dated 26th September, 1966, from the official staff side of the Whitley Council.
    Mr. Diamond: As soon as practicable after the White Paper on the criteria to govern increases in incomes during the period of severe restraint has been published, and after discussions with the staff side of the National Whitley Council on its application to the Civil Service have been completed.
    Mr. Driberg: Is my right hon. Friend aware that that does not quite answer my Question? I was asking him when the discussions between the official side and the staff side would be resumed and completed. May we take it that we do not have to wait for the period of severe restraint for them at least to re-start?
    Mr. Diamond: I thought that I had given that precise answer to my hon. Friend by saying "as soon as practicable … after the White Paper has been published". The White Paper is expected very shortly.
    Mr. McMaster: Is the right hon. Gentleman aware that this group of civil servants has been unfairly treated compared with other grades in the Civil Service who have had a Whitley Council rise? Will he give a guarantee that the rise of at least a 4½ per cent. cost of living bonus will be retrospective?
    Mr. Diamond: These are matters for discussion.

    Immigrants
    Mr. John Hallasked the Chancellor of the Exchequer what estimates have been made of the effect on Great Britain's balance of payments of the large-scale in-flow of immigrants into Great Britain.
    Mr. Callaghan: This depends on many factors and there is no complete answer.

    1137
    However, the current study being made by the National Institute for Economic and Social Research will, I hope, go some way to answer the hon. Gentleman's question.
    Mr. Hall: Would not the Chancellor agree that, in the absence of considerable spare capital capacity, large-scale immigration leads to excess domestic demand and thus creates a worsening in the balance of payments position? Should not this factor be taken into consideration when deciding the scale on which immigration is allowed?
    Mr. Callaghan: This is what the study is now trying to evaluate. I would hope that our immigration policy would never be determined purely on balance of payments considerations. But there are a number of factors to be put on both sides. There is clearly a long-term gain from the work of the immigrants who arrive here. Against that must be set some of the factors which the hon. Gentleman has enumerated. I think that this study will provide some valuable information.
    Mr. Rose: Would not my right hon. Friend agree that the supplementary question of the hon. Member for Wycombe (Mr. John Hall) was deliberately misleading and mischievous and that, in computing this, one must recognise the enormous contribution which immigrants have made to the economy of this country and in a number of respects?

    Public Office Rules
    Mr. John Hallasked the Chancellor of the Exchequer when the revision of the Public Office Rules will be completed.
    Mr. Diamond: I hope soon to consult the staff interests about revised Public Office Rules. When their views have been considered, a Statutory Instrument will be made.
    Mr. Hall: Would not the Minister agree that these rules have been under revision for more than 18 months? Does he not appreciate that in some cases pensions are dependent upon the publication of the new regulations, because no decision can be made until they are published?
    Mr. Diamond: I recognise that these matters are complicated and need very
    1138
    careful consideration, but I think that the Answer I have given should satisfy the hon. Member.

    Gold Coins
    Mr. Higginsasked the Chancellor of the Exchequer whether the policy of the Government is still to give people further time to hand in gold coins under S.I., 1966, No. 438.
    Mr. Diamond: Yes, if there is good reason for the delay in complying with the Order.
    Mr. Higgins: Statutory powers having been taken, who decides whether a person retaining, say, half-a-dozen gold coins should be prosecuted, and what criteria are applied?
    Mr. Diamond: The position is the normal one: the Treasury is interested in the matter, but the person who decides whether a prosecution should take place is the Director of Public Prosecutions.

    Dividends
    Sir C. Osborneasked the Chancellor of the Exchequer in how many cases dividends have been reduced since the wages and incomes policy was imposed on 20th July.
    Mr. Callaghan: 206 publicly quoted companies have announced reduced dividends.
    Sir C. Osborne: How many have been increased? Would not the Chancellor agree that most directors of public companies have tried to play ball with him in his policy?
    Mr. Callaghan: Yes, Sir. About 880 dividends have been announced. About 570 have been published as being the same, 206 have been reduced, and there is a balance of 108, some of which have increased dividends within the policy or under consideration by the Treasury.

    Computers
    Mr. David Priceasked the Chancellor of the Exchequer what techniques of investment appraisal are used by his Department in determining the economic viability of any proposal for a new computer in any part of the public service.
    Mr. Diamond: All Government Departments submitting proposals for the purchase of automatic data processing equipment are required to demonstrate their economic viability using the discounted cash flow technique wherever this is appropriate.
    Mr. Price: Will the right hon. Gentleman recognise that we are very pleased that the Treasury is now using the d.c.f. approach? Will he also take into account that there is that part of viability of the computer that is not economically measurable but is of importance in decision-taking?
    Mr. Diamond: We will, of course, take into account the matters which the hon. Member has mentioned. I would simply add that the d.c.f. technique has been well known to the Treasury for a great number of years.

  LOCAL GOVERNMENT

    Atmospheric Pollution
    Mr. Blenkinsopasked the Minister of Housing and Local Government when he will make regulations under Section 7 of the Clean Air Act, 1956, imposing requirements for measuring and recording dust emissions from certain classes of plant.
    The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Robert Mellish): Draft regulations are being prepared which it is hoped to circulate to interested organisations for comment early next year.
    Mr. Blenkinsop: Is my hon. Friend aware that the decision to publish this next year will be widely welcomed throughout the country?

  MEMBERS' AND MINISTERS' SALARIES
  Sir C. Osborneasked the Prime Minister, in view of the widespread dissatisfaction at his wage standstill policy amongst industrial workers, if he will take steps, by legislation and otherwise, to reduce Members of Parliament's salaries by 10 per cent. and Ministerial salaries by 20 per cent.; and if he will make a statement.
  The Prime Minister (Mr. Harold Wilson): No, Sir. The aim is temporarily to stabilise incomes, not to reduce them.
  Sir C. Osborne: Is the Prime Minister aware that this letter from No. 10 Downing street states
  "This suggestion does have a strong appeal"?
  If he says that on paper, why does he not act upon it? Why does he not enable Members of the House to share in the austerity that he is imposing upon others?
  The Prime Minister: Obviously, the suggestion has a strong appeal. It is appealing to the hon. Member and to very many people who write to me. There is no question about that. This matter was settled, however, as a result of a committee which was set up, with the agreement of all parties, before the 1964 election. So far as Members of Parliament are concerned, that report was acted upon. In the case of Ministers, there was a six months' standstill and then the report was accepted only as to one-half of the recommended increase.
  Mr. Blackburn: Does not my right hon. Friend agree that, whatever merit there may be in this suggestion, the hon. Member for Louth (Sir C. Osborne) is the last person who should make it since he is one who is likely to be least affected by it?
  The Prime Minister: I would not be prepared to make invidious comments on any hon. Member in connection with his approach to this question, but any hon. Member is, of course, free, if he is in reasonably comfortable circumstances or has earnings outside, to decide, as some hon. Members always have done in the past, not to receive his salary as a Member of Parliament.
  Mr. Molloy: Will my right hon. Friend note that the sort of Question which has been put to him and which initiated this discussion is designed mainly to get cheap, sleazy publicity and that he ought to treat it with utter contempt?
  The Prime Minister: No, Sir. I am sorry, I cannot accept my hon. Friend's suggestion. It is not for me to inquire into the circumstances behind the Question. I know that the hon. Member for Louth feels strongly on this matter and

  1141
  has said so on a number of occasions outside. While very often many of us disagree with his proposals, I am not usually in much doubt of the sincerity with which he puts them.
  Mr. Lubbock: Will the Prime Minister make inquiries as to the percentage by which the emoluments of the hon. Member for Louth have increased as chairman of two large companies—[Interruption.]
  Mr. Speaker: Order. I hope that we can conduct debates politically and not personally.
  Hon. Members: Withdraw.
  Mr. Lubbock—[Interruption.]
  Sir G. Nabarro: On a point of order. You have frequently ruled, Mr. Speaker, as have your predecessors, that it is out of order to make dishonourable imputations against an hon. Member. An hon. Member opposite has referred to sleazy propaganda by my hon. Friend the Member for Louth. As that is clearly a dishonourable imputation, would you not cause it to be withdrawn?
  Mr. Speaker: Order. I hope that the hon. Member will ask, but not attempt to make Ruling for the Chair. If something had been said that was out of order, the Chair would have called attention to it.
  Mr. Lubbock: May I ask—
  Sir G. Nabarro—
  Sir C. Osborne: On a point of order, Mr. Speaker.
  Mr. Speaker: Order. We are wasting valuable Question Time. Sir Cyril Osborne, on a point of order.
  Sir C. Osborne: Since a slur has been cast on my reputation, may I seek your guidance as to how I can best defend myself from this baseless and foul slander?
  Mr. Speaker: The hon. Gentleman must seek his Parliamentary opportunities. I called attention to the moment when I thought that the bounds of order had been overstepped in the supplementary question of the hon. Member for Orpington (Mr. Lubbock). Mr. Lubbock—question.
  Mr. Lubbock: I apologise, Mr. Speaker, if I stepped outside the bounds
  1142
  of order. My question to the Prime Minister is this. Does he not consider that greater savings would accrue to the Exchequer by imposing a means test on hon. Members whose outside interests are so extensive that they cannot possibly pay adequate attention to their Parliamentary duties?
  The Prime Minister: The idea of a means test has been considered repeatedly both by Select Committees and other Committees concerned with the remuneration of Members of Parliament, and it has been rejected after being considered carefully by the House itself. As to the suggestion that any hon. Member has too many outside interests to be able to do his work in this House adequately, that must be a question for the hon. Gentleman concerned to decide and cannot be a matter for me; nor is there any Ministerial responsibility for who is chairman of what public or private company.
  Mr. Hogg: Does not the right hon. Gentleman recognise that those of us present on both sides of the House who wish to keep this out of party politics would find it easier to do so if hon. Members who do not have that wish were a little less offensive to individual hon. Members of the House?
  The Prime Minister: I welcome very much the tone in which the right hon. and learned Gentleman has spoken, in view of his well-known desire on all occasions never to be offensive and never to make party points.

  ADVISORY COMMITTEES (INDUSTRIALISTS AND TRADE UNION REPRESENTATIVES)
  Mr. Biffenasked the Prime Minister if he will list the number of advisory committees connected with the National Economic Development Council, the Department of Economic Affairs, the Board of Trade, the Ministry of Technology, the British National Exports Council and the British Productivity Council which involve voluntary service by industrialists and trade union leaders; by what means the productivity of these committees is measured; and if he will make a statement.
  The Prime Minister: With permission, I will circulate the information for which the hon. Member asks in the OFFICIAL REPORT.
  Mr. Biffen: Would not the Prime Minister agree that these committees take up a great deal of time? Is there not now evidence that business men should give priority to giving their full-time activities to improving the profits of their company and thus to providing maximum employment?

  NUMBERS OF CONSULTATIVE AND OTHER COMMITTEES, ON WHICH INDUSTRIALISTS AND TRADE UNION REPRESENTATIVES SERVE VOLUNTARILY, WHOSE FUNCTIONS INCLUDE AN IMPORTANT ADVISORY ELEMENT

  Parent Department or Organisation

  Number of Committees

  Notes

  National Economic Development Council.

  25

  Including 21 Economic Development Committees for particular industries, most of which also have a number of sub-committees.

  The Department of Economic Affairs.

  8

  The regional Economic Planning Councils. [In addition a Consultative Committee for Europe is in process of being set up.]

  The Board of Trade

  17

  On widely varying subjects (e.g. statistics, films, civil aviation). There are also many working groups (some temporary) which advise the Marine Division of the Department on various matters, mostly concerned with the safety of life at sea.

  The Ministry of Technology

  70

  30 concerned with the central work of the Ministry including the interests of particular industries; and 40 concerned with the research work of the Ministry's various Research Stations. There is also a number of committees connected with the Atomic Energy Authority, the National Research and Development Corporation, the British Standards Institution and the various Industrial Research Associations which although not reporting to the Ministry are frequently closely associated with it, through representative members.

  The British National Expon Council.

  13

  Some of these also have sub-committees.

  The British Productivity Council

  4

  In addition, there are about 130 Local Productivity Committees.

  I am satisfied that these committees are making a valuable contribution to the machinery of government in the interests of the country's economy. I welcome the opportunity of expressing the Government's great appreciation of the voluntary service which industralists, trade union leaders and others are prepared to give in this way.

  GOVERNMENT EXPENDITURE
  Mr. Kenneth Lewisasked the Prime Minister what recent representations he has had about the need to cut Government expenditure; and if he will now issue instructions to all Ministers to do this.
  The Prime Minister: I would think that very many, if not all, of the business men concerned feel that they are contributing greatly to helping the solution of the nation's economic problems and to helping to get done on a national scale some of the things on productivity and on exports which so many of them are doing in their own firms.
  Following is the information:
  The Prime Minister: Like all hon. Members I receive a number of representations some urging cuts more urging increases in Government expenditure. So far as expenditure in 1967–68 is concerned, Departments have been instructed to be rigorously selective in their choice of services for inclusion in the Estimates which my right hon. Friend will be laying before the House in due course. For later years, public expenditure will be reviewed as part of the planning operation announced by my right hon. Friend the First Secretary on 10th November.
  Mr. Lewis: But will the Prime Minister translate those mere words into action? The Chancellor of the Exchequer announced this afternoon that there was

  1145
  a very serious increase in the numbers employed in central and local government. Everyone knows that Government expenditure is rising. Is it not time that the Government practised what they preach to other people?
  The Prime Minister: We are carrying out the words that I have said in practice, but the hon. Gentleman will surely wish to await the publication of the Estimates before he comments on them.
  Mr. Heath: Can the Prime Minister tell us whether it is still the Government's intention that Government expenditure should be permitted to increase by 4½ per cent. a year in real terms, and will the Government adhere to that?
  The Prime Minister: In terms of 1964 prices, that is our general policy. The right hon. Gentleman will have to wait until he sees the Estimates before he can appreciate how far it is possible in any year to hold to that figure. In particular, he will be aware of the fact that, in any year, commitments will have been made two, three, or even four years earlier which it is impossible to cut without loss. We have made a number which have been running from previous years and have faced great controversy in this House as a result.

  MOTOR CAR INDUSTRY
  Mr. Kenneth Lewisasked the Prime Minister whether he will make a statement, following his official meeting with representatives of employees in the motor car industry on Monday, 31st October.
  The Prime Minister: I would refer the hon. Member to the statement issued to the Press after the meeting, a copy of which is in the Library.
  Mr. Lewis: Is the Prime Minister aware that, on examining what apparently he said to the motor car workers, there seems to be a difference between what he said to them and what the Leader of the House said at the weekend? Could he comment on what the Leader of the House said? Was this double-talk on the part of the right hon. Gentleman, or have we double navigation now?
  The Prime Minister: No, Sir. So far as my right hon. Friend's statement is
  1146
  concerned, there is a Question on the Order Paper which I shall be dealing with when we reach it, either this week or next week. There is no contradiction between what I said to the motor car employees, what my right hon. Friend the Chancellor said to the employers, and what my right hon. Friend said this weekend, which I happen to know was carefully considered. Indeed, my right hon. Friend was courteous enough to let me see it in advance, and I thought that it was excellent.

  DOWNING STREET (MISS WELLS)
  Sir Knox Cunninghamasked the Prime Minister when, and for how long, Miss Wells was employed in 10 Downing Street.
  The Prime Minister: The lady in question was not a public employee and details of her employment are not therefore matters on which it would be normal for answers to be given in this House. Nevertheless, I am prepared to tell the hon. Gentleman exceptionally that the Answer to his Question is "November, 1965, and 14 days respectively".
  Sir Knox Cunningham: May I ask the Prime Minister two questions? Who recommended Miss Wells; and, while she was working in No. 10, did she have access to the Garden Room?
  The Prime Minister: The hon. and learned Gentleman is already aware from what I have said in the House that she had no access to any official information whatsoever. Because of the illness of my wife's secretary, this lady came to No. 10 Downing Street on loan from Transport House. As I have told the House before now, when her attitude was discovered to one or two questions on which she was typing stock letters about Vietnam, doubts were expressed, and she was returned to the place from which she came. She had no access at any time to confidential information. She had no access to the Garden Room. I have altered the system which my predecessors followed in relation to temporary employment in the Garden Room, where people who had not been vetted had access to and worked in the Garden Room temporarily.
  Mr. McNamara: Is my right hon. Friend aware how much we on this side of the House deprecate the way in which hon. Gentlemen opposite are using this lady's name for the purpose of making sleazy and dishonourable political points? May I ask my right hon. Friend for how long the hon. and learned Member for Antrim, South (Sir Knox Cunningham) was employed at No. 10 Downing Street, and with what results?
  The Prime Minister: The hon. and learned Member for Antrim, South is well aware of these things, because I think that he had a room at No. 10 Downing Street, and I am surprised that he did not use his highly respectable concern for security questions to clear up the situation in the Garden Room to which I have drawn attention.
  Sir Knox Cunningham: Is the right hon. Gentleman aware that, during the time that I was in No. 10 Downing Street, no crypto-Communists were employed there?
  The Prime Minister: Nor have there been any crypto-Communists employed at No. 10 Downing Street in my time. There have always been small political staffs there, but I have kept my political staff doing political work. When the hon. and learned Member for Antrim, South was there, there was an ex-employee of the Conservative Central Office employed as an official secretary who, on Mr. Macmillan's departure, went to another place as a Conservative Peer. There are none like that in my private office.
  Sir Knox Cunningham: On a point of order, Mr. Speaker. The Prime Minister has referred to a temporary civil servant—[Interruption.]—who was—
  Mr. Speaker: Order. The hon. and learned Member for Antrim, South cannot raise a point of order unless he sits down when Mr. Speaker stands. Sir Knox Cunningham, on a point of order.
  Sir Knox Cunningham: The Prime Minister has referred to someone who is now a Member of the other House and who was then employed as a temporary civil servant and did all his work as a civil servant without receiving emoluments.
  Mr. Speaker: Order. That is not a point of order. It is a point of information.

  SPECIALIST COMMITTEES
  Mr. Wallasked the Prime Minister if he will now make a statement about the setting up of specialist committees of the House.
  The Prime Minister: I would ask the hon. Member to await the proposals which my right hon. Friend the Lord President of the Council hopes to put before the House, I hope next week.
  Mr. Wall: I welcome the right hon. Gentleman's reply, but can he confirm that he has studied the American system which gives far more consideration to details of defence and foreign affairs under the specialist committee system, and will he bear this in mind?
  The Prime Minister: The hon. Gentleman knows that this matter has been extensively discussed between the two Front Benches, and that we have in mind, as I am sure right hon. Gentlemen opposite do, experience from other countries. I have expressed my doubts in the past why it would not be suitable to set up committees precisely on the American model in this House, particularly as regards defence, where security is so much involved, and would mean creating first- and second-class Members, some of whom had access to very secret material while others had not.
  Mr. Mendelson: Before making a final decision on this matter, will my right hon. Friend also keep in mind the contrary opinion to that expressed by the hon. Member for Haltemprice (Mr. Wall), that the concentration of foreign affairs in a specialist committee in the United States Congress has led to the situation in which the House itself has become a mere rubber stamp and has lost all the traditional rights to have meaningful debates on foreign affairs?
  The Prime Minister: I am aware of this contrary opinion, and our practice, not only in the matter of committees, but in the matter of full Parliamentary debates, is so different from that of the United States that I do not think it is helpful to draw too many conclusions from their practice.

  UNITED STATES OF AMERICA (MINISTERS' VISITS)
  Mr. Danceasked the Prime Minister what official visits have been paid by Her Majesty's Ministers to the United States of America since 12th August, 1966.
  The Prime Minister: In addition to those visits listed in the Answer I gave on 18th October to a Question by my hon. Friend the Member for West Ham, North (Mr. Arthur Lewis), my right hon. Friend the Chancellor of the Duchy of Lancaster visited the United States of America from 8th to 11th November.
  Mr. Dance: Is not the right hon. Gentleman aware that the Minister of Transport was on a lecturing tour to America which did not improve Anglo-American relations? Would not he agree that a small fraction of the cost of her trip would have been better spent teaching her to drive so that she could see at first hand the frustration the British motorist has on our present roads?
  The Prime Minister: I did not catch the concluding words of the hon. Gentleman's supplementary question. He seemed to be addressing his hon. Friends behind him. He was not turning to face you, Mr. Speaker, or me, so I could not hear what he said. I think that I caught the drift of the early part of his question. My right hon. Friend's visit was concerned with studying American techniques in matters of transport, especially urban transportation.
  As to whether or not it improved Anglo-American relations, the hon. Gentleman usually has a high standard in these matters, and he should not believe all that he reads in the Press. Nor should he be carried away from his usual posture of stability by a recent television programme in which somebody with a high degree of publicity in America came over and gave a falsified account of what my right hon. Friend said there.

PRICES AND INCOMES (WHITE PAPER)
3.33 p.m.
The First Secretary of State and Secretary of State for Economic Affairs (Mr. Michael Stewart): With permission, Mr. Speaker, I wish to make a statement.
After consultation with the Confederation of British Industry, the Trades Union Congress, and other interested parties, I am laying a White Paper before Parliament stating the principles which should govern prices and incomes in the first half of 1967. Copies will be available in the Vote Office this afternoon.
The consultation showed a wide measure of agreement that in this period there must be exceptional restraint on prices, charges and all forms of income.
Proposals for price increases must be judged by criteria of severe restraint. The criteria set out in the White Paper on the standstill cannot, therefore, be relaxed, save that there may be exceptional circumstances in which, without some increase in price, the receipts of an enterprise would not be sufficient to enable it to maintain efficiency and undertake necessary investment. It is important that prices should be reduced wherever possible: the removal of the import surcharge will offer some scope for reductions.
Increases in incomes during this period must be exceptional and severely limited. The criteria for this purpose, therefore, are not invitations to increases, but rigorous tests to be applied to any claims. Accordingly, the Paper redefines the original criteria concerning productivity, lowest-paid workers, distribution of manpower and comparability, in much stricter terms. The chief emphasis is on agreements which will genuinely increase productivity and serve the national interest as well as the interests of those immediately concerned; and on agreements whose sole purpose is to help the worst-off in the community.
Commitments for pay increases entered into on or before 20th July will have their operative dates deferred for 6 months or until at least 1st July, 1967, whichever is the earlier. Commitments for pay reviews to take effect after 20th July, where the amount of the increase had not

1151
by then been determined, should have their operative dates deferred until at least 1st July, 1967, unless an earlier payment can be justified against the severe restraint criteria. This requirement applies to wage and salary increments in the public and private sectors other than those which are of specified amounts within a predetermined range or scale, or were otherwise exempted under paragraph 18(iv) of Cmnd. 3073.
The Government consider that the police, whose next pay review was originally due to take effect from September, 1966, are in a special position because of their importance in combating crime. My right hon. Friends the Home and Scottish Secretaries are, therefore, prepared to discuss in the Police Council an increase payable in July, 1967, retrospective to March, 1967.
The Government have already stated their policy on dividends and are pledged to use appropriate measures to deal with any excessive growth of aggregate profits.
The Government intend to work closely with the Confederation of British Industry and the Trades Union Congress and look to them to give guidance to their members about the application of these principles. The Government will receive information about individual cases, make the necessary inquiries, and consider whether proposals are consistent with the criteria. We intend to make full use of the National Board for Prices and Incomes.
The Retail Price Index for October was one-quarter of 1 per cent. higher than in June; the wage-rate index was two-thirds of 1 per cent. higher, nearly all this increase having occurred in July. This restraint could not have been achieved without widespread voluntary support. Statutory powers will be used only after consultation and only to ensure that the support of the majority is not undermined by the actions of a few.
The first half of 1967 must indeed be a period of severe restraint. This will mean difficulty and sacrifice, but our economic recovery depends on the strict observance of restraint during this period, and on a permanent recognition of the indissoluble connection between productivity, prices and incomes.
Mr. Macleod: The First Secretary will be aware that we regard this as a most important statement. I would wish only briefly to comment on the statement in the form of questions this afternoon, but perhaps the Leader of the House will take note that we shall wish to debate this matter. No doubt there can be discussions through the usual channels.
I want to put two small points to the First Secretary. First, we believe that the police are in a special position, although, in the debate we should like to consider whether the suggestion that the right hon. Gentleman has made is generous enough in the special circumstances of the police. Secondly, does the right hon. Gentleman agree that the figures that he has given for the Retail Price Index are not uncommon for this time of year, and that in 1962 and 1963 the index actually fell between October and June, and that in 1964 the figure was much the same as that to which he has just referred?
I will confine myself to one question and comment only on each of the main criteria. First, is the First Secretary aware that in our view it is too easy a judgment to assume that productivity increases in a particular industry have any automatic relevance to the wage structure of that industry? The problem seems to us to be vastly more complicated than the right hon. Gentleman has outlined.
Secondly, and much more difficult still, will he say a word about the concept of increases for the lowest-paid workers? Naturally, this is an idea that attracts the sympathy of everybody in the House of Commons, but he will agree that the wage structure does not take into account the normal or primary causes of poverty in this country, for example, the size of family? Is he, therefore, not in danger of doing the job that should more properly be done by the Ministry of Social Security in this field?
When the right hon. Gentleman uses the phrase, in his statement,
"whose sole purpose is to help the worst-off in the community"
does he believe that wage agreements are negotiated on that basis? I know of few, if any, that are. Would it not be a much better idea if he were to repeal now—and I promise him an easy passage for it—Section 31 of Part IV of the Act which would enable the Minister of

1153
Labour to protect, through the wages councils, the worst-off paid people? Perhaps he could deal with some of these points in advance of the debate for which I have asked.
Mr. Stewart: The first point which the right hon. Gentleman raised was not one for answer now, but something that may be raised in debate.
With regard to the Retail Price Index, now and in other years, it is unusual for the increase to be as small as this, particularly when we remember that it takes into account the effect of certain tax increases, which were referred to at the time of the standstill White Paper.
With regard to productivity, there is very much more to it than the mere relationship of productivity to wages, but the White Paper is concerned with that aspect. The question we shall have to ask during the period of severe restraint is one that arises only if a proposal is made for wage increases. If a proposal is made on the ground that the increase is justified in terms of productivity we shall have to look at those two thins together: what is the relationship between the proposed increase in pay and the increase in productivity? But next month we shall be having an interim report—I believe—from the National Board on Prices and Incomes on this question, and this will be a help to us in dealing with this matter.
As for the lowest-paid workers, I accept that the problem of removing poverty amongst those worst-off is not a matter which can be dealt with by looking at wages alone. This is said in the White Paper. But it was very strongly represented to us that if increases were proposed for those who could really be regarded as the worst-off in the community they should be considered. It is right to say "Yes" to that proposition if it is clear that it relates to them and to them alone.
The right hon. Gentleman has suggested that a wage agreement of that kind is very unlikely. This is now a matter for those in industry to consider. But the trade union movement was very anxious that account should be taken of this criterion and if, as a result, we find agreements put before us which help the lowest-paid and those alone it would be possible to say "Yes" to them. If, in the event, no such agreements can be
1154
devised this criterion would not come into play.
Mr. Tuck: What does my right hon. Friend mean by
"appropriate measures in connection with dividends"?
Is he prepared to take steps, if so, what, to ensure that increased dividends which were not paid this year are not salted away and paid over at a later stage?
Mr. Stewart: My hon. Friend will find what is required in terms of dividends set out in the White Paper. The requirement is that any proposal about dividends which appears not to be in conformity with the rules laid down in the White Paper should be the subject of an approach to the Treasury.
Dividends in the future must be regarded as part of the whole question of profit in the future, because it is out of profits that dividends are paid. It is open to the Government to take fiscal measures to deal with excessive growth of profits. We must notice, however, that where profits are increased without improper effects on prices—that is to say, by better management—they must then be regarded as a legitimate form of income which should not be discouraged. But where there is an excessive growth of profits it is open to the Government to take fiscal measures to deal with them.
Sir A. V. Harvey: Is the First Secretary aware that a number of firms at this time of the year would normally be considering giving their employees a cost-of-living award covering the last three or four years and that many workers in this category are subject to extreme hardship? What is the effect on the cost-of-living award, to which the right hon. Gentleman has not referred?
Mr. Stewart: If the award, whether based on the cost of living or anything else, is something the amount of which is at the discretion of the employer, that would not be consistent with the criteria. That rule is the one which applies, in effect, in the public services, where there is a commitment to make some increase but the amount is not yet determined. We have had to decide that payments in that respect should not be made until 1st July and, therefore, the same rule must apply to any increases in the private sector where the amount is at the employer's

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discretion. Regular and predetermined cost-of-living increases, as the House already knows, are dealt with on the basis of a six-months' deferment.
Mr. Barnett: Does my right hon. Friend agree that we require rather more than a purely negative policy? Will he consult his colleagues on the question of investment incentives, in present circumstances? Does not he agree that in the present situation paying grants more than 18 months after the initial ordering of the machinery is not helpful to what we have in mind?
Mr. Stewart: I fully accept my hon. Friend's point that rules about severe restraint of prices and incomes, necessary as they are, are not anything like the whole of an economic policy. It must contain more positive measures. I considered whether the White Paper should form part of a larger statement about economic policy, but I felt that since there are many groups of workers who will want to look specifically at the question of criteria it would be best to restrict this White Paper and this statement to the single question of incomes policy during the next six months. My hon. Friend can be assured that the Government have very much in mind the more positive matters to which he has referred.
Sir T. Brinton: Can the right hon. Gentleman be a little clearer about the question of cost-of-living increases? My hon. Friend's question related to a negotiated increase based on the increase in the cost of living over long periods, but there are many types of cost-of-living agreements current in
industry which are directly linked to the retail price. These sums are not determined by the employer, but by the actual index itself. In such a case, is the right hon. Gentleman prepared to allow them to go ahead now or only from 1st July and, if they are to go on from 1st July, will the jump from the present situation to 1st July cover all the intervening increases?
Mr. Stewart: Where the cost of living increase is predetermined in amount—that is to say, it follows automatically from the nature of the settlement—it is in every case deferred by six months. Where it is accepted that there is to be a cost-of-living increase, but the amount
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is open to negotiation and discretion, payment would not occur until 1st July. The same applies to any other increase the amount of which is not determined. The payment must not begin until 1st July.
The reason for that, both in the public and private sector, is that if we were to give people more pay, either in the period of severe restraint or retrospectively in respect of any of those six months, on criteria which were not those of the criteria of severe restraint, we should be treating the people who got an increase more generously than other comparable people.
Mr. R. C. Mitchell: What is the Government's policy on council house rent increases during the period of severe restraint?
Mr. Stewart: In that case, we have to bear in mind that councils have to balance their housing revenue accounts. It is for local councils to decide how to hold the balance most fairly between their council tenants, on the one hand, and the whole body of ratepayers, of whom council tenants are a part, on the other. My hon. Friend will be aware that, during the period of the standstill, although there were no statutory powers on this matter, only 32 out of 1,600 authorities raised rents. Local authorities must be the judge of how to hold the balance fairly between tenants and ratepayers. It will be the easier for them to do that if, as is suggested in the White Paper, they observe the most rigid economy on their general expenditure.
Rear-Admiral Morgan Giles: It is obviously not reasonable to press the right hon. Gentleman on details at this stage, but can he say in principle, in outline, how the Armed Forces will be dealt with under the Grigg formula during the period of which he spoke?
Mr. Stewart: That and other questions about particular cases would be more appropriate either in a debate or in answer to particular Questions in the ordinary way.
Mr. Michael Foot: Despite the content of my right hon. Friend's reply to the last question, since the Government claim that a major purpose of their policy is to assist the lowest-paid workers, how

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does this standstill apply, say, to the railwaymen, the seamen, or the doctors? Would he say whether his reply to the right hon. Member for Enfield, West (Mr. Iain Macleod) means that the agreements with each of these three sections of workers, and others will have to be renegotiated if they defy his principle? Would he take into account, and do the Government take into account, that some of these agreements were made under threat of strike action and that the Government themselves were a direct party to the bargain?
Mr. Stewart: Without going in detail through the various groups, I think that I can answer my hon. Friend satisfactorily by saying that in every case where an agreement had been entered into with a definite operative date and for a definite amount all that happens is that the operative date is deferred for six months—[An HON. MEMBER: "Another six months?"] No. Anyone who had a substantial deferment already would not have a second deferment, but, for example, an agreement of this kind, where the date and the amount were defined, which was to come into force in September of this year, would come into force in March of next year.
Mr. Eldon Griffiths: In the right hon. Gentleman's statement, there is a conspicuous exception made in the case of the police. May I say, on behalf of the Police Federation—
Hon. Members: No.
Mr. Speaker: Order. We usually have only questions at this stage.
Mr. Griffiths: Is the right hon. Gentleman aware that the police will recognise the efforts of his right hon. Friend the Home Secretary, against considerable difficulties, and that this action may go some way towards halting the wastage from the police service, depending on how the negotiations now continue?
Dr. Summerskill: Would my right hon. Friend, not agree that, as the majority of lower-paid workers are women and only 10 per cent. of those at the moment receive the rate for the job, the Government should give early priority to legislating for equal pay for women?
Mr. Stewart: I think that my hon. Friend will understand what is involved
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in this is that we were faced, during the period of the standstill, with a situation in which we had to say, with very few exceptions, "No increases at all." We are now approaching a period in which we shall be able to say, "Yes" to a very few exceptions. Progressively, as time goes on and productivity increases, it will be possible to consider increases on a more generous scale. I trust that, in that process, we will be able to get better justice all around for the comparative incomes of different people. The problem to which my hon. Friend refers will, in time, I trust, fall into place.
Mrs. Knight: Does the right hon. Gentleman recognise that what he has said this afternoon will be accepted by many as a permit for the floodgates to open in July, 1967? Does he not see some danger in this?
Mr. Stewart: I do not think so. I think that there were enough references to severe restraint and the very limited reasons why, in any circumstances, any claim for increase might be allowed, for people to realise that this is not the opening of the floodgates.
Mr. Atkinson: Does my right hon. Friend accept the estimates that the cost-of-living increase will rise by well over 1 per cent. during the period of the freeze and that we may also expect prices to rise even faster during the period of severe restraint, and that this means that, during these 12 months of unhappy history, the cost of living will have risen by over 2½ or 3 per cent.? If this is so, is it not time that the Government got down to the job of seriously tackling prices and carrying out the policy which they intended to do a long time ago, of putting a price freeze into effect?
Mr. Stewart: I do not think that it will be sensible to start making prophecies of the figures in the next six months. As to the general policy of price control, we must accept, as I said at the end of my statement, that there is an indissoluble link both ways—between prices and incomes and between both of these and productivity, which is our real problem.
Mr. Dean: Would the right hon. Gentleman say whether the long overdue increase to university clinical teachers will be admissible under his announcement?
Mr. Stewart: There again, I do not want to deal with this in terms of individual groups. I think that I am right, however, in saying that the position of those the hon. Gentleman mentioned is this. If my memory serves me right, this is a group the amount of whose increase has not yet been determined, although the fact that there is to be one is fixed. In that case, it will be governed by the paragraphs in the White Paper on existing commitments, which would mean that no payment would be made before 1st July, 1967, unless, of course, it could be shown that anything proposed fell within the severe restraint criteria.
Mr. Bagier: Is my right hon. Friend taking note of the very responsible attitude of the leader of the National Union of Railwaymen during the freeze period, a group who are surely among the lowest-paid workers in the land? Could he underline, within the White Paper criteria, whether the payment due to them in September will be due to them six months after that date?
Mr. Stewart: I thought that I had answered that in my reply to my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot). For this and any commitment for which both the date and the amount were fixed, the date will be postponed for six months.
Mr. Lubbock: While agreeing with the right hon. Gentleman that the police are in a special position because of their importance in combating crime, does the reference to their case in his statement mean that no other group will be singled out for particular treatment? Does he not think that equal priority should be given to members of the Fire Service, bearing in mind that their earnings have fallen behind those of the police and that they are of equal importance to the community?
Would the right hon. Gentleman define exactly what he means by "the lowest-paid workers" in terms that the trade unions can understand? Does he not think that the measure of greatest benefit to the lowest-paid worker would be an increase of family allowances, using the money at present paid to people with high incomes through the Income Tax allowances system?
Mr. Stewart: I think that I dealt with that point about the family in reply to the right hon. Member for Enfield, West (Mr. Iain Macleod). I recognise that what can be done through the wages field to alleviate the position of those who are really worst-off is limited. One must notice that "lowest paid" does not, of course, mean the lowest paid in each industry or occupation. It means those who are really and recognisably the worst-off in the community.
I think that the other part of the question illustrates the difficulty we are up against in the whole policy of severe restraint. Many persuasive arguments can be advanced for very many groups of people. If we listened to them all we should be left with a result that would allow both prices and incomes to get so out of control that only a lucky few would be the gainers, and probably those who are now worst-off would be the losers.
Mr. Horner: Can my right hon. Friend say whether, in his discussions with the Trades Union Congress, he was able to win its full acquiescence to the terms of the White Paper? Will he not agree, when he is concerned with the plight of the low-paid workers, that the Ministry of Labour wages index shows that the lowest grade of workers is those in local government and public service employ?
Mr. Stewart: My hon. Friend will find in the White Paper the statement that the consultations "have shown a wide measure of agreement about the need for exceptional restraint", although it cannot be said that the criteria have been wholly endorsed. [Laughter.] That passage, at any rate, was an agreed passage, and I think that that was an inevitable result, for during the period of standstill restraint was at least universal. We now approach the much more difficult task of trying to distinguish between those to whom we may say, "Your claim may be allowed", and the larger number to whom we must say, "Your claim cannot be allowed". Once one tries to do that—and it is a task that must be undertaken—it is much harder to reach universal agreement.
Recalling one part of the discussions, I think that some would have held that the Government should have issued no detailed statement, but merely said that

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they would do their best to do justice during the next six months. I do not think that that would have been regarded as satisfactory by many groups of workers. While a large number of people will have their particular grievances against this White Paper, I believe that the general judgment of people as a whole will be that the restraint was necessary, and that the balance between different claims has been fairly held.
Mr. Peyton: Does the right hon. Gentleman realise how impressed some of us are by the clarity with which he has explained the totally incomprehensible?
Mr. Stewart: I think that the question is, "Incomprehensible to whom?". The hon. Member should read the White Paper before deciding that it is incomprehensible. I know that there are complexities in this. As to the hon. Member's compliment to me, after my experience during the last few weeks I should be able to understand the White Paper.
Mr. Shinwell: Does my right hon. Friend appreciate that it is quite impossible to elucidate what is involved in his statement without first reading the White Paper and having an opportunity of consideration and real debate? Is he aware that, having listened to the questions and the answers, I find myself, speaking for myself alone, completely confused as to what it is all about? Would he therefore arrange with his right hon. Friend the Leader of the House for a debate, very shortly—[Interruption.] I am doing this on behalf of the whole House—which should last at least two days?
Mr. Stewart: The question of a debate is a matter for my right hon. Friend the Leader of the House. I had considered whether there would be an advantage in not saying anything to the House until hon. Members had had the White Paper and been able to read it, but I felt, in view of the general interest, that it was right to make that statement.
My right hon. Friend says that he is confused as to what it is all about. Briefly, it is about this: that there must be severe restraint during the next six months. That severe restraint means that the word "Yes" can be said on a very limited number of occasions. The White Paper sets out the circumstances in which
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it might be used and it also describes the position of people who have existing commitments to either definite increases or reviews. I agree that when dealing with that part in question and answer it is difficult to follow, but I think that my right hon. Friend and hon. Members generally will find it clear in the White Paper.
Sir E. Boyle: Can the right hon. Gentleman say something about teachers' pay generally, bearing in mind that this matter is governed by specific legislation which the right hon. Gentleman introduced into the House?
Mr. Stewart: The teachers are a group of people who have a commitment though to an amount that is still to be determined, and with an operative date occurring in the first six months of next year. Therefore, they will not receive any increase until 1st July and it will be operative from that date, or at any rate, not before 1st July. That is all that can be said pending the actual negotiations.
Mr. Alfred Morris: Can my right hon. Friend say what he has in mind to ensure that his proposals do not permanently harm the interests of people who retire and go on superannuation pensions during the period covered by the White Paper?
Mr. Stewart: I do not think that they will do that. I do not think that one can set out, without defeating the object of the whole policy, any specific measures to deal with that.
Mr. Biffen: Can the right hon. Gentleman confirm that the Government are now embarking on the most difficult period, where they have to say "Nay" to some and "Yea" to others? Are we to assume that the Government wish to be informed of every single proposed income increase in the country. How do they plan to know of those incomes covering the 50 per cent. of workers who are not members of trade unions and those sections of industry and commerce who are excluded from membership of the C.B.I.?
Mr. Stewart: I have discussed this. Clearly, it would be impossible to be informed of every single proposed increase. However, I am satisfied that we

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can be informed of all increases except those which are either for the small number of people they affect or those which will not have repercussions elsewhere. Setting those aside, I think that we can be sure of being informed of the rest.
Mr. Heath: The First Secretary has enunciated the doctrine that agreements for the lowest-paid workers are to be exempted in the interests of social justice and in a supplementary answer he said that as productivity increases this process will be carried further in the interests of social justice. Is he therefore saying that the Government propose in the future to use their powers to impose a wage structure on the economy on the criterion of social justice and not economic requirements? If so, that is a most important principle to have enunciated in this way.
Secondly, when the First Secretary is considering a debate will he bear in mind that we shall wish to discuss not only the very narrow subject he has covered, but also much wider economic questions of falling production, falling investment, heavily rising unemployment and the rest of the economic situation? It will not be enough to discuss either the period of the freeze or of wage restraint, but, above all, we wish to discuss the Government's proposals for the long-term future after 1st July, 1967.
Mr. Stewart: It is going further than I said, and the White Paper says that agreements affecting the lowest-paid are exempt. That is looking at the whole thing the wrong way round. The point is that, if agreements are proposed of which it can be said that they help the lowest-paid in the community, and them only, then it would be reasonable to regard them as in line with the criteria. The way the right hon. Gentleman put it suggested a much more blanket approval than we have in mind.
As to his further point on that, I believe that, if we look at the position from the standstill through the period of severe restraint and thereafter, what we have got to work to is a structure of incomes in which, I accept, there must be some regard to economic efficiency, but there must be some regard, also, to social justice. I think that in a great many respects today our system of distribution of wealth is out of line with both these principles, whereas in the end we have got to secure some sort of balancing of those two principles in our distribution of wealth.
Although the subject of the debate is not entirely a matter for me, I would, for my part, welcome the idea that the incomes policy ought to be considered in a wider context.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. We must move on.

AIR POLLUTION
4.12 p.m.
Mr. Robert Edwards: I beg to move,
That leave be given to bring in a Bill to make further provisions against the pollution of the air; to confer further powers upon local authorities in this respect; to amend the law with regard to diesel and other exhaust fumes; and for purposes connected therewith.
Members of Parliament have great privileges. Their task invariably enables them to work for the good of many people and it is, therefore, a fulfilling task. Occasionally, however, Members are greatly frustrated because they fail to deal with simple problems which affect their constituents and many others. During my 11 years as a Member, I have been frustrated on only two occasions. One was when a constituent of mine purchased a house and mortgaged it for 20 years. The house broke in half and became uninhabitable. He had nowhere to live, but he still had to carry on paying on his mortgage for 20 years.
There was nothing I could do to help this good man and his family, and I was greatly frustrated. To get rid of my frustration, I submitted a Bill under the Ten Minutes Rule, and I believe that now, as a consequence of it, what happened to my constituent cannot happen again to other people if they take normal precautions.
Today, I ask leave to bring in a Bill to deal with the pollution of the air. Again, I have been greatly frustrated, because, for a number of years now, I have been trying, with others of my hon. Friends and people outside, to protect many thousands of my constituents from smoke, dust and smells which come from an important foundry in the locality where they live. None of our Acts of Parliament, however, enable us to protect these good people.
To save the time of the House, I shall read from a letter from a constituent which puts the situation in clear perspective. She writes:
"May I draw your attention to our plight? I live in a council house It is a lovely house which has only been up seven years. The trouble is that there is a foundry behind us which blows filthy smoke and dirt all over us day and night. When I hang out my washing I get my lungs full of filthy smoke. Some days I cannot put out the washing. The other
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day I was coming back from shopping and found the main road covered in fog. This fog was due to damp smoke converting itself into fog."
She goes on to say:
"People who come to my house when the dirty smoke is blowing all down the street say to me, 'I would not live here if the rent was free'. The doctor came to see me and he said, 'It is enough to kill you, living in this filth. No wonder you have bronchitis'."
That is one of many scores of letters which I have received from constituents. These people, on an estate of about 600, have formed an association to try to abate the nuisance. They have petitioned the Prime Minister. They have petitioned the local authorities. I have been successful in getting two local authorities to set up a joint committee to try to persuade the foundry to do something about the dreadful nuisance.
All our efforts over five years have been completely abortive because the Acts of Parliament dealing with pollution of the air do not enable us to deal with this kind of situation. In many areas of our land we are losing control of our environment. As I have said in the House on other occasions, when people lose control of their environment they become slaves of that environment. We do a lot to guarantee that the water we drink is clean, but the air we breathe is even more important than water. I therefore wish to bring in a Bill to make modest amendments to existing Acts and regulations so that we can deal with the rising tide of air pollution.
Recently, the Society of the Chemical Industry stated in a report on air pollution that it still costs the country, after 10 years of the Clean Air Act, £350 million a year because of air pollution, and in that report—I agree with it—the Society complained that the facilities and opportunities provided by the Clean Air Act are not being fully used.
For example, the councils set up under the Act are not vigorous enough. They should be responsible for annual progress reports to the House. Although, in 10 years, over 2,000 areas have been declared smokeless zones, hundreds of tons of coal are still being sold in those areas in violation of the law, and there is no means of applying a sanction against the coal merchants. It is only the consumer who has to face the possibility of prosecution.

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So the Act needs amending to put some penalty on coal merchants who know the smokeless zone areas, but who, in spite of that knowledge, violate the laws of this country.
The air is being polluted by smoke and fumes from diesel oil engines, and we require a small amendment to the regulations that cover smoke from motor vehicles. Regulations 80 to 81 prohibit any emission of smoke, etc., which
"Causes or is likely to cause injury to any person on the road or danger to such persons."
A simple amendment to the regulations, deleting the word "danger" and substituting the word "annoyance", would make the emission of diesel fumes an offence, and it would help considerably in dealing with this nuisance.
In America and Belgium, and in many othe countries, there are the means and the legislation to deal with this problem. I must not abuse the privilege of submitting a Motion under the Ten Minute Rule, although this is a vast subject which lends itself to a long recital on the evils that arise out of the pollution of our atmosphere. I hope that hon. Members will grant me leave to submit the Bill to the House.
Question put and agreed to.
Bill ordered to be brought in by Mr. Robert Edwards, Mr. Frank Allaun, Mr. Will Owen, Mr. Geoffrey Rhodes, Mr. Tom Bradley, Mr. Hugh Delargy, Mr. John Horner, Mr. Peter Archer, and Mr. Jack Ashley.

AIR POLLUTION
Bill to make further provisions against the pollution of the air; to confer further powers upon local authorities in this respect; to amend the law with regard to diesel and other exhaust fumes; and for purposes connected therewith, presented accordingly and read the First time; to be read a Second time upon Friday, 28th April, 1967, and to be printed. [Bill 135.]
ORDERS OF THE DAY
  INDUSTRIAL REORGANISATION CORPORATION BILL
  As amended(in the Standing Committee), considered.

Clause 1.—(THE INDUSTRIAL REORGANISATION CORPORATION.)
4.16 p.m.
The Minister of State, Department of Economic Affairs (Mr. Austen Albu): I beg to move Amendment No. 1, in page 1, line 17, after 'industry', insert 'technology'.
This Amendment has been tabled in response to a promise I made in Committee following a suggestion by the hon. Member for Eastleigh (Mr. David Price), supported by the hon. Member for West Lothian (Mr. Dalyell), that the Secretary of State, should be able to invite, for example, a leading professor of engineering or other advanced technology to join the I.R.C. Board if such an appointment were considered desirable. We think that it is a useful addition.
Mr. David Price: We on this side of the House are grateful to the Minister of State for proposing this Amendment. It is modest, but I think that, marginally, it improves the Bill.
Sir Harry Legge-Bourke: I was not a member of the Standing Committee which dealt with the Bill, but I did speak on it on Second Reading. I have glanced through what happened in the Standing Committee and I welcome the Amendment which the hon. Gentleman has moved. I would, however, like to know a little about how the Government intend to go about assessing these people. During the Second Reading debate I made some observation on the wisdom of certain people accepting appointments on the Board.
Mr. Speaker: We are not discussing the Question that this particular part of the Clause should stand part of the Bill. We are discussing whether the word "technology" should be added.
Sir H. Legge-Bourke: I am conscious of that, Mr. Speaker, and I am grateful to you for reminding me.

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I fully realise that the effect of this Amendment is to ensure that members of the Corporation shall be people who appear to the Secretary of State to have a wide experience of technology. I wanted to ask the right hon. Gentleman how he proposed to arrive at the conclusion that a particular individual was suitable under that category, because since the Second Reading some very important changes have taken place in the organisation of the Ministry of Technology. The work that it is to do will obviously be greater than it is already. How do the Government propose to assess people against the criteria that are now being included in this Clause? That is the purpose of my rising.
Mr. Speaker: There is only one criterion, that applying to the Amendment itself.
Sir H. Legge-Bourke: If it be that we have to accept, without knowing how, that the Secretary of State will be able to decide that certain people appear to have adequate knowledge of technology, then so be it. I was seeking to find out how the Government visualised assessing certain people for this technological requirement. Bearing in mind the great weight of work which now falls on the Department, will they delegate this? What body will they rely upon to advise them on this matter, or will they leave it entirely to the chairman and the managing director of the Corporation?
It would seem to be very important, bearing in mind that there has tended to be a divorce between science and technology in recent years and now there is a threat to bring the two together. It would be interesting to universities, to industry, to bodies such as the Royal Society, and to the country as a whole, to know how the Government propose to select these people.
Amendment agreed to.

Clause 2.—(THE CORPORATION'S FUNCTIONS.)
Mr. David Price: I beg to move Amendment No. 2, in page 2, line 16, to leave out from 'efficiency' to the end of line 17, and to insert:
'having regard for the regional aspects of economic development'.
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The object of this Amendment is twofold. First, it is to leave out from the Bill the vague phrase
"…assisting the economy of the United Kingdom or any part of the United Kingdom".
Secondly, in its more positive rôle—that is, relating to the words which I wish to see inserted—it is to make it clear that in promoting mergers and amalgamations, and in rationalising the industry, the I.R.C. will not do anything which is detrimental to the development areas but will endeavour to bring about more economic growth throughout the United Kingdom.
The House will know that this Amendment is somewhat different from the one which I moved in Standing Committee, in the sense that the second leg of my Amendment is new. It has been tabled as a result of an undertaking I gave in Committee when I moved the deletion of the words, which I again wish to see deleted, without the Amendment I now propose. I had hoped that the Government would themselves have tabled an Amendment along the lines which I am now moving, but, unfortunately, they did not see fit to do so, and I am doing the job for them. I think they will appeal to the House as a whole.
4.30 p.m.
The purposes of my Amendment are as follows. First, there is the proposed deletion. We believe that the words
"…assisting the economy of the United Kingdom or any part of the United Kingdom…"
are unnecessary, in the sense that we are entitled to assume that the promotion of industrial efficiency and profitability by the I.R.C. will assist the economy of the United Kingdom. Indeed, if that were not on its basis, I do not know what the Bill would be about. We may, therefore, take that as read and, in that sense, the presence of those words is redundant.
We therefore must assume that some special and extra meaning must be attached to these words—additional, that is, to the purpose of promoting industrial efficiency; and, I suspect, profitability, for which I look to a later Amendment, which I have no doubt the House will carry. What special reasons are to be attached to the words? What

1171
duty, beyond that of promoting industrial efficiency, is implied as a duty on the board of the Corporation?
That raises all sorts of questions and, in my opinion, we were never given a satisfactory reply in Committee. On this side, we do not believe, for instance, that the I.R.C. should be a positive instrument for promoting technology beyond that which is implicit in the concept of industrial efficiency and assisting catalytically the mergers of companies. It may be said, as was suggested on Second Reading by one or two hon Members opposite, that these words allow the I.R.C. to be an instrument for the promotion of the Government's regional development policy. We are in no way opposed to appropriate regional development policies, but we suggest that the I.R.C. should not be the positive instrument for the promotion of regional development.
The Government are extremely well equipped with other powers and instruments for fulfilling that desirable and—as I hope it will be agreed—non-partisan purpose, but I believe that the Corporation should have a clear and defined purpose. I believe that that purpose—and I am taking the Government entirely on their own terms, and being entirely friendly and helpful here—was defined quite clearly in paragraph 5 of the original White Paper, as being
…to search for opportunities to promote rationalisation schemes which could yield substantial benefits to the national economy."
As I believe that to be the Government's purpose in setting up the Corporation, I do not think it right to have these additional words which raise all sorts of suggestions which, I may say, to be fair to the Government—or, the Minister of State may think, unfair—have certainly not been clarified at any stage of the Bill up to now.
The second leg of my Amendment, which seeks to add the words on the Notice Paper, acknowledges that the Corporation, in fulfilling its duty to promote rationalisation schemes, should always be mindful of the needs of the regions, and should not promote schemes that would be harmful to the least-favoured regions. We all know of companies that have recently set up factories in, say, Fife,
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or Central Scotland or the West Country—in development areas—where one could conceive of mergers being such that the future of these factories might be prejudiced.
That is why I propose adding the words
'having regard for the regional aspects of economic development'.
I am sure that the First Secretary, whom we are delighted to see with us now, will recognise those words, because they come from his predecessor's White Paper. I felt that it would be more agreeable to the Government if I used their own words.
I therefore hope that my Amendment will commend itself not only to the back benchers on both sides, but to the Government, as being eminently reasonable and entirely in line with their own purposes, narrowing, as I believe, the functions of the I.R.C., but still lying well within the purpose outlined in the White Paper.
Mr. Geoffrey Hirst: To be honest, if I had my way I would have neither the words used by the Government nor those proposed by my hon. Friend the Member for Eastleigh (Mr. David Price), but I entirely support the first leg of my hon. Friend's proposition to remove these words in the Bill as being redundant. If the purpose of this organisation—which I have never made any bones about disliking—is to have any object, the Government must believe that it is to promote industrial efficiency, but "industrial efficiency" is a complete phrase entity in itself and needs no clarification. Industrial efficiency is a criterion above anything else. It must be the first criterion. It cannot be governed, in my thinking, by the fact that it is beneficial in one region or another.
If, as I understand, one is in the uncomfortable position of only being able to accept one set of words or the other, I am inclined to those in the Amendment. At the same time, I think that it would be better left as being for the purpose of promoting industrial efficiency. Perhaps in a few years' time we will be able to judge whether that has been achieved. The words in the Bill rouse my suspicions. I am suspicious of the Bill in any case, but they have added to it. I was not a member of the Standing Committee, so I did not hear the words of wisdom

1173
its members had to say on this matter, but having read the OFFICIAL REPORT I must say that it did not seem to have been dealt with by the Government in any great way. I hope that we shall have an explanation. I shall be highly suspicious of the Government's intention if they do not meet the Amendment.
Mr. J. Bruce-Gardyoe: I support the Amendment. I think that both sides agree that this body should not be used as an instrument of a regional policy per se. The Government have, or should have, plenty of other instruments—there was the well-tried system of industrial advances and free depreciation, which they have thrown aside. Those are the right sort of instruments to use. I do not think that the Industrial Reorganisation Corporation is the right instrument.
At the same time, I think that, in considering any proposals for rationalisation or for mergers that may come before it, it is not unreasonable that the Corporation should bear in mind the implications of such proposals for regional development, and should bear in mind, particularly, that such proposals should not militate against regional developments.
Let me give an example of what I have in mind. I believe that in Scotland we already suffer from an excessive dependence in our industrial structure on subsidiaries of foreign and English-based firms. My hon. Friend the Member for Shipley (Mr. Hirst) smiles, but any examination of the industrial structure in Scotland show this to be so. The result tends to be that some of the executive services for these firms—marketing, sales, research and administration—are very often concentrated in the headquarters of the companies outside Scotland, and the loss from Scotland of our most highly qualified graduates, which has been a worrying feature for many years, is thereby encouraged.
In Committee, the Minister of State had the nerve to say that all the Government's policies were aimed at developing the regions. I suppose that things like Selective Employment Tax—which will draw about £3 million out of the Highlands each year—were the considerations he had in mind. Most of the Government's policies, viewed from the point of
1174
view of the regions, seem designed to damage the prospects of regional development rather than to assist them. The Amendment is, therefore, desirable,
It was interesting to note that the examples given by the Minister of the ways in which the I.R.C. might positively assist the processes of regional development were all done by former Conservative Governments—for example, the establishment of Wiggins Teape, at Fort William, of B.M.C., at Bathgate, and of Rootes, at Linwood—in contrast to this Government, who set up a corporation and introduce a lot of deterrents to regional development. We would like to see from the Government not the elaborate bodies which they are seeking to set up, but active steps of the sort followed by former Conservative Administrations to help the regions with their special economic difficulties.
I welcome the Amendment because it is important for the I.R.C. to bear in mind that while it should not in any sense be an instrument of regional development, t should, in considering any proposals put to it or devised by its own initiative, bear in mind the needs of regional development.
Mr. John Nott: I support the Amendment because its acceptance would serve an admirable purpose in emphasising that the economics of industrial location should play some part in the advice which the I.R.C. gives to industrialists.
On Second Reading, some of my hon. Friends said that we would not have opposed the Bill had the I.R.C. been performing merely an advisory or persuasive function for industry and had merely been, as it were, encouraging the natural processes of the market. Similarly, some of my hon. Friends support regional policies because they hasten, encourage and advertise the economic potential of the regions which might otherwise go unrecognised for many years.
The regional aspects of economic development mean a strengthening of free market forces and not a substitution of them. If the Government deem it right to encourage regional development—and many of us have grave doubts on that score following the introduction of S.E.T., the reduction of tax incentives for the regions, the abolition of free

1175
depreciation and so on—then I believe that the I.R.C. can play a slightly more positive rôle than was mentioned by my hon. Friend the Member for Eastleigh (Mr. David Price).
Where the I.R.C. is engaged in helping and promoting the merger of two firms, those firms might wish to close down two out of date and redundant factories and merge them into one. In such a case, it would be unreasonable that, together with a host of other factors, the I.R.C. should have regard to the attractions of the outlying regions of the country. Likewise, where the I.R.C. sponsors a new process or sets up a new factory—and Wiggins Teape has been mentioned—the I.R.C. should bear in mind, together with a host of other factors, that in the regions there are large resources of unutilised labour and skill.
Where the I.R.C. can perform its rôle most adequately is in its activities in meeting a wide range of industrialists from every sector of British industry. It can persuade them of the advantages which the regions have; of the special tax concessions available in them and of the labour, skill and other amenities which exist in those parts of the country. I do not suggest that the £150 million being made available to the I.R.C. should be used specifically to finance industry in the regions. However, the I.R.C. could perform a useful advertising and persuasive function in helping industry to go to the regions.
I thought at one point that my hon. Friend the Member for Eastleigh was going to lapse into some Scottish nationalism. We in Cornwall would be delighted if the subsidiaries of English firms—even the subsidiaries of Scottish or American firms—would come to our part of the world. They would be welcome there, in spite of our Cornish nationalism, for we need more employment and we hope that the I.R.C. will advertise the county to the industrialists who seek its advice. I support the Amendment because it could help the I.R.C. to bear in mind the regional aspects of economic development when it is giving advice to industrialists.
4.45 p.m.
Mr. Joel Barnett: I cannot help feeling that hon. Gentlemen opposite are making heavy
1176
weather of this. If one had not read the Amendment and the subsection to which it refers one might see the need for hon. Members to have a chat about regional development, but one has only to study the Clause as drafted to see that the Amendment is unnecessary.
The hon. Member for St. Ives (Mr. Nott) contradicted himself because he said, on the one hand, that he wants the I.R.C.—which, I gather from his Second Reading speech, he supports with certain qualifications—to be set up and hopes that it will advertise the various tax incentives available in the regions. Then, on the other, he said that he was not particularly happy about the incentives available in the regions.
I do not see, considering the terms of the Amendment, that much scope is left for discussion because the proposal of hon. Gentlemen opposite is to delete from subsection (1) the words:
"… and assisting the economy of the United Kingdom or any part of the United Kingdom…".
and to insert the words:
"having regard for the regional aspects of economic development".
I suppose that one could, from that, have a long debate about regional development, but I should have thought that any hon. Member who is genuinely interested in regional development would be satisfied with the Clause as it stands and could not believe that the Amendment would serve a useful purpose.
Mr. John Peyton: If consistency is a virtue, which I sometimes doubt, hon. Gentlemen opposite deserve a small measure of credit because I have constantly observed that they adhere to the doctrine that one should never use one word when several hundred may be used. In this case, subsection (1) refers to
"… assisting the economy of the United Kingdom or any part of the United Kingdom…"
Why that is included I do not know. It adds absolutely nothing to the sense of the Bill. Although my hon. Friends and I have no great opinion of the Government's bona fides, we do not believe that even they, in this Measure, desire to do the reverse of
"…assisting the economy of the United Kingdom or any part of the United Kingdom…"

1177
I entirely agree with the wise words of my hon. Friend the Member for Shipley (Mr. Hirst). The words in the subsection are wholly unnecessary. I agree, also, in not wishing to add the words suggested by my hon. Friend the Member for Eastleigh (Mr. David Price). I find stress on Government assistance to everybody anathema. It could be that assistance would become interference. In this tremendously busybody Government some have the best intentions. I accept that all the representatives of this wretched Government now seated on the Government Front Bench do, on the whole, have quite decent intentions. I am being quite sincere and I make no reflection on the hon. Gentleman who will answer this debate. But there could come a time when the setting up of one more body to interfere, give advice and even give aid, could be a nuisance.
We are already in danger of creative activity being smothered by far too many absolutely useless organisations. The trouble in this country is that we have too many midwives and far too few potential parents in the economy. The Government carry their habitual busybody, interfering attitude much too far. Although I realise that nothing I say will shake them from their determination to keep these stupid words in the Bill, I could not restrain myself from making a slight but very modest protest.
Mr. John Pardoe: It is becoming a little difficult to tell exactly who on this side of the Chamber is in favour of this Amendment and who is against. We have had two speeches against Government interference—or assistance, whichever word is used. I am in favour of the Amendment. On Second Reading my hon. Friend the Member for Orpington (Mr. Lubbock) said that we will support the Bill because of its regional possibilities. Because we want the Government to emphasise the regional possibilities of the I.R.C., I support it. We want the Government to aim to take investment to the regions and to use any instrument, even the I.R.C., to do this.
I dissociate myself wholeheartedly from any suggestion that Government interference is wrong. The purpose of the Government is to balance the economy between the regions. I hope that they will
1178
interfere until they do so. It may be that the Government will say that there is no need for the words in the Amendment to be written into the Clause because it should be obvious to all that this is the Government's intention. To those of us who live in Cornwall that is not manifestly obvious any longer, although it may have been at one time, It was spelled out in the White Paper, which said:
"and will have regard to the regional aspects of the Government's policies for economic development."
In virtually the same words this Amendment attempts to add such a phrase to the Bill.
I hope that we shall have it spelled out again, whatever the Government's attitude to this Amendment, as a result of this debate that this is the Government's intention and that they intend to pursue it. There is a great danger in backsliding on the regional issue. That is why I hope we shall have this restatement this afternoon.
I could not disagree more than with the speech of the hon. Member for Shipley (Mr. Hirst) about efficiency. Efficiency is not a good enough purpose for any organisation of government. It is not the be-all and end-all of business nor the be-all and end-all of a properly run economy. It may be, as the hon. Member for St. Ives (Mr. Nott) pointed out, that if we are to have a merger between two firms one of which is in an underdeveloped region and one in the South-East, the merger will always tend to go towards the branch in the South-East. It is right that the Government should step into the ring to ensure that the merger does not go always the wrong way, although short-term efficiency arguments might dictate that it should.
I say to the hon. Member for Shipley and others who think like him that there are other purposes besides efficiency—purposes of social justice, the quality of life and development of a community as a whole. That is why I support the Amendment wholeheartedly.
Mr. John Biffen: My hon. Friend the Member for Eastleigh (Mr. David Price) in moving the Amendment, spoke in generous terms. He wished to appear as a Greek bearing gifts, to the Government. He said that he offered them in a friendly and helpful spirit. I

1179
do not mind saying that I am an economic Visigoth. [HON. MEMBERS: "Hear, hear."] I knew we would get a consensus of opinion at least on that limited point. I have no wish to assent to a certain amount of what seems fairly slipshod thinking about the issue of economic development, but I am encouraged to think that there may be hidden virtues in this Amendment before I consider it.
The Amendment, I understand, will result in Clause 2 reading:
"Subject to the provisions of the next following subsection, the Corporation may, for the purpose of promoting industrial efficiency having regard for the regional aspects of economic development".
That is fine. Everyone who has spoken so far has assumed that as a result there will be still greater pressures than ever before to persuade people to put money into parts of the country to which they might not otherwise go under ordinary economic criteria, but why should we assume that that will be the interpretation given to the matter by the Industrial Reorganisation Corporation?
Might it not call evidence from people such as Dr. West and ask him to elaborate on the interesting article in Lloyds Bank Review, a short time ago, about the virtues which lay in further development of the Midlands and the South-East? Are not the Midlands and the South-East also regions, or have we new semantic distinctions which mean that the word "regions" applies only to the Celtic outer fringe with a fascinating number of highly marginal seats where a politically oriented slush fund might, find valuable results? Surely we are not thinking that that should mean regional development?
I am encouraged because my hon. Friend for St. Ives (Mr. Nott) spoke about the economics of industrial location. He must not assume that the economics of industrial location inevitably point to trying to rehabilitate the Highlands and Islands to some position which they held in the middle of the last century.
Mr. Nott: Has my hon. Friend read another article in Lloyds Bank Review by Colin Clark, who took precisely the opposite point of view? What does my hon. Friend think about his view?
Mr. Biffen: I am only too happy to say that I also read the excellent article
1180
by Professor Colin Clark who, I think, is a member of the governing board of the Institute of Economic Affairs, which is a very desirable body. There are a range of opinions on this matter, but we must not assume and presume that the only judgment which Mr. Grierson and his associates will make is to try to divert industries to parts of the country where, because of the problems of communications and problems of indigenous labour, they would not otherwise go. I say with great respect to my Gaullist hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) that we must not assume that the pursuit of industrial efficiency would necessarily lead to the fragmentation of British industry round and about the Celtic periphery.
We must not assume that with the advent of the closer trade ties with Europe which seem to be developing and which one might presume would be consequential upon membership of the E.E.C. there would be deliberate attempts to steer industries away from the European-facing seaboards of East Anglia or the South Coast. We must not assume any of those things. Probably it was in the spirit of giving the widest possible interpretation to the question of the economics of industrial location that the Amendment was tabled. In that possibly personal interpretation of it, I am prepared to support it in the Lobby.
5.0 p.m.
Mr. Albu: My right hon. and hon. Friends have enjoyed the Second Reading debate if, with respect, Mr. Deputy Speaker, I may described it in that way, which the Opposition have been having among themselves. It has been, for us, extremely illuminating. I do not think that I have ever heard an Opposition, although quite small in number, so tear themselves to pieces over a fairly simple matter as hon. Members opposite have done on this occasion. I realise that most of the speeches were made with an eye on the local newspapers: they were constituency speeches.
The hon. Member for South Angus (Mr. Bruce-Gardyne) was in a very schizophrenic mood. He was not quite sure whether he was in favour of the Bill actually doing something for the regions or whether he was not. He was followed in that line by all his hon. Friends, except those who had nothing to say for the Bill.

1181
The hon. Member for Yeovil (Mr. Peyton) also has a constituency in the Celtic fringes, but he was entirely against the Bill and the Government interfering in any way with industry.
Mr. Pardoe: I remind the Minister that there is absolutely nothing Celtic about Somerset. I have lived most of my life there, but I am now the Member for Cornwall, North, and that is a Celtic constituency.
Mr. Albu: I was not referring to the hon. Gentleman. He made his position quite clear.
Mr. Peyton: I had hoped that it would not be necessary for me to rise on this point, but the hon. Member for Cornwall, North (Mr. Pardoe), who endeavoured to teach the Minister of State his geography, evidently failed. I am obliged to allow myself to be in unusual company in reminding the Minister of State that Somerset has nothing to do with the Celts. Will he please digest that now?
Mr. Albu: Nevertheless, the hon. Gentleman had something of the same sort of feeling about the development of the areas which he represents. This is what we are talking about. I do not think that one has necessarily to support the extreme nationalism of those speakers who come from the furthest Scottish areas.
I do not want to get into the argument about whether or not some parts of Scotland are too dependent on subsidiaries, of English firms, or whether we should support in Scotland industry or services. The hon. Member for South Angus was rather in two minds about this question. The Government have done many things for the development areas and will do a great deal more. They are certainly building more advance factories than were built under the previous Administration and have given much assistance—for instance, by doubling the rate of investment grants to these areas.
But let me leave this interesting Second Reading debate and turn to the Amendment. It is true, as we have said over and over again, that the Corporation is not primarily a body for regional development. But in doing its work it will certainly not only have to try to avoid, as some hon. Members have pointed out, damaging the economic prospects of
1182
development areas—for instance, when it creates some sort of merger and may want to close some factories—but it must also bear in mind, as we want it to, the possibility of strengthening the structure of industry in the less prosperous regions. It is important that the Corporation plays an active and not merely a negative or a passive rôle in this matter.
The hon. Member for Eastleigh (Mr. David Price) completely forgot that under Clause 2(1, b) the Secretary of State would be able to request the Corporation in exceptional circumstances to establish new industrial enterprises. This is intended for those cases—the case of Wiggins Teape has been mentioned; this is only one example—where it would be desirable to provide some assistance for the establishment of a factory in a development area.
This comes only at the request of the Secretary of State, because it is perfectly true that we want to keep this policy of regional development in the hands of the Government. This is not something to be left entirely to the Corporation's whim, as it were, even though under the general directions of the Government. It is something which the Government would want to keep to themselves, for the additional reason that we do not think that it would be right to ask the Corporation to set up a single new enterprise, except at the request of the Secretary of State.
Mr. Tam Dalyell: My hon. Friend will appreciate that not all hon. Members now present were on the Standing Committee. Will he confirm that in this instance the phrase "Secretary of State" includes my right hon. Friend the Secretary of State for Scotland?
Mr. Albu: Yes, it does, because the phrase "Secretary of State" covers all Secretaries of State, as I think my hon. Friend knows. If the Amendment were accepted, it would remove the reference to the Corporation's responsibility for
"assisting the economy of the United Kingdom".
It is our view that this should be retained. It is an indication that the Corporation as a public corporation, backed with public money, has to conduct its affairs so as to assist the economy of the United Kingdom; and this does not necessarily mean

1183
making profits in the short term. It must develop and encourage efficiency and profitable enterprise, but its very nature is such that it will do things that would not be done if the free play of the market were left to have its full effect.
It has, as the White Paper makes absolutely clear, the job of rationalisation and modernisation where good prospects of early returns in terms of increased exports or reduced imports would eventuate. That is the Corporation's job. If the Amendment were accepted, this instruction to the Corporation, which is now in the Bill, would be removed.
We think, too, that the words which the Opposition would prefer would give the Corporation a merely negative interest in regional development. We want it to
have a much more positive interest. For that reason, we cannot accept the Amendment.
Mr. David Price: I should have thought that those of my hon. Friends who support my proposed deletions, but who have doubts about my additions, will at least agree, having heard the Minister of State's speech, that though I may appear to my hon. Friend the Member for Oswestry (Mr. Biffen) to be a Greek I have a little Visigoth blood in my veins. I hope that my hon. Friend will support us on the Amendment, because the Minister of State's reply was thoroughly unsatisfactory.
Question put, That the words proposed to be left out stand part of the Bill: —
The House divided: Ayes 221, Noes 152.

Division No. 202.]

AYES

[5.9 p.m.

Albu, Austen

Ellis, John

Jenkins, Rt. Hn. Roy (Stechford)

Allaun, Frank (Salford, E.)

Ensor, David

Johnson, Carol (Lewisham, S.)

Alldritt, Walter

Evans, Albert (Islington, S. W.)

Johnson, James (K'ston-on-Hull, W.)

Allen, Scholefield

Evans, loan L. (Birm'h'm, Yardley)

Jones, Dan (Burnley)

Archer, Peter

Faulds, Andrew

Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

Armstrong, Ernest

Fernyhough, E.

Jones, J. Idwal (Wrexham)

Ashley, Jack

Finch, Harold

Judd, Frank

Atkins, Ronald (Preston, N.)

Fitch, Alan (Wigan)

Kerr, Mrs. Anne (R'ter & Chatham)

Atkinson, Norman (Tottenham)

Fitt, Gerard (Belfast, W.)

Kerr, Russell (Feltham)

Bagier, Gordon A. T.

Fletcher, Ted (Darlington)

Lawson, George

Barnes, Michael

Floud, Bernard

Leadbitter, Ted

Barnett, Joel

Foley, Maurice

Lee, John (Reading)

Bellenger, Rt. Hn. F. J.

Foot, Michael (Ebbw Vale)

Lestor, Miss Joan

Bennett, James (G'gow, Bridgeton)

Ford, Ben

Lever, Harold (Cheetham)

Bidwell, Sydney

Forrester, John

Lewis, Arthur (W. Ham, N.)

Bishop, E. S.

Fowler, Gerry

Lewis, Ron (Carlisle)

Blackburn, F.

Fraser, John (Norwood)

Lomas, Kenneth

Blenkinsop, Arthur

Freeson, Reginald

Loughlin, Charles

Boardman, H.

Galpern, Sir Myer

Luard, Evan

Booth, Albert

Gardner, Tony

Lyon, Alexander W. (York)

Boston, Terence

Garrow, Alex

Lyons, Edward (Bradford, E.)

Braddock, Mrs. E. M.

Ginsburg, David

McCann, John

Bradley, Tom

Gordon Walker, Rt. Hn. P. C.

McKay, Mrs. Margaret

Bray, Dr. Jeremy

Gray, Dr. Hugh (Yarmouth)

Mackenzie, Gregor (Rutherglen)

Brown, Bob (N'c'tle-upon -Tyne, W)

Grey, Charles (Durham)

Mackie, John

Buchan, Norman

Griffiths, David (Rother Valley)

Mackintosh, John P.

Buchanan, Richard (G'gow, Sp'burn)

Griffiths, Rt. Hn. James (Lianelly)

MacMillan, Malcolm (Western Isles)

Butler, Herbert (Hackney, C.)

Hale, Leslie (Oldham, W.)

McNamara, J. Kevin

Cant, R. B.

Hamilton, James (Bothwell)

Mahon, Peter (Preston, S.)

Chapman, Donald

Hamilton, William (Fife, W.)

Mahon, Simon (Bootle)

Coe, Denis

Hamling, William

Mallalieu, E. L. (Brigg)

Conlan, Bernard

Hannan, William

Manuel, Archie

Corbet, Mrs. Freda

Harrison, Walter (Wakefield)

Mapp, Charles

Crossman, Rt. Hn. Richard

Haseldine, Norman

Marquand, David

Cullen, Mrs. Alice

Hattereley, Roy

Marsh, Rt. Hn. Richard

Dalyell, Tam

Hazell, Bert

Mayhew, Christopher

Davies, Dr. Ernest (Stretford)

Heffer, Eric S.

Mellish, Robert

Davies, G. EIfed (Rhondda, E.)

Henig, Stanley

Millan, Bruce

Davies, Ednyfed Hudson (Conway)

Hooley, Frank

Miller, Dr. M. S.

Davies, Ifor (Gower)

Horner, John

Mitchell, R. C. (S'th'pton, Test)

Davies, S. O. (Merthyr)

Howarth, Robert (Bolton, E.)

Molloy, William

Dell, Edmund

Howie, W.

Moonman, Eric

Doig, Peter

Hoy, James

Morgan, Elystan (Cardiganshire)

Driberg, Tom

Hughes, Emrys (Ayrshire, S.)

Morris, John (Aberavon)

Dunn, James A.

Hughes, Roy (Newport)

Moyle, Roland

Dunnett, Jack

Hunter, Adam

Murray, Albert

Dunwoody, Mrs. Gwyneth (Exeter)

Jackson, Colin (B'h'se & Spenb'gh)

Noel-Baker, Francis (Swindon)

Dunwoody, Dr. John (F'th & C'b'e)

Jackson, Peter M. (High Peak)

Noel-Baker, Rt. Hn. Philip (Derby, S.)

Eadie, Alex

Janner, Sir Barnett

Oakes, Gordon

Edwards, Rt. Hn. Ness (Caerphilly)

Jeger, Mrs. Lena (H'b'n&St. P'cras, S.)

0'M alley, Brian

Edwards, William (Merioneth)

Jenkins, Hugh (Putney)

Orme, Stanley

Owen, Dr. David (Plymouth, S'tn.)

Robinson, W. 0. J. (Walth'stow, E.)

Wainwright, Edwin (Dearne Valley)

Owen, Will (Morpeth)

Rodgers, William (Stockton)

Walden, Brian (All Saints)

Page, Derek (King's Lynn)

Rogers, George (Kensington, N.)

Wallace, George

Paget, R. T.

Rose, Paul

Watkins, David (Consett)

Pannell, Rt. Hn. Charles

Ross, Rt. Hn. Wlliam

Watkins, Tudor (Brecon & Radnor)

Park, Trevor

Rowland, Christopher (Meriden)

Weitzman, David

Parker, John (Dagenham)

Rowlands, E. (Cardiff, N.)

Wellbeloved, James

Parkyn, Brian (Bedford)

Sheldon, Robert

Whitaker, Ben

Pavitt, Laurence

Shinwell, Rt. Hn. E.

White, Mrs. Eirene

Pearson, Arthur (Pontypridd)

Short, Mrs. Renée (W'hampton. N. E.)

Whitlock, William

Pentland, Norman

Silkin, Rt. Hn. John (Deptford)

Wilkins, W. A.

Perry, George H. (Nottingham, S.)

Silkin, Hn. S. C. (Dulwich)

Williams, Alan (Swansea, W.)

Price, Christopher (Perry Barr)

Silverman, Julius (Aston)

Williams, Clifford (Abertillery)

Price. Thomas (Westhoughton)

Stater, Joseph

Williams, W. T. (Warrington)

Price, William (Rugby)

Small, William

Willis, George (Edinburgh, E.)

Probert, Arthur

Snow, Julian

Winnick, David

Pursey, Cmdr, Harry

Spriggs, Leslie

Winterbottom, R. E.

Randall, Harry

Steele, Thomas (Dunbartonshire, W.)

Woodburn, Rt. Hn. A.

Rankin, John

Stewart, Rt. Hn. Michael

Woof, Robert

Redhead, Edward

Summerskill, Hn. Dr. Shirley

Yates, Victor

Rhodes, Geoffrey

Thomas, George (Cardiff, W.)

Richard, Ivor

Thornton, Ernest

TELLERS FOR THE AYES:

Roberts, Albert (Normanton)

Tuck, Raphael

Mr. Gourlay and Mr. McBride.

Robertson, John (Paisley)

Varley, Eric G.

NOES

Alison, Michael (Barkston Ash)

Griffiths, Eldon (Bury St. Edmunds)

Mott-Radclyffe, Sir Charles

Allason, James (Hemel Hempstead)

Gurden, Harold

Munro-Lucas-Tooth, Sir Hugh

Astor, John

Halt-Davis, A. G. F.

Nabarro, Sir Gerald

Balniel, Lord

Hamilton, Marquess of (Fermanagh)

Nicholls, Sir Harmar

Batsford, Brian

Hamilton, Michael (Salisbury)

Nott, John

Biffen, John

Harris, Frederic (Croydon, N. W.)

Onslow, Cranley

Biggs-Davison, John

Harrison, Brian (Maldon)

Orr-Ewing, Sir Ian

Blaker, Peter

Harrison, Col. Sir Harwood (Eye)

Oaborn, John (Hallam)

Bossom, Sir Clive

Harvey, Sir Arthur Vere

Osborne, Sir Cyril (Louth)

Boyle, Rt. Hn. Sir Edward

Hawkins, Paul

Page, Graham (Crosby)

Brewis, John

Heseltine, Michael

Page, John (Harrow, W.)

Bromley Davenport, Lt. -Col. Sir Walter

Hiley, Joseph

Pardoe, John

Brown, Sir Edward (Bath)

Hirst, Geoffrey

Pearson, Sir Frank (Clitheroe)

Bruce-Gardyne, J.

Hogg, Rt. Hn. Quintin

Peart, Rt. Hn. Fred

Bryan, Paul

Holland, Philip

Peyton, John

Buck, Antony (Colchester)

Hooson, Emlyn

Pike, Miss Mervyn

Bullus, Sir Eric

Hordern, Peter

Powell, Rt. Hn. J. Enoch

Burden, F. A.

Hutchison, Michael Clark

Price, David (Eastleigh)

Campbell, Gordon

Irvine, Bryant Godman (Rye)

Prior, J. M. L.

Cary, Sir Robert

Jenkin, Patrick (Woodford)

Pym, Francis

Chichester-Clark, R.

Jennings, J. C. (Burton)

Ridley, Hn. Nicholas

Clark, Henry

Johnston, Russell (Inverness)

Ridsdale, Julian

Clegg, Walter

Kaberry, Sir Donald

Rippon, Rt. Hn. Geoffrey

Cooke, Robert

Kerby, Capt. Henry

Roots, William

Cooper-Key, Sir Neill

Kershaw, Anthony

Royle, Anthony

Corfield, F. v.

King, Evelyn (Dorset, S.)

Russell, Sir Ronald

Costain, A. P.

Kirk, Peter

St. John-Stevas, Norman

Crawley, Aidan

Kitson, Timothy

Sharples, Richard

Crouch, David

Knight, Mrs. Jill

Shaw, Michael (Sc'b'gh & Whitby)

Cunningham, Sir Knox

Lancaster, Col. C. G.

Smith, John

Currie, G. B. H.

Langford-Holt, Sir John

Stainton, Keith

Dalkeith, Earl of

Legge-Bourke, Sir Harry

Steel, David (Roxburgh)

Dance, James

Lewis, Kenneth (Rutland)

Stodart, Anthony

d'Avigdor-Go'dsmid, Sir Henry

Lloyd, Rt. Hn. Selwyn (Wirral)

Stoddart-Scott, Col. Sir M. (Ripon)

Dean, Paul (Somerset, N.)

Longden, Gilbert

Summers, Sir Spencer

Doughty, Charles

Loveys, W. H.

Taverne, Dick

Douglas-Home, Rt. Hn. Sir Alec

Lubbock, Eric

Temple, John M.

Eden, Sir John

McAdden, Sir Stephen

Turton, Rt. Hn. R. H.

Elliot, Capt. Walter (Carshalton)

Mackenzie, Alasdair (Ross&Crom'ty)

Vaughan-Morgan, Rt Hn. Sir John

Elliott, R. W.(N'c'stle-upon-Tyne, N.)

Maclean, Sir Fitzroy

Walker, Peter (Worcester)

Errington, Sir Eric

Maddan, Martin

Wall, Patrick

Farr, John

Maginnis, John E.

Walters, Dennis

Fletcher-Cooke, Charles

Marten, Neil

Whitelaw, William

Fortescue, Tim

Mathew, Robert

Wills, Sir Gerald (Bridgwater)

Foster, Sir John

Maude, Angus

Wilson, Geoffrey (Truro)

Gibson-Watt, David

Mawby, Ray

Winstanley, Dr. M. P

Gilmour, Ian (Norfolk, C.)

Maxwell-Hyslop, R. J.

Wolrige-Gordon, Patrick

Gilmour, Sir John (Fife, E.)

Maydon, Lt.-Cmdr. S. L. C.

Worsley, Marcus

Glyn, Sir Richard

Mitchell, David (Basingstoke)

Grant, Anthony

Monro, Hector

TELLERS FOR THE NOES:

Grant-Ferris, R.

More, Jasper

Mr. Younger and Mr. Eyre.

Gresham Cooke, R.

Morrison, Charles (Devizes)

Mr. Albu: I beg to move Amendment No. 3, in page 2, line 16, after 'efficiency', to insert 'and profitability'.
1186
This again is in response to a request from the Opposition, although it does not entirely represent all they asked for.

1187
It is, however, in accordance with a promise I made in Committee. The Amendment makes clear that the Government are in no way hostile to the concept of profitability. Indeed, we are anxious to encourage the profitability of British industry, although we believe that the profit should be earned by the efficient use of assets and not by monopoly power or manipulation of the market. I am sure that right hon. and hon. Members opposite would agree with that.
I do not think that there is any need to say more on this Amendment. It does not very much change the instructions that the Corporation will receive under the Bill. It will still be its business to carry out work so as to improve efficiency and assist the economy of the United Kingdom as a whole.
Mr. Barnett: Does this mean that, where the Corporation wants to undertake, during the first year, a project which it thinks will be efficient but which will not, for a while, be profitable, it will not be able to proceed with the venture?
Mr. Albu: No. The words refer to profitability in the United Kingdom economy as a whole and not to the profitability of any particular enterprise, but of course it will be the object of the Corporation to set up enterprises which in the longer term will be profitable, although perhaps not sufficiently so in the short term for the market to be willing to undertake the investment.
Mr. Peyton: I rise only to say that I welcome this little conversion of the Government. I hope very much that their lip-service to profitability and the fact that they are prepared even to insert the word into a Statute will in some way colour their policies and that this good will will be translated into something more positive. I never expected to hear an Amendment proposed by a Socialist Government, even by so enlightened a member of it as the Minister of State, to insert "profitability" in such a context, and to have the hon. Member for South Ayrshire (Mr. Emrys Hughes) sitting without making a protest because this horrid word is being inserted. I have no wish to interrupt the conversation of the hon. Member for South Ayrshire.
Mr. Emrys Hughes: Whom is the hon. Gentleman insulting now?
Mr. Peyton: Far from it. The hon. Gentleman knows that I would never in any circumstances insult him. I have the friendliest of feelings towards him. I was simply saying that I had never expected to arrive at circumstances in which a member of his own Government would be proposing to insert, in a respectable way, the word "profitability" without protest from the hon. Member. Times are changing, although I fear that some of the hon. Gentleman's less tolerant hon. Friends would be right down on the Minister of State if they were here.
Mr. Hughes: Is that all?
Mr. Peyton: That is all I have to say about the hon. Member.
Mr. Hughes: Merry Christmas.
Mr. Peyton: I hope that the hon. Gentleman will accept that I am not being offensive in his direction. I have the greatest respect for him, but I fear that if some of his wilder hon. Friends were here, they would be forced to make some doctrinaire protest against the comparative liberalism of the Minister of State, meaning "liberalism" in a complimentary sense.
I hope that the Minister of State will translate this small token action into some positive policies at an early date. They are badly needed.
Sir H. Legge-Bourke: I think that I am in favour of the Amendment, but it depends a little on what we mean by the word "profitability" and there is a considerable variety of view about what it should mean, how it ought to be brought about, where it becomes contrary to the social interests of the country and so on. What disconcerts me a little is that since the Second Reading of the Bill we have had the extraordinary speech of the future Chairman of the Corporation to an American audience in London, followed by one of the most fascinating series of articles in the Financial Times, not least that of Mr. Harold Wincott on 1st November and then the joint rejoinder on 8th November from Lord Campbell of Eskan and the retort to that by Mr. Wincott.

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It is perfectly obvious that as a result of this we now see that there is a considerable variation in the approach to profitability exhibited, first, by the future Chairman of the Corporation and, secondly, those who have studied what he himself has done for Courtaulds in the outside world. I am not for a moment suggesting that there is anything in the least dishonourable about what Sir Frank Kearton has done, but it is important that before the House includes this word, we should be very clear about what the Government mean by it. The Minister of State is not certain. However, he has said something which not all of his hon. Friends are apt to say at election times, that the Government are not averse to profits being made. That is something rather new coming from the Labour Party.
I have no doubt that there are many hon. and right hon. Members opposite who, if they could find a way of financing some of their hare-brained schemes without having to rely on the taxation which they get from the profits of industry, would gladly do it if that meant abolishing profits in the course of the exercise, but I am glad to know that the Minister of State is himself in favour of profitability in industry. In the light of what has been written outside and what Sir Frank Kearton himself has said, what we now require is to be clear about what the right hon. Gentleman means by the word.
If profitability is to be respectable only when the maximum pressure has been put on the company concerned to spend the money not as it thinks best, but as the Corporation thinks best, that would not be profitability as I would understand it. I believe that the right people to decide whether an industry is profitable are those who are running it and who are responsible for its day-to-day administration at all levels. It should be they rather than some outside body or the Government themselves who should decide. All I am asking is that we should know where the Government stand on this issue. We have to recollect the famous line of Professor Joad on so many Brains Trust programmes, "It depends what you mean by"—in this case—"profitability". Will the Government tell us what they mean?
Mr. Biffen: I reinforce the remark of my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke). The Minister of State said that the reference was to the profitability of the United Kingdom economy. This is an interesting proposition and I wonder whether he can say that it now becomes part of Government policy to see a rising increase in the total level of industrial profits as recorded in the national income statistics. If so, he must be very concerned, because the movement is in exactly the opposite direction.
On the other hand, he may have put a different interpretation on profitability, and the point made by my hon. Friend the Member for the Isle of Ely is particularly significant in the light of the speech made by the Minister of Technology at Bristol last week, when he gave his definition of "profitability". A definition of "profitability" which would be very acceptable to my hon. Friends and myself would be that any of the enterprises to be assisted by the Industrial Reorganisation Corporation should have as one of its aims the maximum profit before tax, either on capital employed, or on turnover. Its measure of success would be indicated by the extent to which that percentage increased. We would welcome the Minister's confirmation that that is his view of how "profitability" should be interpreted.
Mr. Bruce-Gardyne: I agree entirely with my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) and, on this occasion, my hon. Friend the Member for Oswestry (Mr. Biffen) that we need some indication from the Minister of what he means by this insertion. It is true that the Minister said that this was a reference to the profitability of the economy of the United Kingdom, but that is not precisely where the Amendment is supposed to be inserted. As I read it, the word is supposed to be inserted after "efficiency" so that the provision would read:
"for the purpose of promoting industrial efficiency and profitability."
5.30 p.m.
There is obviously a certain amount of confusion here. On this occasion I entirely accept the definition of profitability given by my hon. Friend the Member for Oswestry. It would be

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interesting to hear what the Minister of State has to say. Like my hon. Friend the Member for Yeovil (Mr. Peyton), I must say that it is nevertheless welcome to see this word included. It has been dragged out of the Minister of State rather like some sort of obscenity out of a maiden aunt. It is said with a blush on the cheek and a note of defiance in the voice, but it remains a sordid and degrading word.
The trouble is that hon. Gentlemen opposite pay lip-service to profitability, provided that it is reasonable profitability, whatever reasonable in that context may be. They fail to see any contradiction between the pretence of the use of profitability as a yardstick of efficiency and the attempt, which they are making with every single fiscal proposal they introduce, to divorce managements from shareholders, who are the only people essentially concerned with profitability and the only people who will constantly remind managements of the need for profitability.
It is because of the increasing divorce between management and shareholders that neither in government nor, all too often, in management is profitability regarded as a serious yardstick any longer. I hope that the introduction of this word, bearing in mind the interpretation which the Minister of State may put upon it, will remind the I.R.C. that it is not to be used rather like a similar measure proposed in France in about 1958, which was described by the then Minister of Finance, M. Pineau, as a pair of crutches for helping lame dogs over stiles.
This is not what the I.R.C. should be and if the use of the word "profitability" will avoid that, then it is certain to be welcome. It is a belated admission that we have dragged out of the Government, but we are grateful for it, little as it is.
Mr. David Price: I welcome the half loaf that we have had from the Minister of State, and I have no cavil. I was interested, as were my hon. Friends, in the interpretation that he put upon the word "profitability", in the context of our discussions. In Committee I was quite clear that when we were arguing for the word "profitability" rather than the
1192
word "efficiency" it was because we thought that profitability was a more precise definition of industrial efficiency. It was to that end that we moved the Amendment, which was not successful in Committee. The Minister of State to some extent met us by saying that on Report he would introduce the word "profitability".
I am quite clear that profitability applies to the narrower context of the yardstick by which the I.R.C. will pursue its rôle of producing mergers and rationalisation. In this context I am tempted to assist the House by repeating the definition of the optimum term relating to profitability which I gave on Second Reading. This was a quotation from Professor Robinson and I should like to give it here, particularly for the benefit of the hon. Member for Heywood and Royton (Mr. Barnett), who asked a telling question. I believe that he will find the answer is included in this quotation which reads:
"By the optimum firm we must mean that firm which in existing conditions of technique and organising ability has the lowest average cost of production per unit, when all those costs which must be covered in the long run are included."
I would ask the hon. Gentleman to mark the words "in the long run".
Mr. Barnett Mr. Barnett rose—
Mr. Price: I will give way later. When I was arguing my preference for the use of the word "profitability" in Committee I made it clear that we were considering profitability over a reasonable number of years. There is nothing between the Minister of State and myself on that point. Anyone who suggests that it should be done on a quick profit term has had little experience of doing this because one knows that if one goes out for the quick profit the chances are in the long run that one does not remain in business, because one gets an extremely bad reputation.
I trust that whoever is to reply to this debate from the Government Front Bench will confirm the interpretation that I have put on the introduction of the word "profitability" which is I think what my hon. Friends want, namely that this will be, along with industrial efficiency—and I would prefer not to use these words—the major yardstick used by the I.R.C.

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in its calculated rôle of bringing about mergers. This is my interpretation of it and I think that this is what the Minister of State meant when moving the Amendment. I hope that it is and we are grateful for our half loaf.
Mr. Hirst: We have had quite a long discussion, but since we cannot all be on these Standing Committees—thank goodness—we do not get the benefit of all the speeches which have been made on the subject. Several points have been raised to which I feel we must have answers. I do not think that I would have used the phrase which the Minister of State did, but I think that I know what he means, at least I hope so. If not, then there is every reason why we should have these discussions. He must mean the profitability of the nation and the sum total of the profitability of the enterprise. He must therefore have the same objectives as we have.
This doubt has been raised, possibly through a slip of the tongue on the part of the Minister of State. I have a high regard for him, but he has gone into a great deal of discussion which is on the record, and the Government owe it to the House to make their position quite clear and to show that they are on the same line of thought as we are, and that in using this word "profitability" there is no confusion of thought.
Mr. Albu: I should like to remind hon. Gentlemen opposite that the functions of the Corporation are not entirely those of setting up mergers. As I have said, there is Clause 2(1,b) which is rather different, and under which different considerations may arise. The main purpose of the Corporation is to assist the rationalisation of industry. I would agree with the hon. Gentleman the Member for Eastleigh (Mr. David Price) in his definition. Everyone has his own definition of profitability and accountants very rarely agree as to whether a firm is profitable. This can be judged only over a fairly long term.
What we are saying is that the object is that the Corporation shall go in for activities which other people have not seen as profitable for one reason or another, but, which, with its greater wisdom and insight into the needs of the economy, the Corporation will undertake. It is not intended that the Corporation
1194
should make a profit in as short a period as a commercial undertaking—as, say, a merchant bank bringing about an amalgamation—may expect to do.
It has a different function. I do not agree that its function is to promote any sort of profitability whatever. As I said in Committee, betting shops are now extremely profitable and have caused an inflation in wages. It is not proposed that the Corporation should set up betting shops or amalgamate them or make them more efficient. They will be completely outwith its purpose of assisting the economy. It will do this by carrying out the purposes in the White Paper and assisting the import-export balance of the country's industry, particularly in those areas where the Corporation feels that there is room for improvement. There is a difference between the simple example of the profitability of a body whose only concern is to make profits and the Corporation's task which, although it is to set up profitable enterprises, has to be considered in relation to enterprises which will assist the import-export balance of the economy.
Mr. Frederic Harris: The hon. Gentleman has muddled the situation even further; it has got worse and worse. Is he worried about the word "profitability"? Do the Government regard it as a dirty word?
Mr. Albu: It seems to me that hon. Members opposite have guilt feelings about it.
Mr. Harris: Quite the reverse. Surely there is every desire to make profits from this enterprise. Surely that is the idea behind it. There should be no disgrace in that. The Government seem to be worried. They have used the word clearly enough in the White Paper issued today. Do not let the Government have any concern about this. We are with them if they want the Corporation to go in for private enterprise activities, which will produce a profit. They should not consider this to be a dirty word and the hon. Gentleman should not excuse himself for having to use it.
Amendment agreed to.
Mr. David Price: I beg to move Amendment No. 7, in page 2, line 24, to leave out 'or elsewhere'.

1195
This is a probing Amendment. We raised the question of the relevance of the words "or elsewhere" in Committee but as part of a wider Amendment. Today, I shall confine my remarks to this narrower Amendment.
I wish to put two questions to the Government. First, why insert these words at all? In the context of the operations of the Industrial Reorganisation Corporation, it seems to us that all that it may wish to do in terms of mergers can be done by operating within the United Kingdom. The Government will raise the question of British companies with overseas subsidiaries, but, as we said in Committee, we are satisfied that the Corporation will have all the legal powers necessary to deal with British companies with overseas subsidiaries because the parent company would be registered in Britain.
On the other hand, if it is suggested that by the introduction of these words the Corporation would deal with companies not of British registration, it raises the very serious matter of what jurisdiction the Corporation will have over foreign companies. It is possible that there is a penumbra of territories within the sterling area—colonies in various stages of development—where it could be said that it might have jurisdiction. It would be interesting to know what would happen in the case of Bermuda and the Bahamas.
Mr. F. A. Burden: Might it not be that the Government are assuming that they might accept the political decisions of the Common Market if they enter it and this Amendment might extend legislation to that? If so, it is a very dangerous thing to do.
Mr. Price: My hon. Friend has anticipated my second point. These matters were gone into in Committee. I return to this argument because we were not satisfied with the Government's reply.
My second question concerns the new factor which has been introduced into our deliberations since we discussed this matter in Committee, namely, the announcement that the Government are seeking membership of the E.E.C. This raises questions at which my hon. Friend
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the Member for Gillingham (Mr. Burden) hinted in his intervention.
The possibility of inter-European company mergers was used by the Parliamentary Secretary in Committee in defence of the inclusion of the words "or elsewhere" in the Bill. He said that as a result of their inclusion the Corporation would be able where appropriate to create mergers with companies in other European countries. He went on to point out that I had referred on Second Reading to my view, to which I strongly adhere, that the structure of British industry may be too fragmented. It is on a European basis rather than purely on a United Kingdom basis that we should approach this problem.
I should like the Parliamentary Secretary or the Minister of State to say whether the Government will use the Corporation to bring about inter-European company mergers. If so, how will they use it? What will be its jurisdiction across the Channel? Will it, for instance, open an office in Brussels, Dusseldorf, Paris or possibly even in Zurich? How will it set about its business? Above all, what will be its relationship in such activities, first, to the Community authorities in Brussels, and, secondly, to the national authorities in the various countries in which it will operate? We are entitled to answers to these questions.
5.45 p.m.
Mr. Peyton: I thought I heard my hon. Friend the Member for Eastleigh (Mr. David Price) describe this as a probing Amendment. As long as by "probing" he means something offensive, I have no objection. The rest of his speech indicated that these words should be taken out of the Bill. I do not want to discover the Government's intentions about this. I am not frightfully interested in the Government's answer. I am sure that the words should be removed. The idea that this nasty monstrosity which the Government are creating should have the power to go perambulating all over Europe and anywhere else in the world it finds convenient is intolerable to me.
The Government have made their hostility to companies trading overseas absolutely clear. I should not wish any Government-created body to be given powers to go outside these shores. I would keep it tightly locked up here.

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We should be interested to hear the explanations, if there are any, and the answers which the Government may have to give to my hon. Friend. I thought that as he went on he made out an extremely cogent and challenging case. Like others, I did not have the doubtful privilege of serving on the Standing Committee, but the remarks which my hon. Friend quoted gave me the impression that it would be wholly wrong for these words to be left in the Bill.
I hope that the Government will not only answer my hon. Friend's questions but will yield to the unassailable logic of his arguments and will take the offending words out of the Bill.
Mr. J. T. Price: I do not wish to be misled by taking up the argument of the hon. Member for Yeovil (Mr. Peyton) who has thrown a few new red herrings into the debate. On another occasion I might be sorely tempted to reply to him in my own way. He would have to accept that my view is as valid as his.
While the hon. Member for Eastleigh (Mr. David Price), who asked certain questions of the Government Front Bench spokesman, put his points reasonably, I cannot follow the logic of his argument. He asked in rather an interrogatory fashion why this new Government organisation should have the right to establish offices in Brussels, Rome or some other European centre when it may not have the right to enforce its jurisdiction within the sovereignty of other countries. This is remarkable coming even from an Opposition Front Bench spokesman. Surely, all the great corporations now operating in the private sector of industry—for example, I.C.I., Lever Bros., van den Berghs and Jurgens and Shell Transport; I could reel off the names of hundreds of them—are doing just this kind of thing.
Mr. David Price Mr. David Price rose—
Mr. J. T. Price: I will not take a moment to say this. It was courtesy on my part not to intervene when the hon. Member was speaking. I wanted him to develop the point in the hope that it would be disposed of satisfactorily by the Government spokesman. I cannot understand this line of reasoning.
The hon. Member for Yeovil said that he would lock up these Government
1198
institutions within this country and prevent them going abroad. He would have a sort of Berlin Wall in reverse applying to this country, not to keep people out, but to keep them in. If the House of Commons were to restrict Government agencies which were established for the country's economic welfare and development, that would be stupid.
Mr. Peyton Mr. Peyton rose—
Mr. J. T. Price: I am not giving way. If the hon. Member comes here for controversy, this is the place where he is likely to get it. I put it to him seriously that this Government agency must have the same rights under international law to pursue its activities for the welfare of the country as private enterprise institutions have all along the line. If the hon. Member wishes to intervene, I have nothing further to say.
Mr. Peyton: I find it gratifying that my short, modest intervention should have brought forward this tirade from the hon. Member, whose interest in the Bill has not, as far as I know, been tremendously strong until this moment. The hon. Member must not identify the large private enterprise concerns which he mentioned and which are self-financed with the sort of organisation which is now being set up by the Government, which is not self-financed but is financed by the taxpayer. At least in its early and formative years, it should be kept under strict control.
Mr. J. T. Price: I am obliged to the hon. Member. What he has said makes it quite clear that the division which exists in the House is a division not on common sense, but on doctrine and theology, on the kind of basis which is so dear to hon. Members opposite.
Mr. David Price: Is the hon. Member aware that the I.R.C. is not a trading corporation? If he cannot see that difference as compared with I.C.I., he can see nothing.
Mr. J. T. Price: I can see that very well.
Mr. Burden: The remarks which have come as a result of the speeches of my hon. Friends the Members for Eastleigh (Mr. David Price) and Yeovil (Mr. Peyton) have made it clear that I was right to raise the point which I put to my hon. Friend the Member for Eastleigh. The passion

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with which the action of the Government is being defended shows more of a rallying to the support of the Government than an understanding of what and why we are probing.
These words in the Clause would give the Government, presumably through their own agency, tremendous powers. Let me indicate where the danger of all this might lie. We were told yesterday that the Government are sponsoring a merger in the aircraft industry between Hawker and the British Aircraft Corporation. It is known also that we are co-operating with the French on the Concord. We might be co-operating on other matters. The British Aircraft Corporation or the new Corporation might have no desire to go into anything closer than its existing accommodation and project planning.
I am fearful that the Clause would give the Government the power, or that they would have the power through the I.R.C. perhaps to instruct such a unit as is being set up to merge with a French corporation. This may or may not be in the best interests of the country. If the Government had this power, it would be tremendous and something that no Government has ever had before. This makes me very suspicious because the Government have shown in many ways their desire to get more and more control of the economy.
I am worried about this because the Government show such lack of being able to manage their own affairs. It is well known to those of us who sit on these benches and listen that there have been dynamic and vitriolic attacks from the Government benches on the financial and economic policy of the Government. Last night, indeed, they scrambled through after an important debate with a small majority because so many hon. Members opposite completely disagreed with them. They are fearful of the economic consequences of what the Government are doing.
We are equally right in being worried at the consequences of many of the things that the Government might do. Words such as those which we propose to leave out give such power to the Corporation that we are entitled to be not only sceptical, but fearful of the consequences.
We believe that the future management of industry generally is far better left in
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the hands of companies. I take the view, with the greatest respect to the Corporation and the Government, that companies are far better able to arrange their own mergers and to decide the companies with which they will merge so as to give benefit to their workers, improve their products and ensure that reasonable profits—which is difficult enough in present circumstances with this Government—which can be distributed to their shareholders are made. They are far better judges, because of their knowledge and understanding of their own industry, than a body set up by the Government and under Government control. I look upon this whole situation with the greatest mistrust, and I hope that the Minister will remove these words.
Mr. Hirst: I agree very much with what my hon. Friend the Member for Gillingham (Mr. Burden) has just said. Possibly we may have a good deal to say about mergers on a later Amendment, on which my hon. Friends will certainly have my support.
My hon. Friend the Member for Eastleigh (Mr. David Price), with his usual courtesy to the House, almost made a masterly understatement when he said that the Amendment had been put down as a probing Amendment. I was not a member of the Standing Committee, but I have read the debate and I have it all with me. In winding up discussion on a similar Amendment on 8th November, my hon. Friend said that the Government
"have not been specific, and we must record our protest at the lack of thought, the lack of clarity and, above all, the lack of prifessionalism in the thinking that has gone into the way in which the I.R.C. should operate."—[OFFICIAL REPORT, Standing Committee E, 8th November, 1966; c. 158.]
That was said when the Committee was discussing a similar Amendment.
What the Government intend to do is in no way clear and is not at all professionalised. No doubt the Parliamentary Secretary did his best, but I was not very impressed with his speech or the examples he gave. We are right to view the position with considerable alarm.
The wording of subsection (2) is terrible. It states that
"The Corporation shall have power to do anything whether in the United Kingdom or elsewhere which is calculated…".

1201
It is colossal. The way that the House of Commons is now behaving horrifies me. If a few years ago, when the Conservative Party were in power, they had produced this sort of thing, the screams from the then Opposition benches would have been immense.
6.0 p.m.
Mr. Peyton: I am glad that my hon. Friend the Member for Shipley (Mr. Hirst) raises that point, because this sort of umbrella legislation is what the Government are always doing now. Indeed, the right hon. Gentleman the Minister of Power has described the Iron and Steel Bill as an "umbrella" Measure. That is what they always do. They use a series of squalid gamps under which later they produce their policies.
Mr. Hirst: I might say, "Some umbrella!". However, I had better not follow those remarks too far. I agree with the line of thinking of my hon. Friend the Member for Yeovil (Mr. Peyton), and it is very dangerous. If the Opposition query these matters, we are thought to be wasting time, or we are looked upon as being incredibly stupid or unpatriotic. But that is nonsense.
As my hon. Friend the Member for Eastleigh said, the proposed powers are far too sweeping. Any company incorporated in this country which has subsidiaries abroad is covered by existing legislation. Therefore, we want to know what the proposed powers are for. They must be put in for some sinister purpose, encroaching in some way or another in a very wide province outside that which the House had in mind when discussing the White Paper and on the Bill's Second Reading. It becomes worse when one accepts, as I do reluctantly, the Prime Minister's sincerity in his move towards the Common Market. I find that very hard to do, but, if one is disposed to accept his sincerity, this becomes a more dangerous form of legislation.
This is a matter for a clear-cut answer. It is a very dangerous experiment and not a desirable one, and certainly the House should not give powers to the Corporation to operate outside this country until we see how those powers are proposed to be used.
I am not altogether impressed with the influx of people to control this body,
1202
although I know some of them very well. They have very wide flung interests, some of them quite contrary to the interests which I hold to be the best in private enterprise in many instances. I do not feel any confidence in the set-up of the proposed directors or the chairman, whom I know and respect personally.
The scheme proposed under this Bill possibly goes far beyond that about which the House registered concern at the time of the White Paper, and, if my hon. Friends will forgive me for saying so, it is not a matter for probing but one of the highest possible principle.
Mr. Pardoe: This is the second Amendment to have occasioned a great divide on the Conservative benches.
I, too, want to probe in the sense that I want to know whether this is about Europe. There have been many speeches from this side of the House criticising the hon. Member for Eastleigh (Mr. David Price) for using the word "probing". I want to probe, because I want to know whether the answer is Europe, and I hope that in the course of winding up this short debate we shall hear from the Government Front Bench what is the answer. If it is Europe, we should support the Amendment, and we shall certainly do so from this bench.
If we go into Europe, there will be a need—[Interruption.] In answer to that ribald laughter, may I point out that there is rather less than one-twelfth of the Conservative Opposition in the Chamber at present. When the Conservative Party begins to turn up and vote in this Chamber, it may get a few more votes in the country.
There will be a need for international mergers if we go into Europe. This will be a very important sphere of endeavour after we go in, always supposing that we do go in, as I hope. It is quite right that the I.R.C. should be involved, and therefore I hope that it is Europe that the Government mean.
I know that the Conservative Party does not like it, because it does not like the I.R.C. and therefore it does not like any extension of its powers. However, I like the I.R.C., and I am glad that it should be extending its powers beyond our shores. Here we have the Tory Party lining up with the Left-wing of the Labour Party, saving that our economy

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should be confined to these shores and that we should never have activities overseas.
Mr. Burden: If the hon. Member for Cornwall, North (Mr. Pardoe) will forgive me for saying so, he is talking absolute rubbish. The Tory Party made a strong bid to go into Europe. The point which concerns me about the Clause is that the I.R.C. will have great powers to carry out mergers. It might carry out mergers which are not in the best interests of this country, and we should have no control over it. That is what concerns and worries me, and the Clause gives the present Government a weapon which they could use to a temendous extent before we know whether we are going into Europe.
Mr. Pardoe: It is unlikely that this weapon could be used in Europe before we go in. It would be rather difficult to use it in that way.
If I may take up briefly the point made by the hon. Member for Gillingham (Mr. Burden), it was the Tory Party which removed our representatives from the original negotiations to set up the Common Market.
The Clause will bring about an extension of the field of activity which we are continually asking our embassies to get into. We are asking them to become the vanguard of our trade throughout the world, and we are asking them to become involved in this. Why should we not ask other Government agencies to become involved as well? It is an insular approach to set up an organisation and say that it should not be able to exercise its functions overseas. We are a trading nation, and, in the trading battle, our home front is where our markets lie. Therefore, I support the inclusion of these words and shall oppose the Amendment.
Sir H. Legge-Bourke: I join with my hon. Friend the Member for Eastleigh (Mr. David Price) in seeking to probe by way of this Amendment. All the probing that I have been able to do up to date is to look at what the Parliamentary Secretary to the Ministry of Technology had to say about c. 150 of the proceedings of the Standing Committee considering the Bill, until he was interrupted and had to start again at the next meeting at c. 153. In that speech, he
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answered quite a number of the points which have been put to him today by the hon. Member for Cornwall, North (Mr. Pardoe).
It appears to be visualised clearly that European tie-ups may become necessary. I say as dispassionately as I can that whether finally we join the European Economic Community or are obliged to have some other arrangement with Europe, it will still be necessary for close relationships across the frontiers of this country and with others.
If we have a rooted objection to Government becoming involved in international exercises of this kind, we have to ask ourselves whether it is right once we accept such a Corporation to crib, cabin and confine it. I am trying to be fair-minded. I have never been an advocate of this kind of Corporation, but, if we have to have it, it is probably necessary to give it these powers.
Although it is much more slanted towards finance than towards industrial reorganisation, we have something of a comparison in the Commonwealth Development Corporation. To some extent, that conception is a precedent, though not a complete one. It is a body set up by Statute which does an immense amount of work overseas. No one who has come into contact with it will give it anything but the highest praise. If we could have that sort of approach to this matter, some of the misgivings would be less than they are.
When some new line of policy is propounded by a Government, it is always dangerous for them to anticipate by legislation what might be necessary if negotiations proved successful. To that extent, what the Parliamentary Secretary said at c. 150 of the proceedings on Committee stage could be interpreted as jumping the gun a little. The hon. Gentleman said that it might be important, on a European basis, to create mergers with companies in other European countries or elsewhere, but I think that this applies whether or not we join the Community. Indeed, it is happening, and I have never been nearly so worried as some about the economics of the Community. I have never visualised Europe putting up a gasholder over itself, with a tariff wall rising round, and being lidded-in, with no one being able to do business with her. I have never visualised

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that being the end of the exercise, and I am convinced that, whatever comes out of the present negotiations, we shall have to get closer and closer to Europe in bigger and bigger units.
If we are to have a Corporation like this, we must give it this sort of power. If it is going to arrange mergers with existing companies, we must remember that many of them will have subsidiaries or close associates overseas. We therefore cannot, while enabling the Corporation to carry out its job, suddenly say that these companies which have overseas links must divorce themselves from them to enable the I.D.C. in England to do what we want here. I am trying to be dispassionate about it, and without qualifying my original misgivings about having a Corporation of this kind, I think that if we are to have it we must give it this power overseas.
Mr. Frederic Harris: I intervene briefly to take up the cudgels against my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke). If we are opposed, as surely we are, to the existence of the Corporation as a whole, and we consider it wrong to create it, it cannot be good to extend its powers to make it even more embracing. I should have thought that that was a straightforward argument.
My hon. Friend referred to the C.D.C. There is no comparison between the C.D.C. and the Corporation proposed in this Measure. The C.D.C. did a first-class job of work, and is continuing to do so. Hon. Members on both sides of the House support it, and the work that it does in our overseas territories of the Commonwealth, and particularly in the Colonial Territories, and in the developing countries. It has done sterling work in Africa, and there is a vast difference between its work and what is proposed for the I.R.C. I am sure that on reflection my hon. Friend will appreciate that there are these tremendous differences between the two.
The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Edmund Dell): I think that the attitude adopted by the hon. Member for the Isle of Ely (Sir H. Legge-Bourke) is right. I recognise the reservations which he has about the whole idea of launching a body like
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this, but, if we are to launch it, it is essential that it should have this power.
I agree with my hon. Friend the Member for Westhoughton (Mr. J. T. Price) and the hon. Member for Cornwall, North (Mr. Pardoe). The attitude of the Conservative Party is quite extraordinary. The disarray which they are displaying in connection with this Amendment is remarkable. They cannot even agree whether the Amendment is a probing or a substantive one.
The hon. Member for Eastleigh (Mr. David Price) asked why we should insert these words at all. We have to insert them because it may be necessary—and I believe that it will increasingly be necessary—for the promotion of international joint companies between this country and others—Europe certainly, and other parts of the world as well. I think that this tendency will increase as time goes on.
In an interruption in the speech of my hon. Friend the Member for Westhoughton, the hon. Member for Eastleigh said that the Corporation would not be a trading company. Of course it will not. Its object will be to promote rationalisation, and, it may well be, to promote rationalisation on an international scale as well as on a national scale. This will be true whether we go into Europe or not.
In moving the Amendment the hon. Member for Eastleigh questioned the example which I gave in Committee about the rationalisation of British Overseas subsidiaries. Does he not foresee the possibility that it may well be necessary to rationalise overseas subsidiaries of British and foreign companies? If they are jointly formed into international companies, they might establish overseas selling subsidiaries in third countries, which will increase overseas sales—
Mr. Burden: The hon. Gentleman referred to rationalising subsidiaries in foreign countries. No action taken by the Government would give them power over foreign-owned companies overseas.
6.15 p.m.
Mr. Dell: I shall come to that in a moment.
There is certainly an important aspect of these words "or elsewhere" in relation to Europe. If this country goes

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into the Common Market, it may be particularly necessary to establish companies on a European basis, and the Corporation might help in this respect.
The hon. Member for Eastleigh asked—and the question was repeated by the hon. Member for Gillingham (Mr. Burden)—what jurisdiction the Corporation would have over foreign companies. The answer is none, but it will have no jurisdiction over British companies either. It will have no compulsory powers whatever. It will have to work on a voluntary basis by obtaining the co-operation of British companies involved in rationalisation schemes, and also the cooperation of any foreign companies which may be involved in such schemes. There is no question of compulsory power or jurisdiction being involved by the use of these words.
The hon. Member for Eastleigh also asked what would happen when we joined, or if we joined, the Common Market. Obviously I cannot forecast what will happen, but the Corporation, in its international activities, if there are any, will have to proceed under the laws of the country concerned, just as it will proceed under the laws of this country. It will be a matter for the independent commercial judgment of the I.R.C. whether it sees rational opportunities of proceeding in this way overseas or not.
I was also asked whether it was the intention to open offices overseas. Currently, there is no such intention.
The attitude of hon. Gentlemen opposite to this Amendment casts doubt on the credibility of their attitude to Europe altogether. Are they Europeans or not? Do they want the development of Europeanism, or not? If they do, they cannot possibly oppose the inclusion of these words in the Bill. If, after all that has been said from the benches opposite, the Opposition press the Amendment to a Division, they will prove themselves to be the worst Little Englanders of all.
Mr. Peyton: The hon. Gentleman must not go into these misconstructions. He is attempting to cast doubt on the genuineness of the Conservative Party's intention to go into Europe. He has no ground for doing that. Our attack is on the wisdom of casting this new-found Government body into Europe. We think that
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it might do positive harm. We think that activities of the sort to which the hon. Gentleman referred are better left to industrialists and financiers who have some experience of the matter, rather than that we should throw in a Government body to try to do the job. What we are really attacking is the intense desire of the Government to interfere at every stage.
Mr. Dell: The hon. Gentleman objects to what I am saying, but the development of international companies is essential if we are to solve our industrial and commercial problems. The question is whether hon. Gentlemen opposite see the future of this country that way, or not. If they do, I return to the point made by the hon. Member for the Isle of Ely. Hon. Gentlemen opposite may object to the establishment of the Corporation—though I believe that many of them do not—but if the Corporation is to be set up, it must be given these powers.
Mr. David Price: That reply has not carried us very much further. When I introduced this probing Amendment, I was not aware that it would let lose such a long debate. The Parliamentary Secretary has not taken advantage of this opportunity to tell us how the I.R.C. will operate overseas. This is unsatisfactory. Nevertheless, in the interests of progress, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Mr. Peter Hordern: I beg to move Amendment No. 8, in page 2, line 28, at the end to insert:
'subject to an affirmative resolution of a majority of the shareholders in the bodies corporate concerned, where the securities have not been purchased on a Stock Exchange of the United Kingdom.'
I hesitate to say that this is a probing Amendment, but it is certainly a wounding Amendment, because in Committee the Minister of State's reply in connection with this matter was totally unsatisfactory. The Amendment is concerned with the acquisition by the Corporation of shares in companies. On a number of occasions in Committee we made it clear that we saw no reason why the Corporation should have power to acquire anything more than a limited shareholding in companies, but on this we were defeated.
We have continued to probe the Government, and they still have not given

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us a satisfactory reply why it is necessary for the Corporation to take a significant shareholding in any company. If they can reply to that point now, it falls to us to point out that if they are going to try to take shares in companies it is likely that the only ones that they can amass in any quantities will be the shares of companies whose shareholders are only too happy to share with them. In Committee the Minister of State, referring to the activities of the Corporation, said:
"It might, by taking up apparently weak and unprofitable companies, particularly by amalgamation with others and by putting in new and more scientific and sophisticated management, achieve great possibilities."
This may or may not be so, but any one with experience of the Stock Exchange knows that if the Corporation is minded to take up shares in weak and unprofitable companies many of the shareholders of those companies will be delighted.
In Committee we suggested that if the Corporation is to acquire shares this is the very worst possible basis upon which to enter negotiations for a merger. The Corporation could not be placed in a weaker position than to have a number of shares cast into its lap.
How, in these amalgamation or merger schemes upon which the Corporation is supposed to embark, is it proposed to buy shares in companies which have a small share capital and in which there is no market? There will be many occasions on which the Corporation will wish to merge small and successful companies with larger concerns, but the Minister gave no sort of reply to the question how he expected the Corporation to carry on its activities in this respect when there was no market at all for the shares concerned.
The Amendment seeks an answer to the question posed by the White Paper in the matter of buying shares outside the normal market machinery. In Committee the Minister of State attempted to deal with this point when he said:
"Finally, I come to the question of the meaning of the words in the White Paper about close collaboration with the market. We have said that it is our intention that the Corporation shall, wherever possible, use the existing market machinery for the promotion of mergers. That is what this means. Wherever possible, the Corporation will leave the market to find any additional capital needed, but the purpose of providing the
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Corporation with funds is that it may be necessary from time to time for the Corporation itself to acquire shares and make loans."—[OFFICIAL REPORT, Standing Committee E, 8th November, 1966; c. 174.]
From an examination it is clear that the answer given by the Minister bore no relation to the question posed by the White Paper. We must press the Minister to tell us precisely in what form the Corporation will work when it is buying shares in close collaboration with the market instead of through the market.
My other question concerns the reference in the Amendment to an affirmative resolution of the majority of shareholders. My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) drew attention to this point in Committee, but again we were given no clear answer. By resolution many private companies' shares may be sold only to existing shareholders. I believe that that is correct—or, at least, the shares have first to be offered to existing shareholders. How does the Corporation propose to acquire such shares?
The main question concerns the subject of the unissued but authorised capital of a company. By the rules of the Stock Exchange, in order to obtain a quotation for shares it is necessary for a company to give an undertaking that the issue of any shares beyond those which have already been authorised can be done only with the consent of shareholders. The shareholders have to be invited, at a general meeting, to give their consent to such a proposal. We want to have from the Government an undertaking that they will carry out the procedures laid down by the Stock Exchange and that the I.R.C. will not be in a position to acquire shares outside the Stock Exchange without the consent of the shareholders. If the Corporation does so acquire shares, we also want an undertaking that it will do so at the market price—neither less nor more. If it buys at a price higher than the existing market price for unissued shares it and the taxpayers will be badly dealt with. If the Corporation pays less it is bad for the existing shareholders. On all these points we want absolutely clear replies from the Minister of State.
Mr. Albu: The hon. Member for Horsham (Mr. Hordern) covered a number of points in moving his Amendment. In fact, the first of his arguments was really directed not to the Amendment

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but to the way in which the Corporation will operate when it acquires shares in what may be weak or potentially strong companies. He seemed to imply that, somehow or other, the Corporation would be in a weak position if it took over shares "cast into its lap". He is presumably implying that the Corporation is so lacking in business judgment that it may pay above the market price. I can assure him that it is unlikely that the Corporation, as it will be constituted, will do any such thing. When it acquires shares in this way it will acquire them at a pretty good price.
The main purpose of the Amendment is to repeat the fears expressed by some hon. Members opposite that the Corporation has some compulsory powers. We thought that we had got that out of their minds. But even if some hon. Members opposite are satisfied about that they think that it will somehow go about its work in a dangerously conspiratorial and obscure way, against all the decent and honest principles of the Stock Exchange. I can assure hon. Members that it will not.
I want first to deal with the hon. Member's point about the small company for whose shares there is no market, or, presumably, no quotation on the Stock Exchange. The Corporation is in a position only slightly different from that of the private company. Obviously, it can acquire shares only with the agreement of existing shareholders and, by definition, there will be few in a small company, and presumably they will all know what is going on.
I turn now to the subject of the private company. The articles of association of most private companies lay down that some or all of the shares must first be offered to the other shareholders. If the other shareholders are not willing to part with their shares or wish to acquire the shares which are given up by their co-shareholders, the Corporation will not be able to take over the company. We have made it clear over and over again that we hope and believe that the Corporation will frequently be able to operate not by taking over shares but by drawing the advantages of mergers and rationalisation to the attention of many small businesses which may not have recognised this.
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It may be able to get one company to merge or take over others or several to merge, without the Corporation being required to put in any money at all. This is the way it will work. In doing all this, it will have no compulsory powers.
6.30 p.m.
Before I come to the final point, which is the crux of the Amendment, I would mention the case of the unissued but authorised shares raised in Committee by the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis). As I think the hon. Member for Horsham said, under the Companies Act, or certainly in the articles of association of most companies, shares cannot be issued and new capital cannot be created without a resolution of the shareholders. This has been so in the vast majority of cases.
There are very few cases where this does not apply, but that is no reason why in such cases the I.R.C., unlike any other company which might want to acquire another company or take shares in it, should be stopped from acquiring those shares and have to go through a time-wasting procedure. After all, the shareholders would be entirely free—I was going to say to vote with their feet, but the hon. Member will understand what I mean—to decide whether to accept or decline any offer which the I.R.C. made to them direct—
Mr. Hordern: The point is not so much the authorised capital of the company, which of course the shareholders have to approve in any case, but the requirements of the Stock Exchange now are—and I understand that the requirements of companies in future will be—that the unissued shares of the authorised capital cannot be issued without the consent of the existing shareholders. It is this, the unissued shares, and not the question of the increase in the authorised capital on which we want an assurance.
Mr. Albu: If the Stock Exchange Rules require a company to do this, it will do so and the Corporation will be unable to acquire shares unless the company has done it. But there is no reason to put the Corporation in a worse position than other companies. The rules of conduct are imposed on directors. We have made it clear that when the Corporation acquires shares in a company it

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will, of course, inform the directors and they, if they are operating in accordance with the codes of conduct laid down by Stock Exchange regulations, will, of course, inform their shareholders. We cannot in this Bill amend the Companies Act or impose conditions on companies or on the Corporation which are not in the existing companies legislation.
The Corporation must be in no better and no worse position than other companies. Further restrictions on the disposal of unissued shares may one day be necessary, but they ought to be imposed in legislation applying to companies generally and not to the I.R.C. alone.
I have made it clear that the directors of the Corporation will act in accordance with the principles which the Stock Exchange has laid down, particularly those in the notes on company amalgamations and mergers, published by the Issuing Houses Association, which are relevant in this case, though there are also general regulations of the Stock Exchange in regard to implementation. The Corporation will do that and, as it has no compulsory powers, the hon. Gentleman can be assured that there is no way in which, any more than any other company, it can go about its activities in a sort of secret and conspiratorial manner—
Mr. Hordern: I followed the hon. Gentleman with great care and he has given a specific assurance that the Corporation will be given no more favourable terms than any other public company. The only question with which he has not dealt—this seems to be a genuine case of misunderstanding: at least I like to think that it is—are the words in the White Paper, "close collaboration with the market". I feel that, because he does not appreciate how difficult it is to acquire shares at all on the Stock Exchange because of the difficulty of turnover, these words have a particularly sinister sound to some of us on this side, but that they are not so intended in fact. With that clear understanding given by the Minister of State, I should like to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.

Clause 7.—(LIMITS ON GUARANTEES BY, AND SUMS ADVANCED TO OR ON BEHALF OF THE CORPORATION.)
Mr. David Price: I beg to move Amendment No. 11, in page 6, line 21, to leave out '£150' and to insert '£50'.
This Amendment deals with the global sum of money which is and can be made available to the Corporation. We are proposing that the figure of £150 million which the Government have put in the Bill is excessive. I have proposed the lesser sum of £50 million. In fact, as I shall try to show, we think that in proposing £50 million we are being more than generous to the I.R.C. in fulfilling that part of its rôle which is specific and for which it would be possible for us on this side even marginally to approve.
When we questioned Ministers about the relevance of this sum of £150 million in the earlier stages of our discussion of the Bill, we received two general arguments. The first was stated by the Minister of State when he said:
"In recent years, the amount of money being spent annually on mergers and subsidiary acquisitions, and so on, is in the region of £300 million. With all these considerations in mind, we arrived at the figure of £150 million."
Of course, that argument was shot down in flames by my hon. Friend the Member for Horsham (Mr. Hordern), who pointed out, quite rightly, that it was not the task of the I.R.C., even on the Government's terms, to take over all the firms whom they were assisting to merge but rather to act as a catalyst. I think that the Minister of State acknowledged that fact, although it is not registered in the OFFICIAL REPORT of the Committee proceedings.
The plain fact is that the total turnover, in terms of assets of firms merged, is quite irrelevant to a consideration of what is the proper sum of money to make available to the I.R.C. I am sure that that is recognised on both sides of the House.
That figure of £300 million a year turnover in terms of mergers does not assist the House in determining what would be the proper sum to make available to the I.R.C. We therefore fall back on the second argument deployed in Committee by the Minister of State, when he said:
"In the end, I must say that we cannot possibly consider reducing the sum of £150 million. We have arrived at it after careful

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consideration, and we are quite certain that it is the right sort of figure."—[OFFICIAL REPORT, Standing Committee E; 10th November, 1966, c. 218–9, 219.]
I must confess that so far we have not had the benefit of results of the Government's careful consideration, although we have had repeated assurances of their certainty.
I very much hope that they will at least tonight give us the benefit of some of their careful considerations, because I am sure that, even if they are not interested in our views, at least some of their hon. Friends will wish to have assurances. I propose that, even on the terms of the I.R.C., as proposed by the Government, £150 million is far too much. I shall endeavour, as briefly as possible, to give the heads of my reasons for saying that.
First, it is not necessary for an industrial merger programme to produce a large dowry. At most a little short-term bridging finance is all that might be required. We went into this matter in Standing Committee and we also delved further.
My second argument is my reference to other public bodies. The House will recall that it was only as recently as 1965 that fresh legislation was passed to raise the financial limit of that admirable body the N.R.D.C. from £10 million to £25 million. I put it to the House, does the I.R.C. need six times the capital of the N.R.D.C.? This is an extremely important point, because in order to feel our way through the maze of factors which come into our determination of the right amount of money to be given this body we could do worse than refer to what has been considered for parallel, if dissimilar, bodies.
My third reason is that at a time of financial stringency this is an absurdly large sum with which to equip the I.R.C. The Minister of State will no doubt point out that it is not proposed that the whole of that £150 million should be available to the I.R.C. in the current financial year. Of course it is not, and we acknowledge that; but £30 million has been allocated in this fiscal year—and I would remind the House of this fact, which I brought up on Second Reading, but about which I had no comment from the Minister of Technology in reply.
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If hon. Members were to look at Cmnd. No. 2974 dated April, 1966, entitled "Loans from the Consolidated Fund 1966 to 1967"—the current financial year—they will find these words:
"The best estimate of the amount that may be required"
—it is referring to the I.R.C.—
"in 1966–67 is £30 million, of which £20 million would be loans from the Consolidated Funds and £10 million advances of capital from votes."
The Government are therefore forecasting—we will not hold them to a million here or there—that something of the order of £30 million will be required in the first year of the Corporation's operation, which is more than the refreshed capital of the N.R.D.C. I ask the House to ponder this at a time of financial stringency, which brings me to my fourth heading of disagreement over the choice of the sum of £150 million, and that is the other competing costs on public capital.
I emphasise that I am looking at this on capital account and not on current and recurring expenditure. We see the need for new medical schools. We see the problems that are being experienced in the university building programme. Let us look at the field of technology, with particular reference to computers. We know, because I had this reply earlier this week, that there are at present 65 computers in use in the public service. For a capital expenditure of £100 million the Government could have a choice, if we go to the smaller end, of 50,000 Elliott 920 computers, including full installation cost; or, if we refer to the larger computers, the Government could have 1,000 of the middle range of the I.C.T. 1900 series.
Which is more important, to give this additional £100 million to the I.R.C—I am proposing £50 million, which seems fair enough, but they want £150 million—as against having 1,000 new I.C.T. computers We know that the Government could not handle that number all at one go, but I am showing the relative choice which has been made by the Government.
Hon. Members who are interested in the future needs of the Navy know that £100 million would go an awfully long way towards producing that aircraft carrier programme which we are told we cannot

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afford. I am not here to speak on behalf of the Royal Navy—I simply mention that. It is very nearly the difference between buying the F111 and keeping the TSR2.
As for the Health Service—a matter on which I have more knowledge than on the subject of aircraft carriers—£100 million of public capital means 4,000 general practitioner health centres equipped at a cost of £50,000 each; yet it is considered a higher priority to give the I.R.C. £150 million of public capital.
Mr. Robert Sheldon: There is expected to be a return from I.R.C.
6.45 p.m.
Mr. Price: That is something about which we have not heard. The hon. Member is entitled to retain his hopes, but I would not have thought that they constitute a good basis for planning at the present stage. So much for the Government's sense of priorities. I hope we shall hear a little less from them in the future about priorities being good for Socialism, because they are not being very good Socialists.
I can sum up my arguments in the language of our former colleague, A. P. Herbert, who said:
"Well, fancy giving money to the Government!
Might as well have put it down the drain.
Fancy giving money to the Government!
Nobody will see the stuff again.
Well, they've no idea what money's for—
Ten to one they'll start another war.
I've heard a lot of silly things, but, Lor'!
Fancy giving money to the Government."
That appeared in a poem entitled "Too Much", and we think that £150 million is too much. I therefore hope that my Amendment will lend itself to the House.
Mr. A. G. F. Hall-Davis: My hon. Friend the Member for Eastleigh (Mr. David Price) referred to the discussions in Committee on the question of the global sum which the I.R.C. was to have the power to commit. This figure goes to the heart of the Bill concerning financial provisions. Whilst the Minister of State endeavoured during the Committee stage to satisfy me on a number of points, I felt that his reply, when this matter was discussed in Committee, was perhaps the most unsatisfactory and disturbing—I use the word "disturbing" with some emphasis—of all.
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He said in column. 218 of our Committee reports:
"There is no scientific way of arriving at the correct amount of capital or resources which the Corporation should have at its disposal."
If the Bill has been brought forward by the Department of Economic Affairs—and I hope I am in the right Department in these rather confusing days—then surely this Department, above all, must realise that in industry today it is not enough just to give a decision. One has to quantify the decision, reduce it to mathematical terms, and say whether it is so much better or so much worse than various alternatives.
If the Minister really set his mind, with those of his advisers, and made a study of the sums involved, I do not believe that the outcome would be quite so barren as his comments made in the Committee stage would lead us to believe. I have not at my disposal the resources of the Department of Economic Affairs, but I did see a table published some time ago, and I referred to it in the Committee stage. I have since had another look at it. It gives us only some idea of the scale involved, but it is a list of the 150 largest companies in the United Kingdom tabulated in net asset order at the end of 1963. The list starts with I.C.I., with net assets of £893 million, and goes down through the next 149 companies to those with £20 million asset value. I was rather pleased to see that my ranging shot was not so wide of the target as it might have been.
The top 75 companies might well be able to arrange their own mergers, though I must add that the chairman-designate of the Corporation might not entirely share my views. The next 75 companies have net assets ranging from £40 million to £20 million, and their total net assets, in the round, were £2,000 million when the table was compiled. The sum of £150 million represents 7½ per cent. of those total net assets.
Bearing in mind what the Minister of State has just very obligingly, from the point of view of my argument, repeated—that he hopes that in many mergers the Corporation will not need to inject any capital at all—it is probably reasonable to say that £150 million would be sufficient to meet the needs for cash injection in merging each of those 75 of what one might call the Division 2

1219
companies in the table. I do not put this forward as a mathematical and exact proposition, but it relates the sum to the type and scale of merger that is feasible.
It is, therefore, fair to say that this sum cannot be needed for effecting mergers that may be contemplated in that foreseeable future, and I should like the Minister of State to justify this figure in more detail. If one comes to that conclusion, it generates suspicion that the money will be used for ill-judged new ventures, which is possible under Clause 2(1,b), or for supporting declining industries.
A little later in that reply, the Minister of State said that
"… some people thought that the sum in the Bill was too much and…some people thought that it was too little."—[OFFICIAL REPORT, Standing Committee E, 10th November, 1966; c. 218.]
Why do the Minister and the Government think that this sum is right? I am not interested, in this context, in what some unknown people say—although having listened to this debate today it is not difficult to think of some people who might think the amount too much and others who think it too little. If the Minister cannot support his view with quantified arguments and examples, I believe that the insertion of such a large figure as this in the Bill at random—which is what it amounts to—is an indication of the incompetence and failure of Ministers to discharge their responsibilities to the taxpayer.
Here the Government would be committing £150 million of the taxpayers' money with a degree of care and examination less than most commercial firms give to the disbursement of their petty cash. I therefore ask the Minister to tell us in more detail how the Government arrive at £150 million. If he does not, I must say in all seriousness that he has no right to ask the House to put such a large sum at the disposal of the I.R.C.
Sir H. Legge-Bourke: I have not much to add to what my hon. Friends have said, but I have been studying with great care what the First Secretary said in the Second Reading debate on 19th October, from which I gather that this figure of £150 million has presumably been arrived at because it is a sum
1220
"… which will enable the Corporation to carry on for several years, by which time it will probably be self-financing ".—[OFFICIAL REPORT, 19th October, 1966; Vol. 734, c. 227.]
On the face of it, that is a perfectly reasonable point, but in that debate we were never given any supporting facts to show how that assertion had been arrived at, nor, from my study of the Committee proceedings, have I been able to find what led the right hon. Gentleman to say it.
It is obviously desirable that, if set up, the Corporation should as soon as possible get out of the pocket of the State, and if it can by wise early investment or lending eventually ensure that it builds up its own resources to employ in the future, that will be excellent. As it is, we are faced—and I am glad that my hon. Friend the Member for Eastleigh (Mr. David Price) has raised this topic—with the State, operating through the N.R.D.C., involved in some extremely important projects, of which the hovercraft is one. We know that the N.R.D.C. could do with a lot more money than it is getting, even with the additional £25 million, yet we have this completely new body starting off with £150 million.
I cannot help wondering whether what is in mind is that the people who will matter to the Corporation in the early days are the bigger people. There is too often in the mind of the Government—and not only of the particular Departments represented here tonight—the belief that the only people who can speak for British industry are such men as Sir Paul Chambers, at the head of colossi. The British people who really earn the country its keep are often not those people, excellent though many of them are—and I know that my hon. Friend the Member for Eastleigh has been with I.C.I.—but a multitude of smaller companies which are slaving away to keep the country going and to keep afloat themselves in our present economic stringency. Those people are often far more export-conscious than many of the bigger people.
I hope we shall not have the Corporation assuming that in order to do anything it can move only into the £2 million-company bracket and start adding another £10 million to bring about a merger with a company with £5 million. That is the wrong end at which to start.

1221
The Corporation will find that some of the smaller companies, which are finding things very difficult in the present stringency and with the falling total investment figure, would welcome assistance. I therefore begin to wonder whether this figure of £150 million has not been arrived at because the exercise visualised for the Corporation starts at the wrong end. Perhaps the Parliamentary Secretary will elucidate that point for us.
When we have a body such as the N.R.D.C. borrowing up to £25 million and this new body, the I.R.C., coming in and being able to borrow up to £150 million, we must be quite sure that there will be a proper relationship from the R. and D. point of view, and between the Corporation and the N.R.D.C., which will ensure that the Corporation, if it is at a loss where else to go among the industries in which it may be particularly interested at the moment, at least knows that the N.R.D.C. is there as well to assist. Where we have the State entering industry, as it now is, it is very important that the fullest advantage should be taken by each part in the State exercise of the other existing parts.
Mr. R. B. Cant: When we talk about rationalisation, should we not remember that the only comparable institution, going back to the thirties, was the Bankers Industrial Development Corporation, which was given so little money that people called it "Brought In Dead"—and it died shortly afterwards? Should we not, therefore, err on the side of generosity?
Sir H. Legge-Bourke: I hope that nothing out of that period will be taken as a precedent for what we are doing now. This is a completely different matter.
7.0 p.m.
Mr. David Crouch: I am somewhat concerned that the same thing is happening in the Chamber as happened in Committee upstairs. As I pointed out in Committee, we are tending to become rather to cosy in discussing this matter. Some of the fire which we had earlier from the West Country has gone out of the debate and we are in danger of slipping something on to the Statute Book which is very different from what the Government have been trying to describe to us is meant to be done by the Bill.
1222
My hon. Friend the Member for Eastleigh (Mr. David Price) reminded us that £150 million is a great deal of money and that we should err on the side of spending too little rather than too much. Perhaps we are spending too much. My hon. Friend related the figure of £150 million to other Government investment in research, even in their defence activities.
My hon. Friends and I have been a united but reasonable Opposition today. We have been reasonable with a reasonable Minister. I wish I could say that this is a reasonable Bill. However, there are far too many loose ends in the Bill and too many ill-conceived provisions. There is about the Measure a slackness in drafting which—
Mr. Speaker: Order. This is not a Third Reading debate. The hon. Member must relate his remarks to the Amendment.
Mr. Crouch: I accept your correction, Mr. Speaker. I allowed my remarks to wander because, in referring to £150 million as being the price of the Bill, I tended to consider the whole aspect of the Measure.
The admission that we must have this figure of £150 million written into the Bill is similar to so much else that is loose in the phrasing of the Measure. My hon. Friend the Member for Eastleigh was right to suggest that we should examine whether this is not too grand a figure for the purposes of the Bill. After all, the Minister said that the Bill had no power to compel. He has been at pains to persuade us that it has no compulsory powers and, in a bland way, he tried to explain that it is not even a strong Bill. Nevertheless, since £150 million is involved, it must be strong.
I suggest that if, as I believe, the Bill has been loosely constructed to enable it to perform greater functions than the Minister has suggested—that it has been given this special monetary strength to enable it to perform the sort of functions about which I am concerned for the future—we must be very careful in considering every provision of it.
Mr. Albu: I wonder if the hon. Member for Eastleigh (Mr. David Price) was speaking with his tongue in his cheek because I found his arguments extraordinary and they had very little to do with the

1223
Amendment. He began, as did his hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke), by comparing the proposed Corporation with the N.R.D.C., although they are quite different bodies. My hon. Friends welcome the enthusiasm with which the N.R.D.C. is now supported by hon. Gentlemen opposite, remembering that it was introduced by my right hon. Friend the present Prime Minister at the time of the first Labour Government after the war and that it has been most successful. My hon. Friend the Parliamentary Secretary is more directly concerned with N.R.D.C. than I am, but we are both anxious to continue to support it to the full
The N.R.D.C. on the other hand, is a completely different animal, from the I.R.C. It is not in business to set up trading bodies or companies but to support research and development and to see that the products of that R. & D. are taken up by companies and properly exploited It therefore does not need the sort of money, even as a revolving capital fund, that the Corporation will require.
The hon. Member for Eastleigh, like his hon. Friend the Member for Canterbury (Mr. Crouch), went on to consider the sums of money that will be available to the Corporation and to compare them with the sums involved in forms of current Government expenditure. They were, in that process, comparing chalk and cheese, as anybody experienced in industry will be aware. My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) made this clear.
In the debate we had earlier, when discussing the word "profitable", hon. Gentlemen opposite tried to suggest that we should spend a lot more money on a great many unprofitable things. The hon. Member for Eastleigh gave no indication of how the purchase of 1,000 computers would be profitable. We have found in the past that hon. Gentlemen opposite were prepared to spend Government money on R. & D. without giving any consideration to the question of profitability. Britain simply could not tolerate that state of affairs and we have put a stop to it.
I assure hon. Gentlemen opposite that at present proposals for R. & D. are considered most seriously from their profitability point of view, even if in the rather
1224
longer term in some cases, and we do not allow this expenditure just to pile up, with Government funds being spent on R. & D. projects merely because certain things happen to look nice.
Sir H. Legge-Bourke: The hon. Gentleman is being somewhat unfair to my hon. Friend the Member for Eastleigh (Mr. David Price). Surely there comes a point when, say, the N.R.D.C. has done its R. & D. work and believes that it is on a world-beater, that the real task of exploiting the project is necessary. Is that not one way to approach this problem?
Mr. Albu: Of course it is, and I have no doubt that the Corporation may be able to help some times in getting such inventions exploited, but it will be doing it under different conditions and with different objectives compared with those of the N.R.D.C. The hon. Member for Eastleigh asked what sort of connection there would be between the two organisations. I assure him that the very fact that the Bill is sponsored jointly by my Department and the Ministry of Technology guarantees that there will be proper consultation on these matters.
I turn to the case made by the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis), who made an able speech, as he did on many occasions in Committee. I do not believe that there is a scientific formula by which one may know precisely the amount of money that should be provided for the Corporation. If there is such a formula, I wish that the hon. Gentleman would tell me it because there are a number of other spheres in which it could be of assistance. If he thinks that Ministers and officials, having made a thorough study, suddenly arrived at this figure, he is wrong. I gave some of the details in Committee and pointed out that one might compare the sum with the recommendations of the Geddes Report on shipbuilding, which said that £40 million of public money would be necessary.
Mr. Hordern: Since the hon. Gentleman mentioned the Geddes Report, are we to understand, first, that the I.R.C. might have some part to play in the reconstruction of the shipbuilding industry and, secondly, is it possible that the I.R.C. will be called upon to provide money for the joint venture in the aircraft industry announced yesterday?
Mr. Albu: As to the second, it is highly unlikely because I should imagine that the sum required would be too large, given the figure in the Bill. As to the first point, the answer is no. The Shipbuilding Industry Board is a separate body and, although the Corporation might well find scope for its activities in the field of components and parts which the engineering industry supplies to the shipbuilding industry, I do not think it will operate in the shipbuilding industry proper.
In many cases where the Corporation has to invest it may have to do so in figures of something like £5 million to £10 million. I agree that this will vary from large to small companies. We have looked at what has happened in the private sector, and I have some examples which might help hon. Members to make up their minds. For instance, I.C.I., made £10 million available to Mr. Joe Hyman to build up Vyella International as a very necessary rationalisation. Hawker Siddeley made a cash offer of over £19 million to gain control of R. A. Lister, which was a diversification. Rolls Royce raised £20 million by debenture issue before going into the proposed merger with Bristol Siddeley.
Hon. Members raised the question of the £300 million which I quoted in Committee and again asked whether this was an incorrect or unfair figure because in many cases it was not cash which passed but an exchange of shares and so forth. In order to help hon. Members, I have gone into this matter further. In the period 1959 to 1963, when publicly quoted companies spent an average of about £335 million a year on acquisitions, cash payments accounted on average for about £145 million of this total a year. Since that time the number of mergers has been increasing, and it is of course the job of the I.R.C. to increase them further.
It does not seem, therefore, that these resources are excessive in relation to what has been going on and what it is intended that the Corporation should do. We have examined the matter carefully and have arrived at the best judgment we could make. I would remind hon.
Members that this sum is to last for five years and would amount to only £30 million a year. But that amount of money will not be required at one time. It will be issued from the Consolidated Fund as and when required, and in some years it may not all be required. It is not comparable to the vast sums of money which the hon. Member for Eastleigh wanted to be spent on unknown and rather unprofitable enterprises.
Mr. David Price: The Minister of State was not fair when he said that there is no comparison between the N.R.D.C. and the I.R.C. I said that there was a parallel. A very strong case can be made for saying that the N.R.D.C. needs more working capital than the I.R.C., particularly if the I.R.C. is working catalytically.
The hon. Gentleman accused me in the examples I gave—again by reference to what £100 million of Government capital means—of mixing current and capital outlay. I did not do so. All the items I chose were of a capital nature. It is true that the National Health Service happens to finance building of new clinics under current expenditure, but that is a typically bad example of financing under all Governments. For computers the Treasury is using the technique of investment, which shows that the Treasury regards that as a capital item. It is not unfair to draw the parallels which I used and to compare things which, of course, are not alike in the physical sense but which have the common denominator of money and the common yardstick of how we deploy our resources.
As to the examples about Listers and other companies, the hon. Gentleman was not quite fair. Although cash passed, these were acquisitions. They were not a fair comparison to the catalytic rôle which the I.R.C. will play. We are still unsatisfied that the choice of £150 million is right and we wish to press the Amendment to a Division.
Question put, That "£150" stand part of the Bill:—
The House divided: Ayes 187, Noes 102.

Division No. 203.]

AYES

[7.16 p.m.

Albu, Austen

Archer, Peter

Barnes, Michael

Allaun, Frank (Salford, E.)

Armstrong, Ernest

Harriett, Joel

Alldritt, Walter

Atkins, Ronald (Presto;;, N.)

Bennett, James (G'gow, Bridgeton)

Anderson, Donald

Atkinson, Norman (Tottenham)

Bidwell, Sydney

Bishop, E. S.

Hamling, William

Oakes, Gordon

Blackburn, F.

Harrison, Walter (Wakefield)

O'Malley, Brian

Blenkinsop, Arthur

Haseldine, Norman

Oram, Albert E.

Boardman, H.

Hazell, Bert

Orme, Stanley

Booth, Albert

Henig, Stanley

Owen, Dr. David (Plymouth, S'tn)

Boston, Terence

Herbison, Rt. Hn. Margaret

Page, Derek (King's Lynn)

Braddock, Mrs. E. M.

Hooley, Frank

Pannell, Rt. Hn. Charles

Bray, Dr. Jeremy

Hooson, Emlyn

Pardoe, John

Brown, Bob (N'c'tle-upon-Tyne, W.)

Horner, John

Parker, John (Dagenham)

Buchan, Norman

Howie, W.

Pavitt, Laurence

Buchanan, Richard (G'gow, Sp'burn)

Hoy, James

Pearson, Arthur (Pontypridd)

Butler, Herbert (Hackney, C.)

Hughes, Roy (Newport)

Pentland, Norman

Butler, Mrs. Joyce (Wood Green)

Hunter, Adam

Perry, George H. (Nottingham, S.)

Cant, R. B.

Irvine, A. J. (Edge Hill)

Price, Christopher (Perry Barr)

Carmichael, Neil

Jackson, Peter M. (High Peak)

Price, Thomas (Westhoughton)

Chapman, Donald

Jeger, Mrs. Lena (H'b'n&St. P'cras, S.)

Price, William (Rugby)

Coe, Denis

Jenkins, Rt. Hn. Roy (Stechford)

Probert, Arthur

Concannon, J. D.

Johnson, James (K'ston-on-Hull, W.)

Pursey, Cmdr. Harry

Corbet, Mrs. Freda

Johnston, Russell (Inverness)

Randall, Harry

Crossman, Rt. Hn. Richard

Jones, Dan (Burnley)

Rhodes, Geoffrey

Cullen, Mrs. Alice

Jones, J. Idwal (Wrexham)

Richard, Ivor

Dalyell, Tarn

Kelley, Richard

Roberts, Albert (Normanton)

Davies, Dr. Ernest (Stretford)

Kenyon, Clifford

Robertson, John (Paisley)

Davies, G. Elfed (Rhondda, E.)

Lawson, George

Robinson, W. O. J. (Walth'stow, E.)

Davies, Ednyfed Hudson (Conway)

Leadbitter, Ted

Rogers, George (Kensington, N.)

Davies, Ifor (Gower)

Ledger, Ron

Rose, Paul

Davies, S. O. (Merthyr)

Lee, John (Reading)

Ross, Rt. Hn. William

Dell, Edmund

Lestor, Miss Joan

Rowlands, E. (Cardiff, N.)

Doig, Peter

Lewis, Ron (Carlisle)

Ryan, John

Dunn, James A.

Lomas, Kenneth

Sheldon, Robert

Dunnett, Jack

Loughlin, Charles

Silkin, Rt. Hn. John (Deptford)

Dunwoody, Mrs. Gwyneth (Exeter)

Luard, Evan

Skeffington, Arthur

Dunwoody, Dr. John (F'ham & C'b's)

Lubbock, Eric

Slater, Joseph

Eadie, Alex

Lyon, Alexander W. (York)

Small, William

Edelman, Maurice

McBride, Neil

Spriggs, Leslie

Edwards, Rt. Hn. Ness (Caerphilly)

McCann, John

Steel, David (Roxburgh)

Edwards, William (Merioneth)

Mackenzie, Alasdair (Ross&Crom'ty)

Steele, Thomas (Dunbartonshire, W.)

Ellis, John

Mackenzie, Gregor (Rutherglen)

Summerskill, Hn. Dr. Shirley

Faulds, Andrew

Mackie, John

Thomas, George (Cardiff, W.)

Fernyhough, E.

Mackintosh, John P.

Varley, Eric G.

Finch, Harold

McMillan, Tom (Glasgow, C.)

Wainwright, Edwin (Dearne Valley)

Fletcher, Ted (Darlington)

McNamara, J. Kevin

Walden, Brian (All Saints)

Floud, Bernard

Maginnis, John E.

Walker, Harold (Doncaster)

Foley, Maurice

Mahon, Simon (Bootle)

Watkins, David (Consett)

Foot, Michael (Ebbw Vale)

Mallalieu, E. L. (Brigg)

Watkins, Tudor (Brecon & Radnor)

Forrester, John

Manuel, Archie

Weitzman, David

Fowler, Gerry

Mapp, Charles

Wellbeloved, James

Fraser, John (Norwood)

Marquand, David

Whitlock, William

Galpern, Sir Myer

Marsh, Rt. Hn. Richard

Wilkins, W. A.

Garrow, Alex

Mayhew, Christopher

Williams, Alan (Swansea, W.)

Gordon Walker, Rt. Hn. P. C.

Millan, Bruce

Williams, Clifford (Abertillery)

Gourlay, Harry

Miller, Dr. M. S.

Willis, George (Edinburgh, E.)

Gray, Dr. Hugh (Yarmouth)

Mitchell, R. C. (S'th'pton, Test)

Wilson, William (Coventry, S.)

Grey, Charles (Durham)

Molloy, William

Winnick, David

Griffiths, David (Rother Valley)

Moonman, Eric

Winstanley, Dr. M. P.

Griffiths, Rt. Hn. James (Llanelly)

Morgan, Elystan (Cardiganshire)

Winterbottom, R. E.

Hale, Leslie (Oldham, W.)

Morris, John (Aberavon)

Woodburn, Rt. Hn. A.

Hamilton, James (Bothwell)

Moyle, Roland

Hamilton, William (Fife, W.)

Murray, Albert

TELLERS FOR THE AYES:

Mr. Fitch and Mr. Ioan L. Evans.

NOES

Alison, Michael (Barkston Ash)

Cunningham, Sir Knox

Hawkins, Paul

Astor, John

Currie, G. B. H.

Heald, Rt. Hn. Sir Lione.

Awdry, Daniel

Dalkeith, Earl of

Hiley, Joseph

Balniel, Lord

Dance, James

Hill, J. E. B.

Batsford, Brian

Dean, Paul (Somerset, N.)

Hirst, Geoffrey

Biffen, John

Deedes, Rt. Hn. W. F. (Ashford)

Holland, Philip

Biggs-Davison, John

Elliot, Capt. Walter (Carshalton)

Hordern, Peter

Boyle, Rt. Hn. Sir Edward

Errington, Sir Eric

Jenkin, Patrick (Woodford)

Brinton, Sir Tatton

Farr, John

Jennings, J. C. (Burton)

Bromley-Davenport, Lt. Col. Sir Walter

Fletcher-Cooke, Charles

Kirk, Peter

Brown, Sir Edward (Bath)

Fortescue, Tim

Kitson, Timothy

Bruce-Gardyne, J.

Foster, Sir John

Lancaster, Col. C. G.

Buchanan-Smith, Alick (Angus, N&M)

Gilmour, Ian (Norfolk, C.)

Langford-Holt, Sir John

Buck, Antony (Colchester)

Gilmour, Sir John (Fife, E.)

Legge-Bourke, Sir Harry

Bullus, Sir Eric

Glyn, Sir Richard

Loveys, W. H.

Burden, F. A.

Grant, Anthony

Maddan, Martin

Chichester-Clark, R.

Gurden, Harold

Marten, Neil

Clegg, Walter

Hall-Davis, A. G. F.

Maude, Angus

Cooke, Robert

Hamilton, Marquess of (Fermanagh)

Mitchell, David (Basingstoke)

Corfield, F. V.

Hamilton, Michael (Salisbury)

Monro, Hector

Costain, A. P.

Harris, Frederic (Croydon, N. W.)

Maxwell-Hyslop, R. J.

Crawley, Aidan

Harrison, Brian (Maldon)

Maydon, Lt.-Cmdr. S. L. C.

1228

1229

Moire, Jasper

Ramsden, Rt. Hn. James

Turton, Rt. Hn. R. H.

Morrison, Charles (Devizes)

Ridsdale, Julian

van Straubenzee, W. R.

Mott-Radclyffe, Sir Charles

Russell, Sir Ronald

Vaughan-Morgan, Rt. Hn. Sir John

Nabarro, Sir Gerald

Sharples, Richard

Walker-Smith, Rt. Hn. Sir Derek

Nicholls, Sir Harmar

Shaw, Michael (Sc'b'gh & Whitby)

Walters, Dennis

Noble, Rt. Hn. Michael

Sinclair, Sir George

Webster, David

Page, Graham (Crosby)

Smith, John

Whitelaw, William

Page, John (Harrow, W.)

Stainton, Keith

Wille, Sir Gerald (Bridgwater)

Peyton, John

Stodart, Anthony

Wilson, Geoffrey (Truro)

Pink, R. Bonner

Summers, Sir Spencer

Wolrige-Gordon, Patrick

Price, David (Eastleigh)

Talbot, John E.

Prior, J. M. L.

Taylor, Sir Charles (Eastbourne)

TELLERS FOR THE NOES:

Pym, Francis

Thatcher, Mrs. Margaret

Mr. R. W. Elliott and Mr. Younger.

Clause 9.—(REPORTS AND INFORMATION.)
Mr. Dell: I beg to move Amendment No. 12, in page 7, line 12, to leave out 'as soon as possible' and to insert:
'within a period of four
months'.
Mr. Speaker: I understand that it would be for the convenience of the House if with this Amendment we take Amendment No. 13, in page 7, line 13, after 'year', insert:
'and as soon as possible within that period'
Mr. Dell: That will be for the convenience of the House.
These Amendments have been tabled in response to a pledge I made in Committee to the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis), who wished to establish a code of good conduct which the Corporation should adhere to. In particular, he wanted a requirement inserted into the Bill that the annual report should be produced within two months. I was unable to make a commitment to that effect, but we have put in a commitment that the annual report will be produced within four months. By so doing, we are enabling the Corporation to set an example to British industry as to the speed with which annual reports might be produced, because the period of four months compares with nine months under the Companies Act.
We fully recognise the validity of the argument that prompt information about the Corporation's activities should be available to Parliament and to the public. Therefore, we have inserted into the Bill the unprecedented obligation to produce the annual report within this period. Perhaps it is a pity that it is unprecedented. We hope that the Corporation will be able to produce its annual report in less than four months. This accounts for Amendment No. 13, by which we insert the words
' as soon as possible within that period '.
Mr. Hall-Davis: I would indeed be churlish if I did not acknowledge that these Amendments fulfil, to as great an extent as anyone could hope for in the circumstances, the intention of the Amendments I proposed in Committee. After the Parliamentary Secretary had expressed sympathy in Committee, I said:
"I wish I could feel that sympathy was always evidence of intention."—[OFFICIAL REPORT, Standing Committee E; 10th November, 1966, c. 246.]
In view of the Parliamentary Secretary's reaction, I almost blush now. I thank him for introducing these Amendments.
Mr. Barnett: Perhaps I should start by declaring a professional interest in the preparation of accounts, although not the ones we are talking about. I am sympathetic to the idea of preparing accounts earlier. When the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis) gave reasons in Committee as to why accounts could be prepared more quickly, he said this:
"All that is involved is the valuation of various investments."—[OFFICIAL REPORT, Standing Committee E, 10th November, 1966; c. 243.]
Especially if the investments are in small companies, this could be a lengthy and difficult process.
Perhaps it is the professional in me, but I worry a little about laying down specific timetables. It may be a great innovation, as my hon. Friend the Joint Parliamentary Secretary said, but I have one or two questions. The requirement in the Companies Act that accounts must be presented by a certain time carries a penalty. What is the penalty under the Bill if accounts are not submitted within the prescribed four months?
If the wording in the Clause is not to be meaningless, what certificate will appear on the accounts? I appreciate that generally the auditors will give the certificate they normally give with public

1231
corporation accounts, but they are not obliged to give the normal certificate under the Companies Act, 1948. Subsection (3) merely says
"and a copy of any report made on the statement by the auditors."
In other words, it would presumably be sufficient under that subsection if the auditors on the accounts said, "We have examined the books and accounts and the profit and loss account and balance sheet but have not got time to certify them, because we have a large number of audit clerks off with the flu". The Clause does not lay down what type of statement the auditors should affix to the report and accounts.
I should like to hear my hon. Friend's opinion as to what type of statement they would be obliged to put in and what would be the penalty if the report was not submitted in the prescribed time.
7.30 p.m.
Mr. Biffen: I want to raise a point rather along the lines drawn by the hon. Member for Heywood and Royton (Mr. Barnett) and I would also add my own appreciation to that of my hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis) of the Government's action in putting down the Amendment. The Joint Parliamentary Secretary suggested that the Corporation was giving a lead for the best in industrial practice and I accept the proposition. But would he go further and consider a provision for interim statements? That also is a growing practice that is to be encouraged.
Mr. Dell: The issuing of interim statements is, I agree, in accordance with the best industrial practice these days. We discussed the subject in Committee on an Amendment moved by the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis), which was resisted by the Government. We should continue to resist the idea on the ground that the type of requirement that makes desirable an interim statement in the case of private companies with private shareholders would not apply in this case, where the only shareholder is the Government and there is no question of dealings in shares on the basis of the prospective profitability of the company.
The main consideration involved here is the justifiable desire to get the annual
1232
report out earlier. I was surprised to hear my hon. Friend the Member for Heywood and Royton (Mr. Barnett) voice even the least doubt on the subject because, on Second Reading of the Companies Bill introduced in the last Parliament, he advocated that there should be such a limit in the case of private companies. There is no penalty in this Bill but, of course, Parliament and the Government would be exceedingly displeased if this requirement were not adhered to. I will write to my hon. Friend about auditors' reports.
Amendment agreed to.
Further Amendment made: In page 7, line 13, after 'year', insert:
'and as soon as possible within that period'.—[Mr. Dell.]
7.33 p.m.
Mr. Albu: I beg to move, That the Bill be now read the Third time.
The origins of the Bill were a White Paper presented by my right hon. Friend the present Foreign Secretary in January, 1966. The Bill suffered a rather considerable delay while the electorate were given an opportunity to pronounce on it and that they gave it overwhelming support is shown by the majority with which the Government were returned. The Bill found its place in our legislative programme, although inevitably it was somewhat delayed.
When it finally got its Second Reading on 19th October, it had a rather ambivalent reception from the benches opposite and today it has again evoked a slightly ambivalent response. I hope that I do not do the hon. Member for Eastleigh (Mr. David Price) any political harm when I say that I make no complaint whatever about the attitude of himself or of his hon. Friends in the Standing Committee. The debates we had there were useful and constructive, although some people might say that they were a rather technocratic series of debates discussing somewhat esoteric matters concerned with company organisation and industry.
Nevertheless, the Bill represents a substantial step forward in dealing with the problems we face in trying to expand the economy to deal with the country's economic problems. We are anxious that the Bill should become law in the near future, as I am sure it will, and that the Corporation should be able to get on with its job.

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In Committee at any rate there seemed to be no real dispute about the need for some new institution of this sort to stimulate and foster industrial rationalisation—although I must say that there was an hour or so today when the guerillas were in the Chamber and I felt that perhaps I might be wrong in that view. Some of them certainly would not be in favour of the Government taking any action to stimulate the economy or assist economic growth.
I must say also that some of the Opposition Amendments, particularly those dealing with the powers of the Corporation and its financial resources, would have completely de-natured it. No doubt that was the intention of some hon. Members opposite. I do not think that it was the intention of the hon. Member for Eastleigh. I hope that the reassurances we have given both in Committee and here today have calmed the doubts and fears of some hon. Members opposite.
Sir Harmar Nicholls: Not yet.
Mr. Albu: Perhaps not below the Gangway but I think that it is so above it. Certainly industry and the City seem much less apprehensive than hon. Members opposite and in a number of cases already close working relationships have been developed between firms and the Corporation, which is not regarded with the suspicion that some hon. Members, like the hon. Member for Oswestry (Mr. Biffen) look upon it.
The members designate of the Corporation have already been approached with a wide variety of suggestions for rationalisation schemes in particular industries and sectors of industry—and some come from some of the nation's most famous companies. I have no doubt that the Corporation, as an independent outside body devoted only to the task of improving the country's economic performance, is welcomed in industry, and that welcome is evidence that the establishment of a body serving this function is long overdue.
We have emphasised throughout the stages of this Bill, as did my right hon. Friend the Foreign Secretary when introducing the White Paper, that the Corporation will have no compulsory powers. But that does not mean that it is not to be an active and even aggressive
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body. It certainly is. It is not to be a bank of last resort or a home for the weak and the failures. I hope very much that its activities will hasten the extinction of weak and failing companies which are not using resources and assets in the most efficient or, if hon. Members opposite prefer it, most profitable way.
There are, of course, companies which are quite small and perhaps at the moment not very profitable or apparently weak, but which have great technical and commercial possibilities. They need just the sort of assistance the Corporation will be able to give in strengthening them so that they can make a better contribution—no doubt in association with others—to our industrial progress.
As has been explained many times, and as was made clear in the White Paper, the first priority for the Corporation is to assist in the improvement of the import-export balance of the economy. That is why we were not able to accept the Opposition's proposal that we should substitute for the wording in the Bill dealing with the functions of the Corporation the sole test of profitability, although we have made it clear that we expect that the companies the Corporation will establish will become profitable in the long term.
The sort of firms to which the Corporation will have to pay attention in the first place—firms which should be making a greater contribution to our export-import balance—will, I think, be found in the engineering industries. I regret to say that, in the engineering industries, our competitors have shown a higher rate of expansion of exports than we have. It is significant that, in comparison with those countries which have a better record than us in exports of all products—there may be all sorts of reasons for this—our competitors' rate of expansion of engineering exports has been consistently higher than ours throughout the last 10 years. Where international trade in engineering products has been expanding fastest, their performance has been better still. In these cases one will find that the average rate of growth of their exports has increased by two, three or four times while ours has increased by only 50 per cent. or even less. To deal with this situation, one of the tasks which the Corporation may well perform will be the creation of consortia for specific

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export jobs, assisting British firms, for instance, to co-operate against foreign rivals.
During the course of the Bill's progress, there has naturally been a good deal of discussion of the use of the Corporation for regional development. We had a good deal of this in the constituency speeches today and in Committee my hon. Friend the Member for West Lothian (Mr. Dalyell) and others took a great interest in this aspect. It has been explained over and over again that regional development is not the Corporation's first duty. That is expressed in Clause 2(1,a) as being to
"promote or assist the reorganisation or development of any industry or section of an industry".
The Corporation will, however, always have to take account of the need to change the industrial structure of our development areas, and under Clause 2(1, b) it can be requested by the Secretary of State to set up a particular single establishment. There has been reference to the example of the Wiggins Teape paper and pulp mill at Fort William, which is a very good example.
When one considers whether one needs a Corporation of this sort or would have needed it in the past, I am reminded, as I explained in Committee, that we nearly lost the First World War because of the complete inadequacy of our chemical industry. In 1915, the Government of the day had to put up money for a reorganisation scheme for the chemical industry, with the assistance of Dr. Weitzman, who later became the President of Israel, by which a company was formed, British Dyes, which in its turn later combined with other companies to become British Dyestuffs Limited. After the First World War, the Government had to play an important rôle in the events which led up to the formation of I.C.I. in 1926. That was all in spite of the fact that aniline dyes had been invented by Perkins in this country, although development had taken place in Germany and the United States.
Since that time, Governments have had to step in time and time again to rationalise industry, or to create conditions in which it could be rationalised—cotton, textiles, aircraft and coal are examples.
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We are not now in a war situation, but we are engaged in a battle for our economic lives and we need to accelerate the pace of industrial change. The Government are sure that indirectly and directly, by its influence as a catalyst and by its activities in the market, I.R.C. will play an important rôle in improving the structure of British industry for the tasks which lie ahead of it.
Sir Harmar Nicholls: Once again the hon. Gentleman has emphasised the importance of the export of tangible things, engineering and chemical products and so on. I take it that the Corporation will also recognise the great part which the service industries will play, the hotel industry, for example. Will the Corporation be available to see that we have our fair share of the tourist trade and so on?
Mr. Albu: I am sure that it will, but I was drawing attention to what I consider to be the present priorities and I believe that they lie in those things which I have mentioned. But that does not prevent the Corporation from undertaking any activities which it believes will help to improve the country's balance of payments.
I am sure that, whatever views have been expressed on both sides of the House about the Corporation, we would all now wish the very distinguished members designate of the Board the best of luck in the tasks which they have ahead of them.
7.44 p.m.
Mr. David Price: I am sorry if my mild and always friendly disposition has led the Minister of State and the Parliamentary Secretary to think that I actually approve of the I.R.C. I hope that the Minister will acknowledge that in Committee I made it quite clear that we could not stop the Bill and that it therefore seemed to be far more sensible and constructive to try to assist in making it a little better.
I must confess that, unlike good wine, the Bill has not improved with the keeping. Our basic objections remain. They have not been removed by five sittings of the Standing Committee, or by the Report stage. If anything, they have been fortified. I have not changed the views which I expressed on Second Reading, which is hardly surprising as few of the questions which I then asked have since

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been answered, least of all by the right hon. Gentleman the Minister of Technology who wound up the Second Reading debate and who frankly seemed more concerned with attacking my right hon. Friend the Member for Wallasey (Mr. Marples) than with answering the questions which we had put about I.R.C.
To be fair, I must acknowledge that the Minister of State and the Parliamentary Secretary were more friendly and more courteous when we were in Committee upstairs. Nevertheless, we still disagree with them. We did not quarrel with them upstairs and I have no intention of quarrelling with them now. Like Chesterton, I hate a quarrel because it interrupts an argument, and I warn the Government that our arguments about the structure of British industry will continue. Passing the Third Reading of the Bill tonight will not end the argument but simply add another factor to it.
I think that the Minister of State will agree that the basic argument revolves around the proposition that many British industries are fragmented and that better results could be obtained in foreign markets if they were concentrated into fewer firms. On Second Reading I acknowledged that there was some truth in this proposition, but I pointed out that British industries were too fragmented not in terms of the British market but only in terms of the world market. How does one, or should one, persuade companies to merge, not in terms of their own market, but in terms of the world market? That still remains the question.
I said that the answer was for Britain to join a larger market, when natural forces would then bring about the necessary structural changes. The only larger market at hand was that of the European Economic Community—"So join it", I said. The Minister of Technology never commented on that proposition. The Government answer all along has been to set up another public body, the Industrial Reorganisation Corporation, which is the subject of the Bill.
Since then, the Government have announced that they want to join the European Economic Community. Can I take it, then, that if the Government succeed in negotiating our entry into the
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Community, as we on this side of the House hope that they will, they will then wind up the I.R.C., a little redeployment of skilled manpower which, after all, is what the Prime Minister talks to the nation about so movingly? In the meantime, are they for instance to rewrite the definition of "monopoly" in terms of the European rather than the British market? This would be a very important move towards the intra-European company mergers which some of us would like to see.
Mr. J. T. Price: I am interested in the question which the hon. Gentleman put to the Government—will the Government wind up the Corporation if we join the European Economic Community? Surely the answer to that must be known. Italy already has two wider and more far-reaching organisations, the I.R.I. and the E.N.I., which are the great trading associations of Italy and which are largely financed by State capital, plus private capital, and which the Italians have never thought fit to wind up. Why should we wind up ours?
Mr. David Price: With respect to the hon. Member, of whom we are all very fond and whose interventions we enjoy, he knows as well as I do that E.N.I. cannot be compared with I.R.C., that E.N.I. is a combination partly of the oil industry, partly of the central electricity generating board and a large part of the atomic energy authority and part of what we would call Shell and B.P. The two are not comparable and the hon. Gentleman has not got hold of the basic idea that the I.R.C. is not a State trading organisation. If he had been with us on the Standing Committee he would have seen that.
I was asking what measures the Government ought to take to get us better poised for entry into Europe and whether they would rewrite the definition of "monopoly" in terms of the European rather than a British market. I would also like to know whether the Bank of England is to assist in matters of exchange control for intra-European company mergers. In my experience, this exchange control can be a severe obstacle.
By now it will be clear to the House that we regard the creation of this new Corporation as unnecessary. Furthermore, we believe that it weakens rather

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than strengthens the market economy, which we would prefer to see strengthened. It is equally clear that when the Government are faced with the peculiar problems of a particular industry, such as shipbuilding, they do not see the I.R.C. as a suitable instrument for rationalisation. On their own terms, I question whether they regard the I.R.C. as being really necessary.
It will be recalled that yesterday the right hon. Gentleman the Minister of Aviation told us that enabling legislation would be required to implement the Government's proposals for the airframe industry. He said:
"I would anticipate legislation being brought forward if, as I hope, the negotiations prove successful."—[OFFICIAL REPORT, 21st November, 1966; Vol. 736, c. 968.]
It is quite irrelevant for me to go into the rights or wrongs of this proposed Measure, but the point I am making is that when the Government find it necessary in the aircraft industry to bring together the two airframe manufacturers it is not to the I.R.C. that they turn as the instrument to effect this. Instead they say that they will table separate legislation.
Similarly, in the shipbuilding industry. We know from earlier discussions that the Government had accepted in principle the Geddes proposals for the rationalisation of the shipbuilding industry, together with its proposal for the establishment of a Shipbuilding Industry Board. On 9th August the President of the Board of Trade in the course of a long statement on the shipbuilding industry said:
"We intend to introduce legislation this Session establishing a Shipbuilding Industry Board to promote the reorganisation of the industry."—[OFFICIAL REPORT, 9th August, 1966; Vol. 733, c. 1400–1.]
He went on to announce the appointment of Mr. Swallow as chairman-elect of the Board. All of this is being done by the Government outwith the I.R.C.
On Second Reading I recounted the major steps taken within the machine tool industry, on its own initiative, to produce bigger units. I compared the present structure of the British machine tool industry with the German industry and showed that there was little structural difference. Naturally I elicited no comment
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from the Minister of Technology in his reply to the debate. We have ceased to expect that.
I put it to the Parliamentary Secretary, in what industry do the Government see the I.R.C. operating? In the shipbuilding industry? Clearly no. In the aircraft industry? Clearly no. In the machine tool industry? Again the answer is no, or else the Minister of Technology would have said so when I invited him to reply to my speech. Is the I.R.C. to operate in the chemical industry? Clearly no. In the motor car industry? Again no. I mentioned on Second Reading that Jaguar was going ahead with its merger without the I.R.C. Is it proposed that B.M.C. be merged with Fords? I hardly think so.
Is the I.R.C. to operate among retail stores and effect a merger between "Gussies" and Marks and Spencers? I think that they would be capable of doing that without the assistance of Sir Frank Kearton. Will it work among the banks or the stockbrokers? The Chancellor is doing that very nicely, particularly with the jobbers. We have had only one suggestion, and that came out at this late hour in the life of this Bill through Parliament, when the Minister of State mentioned the engineering industries.
I would have liked to press him a good deal more about which side of engineering. I have mentioned machine tools and motor cars. Does he see the I.R.C. operating in electrical engineering and at which end, the heavy or the light? We have as yet had not one example from the Government of where they see the I.R.C. operating in its early stages. It is not an unfair question to ask because the Government have allocated £30 million of public capital in the current fiscal year in order that the I.R.C. can get going quickly because, as the Government see it, its task is so urgent.
The Government must tell us which are the industries and firms which are so ripe for mergers and which are being held up because the I.R.C. is not there. We have heard nothing. All the evidence suggests the urgency of a tortoise. The truth is that the I.R.C. was the brain child of the former First Secretary of State, hence the no doubt Freudian references by the Minister of Technology in his Second Reading speech to "artificial insemination".

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When we come to the details of the Bill we find an equally unsatisfactory state of affairs. The Government's view of the functions of the I.R.C. have varied from that of a modest catalyst—this was the view expressed by Ministers upstairs—to that of the vital instrument for the implementation of "Signposts for the Sixties" which was the Minister of Technology's view.
The functions given to the I.R.C. by this Bill have been drawn far too wide for this unwanted waif of instant politics. The finances allotted to the I.R.C. are excessive for its catalytic purposes and even more excessive when one considers the other more urgent calls upon the limited capital funds at the disposal of the Government.
The Government have only the vaguest idea of how the Corporation will operate. When I raised a number of pertinent questions on Second Reading I was dismissed by the Minister of Technology as being academic—a strange charge from a Master of Arts of New College—and advised to watch "The Power Game" on television. That just about sums it up. The I.R.C. is to be another ploy in the Government's power game. I therefore ask the House to refuse this Third Reading by voting against it tonight.
7.58 p.m.
Mr. Sheldon: The hon. Member for Eastleigh (Mr. David Price) was obviously ingenuous when he asked which mergers the Government had in mind. This is to pre-empt the rights of the I.R.C., when it is formed, to make its own decisions. One cannot expect Ministers to take on the tasks of the I.R.C. and decide which are the industries and it is for us to leave it with its options reasonably open for the decisions to be taken in the light of its investigations. For my part I am very pleased to see the Ministry of Technology so strongly represented and so interested in this Bill.
The benefits which will come from the changes of scale are largely technological and it is from this viewpoint that I look forward to improvement in British industry in the years ahead. Many merchant banks are very concerned in the promotion of mergers and much of their work has been of great benefit to industry. But they use different criteria from those
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which the Bill will enable the I.R.C. to use.
In particular the one big criterion which merchant banks use is the increase in financial strength as a result of the mergers. This is always of some value. First of all, it buys time for the changes which will be necessary if there are to be any benefits from the merger. This kind of change can also result in allowing extra time for the inefficient companies to continue operations, even though merged. In itself the financial strength, increased as the result of a merger, does not necessarily involve any increase in efficiency.
The second way in which merchant banks assist mergers is in the promotion of diversification of certain industries which come under the umbrella of the merged company. This diversification can be a bad kind of merger for the country's economy. It is a promotion for security and for protection from competition. If we look at our big holding companies we can see that this is one of the reasons why such mergers are promoted. It provides security in bad times. Those who have the efficiency of the economy at heart should not want to see this kind of security from the competitive forces which should be promoted within our economy.
The third thing which merchant banks look for is an increase in managerial strength. This is desirable, but one cannot be sure for how long it will continue to operate. It is all very well promoting bright middle management to a merged company, but one cannot be certain that this change will be of continuing benefit.
My fourth point concerns sales. From what I have seen, the sales of a merged company are not often more than the sum total of the sales of the individual companies. In many cases, they are considerably less. The benefit to be obtained from increased sales is perhaps in the main rather less than might have been assumed.
The big fundamental improvement which can come from a merged company concerns the change of scale and the technological changes which can be developed. This is where benefits can be immense and continuing. The one thing about merchant banks is that they pay very little regard to this point, not because they do not wish to do so, but

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because they are not equipped to deal with it. They bring in certain outside advice, but they themselves have no expertise in this field. This is the rôle of the Ministry of Technology—to advise the I.R.C. There is a need for a certain amount of humility in connection with the Ministry of Technology. It is a developing organisation. But because there is an organisation precisely with the job of acquiring expertise in this field it is of great benefit that it is vitally concerned in this Measure.
Throughout the debate and in Committee it has been said that profitability should be the sole test. These were the words used by the hon. Member for Horsham (Mr. Hordern) in Committee. The maximising of profit is a very important test, and we should not minimise it, but the modern manager recognises that he has other responsibilities than providing a very high level of continuing profit. He has responsibilities to employees in providing them with a continuity of work which is not wholly dependent on the profit. He has responsibilities to his customers and suppliers, and he has a responsibility to the community. The modern manager is beginning to accept these as normal and natural, and anybody who denies this denies one of the fundamental changes which has come over British industry. One may say that this is enlightened self-interest, because if they did not do these things the difficulties they would encounter would be very much greater. One can look at it another way, and that is that industry considers that it has some responsibility to the community.
Profitability is obviously extremely necessary. It is necessary to provide the funds which are ploughed back for investment. It is necessary in order to raise capital in the capital market and also to provide incentives for those who work in the management of the organisation. It is a fundamental measure of efficiency. But if profitability is the only test, the company's rate of return would be a measure of the efficiency of that company. Despite what has been said by the hon. Member for Oswestry (Mr. Biffen), this is far too simple a proposition.
The Opposition are so anxious to oppose the Bill that they are embracing the market economy to a degree which we
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have not seen in the last 10 years or so. But in embracing the market economy they are denying their own past. They are denying their past in reorganisation of the cotton industry where they spent £30 million of public money for private industry. They are denying their past in the mergers in the aircraft industry and in the free depreciation which they gave to certain industries to move to development areas.
It is not true that the Tories rely only on market forces. The dogma of the Left has been an accusation levelled at us. If the inviolability of the market economy is to become the dogma of the Right, this is a much greater accusation. But, even worse, I believe that it is a dogma in which hon. Members opposite do not really believe. The hon. Member for St. Ives (Mr. Nott) went to the furthest degree to which one could reasonably go. He called for regional development, that is, for public money, which, he said, would help market forces. Confusion greater than this I cannot understand.
I do not believe that there is this great divide. I think that the only divide is the Floor of the House, which divides those with responsibilities from those who oppose because they do not know any other way to conduct an Opposition. In time they will come to welcome the Corporation as they came to welcome the N.R.D.C.
Fundamentally, the success of the Corporation will depend on the success of management. The Bill lays the framework. We should wish the Corporation well.
8.6 p.m.
Mr. Biffen: I do not wish to trespass outside the rules of order, but I want to make one or two comments on the speech of the hon. Member for Ashton-under-Lyne (Mr. Sheldon). First, it is not true that I have ever indicated that I thought that business management was solely concerned with the return on capital. I have never said that. I fully endorse the view of Mr. Harold Wincott, who covered this point in recent exchanges in the Financial Times. I respectfully ask the hon. Member to be a little more careful before attributing to me remarks which I did not make.

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Secondly, it is not true to say that because the Tory Party has been associated with certain operations of intervention in the past it is, therefore, inevitably committed to the kind of proposition with which we are dealing tonight. There have been a great many cases in the past—and I have no doubt that when we are on the other side of the House there will be a great many cases in the future—when there was a limited and defined rôle for State intervention to achieve certain predetermined ends. That was very much the nature of the cotton industry scheme. One can argue the niceties of this, but there is no doubt that we have always preferred to see a limited commitment undertaken whenever we have gone in for economic intervention.
Thirdly, it is all very well for the hon. Member for Ashton-under-Lyne to give a patronising lecture about those who only oppose and can think of no better way of conducting an Opposition. If there is a reasonable and tolerably coherent case to be put against the Bill, we have an obligation to put it. I will not be dissuaded by the kind of patronising talk that there has come into this Chamber in recent years the products of the new managerial class who know so much better how these things are organised and who are very anxious to give us the benefit of their superior knowledge and hope that we shall reflect in our enlightened ignorance.
May I turn to the Third Reading of the Bill. There was a reference—I suspect that it might have been to me—about guerrilla activities. The guerrillas have now certainly been led very ably by the regular field-marshal. I understand that we shall have a Division at the conclusion of this debate. That suits me.
Mr. Sheldon: I am not sure whether my hon. Friend was referring to "gorillas" or "guerrillas".
Mr. Biffen: Only the hon. Member could indulge in that extraordinary third form kind of humour and ungenerous speculation. I will leave it at that.
The doubts and fears which were expressed from the introduction of this Measure, and which were expressed in the form of a vote against the Second Reading, must turn on a variety of issues, but the two which primarily concern me
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are accountability and the purpose of the Corporation. I should like to link my remarks in that respect to Clauses 2, 4 and 9 because they are the Clauses which most intimately touch on these subjects. Accountability undoubtedly runs to the whole heart of good-natured and constructive controversy over this issue. It was the Minister of Technology who on Second Reading, when referring to accountability, said:
"This is something which ought to be worked out and discussed very fully in Committee."
Having studied the Bill as it has now emerged from Standing Committee, I am not at all clear how this has been resolved.
Undoubtedly, under Clause 2(4) general directives can be given and under Clause 4(1) considerable powers clearly rest in the Secretary of State concerning Exchequer loans. Most important of all, it seems to me, are the powers of Clause 4(2) concerning repayment of loans. One would not have to be unduly suspicious to wonder to what extent there may be repayments under very favourable terms and whether this will be a means of financing at much less than normal market rates for access to capital.
These matters are rightly the concern of this House, because when we talk about accountability we are not concerned only with what might be the chummy relationship between the Corporation and the Executive. We are also concerned with the extent to which the Legislature will be enabled to watch the continuing activities of the Corporation, and the Executive. We are also concerned with the extent to which the Legislature will be enabled to watch the continuing activities of the Corporation. It is on this that I am less than reassured.
Reference was made this evening to a comparison, which may or may not be valid, between the National Research and Development Corporation and the I.R.C. I imagine that there is a reasonable basis of comparability, not least in the day-today activities and the extent to which the activities of the N.R.D.C. are the subject of Parliamentary discussion.
There is surely evidence to suggest that we should be less than satisfied about the extent to which the N.R.D.C. goes off on enterprises without this House having much say about it at the time it

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happens. I am not concerned with a great post mortem afterwards. I am not entirely convinced that one day Mr. Duckworth of N.R.D.C. thought that he would put £5 million into I.C.T. or £2 million into Elliott Automation. I cannot believe that there was not a whisper in his ears somewhere along the line from someone who may be sitting on the Front Bench opposite. Decisions of that character, involving those sums of money, should be the subject of much greater Parliamentary discussion. I am sure that this would be for the benefit of the I.R.C. and, above all, for the benefit of this House.
It is very fashionable to be patronising about the capabilities of politicians to discuss industrial matters and to take a day-to-day interest in things of this kind. My hon. Friend the Member for Eastleigh (Mr. David Price) referred to this when he talked about the "Power Game". The actual quotation from the speech of the Minister of Technology is:
"I think that hon. Gentlemen opposite would be better advised to watch the 'Power Game' or the 'Plane Makers' or "—
worst of all—
"read 'Corridors of Power' in order to get a real view of industry ".—[OFFICIAL REPORT, 19th October, 1966; Vol. 734, c. 348–9, 345.]
That may be the view of the Minister of Technology, but it is a pretty Oxford Union type of downgrading of the ability of this House to take an intelligible interest in matters of great public concern involving public funds to the tune of £150 million and concerned with the structural changes which may or may not take place in British industry. If I were to be inspired by the "Power Game", the "Plane Makers" and the rest, it would leave me with a corroding scepticism about the venality of Government. Therefore, on that basis alone, I prefer not to be encouraged to do that. Much more information should be made available to us about how this money is to be used. These are large sums of money and we should be told on what they are being spent by what criteria.
I would have thought that on the basis of import saving or export boosting, practically every lame duck organisation could be supported. Above all, we must know a great deal more about the way in which the suave new mandarins of the
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hybrid Whitehall now developing around the Department of Economic Affairs, the Ministry of Technology and the National Economic Development Council and its proliferating offshoots are operating.
Only a few days ago, the Minister of State sent me an Answer to a Question to say that any recommendations on structural change in industry arising from the discussions of the economic development committees and communicated to the Industrial Reorganisation Corporation would be available to this House only if it were the judgment of the economic development committees that they should be so published.
Mr. Albu: I cannot exactly remember, but what I think I said was that the recommendations of the economic development committee should not be passed to the I.R.C. unless the economic development committee itself desired it. That is not the same thing.
Mr. Biffen: We can check this afterwards. If I am wrong, I will certainly fully apologise. As I recall it, however, my question was how this House would know whether a recommendation had been made. As I understood the hon. Gentleman's answer, it was that publication of any recommendation would rest entirely with the economic development committee. I am saying that this House should know. It is our constituents' money that is being used.
My second point is, to what ends will the Corporation work? The Minister of State has again talked about the greater wisdom that would be exercised by the people who would be the executives of the I.R.C. They are, of course, very few in number, and we understand that many of the senior business men will be there on a very part-time and advisory capacity. I therefore have some suspicion about whether this wealth of talent which will display this superior greater wisdom actually exists on the ground. Where is it? Is it at the moment at the offices of Warburg's? Where will it go? Where will its office be? How many people will be employed? Very little of this is known, and yet with this very inadequate straw some pretty sizeable bricks have been constructed.
Above all, I have my doubts about the extent to which, under the interpretation

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of Clause 2(1), the I.R.C. will conduct a regional bran tub in which various regions will be invited to have a dip, so that practically no Celtic fringe seat will be without its incipient groundnut scheme. I do not wish to sound too sarcastic about this, but these are some of the doubts which have been implanted in my mind. I have heard very little to remove them. Many of the things that we talk about concerning structural changes in industry are perfectly well catered for by the existing market mechanism, which, I acknowledge, is far from perfect.
What, then, do I think is the doctrine behind the I.R.C? I am not so cynical that I am prepared to believe that it is a great undercover nationalisation move. There may be other more effective ways for hon. Members opposite to achieve that. The Corporation flows instead from the doctrine of countervailing nonsense. We have a tax system which is designed to militate against profits, and the Government hope to neutralise this by a public fund of £150 million. I believe that the Parliamentary accountability of that public fund is uncertain and unsatisfactory. The use to which the funds will be put are arousing general scepticism and unallayed doubt, and I for one will be delighted to vote against it.
8.19 p.m.
Mr. Barnett: I do not think that I have ever heard the hon. Member for Oswestry (Mr. Biffen) in quite such insulting form. He almost outdid some of his hon. Friends. His hon. Friend the Member for Shipley (Mr. Hirst) must have felt ashamed of the mild language which he uses from time to time when he heard his hon. Friend the Member for Oswestry.
I understand the reason for all this, because I quite appreciate that a Bill of this description touches to the quick the hon. Member for Oswestry and his disciple the right hon. Member for Wolverhampton, South-West (Mr. Powell). I have always thought of the hon. Member for Oswestry as being whiter than white when it comes to this sort of thing, much whiter than white that his right hon. Friend.
One thing which ought to be answered arose when the hon. Gentleman said that this Government, through their tax policies, have worked against profits. That is totally untrue. In the case of trading
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companies, Corporation Tax helps considerably. I agree at once that what it does is to militate against distribution, but that is not the same thing, and I am sure that the hon. Gentleman would accept that that is not true.
Mr. Biffen: It is not just a question of Corporation Tax. For example, it is the significant and actual working out of a prices and incomes policy which bears much more heavily against prices than against incomes. If the hon. Member for Heywood and Royton (Mr. Barnett) wants the merits of my case fully examined, perhaps he will look at the trend of profits since the present Government came to office.
Mr. Barnett: The hon. Gentleman is changing his ground. He started off with taxation—
Mr. Deputy Speaker (Sir Eric Fletcher): Order. I do not think that we ought to pursue this subject on the Third Reading of this Bill.
Mr. Barnett: I am sure that the hon. Member for Oswestry will give us plenty to read on other occasions. He seems to be very fond of giving us plenty to read in the Financial Times and elsewhere.
The hon. Member for Eastleigh (Mr. David Price) said that he would prefer to see the market economy strengthened than have this Bill. I am not sure whether that is the case. His hon. Friend the Member for Oswestry was delighted to hear him say that and delighted to think that he was moving in his own direction. But I am far from convinced that the hon. Gentleman was doing anything more than making a debating point.
He went on to say that, if we go into Europe—and I hope that we do—probably we shall be able to wind up the I.R.C. Surely he can see that such a body as the I.R.C. will be needed even more in the event of our having a wider market. He was quite right when he said that, if and when we get into Europe, we shall look again at the question of size for the purposes of measuring a monopoly. In due course, if we are able to get into the Common Market, I hope that we shall look at it.
The Opposition tried to defeat the Bill as a whole on Second Reading, and they failed. Since then, they have shown what

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can only be blind political prejudice. All that they have tried to do throughout the whole of the Committee stage and the whole of Report stage today is to carry Amendments to the Bill which would hamstring every operation of the directors and the Board of the I.R.C. One has only to examine the Amendments which they have moved. For example, one would have prevented a bid, except through the board of a particular company. But all of us will learn that there are many boards which one would want to by-pass, because boards are sitting there and should not be. That is precisely the wrong way to approach the whole idea of what we want in the way of a more efficient economy and a more efficient industry.
Hon. Gentlemen opposite then wanted to reduce the finances of the I.R.C. to make it less flexible. They wanted to lay down rigid rules on interest payments; they wanted to restrict the area of operation; and, perhaps, worst of all, they tried to prevent the Corporation assisting in the buying of plant and machinery. If ever there was a time when we wanted to encourage investment in more plant and more machinery, I should have thought that it is now.
The Opposition have moved Amendments which would have restricted precisely that opportunity which would have been given to the I.R.C. and which will be given, I hope, in their operations to encourage industry to invest in new plant and to give them tangible assistance in setting up and promoting new industries. It is no good hon. Gentlemen opposite shaking their heads. That is what they were seeking to do.
One other thing which they did was to put down an Amendment saying that there should be three directors under the age of 50. I have some sympathy with that proposal, because I should not mind seeing such an Amendment made to the Companies Bill. There are a number of corporations with too many old men on the boards and too few younger men. One might even think of insisting that a proportion of a board's members should be under 40. I am not certain that one should leave it at 50, though perhaps when I am a little older I shall change my mind.
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I believe that the I.R.C. can be a valuable Corporation. It is not possible to know, because everything will depend upon how the personalities on the Board of the Corporation operate at any given time. What I wanted to see at the beginning and what I am glad to see that we have now, despite the attempts of the Opposition, is flexibility for the Corporation to operate. I wish the Board and its directors well, and I hope that they will prove successful in increasing the efficiency of the economy and, thereby, the state of our nation.
8.25 p.m.
Mr. Hirst: The accountancy profession, as represented by hon. Gentlemen opposite, whom I have the pleasure of seeing for many hours in the course of Finance Bills, have distinguished themselves, if that is a term of endearment suitable to their speeches today. It has been capped by the last sentences of the speech of the hon. Member for Heywood and Royton (Mr. Barnett), when he alleged that by criticising this organisation we are holding back investment in this country. Seeing that one right hon. Gentleman is out of the country at the moment, that must be the laugh of the day. The Government must realise only too well that their whole policy is holding back investment at present. It has nothing at all to do with this organisation or the arguments about it.
I support the excellent speeches which have been made by my hon. Friends the Member for Eastleigh (Mr. David Price) and the Member for Oswestry (Mr. Biffen). They have dealt with many of the things that I had it in mind to say when thinking out the matter earlier and I will not go over that ground again.
I took a strong personal line about this Measure when it was proposed in the White Paper round about January 1966. I spoke strongly about it then. Like my hon. Friend the Member for Eastleigh, I cannot see that we have advanced down the line at all. I was not a member of the Committee which considered this Bill, but I have read the OFFICIAL REPORT of its proceedings and a great deal of the Second Reading speeches.
There should be no grumbles from right hon. and hon. Gentlemen opposite about our modest Amendments today. If I had been in charge of them, they

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would have been pressed even more strongly, with more Divisions and more fuss, I may be called a guerrilla; I do not mind. I was for some years a director of a subsidiary company of a very well-known issuing house, and that experience gave me some insight into the matters involved here.
I agree that there is value in publicity, and in many things that the Government do, but the fact is that unless it is going to be of a compulsory nature—and that would be terrible to imagine—this is a matter of influencing people's judgment, and this difficulty will remain for the Corporation, as it did for anyone else.
There are many prosperous, good, and uplifting companies, but they do not like the idea of losing their domestic habits, and are hard to bring to the marriage.
This difficulty will not be overcome by a Government organisation and directors spending part of their time dealing with these affairs, or anything else. I hope that it will not be got over by rigging market rates, because this will get the Government into grave trouble.
I think my hon. Friend was right to say that this House should have more control over what is going on in an organisation of this character than can ever be obtained after investigation, whatever that may be, or publication of accounts, which are hard to pinprick. The House will certainly be deprived of any conceivable possibility of knowing what has been advanced in respect of any firm. There will be no audit, no knowledge of what is going on, or what is intended to be going on.
The Minister knows that I have great personal respect for him, but I do not think that he was very helpful today. I handed him the opportunity of clearing up the question of profitability in gracious and easy terms, but all that he did was to make confusion more confounded, and we were left with no idea of what the Government mean by that, and when we hear speeches from some Members of the illustrious accountancy profession, we get even more suspicious of what the Government's intentions are with regard to profitability.
I would have liked to have touched on many other subjects. I think that we are right to say that we do not think that this organisation is desirable or necessary.
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The market forces are there, and they can be encouraged. A great deal of propaganda can be used, and useful work done, to increase the number of marriages. I know only too well the difficulties of bringing about these marriages, but I know of no instance where finance was the difficulty. If the firm could prove that it was enterprising, and worth wihle in every respect, and had a profitable future, and possibly a reasonably profitable past, there was no difficulty. Quite often mergers took place, and I played a humble part in them, when the profit at the moment was not very great, but which it was foreseen could be through the proposed merger. Did that stop the money being available? The answer is "No".
Provided that it is a good scheme, backed with sound management, the City has always found the money, and always will, unless the Government interfere. This is what the Government like to do. Having thoroughly interfered with market forces, and with the City, and having done all that they can to bring a nasty smell into the question of profits—because all the time they are legislating against them—they propose to take the taxpayers' money to set up a monstrous bureaucratic machine to do inefficiently what can be done effectively and well by private interests.
8.32 p.m.
Mr. Bruce-Gardyne: Like my hon. Friends, having listened to the discussions in Committee and the discussions today, I am still at a loss to know precisely what is the motivation for the Corporation. At the beginning of this Third Reading debate the Minister of State reminded us that the Government have had to step in from time to time to rationalise industries. There is plenty of evidence to show that the Government were able to do this in the past without the I.R.C. As my hon. Friend the Member for Eastleigh (Mr. David Price) said, the Government seem able to do this already.
If the Government's protestations are to be believed, the I.R.C. must be nothing more than a glorious and extremely expensive white elephant. They say that (here will be no compulsion and that there is no intention of using the £150 million of taxpayers' money as a sort of illicit battering ram in the stock market. If they are to be believed about

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this I do not see how the Corporation can be other than a sort of statement of intent, and we know what happens to the Government's statements of intent.
I find it a little hard to believe that even this Government will be prepared to allocate the sort of sums of money which we have been discussing this afternoon to such a nugatory purpose, and it is worth recalling—because this might perhaps have escaped the notice of hon. Gentlemen opposite—that during our discussions in Committee the Minister of State reminded us that the words in Clause 1(4) have appeared in every nationalisation Measure since the war. He thought that these words would set the fears of my hon. Friend the Member for Horsham (Mr. Hordern) at rest, but I thought that they should open the eyes of some of these worthy gentlemen who have agreed to serve on the Corporation.
I have heard it said that the Prime Minister appoints to serve on the boards of his
brain children business men who do not believe in them, because he does not believe in them himself. That may be true, but it is something of an oversimplification. I cannot help feeling that the worthy gentlemen who have been gathered together to serve on this Corporation have been, to say the least, curiously naçve. At the same time, I find the choice of names to some extent reassuring. The qualifications of Sir Frank Kearton, the Chairman of the Corporation, seem to be that he has successfully frustrated one merger which I have always believed to be in the interests of his industry and—if the Government like to talk in those terms—in the interests of the country as a whole. He has now failed to bring off a reconciliation, several years later. To say the least, this is a curious qualification for the chairman of this organisation.
But what worries me most is the fact that so many of these gentlemen who are serving on the Corporation are highly responsible executives in large corporations. They are apparently prepared to devote some of their time and energies to this operation. When I raised this point in Committee it was suggested by the Minister of State and some hon. Gentlemen opposite that it was desirable that senior executives—chairmen of public companies and the like—should be
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engaged in activities in what might be called the public sphere, outside their own companies.
I would draw the Minister's attention to a rather interesting statement made the other day by Sir Joseph Latham, Deputy Chairman of A.E.I. on resigning the chairmanship of two "Little Neddies". He was quoted in The Times as issuing a stern warning about the dangers of too much statesmanship by industrialists. The Times said that his view was that industrial leaders may be spending too much time on official bodies and too little time behind their desks, and quote him as saying that
"the ways to improve the economy and balance of payments are greater productivity and efficiency, more exports and fewer imports. These would come from individual efforts, which are in danger of being weakened because 'key people are giving so much time to activities which are not making a direct contribution to the firms' production and profits.'"
One cannot say fairer than that, except to express the hope that Sir Joseph Latham's own chairman, Mike Wheeler, has taken careful note of what he said.
I do not feel that we have had any adequate reassurances from the Government about the way in which this Corporation will operate. I do not believe that it is needed. I am highly suspicious about the motivations which lie behind it, and I shall have the greatest pleasure in voting against it tonight.
8.40 p.m.
Mr. Hordern: The Minister of State and the hon. Member for Heywood and Royton (Mr. Barnett) seemed to be highly surprised that we were prepared to oppose the Third Reading of the Bill. I hasten to assure them that we have no doubts about our opposition. If we had our way none of this money would be voted to the Corporation. The Corporation would not exist, and a very pleasant reduction of taxation would be possible. That is the right way to go about encouraging industry.
My hon. Friend the Member for Shipley (Mr. Hirst) was right in raising the point about the unsatisfactory position of the Corporation in relation to the auditing of accounts. I was surprised that the Parliamentary Secretary should say that he saw no reason for the Corporation to produce six-monthly results

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and reports, because it was not responsible to its shareholders. But it is responsible to the public. Why cannot the Corporation, in the same way as companies, produce proper accounts and a proper report at six-monthly intervals? The responsibility of the Corporation in this respect is greater and not smaller.
My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) rightly referred to the effects of the description by the Minister of State and his hon. Friends in Committee of the activities of the Corporation, as a form of white elephant. If we were to believe what the hon. Gentleman said, it would appear to be like that of a whited sepulchre. It will not engage in any nefarious activities at all. We have our doubts, which have been sustained throughout more by lack of information than by anything positive which the Minister of State has said.
The hon. Member for Ashton-under-Lyne (Mr. Sheldon) referred to merchant banks. I say, with all ignorance, that I do not know what is the hon. Gentleman's acquaintance with merchant banks, but my impression is that he has little experience of their practical working at first hand, because I cannot see them operating if they have all the shortcomings he has suggested. He mentioned my views about profitability and described them as "self-interest". There is a certain amount of doubt on the other side about the meaning of the word "profitability".
We do not always mean short term profitability, but medium term or even long term profitability. It is always possible to find capital for ventures on which there will be no return for many years hence. This occurs in a mining venture, for instance. Hon. Gentlemen opposite always have a subterranean feeling of guilt about "profitability", which is not evident on this side. We regard it as a great triumph that we have managed to insert the word "profitability" into the Bill.
Having done that, the difficulty is that it is still not possible to say with any certainty what precise functions the Corporation will carry out, and, if it has any, why it should carry them out. The Government have given us no evidence to show why the very wide powers in Clause 2 are necessary, save for the few and general remarks in the White Paper.
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It used to be a canon of taxation that, if money were to be levied from the public, it should be levied at the lowest rate compatible with the specified requirements of the Government. My hon. Friend the Member for Oswestry (Mr. Biffen) was absolutely right in pointing out the difference between the kind of State and Government intervention which the Conservative Government used to carry out for specific and limited purposes and that in the Bill, by which we are invited to raise £150 million from the public—£10 from every family—to carry out a series of wholly vague and subjective intentions. The only clue which we have as to why this money is needed is in the White Paper, where we are told, among other things, that the typical company in Britain is too small to achieve long production runs, to take advantage of scale, to do effective research and other matters.
All these points raise the same question—by what criteria are we judging this statement? How long should a production run be? It might be said that it should be as long as necessary to achieve the greatest reduction in costs. The hon. Member for Sheffield, Hooley (Mr. Hooley) expatiated on this in Committee. But what happens if the market does not want that volume of goods? This is precisely what has happened in Russia and many Communist States for many years.
There, even with a fully-controlled economy, they have produced far too much to be readily sold. They, more than any others, are now realising the importance of a proper capitalist system and a system of profits and incentives. There is no better test devised, we believe firmly, than that of profitability in the market. What is required is a larger market in which goods can flow freely from one country to another. That is why we on this side of the House are absolutely genuine in our desire and in our intention to join the E.E.C. Is it in any case true that we are not making sufficient use of the advantages of scale? That is one of the arguments put out by hon. Gentlemen opposite. Certainly the figures that we have do not bear out this contention. I understand that of the largest 100 companies outside the United States, 29 are in the United Kingdom, 19 are in Germany, 12 are in France and

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7 are in Italy. It does not seem from those figures that we have much to fear from competition in the E.E.C. on the size of companies alone.
Again, is it true that mergers have not been proceeding rapidly enough? We find that mergers rose from an average of 290 a year between 1954 and 1958 to 885 in 1963, so that, imperfect as the market system may be, that increase has resulted from market forces international as well as national, and there is no objective evidence to show that we are lagging behind in this respect with our competitors in other countries.
Then it is argued that perhaps there is a shortage of capital in industry. Whose fault is that? Industry can hardly be blamed for having to find an extra £700 million in taxation in the space of two years. It is true that at the moment finance is not coming forward for investment in industry in the way that it should, and that industrial investment is now beginning to fall rapidly. The reason is that nobody, companies or private individuals, sees any point in investing unless there is a reasonable prospect of a clear profit at the end of the operation.
The Prime Minister can have all the working lunches and dinners that he likes. He can go on summoning productivity conferences to his heart's content, but none of those functions will have more than a marginal effect until he learns that companies are in business to make money. The same point can be directed to the Minister of Technology who produced a neglected doctrine in Bristol recently to the effect that profitability was all right, that what matters is how one deals with it at the end. Here again he was pronouncing what is a very dubious doctrine. If profits are not handed out in sufficient scale to shareholders then capital would not be forthcoming to the companies, and that is a delusion from which the Government is suffering.
It might be thought that even if our financial system were not so heavily taxed there might still be a gap in the provision of finance. It has been referred to in Committee as the Macmillan gap, the shortage of medium-term funds. Again, this gap was discussed in the Radcliffe Report which recommended the American system of term loans and the
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formation of an industrial guarantee corporation for insuring risks, both of which could come from within the banking system. Both of these recommendations would be carried out if there was a proper call for them, and I have no doubt this call would arise if we were to join the Common Market.
Hon. Members opposite know full well that provision of capital in the Common Market is on a tiny scale compared with the London capital market; yet, with the sole exception of Italy, none has found it necessary to call into being such an organisation as this. Thus, if there is a gap, it is certainly not one that would put us at a disadvantage with any of our competitors in Europe. Further, even if one accepts a gap, should it be filled by this particular method—this Corporation—and to such a large amount?
In Italy the I.R.I., which is the nearest equivalent that one can find to the Corporation, is financed from the market up to 90 per cent. of its requirements. There is no suggestion in the relative Clauses of the Bill that funds should be attracted from the market, although the London market is more efficient than the Italian.
Then there is Clause 5, the so-called Exchequer investment in the Corporation, which allows £50 million to be given to the Corporation at a rate determined by the Secretary of State. The interesting point about this provision is that although local authorities are forced to go to the market when they have consumed their quota with the Public Works Loan Board, the Corporation, which is avowedly a commercial operation, will be allowed to borrow money from the Exchequer at any rate or at no rate which the Secretary of State may suggest. If the Government were so confident that the Corporation were going to be a viable concern, it would be happy to offer ordinary shares in the Corporation to the public through the Stock Exchange. I have no doubt people would be tumbling over themselves to buy shares in a Corporation which is such a viable entity. Nothing illustrates more clearly the abysmal lack of confidence the Government have in the Corporation than their refusal to allow it to be subjected to the acid test of the market.
The total sum involved is £150 million. It is astonishing that, with all the

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talk of scientific forecasting and planning, the Government should be entirely incapable of telling us how they expect the money to be spent. This is one of our primary objections to the Bill. When the Minister of State was pressed on this subject in Committee, he suggested that £40 million
"… would be required to assist in the rationalisation of the shipbuilding industry …"
and that other industries that might require similar sums. What other industries? As I understand it, it is not the aircraft industry, as mentioned by my hon. Friend the Member for Eastleigh (Mr. David Price). What other industries might be brought into the Corporation's ambit? Shipbuilding is being dealt with by the Shipbuilding Industry Board, so that cannot be one of them.
The Minister of State also said:
"In recent years, the amount of money being spent annually on mergers and subsidiary acquisitions … is in the region of £300 million."—[OFFICIAL REPORT, Standing Committee E, 10th November, 1966; c. 218–9.]
He knows perfectly well that this is wholly misleading; all that happens in mergers is that the paper of one company is exchanged for another. He said today that half the mergers were composed of cash, but that, again, is just a transfer of cash from one company to another. What is happening here is that cash to the tune of £150 million is being hauled out of the economy and put at the sole discretion of the Corporation in a completely arbitrary way.
The sum of £150 million will, therefore, become available for buying up concerns or shares in companies quite arbitrarily, and simply on the say-so of the Corporation. It will be virtually impossible for the Corporation not to favour one company against its competitors, either by the provision of plant and machinery or by the provision of capital. For all these reasons it seems to us that £150 million is far too large a sum for the Corporation to have at its disposal—even supposing that the Corporation knew what it would do with the money, which seems doubtful.
It is interesting to realise that £150 million would allow Corporation Tax to be reduced from 40 per cent. to 34 per cent., and there is no doubt which course
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industry would prefer to be followed. It would be out of order for me to discuss these better ways of spending the money, but all that need be said is that this money is quite as likely to be a disruptive force in industry as a beneficial one.
What is more, it is seldom, if ever, the case that once the State intervenes in industry it is able to withdraw at will. One point made in the White Paper is that the Corporation will be able to turn its money over quickly, but even if it had the will to withdraw, which is questionable, it is far more probable that it will find itself propping up schemes that should have been allowed to wither away.
Further, the Minister of Technology in the Second Reading debate referred to the "creation of new enterprises" as being
"… a very important element in what we hope to do."—[OFFICIAL REPORT, 19th October, 1966; Vol. 734, c. 353.]
What are the new elements? Clause 2 gives the Corporation power to
"… promote … the … development of any industry … whether in the United Kingdom or elsewhere …"
I make no apology whatever for reminding the Government of the East African groundnut scheme—and such a scheme is perfectly possible again under the exact words of the Bill—which in those days cost the taxpayers £35 millions; or for telling them that we shall expose mercilessly any wasting of the taxpayers' money, whether at home or abroad.
The Government have comforted themselves with the fact that they have persuaded some eminent industrialists to serve on the Corporation. May I say that the question that these industrialists have had to ask themselves is not whether the money can better be spent in reducing taxation, for example, but whether, if the money is to be spent in any case, it is not better that it should be spent in the least harmful way. Whether these industrialists are wise in taking this view is quite another question, but the Government should not delude themselves into mistaking acquiescence for enthusiasm.
We shall certainly have no inhibitions in attacking the Corporation if we think that the taxpayers' money is being wasted, as we think very likely.

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It is our view that the I.R.C. is yet another example of the Government mistaking the symptoms of our economic illness for the roots. One can be absolutely certain that the more serious our illness, the more committees the Government will form. The two work together in almost precise proportion and, by the Bill, the Government have shown themselves to be against competition and in favour of more and more Government interference. That is why we reject it absolutely.
8.55 p.m.
Mr. Dell: I was disappointed at the speech of the hon. Member for Eastleigh (Mr. David Price) when he replied to my hon. Friend the Minister of State, not because it is, perhaps, unique that two former members of that great educational establishment, Imperial Chemical Industries, have faced each other across the House and in Committee, but because of the way in which the hon. Gentleman appears to have misunderstood the position. I refer not so much to the hon. Gentleman's genial attitude, but to what he said, for he told us that he still opposes the Bill and regards it as unnecessary.
I believe that the hon. Member for Eastleigh has succumbed to pressure from his back benchers. In Committee and on Second Reading he said time and again that he recognised that a catalyst was needed to promote the rationalisation of British industry. I grant that on every occasion he said that he wanted the powers to be less and less money to be available, but all the time he re-emphasised that a catalyst was necessary.
What has happened to this catalyst? What catalyst or alternative does the hon. Gentleman suggest? It is not we alone who believe that such a catalyst is necessary. In the debates since the White Paper was published it has become more and more widely recognised that such a catalyst is necessary. Indeed, the whole conception of the I.R.C.—even equipped with the £150 million to which the Opposition so much object—has received greater and greater acceptance.
The hon. Member for Eastleigh propounded the view, as he did in Committee, that all that is really wrong with Britain's economy could be put right simply by our joining the E.E.C. I do not yield
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to the hon. Gentleman in my support for Britain joining the Community. I hope that we succeed and enter it. However, that is certainly no miraculous solution to our economic problems. On the contrary, if we do enter the Community it will become even more necessary to ensure that British industry is rationalised and is more competitive so that we can take on the competition and opportunities which entry will give us. I cannot accept the view that entry into the Community will provide a miraculous solution to our problems. Equally, I cannot accept the idea that entry should be the reason for winding up the I.R.C. because, as my hon. Friend the Member for Heywood and Royton (Mr. Barnett) pointed out, the I.R.C. might be even more necessary than it is now.
The hon. Member for Eastleigh again took the example of the British machine tool industry and said that there was little structural difference between the position in our machine tool industry and that of Germany. I accept that, although we have time and again made clear that we do not regard structure as the only problem here. There are other problems—of management, research and development, commercial policy and vigour in finding outlets for our exports—but structure is, nevertheless, an essential part of the answer to many of our problems. The British machine tool industry recognises this. In recent months there have been considerable changes in the structure of this industry. I suggest to the hon. Member that part of the reason for this may be the changing atmosphere, the changing attitude to rationalisation schemes of this type, of which the idea of creating an Industrial Reorganisation Corporation is part.
The hon. Member for Eastleigh also asked what industries the I.R.C. is to be concerned with. We have been asked this question several times. I must agree with my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) that this is a matter for the I.R.C. in consultation with the Government. It would be wrong to give examples at this stage because that would have obvious implications outside this House. We certainly insist, and I do not think this can be denied, that structure is an important element in the problem which the economy of the country faces.

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The hon. Member for Oswestry (Mr. Biffen) raised a very important point, the question of the accountability of the I.R.C. to the Government and to this House. He was more concerned, of course, about accountability to this House—a very proper question. He asked how accountability will be discharged. I think he provided a large part of the answer himself. There is a return to be fixed by the Secretary of State on the loans which will be issued to the Industrial Reorganisation Corporation. In effect, there will be an agreed figure of return on Exchequer dividend capital. This will ensure that the I.R.C. has a target to reach and is accountable for reaching it.
Under the Bill it is possible for the Secretary of State, if he thinks fit, to give the Corporation general directions. Of course if he does, this will be an action by the Secretary of State with all the implications which that has. We said in Committee, and I repeat now, that, wherever possible, wherever commercial secrecy is not involved, the existence of such general directions will be revealed to the House at the earliest possible moment. We said in Committee that if for reasons of commercial secrecy it is impossible for such a general direction to be revealed at the time, it would be mentioned in the annual report and therefore would be known to Members of Parliament when the annual report was presented to Parliament.
The hon. Member for Oswestry wanted information on what the I.R.C. was doing as negotiations were proceeding, and mentioned the case of the N.R.D.C. and computers. Here I think there may be a difference between the hon. Member and the hon. Member for Eastleigh. The N.R.D.C. agreement on computers, of which I think the hon. Member approved, would not have been completed if the whole thing had to be published at the time that the negotiations were going on. We cannot operate the I.R.C., and cannot be expected to operate it, in a goldfish bowl. The I.R.C. must have a considerable degree of independence and must rely on its own judgment. The reason for appointing the sort of board which we have appointed is that these are men on whose judgment we can rely.
The hon. Member for Shipley (Mr. Hirst), who is no longer present in the
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Chamber, does not rely on the judgment of these gentlemen. I do not think I am doing the hon. Member a dishonour when I say that although in other ways he thought highly of him, he had no great confidence in Sir Frank Kearton, the Chairman of the I.R.C. If hon. Members had to select members of boards from those in whom the hon. Member for Shipley has confidence, we would soon be denuded of possible appointments, and they certainly would not include members of his own party.
The hon. Member for Shipley, however, was prepared to give us a point which the hon. Member for South Angus (Mr. Bruce-Gardyne) is not yet prepared to give, despite repeated assurances in Committee. The hon. Member for Shipley accepted that no compulsion was involved in the Bill and as a result the only way in which the I.R.C. could successfully operate was by persuasion. This is the way in which the Board wants to operate and exists to operate, and it would wish to operate in no other way.
Although suspicion still exists in the mind of the hon. Member for South Angus, he and his colleagues, in Committee, went through the Bill with a tooth-comb and were unable to find in it any evidence whatever of any power being given to the I.R.C. which would provide it with any coercive authority over any company in this country. Why therefore in view of this situation he continues to persist in this charge which he cannot justify, I do not know.
The hon. Gentleman also was the only hon. Member to raise this hoary old cry, which I though was abandoned almost as soon as the board of I.C.I. made it, namely, that the Corporation is really a means of back door nationalisation. The Member for Oswestry does not believe that. He knows, and I can again assure the House, that where we have proposals for public ownership we will bring them openly before the House.
Mr. Bruce-Gardyne: All I was reminding the House of was the phrase which the Joint Parliamentary Secretary's hon. Friend used in Committee.
Mr. Dell: That phrase was used in quite a different context. If the hon.

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Gentleman bases his charge merely on that evidence, I suggest that he waits for better evidence before making what are in fact rather serious charges, because it has from the beginning been made perfectly clear by the Government that nationalisation—public ownership—is not involved here and that the Corporation has been set up for certain specific purposes dealing with the rationalisation of industry primarily, and in certain cases with the creation of new enterprises—new enterprises of a technological character sometimes, possibly new enterprises of a regional character.
We have many times in the discussion gone over the question whether the market will suffice to produce the sort or rationalisation which the Government are looking for. I should have thought that the general opinion which certainly exists now outside the House, if not among hon. Members opposite, is that, despite the rising number of mergers and despite the activity of merchant banks and other specialists in this field, yet more needs to be done. Here I entirely agree with my hon. Friend the Member for Ashton-under-Lyne. It was interesting that the Financial Times as early as, I believe, the day after the publication of the I.R.C. White Paper, acknowledged that change was taking place too slowly under present arrangements and that some fresh stimulus was needed. In his recent book Nicholas Stacey has again accepted a place for the Corporation in this business of promoting rationalisation.
To me, it is a curious form of theology that one has to accept that the rate at which the market creates mergers and the type of mergers which the market creates is always right. Here we come to a point which the hon. Member for Horsham (Mr. Hordern) made in his winding-up speech. He returned to the question whether there is a structural problem and he used figures which had previously been used, I believe, by the hon. Member for Eastleigh showing that this country has large companies and that we have perhaps more large companies than Germany has, although the hon. Gentleman must accept that we have many fewer than the United States, which
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is a very serious competitor of ours in the advanced technologies.
I accept that size is not the only aspect of this problem. It is not the only aspect from the point of view that what we are concerned with here is not just size. It is the rationalisation of an industry, the rationalisation of a production process, the rationalisation of a marketing process, the concentration of R. & D. within a rationalised industry. On these points mere questions of size are irrelevant.
I come finally to a summary once more—and I hope in this House for the last time—of the main arguments for the Bill. There is an urgent need to increase the effectiveness of British industry. There is a need to increase the efficiency of overseas marketing, especially in a world with rising new industrial powers such as Japan, and especially when we have to look forward to the intense competition which we can expect to meet in more competitive markets like Europe. The expansion of exports is essential and is, indeed, the key to a self-balancing reflation. Nothing will more rapidly promote exports than improvements in export organisation which can follow from such rationalisation measures as the Corporation can bring about.
There is, moreover, an urgent need to increase market- and production-oriented research and development in the United Kingdom. There is far too little and too slow a research and development response to the demands of the market because too few companies, especially in engineering, have the resources to run an adequate research and development effort and consequently face the danger of falling behind.
These are arguments which industry increasingly recognises and as a result recognises the importance of the Bill, of the Corporation and of the need for rationalisation. I hope that the Corporation can be an example of constructive co-operation between Government and industry to achieve important ends. The Corporation is embarking on an important enterprise and although right hon. and hon. Members opposite seem unable to join with us I am sure that the great majority of the House will wish the Corporation success in that enterprise.
Question put, That the Bill be now read the Third time:—
The House divided: Ayes 210, Noes 119.
Bill accordingly read the Third time, and passed.

New Clause.—(BORROWING POWERS (LIMITATION).)
The Board shall not exercise any of their borrowing powers conferred by the Coal Industry Act 1965 for any purpose in connection with the exercise of the powers conferred by this Act in excess of £6,000,000:
Provided that the Commons House of Parliament may resolve that this section shall have effect with the substitution for the reference to £6,000,000 of a reference to such greater sum (not exceeding £12,000,000) as may be specified in the resolution.—[Mr. Corfield.]
Brought up, and read the First time.
9.21 p.m.
Mr. F. V. Corfield: I beg to move, That the Clause be read a Second time.
This and the next new Clause on the Notice Paper can be said to go to the root of our opposition to this Bill. It is a Bill which gives to the National Coal Board powers to indulge in activities, either by itself or through subsidiaries, which take it into realms far beyond the getting and making available of coal, which is a fair summary of its existing powers under the 1946 Act.
Our opposition is based on the proposition that, whatever the merits of diversification may be in private industry, wholly different criteria are applicable in the case of a nationalised industry, particularly the Coal Board. One of the principal differences is the ease with which the National Coal Board can borrow capital money under the Act of 1965. That must give it an unfair advantage in competition with private industry.
This is particularly so, though not exclusively so, in conditions of credit restriction and high interest rates which are current. The Government have done absolutely nothing to refute this charge of unfair competition throughout our proceedings. We must, therefore, assume that it is something with which they in their heart of hearts agree, and realise cannot be refuted.
When the Bill was first published it had, as is usual, an Explanatory and Financial Memorandum, paragraph 3 of
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which made it quite clear that any borrowing required by the Board in the exercise of the powers conferred by the Bill would be governed by the Act of 1965 and such moneys could be borrowed from the Exchequer subject to the overall limit of the Board's borrowings in the 1965 Act.
The limit was £700 million which can be increased to £750 million by an Order made by the Minister and approved by the House of Commons. The Memorandum goes on:
"The exercise of the Board's new powers may accelerate"
This would seem to be the euphemism of the week. It is quite clearly a conclusion which follows as night follows day that it will accelerate. The Memorandum continues:
"progress towards their borrowing limits and cause an increase in the moneys issued out of the Consolidated Fund, and such an acceleration might cause the House of Commons to be asked to approve an Order increasing the limit under the Coal Industry Act, 1965, earlier than would otherwise be required."
Here again I should have thought that "will" would have been a more appropriate word. Not only has the Coal Board substantial advantages in borrowing as compared with private enterprise under this Bill, in its exploration for and exploitation of natural gas or petroleum beneath the North Sea, but it also has the advantage that it can, if it so desires, provide any gas or petroleum that it acquires to its subsidiaries on favourable terms.
As the Bill stands, this is a situation in which there can be no Parliamentary opportunity to check to what use the Coal Board is putting its new powers, whether they are being profitably operated and, if so, in what circumstances, and whether it is at least endeavouring to trade fairly vis-à-vis private enterprise.
The Government have failed completely in the Bill to accept their responsibility to ensure fair trading conditions between the nationalised sector and the private sector. It therefore seems to my hon. Friends and myself that the next best safeguard would be a Clause on these lines to ensure that there was a limit to the capital which could be used in this enterprise and that that limit should be exceeded only up to another limit—we have doubled the estimate which the Minister gave—on

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coming to the House with a resolution and that any subsequent funds required would have to be the subject of further legislation. In the light of the large sums which could be sunk in an enterprise of this sort, this is an essential safeguard for Parliament to have over what is, after all, the taxpayers' money.
Throughout our proceedings, my hon. Friends, and particularly my hon. and gallant Friend the Member for South Fylde (Colonel Lancaster), with his very great experience in these matters, have been at pains to emphasise that drilling for oil or gas in the North Sea or anywhere else is a highly speculative operation. That is a proposition which the Government have not attempted to deny. But if the Coal Board or its proposed associates, Gulf Oil or Allied Chemicals, are unlucky, not only will the Board's investment—that is, the taxpayers' investment—prove abortive, but there is always the temptation in speculative operations of this sort to go on sinking further capital in the hope of recovering the original capital. It is surely right that Parliament should have some say as to when this operation should stop.
As I understand it, the proposal is that the Coal Board should have a 40 per cent. holding in some sort of subsidiary, of which 60 per cent. would be held by Gulf Oil or Allied Chemicals. If this is so, the decision on whether to go on sinking money must lie with the majority interest, namely, the American associates, rather than the Coal Board. I find it a little curious how respectable the word "speculation" becomes when applied to a nationalised industry compared with the use to which it is put by right hon. and hon. Members opposite in any other context.
There is another aspect, namely, the Coal Board's interest in the various subsidiaries and particularly in the Staveley Chemical Company. It is of some interest that in a reply to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) yesterday the Minister gave a list of companies in which the nationalised industries had interests and failed to mention the very important Staveley Chemical Company. As I said on Second Reading, that company has powers under its memorandum of association which go far beyond anything
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which Parliament conferred on the Coal Board.
The important point is that if the Board's explorations and exploitations are successful, and if it deems it right or wise to supply gas or petroleum to this subsidiary or indeed any other, then clearly the activities and the results of the operations carried out by the Staveley Chemical Company are every bit as much important to Parliament and the public as the operations of the Coal Board. This again is something where there will be no Parliamentary opportunity to review the matter until the whole £700 million borrowing powers are exhausted.
We take the view that it is right to place a limit on the investment that the Coal Board can make in these entirely new activities, in which it has no experience, and that it should be necessary to come back to Parliament if those limits have to be exceeded and for Parliament to be able to have second thoughts and further discussion. That is why I move the new Clause.
9.30 p.m.
Mr. Nicholas Ridley: I support the new Clause because the principle is of the greatest importance. We know that it is the Government's policy that the nationalised industries should diversify. They have announced this and, to the surprise of many hon. Members, they have confirmed it in the Bill and in certain proceedings on the Iron and Steel Bill and other Bills.
I see no parallel between diversification by nationalised industries and diversification by private industry. This whole policy is likely to cause the Minister to run into many Parliamentary storms before he has finished, and it will also cause the country a great deal of difficulty to sort out the mess which is left when this policy has been put into effect. The two angles are completely different. The point of the Amendment is to limit the amount of capital that the nationalised industry, in this case the Coal Board, can invest because of that obstacle, which it is completely impossible to overcome if the Coal Board has limitless capital at its disposal.
The Minister has said that if he considers it to be in the national interest for a nationalised industry to diversify in this way, anyone who attempted to question

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this would be doing a disservice to the nation. The Minister should think about this, because his interpretation of what is in the national interest may well not be the same as the interpretation of my right hon. and hon. Friends. We sincerely question whether it is in the national interest that large numbers of private enterprise firms should face this extremely unfair competition, which in the end, and if the Coal Board has a mind to do so by pumping in more and more money, can reduce those private enterprise firms to a position where they have to capitulate to the great power of the State.
That is the doctrinaire objection which my hon. Friend the Member for Gloucestershire, South (Mr. Corfield) has so ably put, but I would like to go on to a more practical observation. Already the Coal Board has invested nearly £4 million in activities which are not directly concerned with the production of coal or its ancillary products. The vast bulk of this investment has taken place since the present Government came into power. What is so extraordinary is that there was no mention whatever of this investment of £4 million until my hon. Friend dragged it out on Second Reading. The amount of secrecy that has gone on about these investments by the Coal Board underlines the need for the new Clause, so that Parliament will always know when the Board intends to diversify and will be kept fully informed of progress.
I know that the Minister has accepted the need for full accountability of the nationalised industries in diversifications of this sort. On other occasions, he has frequently worshipped at the shrine of Parliamentary accountability. This House is not able to control the day-to-day decisions of the nationalised industries—quite rightly, I think—but it has always kept a stern control over the investment of public capital in their doings. I believe that this is an opportunity for us to write into the Bill a stringent control over the investment of taxpayers' capital in enterprises which are not strictly to do with the production of coal.
Capital is one of the most precious assets that the country has. It does not grow on trees, and it cannot be made in factories. It comes from two sources: the savings of the people and the over-taxation of the people by the Government.
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This year, they are over-taxing us to the extent of some £1,000 million to provide the capital for the nationalised industries which they cannot borrow because their credit is at rock bottom.
Mr. Arthur Palmer: Rubbish.
Mr. Ridley: If the hon. Member for Bristol, Central (Mr. Palmer) cares to look at the Budget accounts, he will find that everything that I have said is true. He will also find that, last year, investors took out £357 million from gilt-edged stocks because they have no confidence in the Government's interest rates.
Mr. Palmer: Does the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) suggest that the gas industry's or the electricity supply industry's credit is at rock bottom? That is utterly absurd.
Mr. Ridley: The hon. Member for Bristol, Central displays abysmal ignorance. Does he not know that the gas industry and the electricity supply industry do not borrow from the public direct but from the Government, as doss the Coal Board?
The point which I am making is that the Government's credit is at rock bottom, and they are trying to provide the capital for ventures such as this from money which has not been saved by the people and which we will have to find as taxpayers in the Budget surplus. If such capital is as scarce and as important to us as I say it is, it is vital that the House, which taxes the citizens, should have the power to see where that capital is invested. The private sector of the economy has the disciplines of the market, and it cannot borrow other than at high interest rates if its prospects are bad. It has all those difficulties in the way of its investment of capital and its expansion into other spheres of activity, whereas the public sector has none of those difficulties. Therefore, it is vital that this House, which is the only authority left in the land which can provide some check, should be given the facts and allowed to comment on the investment of the Coal Board.
It is right that after £6 million the Coal Board should come back to the House and give an account of how it has invested that sum, what its profit has been

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—[Interruption.] It is all very well for the Minister and his Parlimentary Secretary to laugh, but this is an argument of extreme seriousness which has a considerable bearing on the future economy of the country. It is an argument which he has consistently failed to answer upstairs and which he has simply laughed at, but it will have the gravest consequences on our future economy.
I would only add this to my hon. Friend the Member for Gloucestershire, South. I wonder if £6 million is not too high a figure. The Coal Board has already diversified into many other industries and, nominally, has invested only £4 million. If it is going outside the activity of winning coal, something should be laid before the House for each investment made, and I feel that £6 million is rather a high figure. To any private company, £6 million would be an enormous investment. In my view, it is quite wrong for the Coal Board to be able to invest £6 million in North Sea gas, may be wrongly and may be in unfair competition with other firms, and expect the House not to take any notice.
I commend the new Clause to the House, and I hope very much, that it will be accepted.
Sir Gerald Nabarro: The matter of Parliamentary accountability of nationalised industries has, of course, been a very long-standing controversy in this House—for the last 15 years, in fact—and I recall that on a date in 1956, when Mr. Aubrey Jones, now the Chairman of the Prices and Incomes Board, was the Minister of Fuel and Power, I took a miscellany of hon. Members from all three parties into the Lobby against Mr. Aubrey Jones on this very principle of accountability of nationalised industries year by year.
My shibboleth in those far-off days, a matter of nearly 11 years ago, was that each nationalised industry should present to the House of Commons annually a Statutory Instrument in respect of its capital investment required to be borrowed under Treasury guarantee. There was nothing exceptional about this. It was to copy the principles enshrined in the North of Scotland Hydro-Electric Acts which the Minister of Power will recall—though he has no responsibility for those boards—requires that every year a Statutory
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Instrument shall be brought to the House to cover the investment requirements of the board so that the House may judge in retrospect how the capital moneys voted in the preceding year have been expended.
I have always sought the same kind of thing for the National Coal Board. This is what the Clause is all about. It seeks to limit the amount of money which may be devoted to North Sea exploration and extraction of natural gas and oil from under the North Sea. It seeks to limit the money applied to it in relation to the more orthodox processes of the Board which, as I said during my Second Reading speech on the Bill, are correctly applied to the deep mining of coal, to the majority of output, and the open-cast mining of coal for a small minority of tonnage output.
Let us consider the position of the Coal Board during the present year. Its capital investment figure is £88·3 million. It is a generic sum, voted by the House of Commons once every four or five years as part of a Finance Act. It is not part of any Ministry of Power statute, if I may use that expression. It is part of a Finance Act which goes forward by log rolling every four or five years, advancing by thousands of millions of pounds the upper borrowing limit of an aggregation of four, five, or six, nationalised industries.
Once that money is voted every four or five years, the Minister decides each year how much money shall be spent by each of the nationalised industries—this year it is £88·3 million by the National Coal Board—and no Member of this House has a jot or tittle of control over the application of those moneys. We cannot say whether the moneys are to be devoted to sinking new pits, or enlarging open-cast mining sites, or making more Bronowski bullets—
Mr. Ridley: Or making candy floss.
Sir G. Nabarro:—or making candy floss as my hon. Friend says, or making naphtha, or making ammonia, or making aspirin, or making hydrochloric acid, or making sulphuric acid, or any by-product of coal. No one knows.
Mr. Eric Lubbock: Will the hon. Gentleman give way?
Sir G. Nabarro: I am always delighted to give way to the hon. Gentleman.
Mr. Lubbock: The hon. Gentleman can correct me if I am wrong, but surely the Select Committee on the Nationalised Industries has power to inquire into any of the matters which he has mentioned?
Sir G. Nabarro: That febrile and vacuous body!
Mr. David Webster: On a point of order. My hon. Friend has cast aspersions on a Select Committee of the House. Is that in order?
Mr. Speaker: I am afraid that it is perfectly in order.
9.45 p.m.
Sir G. Nabarro: I am deeply grateful, as always, for your timely support, Mr. Speaker.
Mr. Ridley Mr. Ridley rose—
Mr. Speaker: Order. I hope that we shall not have too many interventions. Mr. Ridley.
Mr. Ridley: My hon. Friend will be aware that there are now 14 nationalised industries and that at the present rate of progress the Committee will get round to each industry every 14 years, which is hardly Parliamentary accountability.
Sir G. Nabarro: I am grateful to my hon. Friend; that is one valuable point. The point that I am about to make is an even more powerful one. Members of this House sit in an interrogatory capacity hauling in front of them reluctant and recalcitrant chairmen of nationalised industries and firing a load of ill-informed questions at them. They rarely receive any replies of substance, and they investigate capital expenditure long after it has been expended, when it is too late to bring it back.
Here is the whole miserable British nation subject today to the deepest economic freeze in history. Every motor car worker in the Midlands, every coal miner and every railwayman is told that he cannot have a rise in pay, while these voracious and extravagant nationalised industries spend tens of millions of £s without any effective control from Parliament whatever. That is why, in the Second Reading debate, I said that I would oppose the Bill at every stage.
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The purpose of the new Clause is to segregate from the £88·3 million of capital investment in the Coal Board during the current year such sums as will be spent by the Board for the exploration for natural gas and oil under the North Sea, to enable us to vote a specific sum of money for that purpose and then, shortly after the end of the year, that sum having been expended—to use the characteristic and favourite terminolgy of the Prime Minister—to take a cool look and a hard look at them—[An HON. MEMBER: "In depth."]—in depth in the white heat of technological revolution, to see if the money has been properly spent.
The hon. Member for Bristol, Central (Mr. Palmer) who jumps up a dozen times in every speech that I make on fuel and power is the only Member of the House who is a member of the Institute of Fuel other than myself. We have always disagreed on this point. He believes in unlimited investment by these boards without Parliamentary scrutiny and notably believes that the electricity supply industry should do what it likes for ever and a day with the thousands of millions of £s it has at its disposal—
Mr. Speaker: Order. The hon. Member should come back to the point.
Sir G. Nabarro: I am sorry to have incurred your wrath, Mr. Speaker. It was a passing allusion. The hon. Member intervened in my hon. Friend's speech. He wants the same principle transplanted to the Coal Board. I will have none of it.
All that I would give the Coal Board is a relatively small sum of money. The new Clause is an admirable one. At the end of a year, or 18 months, or 21 months—or whatever may be necessary—we can have a look at it again to see how the Board is getting on. If we have to have the wretched Coal Board in this North Sea business—which I claim we should not, because it is none of the Board's business, but as the Socialists have a majority and foist it on me I have to be democratic and accept it—if we have to have this money spent, I want this long, cool hard look, in the white heat of technological revolution implemented, so that I can take another careful look at it next year.
This is in pursuit of objectives which you, Mr. Speaker, have painstakingly

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listened to me talking about for over 16 years in this House. You have heard me pleading this cause. I shall never be satisfied until there is an annual Statutory instrument for every nationalised industry, covering every year's capital investment.
Mr. John Peyton Mr. John Peyton (Yeovil) indicated assent.
Sir G. Nabarro: I am glad to have my hon. Friend with me. He has been with me man and boy for 15 years in this major cause. I believe, as a Conservative and as a business man—at least I have spent my life running businesses and know how to read a balance sheet, whereas the great majority of hon. Gentlemen opposite have not the qualifications to run a whelk stall profitably—that every industrial investment, nationalised, State or otherwise, should turn in a profit.
I reiterate what my hon. Friend the Member for Cirencester and Tewkesbury said—this is taxpayers' money. The hon. Member for Bristol, Central sat there nodding in dissent. Did not the Chancellor of the Exchequer budget this year for a surplus, below the line, of £1,007 million? What for? To cover the investment of nationalised industries—
Mr. Speaker: Order. Man and boy, I am very kind to the hon. Gentleman. He must keep to the Clause.
Sir G, Nabarro: I am very sorry, Mr. Speaker. I was trying to put matters in their correct perspective.
This is taxpayers' money which is being spent and I dislike intensely, therefore, the levity with which Socialist hon. Members approach this important matter of safeguarding the interests of their constituents—
Mr. Palmer: Was it not the Conservative Party, when in office, which changed the method of financing from mainly borrowing to public financing?
Sir G. Nabarro: We greatly improved accountability—[Laughter.] I do not know what the hon. Member is cackling about. He was not here anyway. In view of your admonitions, Mr. Speaker, I do not want to stray. There is a second new Clause on which I shall hope to
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catch your eye, and the intervention from the benches opposite will more properly be connected with that argument, but arguments there will be. I invite my hon. Friends, as I shall do, to divide the House in support of the new Clause, again demonstrating in the House our anathema for profligate and extravagant Socialist finance.
Mr. Peyton: I am glad to be able to follow my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro). Man and boy, I am so glad to be able to salute this long companionship and I hope that it will ever be fruitful. I do not always agree with every word my hon. Friend says—it would be unreasonable to expect such harmony, even between friends such as we—but tonight I agreed completely with every word he said. I do not believe that he lent himself to even the slightest minutiae of exaggeration. Hyperbole was entirely absent from his speech, and I am able only to congratulate him on the modesty with which he addressed himself to this subject.
I must apologise to my hon. Friend for not being here when he moved the Second Reading of the new Clause. I respect the perspicacity which led him to put down the Clause and I support its principles entirely. I cannot see for one moment why there should be any demur on the part of the Government in gracefully accepting this new Clause. The figure of £6 million is a very generous allowance for the first bite at this highly speculative cherry which may or may not be growing out of the middle of the North Sea to be reaped by the National Coal Board.
It would be unreasonable and even, perhaps, out of order—a crime which I never committed—if I commented upon the lack of experience of the National Coal Board in boring for oil or gas in marine waters. Therefore, I regard this enterprise as highly speculative. I cannot understand what factors led the National Coal Board, at this comparatively late stage to take part in this exercise in the North Sea. I am led to believe by my suspicions, which I have endeavoured to throttle, that the National Coal Board is being encouraged by other forces to go forward. I want to ask

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the Minister about this, because I do not believe that the Coal Board's finances need here be very much committed. I believe that there may be other interests who wish to ride in on the back of the National Coal Board. They have seen how profitable to another American oil company has been the partnership with the Gas Council, and as the National Coal Board is not committed, I ask the Minister is it or is it not a fact that the Coal Board is really acting as laissez-passer to another American company to get in cheaply.
I notice that the Minister makes no denial of this, but I think we are entitled to ask and be clear about it. One of the things which I find intolerable in this Government's policy has been its hostility, through the Corporation Tax and other things, toward the interests of British oil companies, while at the same time their policies, in the Corporation Tax and in other respects, have produced nothing but a hoot of laughter from American oil companies who must be gleefully rubbing their hands at seeing themselves put in the £ seat on something which is primarily British.
Mr. Speaker: That is a little wide from the Clause we are discussing, which is about borrowing power.
Mr. Peyton: There is nothing further from my mind than to trespass on your good will and indulgence, Mr. Speaker. I will therefore content myself with saying that in these sort of circumstances, where it may be that the Coal Board is not really called upon to advance any large sum of capital—indeed I hope this is the case—that it does not seem at all unreasonable that the arguments adduced by my hon. Friends should be listened to with some care, although I recognise—and this includes my hon. Friends the Member for Worcestershire, South, the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) and the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin)—that we have all learned by bitter experience recently that neither the Minister nor the Parliamentary Secretary regard the word "accountability"—let alone accountability to Parliament—as being in any way a sacred or important cause. We know that these appeals are likely to fall on two deaf ears, but nevertheless we hope that the Minister, who is
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himself a Member of Parliament—Heaven knows what fortune may hold for him; in the future he may once again sit on the back benches and regard Parliament as being an institution of some importance rather than a mere rubber stamp—may feel that it would be right to accede to—have I the advantage of the Minister's attention?
The Minister of Power (Mr. Marsh): I had been wondering what this is all about.
Mr. Peyton: After that intervention, I hope you will permit me to say, Mr. Speaker, that in recent weeks there have been many occasions on which I have felt inclined to thank the Minister for his interventions, because constantly he exposes his weakness, constantly he shows that this question of accountability which we put to him, as we put to him now, is something which he regards as being of no importance. I say roundly that if the Minister is going to flout the sort of appeal which is now made under this new Clause, he stands condemned for contempt of Parliament.
Mr. Patrick Jenkin: The whole House is indebted to my hon. Friend the Member for Yeovil (Mr. Peyton) for having drawn our attention to the fact that a number of hon. and right hon. Gentlemen present are now spending perhaps the greater part of their working hours in fighting nationalisation and its extension and in fighting for an increase in Parliamentary control over nationalised bodies. He has already drawn attention to the fact, together with my hon. Friends the Members for Worcestershire, South (Sir G. Nabarro), Cirencester and Tewkesbury (Mr. Ridley)—
It being Ten o'clock, the debate stood adjourned.
Ordered,
That the Proceedings on Government Business may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.—[Mr. Ioan L. Evans.]
Question again proposed.
Mr. Jenkin: As I was saying, those of my hon. Friends and my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) are fighting for Parliamentary control over nationalised

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bodies while, on the other side, fighting for nationalisation and constantly resisting appeals for greater Parliamentary scrutiny, are the Minister and the Parliamentary Secretary and, occupying a silent and somnolent place on the sidelines, as always, is the genial figure of the hon. Member for Dearne Valley (Mr. Edwin Wainwright), who appears as somnolent now—I have wakened him up—as he does in the Standing Committee.
These arguments lie at the very heart of the political argument that has raged and will rage in this country for years, and for as long as the Labour Party remains wedded to the doctrines of nationalisation and State control. As long as it has a majority, it will force its will on Parliament and the country. The most that we can do is to try to inject into the Government's legislation some meagre form of Parliamentary control so that these organisations, these great bodies, that are set up, have at any rate some measure of accountability.
My hon. Friend the Member for Yeovil was absolutely right in stressing the importance of accountability. It was very revealing that just now the Minister of Power—and he has revealed this attitude so often in past weeks—should have intervened on the question of accountability to say, "I do not know what this is all about". He thereby stands condemned from his own mouth in a way which, with respect, my hon. Friends will be unable to condemn him.
This new Clause is essential, and I should like briefly to look at the impact of a Bill which gives the Coal Board power to look for natural gas in the North Sea, and at its relationship to the Board's existing statutory function, when Parliament set up the National Coal Board under the Coal Industry Nationalisation Act, 1946, it gave the Board a number of powers which, though fairly wide, were nevertheless very closely defined. The fringes were very narrow although, within the limits, the powers were relatively wide.
Since then, Parliament has from time to time given the Board powers to borrow money from the Treasury arid, as my hon. Friend the Member for Gloucestershire, South (Mr. Corfield) has said, its most recent powers are given under the Act of 1965.
Sir G. Nabarro Sir G. Nabarro rose—
Mr. Jenkin: I was referring, if my hon. Friend will forgive me, to the speech made by my hon. Friend the Member for Gloucestershire, South.
Section I of the 1946 Act gives the Board its powers and quite clearly delineates its functions and its essential connection with coal. The Board is entitled to mine coal, to sell coal and to manufacture and sell the products of coal—but its functions are always linked with coal. For years, of course—indeed, for decades—the coal industry has been engaged in selling the products of coal, and particularly the chemical products.
Mention of chemicals at this point makes me declare an interest. It is right that I should do this, although the interest is a fairly shadowy one. I work for a chemical company which is concerned with chemicals which may be in competition with chemicals based on coal, but which certainly would be in competition with chemicals based on oil and natural gas. I can, therefore, speak with some knowledge of these matters.
That was the limit placed by Parliament on the National Coal Board when it was established. The products from coal have now gone very wide indeed, such is the art of the organic chemist. Starting from coal, one can make chemicals of an extremely wide variety and the N.C.B., in seeking to exploit the opportunities open to it and seeking to make use of the powers given to the Board by Parliament, sought technical assistance and, in the form of a partnership, a chemical company was established. It is with Stanton Staveley, a part of the Stewarts & Lloyd complex, and the joint company set up is known as Staveley Chemicals.
Many of the products which Staveleys will make have been discussed widely in the technical Press in recent years, and here I must take issue with my hon. Friend the Member for Cirencester and Tewkesbury, who said that the matter had been kept secret. That may be true from the point of view of Parliament, since hon. Members were not told anything until the Second Reading of this Measure. We were not told about the ramifications of this venture into chemicals through Staveleys. However, this has been no secret from the technical Press and the

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matter has been discussed openly there from 11th June, 1966, when an announcement was made to the people concerned in this sphere. These people were worried about the extent to which the N.C.B. appeared to be going deeper into chemical manufacture, and although the N.C.B. proposed to advance from a coal base, nevertheless, it is now moving a long way from that. The N.C.B. announced that it intended to make 20 million gallons of benzole a year and 40 million tons of cycho-hexane a year, and products resulting from that manufacture.
It was also stated—and here we come to the link with this Measure—that the N.C.B. was interested in making p.v.c., poly-vinyl-chloride, and at that stage it was thought that there was a process whereby one could make acetylene, which is the essential intermediate for p.v.c., from coal. It was thought that the N.C.B. would be able to do this within the powers of the 1946 Act. If there is such a process, it is a long way off. However, much closer to hand are hopes of unlimited quantities of this material from natural gas.
Mr. Webster: My hon. Friend will be aware that calcium carbide, which is one of the principal ingredients of acetylene, is made by fusing limestone with deep-seamed anthracite, which is an N.C.B. product. Thus, there is some substance for that argument.
Mr. Speaker: Order. I hope that that intervention will not prevent the hon. Member for Wan stead and Woodford (Mr. Patrick Jenkin) from addressing his remarks to the Clause under discussion.
Mr. Jenkin: I am tempted to reply to my hon. Friend's intervention about calcium carbide, about which I know something, but I will resist the temptation.
The key to this matter is p.v.c. It was thought that it could be made from coal. It has since been discovered that, if this could be done, it is a long way off, although it could be made from natural gas or oil.
Mr. Speaker: Order. The background to this matter is very important. However, we are discussing a financial limitation on borrowing powers. I hope therefore,
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that the hon. Member will address his remarks to that subject.
Mr. Jenkin: I apologise for straying out of order, Mr. Speaker, but I do believe that it is important to realise the background to why the Bill has been introduced, what a big departure it represents for the N.C.B. and why, therefore, it is so essential that Parliament should retain the closest possible scrutiny over the powers given to the Board. The Bill is necessary because, as the Minister pointed out on Second Reading, the powers contained in the 1946 Act were not sufficient.
Mr. Speaker: Order. This is not a Second Reading or a Third Reading debate on the Bill. I must ask the hon. Member to come to the Clause.
Mr. Jenkin: The powers were outside Parliament's intentions and we were therefore asked to give new powers. The need for Parliament at this stage to give closer scrutiny to these new powers seems absolutely paramount. Whereas before under the Coal Industry (Borrowing Powers) Act it may have been appropriate—and I do not take issue at all with my hon. Friend the Member for Worcestershire, South in his desire for a much closer scrutiny even of those powers—while they may have been adequate for expansion and extensions within the field originally covered by the 1946 Act, where we have an industry such as this which will branch out into a wholly new field which has no relation to the basic field it has been in for 20 years, the case for much closer Parliamentary scrutiny is overwhelming.
The figure of £6 million is the figure which was mentioned by the Minister on Second Reading as the sort of likely expenditure which would be incurred by the Coal Board as its share of this tripartite adventure with the two American oil and chemical companies in the North Sea. It seems therefore entirely appropriate that this is the limit that Parliament should put on the borrowing powers of the Coal Board in which it exercises all these functions under the Bill before the Board should come to Parliament and say that it wants to go ahead. Parliament should have an opportunity to examine the success which the Coal Board has made of the first stage which the Minister estimated would cost not much more than

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£6 million. Parliament should have an opportunity to see whether this speculative venture is a venture in which it is right to sink more of the taxpayer's money in the hope that a return will be made.
That is the purpose of this new Clause. We in Parliament as guardians of the public purse should retain this measure of control. It is the only measure of control open to this House. We should retain the measure of control, limited as it is, over the activities of these corporations and in particular over activities such as are embodied in this Bill which represent an entirely novel departure from anything that this corporation has done before.
I believe the case for this new Clause with its limit of £6 million for borrowing is an overwhelming one. I hope that my hon. and right hon. Friend will think it right to divide the House.
Mr. Webster: I am privileged to join in this debate as an outsider from the debates in Committee on the Iron and Steel Bill, and hon. Members who come down from that Committee to brighten our activities in this House—[Interruption.] I could not quite hear what was said by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro).
Sir G. Nabarro: I said that we had descended from the Olympian heights.
Mr. Webster: I am glad that my hon. Friend has come down to earth, and I am glad to see him sitting slightly lower than myself. I agree with what was said by my hon. Friend the Member for Yeovil (Mr. Peyton), with his great experience and authority as a former Parliamentary Secretary to the Ministry of Power, about the laissez-passer of American companies which he was discussing. I gather that my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) was discussing this when he gave the remarkably excellent lecture on polymerisation and the fusing of deep mined anthracite with calcium carbide to make acetylene. I think that very relevant to this Bill.
I see the hon. Member for Aberavon (Mr. John Morris), the present Joint Parliamentary Secretary to the Ministry of Transport, present. Last time we discussed borrowing powers he was Parliamentary
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Secretary to the Ministry of Power. In his constituency there are many deep pits from which anthracite is mined for this purpose. There is a problem of considerable difficulty. We are considering voting, or trying to resist the voting, of a mere £6 million of taxpayers' money. I am glad to see the hon. Member for Dearne Valley (Mr. Edwin Wainwright) sitting on a bench opposite with his genial smile every time the taxpayers' money is passed away.
Mr. Edwin Wainwright: When Colvilles were granted £50 million by the Tory Government, the hon. Gentleman smiled frequently because the money was going to private enterprise.
10.15 p.m.
Mr. Webster: I do not know whether the hon. Gentleman was there to see me smiling or not smiling, but I am grateful for his deep recollection of my Parliamentary history. It is flattery and I am grateful for what the hon. Gentleman said.
In the context of a mere £6 million, where a matter of considerable principle is involved, we are in the presence, as the Joint Parliamentary Secretary to the Ministry of Transport knows, of the process of increasing during the last two years the borrowing powers of the gas industry from £650 million to £1,000 million and, without further redress to Parliament, to £1,250 million. This is the taxpayers' money, of which we in the House are trustees.
We are also in the presence of the process of increasing the finances available to the Ministry of Transport in the Transport Finances Bill. These are very considerable increases in the borrowing and acquisitional powers in the public sector of our economy, at a time when the squeeze has been biting deeper and deeper and when the Leader of the House is saying that it is high time that the squeeze was being relaxed.
The squeeze is being relaxed. Considerable spending power is being released by the granting of this purchasing power. The spending power, as usual, goes to the public sector, which will be the patron of all industry if we in the House do not exercise the greatest care. It is for Parliament to exercise discipline upon this usage of public money.

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The Minister of Power is smiling. He is a cheerful chap, but all this money from his constituents is being voted away. This is a process of a freeze and squeeze on the private sector whilst there is an increase in the moneys available to the nationalised industries.
I see the Chairman of the Select Committee on Nationalised Industries here. I was sorry that he did not rise in wrath when my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) used a phrase about our Select Committee on Nationalised Industries which I very much regretted and resented.
Sir G. Nabarro: What was that?
Mr. Webster: I cannot remember it. I apologise for the fact that, for once, I do not remember what my hon. Friend said.
Sir G. Nabarro: I said that his Committee was febrile and vacuous.
Mr. Webster: I thank my hon. Friend for quoting one of his previous speeches.
Sir G. Nabarro: It was a jolly good expression, was it not?
Mr. Webster: Excellent. I am not sure whether my hon. Friend is asking you, Mr. Deputy Speaker, or me that question. This is a time when we should return a little to the discipline of the market. People abroad are looking to our entry, or hoped-for entry, into the Common Market. They are looking at our economy. They are looking at the gradual growth of public sector, which is nationalised. Why is it nationalised? It is nationalised simply because the Government wish to interfere with the economy of the market place. The more this happens to our economy, the more we lose our ability to compete with our friends overseas.
Mr. Geoffrey Hirst: And the less attractive we become to them.
Mr. Webster: My hon. Friend is always extremely attractive. I am very grateful for what he has said. The new aspect we are worried about is this. In the past we have been willing, albeit reluctantly, to grant moneys on a debenture and fixed interest rate to these industries. The Minister of Power is talking about giving equity capital. This is happening also in
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the Ministry of Aviation. This is the taxpayers' money on speculative risk. This is what the House should exercise the deepest and most careful scrutiny on.
The moment that, in this country, we start to speculate with taxpayers' money, there should be the deepest reservations. If we are outvoted tonight we must at least see that every year we have a scrutiny. Hon. Members opposite are forever saying that the shareholders in equity interests are mute and unable to have any authority. Yet now they are voting equity risk capital to the National Coal Board, speculating with the taxpayers' money. This principle needs the deepest scrutiny and consideration.
Sir Cyril Osborne: I do not speak as an expert but as a back bencher representing the people who have to find the taxes which the National Coal Board is likely to lose as it has lost them in the past. The new Clause, which I support, would limit the amount of money the Board could borrow without coming back to the House and giving an account of what it has done with the money it has borrowed. That seems a sensible and reasonable principle and one which I would have thought that the Minister could have accepted.
I think that, if the right hon. Gentleman were sitting here, this is the sort of speech that he would be making if this Bill had been introduced by a Conservative Minister. I am not so much objecting to the diversification of the Board's activities—I am not sufficiently competent to judge of that. But I speak on behalf of my constituents, who have to pay taxes to keep the Board going, in saying that, before more money is lost, those of us on the back benches should have an opportunity of criticising where the money is going and inquiring whether there is any means of stopping the losses which have been incurred.
It is not diversification which worries me but whether the Board is creditworthy and really worthy of having unlimited amounts voted to it. If we were going as ordinary business men or indidividuals to our bank to borrow, the banker would say, "Let us look at your assets. What have you done with your money before? Can we trust you with a lot more money?" This House has a right to say to the Board, "What

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have you done with the money previously voted? Have you made good use of it? This is the taxpayers' money". I am not speaking as an expert, although I remind the House of what the Board has done with public money in the past and invite right hon. and hon. Members to consider whether that record does not justify this new Clause limiting the borrowing power to £6 million, which seems reasonable.
Mr. Ted Leadbitter Mr. Ted Leadbitter (The Hartlepools) rose—
Sir C. Osborne: I hope the hon. Gentleman will forgive me. I do not claim to be an expert. I am speaking as a taxpayers' representative.
Mr. Leadbitter: Would the hon. Gentleman give way?
Sir C. Osborne: Very well.
Mr. Leadbitter: Assuming that the hon. Gentleman's argument is sincere—
Sir G. Nabarro: Withdraw.
Mr. Leadbitter: I do not think that the hon. Member for Worcestershire, South (Sir G. Nabarro) should butt in here. If the hon. Member for Louth (Sir C. Osborne) has an argument which he presumes to be sincere, would he be prepared to test it against the £400 million which the Conservative Government handed out to private steel interests and compare that sum with the £6 million to be voted to the N.C.B., which has a much better record? How does he reconcile these two facts?
Sir C. Osborne: If I attempted to go into that I should be ruled out of order at once. But I say to the hon. Member that I have had the great honour to be a Member of this House for 22 years and I do not think that anyone who has known me over the years would doubt my sincerity.
Mr. Leadbitter Mr. Leadbitter rose—
Sir C. Osborne: I do not mind my judgment being doubted, but the hon. Gentleman should not question my sincerity.
I want to bring to the attention of the House these pertinent arguments from the taxpayers' point of view and to
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examine what has been done with public money previously and to consider whether in view of that it is reasonable to say to the National Coal Board, "If your borrowing exceeds £6 million you must come back to the House and explain what has happened to the £6 million which we granted you permission to borrow." That seems very fair and reasonable.
I remind hon. Members that so far the Coal Board's accumulated deficit is £115·6 million, a colossal sum, of which £24·8 million was lost only last year. If you had a business, Mr. Deputy Speaker, which last year had lost more than £24 million you would not readily get as many millions as you wanted in the future. It would be said that there should be some control. With so much money having gone down the rat hole before, I want to see that it does not go down the rat hole so quickly in future.
Hon. Members should also bear in mind some other figures. Capital expenditure by the Coal Board so far has amounted to £1,431 million, a lot of money, taxpayers' money, and in addition there are loans from the Ministry of £960 million, totalling £2,391 million sunk into this industry.
Mr. Edwin Wainwright: On a point of order. If you are to allow this debate to carry on so widely, Mr. Deputy Speaker, some of us will have to defend the Coal Board, and I intend to do so.
Mr. Deputy Speaker (Mr. Sydney Irving): The hon. Member for Louth (Sir C. Osborne) is perfectly in order in mentioning these matters as long as he does not go into too much detail.
Sir C. Osborne: I am trying to set the background as to what has happened to public money before and to ask against that background whether it is wise to give unlimited borrowing powers in future. I am sorry that a representative of the National Miners' Union should be so nervous about having the facts put before the House. I am reminding the House of what has happened in the last few years, and in the Clause we are saying that the borrowing should be limited to £6 million and that when that has gone the Coal Board should justify what it has done before being able to borrow more. This is the background: in 1957

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the Coal Board lost £5·3 million; in 1958 it lost £13·5 million; in 1959 £24 million; in 1960 £21·3 million; in 1962 £13·8 million and last year £24·8 million. Against these figures nobody, not even the Treasury, would allow open-ended borrowing.
I am not an expert in these matters, as are so many other hon. Members present tonight, but I am speaking for the taxpayers who have to find this money. I hate a lot of extra taxes which are unnecessary. In a normal industry we reckon to get about 10 per cent. on the capital employed, half of which goes in taxation to maintain the
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Welfare State. Ever since the Coal Board has been in existence, it has not paid one brass farthing out of profits to help to maintain the Welfare State. Therefore, we ought to have a check on this. The nationalised industries have done nothing to help the Welfare State. They have sponged on it. It has been carried by the private sector of industry. It seems reasonable, without going into further details, that we should say that before the Board spends unlimited millions it should come back to this House and justify the manner in which money has been lost. That is why I shall support this Clause.
10.30 p.m.
Mr. Eric Lubbock: Everyone who has spoken has not addressed themselves to this new Clause. They have attacked it by engaging in another Second Reading debate. [Interruption.] Hon. Members have had to be brought to order, so I am not far off the mark in what I say. I have heard nothing in the arguments to justify the Clause and I want to put before the House a consideration which would tend to make me vote against it if hon. Gentlemen insist on pressing it to a Division.
I quite agree with everything said about accountability of the nationalised industries, and if I thought that we were not to have any explanation of how this money is being spent until the whole of the £6 million or £6½ million has been exhausted, I should be extremely concerned, because the Minister told us on Second Reading that this money would be expended over a matter of years on exploration.
Between the time when this Bill has its Third Reading and the exhaustion of the moneys, which it is suggested that we should put into this Bill, there will have been several annual reports and accounts issued by the Board.
I hope, incidentally, that we shall have half-yearly accounts from the National Coal Board, as we have from the Air Corporations. This would be a great advance in accountability. I would also hope that as soon as any discoveries are made by the Board in conjunction with its partners, Gulf Oil and Allied Chemicals, in the North Sea, the Minister will immediately make a statement, just as the other consortia operating in the North Sea have disclosed, as far as possible, their evidence, and say in the preliminary stages what the results of its drilling have been.
Mr. Corfield: The hon. Gentleman has been arguing that there will be several reports and accounts, but it has been made clear that this operation will be carried out in co-operation with an American oil company, as some form of subsidiary. If the hon. Gentleman can find anything in the accounts that gives him anything to go on about subsidiaries, showing that this will come before the House, then he is very much cleverer than I or the Minister.
Mr. Lubbock: If the hon. Gentleman will look at page 16, Vol. II of the Accounts and Statistical Tables of the
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National Coal Board's Report and Accounts, 1965–66, he will find a complete list of all of the enterprises upon which the Board has embarked. Furthermore, if he reads the Report carefully he will see—1 must say that hon. Gentlemen do not seem to have done their homework very thoroughly—
Mr. Ridley: Do not be patronising.
Mr. Lubbock: The hon. Gentleman said that no information has been given to the House about Staveley Chemicals, and I would like to draw his attention to paragraph 107 of the Annual Report and Accounts of the Board, in which these figures, given by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), of 70,000 tons a year of high quality benzine and 40,000 tons of cycho-hexane appear. The hon. Gentleman produced them as though they were a revelation from some totally different source, when they are contained in the Board's accounts.
Mr. Ridley: Will the hon. Gentleman do his own homework and accept that it was my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) who gave these figures?
Mr. Lubbock: There have been so many speeches on this rather limited Clause that it is difficult to remember everyone who has spoken.
Sir G. Nabarro Sir G. Nabarro rose—
Mr. Lubbock: I will give way to the hon. Gentleman, but if I give way many more times we will prolong this debate unnecessarily, and already there has been a great deal of heat and very little light, to no purpose so far.
Sir G. Nabarro: The hon. Member has alluded to the National Coal Board Report and Accounts, Volume II: Accounts and Statistical Tables, to 26th March, 1966, page 16. I have it before me. On that page there is no trading account and no profit and loss account. What there is is a heterogeneous mass of minor investments by the Board in non-coalmining activities. The point of all my hon. Friends and myself is that we want a separate trading account and a separate profit and loss account for all these non-coal-mining activities. Now, will the

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hon. Member tell me that I have not done my homework?
Mr. Lubbock: No. The hon. Member has before him, now that I have drawn it to his attention—
Sir G. Nabarro: We all read it before the hon. Member brought it up.
Mr. Lubbock:—the table in the Coal Board's accounts, "Interests in trade undertakings not wholly owned". I was replying to a question put to me by one of his hon. Friends, who said that no information was given in the Annual Report and Accounts of the National Coal Board about these other enterprises.
There is, however, an important point here. As the hon. Member for Gloucestershire, South (Mr. Corfield) has pointed out, this new operation in the North Sea will not be subsidiary of the Coal Board, which, I understand, will invest only 40 per cent. of the capital. Therefore, I assume and I hope that separate accounts will be published by the consortia and that these will be available to the House and the general public, just as any other report and accounts might be of a commercial undertaking.
What I said at the beginning is still true: that before the £6 million or £6·5 million mentioned in the Clause and by the Minister on Second Reading is exhausted, we shall have had very full information about the financial success or otherwise of the Coal Board's venture into the North Sea, and, I hope, not only that, but several statements in the House as well.
Many hon. Members on this side seem to feel that the investment by the National Coal Board in the North Sea exploration is a bad bargain. I do not know how they come to that conclusion. If they look at the enormous success story of the consortia which have engaged in this great undertaking, they will find that the number of commercial strikes is an extremely high percentage compared with almost any other natural gas area in the world. It is already established, even to the Minister's satisfaction—and he is notoriously pessimistic—that the reserves available in the British section of the North Sea are at least as large as those which have been discovered in Schlochteren. I think that in a few
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years' time we shall find that they are many times as large as those of Schlochteren. I very much hope that the estimates given by the Minister on Second Reading of the reserves of natural gas will also prove to be grossly underestimated and that the National Coal Board will reap the benefit of its own part in this investment.
I do not see this as unfair competition with private enterprise, because there is nothing to nationalise here. We are dealing with the resources of the subsoil under the seabed of the North Sea. Therefore, these are not already in private ownership. We are not expropriating something which belongs to private capitalists. We are developing a completely new resource.
It is entirely wise and right for public undertakings to be involved in this so that it can be done as quickly as possible. If the Minister says that he needs more than £6 million over a period of years to do this, I will certainly go along with him because, as I said on Second Reading, I think that this will be a very good bargain for the taxpayer. I speak for the taxpayers, too, and I am concerned that their money shall be spent carefully and with the maximum possible return from the enterprises in which the Coal Board engages.
Because I believe that this enterprise of the National Coal Board is almost certain of success and because I wish us to get on with the exploitation of this marvellous resource, which will save the country millions of £s in foreign exchange, I wish that the Government would reject the new Clause.
Colonel C. G. Lancaster: I had not intended joining in this debate, because I was fully satisfied that my hon. Friends had made a full case for the accountability of this £6 million. However, I have listened to the hon. Member for Orpington (Mr. Lubbock), who speaks with great confidence on almost every known subject, and he has already made a number of statements about the North Sea situation which are wholly erroneous and have no basis in fact. He now gives it as his opinion that this is likely to be a successful operation. Indeed, he went further and said that he was very anxious to see it go forward, because it would expedite the exploration of the North Sea.

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How does he imagine that it will expedite it? The National Coal Board will not do the exploration. It has been accepted by both sides of the House that all the National Coal Board will do is invest public moneys in a subsidiary company which will be operated wholly by Gulf Oil in some connection with Allied Chemicals, and rightly so. Gulf Oil will do it in its own time, and the fact that the National Coal Board has invested money in it will have no bearing on the speed with which it is effected. The idea that at regular intervals we shall then get a full account of what is occurring and that we shall be able to determine whether the £6 million has been wisely invested in nonsense.
Naturally, we expect that the Minister will look upon this with a considerable degree of responsibility. I am much more worried about the way in which he will determine whether the £6 million is adequate. That will be one of his most difficult problems. He is to put £6 million into an undertaking which itself will need considerable capitalisation. The decision as to whether £6 million is adequate can be reached only by Gulf Oil. Only Gulf Oil can decide whether its scheme of exploration is likely to show results.
One does not simply bore a hole and expect gas to come out of it. One must take part in a comprehensive approach to the exploration of the petroleum geology of a particular sector of the North Sea. Only at that moment will Gulf Oil be able to reach a conclusion as to whether the prospects lying ahead of us are sound or otherwise. It is not something which is within the competence of the National Coal Board, and to that extent, the Minister will find himself in considerable difficulty.
I should have thought that, in his own interests, the Minister would wish to see a condition of accountability so that he could clear himself in what is a complete speculation by him. I do not expect that the Minister wants to find himself in a position where, having spent public money on a speculation and the thing having gone wrong, he has to come back to ask for more. He would be wise to accept my hon. Friend's Clause. I cannot see that it is injurious to his approach
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to the matter. He would be a very sensible man to do just that.
He is asking us to provide public moneys for what, in effect, is a purely speculative approach in a very involved problem. I cannot but believe that, on reflection, he will agree that it would be wise to accept the Clause as put forward by my hon. Friends.
The Parliamentary Secretary to the Ministry of Power (Dr. Jeremy Bray): This is a restricted Clause dealing with a narrow point on a very modest Bill, and we have had a very substantial debate. If I were to attempt to reply to it in full, I fear that I might stray beyond the bounds of order.
10.45 p.m.
The Clause deals with the borrowing of money, whereas the Bill deals with the investing of money in a particular venture, namely, North Sea exploration. There is no precedent in the legislation dealing with the nationalised industries for using the borrowing powers to control spending on investment.
Sir G. Nabarro: Yes there is.
Dr. Bray: The Clause as drafted would not have the effect of restricting expenditure in the North Sea at all, because this comes from the general cash flow of the Board. It is financed not only out of borrowings, but also out of depreciation. The amount of money spent in the North Sea could well go far beyond £6 million without the Clause as drafted having any effect at all.
The capital expenditure of the Board has, of course, to be agreed each year with my right hon. Friend, and in that capital investment review my right hon. Friend exercises a far closer scrutiny—
Sir G. Nabarro: Not this House.
Dr. Bray:—than the House would do, as proposed in this Clause.
Sir G. Nabarro: The hon. Gentleman has really let the cat out of the bag. He is being his usual indiscreet self. We know that the right hon. Gentleman authorises the capital expenditure programme of the Board, but we do not agree with what he so authorises. The power to authorise ought to belong to this House, and not be in the bureaucratic fastnesses of the Minister of Power.
Dr. Bray: Through its ability to question and to call the Minister to account through many different procedures in this House, the House is able, often and effectively, as the hon. Member for Orpington (Mr. Lubbock) said, to follow the progress of such programmes as North Sea exploration.
Mr. Ridley: The hon. Gentleman knows that we cannot put down detailed Questions about the administration of the nationalised industries. How can he say that the Minister is answerable to the House for his decisions on capital expenditure of this sort? It is just not true.
Mr. Hirst: What year, what month?
Dr. Bray: If the hon. Gentleman looks at the Order Paper he will find many Questions relating to my right hon. Friend's exercise of his responsibilities in relation to the National Coal Board and its activities.
The figure of £6 million is only an estimate of the cost of exploration in the initial phase. Were that exploration to be successful, and gas or oil to be found, it would be investing in success if further expenditure were required. The imposition of a specific limit is, therefore, both unnecessary to achieve the end which hon. Gentlemen opposite desire, and undesirable because it would put the Board at a disadvantage in relation to other companies in the North Sea.
Mr. Webster: On a point of order. Would it be appropriate on this Clause to ask the hon. Gentleman when the Minister is accountable to the House for this money, or would it be better to raise the matter on the next Clause?
Mr. Deputy Speaker: That is not a point of Order for the Chair.
Sir G. Nabarro: Would the hon. Gentleman answer it all the same?
Dr. Bray: I shall come to the hon. Gentleman's speech in due course.
The charge of unfair competition made by the hon. Member for Gloucestershire, South (Mr. Corfield) is one which can be refuted by considering the way in which hon. Gentlemen opposite would like to see the Board operating in the North Sea. It needs to operate on the same basis as any
1306
other operator, not only for its own interests, but also for the interests of those operators about whom hon. Gentlemen opposite are concerned, a chemical company and an oil company, to enable them to find the Board as equally satisfactory a partner as anybody else.
The hon. Member referred—as did the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin)—to the question of the Coal Board's interest not only in North Sea exploration but in companies which might use gas discovered in the North Sea. The hon. Member for Wan-stead and Woodford declared his own interest in this matter. He has referred to this repeatedly. I can assure him that we have had no representations from either the very distinguished company that employs him or any other chemical company about the diversification of the Coal Board into chemicals. If anybody has any misgivings about this we are ready to meet him and listen to what he has to say—but we have had no representations, apart from those of the hon. Member.
On the question of the publication of a list of the Board's diversified interests—
Sir G. Nabarro: Accounts.
Dr. Bray: No—diversified interests, the list of companies which my right hon. Friend gave in reply to a Question earlier this week referred to the end of the last financial year, when the Board had no interest in Staveley Chemicals. That is the sole reason why it was not included in the list.
The House has been treated to a "commercial" of the proceedings which are going on regularly upstairs in the Committee on the Iron and Steel Bill. We have heard in particular the amiable and amusing—
Sir G. Nabarro: Commercial?
Dr. Bray: Commercial.
Sir G. Nabarro: What is that?
Dr. Bray: I am sure that the hon. Member knows a darned sight better than I do.
Mr. Peyton: On a point of order. Mr. Deputy Speaker, the Parliamentary Secretary has used the word "commercial" in the sense that a commercial is not

1307
something done for nothing. Is the hon. Member making some suggestion that someone—
Mr. Deputy Speaker: Order. Whatever the hon. Member said is not a point of order.
Sir G. Nabarro: On a point of order. Mr. Deputy Speaker, I distinctly heard the Parliamentary Secretary allude to my speech in this debate as a "commercial". My hon. Friend the Member for Yeovil (Mr. Peyton) has pointed out with great veracity that a commercial operation is one carried out for profit. That is a highly insulting remark by the Parliamentary Secretary, who is evidently lost for words, and it ought to be withdrawn by the hon. Member. May we have this opprobrious epithet withdrawn?
Mr. Deputy Speaker: If the Minister was imputing that what was done in this House was done for financial gain it is out of order, and I hope that the Minister will withdraw it.
Dr. Bray: I was making no such imputation, Mr. Deputy Speaker. If hon. Members opposite now lack the sense of humour which they show so fully on other occasions I wholly withdraw any suggestion whatsoever that the genial and entertaining activities of the hon. Member for Worcestershire, South (Sir G. Nabarro) have been coloured in any way by any commercial interest in respect of anything that he has said in this House. Nevertheless, we have had from hon. Members opposite, if not a "commercial", a sample of the kind of proceedings that we have listened to upstairs, which is no doubt of interest to the House as a whole as an example of the way in which debate is now being conducted there.
The hon. Member for Yeovil raised the question whether having the Coal Board as a partner gave the interested American companies any unfair advantage. The hon. Member is aware that it was the Conservative Government who licensed the Gas Council, with its partner, Amoco, to explore so very successfully in the North Sea. I therefore take it that he has no criticism of the principle involved,
1308
of a public fuel company co-operating with an American oil company in North Sea explorations—which is all that the Bill seeks to achieve—in precisely the same terms as the Gas Council is now operating under licence issued by hon. Gentlemen opposite—
Mr. Peyton: What happened in the case of the Gas Council and its partners was that application was made jointly and together. What I do not understand is the reason for this subsequent junction between the Coal Board and its proposed partners.
Dr. Bray: The circumstances are precisely analogous. An approach has been made jointly by the Coal Board and its American partners in the case of the applications for the licences, which the Bill will make possible.
The hon. Member for Louth (Sir C. Osborne) was concerned about the creditworthiness of the Coal Board in general and the question of whether or not it had paid any taxation. The hon. Gentleman's knowledge of and interest in taxation no doubt extends to the fact that many of our greatest oil companies have also not paid any United Kingdom tax for years. But I am sure he would not wish to say that they had made no contribution to the economy, any more than, I am sure, he really feels that the Coal Board fails to make its full contribution to the economy.
The hon. Member for Orpington set the debate in proper perspective when he said that the House has frequent opportunities to review the progress of a particular exploration in the North Sea, and that the review of the capital expenditure of the nationalised industries needs to be done in a wider framework than that of any one activity such as this. The new Clause is both unnecessary to achieve the Opposition's objectives and would restrict the Coal Board operating in the same way as any other operator in the North Sea. I would therefore advise my hon. Friends to oppose it.
Question put, That the Clause be read a Second time.
The House divided: Ayes 109, Noes 185.

Division No. 204.]

AYES

[9.12 p.m.

Albu, Austen

Cray, Dr. Hugh (Yarmouth)

Mitchell, R. C. (S'th'pton, Test)

Allaun, Frank (Salford, E.)

Grey, Charles (Durham)

Molloy, William

Alldritt, Walter

Griffiths, David (Rother Valley)

Morgan, Elystan (Cardiganshire)

Allen, Scholfield

Griffiths, Rt. Hn. James (Llanelly)

Morris, John (Aberavon)

Anderson, Donald

Hale, Leslie (Oldham, W.)

Moyle, Roland

Archer, Peter

Hamilton, James (Bothwell)

Murray, Albert

Armstrong, Ernest

Hamilton, William (Fife, W.)

Norwood, Christopher

Atkins, Ronald (Preston, N.)

Hamling, William

Oakes, Gordon

Atkinson, Norman (Tottenham)

Hannan, William

O'Malley, Brian

Bagier, Gordon A. T.

Harrison, Walter (Wakefield)

Orme, Stanley

Barnes, Michael

Haseldine, Norman

Oswald, Thomas

Barnett, Joel

Hazell, Bert

Owen, Dr. David (Plymouth, S'tn)

Baxter, William

Heffer, Eric S.

Owen, Will (Morpeth)

Bennett, James (C'gow, Bridgeton)

Henig, Stanley

Page, Derek (King's Lynn)

Bidwell, Sydney

Herbison, Rt. Hn. Margaret

Pannell, Rt. Hn. Charles

Blackburn, F.

Hooley, Frank

Pardoe, John

Blenkinsop, Arthur

Hooson, Emlyn

Park, Trevor

Boardman, H.

Horner, John

Parker, John (Dagenham)

Booth, Albert

Howarth, Robert (Bolton, E.)

Pavitt, Laurence

Boston, Terence

Howie, W.

Pearson, Arthur (Pontypridd)

Braddock, Mrs. E. M.

Hoy, James

Pentland, Norman

Bray, Dr. Jeremy

Hughes, Roy (Newport)

Perry, Ernest G. (Battersea, S.)

Brooks, Edwin

Hunter, Adam

Perry, George H. (Nottingham, S.)

Brown, Bob (N'c'tle-upon-Tyne, W.)

Irvine, A. J. (Edge Hill)

Price, Christopher (Perry Barr)

Buchan, Norman

Jackson, Peter M. (High Peak)

Price, Thomas (Westhoughton)

Buchanan, Richard (G'gow, Sp'burn)

Jeger, Mrs. Lena (H'b'n&St. P, cras, S.)

Price, William (Rugby)

Butler, Herbert (Hackney, C.)

Jenkins, Hugh (Putney)

Pursey, Cmdr. Harry

Butler, Mrs. Joyce (Wood Green)

Jenkins, Rt. Hn. Roy (Stechford)

Randall, Harry

Cant, R. B.

Johnson, Carol (Lewisham, S.)

Rankin, John

Carmichael, Neil

Johnson, James (K'ston-on-Hull, W.)

Reynolds, G. W.

Chapman, Donald

Johnston, Russell (Inverness)

Rhodes, Geoffrey

Coe, Denis

Jones, Dan (Burnley)

Roberts, Albert (Normanton)

Concannon, J, D.

Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

Robertson, John (Paisley)

Corbet, Mrs. Freda

Jones, J. Idwal (Wrexham)

Robinson, W. 0. J. (Walth'stow, E.)

Cullen, Mrs. Alice

Kelley, Richard

Rodgers, William (Stockton)

Dalyell, Tam

Kenyon, Clifford

Rogers, George (Kensington, N.)

Davidson, Arthur (Accrington)

Kerr, Mrs. Anne (R'ter & Chatham)

Rose, Paul

Davies, Dr. Ernest (Stretford)

Lawson, George

Ross, Rt. Hn. William

Davies, G. Elfed (Rhondda, E.)

Leadbitter, Ted

Rowlands, E. (Cardiff, N.)

Davies, Harold (Leek)

Ledger, Ron

Sheldon, Robert

Davies, Ifor (Gower)

Lee, Rt. Hn. Frederick (Newton)

Silkin, Hn. S. C. (Dulwich)

Davies, S. O. (Merthyr)

Lee, John (Reading)

Silverman, Julius (Aston)

Dell, Edmund

Lestor, Miss Joan

Skeffington, Arthur

Doig, Peter

Lewis, Arthur (W. Ham, N.)

Slater, Joseph

Dunn, James A.

Lewis, Ron (Carlisle)

Small, William

Dunnett, Jack

Lomas, Kenneth

Spriggs, Leslie

Dunwoody, Mrs. Gwyneth (Exeter)

Longden, Gilbert

Steel, David (Roxburgh)

Dunwoody, Dr. John (F'th & C'b'e)

Luard, Evan

Steele, Thomas (Dunbartonshire, W.)

Eadie, Alex

Lubbock, Eric

Summerskill, Hn. Dr. Shirley

Edelman, Maurice

Lyon, Alexander W. (York)

Thomas, George (Cardiff, W.)

Edwards, Rt. Hn. Ness (Caerphilly)

McBride, Neil

Varley, Eric G.

Edwards, William (Merioneth)

McCann, John

Wainwright, Edwin (Dearne Valley)

Ellis, John

Mackenzie, Alasdair (Ross&Crom'ty)

Walden, Brian (All Saints)

Ensor, David

Mackenzie, Gregor (Rutherglen)

Walker, Harold (Doncaster)

Evans, Albert (Islington, S. W.)

Mackintosh, John P.

Watkins, David (Consett)

Evans, loan L. (Birm'h'm, Yardley)

McMaster, Stanley

Wellbeloved, James

Faulds, Andrew

McMillan, Tom (Glasgow, C.)

White, Mrs. Eirene

Fernyhough, E.

McNamara, J. Kevin

Whitlock, William

Finch, Harold

Mahon Peter (Preston, S.)

Wilkins, W. A.

Fitch, Alan (Wigan)

Mahon, Simon (Bootle)

Williams, Alan (Swansea, W)

Fletcher, Ted (Darlington)

Mallalieu, E. L. (Brigg)

Williams, Clifford (Abertillery)

Floud, Bernard

Manuel, Archie

Willis, George (Edinburgh, E.)

Foley, Maurice

Mapp, Charles

Wilson, William (Coventry, S.)

Foot, Michael (Ebbw Vale)

Marples, Rt. Hn. Ernest

Winnick, David

Forrester, John

Marsh, Rt. Hn. Richard

Winstanley, Dr. M. P.

Fowler, Gerry

Mason, Roy

Winterbottom, R. E.

Fraser, John (Norwood)

Mayhew, Christopher

Woodburn, Rt. Hn. A.

Galpern, Sir Myer

Mendelson, J, J.

Yates, Victor

Gardner, Tony

Mikardo, Ian

Garrow, Alex

Millan, Bruce

TELLERS FOR THE AYES:

Gordon Walker, Rt. Hn. P. G

Miller, Dr. M. S.

Mr. Bishop and Mr. Gourlay.

NOES

Astor, John

Batsford, Brian

Blaker, Peter

Awdry, Daniel

Biffen, John

Boyd-Carpenter, Rt. Hn. John

Balniel, Lord

Biggs-Davison, John

Boyle, Rt. Hn. Sir Edward

Brewis, John

Grant-Ferris, R.

Nabarro, Sir Gerald

Brinton, Sir Tatton

Gresham Cooke, R.

Nicholls, Sir Harmar

Bromley-Davenport, Lt. Col. Sir Walter

Griffiths, Eldon (Bury St. Edmunds)

Noble, Rt. Hn. Michael

Brown, Sir Edward (Bath)

Gurden, Harold

Onslow, Cranley

Bruce-Gardyne, J.

Hall-Davis, A. G. F.

Osborn, John (Hallam)

Bryan, Paul

Hamilton, Marques of (Fermanagh)

Osborne, Sir Cyril (Louth)

Buchanan-Smith, Alick (Angus, N&M)

Hamilton, Michael (Salisbury)

Page, Graham (Crosby)

Buck, Antony (Colchester)

Harris, Frederic (Croydon, N. W.)

Page, John (Harrow, W.)

Bullus, Sir Eric

Harrison, Brian (Maldon)

Peel, John

Burden, F. A.

Hawkins, Paul

Pink, R. Bonner

Campbell, Gordon

Hiley, Joseph

Price, David (Eastleigh)

Chichester-Clark, R.

Hill, J. E. B.

Prior, J. M. L.

Clark, Henry

Hirst, Geoffrey

Pym, Francis

Clegg, Walter

Holland, Philip

Ramsden, Rt. Hn. James

Cooke, Robert

Hordern, Peter

Renton, Rt. Hn. Sir David

Corfield, F. V.

Jenkin, Patrick (Woodford)

Ridley, Hn. Nicholas

Costain, A. P.

Jennings, J. C. (Burton)

Russell, Sir Ronald

Crawley, Aidan

Kaberry, Sir Donald

Sharples, Richard

Cunningham, Sir Knox

Kimball, Marcus

Shaw, Michael (Sc'b'gh & Whitby)

Currie, G. B. H.

King, Evelyn (Dorset, S.)

Sinclair, Sir George

Dalkeith, Earl of

Kirk, Peter

Smith, John

Dance, James

Knight, Mrs. Jill

Stodart, Anthony

Dean, Paul (Somerset N.)

Lancaster, Col. C. G.

Stoddart-Scott, Col. Sir M. (Ripon)

Deedes, Rt. Hn. W. F. (Ashford)

Langford-Holt, Sir John

Summers, Sir Spencer

Doughty, Charles

Legge-Bourke, Sir Harry

Thatcher, Mrs. Margaret

Eden, Sir John

Loveys, W. H.

Turton, Rt. Hn. R. H.

Elliot, Capt. Walter (Carshalton)

Maddan, Martin

Vaughan-Morgan, Rt. Hn. Sir John

Elliott, R. W.(N'c'tle-upon-Tyne, N.)

Maginnis, John E.

Walker-Smith, Rt. Hn. Sir Derek

Errington, Sir Eric

Marten, Neil

Walters, Dennis

Farr, John

Maude, Angus

Whitelaw, William

Fisher, Nigel

Maudling, Rt. Hn. Reginald

Wilts, Sir Gerald (Bridgwater)

Fletcher-Cooke, Charles

Mawby, Ray

Wilson, Geoffrey (Truro)

Fortescue, Tim

Maxwell-Hyslop, R. J.

Wolrige-Gordon, Patrick

Foster, Sir John

Maydon, Lt.-Cmdr. S. L. C.

Younger, Hn. George

Gilmour, Ian (Norfolk, C.)

Mitchell, David (Basingstoke)

Gilmour, Sir John (Fife, E.)

Monro Hector

TELLERS FOR THE NOES

Glyn, Sir Richard

More, Jasper

Mr. Grant and Mr. Eyre.

Gower, Raymond

Mott-Radclyffe, Sir Charles

Division No. 205.]

AYES

[10.58 p.m.

Astor, John

Foster, Sir John

More, Jasper

Awdry, Daniel

Gilmour, Ian (Norfolk, C.)

Mott-Radclyffe, Sir Charles

Balniel, Lord

Gilmour, Sir John (Fife, E.)

Nabarro, Sir Gerald

Batsford, Brian

Glyn, Sir Richard

Nicholls, Sir Harmar

Biffen, John

Grant, Anthony

Noble, Rt. Hn. Michael

Biggs-Davison, John

Grant-Ferris, R.

Onslow, Cranley

Blaker, Peter

Gresham Cooke, R.

Osborne, John (Hallam)

Boyd-Carpenter, Rt. Hn. John

Griffiths, Eldon (Bury St. Edmunds)

Page, Graham (Crosby)

Boyle, Rt. Hn. Sir Edward

Gurden, Harold

Peel, John

Brewis, John

Hall-Davis, A. G. F.

Peyton, John

Brinton, Sir Tatton

Hamilton, Marquess of (Fermanagh)

Pink, R. Bonner

Bromley-Davenport, Lt.-Col. Sir Walter

Hamilton, Michael (Salisbury)

Price, David (Eastleigh)

Brown, Sir Edward (Bath)

Harris, Reader (Heston)

Prior, J. M. L.

Bryan, Paul

Harrison, Brian (Maldon)

Pym, Francis

Buchanan-Smith, Alick (Angus, N&M)

Hawkins, Paul

Ramsden, Rt. Hn. James

Buck, Antony (Colchester)

Hiley, Joseph

Renton, Rt. Hn. Sir David

Campbell, Gordon

Hill, J. E. B.

Ridley, Hn. Nicholas

Chichester-Clark, R.

Hirst, Geoffrey

Russell, Sir Ronald

Clark, Henry

Holland, Philip

Sharples, Richard

Clegg, Walter

Hordern, Peter

Shaw, Michael (Sc'b'gh & Whitby)

Cooke, Robert

Jenkin, Patrick (Woodford)

Sinclair, Sir George

Corfield, F. V.

Kaberry, Sir Donald

Smith, John

Costain, A. P.

Kimball, Marcus

Stodart, Anthony

Crawley, Aidan

King, Evelyn (Dorset, S.)

Turton, Rt. Hn. R. H.

Currie, G. B. H.

Kirk, Peter

Vaughan-Morgan, Rt. Hn. Sir John

Dalkeith, Earl of

Kitson, Timothy

Walker-Smith, Rt. Hn. Sir Derek

Dean, Paul (Somerset, N.)

Knight, Mrs. Jill

Wall, Patrick

Deedes, Rt. Hn. W. F. (Ashford)

Langford-Holt, Sir John

Waiters, Dennis

Doughty, Charles

Legge-Bourke, Sir Harry

Webster, David

Eden, Sir John

Loveys, W. H.

Whitelaw, William

Elliot, Capt. Walter (Carshalton)

Maddan, Martin

Wills, Sir Gerald (Bridgwater)

Elliott, R. W.(N'c'tle-upon-Tyne, N.)

Maginnis, John E.

Wolrige-Gordon, Patrick

Errington, Sir Eric

Marten, Neil

Wylie, N. R.

Eyre, Reginald

Maude, Angus

Farr, John

Mawby, Ray

TELLERS FOR THE AYES:

Fisher, Nigel

Maxwell-Hyslop, R. J.

Mr. David Mitchell and

Fletcher-Cooke, Charles

Maydon, Lt.-Cmdr, S- L, C.

Mr. George Younger.

Fortescue, Tim

Monro, Hector

NOES

Allaun, Frank (Sallord, E.)

Dunn, James A.

Hughes, Emrys (Ayrshire, S.)

Alldritt, Walter

Dunnett, Jack

Hughes, Roy (Newport)

Allen, Schotefield

Dunwoody, Mrs. Gwyneth (Exeter)

Hunter, Adam

Anderson, Donald

Dunwoody, Dr. John (F'th & C'b'e)

Jackson, Peter M. (High Peak)

Archer, Peter

Eadie, Alex

Jeger, Mrs. Lena (H'b'n&St. P'cras, S.)

Armstrong, Ernest

Edelman, Maurice

Jenkins, Hugh (Putney)

Atkins, Ronald (Preston, N.)

Edwards, William (Merioneth)

Johnson, Carol (Lewisham, S.)

Bagier, Gordon A. T.

Ellis, John

Johnson, James (K'ston-on-Hull, W.)

Barnes, Michael

Ensor, David

Jones, Dan (Burnley)

Baxter, William

Evans, Albert (Islington, S. W.)

Jones, Rt. Hn. Sir Elwyn (W. Ham. S.)

Bennett, James (G'gow, Bridgeton)

Evans, loan L, (Birm'h'm, Yardley)

Jones, J. Idwal (Wrexham)

Bidwell, Sydney

Faulds, Andrew

Kelley, Richard

Bishop, E. S.

Fernyhough, E.

Kenyon, Clifford

Blackburn, F.

Fletcher, Ted (Darlington)

Kerr, Mrs. Anne (R'ter & Chatham)

Blenkinsop, Arthur

Floud, Bernard

Lawson, George

Boardman, H.

Foley, Maurice

Leadbitter, Ted

Booth, Albert

Foot, Michael (Ebbw Vale)

Ledger, Ron

Boston, Terence

Forrester, John

Lee, John (Reading)

Braddock, Mrs. E. M.

Fowler, Gerry

Lestor, Miss Joan

Bray, Or. Jeremy

Fraser, John (Norwood)

Lewis, Arthur (W. Ham, N.)

Brooks, Edwin

Galpern, Sir Myer

Lewis, Ron (Carlisle)

Brown, Bob (N'c'tle-upon-Tyne, W.)

Gardner, Tony

Lomas, Kenneth

Buchan, Norman

Car-row, Alex

Loughlin, Charles

Buchanan, Richard (G'gow, Sp'burn)

Gourlay, Harry

Luard, Evan

Butler, Herbert (Hackney, C.)

Gray, Dr. Hugh (Yarmouth)

Lubbock, Eric

Butler, Mrs. Joyce (Wood Green)

Grey, Charles (Durham)

Lyon, Alexander W. (York)

Cant, R. B.

Griffiths, David (Rother Valley)

McBride, Neil

Carmichael, Neil

Hate, Leslie (Oldham, W.)

McCann, John

Coe, Denis

Hamilton, William (Fife, W.)

Mackenzie, Alasdair (Ross & Crom'ty)

Concannon, J. D.

Hamling, William

Mackenzie, Gregor (Rutherglen)

Conlan, Bernard

Hannan, William

Mackintosh, John P.

Corbet, Mrs. Freda

Harrison, Walter (Wakefield)

MacMillan, Malcolm (Western Isles)

Crossman, Rt. Hn. Richard

Haseldine, Norman

McMillan, Tom (Glasgow, C.)

Cullen, Mrs. Alice

Hazell, Bert

McNamara, J. Kevin

Dalyell, Tarn

Heffer, Eric S.

Mahon, Peter (Preston, S.)

Davidson, Arthur (Accrington)

Henig, Stanley

Manuel, Archie

Davies, Dr. Ernest (Stretford)

Hooley, Frank

Mapp, Charles

Davies, G. Eifed (Rhondda, E.)

Horner, John

Marquand, David

Davies Harold (Leek)

Howarth, Robert (Bolton, E.)

Marsh, Rt. Hn. Richard

Davies, Ifor (Gower)

Howie, W.

Mayhew, Christopher

Doig, Peter

Hoy, James

Mendelson, J. J.

1310

1311

Mikardo, Ian

Pentland, Norman

Spriggs, Leslie

Millan, Bruce

Perry, Ernest G. (Battersea, S.)

Steel, David (Roxburgh)

Miller, Dr. M. S.

Perry, George H. (Nottingham, S.)

Steele, Thomas (Dumbartonshire, W.)

Mitchell, R. C. (S'th'pton, Test)

Price, Christopher (Perry Barr)

Summerskill, Hn. Dr. Shirley

Molloy, William

Price, William (Rugby)

Thomas, George (Cardiff, W.)

Moonman, Eric

Randall, Harry

Varley, Eric G.

Morgan, Elystan (Cardiganshire)

Reynolds, G. W.

Wainwright, Edwin (Dearne Valley)

Morris, John (Aberavon)

Rhodes, Geoffrey

Walker, Harold (Doncaster)

Moyle, Roland

Richard, Ivor

Wellbeloved, James

Murray, Albert

Roberts, Albert (Normanton)

White, Mrs. Eirene

Norwood, Christopher

Robertson, John (Paisley)

Williams, Alan (Swansea, W.)

Oakes, Gordon

Robinson, W. 0. J. (Walth'stow, E.)

Williams, Clifford (Abertiltery)

O'Malley, Brian

Rodgers, William (Stockton)

Willis, George (Edinburgh, E.)

Orme Stanley

Rogers, George (Kensington, N.)

Wilson, William (Coventry, S.)

Oswald, Thomas

Rose, Paul

Winnick, David

Owen, Dr. David (Plymouth, S'tn)

Ross, Rt. Hn. William

Winstanley, Dr. M. P.

Owen, Will (Morpeth)

Ryan, John

Woodburn, Rt. Hn. A.

Page, Derek (King's Lynn)

Sheldon, Robert

Yates, Victor

Pardoe, John

Silkin, Rt. Hn. John (Deptford)

Park, Trevor

Silkin, Hn. S. C. (Dulwich)

TELLERS FOR THE NOES:

Parker, John (Dagenham)

Silverman, Julius (Aston)

Mr. William Whitlock and

Pearson, Arthur (Pontypridd)

Small, William

Mr. Alan Fitch.

NATIONAL COAL BOARD (ADDITIONAL POWERS) BILL
As amended (in the Standing Committee), considered.

New Clause No. 2.—(ACCOUNTS AND RECORDS.)
(1) The Board shall keep proper accounts and other records in relation thereto and shall prepare in respect of each financial year of the Board a statement of accounts in such form as the Minister may direct, being a form which shall conform to the best commercial standards and which shall distinguish each separate activity undertaken in pursuance of the powers of the Act and the provisions of section 31 of the Act of 1946 shall apply accordingly.
(2) The Board shall include in their accounts submitted to the Minister in accordance with the said section 31, a full statement of accounts in respect of any company owned by the Board in whole or in part to whom the Board have supplied or intend to supply gas or petroleum got in the exercise of the powers conferred by this Act and the Minister shall include such accounts, together with a copy of any report made by the Company's auditors amongst the statements and accounts laid before Parliament in accordance with subsection (4) of the said section 31.—[Mr. Corfield.]
Brought up, and read the First time.
Mr. Corfield: I beg to move, That the Clause be read a Second time.
The purpose of this new Clause is not dissimilar from that which we have been discussing. It is to ensure that even if Parliament is denied, by the obstinacy of the Government, any opportunity to review the amount of money borrowed for this new investment, Parliament and public should at least be able to judge fully the financial results of these investments in the report and accounts annually published by the Coal Board.
There is only one aspect of this new Clause to which I would particularly
1312
draw attention, and that is the intent that the accounts of subsidiaries which are closely tied up with this operation should also appear. I have already mentioned Staveley Chemicals, and it is quite clear that this is a company which could have very substantial advantages if it were supplied by the Coal Board on favourable terms with one of its essential feedstocks. For that reason, we feel that not only should the accounts of the operations of the Coal Board be available, and kept separately, but also the accounts of any subsidiary so affected by those operations. I am absolutely astonished that the hon. Member for Orpington (Mr. Lubbock) should regard a mere list of subsidiaries—[HON. MEMBERS: "Where is he?"]—as any indication of their financial results. However, I have no desire in any way to prolong our proceedings.
Sir G. Nabbarro: I support my hon. Friend the Member for Gloucestershire, South (Mr. Corfield). It was an intervention by the hon. Member for Orpington (Mr. Lubbock)—[HON. MEMBERS: "Where is he?"] Echo answers: "Where is he?"
Dr. M. P. Winstanley: He will be here shortly.
Sir G. Nabarro: I hope he shows up soon.
It was the intervention of the hon. Member for Orpington that prolonged our proceedings. The hon. Member, who has no knowledge whatever of accountancy, who is incapable of reading a commercial balance-sheet, who would not recognise a manufacturing return or a trading account in contrast to a drum of oil—
Mr. John Pardoe: On a point of order, Mr. Deputy Speaker. The House may welcome the hon. Gentleman's histrionics, but I fail to see what they have to do with the new Clause we have before us.
Mr. Deputy Speaker: Order. The hon. Member is perfectly in order in mentioning the hon. Member for Orpington (Mr. Lubbock) as long as he does not go into too much detail about the previous discussion.
Sir G. Nabarro: As the hon. Member for Cornwall, North (Mr. Pardoe) has only just arrived in the Chamber after a prolonged absence, and as I have been present throughout the debates on the Bill—and I am glad that the hon. Gentleman does not dissent from my remarks about his absence—I repeat that the hon. Member for Orpington intervened in the discussion on an earlier new Clause to give certain information. He said that the full accounts of non-coalmining activities were available for public scrutiny. He then drew attention to the Report and Accounts of the National Coal Board and referred, in Volume II, to the statistical tables on page 16. When I turn to pages 16 and 17 of that document I find that they do not contain audited accounts in the form called for in new Clause 2. The title on page 16 is:
"Interest in trading undertakings not wholly owned".
The hon. Member for Orpington does not know the difference between a minority interest on the one hand and an audited set of accounts on the other. His knowledge of these matters is both pathetic and abysmal.
Dr. Winstanley: The hon. Gentleman will be reminded, when he reads the report of the speech of my hon. Friend the Member for Orpington (Mr. Lubbock) in tomorrow's OFFICIAL REPORT, that the quotations the hon. Gentleman is making from my hon. Friend's speech are wholly inaccurate.
Sir G. Nabarro: Really.
Dr. Winstanley: I was here throughout my hon. Friend's speech, if that is what the hon. Gentleman means. My hon. Friend's reference to the page of the document to which the hon. Gentleman refers was made in answer to a question
1314
asked by one of the hon. Gentleman's colleagues and was not meant to be relevant to the accounts to which he is now referring.
Mr. Pardoe:rose—
Sir G. Nabarro: I was saying—
Mr. Pardoe: Give way.
Sir G. Nabarro: The hon. Member for Cornwall, North really is becoming obstreperous. I advise him to remain sedentary.
The purpose of the new Clause is exactly in consonance with best company practice. It is enshrined in the Companies Bill, which the Treasury introduced to Parliament only a few days ago. It requires that audited reports and accounts, not only of the parent company but of all subsidiary companies, shall be presented at least once a year.
This North Sea undertaking is in the position of a subsidiary to the N.C.B.s activities. It is utterly different from the remaining activities of the Board. The NG.B. is concerned with the deep mining of coal and, to a small extent, with opencast mining, with a few ancillary activities resulting from the fundamental purpose of the Board, which is the mining of coal.
What my hon. Friends and I want—and this is the purpose of the new Clause—is to be able to examine each year the trading accounts first, the manufacturing accounts secondly and the profit and loss accounts thirdly, with the auditors' certificate attached in respect of the questing and exploration for oil and natural gas beneath the North Sea by the N.C.B. And a very legitimate purpose that is. [Interruption.] I gather that the hon. Member for Central Ayrshire (Mr. Manuel) said, "You could not get your own Government to do it". But Tory Governments for 13 years were not stupid enough to undertake activities of this kind, activities which are wholly irrelevant to the main purpose and activity of the N.C.B., which is the mining of coal.
I hope that my hon. Friends will unanimously support this demand for good company practice in accountancy matters. [Interruption.] From that interruption, it is obvious that, among other hon. Gentlemen opposite, the hon.

1315
Member for Central Ayrshire did not listen to what I was saying. I will repeat it for his benefit.
Mr. Archie Manuel: Oh, no.
Sir G. Nabarro: This request is exactly in consonance with the best company practice, delineated in the Government's Companies Bill which was presented to Parliament a few days ago. Why is there to be one law, one company law, for a private enterprise company and another for a nationalised undertaking? We are concerned with company law; why is there to be a difference? The Parliamentary Secretary pulls a wry face at that sally—
11.15 p.m.
Sir Walter Bromley-Davenport: It is his usual expression.
Sir G. Nabarro: My hon. and gallant Friend the Member for Knutsford (Sir W. Bromley-Davenport) says it is his normal feature. Well, I am sorry for him. The fact is that I shall largely support the Companies Bill, brought forward today in this House—there are a few things wrong with it—but company practice should apply equally—the hon. Member for Orpington comes skulking in almost on his hands and knees, doubtlessly having been warned of the difficulties in the Liberal dug-out over this subject.
I was about to say that company law should apply equally to the nationalised boards, and I hope that we shall not have any nonsense from the Parliamentary Secretary when he comes to reply that, of course, the reports of the National Coal Board are produced before this House once a year. They are; we all know that they are, but what the Parliamentary Secretary will not tell us is that the reports and accounts for the subsidiaries will not be presented.
What is more, perhaps those fervent Socialists opposite, those untiring, strong supporters of the sacred cow of nationalisation, who will enlighten the House later in this debate, will also tell us when we last debated the report and accounts of the National Coal Board. Will they tell us when we last had a day on that subject? I can tell them. It was nearly five years ago. There are, normally, only
1316
three nationalisation days each year, and for five years—1 say to them, for five years—this sacred cow of nationalisation, with all the implications in it, has been hidden away from the public gaze. It was hidden away, were the report and accounts of the National Coal Board, so that nobody should scrutinise too closely the nefarious activities of that Board. [Interruption.] Yes, I say that they were hidden from the public gaze. So I hope that the Parlimentary Secretary will not get up and say to this House that there is an opportunity to debate the report and accounts of this sacred cow.
I call upon all my right hon. and hon. Friends to vote with me in the Lobby tonight in order to register the very strongest disapproval of the habits of Socialism.
Mr. Webster: I am encouraged to come into this debate because of the remarks of the Parliamentary Secretary in reply to the last Amendment. With my usual fervent desire to keep within the rules of order, I asked if it was in order to ask the Parliamentary Secretary about the accountability of the Minister to the House. You, Mr. Deputy Speaker, will recollect, because you were then in the Chair at the time, that the Parliamentary Secretary then said that the Minister carried out a greater scrutiny of the affairs of the Coal Board than could this House. If I am misrepresenting him, I shall withdraw. As he does not correct me, I understand this to be what he said.
One then asks when is the Minister accountable to the House. My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) said that the report and accounts of the Coal Board are presented to the House each year, but, as he said very appropriately, they are not debated every year. The Government do not give time for them to be debated. It is very essential when this extra money is given that they should be debated.
The hon. Member for Dearne Valley (Mr. Edwin Wainwright) almost gave notice that he would speak on the last Clause. We hope that he will give us his views on this. I value his opinion. I gathered from the happy smile he gave me that he was with us. As he nods his head, I take it as a sign of agreeable consent and that he will join us in this debate on this sound principle.
Mr. Edwin Wainwright: Is not the hon. Member aware that his Government for seven years did not debate the coal industry at all?
Sir G. Nabarro: I made them.
Mr. Wainwright: Why did not the hon. Member force it on them?
Mr. Webster: The hon. Member heard my hon. Friend the Member for Worcestershire, South say that he alone made them do it.
Sir G. Nabarro: Absolutely right.
Mr. Webster: I hope the hon. Member for Dearne Valley will support us and make them do it this year.
The Parliamentary Secretary raised the question that the Minister is more efficient than the House and said that he had a closer scrutiny than this House could ever have, It is for the House of Commons to say how scrutiny should be exercised. My hon. Friend has been talking about accountability of nationalised industries. There are 14 such industries within the ambit of the nationalised industries, and my hon. Friend is a member of the Select Committee on Nationalised Industries. Only one was examined every 14 years. As another member of the Select Committee on Nationalised Industries, I point out that the Committee is now diving and bifurcating itself. It has increased its membership and now looks into two of the industries each year, so it is not quite so difficult, but this still means than an industry is examined only once in seven years.
With these additional borrowing powers, financial powers and worries about Staveley Industries and American companies, it is more essential for the Select Committee to examine the industry. As expressed in this new Clause, the House should have the right to look at this matter, knowing that every hon. Member opposite is granting his constituents' money to keep alive this vast mass of subventions.
Another need regarding annual accounting is a principle of constitutional value which can be debated if it is looked at every year. The hon. Member for Ebbw Vale (Mr. Michael Foot) has enlivened the House on this subject in debates on the Army Act, the Air Force
1318
Act and in defence debates, which by rule come to the House every year. Why should the nationalised industries not be give the same scrutiny as the Armed Forces? We are not attacking the nationalised industries, but at least let them come under the same principle which we try to apply to other aspects of great expenditure.
Mr. Peyton: I accept without question that it is impossible to make a silk purse out of a sow's ear. Nevertheless, I had expected and hoped that, when so reasonable and modest a new Clause as this was put, either the Minister or the Parliamentary Secretary would leap up, if only to save time, and accept it. It is clear that what is right for private enterprise must surely be right for nationalised industries.
The right hon. Gentleman is satisfied that he has all the control he needs over the Board. It is something I absolutely deny, and I do not believe that he himself really thinks it. But if, as he claims, he has this sort of control, surely he would be willing to accept this reasonable new Clause, so modestly moved by my hon. Friend the Member for Gloucestershire, South (Mr. Corfield) and so reasonably supported by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), with his customary brevity and modesty and with the great cogency of argument that he was able to bring to bear. [Laughter.] The applause from hon. Members opposite is the brave sound we have become accustomed to and it is rather stimulating to me. It had been my intention only to make a few brief remarks, but I am bound to say that the stimulus revealed by the earnest attention, applause and reactions of hon. Members opposite is gratifying.
Sir John Eden: I am sure my hon. Friend will agree that the degree of interest shown by hon. Members opposite tonight is in marked contrast with the lethargy shown by those of them who serve on the Iron and Steel Bill Standing Committee, who sit silent in seried ranks like a row of winter cabbages in a flooded field. What a contrast with the "cheerful Charlies" opposite!
Mr. Peyton: It takes me a few moments to recover from that. But I think my hon. Friend the Member for

1319
Bournemouth, West (Sir J. Eden) is a little less than fair and kind to bring up such a horrid argument at this late hour and rub their noses in it. It is most ungenerous and uncharacteristic of him, because normally he is such a generous and kindly person. And when he goes on to compare them with wet cabbages floundering in a sea of mud—
Mr. Ridley: Red cabbages.
Mr. Peyton: I accept the amendment, but I will not trespass any more on your indulgence, Mr. Deputy Speaker, nor will I seek any more time. But how difficult it is made for me to be as modest and restrained as I wish to be! [interruption.] All I get are these cheers or jeers—I know not which, for it is very difficult to distinguish between the applause and disapprobation of hon. Members opposite.
Mr. Eric S. Heffer: This is like Sunday night at the Palladium.
Mr. Peyton: The hon. Member for Liverpool, Walton (Mr. Heffer) is highly distinguished for his sedentary interruptions. He enjoys the sound of his own voice and in that alone he is unique.
I have no intention of further trespassing on your indulgence, Mr. Deputy Speaker. I only crave leave to express my profound disappointment that neither the Minister nor the Parliamentary Secretary has had the common sense to accept this very reasonable new Clause.
11.30 p.m.
Sir J. Eden: This is an excellent new Clause which should certainly commend itself to the House. The fact that so many hon. Members opposite are still in the Chamber indicates their degree of sympathy with its objective.
As has been said, there is before Parliament, having reached its Second Reading stage in another place, the Companies Bill which requires that public quoted companies should give a much greater degree of information. By and large, this is a proposition which most hon. Members will support. But public quoted companies already have a safeguard provided by the shareholding interests which watch over their proceedings. Hon. Members opposite may from time to time discount the efficacy of the shareholders' activities, but that is probably because
1320
they are so used to trade union activities and the fact that trade unionists do not bother to turn up at their branch meetings, thus allowing their affairs to fall into the hands of those who are not particularly keen on the administration of democratic institutions.
But the activities of shareholders certainly ensure that the public interest is guarded with public quoted companies. What is more important, they do a great deal to ensure that those companies do no branch out into unprofitable activities, and I think that the test is profitability. When considering the performance of any commercial enterprise, public quoted company, or publicly owned company, or nationalised industry, or any company dependent upon the public support of shareholding interests, the test and standard by which its activities should be judged is the degree to which it is able to secure an adequate return on the capital invested in it.
Public quoted companies are subject to these safeguards and nationalised industries are not. They are not answerable to the normal disciplines of the market. I am concerned to ensure that in so far as nationalised industries are permitted to diversify into a wide range of activities—
Mr. Bernard Conlan Mr. Bernard Conlan (Gateshead, East) rose—
Sir J. Eden: I will not encourage the hon. Gentleman to intervene. I am sure that he will incur the wrath of his Front Bench if I permit him to do so. I have only a couple more sentences. If he wishes to make any comment, no doubt he will be able to catch the eye of the Chair.
Mr. Conlan Mr. Conlan rose—
Sir J. Eden: I will not give way. If the hon. Gentleman wishes to make a speech, he can rise to his feet when I have sat down.
The Bill will give a nationalised industry power to diversify into a number of other activities not even connected with the primary purpose for which the industry was nationalised in the first place.
My hon. Friends have already mentioned the subsidiary company, Staveley Chemicals, and the interests of the National Coal Board in bricks and distribution. All that I am concerned to

1321
see is that these varied and separate activities are properly accounted for. I am concerned to see that in each instance information is as readily available to Members of this House and the public as would information pertaining to publicly quoted companies be available, under the Companies Bill, to shareholders.
No one is asking anything more than that. The Parliamentary Secretary and his right hon. Friend have repeatedly, during discussions in Committee on the Iron and Steel Bill, advanced the proposition that the National Steel Corporation should be placed on an equal footing with private enterprise. This is the other side of the coin. We are asking, in this new Clause, that the Board shall disclose as much detailed information as is required to be disclosed by publicly quoted companies. This is the very least that hon. Members can expect in order to ensure that the industry is in some way answerable to some of the disciplines to which other commercial enterprises are subject.
We have a duty to ensure that the expenditure of public funds is properly managed, to see that where public money is involved, it is invested in a proper manner and shows a reasonable return. We cannot do that unless information is made available in published form. This is all that we are asking for in this New Clause, and I believe that the right hon. Gentleman must accept it.
Mr. Michael Shaw: My intervention in this interesting and important debate will be brief. There is an important principle involved here which has been well brought out by earlier speeches, in particular that of my hon. Friend the Member for Bournemouth, West (Sir J. Eden). I want to look at the same point that he raised from a different angle.
In our discussions in Committee on the Iron and Steel Bill we have seen the wide range of diversification that can take place in the nationalised industries, across the whole spectrum of industry. We have seen that it will be possible for nationalisation to take place either by means of the nationalised corporation entering directly into the industry through trading activities, for which it takes responsibility, or taking an active
1322
part, through a subsidiary company. As these interests widen, in so far as they are widened through the use of subsidiary companies, those companies would have to conform to the disciplines of the Companies Act, and produce the relevant information demanded by that Act.
If the diversification takes place as a result of the nationalised corporation carrying on the activity in question, then it will not be subject to the disciplines of the Companies Act and the presentation of information required under that Act. It will then have to present information in accordance with the appropriate nationalisation Act. There are two different methods which can be adopted by the nationalised industries, and it is wrong that there should be this option to use either a subsidiary company method, in which case the information is automatically given, or to deal directly through either the Coal Board or the National Steel Corporation, so escaping the disciplines of having to produce accounts and the information required by the Companies Act. The information required should be the same in all cases and should be not less than the information that is required of every other public company.
For these reasons the new Clause, which has been put forward so briefly and modestly by my hon. Friend the Member for Gloucestershire, South (Mr. Corfield) and supported so pertinently by my other hon. Friends, is worthy of our support, which should be carried through to the Division Lobby.
Mr. Ridley: My hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw), an accountant, always puts these matters with the greatest of clarity. His explanation of the need for comparable accounts could not be faulted. I was, however, interested in the tactics which the Minister is employing and which he is practising, presumably, for the many late nights that he will sit up arguing his hopeless case on this issue.
On one occasion in Committee on the Iron and Steel Bill, the Minister referred to his hon. Friends and said that he had never seen a salmon played as well as they were playing. Tonight, however, all that he has done is to ask all the salmon to get out of the river. My hon.

1323
Friend the Member for Bournemouth, West (Sir J. Eden) has referred to them as a lot of red cabbages sitting in a flooded field, but I think that the fishy analogy is better. Tonight, we have seen the Minister ask them to leave the Chamber for fear that they might have the temerity to speak and blunder into the argument again.
It is extraordinary that either the Minister or the Parliamentary Secretary has not sprung to his feet to accept the new Clause. It is identical in purpose, if not in words, with a new Clause which was accepted with alacrity in the Iron and Steel Bill Committee. Where the Steel Corporation is to diversify into other activities, the Parliamentary Secretary was quick to accept the principle that separate accounts should be published giving a clear indication of what was capital and what was a contribution to management, to common services and the like. The hon. Gentleman said that he wished to alter the drafting. We would have no objection to his altering the drafting of this new Clause as long as the principle was met. How could it be that he accepts the principle for one nationalised industry but not for another?
A further difficulty is that the Minister has no chance to redraft the new Clause because this is the last stage of the Bill in this House. He might be able to get it redrafted in another place, but I am surprised that the Parliamentary Secretary has not put down his own new Clause to meet the point which my hon. Friends have made. Such an oversight is extraordinary.
The only justification of accountability which we have had from the Government in this whole debate is twofold: first, that the Minister vets all capital programmes, and second, that the Minister is accountable to Parliament. I want to take a minute or two to examine those two propositions. The first is that the Minister will vet each item of capital expenditure of the nationalised industries.
He has under him three major industries, and soon he will have a fourth. In the aggregate, they must spend something like £600 or £700 million a year in capital investment. Each thousand pounds in a private business is checked and vetted by the directors. They ask
1324
themselves from where they are to get this money, where are they to earn the dividend on it, what rate of interest will they have to pay to borrow it, is it economic, are there better ways of doing it, and is it a proper investment to make with the ultimate commercial objective in mind?
How will the Minister or his civil servants go through hundreds of millions of pounds of capital expenditure with those sorts of considerations in mind? How can he know whether the proposed investment is profitable, and how can his civil servants tell him? They do not know the factors involved, they do not know what are the chances of a profitable investment in the North Sea, and they will not have the facts, the technical knowledge, the time or the expertise at their disposal. Yet the right hon. Gentleman comes to the House and says, "We will check it at every step, and this will amount to Parliamentary accountability."
He comes along to the House and says, "Because I am the Minister of Power, I can be questioned in the House, and that gives the House all the say and control that it should have in supervising the conduct of this investment." What a proposition! He knows that debates on nationalised industries are few and far between, and he knows that he need not answer any question which is put to him. Indeed, it is a habit which he has brought to a fine art in the Committee considering the Iron and Steel Bill, where he does not answer any question which is put to him. He knows very well that, if there is an awkward question, it can be swept under the mat and need never be answered in Parliament. He knows, too, that the Comptroller and Auditor-General has no power to investigate these matters in detail. There is no ombudsman for the nationalised industries, and there is no conceivable weapon by which the right hon. Gentleman can be smoked out if he spreads his tentacles too far into the fabric of a nationalised industry.
11.45 p.m.
The two defences that the Minister will vet capital expenditure and will be accountable to Parliament do not stand up to one minute's investigation. Hon. Gentlemen opposite have not the slightest

1325
doubt about the truth of my arguments. Not one of them looks as if he wishes to intervene and contradict what I have said. Each of them in his heart of hearts knows it to be true.
I suggest that the Clause has to be accepted. It does not go far enough for me, but at least it acknowledges the principle of Parliamentary control and the principle that proper accounts should be made. There are many reasons and details concerning this with which I will not weary the House. Suffice it to say that, if the Minister is not prepared to meet this side of the House on the point, he will find himself faced with a running opposition on the whole of his activities. We believe that it is necessary for him to look not just to the glory of the moment but to the future, when we shall have to make this vast extension in the sphere of public enterprise and be guardians of the taxpayers' money.
I am certain that he will do himself a great disservice if he does not acknowledge the principle which my hon. Friends have put forward so eloquently and accept the new Clause.
Dr. Bray: The activities which the National Coal Board will be empowered to undertake by the Bill will be regarded as main ancillary activities which the main National Coal Board Acts enable the Minister to require to be accounted for separately in the Annual Reports of the National Coal Board. The Clause refers to each separate activity, though it does not define this in any way. What I can give an undertaking on—and I repeat what I said in Committee—is that the costs incurred by the Board in the North Sea exploration will be given in the Board's accounts. My right hon. Friend's powers are wholly adequate to secure the publication of accounts in whatever form he may consider to be most illuminating and helpful. My right hon. Friend is constantly in discussion with the Board, and he is continuing discussions with it on the form in which the accounts should be published.
The interests of the Board in companies which it does not wholly own are listed. The accounts of these companies are published, and it is open to any member of the public who may be interested in any company to look at its accounts. What hon. Gentlemen opposite are asking is
1326
that someone should do the homework and should collate these accounts for them. This is an arguable point of view, and it is something which—
Mr. Corfield: I do not know whether the hon. Gentleman has tried to go down to Company House to get hold of the accounts of a company. I do not know whether he knows how long it takes to get things sorted out, and then to get a copy and study it. There are limits to the time available to hon. Members.
Dr. Bray: The hon. Gentleman referred in particular to one company which has been harped on over and over again in this debate. The facts about the company may not be generally known. The company about which the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) is concerned is engaged, or is likely to be engaged, in the manufacture of p.v.c. This is a product in respect of which this country had a major deficit in the balance of payments. By going into this field the Board will fill a serious gap in chemical industry manufacture in this country. What hon. Gentlemen opposite are fearful of is competition in a highly protected field in which the Board is undertaking a major investment which will be of the greatest benefit to the nation.
Hon. Gentlemen have been particularly concerned about the question of cross-subsidisation. This again has not been brought out in the debate. They seek to put the Board at a competitive disadvantage in relation to other North Sea operators.
Mr. Corfield: Surely the Clause is confined to accounts? I did not mention any company. I merely asked the hon. Gentleman to bear in mind the difficulty of collecting these matters, and the convenience of the House and the public. The purpose of the Clause is to have them put together. It has nothing to do with p.v.c., or anything else.
Dr. Bray: We can check in the OFFICIAL REPORT tomorrow whether the hon. Gentleman mentioned the name of this company in connection with the Clause.
Sir G. Nabarro: I did not mention it.
Dr. Bray: In the circumstances, the full disclosure of the money invested and the return received by the Board from

1327
this activity will be published. To ask for more, to ask for information which would enable particular commercial costs to be identified, information which is not, I repeat not, required under the Companies Acts, would put the Board and any company with which it collaborated—
Sir G. Nabarro: The hon. Gentleman has promised that he will lay the costs before the House. That is not what my hon. Friends and I have been pleading for. We want a statement of accounts in accordance with the words in the Clause. It is nothing to do with Staveley. The words are:
"intend to supply gas or petroleum".
That has nothing to do with Staveley. We want accounts.
Dr. Bray: Other hon. Members talked about costs, and I was endeavouring to reply to them. I assure the House that the total costs incurred by the Board will be published in full in the reports. I therefore repeat of this new Clause, as I did of the last, that its intention is already achieved, and that the powers of my right hon. Friend are more than adequate to secure that already. I therefore advise my hon. Friends to vote against the new Clause.
Question put, The Clause be read a Second time:—
The House divided: Ayes 97, Noes 165.

Division No. 206.]

AYES

[11.56 p.m.

Atkins, Humphrey (M't'n & M'd'n)

Gilmour, Ian (Norfolk, C.)

More, Jasper

Awdry, Daniel

Gilmour, Sir John (Fife, E.)

Mott-Radclyffe, Sir Charles

Balniel, Lord

Glyn, Sir Richard

Nabarro, Sir Gerald

Batsford, Brian

Grant, Anthony

Noble, Rt. Hn. Michael

Biffen, John

Grant-Ferris, R.

Onslow, Cranley

Biggs-Davison, John

Gresham Cooke, R.

Osborn, John (Hallam)

Boyd-Carpenter, Rt. Hn. John

Griffiths, Eldon (Bury St. Edmunds)

Page, Graham (Crosby)

Boyle, Rt. Hn. Sir Edward

Gurden, Harold

Peel, John

Brewis, John

Hall-Davis, A. G. F.

Peyton, John

Bromley-Davenport, Lt. Col. Sir Walter

Hamilton, Marquess of (Fermanagh)

Pink, R. Bonner

Brown, Sir Edward (Bath)

Hamilton, Michael (Salisbury)

Price, David (Eastleigh)

Bryan, Paul

Hawkins, Paul

Prior, J. M. L.

Buchanan-Smith, Alick (Angus, N&M)

Hiley, Joseph

Ramsden, Rt. Hn. James

Buck, Antony (Colchester)

Hill, J, E B.

Renton, Rt. Hn. Sir David

Campbell, Cordon

Holland, Philip

Ridley, Hn. Nicholas

Chichester-Clark, R.

Hordern, Peter

Russell, Sir Ronald

Clark, Henry

Jenkin, Patrick (Woodford)

Sharples, Richard

Clegg, Walter

Kimball, Marcus

Shaw, Michael (Sc'b'gh & Whitby)

Cooke, Robert

King, Evelyn (Dorset, S.)

Sinclair, Sir George

Corfield, F. V.

Kirk, Peter

Stodart, Anthony

Costain, A. P.

Kitson, Timothy

Turton, Rt. Hn. R. H.

Crawley, Aidan

Knight, Mrs. Jill

vaughan-Morgan, Rt. Hn. Sir John

Currie, G. B. H.

Langford-Holt, Sir John

Wall, Patrick

Dalkeith, Earl of

Legge-Bourke, Sir Harry

Walters, Dennis

Dean, Paul (Somerset, N.)

Loveys, W. H.

Webster, David

Deedes, Rt. Hn. W. F. (Ashford)

Maddan, Martin

Whitelaw, William

Eden, Sir John

Maginnis, John E.

Wolrige-Gordon, Patrick

Elliot, Capt. Walter (Carshalton)

Marten, Neil

Wylie, N. R.

Elliott, R. W. (N'c'tle-upon-Tyne, N.)

Maude, Angus

Younger, Hn. George

Eyre, Reginald

Mawby, Ray

Farr, John

Maxwell-Hyslop, R. J.

TELLERS FOR THE AYES:

Fisher, Nigel

Maydon, Lt.-Cmdr. S. L. C.

Mr. Francis Pym and

Fortescue, Tim

Mitchell, David (Basingstoke)

Mr. Peter Blaker.

Foster, Sir John

Monro, Hector

NOES

Alraun, Frank (Salford, E.)

Boston, Terence

Davidson, Arthur (Accrington)

Alldritt, Walter

Braddock, Mrs. E. M.

Davies, Dr. Ernest (Stretford)

Allen, Scholefield

Bray, Dr. Jeremy

Davies, G. Elfed (Rhondda, E.)

Archer, Peter

Brooks, Edwin

Davies, Harold (Leek)

Armstrong, Ernest

Brown, Bob (N'c'tle-upon-Tyne, W)

Doig, Peter

Atkins, Ronald (Preston, N.)

Buchan, Norman

Durnett, Jack

Bagier, Gordon A. T.

Buchanan, Richard (G'gow, Sp'burn)

Dunwoody, Mrs. Gwyneth (Exeter)

Barnes, Michael

Butler, Herbert (Hackney, c.)

Dunwoody, Dr. John (F'th & C'b'e)

Baxter, William

Cant, R. B.

Eadie, Alex

Bennett, James (G'gow, Bridgeton)

Carmichael, Neil

Edelman, Maurice

Bidwell, Sydney

Coe, Denis

Edwards, William (Merioneth)

Bishop, E. S.

Concannon, J. D.

Ellis, John

Blackburn, F.

Conlan, Bernard

Ensor, David

Blenkinsop, Arthur

Crossman, Rt. Hn. Richard

Evans, loan L. (Birm'h'm, Yardley)

Boardman, H.

Cullen, Mrs. Alice

Faulds, Andrew

Booth, Albert

Dalyell, Tarn

Fernyhough, E.

Fletcher, Ted (Darlington)

Ledger, Ron

Perry, Ernest C. (Battersea, S.)

Floud, Bernard

Lee, John (Reading)

Perry, George H. (Nottingham, S.)

Foley, Maurice

Lestor, Miss Joan

Price, Christopher (Perry Barr)

Foot, Michael (Ebby Vale)

Lewis, Ron (Carlisle)

Price, William (Rugby)

Forrester, John

Lomas, Kennern

Randall, Harry

Fowler, Gerry

Loughlin, Charles

Reynolds, G. W.

Fraser, John (Norwood)

Luard, Evan

Rhodes, Geoffrey

Galpern, Sir Myer

Lubbock, Eric

Roberts, Albert (Normanton)

Gardner, Tony

McBride, Neil

Robertson, John (Paisley)

Garrow, Alex

McCann, John

Robinson, W. O. J. (Walth'stow, E.)

Gray, Dr. Hugh (Yarmouth)

Mackenzie, Alasdair (Ross & Crom'ty)

Rodgers, William (Stockton)

Grey, Charles (Durham)

Mackenzie, Gregor (Rutherglen)

Rose, Paul

Hale, Leslie (Oldham, W.)

Mackintosh, John P.

Ross, Rt. Hn. William

Hamilton, William (Fife, W.)

McMillan, Tom (Glasgow, C.)

Ryan, John

Hamling, William

McNamara, J. Kevin

Sheldon, Robert

Hannan, William

Mahon, Peter (Preston, S.)

Silkin, Rt. Hn. John (Deptford)

Harrison, Walter (Wakefield)

Manuel, Archie

Silkin, Hn. S. C. (Dulwich)

Haseldine, Norman

Mapp, Charles

Silverman, Julius (Aston)

Hazell, Bert

Marquand, David

Small, William

Heffer, Eric S.

Marsh, Rt. Hn. Richard

Steel, David (Roxburgh)

Henig, Stanley

Mayhew, Christopher

Summerskill, Hn. Dr. Shirley

Hooley, Frank

Millan, Bruce

Thomas, George (Cardiff, W.)

Horner, John

Miller, Dr. M. S.

Varley, Eric G.

Howarth, Robert (Bolton, E.)

Mitchell, R. C. (S'th'pton, Test)

Wainwright, Edwin (Dearne Valley)

Howie, W.

Molloy, William

Walden, Brian (All Saints)

Hoy, James

Moonman, Eric

Walker, Harold (Doncaster)

Hughes, Emrye (Ayrshire, S.)

Morgan, Elystan (Cardiganshire)

Well beloved, James

Hughes, Roy (Newport)

Moyle, Roland

White, Mrs. Eirene

Hunter, Adam

Murray, Albert

Whitlock, William

Jackson, Peter M. (High Peak)

Norwood, Christopher

Williams, Alan (Swansea, W.)

Jeger, Mrs. Lena (H'b'n&St. P' cras, S.)

Oakes, Gordon

Williams, Clifford (Abertillery)

Johnson, Carol (Lewisham, S.)

O'Malley, Brian

Willis, George (Edinburgh, E.)

Johnson, James (K'ston-on-Hull, W.)

Orme, Stanley

Wilson, William (Coventry, S.)

Jones, Dan (Burnley)

Owen, Dr. David (Plymouth, S'tn)

Winnick, David

Jones, J. Idwal (Wrexham)

Owen, Will (Morpeth)

Winstanley, Dr. M. P.

Kelley, Richard

Page, Derek (King's Lynn)

Woodburn, Rt. Hn. A.

Kenyon, Clifford

Pardoe, John

Yates, Victor

Kerr, Mrs. Anne (R'ter & Chatham)

Park, Trevor

Lawson, George

Pavitt, Laurence

TELLERS FOR THE NOES:

Leadbitter, Ted

Pentland, Norman

Mr. Harry Gourlay and

Mr. Alan Fitch.

Clause 1.—(ADDITIONAL POWERS FOR NATIONAL COAL BOARD.)
Mr. Patrick Jenkin: I beg to move Amendment No. 2, in page 2, line 35, at the end to insert:
(4) For the avoidance of doubt it is hereby declared that the powers conferred on the Board by section 1(2) of the Act of 1946 shall not extend to any of the Board's operations carried out in the exercise of powers conferred by this Act.
This is a probing Amendment, and I will move it as briefly as possible. The point should be clarified, because the Minister made a number of contradictory statements on Second Reading. On 21st November, the right hon. Gentleman indicated that it was not his intention to give the Coal Board the power under the Bill to engage in wider activities concerned with petroleum refining and distribution and petro-chemical manufacturing. He went on to say that if it was thought appropriate later to confer these powers on the Board he would bring in legislation.
My hon. and right hon. Friends were not satisfied with this explanation and returned to the point at the end of the debate. My hon. Friend the Member for
1330
Bournemouth, West (Sir J. Eden) was dealing with it when the Minister intervened and said:
"The position is that the Coal Board would be in exactly the same position as anybody else in this field. It will be able to use the natural gas for its own purposes. If it wants to use it outside its own purposes—and 'outside' would include associated companies as distinct from the Board or its immediate environs—then it will have to get the permission of the Minister. There will be no further legislation. That is exactly the same position as everybody else is in."—[OFFICIAL REPORT, 1st November. 1966; Vol. 735, c. 368.]
So in one speech he said there is to be further legislation and in his next speech—in an intervention—he said there was to be no further legislation.
The position under Section 9 of the Continental Shelf Act, 1964, is that the Minister has to give consent to the use of the gas—his consent is mandatory—if the gas is to be used for industrial purposes, which broadly means that the gas will be used as petroleum or chemical feedstock. The Act of 1964 cannot possibly confer powers on the Coal Board which are not conferred either by the 1946 Act, the original Act setting up the Coal Board, or by this Bill.

1331
The Minister is obviously having difficulty in hearing my argument because of conversation in the Chamber.
Hon. Members: Order.
Mr. Jenkin: The powers of the Coal Board cannot possibly be increased by Section 9 of the 1964 Act, but the words that appear in the 1946 Act, and in particular in Section l (2)(d)—and I will not read the whole Section—do refer towards the end of the paragraph to
"or any other of their activities"
and the suggestion has been made that by giving the Coal Board powers under this Bill to engage in the exploration for and selling of natural gas it constitutes that as one of the Coal Board's activities and that therefore taking the 1946 Act in conjunction with the Continental Shelf Act and with this Bill, it does in fact give the Coal Board power to go into petro-chemical refining and all the other forms of manufacture.
The Minister did say it was not his intention that this should be done, and the purpose of this probing Amendment is to make it absolutely clear that this is the position and that further legislation would be required if the Coal Board were to be given these powers.
The Minister of Power (Mr. Richard Marsh): This is a complicated point, but I do not think that it will detain the House very long. The assurance for which the hon. Gentleman asks is contained in the speech I made on Second Reading. He then raises the point about Section 1(2) of the Coal Industry Nationalisation Act, 1946. I think the hon. Gentleman's main problem is whether there are any powers here which would enable the Coal Board to go
further than crude oil. It would not. There is no doubt that the powers conferred by Section 1(2) of the 1946 Act will not extend to the activities the National Coal Board is empowered to take under this Bill.
Section 1(2) starts by providing that
"The functions of the National Coal Board… shall include the carrying on of all such activities as it may appear to the Board to be requisite, advantageous or convenient for them to carry on for or in connection with the discharge of their duties under the preceding subsection."
These duties all relate to coal. In short, they are the working of coal, the development of the coalmining industry, the making available and supply of coal. In the light of that, it is obvious that these provisions cannot include activities which the Board is empowered to carry on under the Bill which are not concerned with coal.
The short answer to the point put by the hon. Gentleman, therefore, is that there is no cause for his fear in this connection. I appreciate the misunderstandings that have occurred, but in view of my assurance that the point is covered and the Amendment is not necessary, I hope that he will be able to withdraw his Amendment.
Mr. Patrick Jenkin: I am grateful to the Minister for his assurance which I am sure will give comfort to the industries affected. In view of the right hon. Gentleman's assurance, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Motion made, and Question put, That the Bill be now read the Third time:
—
The House divided: Ayes 161, Noes 93.

Division No. 207.]

AYES

[12.12 a.m.

Allaun, Frank (Salford, E.)

Brooks, Edwin

Dunwoody, Dr. John (F'th & C'b's)

Allen, Scholefield

Brown, Bob (N'c'tle-upon-Tyne, W)

Eadie, Alex

Alldritt, Walter

Buchan, Norman

Edelman, Maurice

Archer, Peter

Buchanan, Richard (G'gow, Sp'burn)

Edwards, William (Merioneth)

Armstrong, Ernest

Cant, R. B.

Ellis, John

Atkins, Ronald (Preston, N.)

Carmichael, Neil

Ensor, David

Bagier, Cordon A. T.

Coe, Denis

Evans, loan L. (Birm'h'm, Yardley)

Barnes, Michael

Concannon, J. D.

Faulds, Andrew

Baxter, William

Conlan, Bernard

Fernyhough, E.

Bennett, James (G'gow, Bridgeton)

Crossman, Rt. Hn. Richard

Fletcher, Ted (Darlington)

Bidwell, Sydney

Cullen, Mrs. Alice

Floud, Bernard

Bishop, E. S.

Dalyell, Tam

Foley, Maurice

Blackburn, F.

Davidson, Arthur (Accrington)

Foot, Michael (Ebbw Vale)

Blenkinsop, Arthur

Davies, Dr. Ernest (Stretford)

Forrester, John

Boardman, H.

Davies, G. Elfed (Rhondda, E.)

Fowler, Gerry

Booth, Albert

Davies, Harold (Leek)

Fraser, John (Norwood)

Boston, Terence

Doig, Peter

Galpern, Sir Myer

Braddock, Mrs. E. M.

Dunnett, Jack

Gardner, Tony

Bray, Dr. Jeremy

Dunwoody, Mrs. Gwyneth (Exeter)

Garrow, Alex

Gray, Dr. Hugh (Yarmouth)

McBride, Neil

Reynolds, G. W.

Grey, Charles (Durham)

McCann, John

Rhode", Geoffrey

Hale, Leslie (Oldham, W.)

Mackenzie, Alasdair (Ross&Crom'ty)

Robert", Albert (Normanton)

Hamilton, William (Fife, W.)

Mackenzie, Gregor (Rutherglen)

Robertson, John (Paisley)

Hamling, William

Mackintosh, John P.

Robinson, W. O. J. (Walth'stow, E.)

Hannan, William

McMillan, Tom (Glasgow, C.)

Rodgers, William (Stockton)

Haseldine, Norman

McNamara, J. Kevin

Rose, Paul

Hazell, Bert

Mahon, Peter (Preston, S.)

Ross, Rt. Hn. William

Heffer, Eric S.

Manuel, Archie

Ryan, John

Henig, Stanley

Mapp, Charles

Sheldon, Robert

Hooley, Frank

Marquand, David

Silkin, Rt. Hn. John (Deptford)

Horner, John

Marsh, Rt. Hn. Richard

Silkin, Hn. S. C. (Dulwich)

Howarth, Robert (Bolton, E.)

Mayhew, Christopher

Silverman, Julius (Aston)

Howie, W.

Millan, Bruce

Small, William

Hoy, James

Miller, Dr. M. S.

Steel, David (Roxburgh)

Hughes, Emrys (Ayrshire, S.)

Mitchell, R. C. (S'thpton, Test)

Summer-skill, Hn. Dr. Shirley

Hughes, Roy (Newport)

Molloy, William

Thomas, George (Cardiff, W.)

Hunter, Adam

Morgan, Elystan (Cardiganshire)

Varley Eric G.

Jackson, Peter M. (High Peak)

Moyle, Roland

Wainwright, Edwin (Dearne Valley)

Jeger, Mrs. Lena (H'b'n&St.P'cras, S.)

Murray, Albert

Walden, Brian (All Saints)

Johnson, Carol (Lewisham, S.)

Norwood, Christopher

Walker, Harold (Doncaster)

Johnson, James (K'ston-on-Hull, W.)

Oakes, Gordon

Wellbeloved, James

Jones, J. Idwal (Wrexham)

O'Malley, Brian

White, Mrs. Eirene

Kelley, Richard

Orme, Stanley

Whitlock, William

Kenyon, Clifford

Owen, Dr. David (Plymouth, S'tn)

Williams, Alan (Swansea, W.)

Kerr, Mrs. Anne (R'ter & Chatham)

Owen, Will (Morpeth)

Williams, Clifford (Abertillery)

Lawson, George

Page, Derek (King's Lynn)

Willis, George (Edinburgh, E.)

Leadbitter, Ted

Pardoe, John

Wilson, William (Coventry, S.)

Ledger, Ron

Park, Trevor

Winnick, David

Lee, John (Reading)

Pavitt, Laurence

Winstanley, Dr. M. P.

Lestor, Miss Joan

Pentland, Norman

Woodburn, Rt. Hn. A.

Lewis, Ron (Carlisle)

Perry, Ernest G. (Battersea, S.)

Yates, Victor

Lomas, Kenneth

Perry, George H. (Nottingham, S.)

Loughlin, Charles

Price, Christopher (Perry Barr)

TELLERS FOR THE AYES:

Luard, Evan

Price, William (Rugby)

Mr. Alan Fitch and

Lubbock, Eric

Randall, Harry

Mr. Harry Gourlay.

NOES

Astor, John

Foster, Sir John

Mitchell, David (Basingstoke)

Awdry, Daniel

Gilmour, Ian (Norfolk, C.)

Monro, Hector

Batsford, Brian

Gilmour, Sir John (Fife E.)

More, Jasper

Biffen, John

Glyn, Sir Richard

Nabarro, Sir Gerald

Biggs-Davison, John

Grant, Anthony

Noble, Rt. Hn. Michael

Blaker, Peter

Grant-Ferris, R.

Onslow, Cranley

Boyd-Carpenter, Rt. Hn. John

Gresham Cooke, R.

Osborn, John (Hallam)

Boyle, Rt. Hn. Sir Edward

Griffiths, Eldon (Bury St. Edmunds)

Page, Graham (Crosby)

Brewis, John

Gurden, Harold

Peel, John

Bromley- Davenport, Lt. -Col. Sir Walter

Hall-Davis, A. G. F.

Peyton, John

Brown, Sir Edward (Bath)

Hamilton, Marquess of (Fermanagh)

Pink, B. Bonner

Bryan, Paul

Hamilton, Michael (Salisbury)

Price, David (Eastleigh)

Buchanan-Smith, Alick (Angus, N&M)

Hawkins, Paul

Prior, J. M. L.

Buck, Antony (Colchester)

Hiley, Joseph

Ramsden, Rt. Hn. James

Campbell, Gordon

Hill, J. E. B.

Renton, Rt. Hn. Sir David

Chichester-Clark, R.

Holland, Philip

Ridley, Hn. Nicholas

Clark, Henry

Hordern, Peter

Russell, Sir Ronald

Clegg, Walter

Jenkin, Patrick (Woodford)

Sharples, Richard

Cooke, Robert

Kimball, Marcus

Shaw, Michael (Sc'b'gh & Whitby)

Corfield, F. V.

King, Evelyn (Dorset, S.)

Sinclair, Sir George

Costain, A. P.

Kirk, Peter

Stodart, Anthony

Crawley, Aidan

Kitson, Timothy

Turton, Rt. Hn. R. H.

Currie, G. B. H.

Knight, Mrs. Jill

Wall, Patrick

Dalkeith, Earl of

Legge-Bourke, Sir Harry

Walters, Dennis

Dean, Paul (Somerset, N.)

Loveys, W. H.

Webster, David

Deedes, Rt. Hn. W. F. (Ashford)

Maddan, Martin

whitelaw, William

Eden, Sir John

Maginnis, John E.

Wolrige-Gordon, Patrick

Elliot, Capt, Walter (Carshalton)

Marten, Nell

Wylie, N. R.

Elliott, R. W.(N'c'tle-upon-Tyne, N.)

Maude, Angus

Younger, Hn. George

Farr, John

Mawby, Ray

Fisher, Nigel

Maxwell-Hyslop, R. J.

TELLERS FOR THE NOES:

Fortescue, Tim

Maydon, Lt.-Cmdr. S. L. C.

Mr. Francis Pym and

Mr. Reginald Eyre.

Bill accordingly read the Third time and passed.

NATIONAL HEALTH SERVICE (SUPERANNUATION REGU-LATIONS)
12.20 a.m.
The Minister of Health (Mr. Kenneth Robinson): I beg to move,
That the National Health Service (Superannuation) (Amendment) Regulations, 1966, a draft of which was laid before this House on 8th November, be approved.
I think it might also be convenient for the House if we discussed at the same time the similar Regulations for Scotland.
Mr. Deputy Speaker: Yes, that would be convenient.
Mr. Robinson: Thank you, Mr. Deputy Speaker. The Regulations covering Scotland are almost identical, and the Joint Parliamentary Under-Secretary of State is here in case there is any specific point raised, although I find it difficult to anticipate any specific section of the Regulations upon which points could be raised.
The superannuation scheme for some 400,000 persons engaged in the National Health Service is currently provided in the National Health Service (Superannuation) Regulations, 1961. These Regulations make further changes and, at the same time, revoke the 1962 amending Regulations. These new Regulations are both, I am afraid, lengthy and complex; but that is unavoidable. They make five major changes, as well as a number of minor technical amendments and changes, to what is already a complex scheme covering so many people in many different categories. The main changes are set out in the Explanatory Note on page 42, and the first major change to which I should draw attention concerns the method of calculating the superannuation benefits payable to doctors and dentists retiring from general practice.
Since these practitioners are paid by fees, and not by salary, their income tends to fluctuate, and it has always been recognised that the normal method of relating benefits to earnings in the last years of service is not suitable for them. Instead, benefits for these practitioners have been assessed as a flat-rate percentage of career earnings; that is, one and a half per cent. of total superannuate re-
1336
muneration up to 31st August, 1962, and 1¾ per cent. since that date.
For some time, the professions have represented that practitioners' pensions calculated on this basis are too low compared with those of salaried officers, whose pensions are related to earnings in their last three years of service. Last year, in their charter for the family doctor, the British Medical Association stated that:
"the implementation of our new pay proposals will necessitate a complete revision of the family doctors' superannuation scheme and the elimination of the defects of the present scheme."
At the same time, for benefits based on short service, the present flat rate of one and three quarters per cent. has proved to be too generous.
We have been able to meet the professions' representations, in a new formula by which there will be an ascelating series of percentages applied to earnings in successive periods. This new formula, which is set out in Regulation 8, provides for pensions of doctors and dentists in general practice to be based on one and a half per cent. earnings during the first ten years, one and three quarters per cent. during the second ten years, and so on up to two and a half per cent. for all years after the fortieth.
This formula represents a radical change in the method of calculating practitioners' benefits and is the outcome of long discussions with the professions. We think that it is a significant improvement, and the professions accept that it is fair and reasonable. It is not unfair to say that we have succeeded where the previous administration failed, because these discussions date from long before the change of Government.
Regulations 4 to 12 apply the same formula to the calculation of other superannuation benefits, including lump sum retiring allowances and death gratuities, and make some consequential amendments. Transitional provisions in Regulation 59 ensure that existing practitioners will have their benefits calculated on the old—that is the present—basis, if that is more favourable.
The second major change concerns the method of assessing benefits of specialists employed in hospitals on a part-time basis. Although salaried their benefits

1337
have been calculated on the same percentage basis as general practitioners, but the new escalating formula would give the wrong result if applied to them because of their different career earnings pattern. Provision is accordingly being made in Regulations 13 to 20 for the benefits of part-time specialists and other superannuable part-time staff, to be related to their average rate of earnings in their last three years of service, which is, of course, the normal basis for assessing benefits for salaried doctors. To achieve this, future part-time employment will be counted as a proportionately reduced period of whole-time service and the rate of earnings used for calculating benefits will be that appropriate to whole-time employment.
There are also associated changes, one of which makes superannuable those very few part-time hospital doctors and dentists who are not so already. The transitional provisions provide that benefits of existing part-time specialists will be calculated on the old basis if that is more beneficial to them.
Regulation 21 provides an optional improvement in the widow's pensions provisions. At present a widow receives one-third of the husband's rate of pension, and to meet the cost the husband's lump sum retiring allowance is reduced by two-thirds. A married male officer retiring in future will be able, if he wishes, to surrender the remaining one-third of his lump sum retiring allowance to provide a pension for his widow of one-half of his own pension. Similarly, the widow of an officer dying in service will in future be able to receive a half-rate instead of a one-third rate pension by surrendering the balance of the death gratuity that would otherwise be payable. These provisions are optional and the present arrangements are being continued for those who prefer them.
At the same time we are abolishing by Regulation 22 a restriction which has been in the scheme for a long time whereby a widow who was entitled under the scheme to a benefit in her own right could not also receive a widow's pension in respect of her husband's service. In future she will be able to do so.
Regulation 23 and Schedule I introduce into the scheme for the first time a system of allowances in respect of the
1338
dependent children of officers with at least 10 years' service who die either in service or following retirement on pension on or after the date on which the Regulation comes into operation. All children dependent on the officer are covered by the arrangements, including adopted children, step-children and illegitimate children. The provision applies to the children of female officers in the same way as to those of male officers. The allowances will be paid until age 16 or beyond that for a child who continues in full-time education. There are two rates of allowance set out in Schedule 1, the rate for wholly orphaned children being double that paid where there is a surviving parent or stepparent.
The last major change to which I should draw the attention of the House is contained in Regulations 24 and 25 and concerns redundant officers. Redundancy is not a major problem in the National Health Service, but it does occur from time to time following administrative reorganisations. The 1962 amending Regulations provided immediate pension for officers with at least 10 years' service who were made redundant after age 55. This provision is repeated in these Regulations, but it is extended to provide for benefits to be frozen for those who are declared redundant under age 55.
This fulfils an undertaking given to the General Whitley Council and the Service when the improved arrangements for redundancy payments were introduced early this year. It also incidentally does precisely what I asked my predecessor but one to do, but in vain, in the debate on the 1962 Superannuation Regulations. The frozen benefits will normally be put into payment at age 60 or age 55 for certain special classes including nurses, but will be paid earlier if the officer becomes permanently incapacitated. Freezing benefits in this way is optional and, if he prefers, at any time before he actually starts to draw benefits the redundant officer can choose instead to have his contributions plus interest returned to him. There are consequential provisions dealing with the reinstatement of the earlier service if a redundant officer again becomes employed in a superannuable capacity either in the National Health Service or under some

1339
other scheme to which we can transfer accrued pension rights.
The Regulations from 26 onwards are described as "miscellaneous". Many are technical amendments or to remove anomalies that have come to light. I will not trouble the House with an explanation of every one. I will, however, mention briefly the more important.
The actuarial investigation of the scheme as at 31st March, 1962, disclosed a surplus. In 1960, when the previous valuation disclosed a deficit, an additional contribution of 1½per cent. of each employee's superannuate remuneration was imposed on health service employers in order to meet part of that deficiency. The deficiency has been met in substantially less time than was then expected.
The improved state of the superannuation fund is due to a number of factors, including an increase in the valuation rate of interest, later retirements, and a greater number of withdrawals from the scheme than had been assumed at the previous valuation. As the additional contribution was introduced solely to help liquidate a deficiency that no longer exists, its purpose has been achieved and it can now be discontinued. This is done by Regulation 29(2).
Regulation 41 makes some changes in the application of abatement to pensions of re-employed pensioners whose earnings in their new employment are paid from public funds. Since the inception of the National Health Service Superannuation Scheme, the Regulations have provided that, on such re-employment, a pension is abated to ensure that the pensioner does not receive more by way of pension plus remuneration of the new employment than the rate of pay that he was receiving immediately before his retirement.
This rule operates somewhat unfairly in the case of doctors and dentists retired from general practice as, during the last years of their careers, their earnings tend to decrease. Accordingly, we are now providing that, on the re-employment of such pensioners, abatement will be related to the average of the three consecutive years of highest remuneration. We are also providing that, where a pensioner takes on a series of short-term employments, abatement will be related to his earnings during the whole
1340
of a calendar quarter, instead of, as now, during the period of his employment.
Because the effect of these amendments will be to increase the aggregate income of some pensioners—that is, pension plus pay of re-employment—they will not become operative until the end of the standstill period, that is from 1st January, 1967.
Regulation 48 enables the arrangement to be brought to an end whereby employees of the Medical Research Council are admitted to the scheme. This is in accordance with the wishes of the Council, which is introducing its own superannuation scheme.
The last provision to which I might draw attention is that in Regulation 50(b), which increases from £3,500 to £6,000 the overriding limit on the amount of a dental practitioner's remuneration which can be counted for superannuation purposes in any year. This amendment brings the present limit, which was introduced in 1950, into line with current money values and earnings. It does not, of course, involve any increase in a dentist's earnings. What it does is to increase the amount of those earnings that can reckon for superannuation.
There has been full and detailed consultations with all the staff interests concerned about these various amendments, including the British Medical Association and the British Dental Association, and, although on one or two points there have been representations for wider improvements than we are able to make, I can say that the Regulations are broadly acceptable to them. Indeed, we believe that their introduction will generally be welcomed.
12.35 a.m.
Mr. Paul Dean: I am sure that the whole House is grateful to the right hon. Gentleman for his lucid explanation of these complex Regulations. He will no doubt remember that when he stood at this Box when the 1961 Regulations were introduced he welcomed them, but also complained about their complexity. I welcome these Regulations and, although I complain about their complexity, I appreciate that it is inevitable when one is dealing with so large a number of different categories of employees. We wish to see these Regulations put into operation speedily, but

1341
on an important matter like this we ought to devote a little time to considering what the Minister has told us. I should like to make a few comments and to ask a few questions.
I am glad to hear that there has been full consultation with the bodies concerned and that they are broadly in agreement with the proposals which the Minister has put to us. We on this side of the House attach great importance to occupational pension schemes, which are now widespread. We welcome their spread and we want to see them extended as a valuable supplement to the National Insurance pension. It is important that these schemes should keep pace with the evolving concept of what a good superannuation scheme should provide, and nowhere is that more important than in the National Health Service where the staff are often overworked and underpaid and where the discontent has reached disturbing proportions and where the brain drain is serious.
We are debating these Regulations against the sombre background of the pay freeze, which has hit a substantial number of the staff in the Health Service and which has necessarily affected their pension position as well, the pensions being based on the pay which they receive and, in quite a number of cases, on the increases in pay which they have had to forgo because of the freeze.
I should like particularly to welcome four main features of the Regulations. The first is the new formula for calculating the pensions of practitioners. I welcome the greater weight which the formula gives to earnings in the later stages of a person's career. I have one reservation about this to which I will refer later, but generally this formula is a welcome advance in the superannuation arrangements for practitioners.
I also welcome the widows' benefits. We attach great importance to occupational schemes of all kinds providing better cover for widows, whether the woman happens to be widowed during the working life of her husband or after his retirement, and we also attach importance to choice as to type of benefit which a widow can take. The Regulations provide for both of those things.
The dependent children's allowances are also a welcome step forward and the abatement of the pension on re-employment—Regulation 41—is particularly important
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to encourage people to remain in employment or return to work, and I am thinking here particularly of married women. The abatement of the pension by reference to the best three consecutive years rather than the last three years is certainly a welcome step in encouraging this desirable move.
Having welcomed these main features I should like to put one or two questions to the Minister and to make one or two criticisms of the Regulations. The first question concerns the date on which the Regulations come into force. It is said in Regulation I that Regulation 41 will come into operation on 1st January, 1967, and the others within 14 days of the Regulations being approved by both Houses of Parliament. Speed is of great importance in this matter, as the Minister knows. There is quite a substantial number of people who will be retiring shortly, and before the end of the year.
I should be grateful if the Minister could say when he expects the Regulations to be in operation. I hope that it will be before the end of the year. I hope also that he can give a categorical assurance that none of these Regulations is in any way affected by the prices and incomes freeze. My next point is one with which the Minister dealt, namely, the finances of the Scheme and Regulation 29(2) in particular, providing for the ending of the employers 1½ per cent. supplementary contribution, which was imposed in 1961 to meet the deficit.
This was intended to be in operation for about 20 years, but it has been removed after about six years. As the Minister will appreciate, there are some misgivings among a number of National Health Service employees about the removal of this additional contribution. The Minister has explained the reasons for it but I note that the Government Actuary's Report on the scheme states on page 12:
"The margin is not enough however to justify any reduction in the rate of contribution. As the financial effect of future salary increases will become progressively more important it is desirable to retain some margin as a provision against future deficiencies."
I do not feel that the Minister's explanation of the ending of this additional employers' contribution entirely clears up the matter. There are differences of view between his actuaries and between some experts outside.

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The next point concerns the new formula for calculating the pensions of practitioners. I have already generally welcomed the formula, but there is one serious weakness, and this is the main point which I put to the Minister. It concerns the older practitioners who will do very badly under this formula. Broadly speaking, those who were aged 45 or over in 1948, when the scheme began, will get little or no benefit under the formula. These are the men and women who have borne the burden during the heat of the day, over a long period, and in many cases they will retire with no benefit from the escalating formula.
I regret that the Minister has not found some way of weighting this formula so that the older people receive some recognition. As he will realise, and as the House realises, a substantial number of people is involved—something like one-seventh of those practising. When one realises that the average pension for a G.P. retiring now, having served since 1948 is only about £725 the House will see that there is real substance in the point that I am making. There is little doubt that there will be a sense of injustice on the part of these people when they compare their lot with that of their younger colleagues.
The problem of the older pensioner constantly features in debates on public service pensions. From both sides of the House, the problem is constantly put of those who retired longest ago and who both have small pensions and also suffer the effects of inflation over a long period. All parties and Governments have recognised this problem and have tried in the various Pensions (Increase) Acts to meet it. It seems to me, however, that tonight's Regulations will aggravate the problem. It is as if they are deaf to the lesson which we should by now have learnt about the problem of the older public service pensioner.
I believe that the Minister has lost an opportunity to try to minimise these problems in the future by giving some weighting in the new Superannuation Regulations so that the older people would derive some benefit. It could well be that had the Minister decided to
1344
retain the 1½ per cent. supplementary employer's contribution, this would have given him leeway to enable him to do this. It may be that he would have liked to do this but that the Treasury has stopped him from doing so. This, therefore, is a point to which I hope that the Minister will give serious consideration, otherwise the anomalies and the injustices which we are trying to get rid of will be aggravated.
I understand that the new formula applies to dentists only temporarily because talks are in progress. I assume that the Minister intends to reconsider the position when the talks have been completed.
I have one point with regard to abatement of pension on re-employment. I refer in particular to the quarterly basis of calculation. The Minister will, I think, appreciate that this can cause difficulties, particularly with dentists whose earnings are based on a fee for an item of service. Their income cannot easily be regulated to keep within the limits for abatement. I hope that the Minister will further consider the possibility of either a yearly basis or a yearly reassessment should experience show that the quarterly basis causes difficulties for dentists and others.
My final main point concerns the preservation of transferability of pension rights, to which the Minister has briefly referred. We on this side believe that pension rights should be portable, for two main reasons. We feel that the time has now arrived when occupational schemes have developed to a sufficient extent for them to be regarded as deferred pay to which a man or woman is as much entitled as to weekly or monthly earnings. We feel, too, that portability is valuable—and, indeed, necessary—from the viewpoint of mobility of labour. The Regulations certainly make minor improvements in this respect, but, broadly, transferability under them is possible still only within the public service. If an employee goes outside the public service, he will get nothing more than the return of his own contributions.
I quite appreciate that the Minister must be sensitive about any provision which might make it easier for people to leave the National Health Service. None the less, I believe that it is quite

1345
wrong that we should attempt to chain people to their employment by their pension rights. I hope that he will at least make greater use of his powers under the 1961 Regulations to grant transferability to superannuation schemes outside the public service where it is appropriate.
I want now to refer briefly to three small but quite important points. The first is the case of an employee who has not completed 10 years' pensionable service. I have no doubt that the Minister knows of cases where it can cause hardship. I know of a mental health officer with 9½ years' service who is not able, owing to retirement, to qualify for a pension. I wonder whether the Minister has considered the possibility, in cases of that kind, of the employee being able to make up his contributions and so qualify for a pension under the scheme.
The second point is the case of a practitioner who is fined for breach of his terms of services and loses not only the pay which is deducted but the pension rights on that pay because the contribution is withheld. In a case of that kind, the person concerned is being punished twice, and it is not fair to him.
The third point relates to the determination of questions. Regulation 84 of the parent Regulations lays down that the Minister shall decide questions in dispute under the Regulations. I believe that it is wrong that any Minister should be the judge when he is himself an interested party. I hope that the Minister will feel able to make some changes in that respect. As far as I can see, there is no change in the Regulations which we are discussing—
Mr. Speaker: Order. If there is no change in the parent Regulations, we cannot discuss it now.
Mr. Dean: I am sorry, Mr. Speaker. Then I will leave that.
I am afraid that I have detained hon. Members rather long at this late hour, but I am sure that the whole House will feel that anything which concerns the terms and conditions of service in the National Health Service is immensely important and worth devoting time to, particularly at a time when employees in the National Health Service are under great pressure and many have a strong feeling that they are not getting a square deal.
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In spite of the criticisms that I have made, we welcome the Regulations as an advance towards better superannuation in the National Health Service. But I hope that the Minister will watch the working the Regulations carefully and listen sympathetically to suggestions for improvement in the future.
12.54 a.m.
Mrs. Jill Knight: There is precious little encouragement to become a doctor or a nurse or a medical auxiliary in Britain today. Most of us have been lobbied by doctors in our constituencies. They are usually pale young gentlemen who come clutching red dyed bank statements, with horrifying stories of medical moonlighting and the ways in which they have to supplement their inadequate incomes. But if some hon. Members have not had such visits from their constituents, I am sure that they are all well aware of the very serious problem of the medical brain drain which is going on, and it is not something that can be shrugged off.
I do not know whether the Government imagine that these Regulations are a sort of panacea for these ills, and I have a vision of the right hon. Gentleman, like some Canute in reverse, standing on the seashore waving these draft Regulations at the advancing tide of medicos as an incentive to go back up the beach and try again. If that is the case, I must tell the right hon. Gentleman that it will not do. For one thing, a pension is a very long way off to a young doctor, and, for another, what these Regulations do about superannuation really does not greatly help, because pensions are still based on a percentage of earnings, and if the earnings are too low, the pension will be too low. It is as simple as that.
I think that the change mentioned in paragraph (g) of the Explanatory Note on page 42 is very welcome. As my hon. Friend the Member for Somerset, North (Mr. Dean) said, this is an excellent new suggestion that the best three consecutive years before retirement should be the ones to count, instead of the last three. I acknowledge that this is a great help, but if the Minister thinks that this will wholly satisfy the doctors, again he is wrong, because the older doctor has a very real superannuation problem.

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He is a double victim of the Government's incomes policy. The loss of income which he has suffered for the past six months from April to October is one thing, but, because his pension is calculated on his income, he will suffer from the pay pause long after he has ceased to earn. I cannot understand why it is not possible for a doctor who is within three years of retiring age today to pay superannuation on the additional remuneration which he would have received with effect from 1st April if the ice curtain had not slammed down and if the Government's promises had been kept. After all, the Prime Minister and the Government fully accepted the Review Body's award. It was agreed on all sides to be fair, and the increase was promised. If the Regulations permitted the arrangement which I have suggested, at least some of the unfairness would be averted.
The principle that pensions should be exempted from the full effects of the Government's standstill wage policy seems to be a sound one, and I think that it is merely quibbling when we are told that because this principle cannot be applied elsewhere to every pensioner, it cannot be applied here. This is an unfair anomaly, and undoubtedly the doctors are feeling very sore about it when, as my hon. Friend said, they already have cause to be uneasy because of their age in the existing set-up.
These Regulations are all very well, until we come to the elderly, and this point needs to be made very strongly indeed. What the Government seem to be saying here is that all men are equal, but that the elderly shall be slightly less equal than the rest. Perhaps this point had not struck the right hon. Gentleman. The right hon. Gentleman is a kindly man, good to animals, and no doubt excellent with children, but he must try to be a little more sympathetic towards the elderly.
There is another point to be made about the older doctor. It is not wise to throw him on the scrap heap promptly when he reaches retiring age. If he is hale and hearty, he still has many contributions to make in a field which is not overstaffed, to put it mildly. Do these Regulations provide sufficient encouragement
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for the G.P. of pensionable age to go on working? I rather doubt it.
There is also this point about the transferability or preservation of pension rights about which we have heard. This again is a very important point, and I thought that it was one which had been accepted by the Government as a fair principle. I gather that the National Health Service superannuation schemes are still not to be fully transferable, and will not provide full preservation on change of job. The Minister must recognise that this aspect must be looked at again. If it is a fair and right principle elsewhere it is right and fair in the National Health Service, and the present situation should be rectified.
Can the Minister explain the operation of the time limits? Perhaps he would pass another little note to his hon. Friend and get an answer, because the question of the time limits is very important. I cannot understand what he means by them—and there are other conditions, which are too vague, which must be satisfied before superannuation rights can be transferred. These are not clear. Perhaps, with the splendid arrangements for information to be quickly transmitted to the Front Bench, we may get an answer very shortly.
There are some good things about these Regulations, and I applaud those, but to gain wholehearted support the Minister should put forward wholehearted Regulations.
1.0 a.m.
Dr. M. P. Winstanley: I want to associate the Liberal Party with the somewhat qualified welcome already given by the hon. Member for Somerset, North (Mr. Dean) on behalf of the Conservative Party to these new amending Regulations. I will not weary the House by referring to points of approval; I have no wish to delay the acceptance of these Regulations, many of which are long overdue. But I support the remarks of the hon. Member for Somerset, North and the hon. Member for Birmingham, Edgbaston (Mrs. Knight) about the somewhat elderly doctor. When I use the term "elderly" I do so in terms of the normal age of entry into the profession at the beginning of the National Health Service. It is regrettable that opportunity has not been seized to neutralise

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an anomaly of which the Minister was already aware.
I want to express my doubts and misgivings relating to the steps of escalation outlined in Regulation 8(2, a). There might have been merit in these steps having been somewhat smaller and the time intervals less prolonged. One accepts the principle of the steps and the escalation, but I would very much appreciate it if the Minister would at least tell us why this time sequence has been adopted.
My reservation is rather more serious, from my point of view. I am aware that when the hon. Member for Somerset, North raised a question that was not relevant to the Regulations he was properly ruled out of order. I hope that in referring to that fact I have not alerted the Chair to my intentions in such a way as to foil my design, but my attitude to these Regulations, which I, along with other hon. Members, will shortly be asked to approve, is somewhat coloured by my present fears about what might happen if disputes; should arise under them.
The Minister is aware that the profession has expressed some anxiety on this point over the years. Indeed, he will no doubt be aware that the former Minister of Health informed the profession that he would look at the matter and seize an early opportunity of bringing forward possible Amendments to the old Regulation 84 in the 1961 Regulations. I hope that if the Minister endeavours to clear up this point—which I am sure would be most helpful to me and other hon. Members—he will not be ruled out of order, since I am sure that this is relevant to our attitude to these amending Regulations.
I have no wish to detain the House. That is my only main reservation. These Regulations are overdue and will be welcomed by the medical profession—as they are welcomed by my hon. Friends and myself.
Mr. Speaker: The hon. Member was out of order in discussing another set of Regulations. I was perhaps over-generous. We can discuss only the Regulations before us.
1.5 a.m.
Mr. Robert Cooke: My hon. Friend the Member for Birmingham, Edgbaston (Mrs. Knight) has mentioned with greater charm and at greater length the points which I wished to raise. I
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would remind her that Canute was a great king who got his feet wet proving the futility of the advice tendered by his civil servants. Let us have that on the record for all time.
I hope that the Minister, who we all know is a kind and generous man, will deal fully with the question of those whose pensions are related to their last years of earnings, which earnings are affected by the prices and incomes freeze. If they are prevented from getting the fruits of an award which has been agreed, some may have a reduced pension for the rest of their lives. The case has been made that this may not amount to very much in many cases, but before we approve the Regulations I hope that the Minister will clear up this point. If he cannot put our minds at ease, at least he should tell us how these National Health Service employees will be affected if the freeze prevents them from getting any increase in salary on which their pension would be based.
It is the older people who will be affected, who gave many generous years of service before the National Health Service came in on 15th July, 1948. We owe it to them to see them right in their retirement. I am sure that the Minister will be careful not to stray without the scope of the Order, but, in giving us the information about those people who come within the scope of the Order and whose pension may be affected by the wage freeze, perhaps he can say whether there are any outside the scope of the Order, but, nevertheless, employed in the National Health Service who are also so affected.
1.7 a.m.
Mr. Alick Buchanan-Smith: The Minister said that he had great difficulty in seeing the difference between the Regulations for England and Wales and those for Scotland. I assure him that his difficulty is not half as great as mine in finding the differences. It would be unfortunate if, when the debate is over, the Joint Under-Secretary of State for Scotland, who is sitting beside the Minister, should wonder whether his journey here was really necessary. I wish therefore to raise one point of particular importance to Scotland.
I refer to the employers' supplementary contributions. The Minister said that

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the decision to discontinue these contributions from employers was based on the Third Report of the Government Actuary, who, I understand, has not yet completed his survey in Scotland. This discontinuance of the scheme for Scotland is merely based on preliminary investigations. While I have no reason to think that the situation in Scotland is different from that in the rest of the United Kingdom, can the Under-Secretary give us any more information on what stage the Actuarial Report has reached and whether there are any more definite facts available on which the decision to discontinue the supplementary benefits in Scotland can be based.
I support my hon. Friend the Member for Somerset, North (Mr. Dean) in what he said about the problems faced by the older members of the profession. We are perhaps missing an opportunity in this, if there is a surplus in one part of the scheme which might be used to help those less fortunate members of the profession, particularly the older ones. This is a problem not only on the medical side of the public service but in other sectors as well. As we all know who deal with the problems of constituents and organisations representing people retired from public service, this problem is much wider than just the immediate situation of the medical profession. In a scheme like this where there is a surplus in one part of the scheme and money available to deal with the problems of this particular group in the profession, it is a pity that we should let this chance slip by without hearing the reason why this should be the case. I would ask the Minister to reply to these points.
1.10 a.m.
Mr. K. Robinson: With the leave of the House, I should like to try to answer the points raised in the debate. Perhaps I could deal first with the points raised by the hon. Member for Somerset, North (Mr. Dean) for the reason that he spoke first, that his list was numerically longer than that of any other hon. Member, and that a number of the points he took were echoed by other hon. Members opposite.
He asked me about the date of operation of the main Regulations. I understand that one particular Regulation, because of the prices and incomes standstill, will come into operation on 1st January, but we hope very much that all
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the others will be in operation well before the end of the year.
I would hope that time will be found to debate these Regulations in another place in the course of the next week or so, which would mean that the Regulations would come into operation during the first weeks of December.
The hon. Member for Somerset, North, and a number of other hon. Members, brought up the question of the discontinuance of the supplementary employer's contribution, and I think that the hon. Gentleman, no doubt unwittingly, quoted the Government Actuary out of context because the quotation he gave was not in relation to supplementary employer's contribution. It was in relation to the financing of the scheme as a whole, and he did say that he was fully in agreement that the special contribution was no longer necessary and supported its cessation.
What he was saying in the passage quoted was that it was desirable that not all the surplus that was available in the scheme should be used to make immediate improvements in the scheme but a certain amount of it should be held back for future needs, and this has been done.
I would emphasise that this is an actuarial scheme and what we can do and cannot do is not entirely a measure of the generosity of the Minister and the Government but is much more a matter of ingenuity in dealing with the scheme in such a way as to make the maximum improvements which those covered by the Regulations would like to see.
Mr. Dean: The right hon. Gentleman would agree, would he not, that there are some experts among the professions who do not agree these actuarial calculations?
Mr. Robinson: I do not think it is a matter of disagreement with calculations. It is that we considered, and I think we have plenty of evidence to support it, that it is accepted practice that any measures, especially taken to liquidate a deficiency, are discontinued as soon as they are no longer necessary. While I am sure that some of the professions might have liked to see the continuation of this contribution, I do not think there was any fundamental disagreement with the Government Actuary on this point.

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The hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) brought up the Scottish aspect of this. I should like to tell him, on behalf of my hon. Friend the Joint Under-Secretary of State for Scotland, that the Government Actuary's report on the Scottish scheme is not yet to hand, but he certainly said that his preliminary investigation indicated that it would be reasonable to expect that the financial position of the Scottish scheme is likely to be such that the Regulations could include similar provisions to those proposed for the English scheme. It is in connection with that that the same provision is made for the discontinuance of employer's supplementary contribution.
A number of hon. Members repeated the plea made by the British Medical Association and the British Dental Association about the position of the older doctors. I would not deny that these doctors bore a great deal of the burden of the Service in its early and formative years. The hon. Member for Somerset, North suggested that they got no benefit out of these Regulations, but that is not quite true. They get the benefit of the back-dating of the 1¾ per cent. by, I think, four years. It is now back-dated to 1958, and I think that hitherto it was 1962. But they do, in common with other doctors, get an improvement as a result of the escalating formula.
The professions wanted this 1¾per cent. to be back-dated to 1948, but this proposal contains anomalies not only in relation to those who have already retired, who would derive no benefit from it all, but also for those who did not happen to be aged 45 when they entered the National Health Service at its inception. There are many other people, including nurses, who first became superannuate in 1948 and who, in consequence, will have lower pensions than they would have had if their whole careers had been in superannuable service. Had we been able to make the concession, therefore, it would have raised great anomalies.
Nevertheless, I examined the case very carefully. I sought the advice of the Government Actuary on the subject, and his advice indicates that the older practitioners already get full value for their contributions, and that they will derive
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benefit from the new formula. I discussed the matter with representatives of both Associations only last month. I told them that, whilst I had some sympathy with their case, I had to weigh it against the actuarial advice I had received, and had also to consider how far one could justify special treatment for older practitioners compared with older Health Service staffs, bearing in mind that the proposed new formula produces an acceptable result as between these staffs and practitioners in general. I had to tell them that, on balance, my conclusion was that it would not be right to make a further special concession for this group, and I understand that both the B.M.A. and the B.D.A. accept that position.
The hon. Gentleman's next point was about quarterly abatement. He asked whether we could not go that much farther and do it on an annual basis. Again, I examined the case very carefully, but we consider that the changes we have made will provide a very real improvement for both dentists and doctors, and I do not think that it would be possible to go further than that.
He then asked whether it was true that these provisions were only temporary. It is a fact that we have told the dentists that we are prepared to look at their position again when we have had further discussions with them, and when we can see what their future career earnings pattern is likely to be. That matter can be reconsidered later.
I would have hoped that hon. Members opposite would have welcomed the improvements we have made in transferability instead of chiding us for not going further—further, indeed, than any public service superannuation has ever been able to go. It is not practicable to have transferability with private pension schemes, which are not really in any way comparable with public service pension schemes. I entirely agree that maximum transferability is desirable and no doubt we will be able to go further from time to time, but we have gone as far as is reasonable and possible at the moment.
The hon. Member for Somerset, North then raised the question of the determination of appeals and suggested that it was not right that I should be the court of appeal against my own decision. I assure the House that powers to hold

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inquiries in cases where the facts are in dispute already exist and that these powers will be used when necessary. It is, perhaps, not unworthy of note that there has not yet been any need for such an inquiry since the Regulations were originally introduced. However, in accordance with an undertaking given to the B.M.A. and other staff interests, I have it in mind, when a suitable opportunity for legislation presents itself, to seek powers to cite a case for the opinion of the High Court on a point of law. This needs legislation. It cannot be done by amendment of the Regulations.
Mr. Dean: Can the right hon. Gentleman say when this legislation is likely to be introduced?
Mr. Robinson: The hon. Gentleman knows only too well that no Minister can say when such legislation will be brought forward. However, I can say that there are two possibilities and that we shall take whichever arises first to do this.
The hon. Member for Cheadle (Dr. Winstanley) asked if we could rearrange our ladder, our steps of escalation. I assure him that this was carefully and meticulously worked out to derive the maximum possible benefit in this connection from the amount of the surplus available. Considering the nature of the escalation that we have agreed, there was very little dispute between us and the professions and they agreed that this was the best way of doing it. I repeat that this is an actuarial scheme and that we must be governed by the amount of the surplus and the likely demands on the fund in future.
The hon. Lady the Member for Birmingham, Edgbaston (Mrs. Knight) wondered whether I thought that the Regulations were a panacea for all the difficulties facing the National Health Service. I certainly do not, and I hope that I did not present them in that light. Nevertheless, they represent significant improvements in the superannuation arrangements, not only for medical practitioners but for many other staffs in the Service. The hon. Lady asked if they provide sufficient encouragement to doctors to go on working. I believe that they do. After all, a doctor can increase his pension by going on working, and some of the improvements we have made
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in these amendments carry that process a little further.
A question not strictly related to the Regulations concerned the reduced pension that will result from the loss of income suffered by some National Health Service staffs, notably doctors, as a result of the incomes standstill and the deferment for six months of the Review Body award. I have looked into this matter and it has certainly been considered by the Government in a wider context than the medical profession. I assure the House that it would be impossible to make any arrangements, even if one could get over the practical difficulties—and they are formidable—of having notional superannuation payments on notional income which is not received. Even if we had been able to get over the practical difficulties, we should have thrown up far more injustices than those we were seeking to remedy.
One might be able to do this where loss of income was quantifiable; but there have been many staffs, in the National Health Service and outside, who have lost income where income was not quantifiable and, all in all, the Government decided that it would not be right to try to make any adjustment. However, I can confirm that the amounts of reduction of pensions for medical practitioners —and they are perhaps the ones most noticeably affected—are extremely small; far smaller than the hon. Lady appears to imagine.
I do not think that it would have been possible to make any adjustments which would not have thrown up greater injustices elsewhere, and I am grateful for the general response which has been given to these amendments tonight. They are amendments which make significant improvements and, to that extent, I hope that they will be useful in furthering those aspects of the National Health Service about which the hon. Lady spoke.
Question put and agreed to.
Resolved,
That the National Health Service (Superannuation) (Amendment) Regulations, 1966, a draft of which was laid before this House on 8th November, be approved.
National Health Service (Superannuation) (Scotland) Amendment Regulations, 1966 [draft laid before the House, 8th November] approved.—[Mr. Millan.]

MATERNITY SERVICE, ACCRINGTON
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ioan L. Evans.]
1.28 a.m.
Mr. Arthur Davidson: I am grateful for the opportunity to raise at this hour a matter which is of considerable concern to my constituents, and which has been for many years past. When the divisional medical officer of health describes the shortage of maternity beds in my constituency as being desperate, then I think that it is not out of place for me to ask my right hon. Friend the Minister of Health to take a further, and I hope, sympathetic look at the whole position of the maternity unit in Accrington.
Medical officers of health are not given to exaggerated talk or verbal flights of fancy, and the Medical Officer of Health for Accrington is no exception to this rule. So, if there were no other facts than the rather extreme language which he has used about the shortage of beds, I suggest that that alone would be sufficient for me to raise this subject tonight.
But, I shall try to show that there are other pressing facts of which I hope the Minister will take notice; and may I say here that I am extremely grateful to my right hon. Friend for coming here in person to answer this debate, and for the fact that he has given considerable attention to this matter previously. I am grateful, too, for the assurance from him that the views of my constituents will receive full consideration when future hospital developments are being considered.
The Minister, as we have heard earlier tonight, is a kindly man. I do not doubt that, but what my constituents want are more maternity beds, more up-to-date equipment, and the building of a new maternity unit. This, to compress the matter, is what my constituents are asking for. It is what they need and are entitled to if they are to receive the proper care and attention which an up-to-date Health Service should provide in this modern society.
What is the position in Accrington today? In the whole of my constituency
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there is only one maternity unit. That is at Rough Lee. Rough Lee has given admirable service over many years, but it is now out-dated and the building itself shows the signs of antiquity. For example, it does not even contain a lift to transport stretcher cases up and down. In this modern age I should have thought a lift was not exactly a technological wonder. Rough Lee has an even bigger imperfection, for it contains only 12 or 13 beds, a number totally incapable of meeting the requirements of those of my constituents who wish to have delivery in hospital.
To be fair, in addition to Rough Lee my constituents can use the maternity home at Bramley Mead, near Whalley, which has 25 or 26 beds, but Whalley is some distance from my constituency. Cases can be admitted to Queen's Park Hospital, in Blackburn, but many of my constituents would have to make three bus journeys to go there, thus causing delay, and adding to the expense.
The Minister will be aware of the Cranbrook Committee's findings that 70 per cent. of women should have their babies in hospital. Applying this to my constituency, the full gravity of the situation is brought home. In 1965, I am assured, there was a total number of 1,401 live and still births. On the Cranbrook figures, 980 of them should have been delivered in hospital. On the assumption that one bed can take 22 cases a year, there should be 48 beds, plus 10 per cent. more for emergencies and anti-natal cases. This would make a total requirement of 53 beds. This is a conservative estimate, for medical opinion inclines to the view that in North East Lancashire 80 per cent. of the cases in the area are proper hospital cases. Instead, we have the few beds at Rough Lee and such proportion of the Bramley Mead beds as are not required by patients from other districts. To make up for this deficiency, the practice of early discharge from hospital has become a habit. I am aware that there is medical opinion which says that on a scientific basis early discharge is a good thing, but the high percentage of early discharges in my constituency is not for scientific reasons but purely because of shortage of beds. During 1965, I am assured, 38 per cent. of women who were admitted to hospitals were subject to early discharge. I do

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not suggest that all were from my constituency, but they came from the surrounding area. This is a disturbing figure, the more so when it is realised that a high percentage of these early discharges were from Queen's Park Hospital, a unit which is supposed to be for cases with special factors requiring admission to hospital. The Minister will realise that these are the very cases where early discharge is undesirable on general principles.
Another disturbing fact which I hope—indeed, I am sure—that my right hon. Friend will take into consideration is the difficulty that can arise when, as sometimes happens, a case of infection occurs in one of the existing small units. In Rough Lee or Bramley Mead it is impossible to isolate a patient infected or suspected to be infected. In the past, to some degree by luck, the medical officer of health assures me, serious consequences have not ensued but this is an unsatisfactory situation and I hope that it is one that my right hon. Friend will bear in mind when he replies to the debate.
What, therefore, is the alternative? I think that my right hon. Friend is well aware of what we in Accrington want. We want a new unit, and I urge him to use such influence as he has to speed up the building of the new maternity unit which has been suggested for opposite Victoria Hospital. Only a new unit in Accrington would satisfy the very heavy demands on bed space, and the sense of urgency and of fear and alarm that my constituents have about the position. They will not be satisfied by the suggestion of a new hospital in Blackburn.
Lest it should be thought that I am overstating the case, perhaps I can read a telegram I have received:
"1,520 Mothers Union members of the Accrington Deanery support your request for maternity unit."
I also have with me a petition signed by many hundreds of people in Accrington. Doubtless, had there been more time, many more signatures could have been added. I hope the points I have made have impressed upon my right hon. Friend just how urgent the problem is in Accrington and that he will be able to give some words of comfort to my constituents and institute some course of action as well.
1.37 a.m.
The Minister of Health (Mr. Kenneth Robinson): I have listened with great interest to my hon. Friend and from correspondence I have had with him and with others I know that there is considerable local feeling about this whole matter. I think that this was made clear from the way in which he spoke, and in the circumstances I am grateful for the moderation with which he put his case. I am glad to have this opportunity to explain the situation in some detail.
My Department and the Regional Hospital Board acknowledge the inadequacies of the existing Rough Lee Maternity Home in Accrington but, as is explained in the Hospital Building Programme, Command Paper No. 3,000, the planning and building of the proposed new maternity unit at Accrington Victoria Hospital has had to be deferred pending a thorough re-examination of the scheme.
I should first of all say that the hospital service for Accrington cannot be considered in isolation. Accrington falls within the catchment area of the Blackburn and District Hospital Management Committee and the whole of the hospital services, including maternity services, must be planned on a group basis so that an efficient service can be offered to the entire catchment area in the most economical way, both as regards capital provision and consequential maintenance costs. I hope, therefore, that my hon. Friend will bear with me if my remarks range somewhat wider than the specific points he has made.
Similarly, maternity services cannot be planned in isolation from other hospital services, as will be evident from a study of Command Paper No. 3,000, the new building programme published earlier this summer, and of Command Paper No. 1,604, the original Hospital Plan.
The whole concept of the district general hospital is based on the provision of comprehensive hospital facilities, including maternity facilities, on one site, so that everything needed to treat a patient for any contingency is immediately to hand. This is the basis on which the facilities for the Blackburn and Accrington district will be planned, taking into account particular local circumstances.

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For planning purposes, we are working on a 1981 population for the whole area of 260,000, of whom at least 40,000 will live in Accrington Borough. My estimate—and here my figures differ somewhat from one figure given by my hon. Friend—is that to serve the whole catchment area some 140 to 150 maternity beds will be needed by 1981, of which Accrington Borough will require some 20 to 25. At the moment there are only 107 beds for the whole of the Blackburn and district group of hospitals, 58 at Queens Park Hospital, 16 at Bull Hill Maternity Home, 22 at Bramley Mead Maternity Home and my figure is 11 at Rough Lee—my hon. Friend said that that figure was 12 to 13.
Mr. Arthur Davidson: The figure for beds needed which I was given related to the Accrington constituency which contains four urban districts in addition to the borough itself.
Mr. Robinson: That accounts for the discrepancy.
Rough Lee, as my hon. Friend said, is the only unit in the Accrington area and we acknowledge that Rough Lee is the least satisfactory of these units. Not that the accommodation is poor; I understand that the mothers of Accrington appreciate the homely atmosphere. The main objection to Rough Lee is that it is too small, is isolated from hospital and full consultant facilities in the area, and that there is little scope for improvements, even if it were thought worth while to embark on them. To some extent, this also applies to the rest of the maternity accommodation of the group and there, too, improvements are desirable.
Bramley Mead and Bull Hill suffer from the same isolation from other hospital facilities and the substantial improvements at the Queen's Park unit have never been regarded as providing more than an interim solution pending the planning and building of permanent maternity accommodation incorporating all the facilities which we now consider essential.
The shortage of maternity beds and the defects of existing accommodation in the Blackburn area were recognised in the original Hospital Plan. This proposed the building of a new maternity unit at Accrington Victoria Hospital, starting in the first five-year period, and a new
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maternity unit at Queens Park Hospital, Blackburn, starting in the second five-year period. These developments when completed would have provided better facilities than those available in the existing units. Planning of the Accrington unit accordingly proceeded on the basis of a 42-bedded unit, with both consultant and general practitioner beds, to be built on a site across the road from Accrington Victoria Hospital.
As planning progressed, it became clear that the cost of building would be excessive—more than £500,000 for 42 beds—partly because of the need to tunnel underneath the main road separating the unit from the main hospital and partly from the need to expand the services in the old hospital to meet the demands of the new unit. In addition, when it became clear that the assessments in the original Hospital Plan were far too optimistic and the timing of the schemes consequently unrealistic, the Accrington maternity scheme was one of the many schemes in the Manchester region, as in the rest of the country, which had to be deferred.
In view of the unavoidable deferment of the scheme for the reasons which I have given, the Manchester Regional Hospital Board considered it prudent to take the opportunity to review not only the scheme, but also the whole pattern of hospital provision in the Blackburn-Accrington area. The basis of this reexamination is mentioned in Command Paper No. 3,000; first, the planning and content of the Accrington maternity scheme is to be reviewed and, secondly, the possibility will be explored of abandoning in the long term the re-building of Queens Park Hospital in favour of an entirely new hospital on a virgin site.
These two questions are inevitably related, since the maternity facilities to serve the Blackburn area must be associated with this new distrist general hospital. Its precise siting in relation to the catchment area as a whole, and to the Accrington Victoria Hospital in particular, will obviously affect the division of facilities between it and the Accrington Victoria.
At the moment the Board has not formulated any firm proposals which it can put to me, and I understand that it will be some time before it will be in a position to do so. However, I am assured by the Board that in formulating

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its proposals there will be full consultation with all of the local authorities concerned, and that it will hold a public meeting at which the views of any interested party can be heard. Full information on the outcome of these consultations will be supplied to me when the proposals are eventually put forward for my consideration. Very careful attention will be given to any unresolved differences of opinion, and if necessary, I will consult my hon. Friend about them.
The Regional Hospital Board is conscious that it is planning the hospitals to serve the Blackburn-Accrington area for many years to come. It is right that it should try to ensure that its plan is sound and is one which will stand the test of time. Clearly it would have been wrong to proceed with the building of the Accrington unit as originally planned, when more detailed consideration had led it to the conclusion that the validity of its original proposals was open to question.
My hon. Friend mentioned the question of early discharge. I understand
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that in the divisional area, which includes Accrington Borough—Division Five of the Lancashire County Council area—the domiciliary confinement rate is less than 20 per cent. of all births, compared with a national average of 27 per cent. There is in addition a good staff of domiciliary midwives and district nurse midwives. The local health authority is satisfied that these staff provide an adequate domiciliary service for the needs of the area and that the planned scheme for early discharge of maternity cases from hospital is operating well. As far as I am aware, there have been no recent complaints received from patients in the area about the domiciliary services provided. Early discharge is something which needs to be planned in conjunction with the domiciliary services, but according to my information the necessary requirements for it are present in this case. If my hon. Friends has any information to the contrary, which he would send me. I will gladly consider it.
Question put and agreed to.
Adjourned accordingly at twelve minutes to Two o'clock.

TECHNOLOGY
  Machine Tools
  Machine Tools
  Motor Manufacturing Industry (Output and Employment)
  Motor Manufacturing Industry (Output and Employment)
  Hydrofoil Craft
  Hydrofoil Craft
  Electronics Industry (Statistics)
  Electronics Industry (Statistics)
  Industrial Research Associations (Grants)
  Industrial Research Associations (Grants)
  Scientists, Engineers and Technologists
  Scientists, Engineers and Technologists
NATIONAL FINANCE
  Income Tax (Footballers)
  Income Tax (Footballers)
  Government Expenditure and Private Capital Investment
  Government Expenditure and Private Capital Investment
  Hire-Purchase Restrictions (Mopeds)
  Hire-Purchase Restrictions (Mopeds)
  Anglo-German Offset Agreement
  Anglo-German Offset Agreement
  Elections (Political Levy)
  Elections (Political Levy)
  Balance of Payments
  Balance of Payments
HOUSING
  Planning Permission (Appeals)
  Planning Permission (Appeals)
  Rateable Value (Central Heating Installations)
  Rateable Value (Central Heating Installations)
  Building Regulations
  Building Regulations
  Circular No. 50, 1965
  Circular No. 50, 1965
LOCAL GOVERNMENT
  Ipswich Expansion
  Ipswich Expansion
  Spoil Heaps, Shropshire
  Spoil Heaps, Shropshire
  Industrial Development (Agricultural Land)
  Industrial Development (Agricultural Land)
COMMONWEALTH AFFAIRS
  Rhodesia
  Rhodesia
NEW HEBRIDES
  Constitutional Development
  Constitutional Development
BERMUDA
  Constitutional Conference
  Constitutional Conference
MINISTRY OF DEFENCE
  Weather Control (Research)
  Weather Control (Research)
  Communications and Reconnaissance Satellities
  Communications and Reconnaissance Satellities
  RHODESIA
  RHODESIA
  CHINA (NON-PROLIFERATION TREATY)
  CHINA (NON-PROLIFERATION TREATY)
  ANGLO-RUSSIAN TRAVEL FACILITIES
  ANGLO-RUSSIAN TRAVEL FACILITIES
  BRITISH BROADCASTING CORPORATION (OVERSEAS SERVICES)
  BRITISH BROADCASTING CORPORATION (OVERSEAS SERVICES)
  BRITISH HONDURAS AND GUATEMALA (MEDIATION)
  BRITISH HONDURAS AND GUATEMALA (MEDIATION)
HOME DEPARTMENT
  Fire Prevention Publicity (Expenditure)
  Fire Prevention Publicity (Expenditure)
  Wormwood Scrubs Prison (Security Measures)
  Wormwood Scrubs Prison (Security Measures)
  Prisons (Patrols)
  Prisons (Patrols)
  Protection Offences (Metropolitan Area)
  Protection Offences (Metropolitan Area)
  Brodrick Committee (Report)
  Brodrick Committee (Report)
  Prisoners (Psychiatric Services)
  Prisoners (Psychiatric Services)
AGRICULTURE, FISHERIES AND FOOD
  European Economic Community
  European Economic Community
  Fish Farming (Research)
  Fish Farming (Research)
  Columnaris
  Columnaris
  Foodstuffs (Prices)
  Foodstuffs (Prices)
EDUCATION AND SCIENCE
  Universities (Computers)
  Universities (Computers)
  Grammar School Pupils, Harrow
  Grammar School Pupils, Harrow
  Teachers (B.Ed. Degree)
  Teachers (B.Ed. Degree)
  Teacher Training Colleges (Entrants)
  Teacher Training Colleges (Entrants)
MINISTRY OF LABOUR
  Productivity Agreements
  Productivity Agreements
OVERSEAS DEVELOPMENT
  Mr. Milton Barrall (Luncheon)
  Mr. Milton Barrall (Luncheon)
  Aid Programme
  Aid Programme
SCOTLAND
  Lobster Creels (Parlour Type)
  Lobster Creels (Parlour Type)
  Selective Employment Tax (Agricultural Industry)
  Selective Employment Tax (Agricultural Industry)
  Dental Students
  Dental Students
  Scottish Agricultural Securities Corporation
  Scottish Agricultural Securities Corporation
  CROWN ESTATE COMMISSION
  CROWN ESTATE COMMISSION
  HONOURS SYSTEM
  HONOURS SYSTEM
  EUROPEAN SECURITY CONFERENCE
  EUROPEAN SECURITY CONFERENCE
  PRESIDENT DE GAULLE (VISIT)
  PRESIDENT DE GAULLE (VISIT)
  HONG KONG (UNITED STATES NAVY SHIPS)
  HONG KONG (UNITED STATES NAVY SHIPS)
  EUROPEAN ECONOMIC COMMUNITY (MANDATE)
  EUROPEAN ECONOMIC COMMUNITY (MANDATE)
  RHODESIA (PLEBISCITE)
  RHODESIA (PLEBISCITE)
  DRAFT LEGISLATION (LAW COMMISSION)
  DRAFT LEGISLATION (LAW COMMISSION)
  CONSOLIDATION BILLS (COMPUTERS)
  CONSOLIDATION BILLS (COMPUTERS)
ECONOMIC AFFAIRS
  Treaty of Rome
  Treaty of Rome
HOSPITALS
  Nursing Staff, Harrow
  Nursing Staff, Harrow
  Mental Hospitals (Admissions)
  Mental Hospitals (Admissions)
  St. George's Hospital, Morpeth (Staff)
  St. George's Hospital, Morpeth (Staff)
LAND AND NATURAL RESOURCES
  National Parks Commission (Members)
  National Parks Commission (Members)
MINISTRY OF POWER
  Coal Tips, Shropshire
  Coal Tips, Shropshire
BOARD OF TRADE
  International Food Exhibition (British Foodstuffs)
  International Food Exhibition (British Foodstuffs)
  African Territories (Investment and Trade)
  African Territories (Investment and Trade)
  Hire-Purchase Debt (Per Capita Figures)
  Hire-Purchase Debt (Per Capita Figures)
  Motor Vehicles (Exports)
  Motor Vehicles (Exports)
ROADS
  Western Avenue Extension
  Western Avenue Extension
  Harrow Road Flyover
  Harrow Road Flyover
  Euston Road Underpass
  Euston Road Underpass
  Clearways, Central London
  Clearways, Central London
  Motorway Box, London
  Motorway Box, London
  North Circular Road (Ring Route)
  North Circular Road (Ring Route)
  Blackwall Tunnel
  Blackwall Tunnel
  Ring Route, London
  Ring Route, London
  Woolwich Ferry (Terminals)
  Woolwich Ferry (Terminals)
  Motorways (Plan)
  Motorways (Plan)
  Green Lane Road Bridge, Bolton
  Green Lane Road Bridge, Bolton
TRANSPORT
  Driving Instructors (Registration)
  Driving Instructors (Registration)
  Leaflet (Cost)
  Leaflet (Cost)
  Public Service Vehicle Drivers (Licence)
  Public Service Vehicle Drivers (Licence)
  Workers, King's Lynn
  Workers, King's Lynn
RAILWAYS
  Freight and Passenger Services (Departmental Control)
  Freight and Passenger Services (Departmental Control)
  Aberystwyth-Carmarthen Line (Track)
  Aberystwyth-Carmarthen Line (Track)
WALES
  Agriculture (Advisory Staff)
  Agriculture (Advisory Staff)
  Harbours (Survey)
  Harbours (Survey)
  Welsh Planning Board
  Welsh Planning Board

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

FREIGHT LINER TRAIN SERVICE
2.36 p.m.
LORD CONESFORD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they can now inform Parliament of the date on which the freight liner train service will be operated on the basis of open terminals.]
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): My Lords, since the noble Lord last raised this subject on July 28, the trade unions concerned have agreed that the freight-liners on the London-Glasgow route should be served by British Road Services vehicles. Eighty-four containers were carried for British Road Services in the week ended November 12 out of a total number of 1,124 carried on all freight liner services. Her Majesty's Government are confident that this co-operation will be extended to other routes, and negotiations to this end are continuing with the unions.
LORD CONESFORD: My Lords, does the Minister agree that this is not an operation on the basis of open terminals, which the Prime Minister has stated is the determination of Her Majesty's Government? Does he recall that the last time I asked this question the answer he gave was, "Soon"? Does he further remember that negotiations with the trade unions have been proceeding. for over two and a half years? That being the case, can he forecast the date, to the nearest year?
LORD CHAMPION: My Lords, I remember all the things that the noble Lord has asked me, because in fact I have looked them up to see what I said
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last time, and I agree that I said, "Soon". My Lords, "soon" is a word which of course one has to define, and I am not going to define it here. What I am bound to say is that I agree completely with the noble Lord, Lord Conesford, that the sooner we can achieve this the better. There is no sudden, sharp action which the Government can take which will bring it about, but my right honourable friend the Minister of Transport is persisting in her efforts, and indeed met one of the important unions in this connection yesterday. I hope the result of this will become obvious to us in a couple of days. But we are genuinely trying to do this, always having regard to the fact that it is not quite so easy in a democracy as it might be in some other form of society.

RETRAINING IN WALES
2.38 p.m.
LORD ABERDARE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what plans they have for the expansion of retraining facilities in Wales.]
LORD CHAMPION: My Lords, there are two Government training centres in Wales: one at Cardiff with 306 training places and the other at Llanelly with 189 training places. Under the current expansion programme a further 60 places will be provided at Cardiff by February, 1967, and a further 22 places will be provided at Llanelly next year—10 by February and 12 by mid-1967. My right honourable friend the Minister of Labour said on October 24 in another place that he is already considering a further programme of substantial expansion of the Government training centres.
LORD ABERDARE: My Lords, I am grateful for that Answer from the noble Lord, which is slightly encouraging, but I would ask him whether he is aware that the President of the Confederation of British Industry, who no doubt was aware of these forthcoming increases, recently said that these would not be able to meet future demands and that it was absolutely essential that these retraining facilities should be greatly increased. Would the noble Lord not agree that,

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with the further closing of the coalmines, the decline in manpower in the steel industry and the rising unemployment in Wales, it is extremely urgent that really radical increases should be made?
LORD CHAMPION: My Lords, I agree with the noble Lord. We certainly do want this fairly rapid expansion, and that is why the Minister of Labour answered in the terms that he did on October 24. But here again it is a matter of not being able to do things in a great hurry. Preparations have to be made, the buildings have to be there, the people have to be trained who are in turn to train others. So we cannot expect a rapid explosion in this expansion, but we certainly agree that we need it.
LORD BYERS: My Lords, does not what the noble Lord has said prove that there was no contingency planning in July of this year for such things as retraining which are absolutely basic to an incomes and prices policy?
LORD CHAMPION: My Lords, I would not agree with that. Perhaps I shall have to debate this with the noble Lord on his Motion which is down for December 7.
LORD BRECON: My Lords, would the noble Lord not agree that both Cardiff and Llanelly were provided for by the previous Administration and that since this Government have been in office there has been no dynamic action at all in providing more training centres, and in particular nothing has been done in North Wales?
LORD CHAMPION: My Lords, I agree about Llanelly, but I am not too sure about the centre at Cardiff, which has been in being since 1945. I am not too sure who was responsible for that, but I should imagine it was the Coalition Government.
LORD BRECON: My Lords, I would add that it was moved from where it was to a much larger and more extensive place under the last Administration.

TELEPHONE TAPPING AND PARLIAMENTARY PRIVILEGE
2.41 p.m.
LORD BALFOUR OF INCHRYE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether the administrative decision announced by the Prime Minister extending Parliamentary privilege of Members of the House of Commons by exemption from any properly authorised telephone tapping extends also to Members of the House of Lords.]
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, as my right honourable friend the Prime Minister made clear in another place on November 17 the Answers he then gave to Questions on this matter did not, nor could they, affect the privileges of Parliament. The House will also recall that on that occasion my right honourable friend made it clear that the answering of Questions on this subject was most exceptional and in no way detracted from the normal practice whereby Ministers are unable to answer Questions relating to these matters. I am, however, authorised to say, exceptionally, that the statement the Prime Minister then made extends to your Lordships' House.
LORD BALFOUR OF INCHRYE: My Lords, may I ask the Leader of the House to accept my thanks for that Answer, and add that if privilege goes to one House it should go to the other, but in my own view it would be far better if neither House had this particular privilege?
THE EARL OF LONGFORD: My Lords, I suppose I must regard that as a qualified vote of gratitude.
THE EARL OF SWINTON: My Lords, may I ask the Leader of the House to treat this matter a little more seriously? Is it not an established rule that neither House, the Members of neither House, can claim new privileges? And would it not be an entirely new privilege, whether claimed, as I am sure it would not be by any Member of this House or by a Member of the House of Commons,

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or not claimed, that they should not be subject to the ordinary law of the land?
THE EARL OF LONGFORD: My Lords, I am afraid I cannot agree with the noble Earl that this is an extension of Parliamentary privilege.
LORD HAWKE: My Lords, may I ask the noble Earl the Leader of the House whether, looking at the history of the last 700 years, he would not agree that it would be most unwise to give Parliament this particular privilege?
THE EARL OF LONGFORD: My Lords, I have not had time since luncheon to look at that.

PRICES AND INCOMES WHITE PAPER
LORD SHEPHERD: My Lords, at a suitable moment after 3.30 I shall be making a Statement on the Prices and Incomes White Paper.
HOUSING (SCOTLAND) BILL [H.L.]
Read 3a (according to Order), and passed, and sent to the Commons.

COMPANIES BILL [H.L.]
2.45 p.m.
Order of the Day for the Second Reading read.
THE LORD CHANCELLOR (LORD GARDINER): My Lords, I beg to move that this Bill be read a second time. In so moving, I think that my first words must be words of thanks to Lord Jenkins and the members of the Company Law Committee. We are all very indebted to them for the considerable amount of work which they did in this field and of which, in a sense, this Bill is a child. Of course, as economic and social conditions change so the law has to change to meet them. Our Company Law has always been elaborate, and the Jenkins Committee, in the introduction to their Report, say:
"This elaboration of the law can generally speaking he fairly justified as having been found necessary in order to keep effective control over the growing and changing uses of the company system as an instrument of business and finance and the possibilities of abuse inherent in that system."
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The same point was put slightly differently by my noble friend Lord Chorley in a chapter on Company Law in a book called Law Reform Now, when he said:
"Limitation of liability, in its inception a convenient method of joining a number of small investors with a common interest in a particular venture and insulating them from the risks of the venture and the travails of management, became a means to defraud investors, bilk creditors and evade taxation."
From our main Companies Act, originally of 1908, after a lapse of 21 years the time had come for a radical revision of our Company Law, and so we had the Act of 1929. Another 18 years passed, and then again, in the Act of 1947, consolidated in 1948, we had another major revision. Since then another 18 years have passed and the time has come for us to see what revisions are necessary in our Company Law in consequence of changes which have taken place meanwhile. To my mind this should not be a question of Party politics. We are revising a piece of our law as a whole. There will always be room for differences of opinion. For example, so far as directors are concerned the Institute of Directors consider, I rather think, that we have gone too far, while the City as a whole think we have not gone far enough.
The Bill is in four Parts, of which the first Part deals in the main with duties of disclosure, the second Part deals with insurance companies, the third Part deals with banking and money-lending companies, and the fourth Part with miscellaneous provisions. I think that nearly all the points on which there may be differences of opinion are in substance contained in the first Part, and I should like, if I may, to take the less contentious Parts first. This means taking the Bill from back to front; but at any rate it will make a change.
I do not think that in the five clauses of Part IV there is anything to which, for the purpose of Second Reading, I need draw your Lordships' attention. They relate almost wholly to repeals or amendments of detail which are consequent upon the provisions contained in the first three Parts. Part III deals with the distinction between banking companies and money-lending companies, Section 6(d) of the Money-lenders Act 1900 having exempted from the provisions of the Act persons bona fide carrying on the business of banking. We all know

125
what is the difference between a bank and a moneylender. A moneylender is a man who lends his own money, usually at some risk, because if you have securities you go to a bank and not to a moneylender. But if he sees that the would-be borrower is in a responsible position, earning a settled income he is prepared to take his risk. A bank, on the other hand, is an institution into which you put your money for safe keeping, and, quite naturally, they charge you for it. Then, the moment your back is turned, so far from keeping it in safe keeping they go and lend it out to somebody else, out of which they make some money, and they do not usually take any risk because they lend money only on good security. This is primarily why, whether there is a slump or a boom, whether times are good or bad, almost the only people who are never affected are the banks.
The result of all this, for some reason that I have never quite understood, is that everybody agrees that banks are frightfully respectable people and moneylenders are frightfully disrespectable people. In consequence, great difficulties are put in the way of moneylenders who are not banks. They have to get a licence. Their contracts all have to be in a particular form, and if they move a foot wrong the whole thing is illegal and they cannot recover the loan. So it is important to distinguish between the two.
In former limes there was no difficulty, but in later times we have had merchant banks, finance houses, discount houses, and hire-purchase companies. If you want to buy a car and have not the money to do so, what you do in fact is to go to a hire-purchase company and borrow the money from them, on terms that you repay it by installments, they having the right, if you default in your payment of instalments, to come and take the car away. I said "in fact", because that is not at all the view which your Lordships' House formed some years ago, as a matter of law, and it is now too late to alter it. The law on the subject is that instead of being, as it plainly is, a contract for sale on credit terms, you are really only hiring the car from the company, they having never seen the car at all, and it is not until you have paid the final shilling that you can be said to be buying it.
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Whether, in those circumstances, hire-purchase companies are moneylenders or not might, I suppose, be open to some controversy. In February, a case came before the Court of Appeal and it was contended that the United Dominions Trust (an old, most able and respectable hire-purchase company), who were the plaintiffs, were moneylenders. In the course of his judgment, the learned Master of the Rolls, Lord Denning, said:
"It is very desirable that the public should be able to distinguish between bankers and moneylenders. The UDT have only succeeded in this case because of their reputation and standing in the City of London as hankers. If any other concern should wish to be regarded by the courts as bankers, they ought to ask the Board of Trade for a certificate that they should be treated as bankers".
The Board of Trade, in fact, have no such powers. They can give a company the equivalent of a certificate when they are satisfied that it should be treated as a banking company for the purposes of the Eighth Schedule to the Companies Act, 1948; that is to say, as to accounts. But the Board of Trade have no other power to issue a certificate of the kind suggested by the learned Master of the Rolls.
However, it is extremely important that there should not be any uncertainty in this field. If any bona fide hire-purchase company were to be held to be a money-lending company, all of their loans outstanding would be illegal and they would be unable to recover any of them. The purpose of Clause 81, therefore, is to end the present uncertainty by stating that a person is exempted from the provisions of the Money-lenders Acts if he has satisfied the Board of Trade that, as a person carrying on his business of banking, he ought to be so exempted. The clause provides for such an exemption being retrospective. It would be possible, in, say, August, 1967. to exempt a person from an earlier date. If that were not possible, it would leave room for doubt as to whether, in the period before the exemption was given, the company was not, after all, a money-lending company. That is what Clause 81 does. It also improves the definition of companies carrying on a banking business which is contained in the Act of 1900. Clause 82 repeals Section 1 of the Moneylenders Act, 1911. This was a provision which related only to loans under agreements made before January 1, 1928. We do

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not think there are many loans outstanding now which were made before January 1, 1928. If the moneylender has not got his money back in forty years he probably will not get it back now.
Part II of the Bill relates to insurance companies. As your Lordships know, in the case of the Fire Auto and Marine Insurance Company, and one or two others, we have recently found that our citizens have been led to insure in companies which, when a loss arises, are found not to have the means to pay. Not only is this a great hardship on the person who is insured, but it may also, particularly in road traffic cases, be an even greater hardship on the unfortunate plaintiff who has been awarded damages, if he cannot get the damages which he has been awarded. There are few other Western countries in which insurance companies do not have to be authorised before they start business, and accordingly Clauses 44 and 45 provide that, while existing companies will be automatically authorised in relation to their existing classes of business, new companies can start in the insurance world only at the discretion of the Board of Trade. Clause 46 provides that their assets must exceed their liabilities by £50,000, and that if they have a share capital at least £100,000 of the share capital must be paid up.
Clause 47 provides for suitable reinsurance arrangements; Clause 48 that only persons who are fit and proper persons to start insurance companies will be allowed to do so. Clause 49 is one under which the Board of Trade may impose conditions on the investments in which an insurance company's money may be held during its first five years. Clause 50 provides that if the Board of Trade is doubtful about the affairs of an insurance company it can order the company not to undertake new business of a specified class or classes.
Clauses 52 to 57 deal with the accounts of insurance companies. Clause 58 doubles what may be called the solvency margin, and Clause 59deals with the methods of seeing that that margin is maintained. Clause 60 removes the present position by which the Board of Trade cannot petition for the winding-up of an insurance company without the leave of the court. Clauses 61 to 64
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give the Board of Trade the same powers of investigation of insurance companies as they have under the Protection of Depositors Act 1963. Clauses 65 to 72 deal with the enforcement of the previous provisions, and Clauses 73 to 79 with minor miscellaneous matters. It is in the belief that there is really nothing in all this on which there is likely to be any dissent of principle, and in order to leave myself time to deal more fully with Part that I have passed over the clauses to which I have referred without going into matters of detail upon them.
Now I come to Part I, which perhaps raises the only question that is likely to be controversial. It deals in the main with what limited companies ought to disclose. Your Lordships may know that in February a Second Reading was given to a Companies Bill in another place, but then came the General Election as a result of which that Bill fell. Complaints were made during the discussions on that Bill that it did not go far enough. It was said there was nothing about directors' share dealings. Well, there is now, in this Bill. Then it was said that the Bill dealt only partially with the subject of contracts in which directors were interested. This Bill deals with that subject fully. Then it was said that the earlier Bill said nothing about directors' contracts of service. This Bill does.
Another criticism of the earlier Bill was that, so far as insurance companies were concerned, it dealt only with the form of accounts which they ought to keep. This Bill deals with them fully. Further, there was nothing in that earlier Bill relating to businesses akin to the business of banking, whereas Part III of this Bill now deals with that subject. Then it was said that that Bill had not dealt with the exemption of shipping companies from the other provisions. This Bill does so. Another criticism voiced on that Bill was: you have not dealt with the fact that a partnership cannot consist of more than 20 members. This Bill deals with that subject. Then it was said: you have not dealt with the question of nominee shareholdings. The Government said that that was a very difficult question and that any clause which was to provide for disclosure of nominee shareholdings would necessarily have to be a very complicated one. In this Bill we have done our best to cope with that matter also. The result

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is that while the earlier Bill was a Bill in 45 clauses, this is a Bill of very nearly double the length, with 87 clauses and 6 Schedules.
The first matter is that which is the subject matter of Clause 2. If some companies ought to file their accounts at Somerset House, which companies ought to have this obligation? Clause 2 says all of them. As your Lordships will remember, this matter has something of a history to it. Originally, in 1908, Parliament said:" Well, it is really quite simple. There are public companies and there are private companies. The private companies are just small family businesses, and we need not trouble with them." They said that public companies must file their accounts, but private companies need not do so. Subsequent experience showed that the view that private companies would merely be small family businesses was quite wrong, and that a lot of very funny things were going on under the hat of the private company. As a result, in 1947, Parliament had another look at this matter and said, "We will split them into three: public companies, private companies and exempt private companies. Public and private companies should file their accounts, but on our definition of exempt private companies they will be only small family businesses, so we do not have to worry about them.
After a further period of time, the Jenkins Committee went into the matter and found that a lot of funny things were going on in exempt private companies, and that, so far from their being small family businesses, about 75 per cent. of all limited companies were exempt private companies. The Committee recommended, and the Government agree, that all limited companies should now have to file their accounts. The accounts of all companies are, of course, of interest to shareholders, to customers and to employees who may find themselves left with nothing but a claim for their wages in a winding-up.
The principle of the matter, it seems to me, is this. Although limited companies have undoubtedly been of the greatest use in the development of our economy, they are, nevertheless, an enormous privilege. You are saying to
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people: "You lot can get together; you can start a business, and you can engage in trade. If the result of the whole thing is that you have got a lot of creditors whom you cannot pay, don't worry. Nobody is going to take away your house, nobody is going to rummage about in your bank account. You will be quite all right. All you have to do is to start another limited company." It is because this great privilege is given to people who operate limited companies that it is only right that one thing, at least, they can do in return is to file their accounts. All companies must have an annual account. All they are being asked to do is to send a copy of their annual account to the Registrar of Companies. Unlimited companies will be under no such obligation, and the Bill contains provisions at the end enabling registered limited companies to become unlimited companies, and unlimited companies to become limited companies. Those provisions are in Clauses 31 to 33; but if people want to have this great privilege it is not, I suggest, too much to put a duty on all companies to file their accounts.
I think that most lawyers and accountants would agree that, apart from any other factor, the exempt private company has really been the backbone of all the most successful tax frauds and tax evasions that there are. I remember a colleague of mine telling me that he had just had a conference with a client whom he was advising about something or other. At the end of the conference, he said to his client, "Now the conference is over, and I know you are paying me to advise you, and I am not paying you. But as a matter of interest I should be very concerned to know this. I see that your income is almost exactly the same as mine"—I think it was about £20,000 a year—"By the time we have paid income tax and surtax, that is £15,000, we have £5,000 left, and we both know what can be done with it to-day. I have a Rover car, and I am all right, but when I look at your expenses I see that you have a Rolls Royce and a Bentley, as well as a yacht. How on earth do you do that on this income?" The client replied: "Well, I have the best accountant in London, and I do what he says. He has provided me with twelve exempt private companies, and the whole thing is frightfully involved. The yacht belongs to

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an exploration company, and it is all so complicated that the Inland Revenue do not seem to be able to puzzle it out. As a matter of fact I have not paid any tax for six years, and my accountant tells me that as long as there is a letter on the file to answer the Inland Revenue seem quite happy."
The next group of clauses, Clauses 3 to 14, and Schedule 1, deal with disclosure in the accounts of the company and also with the qualification of auditors. It was always one of the problems with the exempt private company that the auditor did not need to have any qualification or to be independent of the company. Clauses 3 and 4 relate to disclosure of subsidiary and associated companies, and by Clause 5 a subsidiary company must say which is its ultimate holding company. Clauses 6 to 8 deal with the remuneration of directors and provide that the chairman, or anybody who is paid more than the chairman, must state what his income is, and that others, as well as employees earning over £10,000 a year, can be put in bands of remuneration. The system of bands is, in fact, what is done in the nationalised industries: one finds the chairman's remuneration, and then that of the other directors in different bands.
A director must also say if he has waived his remuneration. This is of some importance, because otherwise somebody looking at the accounts may say, "Well, the directors are not being paid very much", entirely ignorant of the fact that, whereas he would think that next year their remuneration would be the same, of course if they waived a large part of their remuneration this year their remuneration next year would be very different.
I do not know why this has become controversial. We live in days when there is an incomes policy, and everybody's income is very interesting to everybody else. Why not'? The vast majority of our people are weekly wage-earners and they know what their income is and. for that matter, what their take-home pay is. This can he seen in the reports of the Ministry of Labour and as a result of trade union organisation. Everybody knows what everybody in the Armed Forces is paid, from the private to the
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Field Marshal. Nobody thinks it is infra dig. for people to know what the Field Marshal is paid. Everybody knows what everybody in the Civil Service is paid. Many a wife, I expect, has been grateful to Whitaker's Almanack. Everybody knows what the Lord Chancellor is paid.
Why, then, should we have this privileged group of people, company directors, who are so extraordinarily shy about people knowing what they earn? I believe I am right in thinking that in America the remuneration of every company director has always been published for the last thirty years, and I cannot myself see any reason—we seem to have been very accommodating about the bands; and, of course, one should always be accommodating—why whatever remuneration any director gets should not in fact be known.
Matters of detail as to the accounts are now contained in the Eighth Schedule to the 1948 Act. Clause 9 and Schedule 1 to this Bill propose certain changes in that Schedule, and Schedule 2 to this Bill is a Keeling Schedule; that is to say, Schedule 2 shows what Schedule 8 would look like if the Amendments proposed in Schedule 1 were carried. Schedule 1 also contains an exemption for shipping companies. This was considered by the Jenkins Committee in relation to the exemptions which exist regarding matters to be contained in accounts for shipping companies. The Jenkins Committee were of the opinion that these exemptions should be abolished. The Government are not sure about that. They are not sure that there may not he one or two shipping companies which, for good reasons and in the national interest, ought perhaps not to have to disclose certain matters in their accounts, and accordingly, in Clause 9 and Schedule 1, the question is left to the good sense of the Board of Trade.
Clauses 10 to 14 contain miscellaneous matters—dealing in particular with the qualifications of auditors—and Clause 12 deals with the subject of whether banking and discount companies should also be exempt from some of the provisions which apply to others in relation to their accounts. This was a matter on which the Jenkins Committee were divided in opinion. The majority were in favour

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of retaining the exemption, with some reserved discretion on the part of the Board of Trade. Under the Bill it is left to the Board of Trade, who, frankly, have not yet made up their minds. Discussions on the point have taken place, and are still taking place, between the Board of Trade and banking and discount companies.
I come to the group of clauses, Clauses 15 to 23, which deal with disclosure which is to be made, not in the accounts but in the directors' report. Clause 16 deals with contracts in which directors are interested, and with directors' dealings in the shares of their companies. Clause 17 provides that the directors' report should state what is the turnover of the company in each class of business, and I shall come back to this in a moment.
Clause 18 provides that any contributions over £25 for political or charitable purposes must be disclosed in the report. Clause 19 provides that the report must state the amount of the company's export business if its turnover is over £20.000 a year. Clauses 20 to 22 are subsidiary points, and Clause 23 deals with the shareholders' rights to copies of the directors' report. In this group of clauses there are one or two points which may be open to some controversy.
May I say a word, first, about the requirement that the directors' report should state the turnover and the export business? It is suggested, as I understand it, that if, for example, a limited company here had really only one customer somewhere abroad, this requirement would tell the company's customer much too much about its business. This sort of practical point I shall leave to my noble friend Lord Brown, with his practical experience. But the answer, I suggest, is that if you are a company which has only one customer, he knows it anyway. This is the sort of information which it is necessary for Governments, "Neddies", E.D.C.s and trade associations to know in the days in which we live.
With regard to the provision for disclosure of exports, I understand it is said that this is, or may be, rather hard on some companies which manufacture a lot of parts which some other company then assembles into a machine and exports.
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But the Government and these trade associations are mainly concerned about the actual exporting companies; and, of course, there is nothing whatever to prevent a company which makes the parts from saying in its directors' report, "We are making a good effort to help the export trade, because such-and-such a proportion of our business consists entirely of making parts to sell to other companies, which they in turn export."
Then there is the question of political and charitable contributions over £25. Here I do not understand what the objection is. This is not, after all, the directors' money that they are giving away it is the shareholders' money. The Bill does not provide that they may not do so without the approval of shareholders. All it says is that when they have done so they ought to tell the shareholders what they have been doing, and I should have thought, with respect, that there could be no reasonable objection to that. I can well understand that, if three out of four directors happen to be supporters of the Labour Party, Conservative shareholders might be annoyed if they find their money being given away to the Labour Party. At all events, it is right that they should know. What seems wrong is that a shareholder writes to the directors and asks, "Have you been giving money away to any political Party, and if so which?", and receives the answer, "We shall not tell you." Of course, so often things work all right unless they are overdone.
Your Lordships may remember that in the General Election in October, 1964, the Conservative Party spent £750,000 on Press posters and Press advertising, the steel companies spent £1,250,000 of their shareholders' money on anti-Labour propaganda, Aims of Industry £370,000, and the Economic League £250,000. Then British United Industrialists was openly formed for the purpose of getting directors to give them grants and funnelling them to Conservative Party headquarters. As I have said, this is not directors' money; it is shareholders' money. I should have thought that the least we can do is to provide that, at any rate after the event, shareholders are told how much of their company's money has been given away, and to whom. In a sense, much the same thing applies to charities. Nobody wants to

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stop companies from making reasonable donations to charities, and I should think that the shareholders of any shipping company who found that their board was not making reasonable contributions to seamen's charities would think that they ought to do so. On the other hand, if very large sums of a company's money were being given to Moral Rearmament because three out of the four directors happened to be believers in that, the shareholders might very well object, although I expect that is a charity.
Clauses 24 to 28 are other provisions affecting directors. Clause 24 prohibits directors from getting themselves options on shares. Clause 25 provides for the disclosure of directors' contracts with the company in which those directors are interested. Clause 26 provides for the disclosure by directors of their holdings in the shares and debentures of the companies of which they are directors; and Clauses 27 and 28 provide for the availability of this information at the company's office.
That leaves Clauses 29 and 30. These clauses provide an obligation on the beneficial owners of 10 per cent. or more of the shares of a company to disclose who they are. I did say that when the absence of a provision of this kind in the February Bill was commented on the Government said that it was going to be a rather complicated thing to do—and I think it is. As to whether we have provided for this exactly correctly in these clauses, we shall of course listen to the views of your Lordships and will welcome any Amendments which are genuinely intended to improve the drafting of the Bill.
As I understand it, it is still said in some quarters that even this Bill is not enough: there are still other recommendations of the Jenkins Committee, for example, which this Bill does not include. This Bill is only a first instalment. It is the intention of the Government to introduce a further Companies Bill in the lifetime of this Parliament. If it is asked, "Why do you not do the whole thing now?", it is because it must be for each Government to decide how much Parliamentary time in a particular Session they can allow for reforming the law in any one field, and this is all that can be allowed in this Session. But it is
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a substantial meal. The Government will hope to be able to deal in the other Bill with the question of the protection of minorities; with the powers of the Board of Trade to investigate company affairs; and, perhaps, with the very relevant question to-day—as the success or failure of a company naturally depends so much on those who work for the company, the employees—of whether they ought not to have a more settled place or places on the board of directors of the company by which they are employed than English law allows them now.
It has sometimes been said that this Government have not always taken enough time in the drafting of the legislation which has been put before Parliament. It is because they want further time to consider these matters that they are introducing this Bill as a first instalment; and, in any case, it is not always wise to eat too large a meal at one time. This Bill, after all, has 87 clauses and six Schedules, and is just on 100 pages long, and I suggest it is quite enough for the time being. If, nevertheless, the noble Lord, Lord Erroll of Hale, or the noble Lord, Lord Drumalbyn, still say, "You ought to have covered much more ground", I must say that our reply will be—with every courtesy, of course—"Look who's talking!" In the last 36 years we have had only two Acts to reform our Company Law: that of 1947, consolidated in 1948, which was during the term of office of a Labour Government, and now this Bill is brought forward in 1966, again by a Labour Government. The Conservatives have not been wholly out of office in those 36 years, and it is strange that this passion for reforming our Company Law on an enormous scale seems to exist only when they are in Opposition.
I say nothing about "thirteen years", because I know that that is not a popular subject, but it is a fact that the Jenkins Committee reported in May of 1962 and that the Conservatives then had until October, 1964—two years and five months—with nothing much to do, except to create the worst adverse balance of trade in the history of the country; whereas we have not been in office yet, under both this and the last Government, for as long as two years five months.
LORD OGMORE: It seems so.
THE LORD CHANCELLOR: I hope so. My Lords, I was looking last night at the debates on the 1947 Bill, and I saw that, among the old faces—or familiar faces; I must not say "old"—assisting the Lord Chancellor in the Committee stage at that time (and an enormous number of Amendments were put down) was my noble friend Lord Chorley. There were also notable contributions from my noble friend Lord Latham; from the noble and learned Lord, Lord Simonds, as he then was; from the noble Lord, Lord Saltoun; from the noble Lord, Lord Hawke, coming in on a number of occasions on the question, "Whether the clause shall stand part?"; and the noble Lord, Lord Man-croft. I felt even more at home when I saw that between the dates of the different Committee stages of the Bill there was a debate on the rising trend of divorce, and what we were to do about our divorce law; there was a debate on the Territorial Army; there was the Sunday Entertainments Bill; and there was a debate on the grave economic position. So I felt altogether quite at home.
I also noticed that although, I suppose, in those days, the built-in Conservative majority was a good deal larger than it is now, and although there was this enormous number of Amendments, the Opposition did not press any single Amendment to a Division. Noble Lords opposite are very keen on precedents, and I respectfully commend this precedent to them. On this happy note, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read 2a.—(The Lord Chancellor.)
3.28 p.m.
LORD ERROLL OF HALE: My Lords, I should like to begin by echoing the appreciation which the noble and learned Lord the Lord Chancellor has expressed to the noble and learned Lord, Lord Jenkins, for his admirable Report. Lord Jenkins was invited by my predecessor, a member of a Conservative Government, to study Company Law and to report, and it so happened that I held the office of President of the Board of Trade when he reported to me in May, 1962. I therefore took particular note of what the noble and learned Lord the Lord Chancellor had to say about our so-called
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inactivity. Of course, the first and most essential thing is to get a good Report by a well-known, impartial and highly-respected individual—and that is what we got.
In our way of thinking, we thought it right that there should be time to collect the opinions of all those likely to be affected before framing detailed legislation, and we made our intentions to legislate quite plain in the summer of 1964. It being impossible to carry a Bill through because of the impending Election of October, 1964, we made it quite plain how we were going to legislate and what we were going to do. We are sorry that the successor Government did not see fit to take our Bill on board and put it through, because it was a good Bill. Instead, they have wasted two whole years while they have been doing certain things which the noble and learned Lord the Lord Chancellor described as "yet another economic crisis", rather than getting on with some useful legislation. Nevertheless, we now have the Bill and it was most interesting to hear how the noble and learned Lord the Lord Chancellor described it.
In his dignified and lofty way, he suggested that of course there should be no politics in this matter, and then proceeded to make one of the most violent, controversial Party political speeches that I have heard in this House. Indeed, I have seldom heard one so vicious in its studied arrogance in another place when I was there for twenty years. I hope that some of his violent strictures on the banks of this country were meant to be funny. I like to think that he was being humorous, for I have appreciated his delightful sense of humour on previous occasions. But it might have been better if he had made it a little clearer that he was being funny about the banks and not nasty about them. I should like to give him the benefit of the doubt and assume that he was making jokes about the prosperity of the banks and the poor chances of survival of the moneylenders.
Also I noticed that the noble and learned Lord the Lord Chancellor referred somewhat disparagingly to the Institute of Directors who he thought would be against the Bill, and the City of London who, he said, were in favour of it. Perhaps I might instruct the noble and learned Lord. There are many

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directors in the City of London who are Fellows of the Institute of Directors. Perhaps before going any further it would be in accordance with the custom of this House that I should declare my personal interests. I am a chairman of two British companies and a director of three others, and I am also a member of the Council of the Institute of Directors. So, if I speak with knowledge, I hope that I speak without prejudice.
My Lords, before going into the details of the Bill, I must say that I have seldom heard a Second Reading speech by a Minister introducing a Bill in which he started at the end and ended up at the beginning. But that, as the noble and learned Lord the Lord Chancellor said, does at least make it different; and with that I fully agree. I should like at the beginning of my remarks to state our Conservative attitude towards this Bill. We support changes in Company Law involving greater disclosure as a means towards greater efficiency. We therefore support the principles behind this Bill and many of its provisions. Indeed, there are some areas where we were pledged to go further than Labour has seen fit to go. I do not think that in going further it would have added many more clauses to the Bill. I have never heard a Member of Her Majesty's Labour Government apologise for a lengthy Bill. Some of the Bills we have had in the last two years have been very lengthy indeed. If they had wanted to, they certainly could have produced a more comprehensive Bill using the material that we left behind us.
While, therefore, we can lend our general support to the Bill's proposals, we criticise it on two grounds: first, on the ground of important omissions from matters recommended by the Jenkins Report, and, secondly, on matters in which the Bill goes further than the Jenkins Report recommended. To this we object. Noble Lords will probably have been studying Press comment on the Bill. It has been wide-ranging, and I think it is fair to say that it has been generally favourable. But respectable newspapers have not failed to point out some of the least savoury features of this Bill. For example, The Times, commenting on what one might call the "first edition" of the Bill, which was introduced in February, said on February 11:
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"The bit about political contributions of course is vengeful, the bit about directors' fees is envious and the bit about export earnings invidious."
The Daily Telegraph a week earlier said:
"Another radical proposal is for the abolition of the privileges of the 'exempt' private company. Here, likewise, it is difficult not to credit the Government with political prejudice…".
These are the remarks of two well-respected newspapers who see in this Bill a substantial element of political prejudice.
In studying the Bill, and the many remarks made about it in another place when it had its earlier Second Reading, the "first edition" Second Reading, and listening carefully to the noble and learned Lord the Lord Chancellor, I could not but sympathise with the dilemma and the problems facing a Socialist Government. First of all, we must realise that they do not really believe in the free enterprise system: they regard it as a necessary evil. They must tolerate it, because it is the driving force of productive industry to-day. Secondly, they recognise, quite rightly, that the reform of Company Law is overdue and that they must do something about it. Then they are in the dilemma that they hold shareholders in contempt. They do not like shareholders: they have said so on many occasions. I would quote only one example—it comes from the Chancellor of the Exchequer, who in another place on May 10, 1965, said that the oil company
"shareholder…is as redundant as the rhinoceros."—[OFFICIAL REPORT, Commons, Vol. 712, col. 208; 10/5/65.]
I do not think that that is a very good statement to come from the Chancellor of the Exchequer, even in the heat of a debate in another place. But it illustrates the attitude of Socialist Ministers towards shareholders.
Then there is the distrust, if not hatred, of directors, especially part-time directors or ordinary directors. There is this eager curiosity—a form of envy—to discover what is the pay of directors. But I should have liked the Lord Chancellor to be perhaps a little more forthcoming about the disclosure of the pay of members of his own distinguished profession. When are we going to hear about the emoluments of barristers? When are we going to have some reforms about some of those

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barristers who did very well in their last year and escaped tax? If there is going to be a vendetta between the profession which the Lord Chancellor represents and directors of companies in this country, let us have all the cards on the table and not just sneering, mocking references to the hard-working members of the Community.
I suggest that that summary of the difficulties and dilemma of the present Socialist Government may help to explain some of the more curious features of this Bill. I wanted to begin like this, because I must return to some of the points which can he regarded as political, contentious or prejudicial, according to the viewpoint of the individual noble Lords. Unlike the noble and learned Lord the Lord Chancellor, I propose to begin at the beginning and go on to the end, because in my simple, non-legal, way I find that the easiest way to get through a Bill.
I start, therefore, with exempt private companies. We accept the Jenkins recommendations; but I must point out to noble Lords that there is strong and reasonable opposition from many influential and respected bodies to the abolition of the exempt private company. In my opinion, this stems partly from the fact that Her Majesty's Government have gone beyond the Jenkins recommendations. If they had stuck to the Jenkins recommendations I think that the opposition to the abolition of exempt private companies would have been on a much smaller scale than it has proved to be in the event. The principal features in which the present Bill goes beyond the Jenkins recommendations are in turnover, directors' emoluments and rents. I should like to deal with each of these three in detail for a minute or two.
As regards turnover, it is going to be a very serious matter for the small business to have to reveal its turnover; nor is it necessary for it to do so, in the interests of the community or for any other purpose. The small business operating in, say, Leicester, will have to reveal its turnover in trade; whereas the comparable business in Leicester which happens to he a subsidiary of a nation-wide chain will not have to reveal the comparable turnover from its operations in Leicester. So that the small business will be put at a disadvantage as com-
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pared with the branch of the big business. I believe that in the case of a small company its turnover is a matter entirely for that company and its shareholders. There is no possible justification for compulsory disclosure to the nation as a whole of the turnover of these small businesses.
As regards directors' emoluments in the case of the formerly exempt private company, this provision runs directly counter to what the Jenkins Report had to say in regard to the exempt private company…and I am not here dealing with the question of the large public companies. I think this is a matter of such importance that I hope noble Lords will allow me to quote from Paragraph 351 of the Report, where the Committee say:
"We recognised, however, that some information required in the accounts, while of interest to the members, was not of prime importance to creditors, and that its public disclosure by some small companies might he embarrassing to them; we had in mind particularly the requirement to disclose directors' emoluments."
I should have been glad if the noble and learned Lord the Lord Chancellor could have explained, in a serious rather than a facetious manner, why he felt it was so necessary to override his noble colleagues' considered judgment in this matter. We shall, however, return to this subject during the Committee stage, when perhaps the noble and learned Lord will avail himself of an opportunity to give to noble Lords a fuller explanation.
The same applies to rents. I have mentioned turnover, directors' emoluments and rents, and I should like to inform noble Lords that during the Committee stage we shall seek to delete these requirements in respect of small, unquoted private companies. It is no answer to say that they can go unlimited if they prefer to do so, because that would be a retrograde step, since the great industrial and commercial development of our land has occurred through the remarkable British invention of the limited private company.
I turn now to the requirement to publish figures relating to export performance. I listened in vain for a full and satisfactory explanation from the noble and learned Lord the Lord Chancellor. He is an expert in many things but not, I fear, in the matter of

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exports. I cannot see what useful purpose this disclosure will serve. If the Board of Trade want to know whether a firm is exporting or not, all they have to do is write a polite letter, and get the answer. What are the Government going to do with all this information when they get it? Are they going to start a witch-hunt? Are there to be unpleasant comparisons between a butcher's shop in Leicester which does not export, and a butcher's shop in Hull which does export, because it has a big shipping victualling business? Are we going to have a great stir-up of comparisons between some companies who happen to export direct, and others who export indirectly through what they supply to other companies? Such figures could not be meaningful.
Although the Lord Chancellor suggested that such companies could quote figures, how are they to know, when they supply a large volume of components to a motor car assembly plant, what proportion of those components are going in direct export as motor cars; what proportion are going to spare parts depots in this country, and what proportion will be shipped abroad as spare parts stocks overseas? The only way to find out would be to write to the customer and say, "Please can you give me some figures, because I have to put them in my accounts". What is the outcome to be if they get the information? What are people going to do with these facts when they get them? What I fear about this excessive degree of disclosure is that some people will start to say, "We have a lot of information, now we must start doing something about it". We shall get the assistant economic lecturer at one of the new technical colleges writing a thesis on the proportion of exports among small companies in this country, which will, in turn, stir up more discussion and more controversy.
It may be that those companies which do not export will be accused of" failing the nation"—a phrase very popular with Socialist Ministers at the present time. They will then have to prepare a long justification of why they are not exporting and why, in fact, they are doing much better for the nation by sticking to the job they know how to do. We oppose this disclosure of export turnover because it is misleading as between firm and firm; and
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also because it can be very damaging to the firm concerned, and therefore to the national interest, because it will give foreign competitors valuable information which they would dearly love to have at present. We shall therefore seek to amend these provisions in Committee.
Then, as regards the disclosure of the salaries at higher levels and among public companies, the noble and learned Lord, the Lord Chancellor made great play with the salaries of Field Marshals and the salaries of public servants. I agree with him that many wives must be grateful to Whitaker's Almanack, but the great and essential difference between such salaries and the salaries of directors and executives in business is that the salaries of public servants are paid out of public funds and the public has a right to know how its money is being used. The salaries of directors and senior executives are paid by the chairman and the directors, in accordance with their estimate of the value of the services of each individual, in order to secure the best results for the company for whose success they are responsible to the shareholders. There is a very substantial difference. What is the object of this disclosure? is it really going to serve any useful purpose, or is it merely to satisfy the curious and the malevolent? We have had no satisfactory explanation of this. I fear too much that it is a desire to satisfy the curiosity of those who think they are not as well off as directors or chief executives. Or is it, indeed, to keep a watch on the general increase of such salaries? I thought that might have been a plausible argument which the noble and learned Lord the Lord Chancellor would introduce. I can assure him that the effect of such disclosures will be to increase the rate of increase of salaries far and away above what has been going on in the past few years, because you may be quite sure that there are many people who are curious.
The noble and learned Lord rightly pointed out that we are all interested in the incomes of other people—although we are not able to learn the incomes of barristers. And you may be quite sure that one executive will take good steps to find out what his opposite number in another firm is getting, if it is published, and make sure that his salary goes up commensurately. It is also obvious that

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if the chairman is the best paid executive and he is getting more than the chaps lower down, they are going to say, "Why should you get three times as much as me? What about putting up my salary?"
There is another aspect of the matter: the new phenomenon in England known as the "head hunters"—a specialised firm which looks for men who are quite happily engaged in one job and entices them away to another job which is very much better paid. This section of the Bill is really the "head hunters' charter". It enable them to see in which firms the salary scales are low in relation to others, and they will know exactly where to go to pick out the good men for transfer to higher paid jobs. This may be a very good thing. I am not against high pay; it is only the Socialists who are against high pay. I am on the side of the executives who want more money, and it may be that this disclosure will be a very good thing to help to ameliorate the lot of the insufficiently well paid executive—though I very much doubt whether that was the intention of Her Majesty's Government.
Now I turn to political and charitable donations, a subject which was referred to in the Jenkins Report. It is a matter of some controversy, I think, as to whether Jenkins really referred to both political and charitable donations. I thought, as we may come back to the subject in Committee, that if noble Lords would allow me a moment, I should just like to explain that the relevant paragraphs are 50 to 53 inclusive. Paragraph 53 under the heading "Charitable and political donations", summarises what is going to be dealt with in the ensuing three paragraphs—namely:
(a) whether political donations by companies should be permitted; (b) whether statutory powers should be conferred on every company … to make charitable donations of every kind; (c) whether such donations should be shown separately in the accounts.
Paragraph 51 says:
"We do not comment on the substance of these suggestions"—
that is, about political contributions being prohibited—
"because we are quite clear that they are not primarily a matter of company law".
Paragraph 52 deals with charitable donations, and paragraph 53 sweeps up the
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earlier two paragraphs in regard to donations as a whole, and says:
"But we do not think donations are a sufficiently important item in most company accounts to justify an express, general requirement to disclose them".
We stand by Jenkins in this matter. We do not mind if all these contributions are going to be disclosed. We think it a pity to sully what should be a Bill dealing solely with Company Law by a mean, spiteful gesture designed to frighten firms out of giving to political organisations of their choice. But I think that side will be seen to be very small when compared with the charitable donations which have to be made public at the same time. So I think that by including disclosure and listing of charitable donations, the Government are largely defeating their own purpose in showing up the political donations.
But, of course, there may be effects unexpected by Her Majesty's Government. One would be if, as the years go by and more and more firms have experienced the hazards of Socialist Government, they will become increasingly proud to show their support of the Party which believes in free enterprise. Furthermore, there will be many shareholders—thanks to the initiative shown by Her Majesty's Government—who may well ask their companies, when they see no political contributions are being made to the Conservative Party, why no such contribution is being made on their behalf. So on this side of the House we are not afraid. We think that the correct Party will get the finance which they need from this source, together with funds from all other appropriate sources.
In regard to political contributions there are two matters which I think I ought to put to your Lordships. There can be two unfortunate effects. First of all, Socialist local authorities, and some trade unions, may well instruct the administrators of their pension funds to withdraw investments from firms making a contribution to Parties other than the Labour Party. There was some evidence of this in the summer of 1964. This, of course, would be only to the detriment of the viability of the pension fund. The other aspect (and there is some evidence of this too, though I will not burden your Lordships with the details) is the withdrawing of contracts and purchases from

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such firms by local authorities, and possibly by Her Majesty's Government as well. There is no provision in the Bill against this. And we shall seek at the Committee stage to insert an appropriate Amendment, designed to avoid the victimisation of firms which give full exercise to their right to donate money to such political Parties as they may wish to do.
As regards charitable donations, as I have said, I am sure that the Jenkins Committee were right in thinking that probably the matter did, not warrant action, as the paperwork would be so great. I would question the £25 limit. I mentioned this to the chairman of a large company to-day and he said, "This is going to mean a terrible lot of work." Indeed, it will mean so much that many firms may well consider reducing their donations to charity—but perhaps that is the object of Her Majesty's Government. Perhaps it is not. But it is not made plain. I would make the suggestion, which I hope we shall press in Committee, that at least the lower limit should be raised from the present niggardly £25 to something like £125. In any case, I would say at this stage that in my opinion the Government have wholly failed to make out a case for what they are proposing. About the insurance provisions, which the Lord Chancellor dealt with first, I have little to say, because I am going to leave that to my noble friend Lord Drumalbyn, who will be winding up for our side.
Before I close I should like to mention one or two important omissions which in our view should certainly have been included in this Bill. The first concerns the procedure affecting take-over bids. The Jenkins Committee made some important recommendations in this regard, but there is nothing in this Bill, yet this could surely have gone in. It would have been non-controversial and it is long overdue. Secondly, as regards unit trusts, the Jenkins Committee urged freedom from the prohibitions on security dealing and the issue of circulars, and also that the Board of Trade should have power to impose a number of requirements by Statutory Instrument affecting the operation of unit trusts. This is shown in paragraph 324 of their Report. The law relating to unit trusts urgently needs improvement and overhaul in the framework of the Jenkins Report, and it could
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have been done in this Bill without trouble or difficulty. Yet there is no mention of it at all.
As regards shares of non-par value, paragraphs 32 to 34 of the Jenkins Report recommended that ordinary and preference shares of non-par value should be permitted, but again there is nothing in the Bill about it. Accordingly, I give notice that we shall table an Amendment on Committee stage to give effect to this important recommendation of the Jenkins Committee, which I hope will be carried by noble Lords on both sides of the House.
My Lords, as I have explained, we on this side can give a partial welcome to this Bill, where it is good, but we shall not hesitate to oppose those features which we think are vicious and misconceived, and in that spirit we shall go forward to the Committee stage, where I hope we shall be able to improve the Bill substantially before it goes down the corridor to another place.

PRICES AND INCOMES WHITE PAPER
3.55 p.m.
LORD SHEPHERD: My Lords, with permission, I should like to repeat a Statement that has just been made in another place by my right honourable friend the First Secretary of State for Economic Affairs. These are his words:
"After consultation with the Confederation of British Industry, the Trades Union Congress and other interested parties I am laying a White Paper before Parliament (Cmnd. 3150) stating the principles which should govern prices and incomes in the first half of 1967. Copies are now available in the Vote Office.
"The consultation showed a wide measure of agreement that in this period there must be exceptional restraint on prices, charges and all forms of income.
"Proposals for price increases must be judged by criteria of severe restraint. The criteria set out in the White Paper on the Standstill (Cmnd. 3073) cannot therefore be relaxed, save that there may be exceptional circumstances in which, without some increase in price, the receipts of an enterprise would not be sufficient to enable it to

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maintain efficiency and undertake necessary investment. It is important that prices should be reduced wherever possible: the removal of the import surcharge will offer some scope for reductions.
"Increases in incomes during this period must be exceptional and severely limited. The criteria for this purpose, therefore, are not invitations to increases but rigorous tests to be applied to any claims. Accordingly, the Paper redefines the original criteria concerning productivity, lowest-paid workers, distribution of manpower and comparability, in much stricter terms. The chief emphasis is on agreements which genuinely increase productivity and serve the national interest as well as the interests of those immediately concerned; and on agreements where sole purpose is to help the worst-off in the community.
"Commitments for pay increases entered into in or before July 20 will have their operative dates deferred for 6 months or until at least July 1, 1967, whichever is the earlier. Commitments for pay reviews to take effect after July 20, where the amount of the increase had not by then been determined, should have their operative dates deferred until at least July 1, 1967, unless an earlier payment can be justified against the severe restraint criteria. This requirement applies to wage and salary increments in the public and private sectors other than those which are of specified amounts within a pre-determined range or scale, or were otherwise exempted under paragraph 18(iv) of Cmnd. 3073.
"The Government consider that the police, whose next pay review was originally due to take effect from September 1966, are in a special position because of their imporance in combating crime. My right honourable friend the Home Secretary is therefore prepared to discuss in the Police Council an increase payable in July, 1967, retrospective to March, 1967.
"The Government have already stated their policy on dividends and are pledged to use appropriate measures to deal with any excessive growth of aggregate profits.
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"The Government intend to work closely with the Confederation of British Industry and the Trades Union Congress and look to them to give guidance to their members about the application of these principles. The Government will receive information about individual cases, make the necessary inquiries and consider whether proposals are consistent with the criteria. We intend to make full use of the National Board for Prices and Incomes.
"The retail price index for October was one-quarter of one percent. higher than in June; the wage-rate index was two-thirds of one per cent. higher, nearly all this increase having occurred in July. This restraint could not have been achieved without widespread voluntary support. Statutory powers will be used only after consultation and only to ensure that the support of the majority is not undermined by the actions of a few.
"The first half of 1967 must indeed be a period of severe restraint. This will mean difficulty and sacrifice; but our economic recovery depend son the strict observance of restraint during this period, and on a permanent recognition of the indissoluble connection between productivity, prices and incomes."
4.0 p.m.
LORD ERROLL OF HALE: My Lords, may I, on behalf of noble Lords in all parts of the House, thank the noble Lord, Lord Shepherd, for his courtesy in reading out the Statement which has been made in another place. It is, of course, a complicated Statement and will require a good deal of study before we can find our way through the many platitudes that are contained in it to the essential truths. In the meantime, may I ask the noble Lord whether he could explain a little more fully about the already deferred pay increases? It seemed that we were to have a pay freeze for six months, but apparently commitments for pay increases entered into before the freeze ever started are nevertheless to undergo another period of deferment for six months, or until July 1, 1967, whichever is the earlier, as from this date or as from the beginning of the pay freeze.
Secondly, the Statement refers to the lowest paid workers. But what about

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what one might describe as the lower paid workers, the less well off citizens? Is their pay to be frozen until we have the benefit of another Statement in the summer of next year? I have in mind, particularly, the doctors. The Statement refers to the police. But what about the doctors? It would be helpful if the noble Lord could say something about that.
Finally, when the Statement refers to dividends and profits, it says:
"The Government have already stated their policy on dividends and are pledged to use appropriate measures to deal with any excessive growth of aggregate profits."
Is that a slip of the tongue for "aggregate dividends", or is the growth of profits—whoreby alone substantial investments can be made—to be discouraged as well as the payment of dividends?
LORD SHEPHERD: My Lords, the noble Lord is full of the humour this afternoon, but I hope he will not overdo it. I am not conscious that there are platitudes in this Statement.
SEVERAL NOBLE LORDS: Oh!
LORD SHEPHERD: There is hope. I do not identify that with platitudes. Nor do I find this a very frivolous subject for discussion in this House, particularly for the men and women who will be affected by this Statement. I do not find it in any way an amusing subject.
May I now explain to the noble Lord what is meant in regard to deferment of certain of the agreements? The noble Lord will be aware that there were a certain number of agreements made before July 20, and payment had not been made. Those agreements that were made before July 20, as I understand it, will now become payable in January. There are, however, agreements that were made or were under review before July 20, but there was no predetermined date or amount decided before July 20. These, I understand, will now be able to be paid six months from the date of the agreement. In other words, if the agreement was made for payment on October 30, and it was frozen, then it can now be paid on April 30.
With regard to the doctors, as the noble Lord will know, the Government undertook to pay the doctors the first part of their pay award in April, but owing to administrative problems of
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making arrangements it was not possible to pay it immediately and their pay increases fell within the freeze. The doctors will now receive payment, in December, of the sums due, but, as has already been announced, it will be back-dated to October. In other words, they will physically receive their money in December, but it will be back-dated to October.
With regard to dividends and profits, the view of the Government is well known. We believe that companies should absorb the natural increases of cost of operation within their own productive capacity. This is bound to reduce profits. It is clear already from the figures available that the profits of most companies are remaining at their previous standard, or are below: in fact, there are few that can report increased profits. If increased profits are made, the Government may well think it a matter to send to the Prices and Incomes Board for review into the whole operation of that company. This was not a slip of the tongue, nor was it a threat; it was merely a repeat of what has been said on a number of occasions in this House on this subject. I do not believe, from the support that industry has given the Government, that we need fear that we shall not have the same support during the next difficult six months.
LORD OGMORE: My Lords, we on these Benches will read with interest the White Paper, and no doubt will have some comments to make as a result of doing so. We are particularly glad that in the Statement to-day the chief emphasis is on agreements which generally increase productivity. Your Lordships will remember that in the debate last August from these Benches we particularly stressed the need to encourage productivity. As to the deferment for six months, this does somewhat depress us, in view of the fact that there is no indication of what is to happen after the six months' period. We are afraid that the whole country, and particularly industry, will feel that it is living once again from hand to mouth. Finally, may I ask the noble Lord, Lord Shepherd, whether his attention has been drawn to the speech made by Mr. Crossman, the Leader of another place, over the week-end, when he (I am not trying to quote exactly what he said) indicated that the freeze had

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gone quite far enough, if not too far, and that there was a danger of a serious recession setting in?
LORD SHEPHERD: My Lords, if my memory is right, the Lord President said that we must be careful that the deflationary measures taken by the Government do not lead us into a severe depression. I do not think he suggested that that position had been arrived at. I am glad the noble Lord welcomes the stress we have made in the Statement on productivity agreements. But I am sure that he and his colleagues will agree that a productivity agreement is something more than a title; it has to be a genuine productivity agreement from which the nation as a whole benefits. I believe that productivity agreements in that class will be welcomed, and that there will be no difficulty in implementing those agreements.
LORD REA: My Lords, would the noble Lord indicate once more that the Government are well aware that disincentive is a very serious thing, and will he try to give some encouragement to incentives?
LORD SHEPHERD: Certainly, my Lords; but may I say this to the noble Lord? In view of some of the criticisms that have been made of the measures taken on July 20, of which this is part, I may say that we saw the benefit of those measures in the October figures, when for the first time for many years we had a surplus of visible trade.
LORD CARRINGTON: My Lords, I rise to ask a question on a point of clarification. Did I understand the noble Lord opposite to say that if a company was successful in its exports and in its sales drive, and as a result made more profits, then the matter would be referred to the Prices and Incomes Board?
LORDSHEPHERD: I certainly did not mean to take that line. Obviously companies should make profits. We wish to see companies make profits, since it is only from profits that investments can arise. There is no dispute in this matter. But, clearly, if profits are made and they are distributed by way of dividends, in the present circumstances the Government may well consider it right. If the success of the company comes about by
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reason of increased productivity, production and exports, it would have nothing to lose in the matter being examined publicly.
LORD BYERS: My Lords, surely this cannot be right. The Government must make up their mind whether they are to control dividends or profits. Up to now, rightly or wrongly, they have controlled dividends. If they are going into the field of profits, it is an entirely new departure which would warrant a debate.
LORD CONESFORD: My Lords, does the noble Lord realise how much, by this statement of policy and earlier statements of policy, the Government are discouraging investment? Does he realise that, or will the further discouragement of investment strike them with complete surprise?
LORD SHEPHERD: My Lords, it is true that investment is a matter of concern. I would ask the noble Lord to recall the circumstances in which this Government took office—the circumstances at July 20. I do not believe any noble Lord in any part of this House would disagree that the Government had to act for balance-of-payments reasons, and that the actions they took are now having an effect. The point the noble Lord has made about investment is well taken. It is a matter for concern and certainly a matter for consideration.
LORD BLYTON: My Lords, apart from productivity agreements in industries like mining, where men are getting £10 per week, shipyard labourers who are taking about £9 a week, and dustmen under local authorities who are taking about £10 a week, am I to assume that there should be a wage restraint on these men because they cannot increase their productivity?
LORD SHEPHERD: My Lords, I am glad that the noble Lord from this side of the House has raised a subject other than dividends and profits. If the noble Lord will look at my Statement he will see that we have made special reference to those who are on the poorer side of our community. This is a matter which is subject to investigation by the Prices and Incomes Board. A number of references have been made to this matter to see whether we can establish some criteria. It is certainly being looked at, and is very much in the mind of the Government.
LORD ALPORT: My Lords, I can quite understand that the Minister is glad to be asked a question which does not refer to dividends and profits, but, as I understand it, the fact of the matter is that his statement with regard to profits contradicts the passage that he read out from the First Secretary's Statement. It deals with a very important point which, so far as I understood it, involves a complete departure from previous policy. If I and other noble Lord sare wrong in this, would it not he prudent for the Minister to consider it and explain the proposition in greater detail than he has been able to do up to the present, and at a very early date?
LORD SHEPHERD: My Lords, the noble Lord will appreciate that I speak under some difficulties, in that I am not a Minister of the Department concerned. I am not aware that what I have said is either new or departs from previous Government policy. For the benefit of the noble Lord and any of his colleagues I will repeat what was in the Statement. It said:
"The Government have already stated their policy on dividends and are pledged to use the appropriate measures to deal with any"—
and I stress this word—
"excessive growth of aggregate profits."
There is nothing new there, and I do not believe it should create special concern at this stage.
LORD CARRINGTON: My Lords, it may not concern the noble Lord, but it certainly concerns those of us on this side of the House. I must say that I find his explanations most unsatisfactory. I realise the difficulty he is in, and I do not want to press him, but the words he has used seem to me to go much further than anything we have heard before, and they cause a good deal of alarm on this side.
LORD SHEPHERD: My Lords, may I say to the noble Lord that I am not conscious that I have departed from previous policy, and I stand by all that I have said. If the noble Lord wishes to raise this matter, there are occasions which no doubt can be arranged so that the matter can be elucidated for the benefit of the whole House.
LORD SOMERS: My Lords, may I ask the noble Lord to make it quite plain whether this question of increase in incomes includes those salaries which in-
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crease annually by increments, such as the teaching profession on the Burnham scale and so on.
LORD SHEPHERD: My Lords, I gather that those salaries are subject to review and fall within the second part of the Statement I gave to the House. These reviews can take place, and no doubt will take place, and each of them will be judged on their particular merits.
LORD CITRINE: My Lords, would the noble Lord not agree that the proper course for Members of the House is to await the publication of the White Paper and, having studied it and its language, to raise the matter then?
LORD SHEPHERD: My Lords, once again the noble Lord, Lord Citrine, speaks words of wisdom and advice.
LORD BLYTON: My Lords, on the profits issue, does the White Paper not state that profits shall be no more in the next six months than in the first six months of last year?
LORD SHEPHERD: My Lords, I am sorry to correct my noble friend. It refers to dividends: that dividends should not be more than in the previous twelve months. I do not think it is possible to control profits to that extent.

COMPANIES BILL [H.L.]
Debate on Second Reading resumed.
4.17 p.m.
LORD BYERS: My Lords, perhaps for the sake of the Record I should point out that we are now continuing the debate on the Companies Bill. First of all, like the noble Lord, Lord Erroll of Hale, I must declare my interest. I am an executive director of a large public corporation, but I do not speak in that capacity to-day. I speak for myself and, I hope, for my noble friends on these Benches and the Party to which I belong.
I am not, like the noble Lord, Lord Erroll of Hale. a member of the Institute of Directors, but I should like to say how much I welcome the innate Liberalism of the Lord Chancellor's speech this afternoon. I was extremely surprised that the noble Lord, Lord Erroll of Hale, should have found it in any way vicious. I thought it rather gentle and

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soothing, and it was certainly quite innocuous, if you compare some of the experiences which the noble Lord and I have had in another place. I am sorry he found it arrogant and vicious.
It is certainly time there was a fresh look at the legislation dealing with companies, and to the extent that this Bill exposes the finance and the activities of companies to greater public scutiny, I and my noble friends certainly welcome it. I think: we would say to the Lord Chancellor that we regard it as a rather timid measure, but we accept his assurance that this is only the first instalment of what should be a much more radical reform. I hope that before the next Companies Bill is introduced there will be many opportunities in this House, and in other places, for a full public debate on the basic principles involved in the whole question of the reform of Company Law: the functions of companies, how they should be organised, and so on.
I do not think there are many people to-day who could say with complete honesty that they are satisfied with the organisation and functioning of the private enterprise system, though it is difficult to find anything very much better. At the same time, many of us consider that the intricacies of the large public corporations have not yet been mastered, particularly in the field of nationalisation. Moreover, many of us heartily distrust some of the theories which are put forward from time to time by armchair Socialist economists who have had no first-hand knowledge of how the private enterprise machine works at different levels.
I should like now to deal with the parts of the Bill which we welcome, especially those clauses which call for greater disclosure. I believe that the greater the knowledge which members of a firm and the public have of the affairs of companies, the stricter will be the discipline imposed on those running them and the higher will be the standards which are demanded and attained. I believe that the fear of being found wanting is a powerful influence towards virtue. I welcome the publication of directors' and higher executives' remuneration. I do not accept the view expressed by the noble Lord, Lord Erroll of Hale, that it is quite a different matter in the case of civil servants, whose emoluments are paid out
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of public funds. I think that where shareholders' funds are used there is an interest for the shareholder of the company and the employee of the company to know what top management is getting.
I am not sure that we should not have to go further and break down specifically the different types of emoluments which the top management receive, because I think much of the resentment about directors' expenses stems from the belief that all directors get tremendous "perks". I know this happens in a small number of cases, but I do not believe that it is widespread, or that there is anything like the abuse which the public think there is. I believe that if details were provided a good deal of uniformed speculation would be avoided. As the noble and learned Lord the Lord Chancellor hinted, we may have to go more closely to the American system, where the remuneration for the job is published, and in that way the shareholders can see whether there are any obvious discrepancies between the remuneration ratios at different levels.
Coming to the question of contributions to Party funds, I was not quite sure where the noble Lord, Lord Erroll of Hale, stood on this point: at one moment he appeared to welcome it, but at another moment I was not quite so sure. In my view, shareholders have the right to know what is being done with their money in this field, just as directors who believe that their interests are better served by one Party or another are quite justified in making a contribution which they think is right. Indeed, I think at the present time many companies would find it difficult to determine whether their contributions to the Conservative Party during those celebrated thirteen years had been worthwhile and, equally, I think there must be a number of trade unions licking their wounds at the moment and wondering why, over the years, they have contributed so many hundreds of thousands of pounds of their members' hard-earned money to Party funds. I think that both sides are wondering whether they have had value for money. Anyhow, it is a nice thought for a Liberal!
On the question of charitable donations, I feel that this is a problem. Large companies should certainly expect to support charitable organisations, and without

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this many of us would be badly off indeed. What I think is difficult is to know where to draw the line, and I wish the Government could offer some advice in this respect. What percentage is it reasonable to set aside for charity? This is a constant problem for the company which wants to do the right thing socially but, on the other hand, does not want to be wrongly accused of misusing money. I would support the noble Lord, Lord Erroll of Hale, in his contention that the £25 limit for charities is far too low. I think that companies normally give something like £50 or £100. If they respond to a very large appeal and give a donation of £10,000, or something of that sort, of course it should be known; but I think the normal figure should be about one hundred guineas. But, as I say, I should like guidance from the Government on this point.
The provision about nominee shareholders is also to be welcomed, though I doubt the wisdom of confining this to a 10 per cent. holding. Why not abolish the nominee principle altogether? In large companies with many shareholders, two organisations, each having 9 per cent., could exercise a high degree of control, and in my view it would be better if everyone knew where the financial power of the shareholdings actually lies. I can see no reason why we should not abolish the nominee system altogether.
Then I turn to the safeguards concerning dealing in shares by directors. These safeguards, I believe, ought to be extended to cover wives. There is perhaps some truth in the story of the man who said that everything was in the wife's name, "except the mink." I understand that the Stock Exchange, in its new recommendations, refers to the disclosure of family interests, and I think it is quite wrong to exclude the wife from this category. Other members of the staff of a company should also be covered by this. The principle here is whether they have access to, and can use, prior knowledge; and certainly that is not by any means the exclusive property of the board. I believe that this point should be looked at again.
Like the noble Lord, Lord Erroll of Hale, I would ask what is the object of the clause dealing with the disclosure of exports? It seems to me that this will
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get into a real Civil Service bureaucratic tangle. I am a great believer in encouraging exports, but I do not believe this can possibly be the way to go about it. I have a feeling that there might be something sinister behind this idea. I hope I am wrong; and if there is nothing sinister in it, why not drop it from the Bill? If we are going to disclose exports then why not disclose export services; and why not import savings? I believe we shall get into a red-tape muddle which it would be better to avoid from the very beginning.
I regret that there is nothing in this Bill about industrial relations and no recognition of the interest which employees have in the survival and prosperity of their companies. It ought surely to be made a requirement that before a new public company of any size is incorporated the structure of the company and the rights and duties of employees should be included in the Articles of Association; and in time that requirement should apply to all companies of any size. In the same way—and I think this could have been included in the Bill—the setting up of works councils should be made mandatory for companies of a certain size. There are admirable examples of constitutions of works councils set out in the Industrial Relations Handbook published by the Stationery Office and in Positive Employment Policies published by the Minister of Labour. Employees can suffer from mismanagement just as much as shareholders, if not more. Why should they not be allowed to call for an efficiency audit of their company if they feel that things are going wrong?
When all is said and done, this Bill merely skates lightly over a fundamental problem of great complexity. If it prevents scandals like Fire Auto and Marine, British Printing Corporation and others from being repeated it will have done something. Great public debate must go on and must deal, before the next Companies Bill, with the whole philosophy behind our industrial companies structure. I cannot emphasise too strongly the need for this before we embark on radical changes in our industrial system. I speak as one who wants them. We cannot afford to have the Government coming forward in a year or two years' time with half-baked ideas, as they did with the selective employment tax, and

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I hope that at the very least the Government will publish a White Paper indicating the sort of direction in which they believe company reorganisation should move. I believe that this would give rise to a really useful series of debates. After all, there was a lot of public discussion in Germany before they brought in the participation of workers which they now have and which in many German companies works extremely well. The French have been debating the Vallon Amendment for some time, which gives a form of co-ownership and co-partnership; and I understand that in Yugoslavia at the moment they are also discussing this sort of system.
We as Liberals believe that we have to move much further towards the concept of a team within each company, a team which is determined to play fair by the public in the form of the consumer. We must ensure proper conditions of remuneration and pensions for those employed and a fair return to those who risk their capital. If this is accepted it points very clearly in the direction of encouraging profits, encouraging profits in conditions of really free competition and ensuring that those profits are properly shared. And it means also bringing the employees far closer to the central direction of the company which is making those profits. I say to the Labour Party they must get their thinking straight on profits. Even to-day the most enlightened and sophisticated Lord Shepherd seemed to be sneering at the word "profits". I do not think he intended to, but if one has been in the Socialist movement as long as he has one tends to get these things ingrained. I say that basic to the radical reform of company law in two years' time will be a proper understanding of the private enterprise system as it should be and of the important place profits have in it.
4.32 p.m.
LORD PEDDIE: My Lords, I believe the House is indebted to my noble and learned friend who sits on the Woolsack for his clear, concise and cool assessment of this Bill. It was interesting to me to hear every gentle explanation as devastating support for the Bill. In contrast, I listened to the noble Lord, Lord Erroll of Hale, and I seemed to detect in his opposition to certain features of the Bill an element of heated panic, such panic
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as to carry an indication, at least to me, or a hint, of the need for some of the disclosures he did not wish to see. I think the House will come to the conclusion that this Bill, with all its limitations, deserves full support.
My noble friend stated that this goes some way further than the previous Bill, but at the same time it does not, nor is it intended to, cover the full range of the problems associated with company organisation. It is now more than a hundred years since the Companies Act 1862 was passed, and during that period the volume and complexity of legislation affecting company law has increased. I found it interesting to read in the Jenkins Report that the Chairman and his Committee offered very little prospect indeed of any reduction in the volume of legislation associated with companies. Therefore, I accept the necessity for looking upon this Bill as a first stage along what may be a long road towards reform.
We have been given an indication of the objects of this Bill: first, to abolish the status of exempt private companies; secondly, in the broadest terms, to give a greater disclosure of information on the accounts of companies; and, thirdly—of tremendous importance—to have a closer supervision of insurance companies. We have already had hints that Clause 2, which abolishes the privilege of the exempt private company, is likely to be resisted. The effect of this clause would mean that all limited companies would be required to file accounts and audit reports with the Registrar. All members of the House will have read Press criticisms of this particular suggestion on the grounds that the burden of disclosure is out of keeping with the value of the information received, and indeed one colourful phrase was used by one writer in which he said this was indicative of throwing weed killer among prize blooms. I do not agree.
I would accept the statement that the overwhelming majority of exempt private companies are small businesses doing an exceedingly good job of work. But there is no doubt at all about it, as my noble friend evidenced, that there are a considerable number of such companies that are used as a vehicle for fraud or damage to the public in some way. The Consumer Council itself has a long list of companies that come within that category,

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and indeed recently it published details of at least one individual who was active in no fewer than thirty such companies, all substantially fraudulent. I know that we cannot legislate against sin by putting all the population in handcuffs, but there is no doubt at all about it that over the years since 1908 increasing justification has developed for devoting more attention to this particular type of company.
In addition there is a basic principle involved here, and the principle is that where limited liability is granted, which has already been described by my noble and learned friend, quite rightly, as an enormous privilege, there is a responsibility to the State and to the public, and that responsibility must be accepted by such companies. I am quite convinced that the ready availability of information concerning companies will be a safeguard for the public. But must point out that, while more information will potentially be available, the control of abuses will be left to the overworked companies section of the Board of Trade; and I feel that whatever body is charged with the enforcement of the Companies Act ought to be given a wider discretion with greater access to companies' books and papers. Indeed. I would go further still and indicate that it should be specifically charged with investigating complaints about activities that are prejudicial to the public as well as to the shareholders. I regret to say that, until we have an efficient regulatory system in operation, the enforcement of company law will of necessity he somewhat "hit or miss".
The noble Lord, Lord Erroll of Hale, objected to certain matters that will be called upon for disclosure. He objected to the disclosing of directors' salaries, and he gave the strangest reason as the basis for his opposition, which was that he thought it would lead to higher salaries in consequence of the resulting competition. I am sure that is not part of the brief that has been given to him by the Institute of Directors. I believe that greater disclosure of information is long overdue, because it will, or should, enable earlier detection of unsound or fraudulent company management; and furthermore, would give a greater safeguard for consumers who suffer when a company goes into liquidation. They
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suffer in a variety of ways. Spare parts of some machine or other that has been purchased from a company that has gone into liquidation are no longer available; servicing obligations lapse; in completed contracts lapse without redress. In this sort of way one would imagine that this Bill would ultimately provide a means for dealing at least in part with these difficulties.
The additional information on public record will assist investigation by statutory authority, and at the same time will have a self-regulatory effect on unsound company management. But I must take this opportunity of pointing out that, to some extent, the disclosures are effected in a somewhat inconsistent manner. Let me take one or two illustrations: first, the question of a director's service contract. Under the new regulations companies are required to keep copies available for inspection, but only at the company registrar's office, and the only people empowered to see them will be the actual shareholders. I cannot see the point of this. To my mind it appears to be somewhat illogical, because even to-day, when a company is making a new issue or seeking new capital, it has to show relevant documents, including directors' contracts, to anyone who cares to ask. If it is justified when a company is seeking new money, then there is no case for restricting access during the intervening years. I should have thought it would be far better that the whole lot should be on file and open to all in Company House.
To my mind a similar consideration applies to directors' share dealings. In my opinion it is exceedingly good that they should go on record, and within the maximum period of only ten days before they have to be registered. But again they can be seen only at the company's offices, although this time anyone is allowed to inspect the register. Noble Lords will recognise that few will make that effort unless there is real cause for suspicion. The whole point of continuous monitoring is that someone should be able to see that directors are unloading all their shares before, and not after, the crash. I believe that there is certainly more opportunity to observe this if the record in Company House or on the file is always likely to be turned up.
It is true that a considerable increase of information relating to companies will

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now be available, but we must make sure that it is used, otherwise there will be justification for the criticism which was advanced by the noble Lord, Lord Erroll of Hale. Disclosure alone is not enough. The supply of more and more information is welcome, but with the most important exception of insurance, the Bill itself does very little indeed to give the Board of Trade greater powers or greater inducements to take action against wrongdoers.
Now I turn to insurance. Part II of the Bill, introducing the system of authorisation and closer supervision of insurance companies, was well received in insurance circles. As one who has spent many years as a director of an insurance organisation I would endorse that. The British Insurance Association has said publicly that the Bill will give the Board of Trade powers to prevent a repetition of the Fire, Auto and Marine failure. But it is well to remember that over one hundred new companies have been formed in the past five years, fifty of them to underwrite motor business. So far as I can see, all of these companies will get automatic authorisation under the Bill and, so long as they continue in the same line of insurance, they do not have to increase their capital to the new minimum of £100,000, nor do they automatically have to increase their solvency margin to the new minimum of 20 per cent. of premiums, although I must admit that they run the risk of being wound up by the Board of Trade if they do not do it.
I suppose one must accept that the key to the situation is that the Board of Trade will have the power to order companies not to make new contracts if it is doubtful about solvency or the way the company is being run. But let us keep in mind that existing companies and the companies to which I have just referred will be at a premium for anyone wishing to get into the insurance business. When the new Bill is law all insurance companies must notify a change in the ownership, but the field is going to be open for some months. I can only express the hope that any company changing hands in that period will put itself extremely high on the list for attention by the Board of Trade.
However, the real problem here—indeed, many people engaged in insurance have pointed this out—is the possibility of the development of the closed shop in
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insurance. I think it must not be made too difficult for newcomers to go into the insurance field. It is quite proper and right that this new legislation will, in the long run, help to kill off the cut price companies. I must agree, as I am sure other noble Lords will, that there is all too frequently a link between highly competitive terms and financial instability. There is no doubt about it that the cut price era certainly sharpened competition, and it is to be hoped that at least the competition will continue.
Over the years the development of British company law has followed the need to protect the interests of investors and traders. When originally developed that was the purpose, that was the function and that was the intention; and on the whole it was done fairly well. The protection of the public as a consumer has not been regarded as an integral function of company legislation until recent times. Indeed, all the provisions which protect the public interest are, to some degree, incidental to the main purpose of the 1947 and 1948 Acts.
I know that in another place the Minister has indicated his belief in the new philosophy that will guide those who will be responsible for framing the new company legislation. There is a need also for a new dimension in company law, by extending protection to the ultimate consumer and the public at large. I would agree that there is a need to effect a delicate balance between avoiding unnecessary brakes upon organisations that make some contribution to the wealth of the economy and, at the same time, causing companies to recognise their responsibility to the State and to the public at large.
I would agree with the noble Lord opposite who makes the comment about a wider, fresh approach concerning company law. I believe there must be a new relationship developed between the corporate bodies, the State and the public and those who are engaged in those companies, namely labour. All this, then, offers prospects for the future. We are to-day dealing with but a limited part, and I would echo the point that has already been made; in the tremendous task that lies ahead, in presenting to Parliament the new legislation, I hope that the field of consultation will be made extremely wide, far beyond the range of those engaged in companies, accountants

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and solicitors, reaching well beyond that because only by such means will it be possible really to express that new philosophy that will determine the approach to the new company legislation.
4.50 p.m.
LORD MANCROFT: My Lords, this Bill will obviously need careful examination at the Committee stage, but I think we are all agreed that we can safely accord it a Second Reading. For my part, I think it is a
"Wee, sleekit, cow'rin', tim'rous beastie"
of a Bill. There is a very good reason for that; nevertheless, it does more good than harm, and I shall therefore support it.
The reason why the Bill is such a ragbag is that it owns three parents. Some of it has been drafted by the Jenkins Committee—and though I should like to echo those who have extended their thanks to the Jenkins Committee for their work, I could only have wished that they had not stuck quite so closely to their terms of reference; some of the Bill has been drafted by the Board of Trade in a hurry; and some of it has been drafted by Transport House in a fit of political spleen. The noble and learned Lord on the Woolsack has told us that another Bill is to follow. This, to me, is acceptable. I think he has a point when he says that a Bill containing all the possible reforms would have been unnecessarily unwieldy and would have taken a long time to get through your Lordships' House.
But even with this short measure that is before us there is one obvious need straight away—and here the noble Lord, Lord Peddie, has opened the ground which I wish to cross. We undoubtedly ask the noble and learned Lord on the Woolsack at once to strengthen the Board of Trade's powers not only to act when something has gone wrong, but to act when it looks as if something will go wrong. The Companies Department of the Board of Trade has always been a notoriously weak department. This Bill is going to produce a whole list of new omissions and offences, a whole list of new things which have got to be policed—disclosure, nominee shareholdings, and the rest. I think that the details of the notorious John Bloom case have only
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now, after two and a half years, passed from the Board of Trade to the Director of Public Prosecutions. That is too long.
The noble Lord, Lord Peddie, gave us some sad reflections on original sin and directors. He would, I know, agree with me that if there are ninety-nine honest ones then it is the one villain who brings all the disrepute on the other ninety and nine. So I think that another department that will have to be strengthened if this Bill is going to come into effect is the Fraud Squad of the police in the City, which is notoriously understaffed. I believe that if you get into trouble you have got to fiddle your partner out of nearly £1 million to have any chance of getting anybody more senior than a sergeant put on the job. This means that the two departments have got to smarten up their procedures, because any director who wants to go wrong will employ some pretty smart accountants, and some smart wits will have to be pitted against them. The other accountants who are not quite so smart need not worry, because nearly 500,000 new balance sheets will be required under the Bill and this will keep them busy enough.
Disclosure will be one of the most difficult points under the Bill. I, for one, do not object to this. I think that the Government here are doing good by accident. What they have set out to do is not actually what they are going to achieve. My noble friend Lord Erroll of Hale took the noble and learned Lord the Lord Chancellor to task. I listened to the noble and learned Lord on the Woolsack observing that this Bill is in no way a political measure. He did it so gently and so quickly, I realised at once that we must look out. He then made a highly political speech, a Party political speech, to which I take not the slightest exception. I rather like Party politics. As President Truman used to say, "If you don't like the heat, keep out of the kitchen". So I took no exception to the remarks of the noble Lord on the soapbox—I am sorry: on the Woolsack—because I think that what he is doing will accidentally do one other very good thing. The disclosure provisions will dispel a large number of those legends which have be devilled the relationship between capital and labour in the companies world for many years. This lore of legend is one of the reasons why the question of shares

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with no par value is not included in this Bill, and will not, I am sure, be included in the next Bill.
We discussed this matter when we debated the Gedge Report over eleven years ago in your Lordships' House on January 25, 1955, on a Motion by the noble Lord, Lord Cromer. The Government's point of view was put forward in a speech as lucid as it was reasonable, as fair as it was comprehensive. In the course of that speech what I tried to point out was that politics would always bedevil this question. When you hear that a company has declared a dividend of 100 per cent. you have a marvellous political point, if you are on that side of the House, for your weekend speeches—"These evil, money-grasping directors with 100 per cent. dividends …".If you reduce it to ordinary financial details, you find that it only means a dividend of between 7 and 8 per cent., depending on the market price of the shares, and half your political points have gone. If you want the case developed in more detail, read the minority report on the Gedge Committee which I believe was drafted (which is not surprising when you consider its lucidity and skill) by none other than the late Mr. Hugh Gaitskell.
Why is there so much play made about directors' salaries? I agree with these proposals because they will also dispel a legend. Once again the Government are doing the right thing for the wrong reason. They are going to help the whole situation by dispelling these legends of tremendous salaries, vast directorships and earnings. The noble and learned Lord is perfectly right when he says that we can look up his salary in Whitaker; we can look up the salary of the noble Lord, Lord Brown, there, too. But be very careful to get an up-to-date edition, because Ministers' salaries are raised more frequently nowadays than when I was a boy! I think that the proposals, given as they are for the wrong reasons and achieving right, are messy. I would rather have all the figures laid out clearly, stating exactly what each director earns, how it compares with the senior executives—and trying to cause strife between directors and executives is, I believe, one of the hidden purposes of this Bill.
I would add one or two things. I think that the shareholders and employees
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should be told exactly what job each director is doing and why he is being paid that salary. To that should he added the fringe benefits—top hats, cars, and, if you are a lucky man like the Prime Minister, how much of your salary you are receiving tax free. Furthermore, our gratitude should go out to the noble Lord, Lord Beeching, who, when he was transferred from I.C.I. to British Railways, insisted on taking his salary of £24,000 with him, because it showed up exactly the huge amount of tax which is paid on that size of salary, a point which is very often overlooked by the propagandist against directors' salaries.
Why do the Government want all this information? They are trying to persuade us that disclosure is for the good of the company, for the good of the shareholder. It is nothing of the sort. It is for the good of the Socialist Party. This is pure Party political propaganda. I do not mind, but I wish the Lord Chancellor would not try to persuade us that the contrary is the truth. The effect of publishing these so-called large salaries of £24,000, the Socialists hope, is to stir up jealousy among employees. It is certainly not going to help things much. It will also produce two other bits of trouble, as the noble Lord, Lord Byers, mentioned. The head-hunters will be out after those whose salaries are in the group they particularly want. It will also cause a considerable amount of heart-searching in various board-rooms. Your Lordships will be surprised to know how very many directors have no idea what their colleagues are earning. All this shows that Socialists frankly do not like directors. I do not think they like companies. I know they do not like profits. But this provision will, to their surprise, achieve good by stealth, by giving the truth and not the legend.
The same goes for political contributions. What the noble Lord is doing on this matter is again right, but for the wrong reasons. By allowing all these—if they are very many, and I doubt it—political contributions to appear on paper openly, a large number of legends will be dispelled. The idea that every company is secretly contributing to the Tory Party—all that legend will go the moment this provision comes into effect. And if the advice given in a letter from

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Sir John Foster in The Times this morning is closely followed, as I hope it will be, then a large number of companies will realise that, contrary to their previous opinion, it is legitimate and correct to subscribe to a Party if by so doing you are furthering the interests of that company.
The noble Lord, Lord Byers, painted a sad picture of the two Parties who, having subscribed to their own political organisations, wished they had done the opposite. I wonder whether he had in mind, also, that well-known North Country industrialist—and wild horses on bended knees will not drag his name from me—who at the last Election subscribed £10,000 to the Tory Party, which naturally pleased the Tory Party, until they discovered that in order to hedge his bet, he had also subscribed £10,000 to the Socialist Party. Whether under this Bill he gets a knighthood or nine months, I am not quite certain. He is a direct descendant of the American judge, who was given a bribe of 20,000 dollars to find for the plaintiff, but the defendant getting wind of this gave 25,000 dollars. So the Judge, being an upright, honourable man, gave 5,000 dollars to the Red Cross and tried the case on its merits.
May I ask the noble Lord, Lord Brown: when we have all this information, what are the shareholders going to do with it? I do not believe it is going to be of the slightest value to them. It is not going to help the progress of the company, it is not going to help the employees, it is not going to help the shareholders. It is only going to help Her Majesty's Government in any political battle which they may wish to fight over this next Bill; but it is not going to help the companies. But I do not think the Government want to help the companies, not a scrap. The Government are against the companies; they are against directors. This fact is only thinly veiled in the present Bill. We are having a second bite at the cherry, as the noble and learned Lord on the Woolsack has told us. I hope he will follow the advice which several noble Lords have given him, and make certain that the proposals which he has in mind are produced in a White Paper in the early future, so that we can see what the Government's philosophy is
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concerning the whole of the corporate aspects. I do not believe they have thought this out. If they have thought it out at all, I am certain they have come to the wrong answer. There is the whole aspect of the company's relationship—employers, directors, shareholders, public, potential public and, most important, employees.
Perhaps noble Lords opposite would bend their minds now to those great problems which have bedevilled any attempt to associate employees more closely with their companies' well-being. if you ask employees to take shares or give them shares, you will find that they love shares when the company is making a profit. They hate the sight of them if there is the risk of the company making a loss. This is human nature. The other trouble is that of identifying the employee more closely with the policies of the company, because the moment an employee starts to show an intelligent interest or is put on the board he is labelled as the "boss's man", and he loses the support of his fellow employees.
I suspect, and I hope I am wrong, that the Government's ultimate legislation is directed towards the destruction of the whole idea of company status. I do not believe they are interested in shareholders. I am sure they are not interested in small companies. I do not believe they are interested in any of this at all. I may be wrong; I hope I am. Therefore I hope that the Government will produce a White Paper proving me wrong, setting out their faith in a system which has brought so much prosperity to this country over the years and which will, if properly controlled, bring so much prosperity in the years to come. I may be wrong; I hope I am. I live in hopes.
5.4 p.m.
LORD GOODMAN: My Lords, I would begin by saying, in view of what was said in the most entertaining contribution by the last speaker, that I have no intention of making a political speech. In fact, I must apologise for bringing your Lordships back to the arid wastes of Company Law. These are, I think, a matter of concern to many people, and in relation to this Bill may be a matter of very grave concern to a number of small traders, people conducting small businesses, who may be vitally affected by provisions which I venture to think have

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not been sufficiently considered by the draftsmen of the Bill.
I should like to say this. It is rendered more difficult in an atmosphere of political discussion to make a critical contribution to this Bill. I should not like to think that I was associating myself with the comments of a general kind made by the last speaker: that I suspect the Government of having designs on Company Law as a whole, of hating directors, and of other rather extravagant and fanciful notions which have been expressed. I do not believe any such thing. What I do believe is that it is doing them too much credit to attribute some of the sinister motives which have been found in this Bill. I think they relate to the drafting, and nothing else. I think, also, that it is doing a disservice to the Jenkins Committee to say that this Bill is the legislative expression of their Report. It is, of course, the legislative expression only of a very small portion of their Report.
Here I venture to join issue with the noble and learned Lord on the Woolsack, and with the last speaker, on the desirability of legislating piecemeal on matters of this kind. I do not think it is sensible or remotely scientific to say, "We can have this amount of legislation in relation to Company Law this Session. Leave the rest of it, and come to the rest of it next Session." It is not possible to dole out a pound-and-a-half of Company Law this year and have another pound-and-a-half next year. But I sincerely believe that if many of these provisions had been drafted in the context of a whole comprehensive scheme of Company Law, this present Bill of the Government, in relation to those provisions, would have been very different. Viewed against the context of what the Government have promised—a whole comprehensive philosophy of Company Law—many of these provisions would not have taken their present form.
I wonder whether I might venture to illustrate my viewpoint on this matter in this way. I have some criticism of the Jenkins Committee in one particular. It was a splendid Committee composed of very great experts, but I thought it had one very great shortcoming. Most of the members, if not all, were people trained in matters of large company finance, concerned with public companies, concerned
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with the affairs of the City, and concerned with companies as a means of investment. I did not find in that Committee, nor did I find in the evidence called before that Committee, much evidence of a recognition of the importance of Company Law in relation to the overwhelming preponderance of small private companies.
If we look at the number of companies registered in this country—and this is a very important consideration—we find that there are something over 400,000 companies registered as private companies, as against (on the figures given in the Jenkins Committee Report) something like 16,000 public companies. It is quite plain that the overwhelming majority of companies are private companies, and, if I may say so, the greatest importance of Company Law in one very important particular relates to the private company. We find, in the abolition of the exempt private company, the type of viewpoint which I have instanced; the type of viewpoint which does not take sufficiently into consideration the interests of the small trader, the interests of the man who is concerned in running a small business. We need to examine this question of disclosure much more than in terms of generality. Disclosure for disclosure's sake sounds well: it is an attractive proposition. But we should examine it more closely in relation to the exempt private company.
An obligation is now to be imposed on every company to file a balance sheet, to file accounts, at the end of the year. Those accounts will not he timely accounts. As is known, the accounts can be twelve months out of date, so that from the point of view of the prospective customer, from the point of view of the prospective creditor who is doing business with the company, they may have no validity of any kind. There is a further consideration. If a man wants to do business with a company of doubtful credit, the sensible thing for him to do is what the bank will do if a company seeks an overdraft. They will not go and search a file: they will ask for a copy of the company's accounts. There is absolutely no reason why this method of protection should not be adopted by anybody who wants to do business with a small private company.

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The necessity of imposing an obligation on 400,000 private companies to file their accounts, so that somebody can have an opportunity of examining out-of-date financial information, commends itself to me as a total absurdity. It seems to me that what we are really doing is, by legislation, to dictate a sort of paralysis of self-help. There is no reason at all why people who want the information (and, of course, as prospective givers of credit they are entitled to ask for the information; it cannot be refused to them) should not obtain it simply by asking for it, without this very important change being imposed. Because, while I think there is no benefit at all to the small private company in this matter, I believe, with the Cohen Committee—and I am interested to see the noble and learned Lord, Lord Cohen of Birkenhead, here to-day—that there are very considerable detriments. I also believe that those detriments have increased since the days of the Cohen Committee because of the proposed abolition of retail price maintenance.
I should like to read one paragraph from the Cohen Report which I think has very high relevance to-day. It says this:
"Exposure of small private companies to competition. We have had evidence that the publication of the accounts of small companies would give large concerns valuable information about the finances of their small rivals while the latter do not gain any corresponding advantage from the publication of the accounts of the larger concerns".
I will not read the whole of the long paragraph, but I believe that that statement has total validity to-day. In many details a small company will be put at a great disadvantage by having to publish figures in relation to its turnover, in relation to matters like its rent and in relation to a number of things, which will be available to a larger rival, while there is no corresponding benefit to the small company in having that information from its larger rivals because it has not the financial resources to utilise the information.
I would venture to ask the Government to reconsider this matter very closely, because I think that on close and mature consideration they may find there is no real benefit in this requirement: that it will not procure any advantage; no creditor is any better off; no information
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is thereby available which cannot be made available by the simple expedient of asking for it, and it may be doing great damage to a number of people. I find myself in complete agreement with the noble Lord who spoke for the Opposition, when he said to the Government, in effect: if you are going to legislate, then at least legislate in accordance with the recommendations of the Committee. Perhaps I might here be permitted a digression. This is a highly-technical topic, and a highly-expert Committee have been at work on it. They have made a number of detailed recommendations, and it seems to me to be somewhat vainglorious, if I may say so, to depart from those recommendations without very full further consultation with other interests.
The Jenkins Committee, I think wrongly, recommended that the exemption of private companies should go, but only on a limited basis, and that exemption should be preserved in relation to certain matters such as turnover, directors' remuneration and, particularly, rent. I should like to enlarge on the topic of rent, because it was not enlarged on by the noble Lord who spoke for the Opposition and I regard this as a most important matter. The most vulnerable feature of a small business is its premises. Everyone knows that a very real threat to a small shop is that the lease will come to an end, and that it will not be able to procure a new lease at a reasonable rent. To require the small shopkeeper to divulge his rent to the people who we all know are prowling about looking for the opportunity to obtain premises at modest prices for their own enrichment seems to me entirely wrong, and I do not think it ought to be done.
If the benefit of exempting the private company is to be taken away (and I hope that, on reflection, the Government may still decide not to do this, because I do not think there is any benefit to anyone in the matter) I hope it will be done in the terms of the Jenkins Committee and not in the far-reaching terms of this particular Bill. I would plead with the Government to give this matter very serious consideration, because great damage could be done to a great number of people who are the mainstay of the trading community of this country, and with no corresponding benefit to anybody.
I venture to think, also, that on the question of disclosure the Bill goes too

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far in some directions. There is a provision that there should be a disclosure of all directors' contracts. We know the sort of scandals that have induced this type of provision, and why it is here. But why should it be necessary to provide a copy of the total contract? Why should a rival be given details of, for instance, the restriction clause, of the restraint on a man's re-employment, on the actual area in which he may not engage when he leaves the business, simply to ensure that shareholders are furnished with information about the directors' salaries? This again seems to me to be an unconsidered provision, if I may say so. I think that, pursuing a shibboleth of disclosure, the Government have legislated too widely, too bluntly and without sufficient concern for detail. My view is that much greater attention to detail is necessary to ensure that gratuitious damage is not done to a number of people.
Pursuing my theme that the Jenkins Committee were not sensitive to the concern of the small private company, tucked away in the Bill there is another provision which I regard as quite unnecessary and which will be extremely damaging to private companies and difficult to operate. That is the provision which says that a director of a private company may not borrow money from his company. If one has a family concern which is run as a family concern, what point is there in imposing this exceptional formalism in relation to the company's finances? It does not seem to me to make any sort of sense. We all know that you cannot get money out of a company except by a very restricted number of procedures. You can declare a dividend, you can pay a capital bonus, or you can go to the court and increase your capital; but the most convenient way to get money out of a company, for anyone who is running the business in an informal fashion and is not too concerned about having to call his accountants every five minutes to advise him, is simply to borrow the money from the company.
It is absolutely right that that prohibition should exist in relation to public companies, where other people's money is concerned; but it seems to me absolutely wrong, and quite nonsensical (if I may venture to use the word), that that prohibition should be imposed in relation to the great majority of private
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companies. It reveals, as I say, an absence of sensitivity to the needs of the small private company, and I should like to see this Bill reconsidered from that point of view, because I do not share the views put forward by the noble Lord, Lord Mancroft, about the sinister intentions of this Government. I know that this Government would not want to legislate to the damage of the small trader, but I think they may unwittingly and inadvertently have done so.
On the question of the second piece of legislation, there are some very vital matters of Company Law which have been left out. Here, I am proposing to make an uncharitable observation. I believe they have been left out not by the Government, not by the Minister, but by his draftsmen because they were difficult to draft. One has a splendid instance of this in relation to the doctrine of ultra vires. I do not intend to expound to this House the doctrine of ultra vires, because your Lordships would be bored to tears, but it does happen that there was a thorough-going recommendation from the Cohen Committee (which I think sat in 1945 or 1946) that the doctrine of ultra vires, which is far more calculated to do an injustice to a creditor and which may very easily defraud creditors, should be totally abolished. That was a thorough-going, simple recommendation made, if I am not mistaken, over 22 years ago.
When the Jenkins Committee saw the Board of Trade experts and asked why abolition of this doctrine had not been incorporated in legislation, they were told that it was too difficult to incorporate it in legislation. This, if I may say so, is the most pathetic admission of inadequacy and failure. It must be possible to produce an absolutely indispensable change in the law, or to find a draftsman who can do it. We still find a Bill in which not a word on the subject appears.
The Jenkins Committee then made a recommendation that was probably more generous and more sympathetic to the human failings of the draftsman. They did not impose upon him the obligation of having to draft something that would totally abolish the ultra vires doctrine: they said, "Let us go half way. Let us abolish the doctrine in so far as the person contracting with the company

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shall be entitled to enforce the contract, and the company itself shall not" But nowhere is that to be found in this Bill. There is not a word on the subject.
This, if I may say so, is the vice of piecemeal legislation. It is also the vice of trying to deal with highly specialised topics without sufficient resort to specialists. I think it is quite wrong that this Bill was not referred to the Law Commission. The Law Commission has as one of its members a most distinguished company lawyer who was a member of the Jenkins Committee. It would have made absolute sense to have referred this matter to the Law Commission and to have had their views on it. I should have been astonished if the Law Commission could not have evolved a piece of drafting that would have ended this idiotic doctrine of ultra vires.
I should like just to illustrate the working of the doctrine of ultra vires, because to some of your Lordships it may be a total mystery and because its working is really quite monstrous. In one case—I think In re Beaufort is the name of the case; it is a decision of Mr. Justice Roxburgh—what happened was quite simple. A company had been formed to manufacture, I think, veneers. It changed its business and went on to manufacture furniture, or something of the sort. When manufacturing furniture, it ordered a consignment of coal. It was then held entitled not to pay for the coal because all its activities were ultra vires the company. Can one imagine anything more idiotic or anything more monstrous? Yet this is being preserved as the law at a time when we are supposed to be making effective and far-reaching changes in the law. I think it reflects very badly on the draftsmen that they have not dealt with this.
There are a number of other matters which ought to be dealt with and which I am sure will be dealt with in the new Bill. I agree with what has been said about no par value shares. I think that one of the things that make the whole business of disclosure an absurdity is that the accounts produced are really meaningless until you have no par value shares. You have a situation at this moment that a nominal value is ascribed to assets in a balance sheet of a company,
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related to the sum of money for which the company was originally capitalised, which ceased to reflect the value of the company literally within five minutes of its formation. That remains nominally the value of the company to which all substantial transactions are related.
The Gedge Committee recommended that no par value shares should be introduced in respect to ordinary, but not to preference, shares. I think the Cohen Committee held that there was no strong demand for it. The Jenkins Committee took the view that it ought to be introduced for both categories of shares. My own view, for what it is worth, is that it ought to be introduced for ordinary shares but it would be inappropriate for preference shares. I do not agree with the noble Lord, Lord Mancroft, that there are sinister political reasons why this has not been introduced. I think the arguments about trade unions and so forth are historical; they have no further relevance today. I doubt if you could find an informed trade union leader who would not agree that this change ought to be made within ten minutes of having it explained to him. All the necessary safeguards to ensure that you show what distribution is being made, what amount of capital is being drawn on and so on, could be inserted as part of a short Bill. I hope that when the new Bill is introduced this particular change will he introduced.
Another matter which also surprised me was that there were no reference to the notorious Section 54; the take-over bid; the right of a company to spend their money in buying their own shares This again is a very important omission which ought to be remedied at some future stage. This is a Second Reading debate and therefore it would be wrong to go into detail; but I have said I do not think this is more than a stopgap measure. I think it is a useful measure. I think there are provisions in it that one would wish to see and which are timely. But I think it would have been far better if someone had taken the trouble to produce a comprehensive Bill. I do not think the explanation that it would have taken too much Parliamentary time is adequate. It is better to give twice the Parliamentary time to producing a satisfactory measure than to give half that time to producing something that is of little use at all, for then that time is totally wasted. I hope that before

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long we shall see another Bill, an adequate Bill, which deals thoroughly with a great many matters that are of great concern to many people.
5.22 p.m.
VISCOUNT ECCLES: My Lords, I must apologise for not being in the Chamber at the beginning of this debate. Unfortunately I had to take an annual meeting the date of which was fixed some time ago, and I was therefore unable to benefit from the opening speeches. But I can now be much shorter than I had thought, because the noble Lord, Lord Goodman, said so excellently what I wanted to say about private companies that I can only commend your Lordships to take every word he said to heart. With his experience, and with no political bias, I believe he has made an unanswerable case for some important Amendments which I only hope the noble Lord will put down. If he does so he may find support in all parts of the House. I can assure the noble Lord that it is my intention, with the support of other noble Lords, to put a new clause—and I am sorry to say that it will be a lengthy one—and a new Schedule on the List of Amendments which would provide for the issue of shares of no par value.
It is twelve years since my distinguished friend Mr. Montagu Gedge, whose untimely death was a great loss to Company Law, reported, and the case he made was unanswerable. There was at that time a trade union reservation, and I am glad to hear from the noble Lord, Lord Goodman, that he thinks that is now a matter of the past. Eight years later the Jenkins Committee, having looked at this again, said that there was no evidence against, and much in favour of, the introduction of no par value shares. The new clause which I hope to put down will follow the recommendation of the Gedge Committee except in two respects, which I would speak to if an appropriate occasion arose later, and it will also embrace the additional recommendation of the Jenkins Committee that the system should apply to preference as well as to ordinary shares. I agree with the noble Lord, Lord Goodman, that there is not the same argument in favour of its application to preference shares as to ordinary shares, but the very careful examination which the Jenkins Committee gave to the subject is something that should weigh
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with us. Therefore I should hope that we could follow their advice. If your Lordships are agreed in Committee to the new clause, it would then be necessary in another place to consider certain consequential changes in the registration fees and capital duties which it would not be appropriate to bring forward in your Lordships' House.
Looking at the Bill as a whole, I cannot but feel disappointed, not because of what is in the Bill but because of what has been left out. I gather from the speeches that I have had the good fortune to hear that that point of view is fairly widely shared in this House. We badly need a new Company Act, but we cannot have one every year, and when we have a new Company Act it ought to be as good as we can make it. If one asks what is the main purpose for which we want more information about what companies are doing, surely the answer must be: "In order to secure a better performance in industry". That is the only real object of getting more information, and the Bill, as I see it, is much weakened by including requests for information, which have little relevance to the efficiency of the economy, and by leaving out other requests that would have been highly relevant. For this reason I judge it to be a sad disappointment.
It is seven years since the Jenkins Committee was set up and they must have based their conclusions in a very large measure on the balance sheets, the business practices, the notions of economic policies that were current in the 1950s. Since they were at work we have learned a great deal about company accounts and about the relevance of the way they conduct their affairs to the general health of the economy and of Government policy. It is a great pity that so much of what we have learned has failed to find a place in this Bill. I do not think anyone expects the disclosure of directors' and executives' emoluments to be of much value to the economy. This information is as likely to find a place in the gossip columns as in the financial columns of the Press. I am sure that the practical effect of these disclosures is that they will greatly increase the pressure to raise salaries and fees to the level of the highest paid in comparable companies. In the field of wages we are all too familiar with the

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principle of comparability. It is perhaps only human nature that in a field in which we have lacked a good deal of information we shall now be able to play this game of leapfrog. That is going to be the result. It will add to costs, and I can hardly believe that there will be any compensating advantage to the economy as a whole.
Would it not have been much better, to give one example, to have asked these same directors and executives to disclose in the balance sheet the basis on which they value their stocks? And especially to tell us when they alter their valuation? I heard recently of a company which offered itself for a take-over. It was a printing company. The balance sheet looked all right. Its main business was the printing of annual diaries, social diaries, business diaries and all those useful books which we expect to be given at Christmas time. But when the stocks were examined it was found that the unsold stocks of diaries going back for years were all there at the cost of production—that is, on the directors' valuation. Well, my Lords, it must be fairly clear that there was a company very ripe for a take-over.
We should also be advantaged if directors were compelled to tell us the basis on which they depreciate their buildings, their plant and their machinery. This is not done on the same basis as between one company and another. This is the sort of information that we really need to have if we are to assess the position of a company. Again, the Bill contains very arguable provisions designed to make a company show where its profits were earned. In theory, this sounds a very laudable thing to require from private industry—that they should tell where their profits are earned. And, similarly, one would like to know where the losses of the nationalised industries were made. But it is necessary to ask oneself whether this is going to do any good to the economy.
In particular, I doubt whether the requirement to disclose exports as a separate part of the turnover is going to work to the advantage of the British economy. I imagine the intention is to "put on the spot" those companies whose exports are very small, and to be in a position to congratulate those companies whose exports are large. But is
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that fair? A company may manufacture parts which are assembled by another company, and the assembling company may do all the exporting. The manufacturing company would have to show that it did not export at all.
More serious than that, which I should think one could put up with without too much difficulty, would be the disclosure of information to our overseas rivals. I imagine it is most serious in the capital goods industry, for there the quotations are cut very fine. We all know that in certain markets capital goods are subsidised by Governments in one way or another. If a company is exporting a large proportion of its products overseas and it has to declare that proportion, and rival companies have not only that figure but the profit and loss account of the company, they can work out the profit margin pretty easily; and will be in possession of information which might be of very serious consequence to our firms. I think that firms in this position of fighting for capital goods orders overseas should be consulted as to whether or not the provision in the Bill will damage their affairs. In fact, some of the provisions in the Bill appear to have been inserted by people who are more interested in statistics than in production and exports. We ought to be interested in both—of course that is so—but in our present position it is very unwise to ask for information which would have the effect of slowing down any part of our economy, and more particularly the export trade.
I come to a point about which I do not know whether your Lordships will agree with me or not, but I wish that in this Bill the Government had taken a bold step and required the value of the assets in a balance sheet to be shown at replacement value. This is done by great companies like Philips in Holland. Until we can have the assets shown at what they are really worth in terms of present-day price-levels—and they are always changing—we cannot calculate how much a company is earning on the capital employed. I should have thought that the Ministry of Technology, and all other persons and bodies interested in raising the efficiency of British industry, needed this yardstick; that they needed to be able to know when one board of directors employed assets of a similar value and

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kind to another board of directors but were in fact earning much more. With this information we might begin to ask why one company was earning more on its capital than another. We cannot do that satisfactorily until assets are valued at replacement value, and I had hoped that this requirement would find a place in a Companies Bill brought forward by a Government which so frequently tells us that they are devoted to modern methods to make us efficient. Instead of that we have a Bill which is largely trivial.
It may be worth reminding your Lordships that it will not be by getting better information, however accurate, however good and useful that information may be, that we shall make our industry perform better. It is a question of the attitudes inside industry, between management and workpeople and between both and society at large. The time will come when we shall have to discuss these, which are the really serious difficulties in British industry. I only hope that we shall not persuade ourselves that just because we know a little more in facts and figures we need not pay attention to the really serious problem of attitudes in industry. In the meantime, we must make the best we can of this inadequate Bill.
5.37 p.m.
LORD STOW HILL: My Lords, your Lordships have listened to a series of admirable speeches on this somewhat abstruse Bill, beginning with what I thought were two splendid opening speeches. If from time to time I detected a slightly controversial note in the speech of the noble and learned Lord, the Lord Chancellor, when I listened to the admirable speech of the noble Lord, Lord Erroll of Hale, I could not help thinking of the adage that imitation is the sincerest form of flattery. As I listened to the informed speeches which have been delivered, I had the painful experience that I sometimes have in your Lordships' House of thinking that the points which I had carefully prepared I ought one by one to discard; and, having performed that process, which I am sure is to your Lordships' relief, I find myself left with a few rather naked, feeble points. But they have not yet been touched on, and I hope your Lordships will not think that I am unnecessarily trespassing on the time of the House if I just make them.
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Part I of the Bill, in effect, reconstructs Schedule 8 of the Companies Act, 1948, broadly in order to achieve the purpose set by the Jenkins Committee of making the conventional balance sheet and profit and loss account approximate more nearly to the requirement of the Companies Act, 1948—I think Section 149—that the accounts should present a true and fair picture of the company's position. Clearly that objective involves a number of points on which your Lordships have differed and on which I suppose in the course of our Committee investigation of this Bill your Lordships will express conflicting views.
The point on Part I of the Bill on which I would detain your Lordships for a moment is Clause 18, which deals with the requirement to disclose contributions or payments, as they are first called, to charitable or political organisations. If I may say one word to the noble Lord, Lord Mancroft, I hope that he will not continue to think that the purpose of this clause is sinister. After all, noble Lords on all sides in this House believe in the necessity of a mixed economy, and over the years the number of smaller investors drawn from all sections of the population has increased and will increase, and I hope your Lordships will accept that that is a desirable process.
The interest of shareholders is growing. I should have thought I should be echoing your Lordships' feelings if I said that an annual general meeting these days is sometimes less pacific than it used to be fifty years ago. Partly this is due to the fact that individual shareholders with modest holdings take a much greater interest in the company's affairs and wish to be better informed about them. The names of our great companies and their activities and history are largely featured in the Press, on television and on radio, and people generally are more interested in them. There are also large institutional shareholders who wish to know more, in order to be able to probe the board about the company's proceedings during the year. And I should have thought that in general it was desirable, as a trend, to lean towards greater disclosure.
It is in the context of this that I view, for example, the disclosure of directors'

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remuneration. It is not an envious provision. It is simply that those who provide the money should be in a position of knowing how it is disposed of. I think that the noble Lord, Lord Man-croft, was perfectly right in saying that frequently such disclosures will serve to allay a bogey. People sometimes think of enormous remuneration received by directors when in fact nothing of the sort is the truth. The truth should be given, and there surely can be nothing wrong about that. It may be that it will have the effect of levelling up remuneration in different companies. If so, so be it. I believe that in general it is right that shareholders should know how those who manage their money deal with it in this respect as in others.
The noble Lord, Lord Erroll of Hale, in answering an argument addressed to the House by my noble and learned friend the Lord Chancellor, said that the remuneration of civil servants, Ministers and members of public bodies should be known because that involved the expenditure of public money, and he differentiated that from the case of directors who are remunerated by their shareholders—or, in the ultimate result, out of the use of shareholders' money. I should have thought, with great respect, that that was a distinction without a difference. It seems to me that, if anything, there is greater reason for shareholders to know what happens to the money they provide, and how it is applied, than for the general body of the public to know how public funds are disposed of. The public are informed with regard to the expenditure of public money, and I think that to inform shareholders with regard to the expenditure of the money they provide is logical and desirable. If it will help to dispel suspicions and exaggerated views of remuneration, that is all to the good. I hope that the House will feel that this is a provision which is inserted in the Bill not from any sinister political motive but because it is generally healthy that people should have as much information as can be given without injuring the company and its interests.
LORD ERROLL OF HALE: My Lords, I am grateful to the noble Lord for giving way, particularly as your Lordships heard
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my speech without interruption, but I think that I ought to explain to the House that this information is already available to shareholders, since the total sum expended by way of fees and salaries to directors is already shown in the company balance sheet. It is the breakdown that I object to.
LORD STOW HILL: My Lords, the difference is between the total sum, which is certainly shown, and the breakdown for which this Bill provides. I should have thought that that was desirable from the point of view of the general public. But I leave that point, which your Lordships may wish to consider further in Committee.
The other part of this question is contributions to political organisations, and here I would apply the same touchstone. People ought to know. As my noble and learned friend the Lord Chancellor said, the Bill does not in any sense prevent such payments. It simply says that shareholders should know if there are charitable or political payments. Speaking for myself I certainly would not put political payments to Party organisations on the same footing as payments to charities. In this healthy and vigorous democracy of ours, where we have differences on political matters—and I hope that we always shall, because democracy cannot learn without them and democracy is essential to civilised living—payments to a political Party have (if I may use a rather ugly word which has now crept into our language) an emotive quality. I do not quite know what that word means, but I take it that it is a quality which makes one's hackles rise.
After all, shareholders come from all shades of political opinion. I am a member of the Labour Party, and I should like to know whether the companies in which I am a shareholder—and I hold shares in a number of companies—do in fact contribute to the Conservative Party. There is nothing wrong in my knowing that. If I object, there are various courses open to me to take; but all that is being done by the Bill is to put me in a position to know. With great respect, I would submit that it is not really an answer to that to ask, as the noble Lord, Lord Mancroft, did, what would the shareholders do when they knew. I do not know. They may disregard it. They

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may say, on the other hand, that they are no longer going to be a shareholder in a company which makes contributions for that purpose. Perhaps they will not. But they will be in a position of having the information available to them.
It is not easy to determine what is a political payment, and I should like to make a few observations on that point. It is easy enough, when talking of a payment to the Conservative Party or the Labour Party or the Liberal Party, but it is not so easy to determine what is a political payment when the payment is made to some organisation which may be more or less closely affiliated to, or designed to serve the purposes of, a particular trend of political thought. A number of names spring to mind—but, "No names, no pack-drill!" They are not here to defend themselves or speak for themselves, so I do not name them. But there are organisations which are "Friends of" this and "Friends of" that, which may or may not directly serve the purposes of some political trend. The way the Government seek to deal with this is to provide the definition which appears in Clause 18(4). The relevant words are:
"For the purposes of this section a company shall be treated as giving money for political purposes if, directly or indirectly,—

(a) it gives a donation or subscription to a political party of the United Kingdom or of any part thereof; or"—

that is simple enough. It covers a straight contribution to a political Party—

(b) it gives a donation or subscription to a person who, to its knowledge, is carrying on, or proposing to carry on, any activities which can, at the time at which the donation or subscription was given, reasonably be regarded as likely to affect public support for such a political party as aforesaid."

The directors have to decide; it is for them to take the decision, and to accept the responsibility of determining whether a payment comes within this definition or not.
What is, and what is not, within that definition? Supposing a large company pays a sum of £25 5s. annually in order to provide the public with newspapers in their waiting rooms? Newspapers sometimes support one political Party, sometimes they support another political Party, and sometimes both; and they quite often criticise all political Parties, and it is a good thing that they should. Have the
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directors of a company to put into their report that they have paid £25 5s. to buy a newspaper, or a periodical or something of that sort, to put in their waiting room so that people can read it when they wait? I cannot suggest a better definition. I think this is a serious difficulty, and it may be that the Government have chosen the best form of words. Common sense generally comes to the rescue in difficult situations of this sort, and one hopes that it will relieve directors from embarrassment in having to exercise their discretion on these words.
The expression "subscription" is used. Do you pay a subscription within the meaning of the definition only if you pay for nothing in return; or do you pay a subscription if in return for the payment you make, to take the example that I gave, you receive a newspaper? I do not know. It is, I think, a difficult point, and it may be one that your Lordships will wish to consider further in Committee.
I should like now to pass from Part I and make some observations on Part II of the Bill. Every Government are in this dilemma. If a Government take stringent powers, often they are, quite properly, called dictatorial; if they do not take stringent powers, they are apt to be called weak and not ready to take the necessary measures to avert a particular mischief. But your Lordships may in Committee wish to examine some of the powers which are taken in Part II of the Bill. If I may give your Lordships some examples, Clause 61 says that the Board of Trade can insist on the production of papers and books, and they may take copies. Clause 62 provides that a justice of the peace may on the information of the Board of Trade authorise what is in effect a forcible entry of premises in order to enable the Board of Trade officers to take possession of papers. I think your Lordships may wish to question whether there are other precedents for powers quite as drastic as that. I think I am right in saying that there are some fairly close to this in the Exchange Control Act 1947, for which the Government of which I then had the honour of being a member had some responsibility. It may well be that these powers are essential and cannot be forgone.

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Clause 48 raises a difficulty which I think often emerges when stringent powers are under consideration. The Board of Trade can refuse to allow, in effect, a person to serve as an officer of an insurance company on the ground that he is generally undesirable. A "person", I think, includes a manager, director, secretary and so on. It is a very drastic power. It may, of course, be necessary. British insurance has, I suppose, as high a reputation as any in the world, and I can well understand those concerned with its interests being most anxious to keep away from it a person whose character, particularly financially, leaves something to be desired. But for somebody in the Board of Trade to say, "I hear that X is to be a director of such-and-such an insurance company. He has not been to prison; he is not in prison at the moment, and he is not bankrupt, but we do not like it. We think he is a person of potential bad character", there being no appeal against that decision, and no recourse to any other authority against it, is a very stringent measure, and your Lordships may wish to examine that in Committee.
I suppose a particular feature of Part II of the Bill is that it puts beyond doubt that the Board of Trade can intervene before an insurance company, if I may use a colloquialism, goes "on the rocks". I think it was thought by some, at any rate, that this power already existed, but this puts it beyond doubt. I should have thought that this was absolutely right. The only comment I have to make is this. There are stringent powers for the Board of Trade to intervene when it doubts whether an insurance company is being carried on on a stable footing. But I wonder whether those powers are sufficient, that are designed to prevent the entry into the insurance field of new unstable concerns. In effect, the only gateway through which you have to pass if you wish to start a new insurance company—a cut-price motor insurance company, for example—is that if you are a limited company you must have a paid up capital of £100,000, and your assets must exceed your liabilities by £50,000. Those of us who, unhappily, have had some professional contact with these matters know perfectly well that if there is a collision between
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two cars, each of which has passengers, and if the driver of one of the cars is held in the courts to be negligent, the consequent damage, consisting of compensation for injury to the various persons involved, may easily exceed £50,000. So I ask myself whether the provision designed to prevent companies from entering into the insurance field is adequate. Is £50,000 really a figure which has any other than an illusory significance in this context?
I understand that there are a number of perfectly solid respectable companies which operate only in limited fields of insurance on a modest scale, and if the figure of £50,000 were considerably higher, it would make it impossible for them to continue their very useful undertakings. I should have thought that possibly the right way to provide for this situation would be to make the figure of £50,000 considerably higher, but to allow the Board of Trade to grant special exemption to smaller companies dealing with particular types of insurance business.
I now want to pass on, quite briefly, to Part III of the Bill. This is the part of the Bill, as the noble and learned Lord the Lord Chancellor told us, in which the Government have, in effect, adopted the advice of the Jenkins Committee, not to define bankers, but, as the Committee recommended, to leave it to the Board of Trade to certify what concerns are and what concerns are not bankers. The situation arises in these circumstances. Hire-purchase business is now an enormously important field of our commercial and industrial enterprise. A hire-purchase company, if it comes within the scope of the Money-Lenders Acts, as the noble and learned Lord the Lord Chancellor said, cannot recover the debts owed to it, and, indeed, may well be committing criminal offences if it fails to comply with certain requirements of the Money-Lenders Acts. The situation sometimes arises that a hirer who owes money to a hire-purchase company seeks to evade liability by maintaining that the hire-purchase company really carries on the business of money-Lending and therefore should be prohibited by the 1909 to 1927 Money-Lenders Acts from recovering its debt against him.
The noble Lord, Lord Erroll of Hale, mentioned one case of that sort to which

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I should like to invite your Lordships' attention in support of the argument that I seek to put that possibly the Government have taken a mistaken view here. I know the truth of the adage that one can tell an elephant when one sees one but it is awfully difficult to define one, and it may not be easy to define the business of banking. But it is not as difficult as all that, and I should have thought that the Government ought to try to define the business of banking. There are many definitions in the cases. Joachimson v. The Swiss Banking Corporation gives a general definition and, normally speaking, the general business of banking is the acceptance of money on deposit with an undertaking to repay on demand on the understanding that the bank can use the money until repaid to a depositor. That is a general description which does not necessarily describe a number of commercial activities which we now associate, for example, with commercial banks, merchant banks, discount houses, acceptance houses, and so on.
But the position arose in a somewhat difficult and acute form in the case to which the noble Lord referred, the United Dominions Trust v. Kirkwood. The United Dominions Trust is a famous company which carries on business on a very large scale, and is of the highest repute and standing. It wanted to sue a motor dealer for £5,000 due on what were called "stocking" agreements. The motor dealer said, "No, you cannot recover the amount because you are moneylenders, and you did not comply with the terms of the Act." The United Dominions Trust said, "No, we are not moneylenders we are bankers." That issue came before the Court of Appeal, over which the noble and learned Lord, Lord Denning, presided as Master of the Rolls. I hope I state fairly what actually happened.
The noble and learned Lord proceeded first to look at no fewer than twelve Statutes which contained important provisions about banking. In the case of each Statute he looked to find what was a banker, and in each case he found the definition that a banker was "a person who carried on the business of banking." Sometimes there was a variant, and the variant took this form: that a banker is a person whom the Board of Trade certify carries on the business of banking. The
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Court of Appeal, finding that there was no help in that direction, proceeded to look at cases like Joachimson v. The Swiss Banking Corporation, and by reference to the definitions in those cases, to examine the proceedings and the type of business carried on by the United Dominions Trust.
The Master of the Rolls came to the conclusion that none of the business carried on by the United Dominions Trust conformed to the ordinary understanding of what a banker does. That looked rather black for the United Dominions Trust, and if the case had been decided against it, it would have been quite disastrous. It could not have recovered that debt or, I suppose, any other debt. I speak rather feelingly, because I have been privileged to represent a number of companies in a similar situation, and it is very serious for them indeed. Fortunately, the Court of Appeal felt that on the authorities it could and ought to decide that the United Dominions Trust was a bank, for the reason that it was generally reputed in the City of London to be a bank and was generally described and treated as a bank. I summarise the argument.
In those circumstances judgment was given for the plaintiff. But Lord Justice Diplock, who was a member of the Court, pointed out at the end of his judgment that in that particular case the Court of Appeal were able to decide in favour of the United Dominions Trust because there was sufficient evidence before the Court to convince them that it was generally reputed to be a bank in the City of London. But he said that in future cases the evidence may not come up to that, and that although the judgment was good as between the United Dominions Trust and the defendant in that case, it would not be good as between anybody else and the whole question would have to be litigated as a matter of fact should the question arise in the future. Surely, that is a most unsatisfactory position.
The Board of Trade said to the Jenkins Committee that they found that the power which was vested in them, or thought to be vested in them, of saying what was a bank and what was not was a difficult one to exercise, and expressed the hope that a definition would be found. I would venture to echo a similar hope, and express the view that the Government might

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think again on this question of definition. It would introduce certainty where uncertainty now resides in a very large field of our valuable commercial operations centring around hire-purchase companies and finance companies.
I personally think that this is a necessary Bill. I am glad to see that it is only one instalment. I should hope that, when the full thinking of the Government is reflected in statutory provisions, the example of the Government in 1947 and 1948 will be followed; and that the new provisions will be consolidated, as the 1947 Act was consolidated in the Companies Act 1948, which is now the Act which governs the situation.
6.5 p.m.
LORD HAWKE: My Lords, the noble and learned Lord on the Woolsack reminded the House of what transpired in 1947 when the present Companies Act was going through this House. I well remember that, because I was an extremely inadequate secretary of the Committee on this side of the House putting down Amendments. I should like to recall the very pleasant atmosphere there was in the House at that time. The noble and learned Lord on the Woolsack—in those days Lord Jowitt—invited the House to improve this Company Law. I hope that the noble and learned Lord who sits there to-day will take the same attitude, though from one remark in his speech I rather imagined that he might be thinking he was casting us something on which to do a few drafting Amendments only. I hope I was wrong.
On the whole, this Bill has had a very good Press, and the financial journalists are now the best protection that shareholders have to-day; and shareholders are very inadequately "trade unionized" in an increasingly unionised world. There has been a good deal of talk about the proposals for disclosure, and I personally do not object to them. But they will have certain repercussions which I do not think the Government have thought of.
I am glad that an ex-Home Secretary picked up Clause 18(4)(b), because I think that is quite impracticable, and I hope we shall try to delete it from the Bill. Various noble Lords who have said in effect that it is not necessarily to the advantage of shareholders to learn
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the emoluments of their directors and their principal executives are absolutely correct, because undoubtedly the shareholders will find themselves paying more for their executives as a result of the process of "head hunting", et cetera, which will certainly go on. I have not the slightest doubt about that.
I am not sure that I am happy about the banking and insurance clauses. The noble Lord who has just sat down told us a good deal about his experiences on this question of what is and what is not a bank. If you are not a bank you become a moneylender, and under a grave handicap. I should have thought there was a case for having a third animal: a bank, in the sense in which the general public thinks of a hank, a person who lends money against goods in some way or another and takes deposits from the public to do so, and the moneylender. I give that thought to the Board of Trade to think on next time.
When we come to insurance, I am sure the noble Lord, Lord Stow Hill, is absolutely right that there are a number of insurance companies in existence to-day who have come into existence for the specific purpose of insuring people whom nobody else is prepared to insure. Considering what shockingly bad accident records some of these people have, the financial provisions for allowing these companies to go on are to my mind quite inadequate, and something ought to be done about that. Perhaps I should declare an interest, as I am a director of a small tariff insurance company. I know that one noble Lord—I think, Lord Peddie—was frightened of insurance becoming a closed shop. I can assure him that there is not the slightest chance of that happening so long as Lloyd's is in existence. Insurance is the biggest cut-price industry in the country to-day, and always will be so long as Lloyd's and the companies are all competing.
As to the exempt private companies, I do not think there is any great objection to the abolition of their status. But when we make them conform to various rules and regulations which were designed for the large public companies, the small businesses can be very heavily penalised. The noble Lord, Lord Goodman, made a number of valid points in that field, and I hope that when we come to the Committee stage they may be turned into

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action. Publishing the turnover is most deleterious to a small business in a small town. I do not see that publishing the directors' emoluments serves any useful purpose. Does it really help the stockholders, the widows or retired people of the family, to know that Uncle Stanley takes £2,000 a year out of the business? They probably know that already and do not object.
When we were dealing with the last Companies Bill I remember that I was much struck by the reminiscences of the late Lord Maugham, who had been Lord Chancellor. He told us wonderful stories of cases in which he had been engaged, of quarrels between families, directors, and so on, and it was most eye-opening to me as the experience was completely different from anything I had ever come across. Then I realised that the Chancery Bar probably comes upon the cases of these innumerable small companies when they have quarrels and are foolish enough to go to law. The other day I was discussing this Bill with a friend who has a practice at the Chancery Bar, and his comment was that he thought it fundamentally wrong to treat private companies like public companies. He thought there should be a separate code of law and he said that at least one country on the Continent (the name of which I forget) has some sort of separate law, so that in effect there are three different types of "person".
Some of the legislative protections designed for the shareholders in the large public company can act in a most deleterious manner to those in a small private company, and the noble Lord, Lord Goodman, gave various instances. I will give another one, drawn from my friend's practice. There was a flourishing little business in the South of London, run by a man and his wife. They were sole directors and they took the whole profits of the business, more or less as directors' fees. The wife had 51 per cent. and the husband had 49 per cent. The marriage broke up, whereupon the wife promptly sacked the husband and ruined him. He had nothing to live on. They were to all intents and purposes an incorporated partnership, and of course she could not have got rid of him in that way if they had been partners. It is quite right that the shareholders in a big public company should be able to get rid of their directors
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like that, but in this particular instance it worked in a harsh manner.
The Jenkins Committee rejected the idea of following the American practice of allowing companies to buy their own shares. Their reasons are obviously perfectly sound for large public companies, but when it comes to a small family company and one of the shareholders dies, there may not be any other method of disposing of the shares if the company is not permitted to buy them, and it really acts as a reduction of capital and the executor finds a buyer. Arising out of this sort of situation it might be in the best interests of the company that one of the surviving directors should be allowed to borrow money from the company in order to acquire the shares, but of course the law is very stringent against that happening in a large public company; and quite rightly so. In this case it would have to be subject to the shareholders' not having an objection and to the interests of the creditors being safeguarded.
Then again, I am told that there is no fiduciary relationship between the director of a private company and the other shareholders. He can buy shares too cheaply from the widow and not be accountable to her for any profit he makes by re-selling them. If it is correct, that seems to be a flaw in the law as relating to these small companies. My Friend brought out all these points, not with a view to this Bill but immediately the Jenkins Committee's Report was published, and I think he spotted, as the noble Lord, Lord Goodman, has, that the Committee was composed of people well skilled and learned in big company practice but with little experience of the small private companies which conduct most of the business of the country.
I hope that the next Bill will deal with this situation. This one, of course, by its insistence on various forms of statistics and disclosures, will provide a lot of extra work for those service industries clustering around Whitehall, which makes the Government's intentions rather extraordinary. They want to reduce the employment in service industries in the private sector, yet at the same time everything they do is trying to increase the employment in the service industries in the public sector—the statistical offices, and so on. That, of course, is inconsistent and silly. In fact, in that respect

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the Bill really panders to this modern trend for statistics and information, quite regardless of whether the result will be of the slightest use to anybody.
6.18 p.m.
LORD MILNE: My Lords, I should like to preface such brief remarks as are now left to me by echoing an earlier tribute to the Jenkins Company Law Committee. Speaking as an accountant, and so to a certain extent an interested party, I welcome the objects of this Bill generally. I, too, have some reservations on Part I, both as to the contents of one or two clauses and, with the noble Lord, Lord Goodman, as to the proposed application of the Bill to the small limited companies.
There is a dilemma with regard to what is reasonable in disclosure. This was considered by the Jenkins Committee and their views may be summarised under three heads. First, that the information should be of real value to the recipient; secondly, that it should not involve disproportionate work, and thirdly, that it should not be detrimental to the business. I think that, with few exceptions, most of the clauses in Part I of this new Bill fulfil these three requirements, provided that the application is not to be universal. I cannot, however, feel that the detail required in Clause 18 with regard to donations is justifiable from the point of view of Company Law. The Jenkins Committee considered this point and they dismissed the subject as immaterial. If, notwithstanding that, it is thought that times have now so changed as to warrant such disclosure, so let it be; but I think the disclosure should be in total only and the details should be available to shareholders or others, possibly on request.
Nor do I feel, following a multitude of speakers, that the particulars of exports required by Clause 19 have any real value, other than to satisfy curiosity. They will not assist shareholders or creditors, while the Board of Trade has other means of obtaining such information if it requires it, and the information would then be defined, and so accurate for their purposes. I agree with the noble Viscount, Lord Eccles, that stated in company accounts the information could well be misleading, and coupled with the other disclosure now contemplated could very well do more harm
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than good. My feelings are rather with the noble Lord, Lord Byers, and a speaker in the other place on an earlier Bill who asked, "If exports, why not imports also?"
To turn to the question of the application of the Bill, it is clear there is considerable concern over the general application to small companies. This I share. The reasons are obvious and the arguments have already been expounded at length by the noble Lord, Lord Goodman. The problem, of course, is where to draw the line. As a compromise, could not the provisions of the Bill apply to all companies, but, let us say, the former exempt private companies should file only their balance sheets? Power might also be given to the Board of Trade in certain stated circumstances depending on size to call for further information, and they should be given a fair measure of discretion in so doing.
As to omissions, this Bill mainly concerns disclosure, so the omission of such matters as no par value shares and nonvoting shares will no doubt be justified on those grounds. But it seems a pity to omit these, or to leave the initiative with the Stock Exchange on, for example, half-yearly accounts. I also agree with the noble Viscount, Lord Eccles, on the remarks about depreciation. Also why should the "inside information" clause not be extended if possible beyond directors?
I do not wish to raise now details which can be amended in Committee, but there are also some taxation matters which arise out of the 1965 Finance Act and which I think will need attention. Apparently, however, we must wait for another Bill to apply these Jenkins proposals which, though not strictly on disclosure, bear on take-over bids and good company management. Lastly, the withdrawal of the ban on large partnerships contained in Section 37 will be welcomed with relief by those concerned. Though not greatly publicised, this is a considerable change of policy and may have far-reaching effects on the shape of business, in the professions, the Stock Exchange and even in commerce. May I suggest to the Government that they might now consider amending the Business Names Act so as to avoid the necessity of putting the names of all partners on letter headings et cetera, failing which, as

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was pointed out to me, some notepaper will look like the back of a Lloyd's policy. With those remarks, I welcome this Bill.
6.14 p.m.
LORD ROYLE: My Lords, because I am conscious of my own limitations, in the short time I shall keep your Lordships I intend to talk only about Part II relative to the insurance clauses; and even here, because of what has been said by my noble friends Lord Peddie and Lord Stow Hill, what I had intended to say will now be shortened, because I am quite confident that both of them have said some of the things I wanted to say very much better than I could. If the noble Lord, Lord Erroll of Hale, were here at the moment he would be either shocked or comforted by the fact that a noble Lord on this side of the House has to declare an interest as being a director of an insurance company. I got the impression from the noble Lord that anything of that sort would be completely outside our ken and consideration. But I do at once make that declaration. It is not a company in the "top ten", as it were, but for all that it is a very important company in all classes of business, and therefore what I am saying this evening is to a large extent what my fellow directors in the management of that company are thinking.
It took the State Building Society to compel the Government to introduce in1962 the Building Societies Act, as it is now. It seemed in that case that to a large degree the stable door had been locked after the horse had fled. Likewise with regard to insurance companies, it is due to the activities of American and Military, Brandaris and Fire Auto that we have this part of this Bill before us to-day—because, if I understand rightly, it was never intended that there should be any clauses on insurance, particularly after the publication of the Jenkins Report, and this section of the Bill must be a later thought on the part of the Government. Therefore it seems to me that to some extent their hand has been forced by the fact that these incidents have occurred. They are closing the stable door after two or three horses have escaped, at least so far as insurance companies are concerned, and it is interesting to note that the "vet" is still examining one or two more at this stage.
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Nevertheless, I say without hesitation—and I am sure I speak for most of the insurance world—that we welcome part of the Bill which the House is discussing this afternoon. We welcome it from the point of view of the country and business generally, but it is more particularly welcome from the point of view of the insurance companies. Every reputable insurance company in the country is wholeheartedly pleased with the provisions of the Bill, the Government's intentions and the protection which they as reputable companies will now receive, and particularly, if I may say so, where motor insurance is involved. There was great anxiety over the last year or two among the good companies during the cut-price premium period of some of the companies with which we are now very familiar. A great deal of business was lost to this mushroom type of company, and it is a happy feeling that now that some of them have been found out, even though it has meant great sacrifice for some people, there is a steady drift back to sanity after very many fingers have been burned in the process.
In passing, may I say one thing? I do not want to be critical of insurance brokers—indeed, insurance companies depend greatly upon them—and I do not blame insurance brokers for advising their clients which is the best company in which to take out their insurance: it is their job, their duty, to get the best value they can for their clients. On the other hand, it seems to me that brokers might be a little more careful than they have been in the past in the giving of their advice so that there will be a greater guarantee and assurance for their clients. And surely nobody is better placed than the broker to know, or at least have a very good idea, what type of company he is recommending.
One point to be stressed in any debate on the insurance business in this country in a general survey, for which this Bill gives the opportunity, is the value of insurance as an invisible export. We have heard a good deal this afternoon with regard to the production of figures relevant to exports. I do not think it is generally realised what a great part insurance companies in this country play in the realm of invisible exports. I believe that in the national interest we have to

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maintain the companies' vital contribution towards the balance of payments. Two-thirds of the total non-life business, £750 million, is transacted overseas and earning a net benefit of £50 million a year. If I might be allowed to quote my own company, we have business in France, Morocco, Scandinavia, Malaya, Algiers, and Greece, apart from the Commonwealth, and in that way a great deal of money is earned for our country. The reputation which British insurance has established over the years must continue to be unsullied by unstable companies, and I believe that, more than anything, this Bill will help to preserve that reputation.
I am disappointed that the British Insurance Association were not able to persuade the industry generally to adopt the main recommendation of the Mackenzie Report, part of which suggested a revision of underwriting to insist on compulsory excess for motor insurance. I believe that a great number of people, mainly young drivers, are in many cases quite careless because they know full well that in the final analysis it costs them next to nothing, and therefore they are prepared to take risks. If a compulsory excess of, say, £25 were placed on every motor insurance I think we should find much greater care being taken, and in my view there would be far fewer accidents in the country.
Now may I make one or two brief points on individual clauses? My noble friend Lord Stow Hill has mentioned one that I wanted to refer to, Clause 48, which relates to the question of unfit directors or officers of any insurance company and takes powers to prohibit them from acting. I agree with my noble friend that this can be very wide indeed. It is a clause which is admirable in its intent, but a great deal of power is left to the Board of Trade. As my noble friend says, there seems no provision at all for an appeal against a decision which some officer of the Board of Trade, with the best intentions in the world, might take. Surely we should all agree that an appeal in anything of this kind is in accordance with our British sense of justice. Why not apply the appeal procedure of the fraud legislation, which provides for a tribunal of an independent nature? I do
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not want to say more about it because my noble friend has dealt with it so well. But I strongly press this point on my noble friend Lord Brown, in the hope that some notice may be taken of it.
My other point is on Clause 49, which relates to investment by insurance companies. Subsection (1) of that clause says that the Board of Trade may impose on a company
"a requirement that the company or body shall not make investments of a specified class and shall, before the expiration of a specified period … realise investments of that class held by it immediately before the requirement is imposed."
This provision, again, seems to me to be giving a great deal of discretion to the Board of Trade. I feel that any requirements which concern investment should be prescribed rather than left in the loose and vague way envisaged in the Bill. I understand that in the realm of insurance the French Government insist on certain definite investment. I am not quite sure of my figures, hut they are something like this: 25 per cent. in Government stock, 25 per cent. in what we call "blue chips", 25 per cent. in property and 25 per cent. miscellaneous. In addition, the company must send a quarterly schedule of the investment portfolio to the appropriate Ministry. It seems to me that if we adopted this method, the board of an insurance company would know what it had to do, and the Board of Trade officers would know what they had to check. I think this would be a wise provision, and it is a suggestion which again I put to my noble friend. With great respect, Government Departments are not famous for exercising discretion, and rules are so often vigorously applied. It seems that here would be one way of dealing with the question.
In conclusion, as a director of a composite company with predominant interests in the motor market, for that special reason and perhaps with special knowledge, I welcome this legislation, because I think it should, and will, bring back sanity to the motor market in insurance. I wish the Bill well. I can assure my noble friend that the general feeling in the insurance world is that these are fine steps, and that the proposals and provisions of this Bill will be generally welcomed.
6.38 p.m.
LORD ALPORT: My Lords, I must begin by following the noble Lord, Lord Royle, in declaring my interest. I am associated both with a merchant banking institution in the City and with an insurance broking group at Lloyd's. I listened with interest to the advice which the noble Lord, Lord Royle, gave with regard to the duties of brokers in the insurance field, and I think that everyone would entirely agree with him. Certainly what he has preached is our practice. On the one hand, it is quite clear that the proposed legislation in this Bill deserves to be welcomed as a reforming measure in the body of our company law.
When I first studied the Bill, I must say that I thought there was behind it a new and desirable basis of philosophy. I thought that the provisions for disclosure might perhaps be intended by the Government to increase the shareholder's interest in the activities of the company of which he was partly a proprietor. My own view is that the developments in business during the years ahead of us certainly should see an increasing participation by the shareholder in the affairs of the company whether it be as an institution or as a person. I do not mean that there should be interference with the decisions made by the company. I fully recognise the warning given by Professor Galbraith in the second of his Reith Lectures, in which he said:
"The modern large enterprise is equally jealous, although less outspoken, in protecting itself from interference from those who own or supply it with capital. Interference with decisions from these quarters would be equally damaging to the authority of its planning and to the quality of its decision."
That is perfectly right. On the other hand, a new relationship is growing up between boards of directors, on the one hand, and their shareholders, on the other, and I believe that this is a thoroughly desirable development.
The more useful information which can be made available to shareholders the better for the general health of British industry and business. In so far as this Bill represents that principle, I would welcome it. Whether all the disclosure of information is required I am not at the moment prepared to say, although I have listened with great interest to the arguments put forward by noble Lords
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on both sides of the House, particularly that made by the noble Lord, Lord Goodman.
On the other side of the matter, I think it is a pity that in a measure of reform, much of which would be generally regarded as desirable, a political element should have been introduced. I know that we are dealing with the realities of a political world and a Party system in this country, but on the whole we tend, both in this House and in the House of Commons, to over-estimate the involvement of people in this country in politics generally and Party politics in particular. I must say that since I ceased to be an active politician I have begun to realise how in the general field of business and of national activities there is far less partisanship than I had ever realised when I was an active politician or than is reflected in the Press or in other forms of communication. I think that when reform measures of this sort are being introduced, it is a mistake that what are blatant Party political points should be included in them.
I refer of course to Clause 18. My own view is that the result of that clause and the provision requiring the publication of political contributions will in fact probably increase, as my noble friend Lord Erroll of Hale suggested, the number of contributions made by companies to the various Parties—but what I think it will do also is to decrease the contributions which are made by companies to charitable objects. On the whole, that clause obviously is intended to be a deterrent to Party political contributions. By associating charitable contributions with them it will act as a deterrent to charitable contributions. All of us in this House are associated with appeals of various sorts and we all know from our experience how much we depend on the generosity of companies of all sorts and sizes to support these appeals. There is relatively little scope for patronage in these days, and we look to public authorities and to corporations to help us when we need money for charitable objects. Therefore, I think that it is a mistake for the Government to introduce this provision.
I want now to deal with one relatively limited point in this Bill, although it is a matter of principle and therefore is properly to be aired on Second Reading.

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Indeed, it has already been elaborated in detail by the noble Lord, Lord Stow Hill, when he referred to the absence from this Bill of a definition of banking. When the noble and learned Lord the Lord Chancellor was referring to this part of the Bill, namely Part III, he said at one stage in his speech that "there should be no uncertainty in this field", and went on to claim that Clause 81 met the requirements of the situation. The noble Lord, Lord Stow Hill, pointed out very clearly that, whatever may be the effect of this particular clause, it does not contain any definition of banking. He pointed out that the matter was considered in great detail by the Court of Appeal in the recent U.D.T. case. He referred to the fact that the noble and learned Lord, Lord Denning, suggested in that case that the definition should be a decision of the Board of Trade. If it is the purpose, as indeed it is, of this clause that the decision as to what is a bank should be left to the Board of Trade, then surely it is right that the Board of Trade should be given some criteria on which to make that decision, and to make it in the interests of good government, good business and good banking here in Britain.
I have looked through the banking legislation of the Commonwealth to see whether there is any definition there, and I must confess that neither in Australian nor in Canadian legislation could I find any different definition of a "bank". The only country which has a definition, so far as I can discover, is the Republic of Malawi. And I am not sure that the definition which is contained in their banking legislation would necessarily commend itself to Parliament in this country. But, at any rate, they have done something about attempting to define by statute "a bank". We, the greatest banking country in the world, have so far left that definition uncertain.
Under this Bill the responsibility for defining a bank is to be put on the shoulders of a civil servant or a department in the Board of Trade. It may be that that is the right solution, but it is still very important that we should know what are the criteria which the Board of Trade are to use in judging whether a company carrying on the activities of a bank is qualified for registration as a
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bank. In his judgment in the lower court in the U.D.T. case, Mr. Justice Mocatta said that there were five criteria with which a company could establish its right to be a bank; and I hope that I am reflecting his judgment correctly when I say that they were taking money on current account; paying cheques; collecting cheques; carrying out a significant volume of banking business; and having the repute in the commercial community as a bank.
I understand—and whether I am right or wrong in this I do not know—that up to the present in interpreting the right of a company to be included as a bank under paragraph 23 of Schedule 8 to The Companies Act 1948, the Board of Trade used criteria on the following lines: that capital should be above £250,000; that its liquidity ratio should be adequate; that it should carry out a full range of banking services; that it should be a member of the British Banks Association, the Issuing Houses Association or the Discount Houses Association; that it should have the repute in the City of London of being a bank, and that the Commissioners of Inland Revenue and the main clearing banks should regard it as a bank.
The Financial Times, in a recent article commenting on this Bill and this particular clause said this:
"Whether a particular company qualifies for a stamp or not it will be for the Board of Trade to decide. But it would appear that to start with at all events there will be one criterion. This is whether the company has been able to satisfy another governmental body—the Inland Revenue—that its activities have enough of a banking flavour to enable it to qualify for privileges reserved for banks in the Income Tax Acts, of which that permitting it to pay interest without first deducting tax is the most important."
Are we, therefore, in the Bill as it is at present drafted leaving this decision not to the Board of Trade but to the Commissioners of Inland Revenue? Is this not a case when, in fact, administrative discretion is not appropriate; when we in the House—we in Parliament, in both Houses, to put it more accurately—should take the responsibility for defining in law what a bank is?
I realise that this is extremely difficult. I realise the problems which this creates for those who are attempting to draft this definition. But I ask the Government to

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consider most earnestly, when the Bill is in Committee, the advice which they have already had from a very distinguished lawyer in this House, the noble Lord, Lord Stow Hill, and from other Members of this House, and to try to grasp this nettle which has been left untended, so to speak, for a long time past, and to include in this Bill a definition of what is a bank. The noble Lord, Lord Stow Hill, emphasised the consequences of a different judgment of the Court of Appeal in the U.D.T. case, and perhaps that will emphasise to your Lordships in general the importance of this particular matter. It is on that point that I wish to address your Lordships' House at this stage, and perhaps to have an opportunity of coming back to this point when we reach Committee.
6.52 p.m.
VISCOUNT MASSEREENE AND FERRARD: My Lords, I should like, on the whole, to give a welcome to this Bill, in that I personally have never seen any object in secrecy regarding the affairs of a company. Apart from the fact that if everything is published, as is suggested in this Bill, that can aid one's competitors, especially foreign competitors, I have always thought the less secrecy the better. We have to remember now, when we think of the control of some of these very big companies, that direction has now become very far removed from ownership. That is another reason why many of the clauses in this Bill, which aim at giving the shareholders and the public generally more information, are good. Of course formerly, perhaps fifty years ago, the ownership and the directorship in the average company were to a great extent one and the same thing.
I particularly welcome Clause 24, which does not allow directors to deal in options in their own shares. I regard that as an excellent clause. I also like Clause 25 which deals with service contracts. But with regard to the clauses relating to the disclosure of directors' emoluments and the remunerations of highly-paid employees, I would ask: is this really necessary in the case of small private companies? I have to declare an interest in one or two small private companies. Of course, it has been pointed out already that this disclosure lays these small companies open to take-overs. A big company—take a firm like Sains-
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bury's; though the noble Lord, Lord Sainsbury, is not here, so perhaps I should not mention it—can have a shop in a small country town, but be under no obligation to disclose the trading figures of that shop or, in fact, anything about it; although, of course, they are under obligation to disclose general information about the company as a whole. But a small private company with a shop whose operations are entirely local has to disclose everything, which seems rather unfair, and I am afraid that it may lead to giving an unfair advantage to some big concern. I had a small company which has been taken over, although I was quite pleased that it was taken over.
I am rather mystified as to why the chairman and the highest-paid director are singled out with regard to the disclosure of fees. Why does this not apply to all the directors? In any event, in my experience the chairman is not usually the highest paid. In fact, I am quite convinced that when all this information becomes public a great many people will be very surprised that the average director is paid so badly. In fact, in my experience in small manufacturing companies, the average director is paid worse than the lowest skilled manual worker in the firm. So I am all for having this information. I think it will be excellent propaganda for free enterprise.
With regard to Clause 19, which deals with exports, I believe that there is a great danger here. I entirely agree that the Board of Trade should have every help in compiling statistics of exports, but I should have thought they could get this information equally well by just writing to a company. If information on exports is to be made public the world over, it is bound to help our overseas competitors.
The other question on exports over which I am a little worried, although the noble and learned Lord who sits on the Woolsack told us that we had no need to worry about it, concerns the firms who make component parts for other firms, who export the finished products. It appears that a firm making component parts is not going to have any kudos from the Board of Trade for doing that. It is the exporting firm which will get the kudos. The noble and learned Lord told us that we could always blow our own trumpet in our accounts, and could say

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how we made these component parts. But that is not quite the same as having the export figures credited to you. I cannot understand why the Government require these export figures. I am sure they have some hidden motive, and I have been wondering what it is. I can really smell quite a big rat here, and I am wondering whether they are thinking of taking over, or taking an interest in, certain firms that export. I am sure they have something up their sleeve, but I do not know what it is. Perhaps the noble Lord, Lord Brown, will tell us, although I rather doubt it.
The other clause I should like to speak about is the one that has been referred to by almost every noble Lord who has spoken—the famous Clause 18, dealing with political contributions. How much better the Bill would have been drafted, surely, if all the clause had said was, "contributions to political Parties" instead of saying, "contributions for political purposes". This has been brought up, I think, before—it was the noble Lord, Lord Stow Hill, I think, who brought it up—but how is one going to define a political purpose? As the noble Lord, Lord Stow Hill, said, any firm buying newspapers for its waiting-room could spend over £25, and this could be classed as paying money for political purposes. Personally, I think, that is rather farfetched. But take, for instance, firms which contribute funds to agencies abroad to protect their capital investments overseas. Is that a political purpose? Surely the Government desire to protect British capital overseas. I understand that if firms give money to protect private enterprise at home—in other words, to protect their shareholders' capital at home—that is to be classed as a political purpose. But it is a great pity that this cannot be defined.
Take the Foreign Office, for instance. I think some people have objected that the Foreign Office were publishing abroad Labour Party arguments for steel nationalisation. My Lords, their excuse for doing this was that it was Government policy. We really ought to have a distinction between Government policy and political purpose, because if, through the Foreign Office, the Government can broadcast Socialist policy abroad, then opposition at home to the Government
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policy of nationalisation cannot rightly be held to be influencing the public attitude towards a political Party. You cannot have it both ways. I do not object at all to the publication of particulars about political contributions, but I am concerned about victimisation. It may be that if a firm has made a very big contribution to the Conservative Party, or to some other organisation promoting the Conservative policy of private enterprise, then they may perhaps have a politically inspired strike. There is also the question that a firm may not get contracts from a Socialist-dominated council, or even from a nationalised industry. As I say, there is nothing wrong in requiring disclosure of information about these political contributions, but firms—and individuals, too—ought to be protected against victimisation. I should have liked to see some clause in this Bill to prevent victimisation, because my own opinion is that there may be some.
My Lords, another point that I should like to make (it has also been made by the noble Lord, Lord Goodman, who made an admirable speech) is on the question of no-par-value shares. It is a great pity that we could not have had something in this Bill about that subject, because it really confuses the public if, as the noble Lord, Lord Mancroft, said, they see a dividend of, say, 100 per cent. declared. They might well imagine that the investor is getting 100 per cent. on his money, whereas, of course, in actual fact, he is probably getting only 6 or 7 per cent. I therefore think it is a great pity there is nothing in the Bill about no par value shares.
Another point—it is a rather ticklish subject, I suppose—regarding this question of political contributions is this. I agree that it is all published, but, after all, trade unions subscribe hundreds of thousands of pounds, I understand, to the Socialist Party. I think we ought also to have something in this Bill applying to any organisation which pays people, or gives people salaries, to put forward their point of view in either House of Parliament. I do not know if that happens, but it may; and if it does it ought to be brought out into the open. In conclusion, my Lords, I will merely say that, on the whole, I welcome this Bill. I am quite sure that it will be a

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great help in generally assisting shareholders and the public generally. With those words, I sit down.
7.10 p.m.
LORD DRUMALBYN: My Lords, we have had a long and very interesting debate which, as one would have expected when considering a Companies Bill, has covered a very wide range of subjects. If I have gathered the sense of this House correctly, it would simply be that in so far as the Bill lets light into hitherto dark places and so prevents abuse it is a good thing; in so far as greater disclosure by companies can lead to a greater interest in their affairs on the part of all concerned with them, be they employees, shareholders, would-be shareholders, creditors or customers, and to a more competitive spirit and greater efficiency on the part of the companies themselves, it is also a good thing—although one can have too much of a good thing, especially if it is compulsory. As the noble and learned Lord who sits on the Woolsack said earlier, one may overdo things.
I think all this has to be looked at in the light of the criteria that Lord Jenkins himself laid down. First of all, he said:
"… generally speaking we accept the principle that it must be for those who claim that the law should be altered to make out their case."
With that, I think we should always agree. Then he went on to deal with restrictions and requirements, and in that too we should very much agree with what he said. He said:
"… we have asked ourselves whether the new restriction or duty proposed would, if it was made law, improve to an extent worthy of legislation the position of the investors or creditors it was designed to protect if so whether its implementation would to any significant extent hamper or impede the company in the efficient conduct of its legitimate business, thus perhaps operating to the detriment of those very persons."
Then, in dealing with information, he laid down three criteria regarding proposed statutory obligation, to which my noble friend Lord Milne has referred. First: will the additional information be of any real value to the persons receiving it? Secondly, will its ascertainment involve an amount of work disproportionate to its value? Thirdly, may its publication be detrimental to the company's business and thus indirectly to its shareholders and creditors?
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In some respects the Bill does not require so much disclosure as the Stock Exchange requires when new issues are made. When there is no question of a public issue or a quotation on the Stock Exchange at all, it may be that in some respects the Bill goes a little too far. I think we could look at this particular matter in the light of those criteria.
We have had a great deal of discussion to-day on the exempt private company. Almost every speaker, except the noble Lord, Lord Boyle, has mentioned this subject. We can discuss it in detail when we come to the Committee stage of the Bill. But we have to look at the general proposal to abolish the status of the exempt private company in the light of the principles enunciated by Jenkins. In a particularly cogent speech, the noble Lord, Lord Goodman, made clear his reasons for thinking that at the very least we should accept the Jenkins conclusions—namely, that so far as turnover, rent and directors' emoluments are concerned, a degree of exemption should continue to remain. It is, of course, here in the first place that the Government must make their case for the non-retention of the three exemptions which already exist.
I recognise that it is a difficult problem because, as the noble and learned Lord the Lord Chancellor said, some operators may have sheltered behind the exemption provided by the exempt private company in order to commit frauds. It is also true, I believe, that some bodies which have the status of an exempt private company are on a very much larger scale than the Cohen Committee originally envisaged. This is a problem we have to solve. I hope we shall not simply say that because of these two facts we should sweep away any necessary exemption for those for whom the sweeping-away would be detrimental.
I do not want to go into any detail on this matter, but there is one point which the noble Lord, Lord Goodman, mentioned with which I would deal. It is the question of loans to the directors of private companies. I should like to mention this first because it seems to me that in any case quite different considerations, which he went into, apply to private companies in regard to loans to directors from those which apply to public companies. Secondly, I should like to make

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the point that in any case there seems to be no transitional provision as to loans made by exempt private companies to directors. What is to happen about such loans which were made before the introduction of the Bill? I suggest it would be unduly harsh to require that they should all be paid back, irrespective of the terms on which they were made, before Clause 2 comes into operation. It would be even harsher on the creditor if any guarantee from the company automatically ended six months from the passage of the Bill. The Bill is not quite clear to me on that point. It should be made quite clear either that it does not apply to loans already outstanding, or that a generous transitional period would be allowed in which to pay them back. In any case we should look at this question as well. I recognise that Jenkins, on the ground that there had been very few representations on this matter, did recommend that in future exemption as to loans made to directors of private companies should be discontinued.
There is another point I should like to make which is of the utmost importance. Clearly private companies on losing their exempt status should have the right to be re-registered as unlimited. To do so the Bill requires them to apply to the Registrar of Companies on a prescribed form of assent which has to be signed by or on behalf of all the members of the company. In other words, this must be unanimous, and not as the Jenkins Committee recommended. I think this is probably right. But what is extremely important is that the form of assent itself should make very clear the effect of assuming unlimited status. I hope that the Government will pay attention to this so that everyone concerned, all the shareholders in a private company, will be well aware before they sign that the entire personal fortune of each of the members is at risk.
I turn to a question which has been dealt with at any length only by the noble Lord, Lord Royle. It is the question of insurance, which the noble and learned Lord who sits on the Woolsack said would be dealt with by the noble Lord who is to wind up. If I may say so—and I do not want to be captious in this matter—it is perhaps a little unfortunate, for we should have
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willingly listened a little longer to the noble and learned Lord the Lord Chancellor in order that we might have some steering for the debate on insurance before we considered it to-day. It seems to me that there are two aspects of insurance which currently raise difficulties. The first is how to prevent insurance from being abused as a means of financing other undertakings with money raised as insurance premiums; the second is, when things start to go wrong, how to intervene in such a way as not to make them worse.
My Lords, to deal with these aspects, and I would say without creating a closed shop, the main proposals in the Bill seem to be, first, a system of authorisation by the Board of Trade under Clause 45 for each class of insurance undertaken, coupled with the power to impose requirements for up to five years and a duty on the Board of Trade before issuing an authorisation to satisfy itself that the company's officers and any person controlling the company are fit and proper persons; secondly, to increase the margin of solvency by which assets may exceed liabilities; thirdly, a power for the Board of Trade to intervene if it is dissatisfied with the conduct of business, coupled with wider powers of investigation; fourthly, a power for the Board of Trade to present a petition for the winding up of an insurance company without previous reference to a court; and, fifthly, an obligation on insurance companies to report to the Board of Trade the appointment of an officer, defined rather vaguely as including "a director, manager or secretary, "or a person acquiring or relinquishing control of the company. I think these are the main points.
These powers for which the Government are asking are very wide; nevertheless it seems necessary that someone should exercise such powers of supervision and control in the interests of policyholders and of the good name of British insurance. I believe that the insurance companies as a whole have given a general welcome to these provisions. What I think is in doubt, my Lords, and this has been slightly questioned during the debate, is whether the Board of Trade is equipped to do this. In due course the Board of Trade may, no doubt, accumulate sufficient experience,

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but the difficulty is, as we know, that civil servants seldom remain in the same division for long and it is doubtful whether any of them will be there long enough to acquire the necessary expertise.
The Board of Trade has its legal department to keep it right with the law, and I am bound to say that I did not agree with one observation made in the debate about the legal department. Having been at the Board of Trade myself, I can say that I found the advice which we received was, so far as I could judge, very sound advice. It is not easy to judge—and this is not a matter for the legal department—whether or not a particular company is in danger of becoming insolvent, or, for that matter, whether a particular person is a fit and proper person to be involved in insurance, with all its peculiar responsibilities. It may well be that some form of appeal should be provided for a person who is barred by the Board of Trade in this way, as the noble and learned Lord, Lord Stow Hill, suggested—I am sorry that I missed part of his speech—either to the courts or to the Privy Council; and it may well be that the Board of Trade's power should be limited to suspension pending settlement by the courts.
There is wide agreement in insurance and financial circles that something must be done as soon as possible. I hope that the Government will proceed with this Bill with all due expedition, but we certainly need time to consider its various aspects. We shall certainly wish to discuss these powers. In the long run—and here I speak entirely for myself—it may be that some new expert body, an insurance commission or something of the sort, could exercise at least some of the powers more appropriately, with more continuity and with a more intimate knowledge of the insurance world. The reason is that the Board of Trade's information must come from the insurance world. It must rely to a tremendous extent on the insurance world for its sources of information, and, as I say, continuity is of great importance, as is depth of experience, in matters of this sort.
The area which has given most trouble recently is motor-car insurance. The insurance companies have a very direct
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interest in seeing that claims are met, since whenever they are not, whether because the insurer cannot meet his obligation or the other party was not insured at all or for any other reason, the Motor Insurance Bureau has to pay up. Some insurance companies would like the Board of Trade not to authorise any company to engage in motor vehicle insurance until it has had at least a period of experience—say five years—in other classes of insurance, and has proved its competence and reliability. This, again, is a matter with which we can deal during the Committee stage discussions.
It has been argued that it would have been better to have one big Bill dealing with Company Law, and it might have been better to have a separate insurance Bill. In this case, I am not certain whether the companies' part is tacked on to the insurance part, or the insurance part tacked on to the companies' part, but we all know that a Department will take every opportunity to get legislation through as soon as it has decided upon it; and we can only conclude that it is either because the Department has not decided on other legislation or because, as I think the noble Lord, Lord Goodman, said, of drafting difficulties that the Bill does not contain other clauses, despite the fact that two years have passed.
My Lords, I think I ought to say to the noble and learned Lord who sits on the Woolsack that as soon as a Report is submitted it has to be carefully examined by the Department. This is what happened in the two years before we reached a decision as to what action ought to be taken. The Department had all that background, it had the matter at its fingertips, but the fact is that the Government have still taken two more years before presenting this Bill. I do not think that is an unfair comment to make. Nobody denies the difficulty of the subjects with which we are dealing, but perhaps it is not an unreasonable criticism that we might have had a Bill with rather more content than we have at present.
My noble friend Lord Eccles will move an Amendment to deal with the no par value shares. It is very difficult, of course, for an Opposition or Back Benchers to move whole sections into a new Bill, and I imagine that the observations of the noble and learned Lord the

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Lord Chancellor were some indication of a desire that we should not attempt to do so. But there are a good many Amendments that we shall be able to deal with. There will be some where it seems the Government have gone rather too far, and I think that the Government will have to justify the need, or what they consider to be the need, for a statement of exports. There is a great deal to be said against it. One company may be supplying component goods which go for export while another may be supplying machinery for the production of exports. Another company may be supplying manufacturing goods for the replacement of imports: another may be exporting materials and components for manufacture or assembly by their own subsidiaries abroad; and if the companies supplying components and machinery to home industries were instead to export, or were to dispose of or wind up their subsidiaries abroad, the resulting effect on the balance of payments might be very much worse.
I think the main point to bring out here is that a mere statement of exports can be only a very approximate indication because it depends on what basis they are shown. Apart from that, it is no indication whatsoever of a company's real contribution to the balance-of-payments situation, which is after all what concerns most of us in these days. My Lords, many companies will gladly give this information whether or not required by Statute to do so. Others may have very good reason for fearing to disclose it, because it might well result in making it harder for them to maintain the volume or the value of their export business. I would suggest to the noble Lord that at the very least there should be a proviso, similar to those in Clause 3(2) and Clause 16(1)(f), which allows directors not to publish certain information in their reports if, in their opinion, it would be harmful to the business of the company or of its subsidiaries to do so. I feel that the Government are bound to accept an Amendment of this kind.
I suppose that your Lordships expect me to say a word about charitable and political donations. Whatever the purpose of requiring this information might be, we must also ask what are going to be the effects of it. It may well be that
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shareholders may want to know this information, and it may well be that they should have a right to know it, but what is going to be the effect of publishing this information? I think that my noble friend Lord Massereene and Ferrard was right here. If this information is to be published, we have to make very certain that there will be no discrimination as a result, and it is to this that we would direct our attention in Committee.
I would regard Clause 16, which deals with directors' reports, as a messy piece of drafting. It brings in a variety of matters. The interests of directors and the activities of the company seemed to be jumbled up in one subsection. Where it is necessary that interests should be disclosed, not only the interests of the director himself but those of his wife and minor children should be disclosed as well. This applies elsewhere.
I should like to make a technical point about options. I think that the essence of this clause should be that no director should have available to himself options which are not available to others. I am told that this clause goes rather further than that. We shall have to look at it in Committee. There are such things as convertible debentures and convertible preferences, and it may also happen that shares are issued with a warrant to subscribe for ordinary shares. It hardly seems reasonable that directors should be in a worse position than any other shareholder in these matters. It may be that the Government meant to cover this in Clause 26. I am told that it does not appear to have done so, and I hope that the noble Lord will look at this question again.
I come back to what I said before, that in this Bill what we have to make certain of is that as much disclosure as is needed for shareholders and others interested should be given, while at the same time it should be made certain that no detriment will result to companies in consequence of disclosure. This, I think, is the way in which we should look at this Bill throughout. It certainly carries us some way forward. We cannot but regret that it has not dealt with other subjects, such as unit trusts, the procedure for take-over bids, no par value shares and the interesting points which the noble Lord, Lord Goodman, mentioned—namely, the suggestions of the Jenkins

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Committee that there should be some standard clauses for the memorandum and that the ultra vires doctrine should disappear. We should have liked to see these matters dealt with in the Bill. But, in so far as this Bill is likely to lead to a greater economic activity, to a greater appreciation of what our companies are doing, we would welcome it; and we give the promise that we will look at it very carefully in Committee.
7.35 p.m.
THE MINISTER OF STATE, BOARD OF TRADE (LORD BROWN): My Lords, I should like to start by pointing out to the House that this is the first Bill in which I have had any hand. I am sure that I am going to exhibit many inadequacies, and I ask your Lordships' forgiveness for these in advance. One thing I have learned this evening is to exercise more compassion for my colleagues who wind up debates in the evening than I have done in the past. I have an enormous series of notes here, and whether they will form themselves into a coherent speech remains to be seen.
I should like to pay tribute to the noble Lord, Lord Cohen, who was present this afternoon but who has now gone, as the man chiefly responsible for the 1948 Act. Other noble Lords have paid tribute to the Jenkins Committee, and in this I would join with them. This has been a good debate. It has not been political in character, although some noble Lords have insisted that it is so. I am sorry that the noble Lord, Lord Erroll of Hale, has had to leave. He is suffering a little to-night and passed me a note excusing himself. My noble and learned friend the Lord Chancellor indulged in some gentle leg-pulling, and I think the noble Lord opposite took this up a little sharply. Several speakers subsequently suggested that there were political points in the Bill, but I can only say sincerely that to me there are no political points in this Bill. But I will come later to some of the accusations made.
An increasingly complex society can become a jungle of confused institutions and endeavours unless there is adequate information available, not only to the Government but to the public generally. It is my view that an increasing flow of data in future is the necessary basis of good legislation and good government.
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Secrecy over affairs of business is usually replaced by a highly inaccurate series of conjectures by those in industry. Everybody with experience of industry knows this full well. I do not think that industry is being given a sufficiently important place in our society. I make this point all over the country in speeches vis-à-vis exports, and I am happy to be able to make it here with reference to this Bill: because this biased, unsatisfactory and unfair image is partly, I think, the responsibility of industry itself.
It often fails to be sufficiently outspoken in talking about its affairs, and the consequential ignorance of the public generates quite unjustified suspicions. Whatever the salaries of directors, most employees assume that they are larger than in fact they are. Whatever the profits, they are assumed to be higher than they really are; and if a firm is in trouble, the losses are assumed to be bigger than they are. However honest the accounts, they are believed to he "fiddled". However large the tax paid, it is believed that some of it has been evaded. In the absence of real knowledge, everything tends to be exaggerated. This is one of the great justifications for this Bill. Some noble Lords have suggested that business will be made more difficult by the Bill because of the increased information which is to be disclosed. As an erstwhile businessman, I do not think that this is sound thinking. Knowledge, good relations, efficiency and growing wealth are, in my view, bed-mates, and ignorance and secrecy are the enemies of every one of these things.
Moving on to the debate itself, I would try to reduce the time I take by doing something perhaps a little unfair. Many noble Lords have welcomed the Bill wholly, and some have welcomed parts of it. I am going to do them the injustice of passing over those who have spoken favourably and concentrating my attention on those who have spoken critically—though, to the credit of the House, I do not think that any noble Lord has been bitterly critical. The noble Lord, Lord Erroll of Hale, and the noble Viscount, Lord Eccles, both delivered what might be considered an attack on the required disclosure of directors' salaries, and they were joined by the noble Lords, Lord Byers, Lord Peddie and Lord Mancroft.
LORD BYERS: No. Let us get the Record right.
LORD BROWN: I am sorry. Of course, it was the exact opposite. The noble Lords, Lord Byers, Lord Peddie and Lord Mancroft, in what I might describe as a slightly cynical way, and the noble Lords, Lord Stow Hill and Lord Hawke, all approved of, or at least did not object to, these clauses. The suggestion was made that the disclosure provision is to satisfy idle curiousity; that it is an attack on directors and so on. The justification for this disclosure is really contained in the opening statement that I made this evening: that employees want to know this information, and shareholders want to know.
But, above all, I would grasp the nettle firmly that has been held out to me, and agree that this disclosure may lead to some people being paid higher salaries than they are at the moment. And this may well be justified, because there probably are cases of underpayment in British industry. But, what has not been said is that it could equally well result in a board of directors facing the fact that they have been paying "old Joe" a very large sum for a very long time; that they have not had the "guts" to ask him to retire, or to do anything about his salary, and they will now be faced with disclosure, and this may result in action. It may also result in the exposure of a number of other forms of salary which are higher than they ought to be, and have been higher, through a history of over-assessment or good service in the past, than is justified. I can see nothing in this disclosure except good. It is impossible to adjust things in accordance with equity and service unless the facts are known. If they are kept secret, this is a way of ensuring that things will remain inequitable.
There has been a lot of criticism of the requirement on small firms to declare their turnover. Again, the noble Lords, Lord Erroll of Hale, Lord Goodman, Lord Drumalbyn, and others, have been very concerned about this. The point has been made that it would be damaging to small firms to have to disclose their turnover, I think on the inference (although I do not think it was quite brought out in this way) that people would be able to see what their profit
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margins were. I have heard this argument elsewhere on the ground that there are firms which make only one product, and if a firm makes only one product then, ipso facto, when that firm discloses its turnover its opponents know what its profit percentage it. But there is no such thing as a firm with one product. If a firm confines its products to pins, it makes them with different heads, different points and different coatings, and it would be unable to distinguish what the profit was on a particular type of pin. So, in my view, the disclosure of turnover will be good for competition and good for creditors, who will be able to see whether a concern is safe or in a dangerous position, and in many other ways. We shall be prepared to consider Amendments in Committee, but we shall need some strong arguments to shift us from the position in which we stand at the moment.
The noble Lord, Lord Goodman, supported by the noble Viscount, Lord Massereene and Ferrard, raised the point about the disclosure of rent. I think he has a point, particularly in the case of a small business that has to disclose its rent, when there may be property companies looking for easy purchases. This may be a case of a minority feeling the cold draught of exposure, but if we began to single our particular items of this sort from the general disclosure plan I think we should be in grave difficulty.
LORD HAWKE: My Lords, before the noble Lord leaves that point, can he say what is the exact purpose of requiring disclosure of rent? I have never been able to see that it serves any useful purpose at all.
LORD BROWN: I think the argument for the disclosure of rent is merely the general argument for the disclosure of the information of the expenses of the business, so that creditors and others may be well aware of the position of the business. If you insist on the protection of limited liability you are liable to have to disclose items of this sort for the information of those who are giving you credit.
I move on now to the question of charitable and political donations. It has been averred by one speaker after another this afternoon that this is a somewhat vindictive political measure. I

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can only suggest that to let in the light of day into a situation where directors are deciding without reference to shareholders what proportion of the shareholders' money they are going to give away is absolutely correct. I do not think that in equity it is possible to challenge that. The argument that companies may begin limiting the amount which they give by way of charity because they can be seen to be charitable does not ring true to me. I think it could quite probably have the opposite effect; and if some companies were giving away a rather small amount the matter might well be raised at a shareholders' meeting.
The noble Lord, Lord Byers, raised the question of the possibility of the Government providing guidance on the percentage of profits, or of turnover (I am not sure which it was), which industry might see fit to pay to charity. I think it would be a dangerous exercise for the Government to attempt to give guidance, and this would seem to me to be a point for discussion by the Confederation of British Industry, the Institute of Directors or some such body concerned with industry as a whole. I personally should not like to wind up a debate on a Bill which had proposed a percentage. I think it would cause a great deal of argument.
There was a point made (I think it was by the noble Lord, Lord Byers, but he will no doubt correct me if it was somebody else) on the possibility that local authorities, and indeed the Government, on learning of the fact that a particular company was paying large sums to a particular political Party, might show political prejudice in the placing of contracts.
LORD BYERS: My Lords, I think the noble Lord will allow me to say that that suggestion is unlikely to have come from me. It must have come from someone else.
VISCOUNT MASSEREENE AND FERRARD: My Lords, it came from me.
LORD BROWN: May I suggest, with respect, that a comment of that sort is a somewhat unworthy reflection on our local authorities, and indeed on the Government. I do not think that there is
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any real danger of such a point becoming one of importance.
LORD DRUMALBYN: My Lords, may I intervene for a moment? This is an important point, as we see it from this side of the House, because we already have had some information that something of this kind has started to appear. I hope the noble Lord will look at this. He says it is something that is not likely to happen, but since it has already appeared on the scene I think measures must be taken in the Bill to prevent it.
LORD BROWN: My Lords, if this sort of situation emerged it would indeed be extremely serious, but it would seem to me at first sight to be an extraordinarily difficult matter about which to legislate. We are in a situation in society where there are many opportunities for displaying political prejudice on matters on which it should not be displayed, but I think that on the whole we do not suffer too extremely from this. However, we note the point.
The noble Viscount, Lord Eccles, has commented very seriously on the absence from the Bill of anything to do with shares of no par value. The noble Lord, Lord Mancroft, took this up in rather a political way, suggesting that the omission of it was a political point. The introduction into the Bill of the whole conception of shares of no par value is likely, I am advised, to involve many clauses and consequential amendments affecting other financial Acts. There is in the Government's mind nothing in principle against this matter, but it has been delayed for the purpose of simplicity. The political accusation is, I think, not justified. The noble Lord, Lord Goodman, made the point that, in his experience, given ten minutes to understand the point the unions would not be against them, and I think he was right.
The noble Viscount, Lord Eccles, suggested during his speech that it would have been an improvement if the Bill had included the necessity for directors to put in their report the basis on which stocks had been valued. In case there is any misunderstanding about this, I would point out that where the valuation of stocks can have an important effect on the profit and loss account of the company, then under the Bill that obligation rests on the directors. I think the noble

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Viscount is mistaken on that point. He also spoke about the advisability of considering fixed asset valuation at replacement value. This is a subject which has been debated by the accounting profession ever since the end of the last war. It is a tremendously evocative subject. It is a very contentious subject, and certainly not one which would be suitable to introduce into a Bill aimed at getting on with matters now while we are considering a further measure of greater extent at a later date.
I come now to the point made by the noble Lords, Lord Royle, Lord Stow Hill and Lord Drumalbyn, on the insurance clauses, about which there has not been a great deal of discussion this afternoon. The noble Lord, Lord Royle, in referring to Clause 48, drew attention to the fact that the Board of Trade were going to exercise a great deal of discretion over the veto they possessed under the Bill of the appointment of officers whom they considered unfit, and suggested the necessity of introducing an appeal tribunal. In very recent years the Board of Trade have been suffering acutely from the fact that in certain cases, in order to take action which in the eyes of Parliament and, indeed, in the eyes of the public was necessary as a matter of urgency, they have been handicapped by having to go through the legal procedures which make the production of proof rather than suspicion the basis of their act. It is a very far-reaching measure to put the Board of Trade into a position where, on the basis of their assessment or their suspicions, they can exercise a veto of this sort. But in the light of the events which have taken place over the last three or four years, it would appear to be necessary, and I have the feeling that the House is with the Government in this clause.
The noble Lord, Lord Drumalbyn, has raised a very serious point in wondering whether the Board of Trade is administratively in' a position to exercise these controls. That, of course, is an administration matter. We take note of the point. I think there are a few people already rather worried about it, and we have noted the suggestion he made in connection with that point. It will be considered.
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The noble Lord, Lord Royle, raised a point in connection with Clause 49, concerning the right under the Bill for the Board of Trade to veto certain classes of investment for insurance companies about whom they were concerned. He went on to suggest, a little to my surprise, that in place of this veto there should be in various types of insurance a positive right to make insurance companies invest in particular types of securities. In my opinion, I think this goes too far. I believe that the veto which is included in the Bill will be adequate for the purposes of putting the matter to rights. We shall see.
The noble Lord, Lord Alport, gave us an extremely interesting commentary on the lack of a definition in the Bill of a bank. Of course, if we had a sound and well tried definition it would be an enormous advantage. The immediate purpose of the clauses in the Bill is to try to get the banks—and merchant banks in particular—into a situation where they can no longer be regarded as moneylenders who have not been authorised, and get them out of the awkward situation in which they are placed inadvertently. The noble Lord may well he right in that there is this necessity. In my submission, it will take a long rime to get a satisfactorily agreed definition, because the term "banking" connotes a very wide field of operations. This Bill provides a breathing space, and the point will be noted as a possibility for inclusion in a later Bill. I do not think we can possibly indicate our intention to do much more than that at this state because of the difficulties of definition.
A point was raised by the noble Lord, Lord Goodman, and others about loans to directors. I think the noble Lord, Lord Drumalbyn, raised the point that in the case of loans that have already been made there might be some injustice arising after this Bill was introduced and they found themselves in difficulties. I think that is probably a Committee point, and should be dealt with at that stage. The noble Lord, Lord Drumalbyn, in his summary of what he had to say, made the well-known and largely accepted point that if alterations were to be made, then those who sought to make them must make the case for them. In industrial circles in recent years I have

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begun to doubt the wisdom of that statement. I believe we tend to be a society who, on looking at any change, examine it with great rigour to see whether there is the slightest possibility of faults within it, and if we can detect any then we refuse to move. What we fail to do is to examine what exists with equal rigour, and then decide which has the most faults and come to a conclusion sometimes to change simply because what is new has less faults than the old.
LORD DRUMALBYN: I quite agree.
LORD BROWN: If we are agreed on that, then many of the points in this Bill, criticisable as they may be, should stand so long as they are a betterment on the situation which exists.
May I wind up what I have to say in this way? I notice that the noble Lord, Lord Byers, has now gone, but I thought his speech was a model of clear thinking of what we were going to require in the future. If I might paraphrase what he said, it seems to me that it must not be a politically biased scrutiny which leads to the next Companies Bill which will follow this one, but one simply designed to examine all the institutions, the relationships, the organisational structures, the groupings, the procedures and the conventions alike in what Harold Wilson has referred to as an "irreverent attitude". I think that is necessary, with a view to seeing what change is essential to make a larger contribution to the wellbeing of the people and the wellbeing of our economy.
It seems to me that the future of company legislation is not necessarily, as I think it has been to some extent in the past, an exercise in law, in finance and accountancy, but will have to be based on a penetrating study not only of those but of economics, of sociology and of psychology, because in trying to control the increasing complexity of business in this country we are entering these fields. We are going to need far more information than this Bill will give us if we are going to reach an optimum situation in our industrial and commercial life.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

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