Sitting of 27 February 1980

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
MESSAGE FROM THE QUEEN

  DOUBLE TAXATION RELIEF (UNITED STATES OF AMERICA)
  The Vice-Chamberlain of the Household (Mr. Anthony Berry)The Vice-Chamberlain of the Household (Mr. Anthony Berry) reported Her Majesty's Answer to the Address, as follows:
  I have received your Address praying that on the ratification by the Government of the United States of America of the convention and protocols set out in the schedule to the draft order entitled the Double Taxation Relief (Taxes on Income) (The United States of America) Order 1980, which draft was laid before your House, an order be made in the form of that draft.
  I will comply with your request.

ORAL ANSWERS TO QUESTIONS
  ENVIRONMENT

    Nursery Education (Urban Aid)
    Mr. Chris Pattenasked the Secretary of State for the Environment when he expects to announce his decision on the Avon county council's application for urban aid for nursery education in that county.
    The Minister for Local Government and Environmental Services (Mr. Tom King): I hope to do so in March.
    Mr. Patten: In reaching his decision, will my right hon. Friend recognise that my constituency has suffered for many years from a totally inadequate number of nursery schools? Will he also bear in mind that the establishment of a nursery class at Twerton—part of Avon's plan —would meet a genuine educational and social need?
    Mr. King: I am aware of my hon. Friend's concern. That is one of the factors that we shall bear in mind when considering the various projects that have been put forward.

    Rate Support Grant
    Mr. Rentonasked the Secretary of State for the Environment whether he will make public the criteria by which he will judge the efficiency of individual local authorities when deciding the allocation of rate support grant under the unitary method.
    Mr. King: Under block grant, an authority spending significantly above its assessed standard expenditure will receive a declining rate of grant. The method of assessing standard expenditure will be developed in full consultation with the local authority associations.
    Mr. Renton: Under the unitary system, will ratepayers be able to judge, in due course, whether their local authority is efficient? If so, will the system be explained in a manner that is comprehensible to ratepayers? Is my right hon. Friend aware that multiple regression analysis does not receive instant understanding from readers of the Mid Sussex Times—or from their Member of Parliament?
    Mr. King: The principle of block grant and the standard rate poundage is principally a method for the distribution of the public funds involved in the rate support grant. Various anomalies will arise under the standard rate poundage. My hon. Friend's worthy concern for his ratepayers will be best met by the publication of comparable information about the performance of different authorities under the various categories. That is an important ingredient of the Local Government, Planning and Land (No. 2) Bill. I hope that it will help all ratepayers.
    Mr. Dubs: In looking at the type of information that will be published on a comparative basis, will the Minister consider such an important yardstick as the number of council houses that stand empty, awaiting sale? Is he aware that in the borough of Wandsworth there are 700 such council houses? Is that not a typical example of gross inefficiency? Is it not the consequence of policies that

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    have been foisted upon local authorities by the Government?
    Mr. King: If we are to look at this issue objectively, we must consider the number of empty houses in other boroughs—for example, in the borough of Lambeth, I believe that there are five times as many houses standing empty as a result of its policy of municipalisation. People are being deprived of any possibility of occupancy.
    Mr. Squire: When my right hon. Friend considers the rate support grant, will he also look carefully at the submissions of the joint authority associations that he has recently received? They go some way to meet the Government's proposals for control of expenditure. Is he aware that, in addition, they remove some of the more objectionable features of the present system?
    Mr. King: I can confirm that we are now considering their submissions carefully. We hope to meet the associations very shortly.
    Mr. Oakes: As the Government still do not have the slightest idea how to operate part VI of the Bill and no chance of getting agreement with local authority associations on that, will they drop the provision at least from the present Bill and negotiate further with local authorities until an acceptable scheme is produced?
    Mr. King: The right hon. Gentleman would be the first to criticise us if we did not have meaningful consultations with local authority associations on the details of how the block grant scheme will work. That is precisely what we are committed to, and that work is under way.

    Urban Development Corporations
    Mr. Parrisasked the Secretary of State for the Environment how long he expects urban development corporations to be in existence; and how he plans to review their performance.
    The Secretary of State for the Environment (Mr. Michael Heseltine): The UDCs will remain in being long enough to enable them to do their job of regenerating their areas. Their reports and accounts will be laid before the House, and their performance discussed as their
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    programmes and applications for Exchequer moneys are examined.
    Mr. Parris: I thank my right hon. Friend for that answer. Will he ensure that a balance is maintained between provision of new housing and provision of industrial infrastructure so that these projects become self-financing and do not constitute a drain on the county areas?
    Mr. Heseltine: I am anxious that as much work as possible within UDC areas is self-financing and attracts additional private sector support. I believe that the precise balance of policies must await the establishment of the UDCs and their first policy decisions.
    Mr. Steen: Although the House realises that urban development corporations are in their very early stages, will my right hon. Friend say what other plans he has to help regenerate ailing older cities?
    Mr. Heseltine: The repeal of the Community Land Act and the establishment of land registers will be important features of our attempt to bring into use land currently lying derelict in urban areas.

    Rent (Agriculture) Act 1976
    Mr. Delwyn Williamsasked the Secretary of State for the Environment how many households have been rehoused under the provisions of the Housing (Agriculture Provisions) Act 1976.
    The Minister for Housing and Construction (Mr. John Stanley): My hon. Friend is no doubt referring to the Rent (Agriculture) Act 1976. The figures obtained by the Department show that by the end of 1978, 1480 households were rehoused under the Act, as a result of applications to local authorities.
    Mr. Williams: Does my hon. Friend agree that the pre-emption clause introduced into the Housing Bill in Committee will, in practice ensure that local authorities are fully able to discharge their responsibilities under the Rent (Agriculture) Act?
    Mr. Stanley: I am grateful to my hon. Friend. That change in the Bill has been widely welcomed.
    Mr. Newens: What action does the hon. Gentleman propose to take over authorities that are not implementing the Act? What action will be taken if local authorities find themselves completely without council houses at their disposal to enable them to offer alternative accommodation?
    Mr. Stanley: The Act is monitored by the Department of the Environment and the Department of Agriculture. Fisheries and Food. Our view is that the Act is operating satisfactorily. We believe that the changes that we are making to revive the privately rented sector, and particularly the introduction of shorthold, will be material in meeting the problem to which the hon. Gentleman refers.

    Local Government Expenditure (Wages and Salaries)
    Mr. Majorasked the Secretary of State for the Environment what percentage of local government revenue expenditure was accounted for by staff wages and salaries as at (a) the financial year 1973–74 and (b) the latest date for which information is available.
    Mr. Heseltine: In 1973–74 wage and salary costs accounted for just over 50 per cent. of gross local government revenue expenditure of 71 per cent. of gross current expenditure. In 1978–79, the figures were 51 per cent. and 69 per cent. respectively.
    Mr. Major: I am grateful to my right hon. Friend for that reply. Does he agree that it indicates an imperative need to continue to restrain staff levels and levels of wage settlements in local government? Will he urge on local authorities, wherever possible, a policy of retrenchment in staffing levels to ensure that the money available is used for services rather than excessive staffing?
    Mr. Heseltine: I am grateful to my hon. Friend for drawing these important points to the attention of the House. I have asked local authorities to constrain manpower recruitment wherever possible. I am absolutely sure that, in the present climate of public expenditure, the more that the available resources can be used to provide services rather than increase the number of employees the better.
    Mr. Ian Lloyd: May I endorse the plea made by my hon. Friend the Member for Huntingdonshire (Mr. Major)? Is my right hon. Friend aware that in my local authority the increase in the wage and salary component last year was 39 per cent.? If that is 39 per cent. of 70 per cent., how can it possibly be said that local councillors are effectively in control of finances in their authority?
    Mr. Heseltine: The present levels of rate fixing indicate that there are considerable numbers of Conservative authorities that are very much in control and therefore able to effect considerable constraint in the rate levels. It must be a matter for the individual judgment and accountability of the local authority and its councillors in each area.

    Planning Control
    Mr. Heddleasked the Secretary of State for the Environment if he is satisfied with the operation and effectiveness of article 4 directions in planning control.
    The Under-Secretary of State for the Environment (Mr. Marcus Fox): In general, yes, but we are prepared to consider any particular difficulties.
    Mr. Heddle: May I thank my hon. Friend for that answer and invite him to consider whether there might be firms of speculators developing these leisure plots, particularly in the Home Counties, and leading prospective purchasers to believe that they might have planning potential? Does my hon. Friend agree that article 4 directions are negative, do not help the planning process and certainly do not protect the purchaser? Further does he agree that the answer is to redefine the words "agricultural use" in the town and country planning Acts?
    Mr. Fox: I also deprecate the practice of selling these small leisure plots. The purchaser often suffers the full effect of the law and the vendor escapes. I am aware of the weakness in article 4 directions. However, I must point out that they are concerned with the use of land and not ownership. I shall carefully watch the County of Kent Bill, which is in the other place.
    Mr. Steen: Does the Minister agree that a great deal could be done by reducing the powers of the planning department, particularly in urban regeneration?

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    Has he considered setting up enterprise zones, free of planning controls, to help small firms?
    Mr. Fox: I sympathise with much of what my hon. Friend says, but that is not a matter for me.

    Building Societies Association
    Mr. Richard Wainwrightasked the Secretary of State for the Environment when he expects to meet the chairman of the Building Societies Association.
    Mr. Heseltine: I have no immediate plans to meet the chairman of the Building Societies Association. We last met on 18 January, and will meet again as appropriate. My Department has close and frequent contacts with BSA representatives.
    Mr. Wainwright: When the right hon. Gentleman's Department is next in contact with the BSA, will he ensure that building societies are urged to compete more vigorously with each other so that potential house purchasers have a wider choice of terms and conditions and, in some cases, less exacting ones?
    Mr. Heseltine: The hon. Gentleman will know that there are a number of reports, and I have conducted my own investigations into the wide issues that form the background to his question. It would be wrong for me to anticipate the conclusions that I shall draw from those reports. It is worth making the point that any step of the sort that the hon. Gentleman has in mind might easily lead to higher mortgage rates.
    Mr. McCrindle: When the Secretary of State next meets the BSA, will he tell the association that it is no part of the Government's policy to adopt the recommendation in a report published in the past week which could lead to a tax on owner-occupation not dissimilar to schedule A, which some of us spent a decade urging the previous Conservative Government to abolish?
    Mr. Heseltine: I am most grateful to my hon. Friend for raising the question of schedule A, which I understand is the subject of a bitter defeat of myself in the processes of Government, because I failed to get it re-introduced. As the words have never crossed my lips since the return of
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    this Government, it is unlikely that that is a true story.
    Mr. Ioan Evans: As the Prime Minister is meeting the guru Milton Friedman today, will the right hon. Gentleman pass a message through the right hon. Lady to ask whether his philosophies are working with regard to housing. Does the right hon. Gentleman agree that when MLR was 70 per cent. mortgages reached a record height and yet the banks were making hundreds of millions of pounds in extra profits?
    Mr. Heseltine: The hon. Gentleman will, therefore, want to support the Government in our efforts to reduce public expenditure, which is the root cause of the problem to which he draws our attention.

    Domestic Property (Rating)
    Mr. Greville Jannerasked the Secretary of State for the Environment whether he will take steps to end the present arrangement whereby householders who save energy through the installation of insulation or by the installation of solar heating incur additional liability for rates.
    Mr. Neil Thorneasked the Secretary of State for the Environment whether, between rate revaluations, he would consider exempting from rating all improvements to domestic property within the curtilage of the building or any third schedule addition, in order to encourage the continuous improvement of the national housing stock.
    Mr. King: Most new small improvements to domestic property, including energy-saving measures, are already exempt from rating between general revaluations under section 21 of the Local Government Act 1974.
    Mr. Janner: Does the right hon. Gentleman agree that many such changes, which are subject to rates, are extremely desirable at a time when we wish to preserve energy? Is the right hon. Gentleman aware that in the United States householders who install such devices and arrangments save tax, yet here they are taxed more? Will the Government do something about that?
    Mr. King: The hon. and learned Gentleman will be aware that, provided

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    the improvement does not add more than £30 to the rental assessment—and the majority of energy-saving methods do not—it will not normally be caught under the rating provision.
    Mr. Thorne: Does not my right hon. Friend consider that it is a waste of effort by the district valuers, who have to value every single improvement to establish whether it is more, or less, than £30? In view of the Government's commitment to the improvement, not only of owner-occupied homes but also council dwellings, should not the Government take another look at the matter?
    Mr. King: The point that my hon. Friend makes is perfectly fair. This is a difficult issue. Resentment is felt by existing ratepayers who have been assessed when others are not assessed under this provision. At the same time, as my hon. Friend rightly says, it is Government policy to encourage improvement whenever possible. There is much feeling that this extra niggle for ratepayers, who are rated on improvements that they make, is a discouragement to such improvement.
    Mr. Alton: Has the Minister received today representations from the British Association of Insulation Manufacturers? What is his response to its allegation that there will be over-capacity among its firms as a result of the reduction of the 21 per cent. in the amount of money available for insulation in his announcement last week together with the 50 per cent. reduction in the overall amount available for insulation?
    Secondly, what assistance will the right hon. Gentleman give [HON. MEMBERS: "One question".]
    Mr. Speaker: Order. Hon. Members are quite right, provided they apply the same rule of one question to everyone.
    Mr. Alton rose—
    Mr. Speaker: The hon. Gentleman has asked his question.
    Mr. King: The question relates primarily to rating. Some comments in the press today about insulation grants are highly misleading. It is suggested that insulation for council houses is no longer available. This is now covered under a single block. It is open to local autho-
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    rities, if they so choose, to engage in the largest insulation programme in their history.
    Mr. Michael Morris: While my right hon. Friend is to be congratulated on reviewing insulation, is there not a strong case for a total review of rate surcharge and rate poundage? If we believe in an energy-saving policy, should not the Government be taking a lead?
    Mr. King: My hon. Friend will know that this is a further example of the problems of the rating system. It is receiving active consideration.

    Housing Investment Programme
    Mr. Strawasked the Secretary of State for the Environment what are the housing investment programme allocations for 1980–81 for (a) England, (b) the North-West and (c) Blackburn; and what the corresponding allocations were for 1979–80, expressed on the same price basis as for 1980–81.
    Mr. Edwin Wainwrightasked the Secretary of State for the Environment if he will now give the date when he will be announcing the housing investment programme allocation for 1980–81.
    Mr. Stanley: Housing investment programme allocations for 1980–81 were announced on 21 February. Such comparisons are usually made at public expenditure survey prices. At 1979 survey prices, the 1980–81 figures sought are for England, £1,601 million; for the North-West region, £226 million; and for Blackburn, £6 million.
    The corresponding allocations, at 1979 survey prices, for 1979–80 were for England, £2,351 million; for the North-West region, £308 million, and for Blackburn, £8·7 million.
    Mr. Straw: Will the Minister explain why a detailed written question was required from my right hon. Friend, the Member for Manchester, Ardwick (Mr. Kaufman) to force out from the Secretary of State an admission that next year's housing investment programme allocations involve a massive 33·4 per cent. cut—£955 million—and not the £540 million, which the Secretary of State put forward in his statement? Is the Minister aware that many opposition Members feel misled

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    and deceived by the Secretary of State's statement last Thursday?
    Mr. Stanley: If the hon. Gentleman consults the January 1979 White Paper, produced by the previous Government, he will know that the comparisons made are between out-turn in one year and future provisions in a subsequent year. That was precisely the basis on which my right hon. Friend made his announcement. In no way was he misleading the House.
    Mr. Wainwright: Does the Minister realise that the Government's housing policy means that many new houses that should be built will not be built this year and that modernisation of houses will not take place in the numbers required? This will greatly affect the whole country and especially the South Yorkshire area where I live. Will he confirm that £2·10 is to go on each council house rent? Furthermore—
    Hon. Members: "One Question".
    Mr. Speaker: Order. So far as I can understand, it is one complicated question.
    Mr. Wainwright: Has the Minister taken note of the Tory-controlled local councils that are objecting to the Government's policy on this issue?
    Mr. Stanley: The allocations made for this year reflect the fundamental determination to bring the public expenditure that this country can afford into line with what the nation is producing. That is the essential background to the allocations that we have made.
    Mr. Heddle: Will not my hon. Friend agree that by pursuing the Government's policy of selling council houses, he is re-cycling money at present locked up in bricks and mortar, to provide homes for those in need?
    Mr. Stanley: I agree entirely with my hon. Friend. It is strange that Opposition Members are at one moment complaining that they have not sufficient money and the next refusing to sell council houses which they know perfectly well add to their allocation.
    Mr. Douglas-Mann: Will the Minister say what changes in assumptions have been made about the extent of housing
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    need in the public sector since the housing policy review was published? This assessed housing need in that sector as 290,000 households requiring houses per year with 170,000 houses becoming available for re-lets, leaving 120,000 needed? Is it correct, according to the figures published last week, that the shortfall will be at least 85,000 families without housing?
    Mr. Stanley: The basic change in the assumption made since the previous Government's Green Paper was published is that we believe the private, as well as the public, sector can make a contribution towards rented accommodation.
    Mr. Michael Morris: Is it not a fact that the production of public sector housing has been declining steadily over the last three years? Is that not a legacy from the previous Labour Government?
    Mr. Stanley: My hon. Friend is entirely right. Opposition Members will want to recall that over the last five years they succeeded in halving capital expenditure on housing in real terms.
    Mr. Kaufman: Will not the Minister and his entire Front Bench abandon the deliberate, disreputable policy of fiddling the figures of housing expenditure? Why did they pretend, last week, that it was a cut of 21 per cent. when the Minister admits in his answer to me that the cut is £967 million in local authority housing allocation? That is a 33·4 per cent. cut.
    Mr. Stanley: The right hon. Gentleman knows perfectly well that, on the basis of the comparison that he makes, he is taking into account the allocations made by the previous Administration. Those allocations would have been underspent by hundreds of millions of pounds.

    Local Authority Services
    Mr. Flanneryasked the Secretary of State for the Environment what representations he has received regarding cuts in local authority services.
    Mr. King: Many members of the public, local authorities and other bodies have written to me about this. I am impressed by the widespread recognition of the need for economies.
    Mr. Flannery: When will the Minister realise that the doctrinaire, monetarist

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    policies pursued by his Government—that are splitting his own party wide open, according to The Times editorial yesterday—are bearing down so heavily on the most vulnerable sections of the public that some action will have to be taken if local councils are to avoid imposing 50 per cent. rate rises? As long as this policy continues, local council can no longer service the people. What do the Government intend to do?
    Mr. King: If there were the slightest nuances of difference of view among my right hon. and hon. Friends, the rubbish put forward by the hon. Gentleman would have solidified our view. In a situation when we have called for a 1½ per cent. cut next year, it is possible for per cent. next year, it is possible for efficient and prudent authorities to make those economies without enormously damaging cuts such as some authorities seem to be choosing to make for the maximum political capital.
    Mr. Robert Atkins: If my right hon. Friend receives any representations about cutting the cost of services, will he point them to the borough of Preston, Tory-controlled for the past four years, which has reduced its rates over that time from 32p in the pound to 8p in the pound and is maintaining that figure this year by cutting its costs carefully?
    Mr. King: In local authorities, as in companies and other walks of life, there are some well-run authorities and others that have failed to match the same standards. What my hon. Friend says about the record of Preston is most interesting. I look forward to going there on Friday and seeing at first hand how these economies have been made. I am sure that for concerned authorities there are lessons to be learnt from the better run authorities.
    Mr. Jay: Is the Minister aware that, whatever may happen in Preston, in the borough of Wandsworth the Government's policies have produced the worst housing situation since the war?
    Mr. King: I am obviously not here to discuss every individual authority, but it is worth comparing the future rates performance of relavent adjacent authorities. I believe that the rate will rise in Wandsworth over two years by some
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    18 per cent. In an adjoining authority it will rise no less than 90 per cent. during that period. The effect on small businesses and the commercial economy of the area, and the general well-being of the residents of that area will clearly be far better in the hands of the first authority than in the hands of the second.
    Mr. John Townend: Does my right hon. Friend agree that if the majority of local authorities had not acted responsibly and had not made reductions in expenditure, as advised by the Government, and had not cut waste, rates increases this year would have been intolerably high?
    Mr. King: I can confirm that the first assessments that I made when we came into office indicated that if economies were not made at that time the rate increases that were inevitable and in the pipeline, stemming from all actions of the previous Government, would have been substantially higher than the rate increases now being advised.
    Mr. Allan Roberts: Does the Minister agree that one of the most essential local authority services is the provision of housing? Will he ask the Secretary of State for the Environment to visit the Southend, East by-election and explain why his announced 21 per cent. cut in housing expenditure for local authorities is 40 per cent. in Southend? Will the Minister allow me to help the Secretary of State in explaining away that 40 per cent. cut by showing that the right hon. Gentleman is politically unbiased because he has cut local authority housing capital expenditure in the Prime Minister's constituency by 25 per cent?
    Mr. King: I wonder whether the hon. Gentleman deliberately chose to put to me a question on housing since he knows that I do not have responsibility for that subject. I wonder, too, whether he was somewhat afraid of the straight answer that he would have got from my right hon. Friend the Secretary of State or my hon. Friend the Minister for Housing and Construction.
    Mr. McCrindle: Will my right hon. Friend note the new-found solicitude on the Labour Benches for the affairs of Essex? Is there a reason, which appears to be escaping me at the moment, as to why the home help service, instead of being

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    cut back as it is in some areas, should not be passed on to some form of organisation combining the voluntary and the private sectors?
    Mr. William Hamilton: The girl guides?
    Mr. King: I am impressed by the widespread recognition throughout the country —much more widespread than is apparent to Labour Members—of the need for economies and for an intelligent approach to the difficulties we face. Many councils are finding alternative ways, such as joint funding and voluntary help, to provide services in the interests of all those who genuinely need help and whom we should now all be concerned to help.
    Mr. Hattersley: If the Minister of State does not want to comment on individual authorities, will he agree, as a statistical fact, that the inner cities in general and inner London in particular will suffer most from the Government's cut-back in local authority expenditure?
    Mr. King: In looking at the record of problems and the need for economies I do not single out individual parts of the country. There are problems right across the country in many areas. It is interesting to note the degree of resolution and intelligence being employed by different councils in facing those problems.

    Land Registers
    Mr. Peter Lloydasked the Secretary of State for the Environment when he expects to announce those names of the local authorities which will be required to publish land registers.
    Mr. Heseltine: I am now considering this matter and will make a statement as soon as possible.
    Mr. Lloyd: When the information is published will my right hon. Friend be taking steps to make it clear that the local authorities in whose areas land is being left idle can be identified? Will any pressure, other than that springing naturally and spontaneously from local public opinion, be brought to bear upon them?
    Mr. Heseltine: I am grateful to my hon. Friend for his interest in this matter. I hope shortly to indicate where these
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    registers are to be established in the first instance. I very much hope to establish a co-operative attitude with local government and to have consultations on the matter. However, at this moment I should be grateful if the House would bear with me since I am not yet in a position to publish details of the specific areas.

    Water Rates
    Mr. Parryasked the Secretary of State for the Environment if he will seek to take powers to control proposed increases in water rates.
    Mr. Fox: No, Sir.
    Mr. Parry: Is the Minister aware that on Merseyside the proposed increases in water rates include 28 per cent. for Ellesmere Port, 25 per cent. for the Wirral, and 25 per cent. for Liverpool? These increases, with increases in the general rate of more than 50 per cent., and coupled with large increases in rents and gas and electricity charges, are knocking the consumer and the householder punch drunk. Do the Government have any genuine intention of trying to control inflation?
    Mr. Fox: I shall restrict my observations to water charges. Of course, my right hon. Friend the Secretary of State is concerned about the increases and is to see one chairman of a water authority to discuss the high increases. However, much of what the water authorities have had to do relates to what happened before 3 May and to the unrealistic assumptions that they took last year. An example was the assumption that wage costs would be about 5 per cent., when the industry eventually had to settle for 16 per cent. That factor had a considerable bearing on the situation.
    Mr. Chapman: Will my hon. Friend spell out most clearly that the main reason for the vast increases in water rates this year is to counter the deficit caused by the calculation last year based on wages rising by the 5 per cent. norm of the previous Government?
    Mr. Fox: I thought that my hon. Friend would have realised that that was exactly what I was trying to say. It is apparent that in future I shall have to give longer rather than shorter answers. Of course, my hon. Friend is entirely right.
    Mr. Straw: Is the Minister aware that in the North-West employers face massive increases in water charges for equipment which is connected with sprinklers and other fire-fighting equipment? Is the Minister willing to take this matter up with the chairman of the North-West water authority, because the increases represent a penalty on good employers?
    Mr. Fox: The hon. Gentleman is a little late in the day. Some 40 other hon. Members have already corresponded with me about this. I am happy to say that already the authority has reduced the expected charge by some 50 per cent., and I hope that it is reconsidering even that.
    Mr. Costain: Is my hon. Friend aware that the practice of the water companies of engaging in direct billing is rubbing salt in the wound and is causing great financial embarrassment to consumers? Cannot he do something to reduce the level of the charge?
    Mr. Fox: Direct billing was well under way under the previous Administration, and it would have been wrong for us to prevent it when we came into office. The water authorities claim financial advantages for the system. My hon. Friend is clearly as concerned as we are about the matter. I can assure him that we are looking carefully at all the costs that the authorities are passing on to their consumers.
    Mr. Denis Howell: Since the Conservatives did not support the Labour Government, either in the wages policy they were trying to pursue or in the 16 per cent. settlement for the water industry, why have they agreed to a settlement of 22 per cent., which most people regard as reasonable in comparison with awards to gas and electricity workers? As the Prime Minister said last week from the Dispatch Box that water bills are too high, what are the Government to do about them?
    Mr. Fox: The right hon. Gentleman can hardly claim success when, under his Government, a 5 per cent. wage increase ended up as 16 per cent. The difference between our policy and that of the Labour Government is that we believe that wage increases are a matter for the employer —the National Water Council.

    Wildlife and Countryside Bill
    Mr. Wallerasked the Secretary of State for the Environment what proposals he has to have fresh consultations on the Wildlife and Countryside Bill.
    The Under-Secretary of State for the Environment (Mr. Hector Monro): My right hon. Friend is continuing discussions with interested parties and we intend to publish a paper in the spring describing the revised proposals in detail.
    Mr. Waller: Is my hon. Friend aware that hon. Members on both sides of the House are anxious to see this legislation for the protection of vulnerable species enacted as soon as possible? Will my hon. Friend assure the House that he will not allow discussions to be so protracted as to prevent this legislation from being brought forward as early as possible in the new Session?
    Mr. Monro: I entirely agree that this is an important matter. There will be no delay once we have dealt with the discussions and consultations that we are now engaged in.
    Dr. David Clark: In view of the recommendations of the Royal Commission on common land in 1958, and the recommendations made two years ago by the working party from the hon. Gentleman's Department that the general public should have access to all common land, will the hon. Gentleman give us an assurance that he will consider including a clause in this Bill to deal with this problem?
    Mr. Monro: We are certainly considering all these matters and I assure the hon. Gentleman that that issue will be considered. We shall see how the hon. Gentleman's Ten-Minute Bill gets on today.
    Mr. McQuarrie: When the Minister consults the representatives of the Country Landowners Association on this matter will he take into consideration the considerable number of people who are employed in rural areas and on the moors? This is an important issue in relation to employment in rural areas.
    Mr. Monro: I agree with my hon. Friend that we want harmony in the countryside. We appreciate the traditional pursuits of those who live there. Those

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    people have every right to continue those pursuits.
    Mr. Marks: In view of the delay in bringing in this Bill—I presume that that is because of lack of parliamentary time, not because the Government do not like the Bill—will the Government assist the Nature Conservancy Council in taking over any land threatened as a result of the delay?
    Mr. Monro: The hon. Gentleman is right. The delay in the introduction of the Bill is purely due to lack of parliamentary time. We are in the closest touch with the Nature Conservancy Council and we listen to its views with great care.

    Cheshire County Council
    Mr. John Evansasked the Secretary of State for the Environment if he will meet the leader of Cheshire county council.
    Mr. Heseltine: I hope to meet him on Friday 14 March.
    Mr. Evans: I thank the Secretary of State for that answer. Will he discuss with the chairman of the Tory-controlled Cheshire county council his objections to the dictatorial powers that the right hon. Gentleman arrogates to himself in his Local Government, Planning and Land (No. 2) Bill? Will the Secretary of State ascertain from councillor Richardson that the clauses in the Bill that are objectionable to Labour councillors are equally objectionable to Tory councillors?
    Mr. Heseltine: First I would have to identify any dictatorial powers. I do not think I would be able to do that.

    Property Services Agency
    Mr. Michael Brownasked the Secretary of State for the Environment what steps he is taking to reduce the level of staffing in the Property Services Agency.
    Mr. Heseltine: Since 1 April 1979, the staff of the agency has been reduced by 7 per cent. As part of my review of the work of the Department, I intend to look at the functions of the agency with the object of establishing the scope for further reductions. Meantime, I am confining recruitment to the filling of the most essential vacancies.
    Mr. Brown: In the light of that reply can my right hon. Friend indicate what aspects of the Property Services Agency's work might be contracted out to private enterprise?
    Mr. Heseltine: Any area where I feel that the private sector could do the job more effectively.
    Mr. Guy Barnett: Is the right hon. Gentleman aware that the work of the PSA is likely to increase in one respect and will therefore not allow for reductions in staff? Is he aware that I refer to the increasing number of unemployment benefit offices which will be required as a result of the Government's economic and industrial policy?
    Mr. Heseltine: I am sure that the hon. Gentleman will have taken into account that when unemployment rose under the Government of whom he was a member the number of people who were employed in the PSA was reduced.
    Mr. Stokes: Is my right hon Friend aware that the PSA is one of the most unpopular bodies associated with central Government? Is he further aware that there is grave disquiet about the excessive staff and that many of my hon. Friends feel that much of the work of the PSA could be better carried out by private enterprise?
    Mr. Heseltine: I believe that there is scope for reducing the size of the PSA and that there is work within the PSA that could be better done by the private sector. However, I have to say that there would still remain a viable job for the PSA that could be done only by a public sector body. I shall do my best to ensure that what remains of the PSA is run as effectively as possible.
    Mr. Freeson: Would the Secretary of State care to publish to the House comparative figures showing whether there has been a saving as a result of contracting out professional work already from the PSA to private consultants or whether those jobs are costing more?
    Mr. Heseltine: I think that this would be an excellent subject for investigation by the Select Committee that monitors my Department.

    Birmingham (Water Supply)
    Mr. Cadburyasked the Secretary of State for the Environment if, in view of the effect on Birmingham's water supply, he will institute a review of the decision to allow the diversion of additional water from the Elan reservoirs to the River Wye.
    Mr. Fox: This decision was taken jointly with my right hon. Friend the Secretary of State for Wales. We have been looking at the timing of implementing the variation to the Elan Valley reservoirs abstraction licence and we shall be writing to the Severn-Trent water authority about this.
    Mr. Cadbury: Is my hon. Friend aware that the decision to divert water from the Elan reservoir to the River Wye significantly reduces the reliable supply of water to Birmingham? Can my hon. Friend give an assurance that in the event of a very dry summer Birmingham will not be allowed to run out of water?
    Mr. Fox: My hon. Friend will remember that this decision came about because of the drought and its effect in southeast Wales. I can give him the assurance that Birmingham's water will be protected. The decision letter stated that the Secretaries of State were confident that the Welsh Water Authority would have due regard to the Severn-Trent water authority's needs respecting the Birmingham supply.
    Mr. Sever: Will the Minister, having regard to what will be the phenomenal growth in demand for water in Birmingham over the next 20 years, inform the House of the progress in the provision of new reservoirs in Wales?
    Mr. Fox: I have to say to the hon. Gentleman that the acceptance of the need for an increase in water consumption year after year is a matter of deep concern. Perhaps the House should occasionally think about water conservation rather than regularly discussing the creation of more reservoirs. If the hon. Gentleman cares to write to me shall be happy to give him an answer.

    Council House Sales
    Mr. Moateasked the Secretary of State for the Environment if he is yet
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    able to announce his proposals for reducing delays in processing applications for council house sales.
    Mr. Stanley: The changes in the general consents referred to in my right hon. Friend's answer of 1 February to my hon. Friend the Member for Reading, North (Mr. Durant) will help to avoid such delays.
    Mr. Moate: Does my hon. Friend agree that, because of the immense demand by people to buy their own home, there have been considerable delays in processing applications and making valuations? Will the Minister confirm that local authorities can, to avoid such delays, contract some of the work out to private enterprise estate agents and solicitors, thus ensuring that delays do not occur?
    Mr. Stanley: My hon. Friend is entirely right. They can most certainly do so and we would encourage local authorities to do that where they think that it is right.
    Mr. Winnick: Instead of worrrying about council house sales should not the Minister be far more concerned with the devastating blow inflicted and the misery caused by the decision last week, when the House was deliberately misled?
    Mr. Stanley: I am also concerned about realising the aspirations to home ownership of council tenants.
    Mr. Allan Roberts: Does not the Minister agree that the Government-imposed cuts in public expenditure by local authorities have meant reductions in staff and that that in turn has meant a delay in the processing of council house sales? Is he aware that local authorities are justified in not diverting staff needed for other essential housing matters to this particular activity?
    Mr. Stanley: The hon. Member should take note of what happened in Leeds when the Conservatives took control of the council and started to sell council houses. There was a reduction in council staff at the same time.

    Amble North Pier Breakwater
    Mr. Beithasked the Secretary or State for the Environment when he expects to receive the proposals of the Alnwick district council for the repair of the Amble North Pier breakwater.
    Mr. Fox: It is a matter for the Council to formulate proposals and to decide when to submit them. I can assure the hon. Member that any proposals submitted will be carefully considered on their merits.
    Mr. Beith: Does the Minister realise the impossible position in which the council was left when the Ministry of Defence, having caused years of delay to the project—and having promised a massive contribution to it—withdrew from it less than a year ago? Will the hon. Gentleman involve the Ministry of Defence fully in the negotiations that take place and ensure that that Department makes some contribution to the cost, if the council is not to be involved in capital costs and, consequently, rate increases of which his right hon. Friend would most certainly disapprove?
    Mr. Fox: The hon. Gentleman is right in that the Ministry of Defence is involved in this in the sense that the council has made certain proposals to that Ministry. However, I am sure that, on reflection, the hon. Gentleman will realise that this is a matter for the Secretary of State for Defence. All I can promise is that when the council makes application to us we shall give that application the fullest consideration.

    Council House Sales (New Forest)
    Mr Adleyasked the Secretary of State for the Environment what discussions he has had with the New Forest district council concerning the sale of local authority houses to tenants.
    Mr. Stanley: I have had no discussions with the council on this subject but I am sending my hon. Friend copies of the correspondence my hon. Friend has had with it.
    Mr. Adley: Is my hon. Friend aware that many of my constituents in Lymington, Pennington and New Milton who live in local authority houses are angry that their desire to buy their houses is being thwarted by the obstinacy of the supposedly Conservative council? In order to enable me to redeem my pledges to my constituents at the last election will my hon. Friend make it clear beyond peradventure that the Government will maintain their firm promise to ensue: that those people will have the
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    chance to buy the homes, in which many of them have lived all their lives?
    Mr. Stanley: I assure my hon. Friend that there will be no wavering from the provisions of the right to buy and I am confident that his powers of persuasion will, sooner or later, persuade the Tory authority in the New Forest to give the right to buy to its tenants. In case Labour Members draw an incorrect conclusion from what my hon. Friend has said, I should point out that the information available to me indicates that of the 195 Conservative-controlled local authorities, 194 are selling.

    Olympic Games
    Mr. Dalyellasked the Secretary of State for the Environment if he will make a statement on his discussions with the British Olympic Committee on the siting of the Olympic Games.
    Mr. Monro: I have had several informal discussions in recent weeks with the office bearers and the general secretary of the British Olympic Association. The siting of the Olympic Games was included in the subjects covered. I am fully aware of their approach to the subject and they are in no doubt of the strength of the Government's views.
    Mr. Dalyell: What is the justification for allowing the Moscow branch of the Chase Manhatten Bank to continue its commercial operations, allowing the EEC to sell butter to the Russians and keeping an ambassador in Moscow while saying to the athletes "You cannot go"? Since President Carter has got what he wants in New Hampshire, is it not time to end this humbugging nonsense?
    Mr. Monro: The hon. Gentleman is totally misguided as to the reasons why we have taken such strong action and are advising our team not to go to the Olympics. It is intolerable that we should go there while the invasion of Afghanistan continues.
    Mr. Dalyell: Humbug!
    Mr. Gummer: Will my hon. Friend make sure that the British Olympic Committee is told that it is unacceptable for it to say that the Government's proposal is bringing politics into the Olympics

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    when the committee connived at the exclusion from the Olympics of Taiwan, Rhodesia and South Africa? These were political decisions.
    Mr. Monro: I should make clear that it was the International Olympic Committee rather than the British Olympic Committee which took those decisions, but it is a statement of fact that South Africa was banned from the Olympic Games, and that was a political act.
    Mr. Denis Howell: Was South Africa not excluded by the International Olympic Committee and not by any Government? Is not my hon. Friend the Member for West Lothian (Mr. Dalyell) correct in saying that it is intolerable to expect Sebastian Coe and other distinguished athletes to confront the Russian military might when ICI has just announced the opening of a new office in Moscow and a Minister has made clear that export guarantees for trade with Russia will continue? Is it not disgraceful to discriminate against sport in this way?
    Mr. Monro: The right hon. Gentleman is getting steamed up. He does not seem to accept the basic reason for the Government's attitude, which is the Russian invasion of Afghanistan. That is an extremely serious situation and that is why we have taken many steps against the Soviet Union in trade and technology.
    Mr. Dalyell: On a point of order, Mr. Speaker in view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek, for the third time, to raise the matter on the Adjournment.

    Urban Development Corporations
    Mr. Thompsonasked the Secretary of State for the Environment how much money will be allocated to urban development corporations in their first year of operation; and on what terms.
    Mr. Heseltine: The amount of money to be allocated to UDCs in their first year will depend upon the scale of their proposed programmes, and the extent to which these can be accommodated within the Government's public expenditure plans. Loan finance will be made available for commercial-type projects, and grant for non-commercial type projects. I intend to table an amendment in Committee delineating those types of
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    expenditure which would be eligible for grant.
    Mr. Thompson: Is my right hon. Friend aware that many of his hon. Friends have visited docklands and seen the vast dereliction there and that we sympathise with and understand the problems? However, does he also realise that, in an era of finite resources, many other urban areas are looking carefully at the financing of the UDCs?
    Mr. Heseltine: I understand my hon. Friend's concern. He will be aware that other urban programmes are administered through my Department and are of help to the areas where the worst problems of urban dereliction exist outside docklands. However, the Government's view is that the two areas where UDCs are to be set up, London and Merseyside, are examples of such extreme dereliction that urgent action is necessary.
    Mr. Chapman: Does my right hon. Friend agree that equally as important are the executive powers given to the corporations to get on with the job and their ability to acquire surplus lands from local authorities and statutory undertakings with the minimum of bureaucracy?
    Mr. Heseltine: My hon. Friend understands the problems clearly. It will he for hon. Members to decide what powers to give to the UDCs when we put the order before Parliament. I shall certainly bear in mind what my hon. Friend has said.
    Mr. Alton: If the corporations are to be successful—and a figure of £200 million was mentioned at one stage—is it not reasonable that they should be told soon how much money will be made available to them?
    Mr. Heseltine: It would be helpful if we knew what they wanted to do with the money before we answer that question.
    Mr. Steen: The establishment of the corporations and the injection of public money will not, of themselves, regenerate ailing urban areas. What is needed is an injection of private funds and private investment. How will the UDCs achieve that?
    Mr. Heseltine: I know that my hon. Friend understands the problems well.

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    The purpose of the money that we shall make available to the corporations will be to clear the areas to encourage private sector investment, which, alone, will lead to the success that we want to see.
    Mr. Parry: Will the right hon. Gentleman make a personal visit to Liverpool docklands before deciding on the allocation of money to the area?
    Mr. Heseltine: I have visited the area many times and I shall certainly go there again.

    Development Commission
    Mr. Hicksasked the Secretary of State for the Environment when he will be in a position to make a statement about the future of the Development Commission and its associated organisation, the Council for Small Industries in Rural Areas.
    Mr. Monro: I expect to receive the report of the review group this week. After studying it I shall be consulting my colleagues about the findings.
    Mr. Hicks: Is my hon. Friend aware of the substantial contribution that the Development Commission and its associated body COSIRA make in promoting economic activity in rural areas in the English countryside? Does he agree that the long delay that has occurred in determining the future of the commission has caused great anxiety in those areas?
    Mr. Monro: I appreciate what my hon. Friend says and how right he is to emphasise the good work done by the commission and COSIRA in the rural countryside in developing employment and industry. It is important that we get it right and that is why we are looking carefully at the situation. We shall make decisions as quickly as possible so that the countryside does not lack help in development.
    Mr. Beith: Is the hon. Gentleman aware that COSIRA is moving to new offices in Salisbury in a few weeks time? Will he guarantee that, before it packs its bags, it will know that it will be able to continue its excellent work?
    Mr. Monro: I shall be surprised if there is any problem over the offices in Salisbury.
    Mr. Cockeram: Does my hon. Friend accept that this quango, like others, tends to grow like Topsy and that while a number of factories are needed in rural areas, there is a limit? Is he aware that in my constituency moving a factory from one village to another is not progress and that taxpayers' money has been used to build factories that are standing empty while there are plans to build still more?
    Mr. Monro: That is why my right hon. Friend set up the inquiry into the future of the Development Commission and COSIRA. It would be foolish to anticipate the report as we have not yet seen it, but once we have studied it we shall come to decisions.
    Mr. Newens: Is the hon. Gentleman aware that in places such as west Essex the principal difficulty facing small businessmen wishing to set up in rural areas is frequently finding a site? Will he ask local authorities to provide more industrial estates, which will help to give small business men an opportunity and assist in preserving the green belt?
    Mr. Monro: I have indicated previously that I recognise the importance of the Development Commission and the work that it has done in the countryside, but I do not want to anticipate the report, which we shall receive this week.

    Local Authority Manpower
    Mr. Greenwayasked the Secretary of State for the Environment what is his estimate of the effect on local authority manpower of the abolition of Parker Morris standards and the housing cost yardstick.
    Mr. Butcherasked the Secretary of State for the Environment what effect he expects the abolition of Parker Morris standards and the housing cost yardstick will have on local government manpower.
    Mr. Stanley: It will be for each local authority to judge what savings it is able to make, but our proposals to reduce substantially the Department's detailed intervention in individual housing schemes should assist local authorities to make manpower savings.
    Mr. Greenway: Does my hon. Friend consider that the abolition of Parker

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    Morris standards and the housing cost yardstick will help to bring down housing costs in the public sector?
    Mr. Stanley: It will materially help local authorities to tailor standards to what they see as appropriate for those on their waiting lists, and for those who want rented accommodation. In so far as it helps local authorities to make economies, it should have a beneficial effect on house prices.
    Mr. Butcher: What effect does my hon. Friend consider the abolition of the housing cost yardstick for Parker Morris standards will have on the quality of new building in the public sector?
    Mr. Stanley: It is right that local authorities, with the considerable reservoirs of experience which they have at both officer and member level, should make judgments as to what is the best value for money for their capital investment programme.
    Mr. Allen McKay: Was the Parker Morris standard not introduced to stop councils from building future slums? What will the Minister do about that when the Parker Morris standards have been abolished?
    Mr. Stanley: We are perfectly confident that local authorities, spending their allocations, will take care to ensure that they receive value for money.
    A number of authorities, of both political persuasions, have approached the Government in recent months asking for the relaxation of Parker Morris standards in individual schemes. We have been treating those applications sympathetically.

EUROPEAN COMMUNITY (COUNCIL OF MINISTERS' MEETINGS)
The Lord Privy Seal (Sir Ian Gilmour): With your permission, Mr. Speaker, I will make a statement about the main business to be taken by Ministers of the European Community during March. The usual written forecast of business was deposited in the House yesterday. Heads of State and Government will meet in the European Council in Brussels on 31 March and 1 April. At present four meetings of the Council of Ministers are scheduled for March.
The Agriculture Council is expected to meet on 3 and 4 March, and again on 26 and 27 March, to continue discussion of the Commission's proposals on CAP prices for 1980–81; the proposed economies in the CAP to help balance the markets; and to streamline expenditure and proposals on policy regarding agricultural structures. Ministers are also expected to discuss the common organisation of the market in sheepmeat and French import controls; the extension of the application of the European currency unit in the CAP; and proposals to extend current arrangements for the distillation of wine.
The Finance Council is expected to meet on 17 March to resume discussion of the Commission's latest paper on convergence and budgetary questions. The Council is also likely to consider the report on the European monetary fund; the Commission's first quarterly review of the economic situation in the Community; and the proposal for a second tranche of loans under the Ortoli loan facility. Ministers will also continue their consideration of the financial effects of Commission proposals for CAP economies and the annual agricultural price-fixing.
The Foreign Affairs Council will meet on 17 and 18 March and is expected to discuss preparations for the next European Council, at which our main concern will be to find an adequate and lasting solution to the budget problem. Foreign Ministers may also discuss Community reaction to the Soviet invasion of Afghanistan; the Community attitude to the global negotiations on international development issues, which are to be launched by the special session of the

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United Nations General Assembly late this year; safeguard action on synthetic textiles; the Community's external steel policy; a report on Community relations with the Gulf States; the conclusion of the European Community-Yugoslavia cooperation agreement; a follow-up to the meeting of the European Community-Turkey Association Council on 5 February; and a review of progress in negotiations on adaptation protocols for Greek accession.
The Council will also examine the short list of developers' projects selected by the Belgian Government for the construction of a new building to meet the Council's accommodation needs following enlargement.
Mrs. Dunwoody: As it is now painfully obvious that in spite of the aristocratic swanning around the capitals of Europe by the right hon. Gentleman there is not to be an early meeting, what contingency plans has his Cabinet produced for dealing with the budgetary question, if we are not even to receive the same sort of offer as was made at earlier meetings?
What does the Cabinet intend to do? Does it intend not to pay over our proportion of the VAT? If not, how long does it expect to continue paying for many of the absurdities of the existing Community policies?
When the discussion of the sheepmeat regime takes place will it be made clear that the sort of action taken by the French at the present time, which removes one ban and replaces it with a totally unacceptable import levy, will not in any way contribute to any Community understanding?
Will the Lord Privy Seal tell us that it is his intention and that of his right hon. Friends to resist any attempt to push forward an ethyl alcohol scheme that would have a great effect on jobs and on the relevant industries in Britain?
Will the right hon. Gentleman ensure that when the cane sugar arrangements are discussed the interests of African, Caribbean and Pacific countries will be borne in mind, as well as those in the sugar industry in this country who are directly involved?
Does it really seem sensible, when there is already an outpouring of moneys that the Community can hardly afford, to con-
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sider developers' plans for yet another building to meet the Council's accommodation needs?
Sir I. Gilmour: To take the hon. Lady's last question first, as the present building would not be large enough following the enlargement of the Community, I should have thought it highly necessary to have a new building.
On the question of sugar, of course the points raised by the hon. Lady will be taken into account. I agree that the latest French measures are no less illegal than their previous measures.
The hon. Lady's first question, as she must realise, is entirely hypothetical. We hope to make progress in the normal process of negotiations, which is now taking place. We shall seek every possible means to achieve a solution.
Mr. Cormack: At which of the many meetings to which my right hon. Friend referred will butter be discussed? When it is, will he make it abundantly clear—or will my right hon. and noble Friend the Secretary of State for Foreign and Commonwealth Affairs make it clear—that in no circumstances will the British Government agree to sell subsidised butter to the Russians so that they have more money for guns?
Sir I. Gilmour: The matter will be discussed at more than one meeting. It will probably be discussed by the Foreign Affairs Council as well as the Agriculture Council. As my hon. Friend knows well, it is our view that such exports of subsidised butter to Russia are wrong and should cease. He will remember that there was a Council decision on 15 January that traditional patterns of trade should continue. We are monitoring the position carefully and will take account of his remarks. He will be aware that other countries take a slightly different attitude.
Mr. Cryer: Will the Lord Privy Seal explain what he intends to do about the £1 billion contribution to the budget, 80 per cent. of which goes to the CAP? Will he confirm that unless there is unanimity of agreement, the position of the CAP will not be changed one jot, and that we shall continue our pathetic stance of accepting all the rules of the EEC, making no move to get out and paying through the nose for it?
Sir I. Gilmour: The figure is nearer 70 per cent., but I agree that it is far too high. I do not think that there is anything pathetic about our stance. We have not the remotest intention of getting out of the EEC.
As I said earlier in answer to a question from the hon. Member for Crewe (Mrs. Dunwoody), our intention is to continue negotiating and to reach an agreement. On the tour to which the hon. Lady referred, in childish terms, at least I can say that everybody agreed that it was in the interests not only of Britain but of the Community to get the issue out of the way.
Mr. Kenneth Lewis: Accepting what my right hon. Friend said about the continuous discussions on budgetary policy since it was last discussed by the Council of Ministers, will he tell me at which meeting it will be discussed again in the next few weeks?
Sir I. Gilmour: I made it clear in my statement that it will be discussed at the Council of Ministers' meeting on 17 and 18 March. Above all, it will be discussed at the summit on 31 March and 1 April.
Mr. Jay: What has become of the special summit meeting on the British budget contribution, which was pressed for by the Prime Minister in February?
Sir I. Gilmour: The last time that we discussed the matter I told the right hon. Gentleman that it was decided at Dublin that it would be a matter for the presidency, namely, Senor Cossiga, to decide whether there was a sufficient prospect of agreement to make such an early summit worth while. He decided that that condition precedent was not in existence.
Mr. Nelson: My right hon. Friend said that monetary matters may be considered. Does not he agree that the relative stability of European currency exchange rates since the introduction of the European monetary system has provided a welcome degree of confidence, on which businesses can make decisions? Will he consider ensuring that Britain becomes a full member of the scheme?
Sir I. Gilmour: I entirely agree with my hon. Friend that the EMS has obviously benefited Europe. However,
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he and our partners are aware of the particular difficulties that we face because of our currency being a petrocurrency. Therefore, we must consider the matter even more carefully than we would otherwise have to do.
Mr. Benn: Has the right hon. Gentleman considered the growing pressure for some import controls over subsidised steel and, indeed, car imports into this country from the Community? Have the Government raised this matter with the Council of Ministers, or with Ministers? Can he explain why we should have to pay more for our food than we would have to pay on world markets, whereas in a crucial industrial area we are being badly hammered by subsidised imports?
Sir I. Gilmour: There has been no pressure on us to ban imports of steel or cars. As to the right hon. Gentleman's general question, as he was a member of a Government who twice applied to join the Community, and as he remained a member of the Government, after the referendum, he knows the answer to that question perfectly well.
Mr. Dykes: Can my right hon. Friend confirm robustly that there is every prospect of the British budget deficit problem being satisfactorily solved and negotiated during the next few months and that that will not be a problem with proper European co-operation and good will between the member States? In contrast to the hysteria from Labour Members, surely we must continually remind ourselves that the figure of £1 billion is only the inflation increase on the original White Paper figures when we joined.
Sir I. Gilmour: I agree with my hon. Friend that it is important, not only to us but to the Community, that we should reach an agreement on this matter. There is no doubt that we have an unanswerable case. We shall continue to put it, and the negotiations are continuing.
Mr. Spriggs: Will the right hon. Gentleman explain what he intends to do about the policy of the French Government to carry out what are termed "illegal practices", first, by banning imports of British mutton and, secondly, by opening their doors to mutton and putting a levy on it? What steps is he

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about to take to stop these illegal practices by the French Government?
Sir I. Gilmour: The hon. Gentleman is quite right. As I said earlier, those practices are illegal. As the hon. Gentleman will know, we have pressed the Commission to take interim measures in the courts. As he also knows, the Commission is the guardian of the Treaty and it is for it to act, not for us. We can only ensure that our views are made very clear, and that is what we have done.
Sir Anthony Meyer: Does my right hon. Friend recall that those who are now pressing for import controls are those who urged that in our relations with the EEC we should have industrial free trade as a better solution than membership of the Community? Will he remind them that membership of the EEC is something conceived not as a solution to Britain's short-term problems but as a framework within which, over generations, this country can better secure its future?
Sir I. Gilmour: My hon. Friend is perfectly right. There has been a most distressing pattern of events by the Labour Party, of which it will be well aware. Basically, when it is in government it is in favour of the European Community and when it is in opposition it is opposed to it. That is not a proper way for a responsible party to behave.
Mr. Stoddart: In the light of the statement made by a Conservative Member of Parliament that the Cabinet is openly split on EEC matters, can the right hon. Gentleman confirm that it is still the Government's policy to get rid of our net contribution to the EEC? Can he also say how he will be successful in the negotiations about that unless he is prepared to take action to back up his words?
Sir I. Gilmour: I do not accept the hon. Gentleman's original premise, and I do not know where he got it from. As I have told the House frequently, we are seeking a genuine compromise. However, our partners are well aware that our margin for manoeuvre is small, and that remains the position.
Mr. Costain: In view of the special problems of the fishing industry, at which
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of the meetings will that matter be discussed?
Sir I. Gilmour: I think that the Council responsible for fishing has been postponed until April.
Mr. Dalyell: I should like to ask the right hon. Gentleman a question, notice of which I gave his office this morning and which was raised by my hon. Friend the Member for Crewe (Mrs. Dunwoody). It relates to ethyl alcohol. Can that subject be put on the agenda for 3 or 4 March? A £50 million investment is at stake at Grangemouth, and BP Chemicals must know one way or the other which way the proverbial cat will jump?
Sir I. Gilmour: I am grateful to the hon. Gentleman for giving my office notice of that question. We share his view of the importance of the matter. He will appreciate that we cannot dictate the agenda. I shall certainly bring the matter to the notice of my right hon. Friend. The hon. Gentleman will realise that the discussion of an alcohol regime properly takes place in the Agriculture Council, and my right hon. Friend the Minister of Agriculture, Fisheries and Food is fully aware of the wider industrial implications about which the hon. Gentleman talked—in particular, the important investment problem at Grangemouth.
Mr. Dalyell rose—
Mr. Speaker: Order.
Mr. Gummer: Does not my right hon. Friend agree that it would be much easier to organise and deal with transgressions of the Treaty if we concentrated upon those and did not constantly use the EEC as the excuse for Britain's failure and under-production?
Sir I. Gilmour: I agree with my how Friend. Our problems, which date over a number of years, are very deep-seated, and it is entirely wrong to use the European Community as a scapegoat for them. Nevertheless, as I am sure the whole House will agree, there is a fundamental problem with regard to the budget, which needs to be solved.
Several Hon. Members rose—
Mr. Speaker: Order. I do not propose to call any hon. Member twice. I propose

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to call those hon. Members who have been rising, if they will co-operate with me.
Mr. English: I did not hear the right hon. Gentleman mention the proposals that the President of the Commission at the Savoy yesterday said would be put to the Council before the end of March. Is he aware that there is a proposal for a common energy policy, about which the President said that the only way to save energy was to increase its price, if necessary by a levy?
Sir I. Gilmour: I am sorry, but I am not aware of what went on at the Savoy yesterday. The Commission is certainly considering proposals for a common energy policy, and when it comes forward with proposals we shall give them serious consideration.
Mr. Squire: Will my right hon. Friend confirm that in any discussions on the possible accession of Turkey he will reiterate the Government's view that there can be no accession without a firm and just final solution to the problem of Cyprus?
Sir I. Gilmour: With respect, I think that my hon. Friend is jumping two fences at once and has gone rather further than we are at the moment. Turkey has not yet applied to join the Community. It may do so, but that is some way ahead. While, like him, I am anxious to see the problem of Cyprus solved, I do not think that it should be linked to Turkey's accession to the European Community.
Mr. Spriggs: On a point of order, Mr. Speaker. You have just announced to the House that you would not call an hon. Member twice. Is the right hon. Gentleman aware that precedent has it that many hon. Members have been called twice in the years before he took the Chair? Will he reconsider his reply to my hon. Friend—
Mr. Speaker: The hon. Gentleman does not address me as "the right hon. Gentleman".
Mr. Spriggs: I apologise, Mr. Speaker.
Mr. Speaker: I remind the House that it is true that from time to time hon. Members are called twice. There is an exception this afternoon. I understand that the hon. Member for Crewe (Mrs.
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Dunwoody) wishes to be called again at the end of questions. I indicated that in this series of questions I do not propose to call any Back Bencher twice. It is not fair to the House. We have other business to conduct.
Mr. Straw: The Lord Privy Seal spoke of an adequate and lasting solution. Will he confirm that by adequacy he meant not less than £1,000 million? As there was insufficient agreement to call a meeting of Heads of State in February, what evidence does the Lord Privy Seal have that a meeting called in March will produce agreement?
Sir I. Gilmour: As to the amount of money, as I have already said, we are seeking a genuine compromise. My right hon. Friend the Prime Minister has said that since 3 December, and I hope that the Shadow Minister of Agriculture will shortly catch up with events. That remains our position.
The hon. Gentleman is labouring under a misconception. The Council meeting on 31 March and 1 April is not a special Council. It is a meeting that is taking place in the ordinary course of events.
Mr. Hill: In view of the serious decline of the United Kingdom merchant shipbuilding industry, can the Lord Privy Seal give the House any news of progress of the Council of Ministers on the scrap and build scheme that the Commissioners raised recently? I hope that that matter will come before the Council of Ministers before too long.
Sir I. Gilmour: I shall certainly take advice on that. As far as I know, there are no plans for it to be raised next month. I shall make inquiries, and I shall write to my hon. Friend.
Mr. Donald Stewart: Is the Lord Privy Seal aware that we shall never have a negotiating stance of any muscle as long as his right hon. Friend the Prime Minister continues to repeat that we shall never withdraw from the Common Market under any circumstances?
Sir I. Gilmour: I do not agree. My right hon. Friend the Prime Minister's negotiating stance has been extremely strong throughout. It is worth bearing in mind that she and the Government have achieved a good deal more than our predecessors.
Mr. Marlow: According to a parliamentary answer given yesterday, Holland, which is one-fifth the size of Britain, receives £200 million more each year from the EEC. Denmark, which is only one-tenth the size of Britain, receives as much through the CAP as Britain receives. Since we receive less than 20 per cent. of our gross contributions in income from the CAP and Ireland receives nearly 280 per cent. of its contributions, will my right hon. Friend tell the House what action Britain and the Government will be forced to take if we do not achieve an equitable solution? Will he further accept that whether or not he believes that we will never leave the Common Market, if things do not go right there will be an overwhelming movement within the country to take Britain out, which I should not like to see?
Sir I. Gilmour: My hon. Friend has merely rehearsed at some length and in detail what we already know. Our net contribution is unreasonably high. Because we are by far the biggest net contributor to the European Community budget it follows that most of our partners are net recipients. I agree with my hon. Friend.
Mr. Spearing: Since the cost of disposing of food surpluses by the EEC is now about £8,000 million a year, to which the United Kingdom contributes heavily, will the Minister of Agriculture suggest that there should be no further disposal of additional surpluses, that quotas should be applied, and that over a further period the surpluses should be successively reduced? Would that not be an equitable solution to the surplus problem?
Sir I. Gilmour: That would certainly be one solution, but whether it would be agreed is another matter. In general, I entirely agree with the hon. Gentleman that the costs of disposals and the creation of disposals impose a grotesque burden upon the agricultural budgets of the entire Community. One of our main efforts should be to get rid of the surpluses and to ensure that they do not continue.
Mr. John Townend: Does my right hon. Friend agree that the recent proposals of the Commission in respect of the co-responsibility levy for milk and the
1368
quota for sugar show distinct anti-British bias? What steps do the Government intend to take to reverse that bias?
Sir I. Gilmour: I am not sure that they show a distinct anti-British bias, but there are some aspects of them which are unsatisfactory. My right hon. Friend the Minister of Agriculture, Fisheries and Food has drawn the attention of the Commissioner and of the Agriculture Council to those matters. As I said earlier in my statement, we shall be discussing them twice more this month.
Mr. Ioan Evans: In the television programme "Weekend World" in January the Prime Minister said that she hoped to make a £2 billion cut in public expenditure, and that £1 billion of that would be the cut in our contribution to the EEC budget. Is it not important that the House should know the understanding between the Government and the EEC before we discuss the Budget, or are we to anticipate a £2 billion cut in the Budget on the social services because the Government have failed to cut the EEC contribution?
Sir I. Gilmour: I do not think that the hon. Gentleman has quoted my right hon. Friend the Prime Minister correctly. He knows when the Budget will be announced, and in the nature of matters the budget will precede the European Council. It cannot be altered.
Mr. Winnick: As the next Cabinet Minister to be publicly rebuked by the Prime Minister, will the Lord Privy Seal be a little more forthright and explain to the House what will happen if agreement cannot be reached with our partners over Britain's disgracefully high net contribution? Is he saying that regardless of a lack of agreement no further action, such as the possibility of withdrawal, will be undertaken by the Government?
Sir I. Gilmour: As the hon. Gentleman will be aware, in answer to questions by Mr. Robin Day on "Panorama" on Monday evening my right hon. Friend the Prime Minister repeated what she said on 3 December last year, namely, that there were two possibilities—obstruction and withholding. She said that those were two options that we considered, but that we should be loth to carry them out because we were aiming for a solution.
Mr. Parry: Will the Lord Privy Seal confirm that at their meeting on 3 and 4 March, the Agriculture Ministers will discuss the proposals of the Commission for the reduction of sugar beet quotas? Will his right hon. Friend the Minister of Agriculture support those proposals?
Sir I. Gilmour: As the hon. Gentleman knows, my right hon. Friend has certain reservations about the proposals on the sugar quotas, but they will certainly be discussed at the Agriculture Council.
Mrs. Dunwoody: Will the Lord Privy Seal please tell hon. Members why suddenly his vocabulary has changed in relation to our contribution to the budget? The right hon. Lady the Prime Minister originally asked for a broad balance. We are told that she is now asking for an equitable solution. If no offer that produces a broad balance is forthcoming, what do the Government intend to do to stop the bleeding away of finance from Britain into schemes that cannot be supported?
Sir I. Gilmour: The hon. Lady has a very odd idea of what is sudden. We have been talking about a genuine compromise since 3 December—for three months. As to what we shall do, I have already given the answer, and I have nothing further to add. Plainly, we shall have to reconsider our position. We are making progress. Our objective—I think that the Shadow Minister of Agriculture will agree—is to aim for a solution and not to utter threats.

QUESTIONS TO MINISTERS
Mr. Dubs: I wish to raise a point of order, Mr. Speaker, about the refusal by the Table Office to accept a parliamentary question that I endeavoured to table last week. May I hasten to add that I am in no way criticising the Clerks in the Table Office. I have found them unfailingly helpful, and they have continually given me advice since I became a Member. I am sure that that is the view of all other hon. Members.
However, last week I endeavoured to table a parliamentary question concerning a publication called the Sherlock report. That is the nickname for it. It is entitled "Report of the Committee on Education in Inner London". It is a
1370
report about which there were references in the newspapers. When I tried to table the parliamentary question it was, as I said, refused. What happened, apparently, was that the Clerks in the Table Office, as they sometimes quite properly do, checked on the details with civil servants at the Department of Education and Science. My understanding is that the civil servants said that the subject was not a proper one for a parliamentary question, and that accordingly the Clerks refused to allow me to table it.
At that point, I had seen only press comments on the report, but they seemed to indicate that the report had been prepared for, and at the request of, the Secretary of State for Education and Science. Today I received from the House of Commons Library a copy of the report. As was made clear in the press last week, the terms of reference of the report show that the Secretary of State set up this committee of London Conservatives, and so on.
I have been told today that it would be in order for me to table the parliamentary question, as the report is in the Library. It is fairly obvious that had I been allowed to table my parliamentary question the answer given by the Secretary of State would have been politically significant—even if the Secretary of State had said that it was an unofficial document that had no particular standing. That fact itself would have been useful in relation to the political controversy that the issue is arousing in London, and particularly in Wandsworth.
My point of order, Mr. Speaker, relates to my feeling that the influence of civil servants in this process is unduly large, in that they appear to be able to veto the right of a Member of Parliament to table a parliamentary question. Civil servants have an interest in protecting the Ministers in the Department for which they work. I am not suggesting that civil servants were doing that in this case. I am certain that it was a genuine error. But I ask you, Mr. Speaker, to give some guidance to the House as to how hon. Members can get out of this dilemma, because it seems to me to be an improper state of affairs.
Mr. Speaker: The hon. Member for Battersea, South (Mr. Dubs) has raised a very important question. I listened

1371
with care to the points that he made. Before dealing with his point of order, I say in passing that it is always open to hon. Members to appeal to me when a question is rejected, although I in no way seek to encourage that. The hon. Member perhaps was not aware of that fact.
It has been customary over many years for there to be a relationship between the Table Office and the Departments. This is in the interests of the House itself. It has happened under every Administration for many years, and under every Speaker for many years. Government Departments have a major obligation to make sure that the advice that they tender is accurate. I am happy to say that that major obligation is carried out, but there is bound to be human error from time to time.
As I understand the position, the document to which the hon. Gentleman referred was placed in the Library not by the Minister but by an hon. Member who wanted to put it in the Library. It appears to me, at first glance, to be an internal party political exercise, but I have taken note of what the hon. Gentleman has said, and I assure him that the Table Office and myself are very jealous of the rights of hon. Members to be able to question the Administration, because this House is the only check there is on the Administration of the day.
Mr. Foot: Further to the point of order, Mr. Speaker. I am sure that the whole House will be most grateful to you for your ruling. But in such a case, is it not for the Minister concerned to look into it, and, if wrong advice has been tendered from his Department, should he not come to the House and make a statement about it? If the document were one of a party nature, that would not, as I understand the position, absolve the Minister in any sense. I repeat that we are all grateful to you, Mr. Speaker, for your ruling, especially as you underlined the importance of the subject, but I express the hope, through you, that the Minister concerned will come to the House and tell us the position.
Mr. Jay: Further to the point of order, Mr. Speaker. In your view, does the original reluctance of the Minister to answer a question on the subject mean
1372
that he regards the report as not worth the paper that it is written on?
Mr. Spearing: Further to the point of order, Mr. Speaker. In endorsing the view of the Table Office expressed by my hon. Friend the Member for Battersea, South (Mr. Dubs), may I seek your concurrence with the principle that anything that is the responsibility of a Minister of the Crown is, unless otherwise blocked by a previous question, open to question in this House? Surely the point at issue is whether the Secretary of State for Education and Science requested and received a particular report, or whether a right hon. Gentleman, a Member of this House, did so in another capacity.
Mr. Speaker: I shall answer that point of order at once so that it will not get mixed up with others. Under every Administration since I have been in this House, various Ministers have within their own parties set up committees to advise them, and it has not been thought that a Minister was answerable to this House for dealings within his own party.
The observations made by the right hon. Member for Ebbw Vale (Mr. Foot) will have been heard by others as well as by me.

LAMBETH, SOUTHWARK AND LEWISHAM AREA HEALTH AUTHORITY
Mr. English: You will recollect, Mr. Speaker, that yesterday, on the Floor of the House, I suggested to you that if there was not a further statement from the Secretary of State for Social Services, there could perhaps be the opportunity for a debate under Standing Order No. 9. People who were employed at hospitals that are now closed do not know whether they ought to return to work, since the instructions that the hospitals should be closed are invalid and illegal. I shall not argue the case now, but I think you would agree, Mr. Speaker, that it is a matter of urgent public importance that what should happen in respect of actions taken during the period of illegality should be discussed on the Floor of this House.
Mr. Speaker: I allowed the hon. Member for Nottingham, West (Mr. English) to make his point of order. He will realise that he should have notified me before

1373
12 o'clock today if he intended to make an application under Standing Order No. 9. But the hon. Gentleman has got on the record the point of view that he wished to advance.
Mr. English: If you will look at the Official Report, Mr. Speaker, you will find that I specifically referred to the possibility of a Standing Order No. 9 debate today, as well as to the desirability of a statement to the Secretary of State. I should not, of course, have raised the matter under Standing Order No. 9 had there been a statement by the Secretary of State. You will find it, Mr. Speaker, in the Official Report.
Mr. Speaker: I know that quite well. But I do not take notice, across the Floor of the House, of applications under Standing Order No. 9, except when the matter arises out of the business of the day. It is quite easy for hon. Members to write to me before 12 o'clock, and then I have a chance to consider the matter. With his usual courtesy, I know that the hon. Gentleman would have done so had he really wished to pursue the matter—
Mr. English: No.
Mr. Speaker: —had the hon. Gentleman wished to pursue the matter this afternoon.
Mr. English: I hope that you will give me credit, Mr. Speaker, for believing that I may have been mistaken, to use Cromwell's words, rather than that I intended not to raise the matter this afternoon. You imputed to me something that was not correct. I genuinely believe that the matter ought to be discussed as soon as possible.
Mr. Speaker: I had no desire to impute anything to the hon. Gentleman, except that he had failed to observe our general custom.

ACCESS TO COMMONS AND OPEN COUNTRY
4.9 pm
Dr. David Clark: I beg to move,
That leave be given to bring in a Bill to amend sections 193 and 194 of the Law of Property Act 1925; to clarify the meaning of the Commons Registration Act 1965; to grant a right of public access to open country (as defined in the National Parks and Access to the Countryside Act 1949 as amended by the Countryside Act 1968); and for connected purposes.
The aim of the Bill would, in essence, be threefold. First, it would allow legal access to all commons. Secondly, it would amend, in a minor fashion, the Commons Registration Act 1965. Thirdly, it would grant right of access for air and exercise to all open land.
In asking for leave to introduce this Bill I am aware that it is only one of many that have been introduced over the years. Indeed, if we go back to 1888, we find that James Bryce introduced a Bill of this nature into the House. Since then a number of similar Bills have been introduced. It is interesting to note that the majority of such moves were made by Members of Parliament who represented constituencies in the industrial North-East of England. Charles Trevelyan of Newcastle, Ellen Wilkinson of Jarrow, Hugh Dalton of Bishop Auckland, Chuter Ede and Arthur Blenkinsop both of my own constituency of South Shields, were among those who sponsored or introduced such Bills. There is a long tradition of introducing such Bills.
I am often asked why this is so, and I believe that the explanation is simple. After spending weeks down the mines, in the shipyards, in the workshops on Tyneside or in the towns of Durham, Manchester, Sheffield or Workington, in West Cumberland, men had only to lift their eyes and in the distance they could see the beckoning Pennines. Naturally, because of their limited freedom, they yearned to walk among those hills. But alas, it was not to be, and that is often so today.
Those workmen only wanted the same rights as their Lordships' grouse to wander on the moors, except that they did not want to be shot at. We should now consider freer access to such areas, especially

1375
as there is increasing demand for leisure activities and every Government report points in that direction.
My Bill would correct the anomaly that arises out of the case of the Central Electricity Generating Board v. Clwyd county council 1976, and also the Box parish council v. Lacey in 1978. I believe that it is a minor technicality, which the House should put right.
Secondly, I seek to allow the public access to all commons. The paradox is that by their definition the commons belong to people yet the traditional rights of many people have been limited over the past 100 years. There is a rhyme that is associated with the Commons, Open Spaces and Footpath Preservation Society, of which I am chairman. It is an 18th century rhyme, but is well worth remembering. It runs:
"The law doth punish man and woman, That steals a goose from off the common, But lets the greater felon loose,
That steals a common off the goose."
That is precisely what has happened. Over the centuries people have had their land stolen from them. This is not just the view of a rabid Socialist; it was also the view of the Royal Commission in 1958. I understand that it is the view of the Department of Environment working party.
It is time that the problem of access to commons was sorted out once and for all. We are lucky that under the Law of Property Act 1925 commons in urban areas are accessible to the public as of right. This means, especially in the Lake District, that there are large areas where we are free to wander and obtain great enjoyment.
The third part of my Bill would allow pedestrian access to all other non-cultivated open land. That would bring this country in line with the more advanced countries in Europe. The National Parks and Access to the Countryside Act 1949 went some way towards this, but I believe that the time is now opportune for us to go all the way and to grant this concession and, indeed, this right.
I concede that there will sometimes be difficulties. I concede that there are often public footpaths in these areas. But public footpaths and legal rights of way are no guarantee. I have been told to get off moors even though I have been on a
1376
statutorily registered public footpath. That has been said to me at gunpoint on two occasions by people who have told me that they do not recognise the law as applied to the Queen's highways. Therefore, we must go a stage further when talking about open areas and make them available to everyone.
I fully accept that there would be problems with a minority who are vandals and there would have to be punitive measures involved in any legislation. I fully concede that, but what I am arguing has been put forward by responsible committees such as the Dower committee of 1945 and the Hobhouse committee of 1947.
All evidence—we must all welcome it—points to an increase in leisure time. On a Friday evening we have only to look at the exodus from industrial cities such as Newcastle, London, Birmingham, Sheffield and Manchester to realise the demands that are put upon the countryside.
The countryside is not a museum. I fully accept that. It is a workshop. But it is more than that. It is part of our natural and national heritage, just as much as Hadrian's Wall or Westminster Abbey. The time has come when we should give this right back—I emphasise the word "back "—to our people and allow them to wander freely over open moorland and other non-cultivated land.
Question put and agreed to.
Bill ordered to be brought in by Dr. David Clark, Mr. Andrew F. Bennett, Mr. D. N. Campbell-Savours, Mr. Sydney Chapman, Mr. Patrick Cormack, Mr. Alfred Dubs, Mr. Frank Hooley, Mr. John Parker, Mr. Geoffrey Rippon, Mr. Leslie Spriggs, and Mr. Frederick Willey.

ACCESS TO COMMONS AND OPEN COUNTRY
  ACCESS TO COMMONS AND OPEN COUNTRY
  Dr. David Clark accordingly presented a Bill to clarify the meaning of the Commons Registration Act 1965; to grant a right of public access to open country (as defined in the National Parks and Access to the Countryside Act 1949 as amended by the Countryside Act 1968); and for connected purposes: And the same was read the First Time; and ordered to be read a Second Time upon Friday 14 March and to be printed. [Bill 153.]

SEA FISHERIES
Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments, &c.),
That the draft Sea Fish Industry Act 1970 (Increase in Rate of Levy) Order 1980, which was laid before this House on 28th January, be approved.—[Mr Brooke.]
The House divided: Ayes 166, Noes 140.

Division No. 198]

AYES

[4.20 pm

Aitken, Jonathan

Gower, Sir Raymond

Needham, Richard

Alexander, Richard

Gray, Hamish

Nelson, Anthony

Ancram, Michael

Grieve, Percy

Neubert, Michael

Aspinwall, Jack

Griffiths, Peter (Portsmouth N)

Newton, Tony

Atkins, Robert (Preston North)

Grist, Ian

Nott, Rt Hon John

Baker, Kenneth (St. Marylebone)

Gummer, John Selwyn

Page, Rt Hon Sir R. Graham

Baker, Nicholas (North Dorset)

Hamilton, Michael (Salisbury)

Page, Richard (SW Hertfordshire)

Bell, Sir Ronald

Hampson, Dr Keith

Parkinson, Cecil

Berry, Hon Anthony

Hannam, John

Parris, Matthew

Best, Keith

Haselhurst, Alan

Patten, Christopher (Bath)

Bevan, David Gilroy

Hayhoe, Barney

Patten, John (Oxford)

Bitten, Rt Hon John

Heddle, John

Pattie, Geoffrey

Biggs-Davison, John

Henderson, Barry

Pollock, Alexander

Blackburn, John

Hill, James

Proctor, K. Harvey

Boscawen, Hon Robert

Hogg, Hon Douglas (Grantham)

Rathbone, Tim

Braine, Sir Bernard

Holland, Philip (Carlton)

Rees-Davies, W. R.

Brinton, Tim

Hooson, Tom

Renton, Tim

Brocklebank-Fowler, Christopher

Howell, Ralph (North Norfolk)

Rhodes James, Robert

Brotherton, Michael

Hunt, David (Wirral)

Royle, Sir Anthony

Brown, Michael (Brigg & Sc'thorpe)

Hunt, John (Ravensbourne)

Sainsbury, Hon Timothy

Browne, John (Winchester)

Jessel, Toby

Skeet, T. H. H.

Buchanan-Smith, Hon Alick

Jopling, Rt Hon Michael

Speed, Keith

Buck, Antony

Kellett-Bowman, Mrs Elaine

Speller, Tony

Budgen, Nick

Kershaw, Anthony

Spence, John

Burden, F. A.

Kitson, Sir Timothy

Stevens, Martin

Butcher, John

Knox, David

Stewart, Ian (Hitchin)

Cadbury, Jocelyn

Lang,Ian

Stewart, John (East Renfrewshire)

Carlisle, John (Luton West)

Latham, Michael

Stradling Thomas, J.

Chapman, Sydney

Lawrence, Ivan

Tapsell, Peter

Churchill, W. S.

Lee, John

Tebbit, Norman

Clark, Hon Alan (Plymouth, Sutton)

Le Marchant, Spencer

Thompson, Donald

Clark, Sir William (Croydon South)

Lester, Jim (Beeston)

Thorne, Neil (Ilford South)

Clegg, Sir Walter

Lewis, Kenneth (Rutland)

Thornton, Malcolm

Cockeram, Eric

Lloyd, Ian (Havant & Waterloo)

Townend, John (Bridlington)

Cope, John

Lloyd, Peter (Fareham)

Townsend, Cyril D. (Bexleyheath)

Cormack, Patrick

Loveridge, John

Trippier, David

Corrie, John

MacGregor, John

Waddington, David

Costain, A. P.

McGuire, Michael (Ince)

Waldegrave, Hon William

Cranborne, Viscount

MacKay, John (Argyll)

Walker, Rt Hon Harold (Doncaster)

Dickens, Geoffrey

McNair-Wilson, Michael, (Newbury)

Walker, Rt Hon Peter (Worcester)

Dorrell, Stephen

McQuarrie, Albert

Waller, Gary

Douglas-Hamilton, Lord James

Marland, Paul

Ward, John

Dunn, Robert (Dartford)

Marlow, Tony

Warren, Kenneth

Dykes, Hugh

Mates, Michael

Watson, John

Eggar, Timothy

Mather, Carol

Wells, John (Maidstone)

Elliott, Sir William

Mawby, Ray

Wells, Bowen (Hert'rd & Stev'nage)

Faith, Mrs Sheila

Mawhinney, Dr Brian

Wheeler, John

Fisher, Sir Nigel

Miller, Hal (Bromsgrove & Redditch)

Wickenden, Keith

Fletcher, Alexander (Edinburgh N)

Mills, Iain (Meriden)

Wiggin, Jerry

Fletcher-Cooke, Charles

Mills, Peter (West Devon)

Williams, Delwyn (Montgomery)

Forman, Nigel

Moate, Roger

Winterton, Nicholas

Fox, Marcus

Morgan, Geraint

Wolfson, Mark

Fraser, Peter (South Angus)

Morris, Michael (Northampton, Sth)

Galbraith, Hon T. G. D.

Morrison, Hon Peter (City of Chester)

TELLERS FOR THE AYES:

Garel-Jones, Tristan

Murphy, Christopher

Mr. John Wakeman and

Goodlad, Alastair

Myles, David

Mr. Peter Brooke.

Gorst, John

Neale, Gerrard

NOES

Alton, David

Coleman, Donald

Dixon, Donald

Anderson, Donald

Cormack, Patrick

Dormand, Jack

Archer, Rt Hon Peter

Cox, Tom (Wandsworth, Tooting)

Douglas, Dick

Armstrong, Rt Hon Ernest

Craigen, J. M. (Glasgow, Maryhill)

Douglas-Mann, Bruce

Ashton, Joe

Crowther, J. S.

Dubs, Alfred

Booth, Rt Hon Albert

Cryer, Bob

Duffy, A. E. P.

Boothroyd, Miss Betty

Cunliffe, Lawrence

Dunn, James A. (Liverpool, Kirkdale)

Bottomley, Rt Hon Arthur (M'brough)

Cunningham, Dr John (Whitehaven)

Dunwoody, Mrs Gwyneth

Brown, Hugh D. (Provan)

Dalyell, Tarn

Eadie, Alex

Callaghan, Jim (Middleton & P)

Davis, Clinton (Hackney Central)

Eastham, Ken

Campbell-Savours, Dale

Davis, Terry (B'rm'ham, Stechford)

Edwards, Robert (Wolv SE)

Clark, Dr David (South Shields)

Dean, Joseph (Leeds West)

Ellis, Raymond (NE Derbyshire)

Cocks, Rt Hon Michael (Bristol S)

Dempsey, James

English, Michael

Evans, John (Newton)

McGuire, Michael (Ince)

Smith, Rt Hon J. (North Lanarkshire)

Field, Frank

McKay, Allen (Penistone)

Soley, Clive

Fitch, Alan

McKelvey, William

Spearing, Nigel

Flannery, Martin

Maclennan, Robert

Spriggs, Leslie

Fletcher, Ted (Darlington)

McNally, Thomas

Stallard, A. W.

Foot, Rt Hon Michael

McNamara, Kevin

Steel, Rt Hon David

Forrester, John

Marks, Kenneth

Stewart, Rt Hon Donald (W Isles)

Foulkes, George

Marshall, David (Gl'sgow.Shettles'n)

Stoddart, David

Freud, Clement

Marshall, Dr Edmund (Goole)

Stott, Roger

Garrett, John (Norwich S)

Mason, Rt Hon Roy

Strang, Gavin

Garrett, W. E. (Wallsend)

Maxton, John

Taylor, Mrs Ann (Bolton West)

Graham, Ted

Maynard, Miss Joan

Thomas, Dafydd (Merioneth)

Grant, John (Islington C)

Miller, Dr M. S. (East Kilbride)

Thomas, Jeffrey (Abertillery)

Grimond, Rt Hon J.

Mitchell, R. C. (Soton, Itchen)

Thomas, Mike (Newcastle East)

Hamilton, James (Bothwell)

Morris, Rt Hon Alfred (Wythenshawe)

Thomas, Dr Roger (Carmarthen)

Hamilton, W. W. (Central Fife)

Morris, Rt Hon Charles (Openshaw)

Thorne, Stan (Preston South)

Harrison, Rt Hon Walter

Morris, Rt Hon John (Aberavon)

Tinn, James

Haynes, Frank

Morton, George

Torney, Tom

Healey, Rt Hon Denis

Newens, Stanley

Wainwright, Richard (Coine Valley)

Holland, Stuart (L'beth, Vauxhall)

Oakes, Rt Hon Gordon

Walker, Rt Hon Harold (Doncaster)

Home Robertson, John

O'Halloran, Michael

Watkins, David

Hooley, Frank

Orme, Rt Hon Stanley

Welsh, Michael

Howells, Geraint

Palmer, Arthur

White, Frank R. (Bury & Radcliffe)

Hughes, Robert (Aberdeen North)

Parry, Robert

Whitehead, Phillip

Jay, Rt Hon Douglas

Powell, Raymond (Ogmore)

Willey, Rt Hon Frederick

John, Brynmor

Prescott, John

Williams, Sir Thomas (Warrington)

Jones, Barry (East Flint)

Price, Christopher (Lewisham West)

Winnick, David

Kerr, Russell

Radice, Giles

Woodail, Alec

Kershaw, Anthony

Roberts, Albert (Normanton)

Woolmer, Kenneth

Lamond, James

Roberts, Ernest (Hackney North)

Wrigglesworth, Ian

Leadbitter, Ted

Robertson, George

Young, David (Bolton East)

Lewis, Ron (Carlisle)

Rooker, J. W.

Lofthouse, Geoffrey

Sandelson, Neville

TELLERS FOR THE NOES

McDonald, Dr Oonagh

Sheerman, Barry

Mr A. J. Beith and

McElhone, Frank

Silverman, Julius

Mr Stephen Ross.

Question accordingly agreed to.

Resolved,

That the draft Sea Fish Industry Act 1970 (Increase in Rate of Levy) Order 1980, which was laid before this House on 28th January, be approved.

ORDERS OF THE DAY
  COMPANIES BILL [Lords]
  As amended (in the Standing Committee), further considered.
  COMPANIES BILL [Lords]
    New Clause 16

      AMENDMENT OF SECTION 52 OF COMPANIES ACT 1948
      'In section 52 of the Act of 1948 (return as to allotments) for the words "one month" wherever they occur, there shall be substituted the words "fourteen days."'.—[Mr. Clinton Davis.]
      Brought up, and read the First time.
      4.30 pm
      Mr. Clinton Davis: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker (Mr. Richard Crawshaw): With this we may take the following:
      New clause 17—Amendment of s.33 of Companies Act 1967:
      'In section 33 of the Act of 1967 the word "person" shall be defined as any person whether acting alone or in concert with any other person'.
      New clause 18—Amendment to Componies Act 1976 (No. 1):
      'After section 27 of the Companies Act 1976 there shall be inserted the following section—
      "27A.—(1) If a person fails to comply with a notice under the foregoing section the company may by order direct that the shares in respect of which the notice was served shall, until that person complies with the notice or further order, be subject to the restrictions imposed by this section.
      (2) So long as any shares are directed to be subject to the restrictions imposed by this section—

      (a) Any transfer of those shares, or in the case of unissued shares any transfer of the right to be issued therewith and any issue thereof, shall be void;

      (b) No voting right shall he exercisable in respect of those shares;

      (c) No further shares shall be issued in right of those shares or in pursuance of any offer made to the holder thereof;

      (d) Except in a liquidation, no payment shall be made of any sum due from the company on those shares, whether in respect of capital or otherwise.

      (3) Where a company makes an order directing that shares shall be subject to the said restrictions, the company shall forthwith give notice in writing thereof to the person whose
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      failure to comply with a notice under the foregoing section led to the making of the order such notice shall be deemed to be duly given by being sent by prepaid first class post to the last known address of that person.
      (4) Where a company makes an order directing that shares shall be subject to the said restrictions, or refuses to make an order directing shares shall cease to be subject thereto, any pawn aggrieved thereby may apply to the Court and the Court may, if it sees fit, direct that the shares shall cease to be subject to all or any of the said restrictions in whole or in part on such terms as the Court thinks fit.
      (5) Whenever an order is made in respect of: shares comprised in relevant share capital of the company under this secton or under section 174 of the Act of 1948 (power of the Secretary of State to impose restrictions on shares or debentures) the company shall be under an obligation to inscribe against the name of the member in whose name those shares are registered in a separate part of the register kept by it under section 34 of the Act of 1967 (Register of Interests in Voting Shares) the fact that the restrictions were imposed, the date on which they were imposed and, where appropriate, the date on which they were lifted.
      (6) Subsections (2) to (9) of the said section 34 (which relates to the manner in which the register is to be made up and provide for public inspection of the register) shall apply in relation to the part of the register referred to in subsection (5) above as they apply in relation to the remainder of the register, and as if reference to subsection (1) of that section included references to subsection (5) above.
      (7) In this section 'relevant share capital' has the same meaning as in section 33 of the Act of 1967 and 'the court' means any court having jurisdiction to wind up the company.".'.
      New clause 19—Amendment to Companies Act 1976 (No. 2):
      'After section 27 of the Companies Act 1976 there shall be inserted the following sections:—
      "27(B.—(1) Where, on the application of the Secretary of State it appears to the High Court—

      (a) that a person has failed to comply with a notice under section 27 of this Act: or

      (b) that in connection with an investigation under either section 172 (appointment and powers of inspectors to investigate ownership of a company) or section 173 (power to require information as to persons interested in shares or debentures) that there is difficulty in finding out the relevant facts about any shares (whether issued or to be issued), and that the difficulty is due wholly or mainly to the unwillingness of the persons concerned or any of them to assist the investigation as required by the Act of 1948;

      and that it is in the interests of the company that an order be made under this section, the court may make an order that the shares

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      or debentures be forfeited and cancelled on such terms as the court thinks fit.
      (2) A person whose shares have been forfeited under this section shall cease to be a member in respect of the forfeited shares, but shall, notwithstanding, remain liable to pay the company all monies which, at the date of forfeiture, were payable by him to the company in respect of the shares, but his liability shall cease if and when the company shall have received payment in full of all such monies in respect of the shares.
      (3) The Secretary of State shall give not less than 10 days' notice of his intention to apply for an order under this section to the person who has failed to comply with the notice under section 27 or to those persons who appear to him to be unwilling to assist in an investigation under section 172 or 173 of the Act of 1948 and to the company, and on the hearing of the application that person or those persons and the company may appear and may give evidence or call witnesses.
      (4) On the hearing of any application for an order under this section or on any application made by a person aggrieved by such order to rescind or vary the same, the Secretary of State shall appear and call the attention of the court to any matters which seem to him to be relevant and may himself give evidence or call witnesses.
      (5) In this section 'the court' means any court having jurisdiction to wind up the company.".'.
      Amendment No. 36, in clause 33, page 41, line 19, leave out 'one month' and insert 'fourteen days'.
      Amendment No. 37, in page 41, line 29, leave out 'one month' and insert 'fourteen days'.
      Amendment No. 38, in page 41, line 37, leave out 'one month' and insert 'fourteen days'.
      Mr. Davis: This group of new clauses and amendments enables us to debate and to try to find a way of dealing with the serious issues for British companies that have been raised in the recent Consolidated Gold Fields case. New clauses 16 and 17 represent a more general approach as distinct from the more specific proposals that we adumbrate in new clauses 18 and 19, which provide detailed and quite Draconian powers which are designed to render section 27 of the Companies Act 1976 far more effective.
      We feel that a serious issue has been raised. Important problems and serious threats are posed to the ownership of United Kingdom quoted companies. Bearing in mind that about 25 per cent. of the top 1,000 companies cited by The Times are already controlled by
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      foreign shareholders, we must recognise the importance of dealing with the issue effectively.
      Surely it was the Government's ditty to seize the opportunity to announce proposals and to take effective action. However, once again, when it comes to taking effective remedial action to deal with an abuse, the Government adopt their characteristic posture of masterly inactivity. That is an attitude that no doubt will be much praised by all those who pose a major threat to many of our largest companies. No doubt the Minister will seek to camouflage his sluggishness, as he did yesterday, with an attack on the drafting of our proposals. I think that he will refuse to deal with the issues of principle. That will be a totally unacceptable role for him to fulfil. I hope that my pessimism about his conduct will not come to pass.
      The Department of Trade appointed inspectors under section 172 of the Companies Act 1948 to investigate and report on the membership of Consolidated Gold Fields Ltd. That action was taken rather late in the day. Everybody appears to know the present membership of the company. We should be addressing our minds to strengthening the provisions of the 1967 Act by providing companies and the Secretary of State with some effective sanctions. There can be no doubt that it is an important matter. A danger to British companies has arisen as a result of the abolition of exchange control regulations, which the Consolidated Gold Fields case has illustrated vividly.
      The Secretary of State for Trade (Mr. John Nott): For about four years the hon. Gentleman, as Under-Secretary of State for Trade, was responsible for company affairs. Will he illustrate the occasions during those years when the Department of Trade persuaded the Treasury to use the exchange control legislation to block a foreign bid? Will the hon Gentleman tell us when that legislation was used to stop a bid when he was a member of the Labour Government?
      Mr. Davis: I cannot recall that now. However, a danger has been posed by a specific case. If the Department of Trade was not alerted to the position before, as clearly it was not, it is right that we should now learn from the lesson. I hope

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      that on that ground the right hon. Gentleman will be with me. I recognise only too well that there are matters that arise from inspectors' reports to which the Department is not alerted and to which Ministers ought to be alerted. Those matters have been missed by Ministers and by those advising them. The value of inspectors' reports and the value of any scandal is to learn lessons from them. Surely the Government should have said "There is a clear lacuna in the law which needs to be remedied." Evidently that is not the attitude that the Government plan to take.
      The Minister for Trade (Mr. Cecil Parkinson): Will the hon. Gentleman tell us on how many occasions when he was in charge of these affairs he introduced legislation to deal with problems that had arisen within two or three weeks of appointing inspectors to investigate and report, and long before they had reported?
      Mr. Davis: Is the Minister arguing that this is a serious matter that warrants some action? Surely he cannot equate it with everything else that has arisen. The Government's attention was drawn to the matter in the Ashbourne report. It is not as though the Government were not alerted to these events before they happened. I shall quote paragraph 1257 of the Ashbourne report, which was delivered on 30 April 1979. It was published by the Government. It has been in the Secretary of State's possession for a considerable period. The inspectors stated:
      "Finally, we express concern at the inadequacy of the present legal machinery to enable the identification of the true owner, or owners of shares of a British registered company, where those shares are held by a nominee resident abroad."
      That view is also stated by Professor Gower, who is the head of the panel of advisers appointed by the Government. In his book on modern company law he deals with piercing the veil of nominee shareholdings. He states:
      "The weakness, of course, is that a pyramid of nominees may make it impossible to ascertain the identity of the ultimate beneficial owners. Severe penalties can be imposed for failure to give information or for giving false information, but these are ineffective as regards people outside the jurisdiction."
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      That is the important feature. Professor Gower continues:
      "In such a case resort to the appointment of an inspector under section 172, or investigation by the Department of Trade under section 173 of the 1948 Act, is likely to be equally ineffective."
      If the Government's case is that the Labour Government were neglectful because they did not address their minds to the issue, that is no excuse for not doing something now. The Government claim that they are entitled to rectify Labour legislation and Labour Government omissions in other respects. Why do they choose not to do so in this instance when their attention was alerted by the Ashbourne report while the Bill was being prepared? They cannot escape from that.
      Mr. Nott rose—
      Mr. Davis: I shall give way in a moment—[Interruption.] If the right hon. Gentleman wishes to intervene, he might listen to what I have to say.
      Mr. John Smith: Hear, hear. Behave yourself.
      Mr. Davis: The Government should say "We have not dealt with this matter so far, but we undertake during the remaining stages of the Bill in another place to ensure that some legislative action is proposed."
      Mr. Nott: The Government have had about 10 months to consider these matters. The hon. Gentleman had four years to consider them. What did he introduce for piercing the veil, as he puts it, to deal with those who were hiding behind foreign companies or foreign situations in his proposals for insider dealing? What were the Labour Government's proposals to deal with matters handled from outside our jurisdiction? I do not recall what he thought should be done to pierce the veil in those instances.
      Mr. Davis: This is not essentially an instance of insider dealing. The right hon. Gentleman should address himself to the relevant aspects. Insider dealing is only a peripheral issue. The Labour Government introduced as a first attempt—the then Opposition played a substantial part—the nominee provisions in the 1976 Act. That measure was designed

      1387
      to build on the 1967 Act. It was a refinement of Jenkins; it was an advance. However, we did not pick up the issue with which we are now dealing at that time. I have conceded that. I am arguing that the right hon. Gentleman has had his attention specifically drawn to the issue now before us. He cannot escape from that, bearing in mind the Ashbourne report of April 1979.
      The right hon. Gentleman has a Bill that has been in the course of drafting for some time. I suspect that the Government have not picked up the issue because of the mess that they have made of the proposals in the first place. It may be that they intended to introduce a Bill to deal only with the proposals relating to the second directive. They made a hash of that and then changed their mind on the brink of Second Reading in this House, after the legislation had passed through another place.
      That is why the Government have introduced all these complicated matters dealing with insider dealing, conflicts of interest, loans to directors and so on in a haphazard way during the Committee stage. That is a most unsatisfactory way to deal with legislation, and the Minister knows that. Indeed, if it had not been for the Minister of. State, we would not have had the legislation. The Secretary of State had set his mind against it, as he indicated on Second Reading of our Bill. I understand that a great deal of internal bickering went on in the Department, but the Secretary of State was defeated by his Minister of State—which was a good thing.
      In addition to averting their eyes from the Ashbourne report, the Government have ignored the consequences of the abolition of exchange control in this respect. It is now much easier for overseas investors to accumulate secretly large stakes in United Kingdom companies and bid for them outright. Foreign companies and individuals who are not subject to United Kingdom law are no longer bound to obtain Bank of England consent for the acquisition of 10 per cent. or more of a British company. British and foreign companies are subject to different rules, until a stake reaches the 30 per cent. mark, when it has to be declared to the take-over panel.
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      Therefore, it is relevant to ask the Secretary of State, as he is here, whether the consequence of the abolition of exchange controls was contemplated by him or the Chancellor of the Exchequer when the proposals were introduced in October. What thought did the Secretary of State give to that? What advice, if any, did he tender to the Chancellor of the Exchequer? Or did he not alert himself or the Chancellor to the dangers?
      Mr. Nott: As the previous Government never used the Exchange Control Act in these circumstances, I do not think that it is an important point.
      Mr. Davis: Is the right hon. Gentleman saying that Bank of England consent to the acquisition of 10 per cent. or more of a company was never used?
      Mr. Nott: Yes; it was never used to block a bid.
      Mr. Davis: I cannot accept the right hon. Gentleman's assertion. I believe that he is wrong. I do not have the details here, nor does he. It is simply a bare assertion.
      Let us turn to the Consolidated Gold Fields case and the issues concerned there. [Interruption.] Does the Secretary of State wish to intervene again?
      Mr. Nott: No.
      Mr. Davis: Good. I am glad that he is enjoying my speech.
      The Consolidated Gold Fields case has cast an enormous question mark over the ability of the City to regulate its own affairs. The take-over panel and the Department of Trade proved powerless to deal with the breach of the gentlemanly understandings that apply in the City. The system and spirit of the law were flouted by those who made the bids and who are not amenable to those criteria because they are not within United Kingdom jurisdiction and do not wish to make themselves so amenable. Therefore, I believe that the case calls for a serious review of the law and the rules of the take-over panel and the Stock Exchange.
      4.45 pm
      It is fair to say that the Stock Exchange, like the Department of Trade, is holding an inquiry. However, let us examine what happened in this case. I contend that it was a case of significant

      1389
      importance which was virtually unprecedented. I am glad that I carry the Secretary of State with me on that point. De Beers bought 11 per cent. of Consolidated Gold Fields and added to that furtive acquisition over the previous four months, making a 25 per cent. interest in all in the company. It would not appear on the face of it that De Beers offended any United Kingdom company law. It does not appear that the company was caught by section 28 of the 1967 Act. I shall not rehearse the provisions of that Act, but it appears that that was the case. Certainly many financial and legal commentators in the press took that view.
      Therefore, there are many unsatisfactory features about the case. First, there is the covert way in which De Beers built up the initial shareholding. Its own shareholding and that of the unnamed parties for which it had options to purchase shares were just below the 5 per cent. mark. On the face of it, it would seem that the company was not required to make disclosure under the Companies Act. Secondly, I believe that it was a thoroughly discreditable way of behaving, particularly in the case of a company with the international reputation which De Beers used to enjoy.
      I am not alone in that opinion. The case drove the chairman of the Stock Exchange, Mr. Nicholas Goodison, to Say:
      "It looks as if the intention of company law, which is that a company should be able to discover the beneficial owners of its capital, was being at least temporarily frustrated."
      It was only when the Secretary of State announced the section 172 investigation that De Beers revealed anything at all.
      Mr. Donald Anderson: Does my hon. Friend recognise a further worrying factor? Given the nature of the shareholding in Consolidated Gold Fields, where no particular shareholder has more than 5 per cent. of the holding, a less than 30 per cent. holding, in effect, may give the foreign purchaser effective control of the company.
      Mr. Davis: My hon. Friend has anticipated my next point. I need not rehearse it again; I entirely endorse his remarks.
      In the course of the operation, the fourth unsatisfactory feature was that De
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      Beers, having entered into the covert acquisition of shares, went on to mount a share raid on 12 February in a very questionable way. Indeed, it was reported in the Financial Times of 16 February:
      "The jobbers were given full details of the buying plan by brokers Rowe and Pitman at 8.30 am, and by 10 am it was all over. Between them they had bought 16·5m shares at 616p compared with a closing price of 525p on Monday and 510p last night. Clients were scaled down to around 75 per cent, but could still feel very pleased with the outcome."
      The effect of that was to exclude the vast majority of Consolidated Gold Field shareholders from the buying spree in aid of the Oppenheimer benefit fund After the completion of the order, the shares fell back considerably.
      The institutions seemed to do all right out of it. Again, I quote the Financial Times:
      "De Beers bought its shares on a first come first served basis, which inevitably meant that the institutions got the lion's share of the action. Rowe and Pitman told the four jobbers in the stock what was happening at 8.30 am. but it was not until nearly an hour later that many leading brokers heard what was goinq, on.
      For an hour and a half, the City's telephones were humming with specific, privileged, price sensitive information. It would he challenging to explain to anyone not wise in the ways of the Square Mile why this does not count as insider trading."
      Could it be said, in any circumstances, that the spirit of the take-over code, the gentlemanly arrangement for conduct, was honoured in this case? Did shareholders have sufficient evidence, facts and opinions on which to make an adequate judgment? Did they have sufficient time in which to do so? The answer must be in the negative. Anglo-American appears to have its own shady interpretation. However, I shall not enlarge upon that.
      The case illustrates yet again the need to make insider dealing a criminal offence. There is no doubt that on that Tuesday morning much specific price sensitive information was exchanged among, as the Financial Times said, "the favoured few", in pursuance of swift and certain gain.
      Mr. Tim Renton (Mid-Sussex): I have listened to the hon. Gentleman's argument with great interest. I have sympathy with many of his points. However, surely he is wrong to refer to this as "insider

      1391
      dealing", or as "price sensitive information in relation to insider dealing. I agree that, according to the available information, there was a large buyer in the market at a price well above the previous night's closing price. That is not insider dealing. It did not relate to specific developments within the company or to price sensitive information about developments within Consolidated Gold Fields.
      Mr. Davis: This issue can be dealt with the Stock Exchange. That is why I said that it was peripheral to the main issue. It is alleged that some people made use of certain specific information that was not publicly available. They did so in a way that would constitute insider dealing. I do not wish to cross swords with the hon. Gentleman. I do not think that that is a particularly important point.
      The important question is whether we can learn any lesson from the main issue involved in the case of Consolidated Gold Fields. We must decide whether it requires legislative action. As a result of, at best, somewhat dubious conduct, £100 million changed hands in about 90 minutes. The whole affair might never have been detected had Consolidated Gold Fields not kept—fortuitously perhaps—a tally of unregistered shares. That was the great safeguard. I am sure that it has helped the Secretary of State in his inquiry.
      A large part of one of our biggest companies was acquired in a piecemeal and furtive fashion. It was not unmasked until the whole deal had virtually been accomplished. The value of investigations at this stage is limited. The facts appear to be known. We need to change the law in order to ensure that it cannot be bypassed in a similar way in future.
      The law should compel parties acting together in concert to declare their position if they together hold more than 5 per cent. of a company's capital. Sir Peter Parker has pointed out that that would prevent an undesirable "mergerous intent". It is needed in the interests of a diminishing band of small investors who have been strongly encouraged by the Government. It is needed in the interest of the fair operation of the market. It is required in order to reinforce the desirability of adequate disclosure. It is
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      needed also to stop faceless parties abusing the spirit of the law. We are entitled to a positive response from the Government.
      I shall now consider the new clauses in detail. New clauses 18 and 19 propose to amend section 27 of the 1976 Act. That, of course, is restricted to companies on a recognised stock exchange. Therefore, no objection can be raised to the effect that this will encompass private companies. The precedent used in drafting the new clauses is found in section 174 of the 1948 Act. That section may be exercised only by the Secretary of State. Precedent is also established in subsection (2), which reproduces section 174(2). Subsection (4) is based on subsection (3) of the main Act. Subsection (5) reproduces section 27(5) of the 1976 Act. I hope that all hon. Members will therefore agree that the new clauses have an impeccable pedigree.
      Subsection (1) provides for failure to comply with a notice under section 27 of the 1976 Act. It entitles a company to impose the restrictions that are set out in the new clause so long as non-compliance persists. Subsection (2) deals with disqualifications relating to shares. They will apply as long as they are subject to the restrictions. Subsection (3) provides for notice of the restrictions to be sent to the person failing to comply. Subsection (4) provides for an aggrieved person to seek remedy through the courts. The court is able to make such order as it thinks fit. Subsection (5) provides for registration of the restriction, and of its lifting. Subsection (6) provides for certain consequential amendments of section 34 of the 1967 Act. Subsection (7) requires no further comment.
      New clause 19 provides severe powers with the ultimate sanction of confiscation. Again, that is based on section 174 of the 1948 Act. Subsection (1) provides that, when the Secretary of State makes an application under section 174 of the 1948 Act, the court has power—in circumstances prescribed in subsections (1)(a) and (b) and when it is also in the interests of the company that an order shall be made—to make an order to forfeit and cancel shares and debentures on such terms as it thinks fit.
      Subsection (2) provides consequential safeguards for the person whose shares

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      have been forfeited. Subsection (3) states that the Secretary of State should give notice of his intention to comply with such an order. It also provides for the period within which such notice must be given. That would have smoked out De Beers much earlier. Subsection (4) sets out certain procedural matters at the hearing of the application.
      Those are draconian sanctions. However, it is a matter of life and death to many of our leading British companies which are vulnerable to that form of colonisation. We therefore feel that this form of treatment is required.
      Mr. Anthony Nelson: Can the hon. Gentleman confirm that the amendments and new clauses do not affect the problems involved in an early morning share raid on such companies? I recognise that they seek to rectify the problem of non-registration of shares.
      Mr. Davis: That is right. The hon. Gentleman will no doubt concede that it is extremely difficult for an Opposition who have not been helped by a parliament draftsman to get all these answers right. That is why I said that it was incumbent upon the Government to make these proposals. Our proposals are not unreasonable in the circumstances. I hope that they have been reasonably drafted. However, I cannot say that they are without imperfection. I often heard that remark being made when present Ministers were in opposition.
      I hope that the Government will not say that legislative action is not required, or that there is no precedent. We are the only major trading country where this can occur on such a scale. I understand that Japan makes a distinction between domestic and foreign registered shares. That enables the Bank of Japan to lift the veil on nominee holdings. No single foreign person can acquire more than 7 per cent. of an industrial company.
      In France, if a foreign holding is thought to have passed the 20 per cent. mark, banks or brokers can be obliged to disclose the identity of their clients. In Canada and Austrailia there are similar provisions. Of course, the Securities and Exchange Commission operates in the United States. It is inconceivable that it would not intervene at an early stage. If a holding of 5 per cent. is not
      1394
      disclosed, the SEC can seek an injunction and prohibit further deals, or require the purchaser to sell the holding.
      In conclusion, I submit that this is a serious matter which requires urgent attention. There is no need to wait for the determination of the section 172 report before the Government are able to make up their mind whether there is a lacuna in the law. It is a lacuna that has been exposed in a number of cases—in the Ashbourne report and in Professor Gower's learned work on company law. It has been exposed most particularly in this case.
      5 pm
      I hope that the Minister will say that the Government are working urgently on the matter and will be proposing in another place amendments to attempt to prevent that abuse from occurring again, or at least will use their best endeavours to effect that purpose. I cannot ask for more than that.
      Mr. Nelson: The Opposition have performed a singular service in presenting the new clauses and amendments. They give us a valuable opportunity to discuss an incident that is of concern to many hon. Members. It is right that the Government should be aware of our worries and have the opportunity to respond.
      When press reports indicated that shares were being acquired in Consolidated Gold Fields, I tabled a number of questions to my right hon. Friends the Secretaries of State for Trade and for Industry to see whether there was an indication that the existing law had been infringed and whether the beneficial ownership of the shareholdings built up was known and desirable.
      My concern was quite simply this. Consolidated Gold Fields is a company with major interests in North Sea oil exploration, gold and uranium mining, road construction and transport, which can be regarded as interests of strategic as well as economic importance. Is it desirable that, within a short time, by covert means, a shareholding, and possibly an effective controlling interest, can be built up in one of the 15 largest companies in the United Kingdom? It is because of concern felt about existing voluntary and statutory regulations that seek to prevent such a situation that I

      1395
      have been moved to contribute briefly to the debate.
      Amendments Nos. 36, 37 and 38 amend clause 3 in the same way as new clauses 16 and 17 seek to amend section 52 of the Companies Act 1948 and section 33 of the Companies Act 1967 by reducing the registration period from one month to 14 days. New clause 18 enables a company to place restrictions on rights attaching to shares if they are not registered within that time, such restrictions including those on transfer, votes, scrip issues and dividends. New clause 19 enables a court to order the forfeit of shares that are not registered in time. The purchaser of the shares remains liable under the new clause for moneys payable to the company.
      There appears to be a "Catch 22" situation as the covert and partial bid for Consolidated Gold Fields was not prevented by any existing controls. Under the Companies Acts, there is a requirement for purchasers to declare interests in a company of over 5 per cent. As has been rightly pointed out by the hon. Member for Hackney, Central (Mr. Davis), it does not cover concert party purchases. The take-over panel, which has some interest and influence in the area, is also powerless in this instance, as acting in concert is only of interest to it where there is a bid in progress, where the interest built up exceeds 30 per cent. and where a bid for the whole company has to be mounted.
      There is also the serious problem of the share raid mounted on that major British company within half an hour of the opening of trading on the Stock Exchange. It must be of concern to all of us who wish to see the London Stock Exchange exemplifying the best standards of fair practice that £100 million worth of shares can be acquired—some 16·5 million shares in that major company—within half an hour on the basis of an agreement between the stockbrokers, Rowe and Pitman, and the stock jobbers. While some institutional shareholders did extremely well and others managed only to sell 25 per cent. of their holdings, there were a substantial number of small shareholders who were given no opportunity and no public notification of the likelihood of a share price of some 100p in excess of the previous day's closing
      1396
      price and the possibility of disposing of their shares in that way. I have some experience of the City and I regard that as sharp practice. I hope that that will not be taken as a compliment by the brokers and jobbers involved.
      I am in favour of the substantial relaxation of exchange control regulations announced by the Chancellor of the Exchequer. However, we should recognise that the former rule that an overseas buyer had to secure Bank of England approval when buying more than 10 per cent. of a United Kingdom company has gone by the board. Some companies have used that new freedom as a means of building up share interests in British companies which formerly would have had to be disclosed.
      Some companies in other countries, and, indeed, in this country, have tried to get round the problem by including in their articles of association a provision limiting foreign nominee shareholdings in their company to, say, 5 per cent. Presumably it is within the realms of possibility for any British company that is concerned about the Consolidated Gold Fields incident being repeated to change its articles of association to protect itself.
      However that may not be wholly desirable. It is preferable that share ownership in companies is not restricted by their own provisions but rather by the law or the proper voluntary practice of City agencies, and is therefore made to apply to all companies and all shareholders rather than a few that decide to change their articles of association.
      My concern is principally about the size of that company and the nature of its industrial and mining interests. If it is possible to acquire within a short time an effective controlling management interest in the company, it is conceivable that similar interests could be built up in other major important British public companies.
      For that reason, I asked my right hon. Friend the Secretary of State for Industry whether the interests of Consolidated Gold Fields in areas such as North Sea oil exploration fell within section 11 of the Industry Act 1975 and whether a change of control could be prohibited or prevented under section 13. I do not have a high regard for the provisions of that Act, but it is the legislation that enables the Secretary of State to try

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      to prevent changes in control or undesirable shareholdings being built up in major British manufacturing undertakings. The definition of a manufacturing undertaking in the Act probably excludes Consolidated Gold Fields in that case. However, it is interesting that my hon. Friend the Under-Secretary of State, in his reply said:
      "Section 37 (3) provides that a number of non-manufacturing activities, including transport and mining and quarrying, shall be treated as manufacturing industry so far as they relate to products manufactured or to be manufactured by the undertaking. Detailed and comprehensive information about Consolidated Gold Fields' United Kingdom activities would therefore be needed to indicate to what extent the powers in section 13 might be applicable."—[Official Report, 22 February 1980; Vol. 979, c. 359.]
      My hon. Friend, in winding up the debate, may wish to refer to the existing industrial legislation as well as that which falls within his ministerial remit.
      I am pleased with the prompt response that I obtained from my right hon. Friend the Secretary of State for Trade to my expression of concern and call for an inspector to prepare a report on this matter. It would be most unwise for the Government to accept these amendments and new clauses before they had received the full report that is being undertaken and before they had obtained the more detailed advice of the stock exchange, which is undertaking its own inquiries, together with various other interested bodies in the City.
      It is important to get changes in legislation right before they are undertaken. I hope that, in replying to the debate, my hon. Friend will be in no doubt about the concern felt by hon. Members on both sides of the House about this particular incident and our strong anxiety that the law should be changed if necessary to prevent similar situations from arising in the future.
      Mr. Anderson: We have heard a remarkably helpful speech by the hon. Member for Chichester (Mr. Nelson). It was made in an entirely non-controversial and non-partisan way. Since he made his speech in such a non-partisan spirit, I shall refrain from pointing out, as I had intended to do, that Consolidated Gold Fields contributed £20,000 to Tory Party funds and £2,000 to the Economic League. I shall abandon that section of my speech
      1398
      as a result of the hon. Gentleman's contribution.
      The hon. Gentleman has a good record in seeking to lift the lid off these creeping acquisitions, known in the City for some time before Oppenheimer eventually put up his hands in relation to this transaction. The hon. Gentleman said that there was a sharp practice by the institutions in relation to the ganging-up at the time he mentioned and the consequent loss by a number of small investors. That is one, but not the most important, aspect.
      The most important, as the hon. Gentleman conceded, is the fact that a substantial British company was in danger of being taken over by stealth. This is one of the more vulnerable companies, as my hon. Friend for Hackney, Central (Mr. Davis) pointed out. There is such a scattering of small shareholdings in this country that a holding of 25 per cent. plus gives effective control to the company that has taken it over. This could have the adverse effects on United Kingdom security to which my hon. Friend referred.
      At least the hon. Member for Chicester recognised that a problem had been revealed. We have yet to hear the response of the Minister. The immediate response made to my hon. Friend the Member for Hackney, Central hardly bodes well for a positive response by the Government to the problem revealed. That problem essentially was that Anglo-American and De Beers Consolidated Mines had bought a 25 per cent. stake and probably effective control, given the difficulties of the other shareholders in concerting a position in Consolidated Gold Fields, one of the top 15 companies in Britain, for at least £150 million. This was done, whatever the importance in our national interest terms, without anyone knowing what was going on.
      There had been three months of speculation as this creeping acquisition was taking place. Some of the press comment stated a sense of relief that the company that eventually took over, Anglo-American, represented English South African interests rather than General Mining, the Afrikaaner interest, for what that is worth. I am not sure that this has any particular relevance. A foreign company or a foreign country, with a far more sinister background, may, by means of acquisition,

      1399
      have achieved a major stake, or a stake at least, in British North Sea oil exploration and other matters of considerable importance to this country.
      5.15 pm
      This has been facilitated by the abolition of exchange control by the Government. Since last October, foreign companies and individuals are not subject to United Kingdom company law and are no longer bound to obtain Bank of England consent for the acquisition of 10 per cent. or more of a British company. One wondered, as my hon. Friend for Hackney, Central declared, whether this side effect of the abolition of exchange control had been considered and whether a whole series of other side effects of that abolition, such as the undermining of much of our tax legislation, in terms of capital transfer tax, for example, and other aspects, had been seriously considered by the Government in the great bonfire of controls orgy in which they indulged last October.
      When this point was raised with the Secretary of State by my hon. Friend the Member for Hackney, Central, the only response he received was to have a question posed to him asking whether he could indicate when, in the last four years, the Treasury had blocked a bid from a foreign company seeking to acquire a substantial shareholding in excess of 10 per cent. in a British company. One can only comment on the complacency revealed by that question in the face of the revelations made in the Consolidated Gold Fields case.
      Secondly, it indicates perhaps that the Secretary of State is not concerned at the fact that a major British company can be surreptitiously taken over in this way, with all the implications that would follow. To indicate that, even if the Secretary of State is not concerned about this problem, there is concern among other major interests, one need only quote Mr. Nicholas Goodison, chairman of the London Stock Exchange, who, according to the Financial Times on 13 February said:
      "It looks as if the intention of company law, which is that a company should be able to discover the beneficial owners of its capital, was being at least temporarily frustrated".
      The writer of the Lex column says:
      "It seems extraordinary that a company of De Beers' stature should wait until Gold
      1400
      Fields had gone to the lengths of asking the Department of Trade to conduct an inquiry before it showed its hand.
      There is a case for considering a change in the law along United States lines, making it obligatory to disclose a purchase of more than 5 per cent. of a company by an individual or a group of individuals acting together".
      That is the concert party point made by the hon. Member for Chichester. In The Times of 13 February it was reported:
      "It could have been worse. Instead of the expected emergence of Afrikaaner business interests as the big buyer of Gold Fields' shares over the last two or three months, it was the Anglo-American Corporation of South Africa—the republic's biggest mining finance house—which finally admitted yesterday that through its De Beers diamond associate, it had built up a stake of almost a quarter in the United Kingdom-owned Gold Fields group".
      I am not sure about the relevance of the phrase "It could have been worse". At least, it shows that far more sinister interests could have acquired this interest in a sensitive part of United Kingdom industry without our being able to do anything about it.
      The commentator in The Times states in that same article of 13 February:
      "The most enduring lesson of the past few weeks may not be the fact that Anglo has taken a quarter stake in a major British industrial company but the weaknesses the episode has exposed in United Kingdom company law when it conies to overseas bidders."
      The article quotes Mr. Goodison, who stated:
      "'Adequate disclosure is essential for a fair market' he added, and that is something that has been palpably lacking in Gold Fields' shares for at least the last three months. The City's self-regulatory mechanism has once again been shown up to lack real force when one side refuses to play by the spirit of the law."
      Finally, the joint managing director of Consolidated Gold Fields, Mr. David Lloyd-Jacob, was critical of the way Anglo-American had built up its stake. He said:
      "'There are implications for United Kingdom law and the protection of shareholders,' he said."
      So at least, even if the Government have not accecpted the lessons of this takeover bid, some of the leading interests in the City and some of those immediately concerned in the company realise the lacunae in the law which have been exposed. If we conclude that it is necessary to amend our company legislation,

      1401
      what better time than now since we have before us a Bill which is being mightily transformed as it proceeds? The Government will have an opportunity, if not now, at least when the Bill reaches the other place, to state their response to the problems that have been exposed.
      My right hon. Friend the Member for Hackney, Central has already largely explained the detailed considerations which prompted us to draft the clauses, the first in relation to the time obligations. New clauses 18 and 19 are based upon impeccable precedents. They arise from the problem exposed by Consolidated Gold Fields. They build on section 27 of the 1976 Act, which is restricted to companies on a recognised stock exchange. There can therefore be no objection that private companies would in any way be caught. They are aimed at nominees resident abroad, against whom the criminal sanctions of the 1976 Act are useless.
      Therefore, if a company seeks to follow the chain of its purchasers it may come eventually to a nominee resident abroad. It may reach the "Gnömische Kreditvereinbank and if that is a Swiss company, not only will it refuse to disclose who the principal is but it will claim that the inquiry is impertinent and, worse, that it is contrary to Swiss company law for it to disclose upon whose behalf it is acting. That is the reality. The chain breaks when one comes to a nominee resident abroad. Therefore, that nominee being outside our jurisdiction, there is no means of our tackling the problem unless the Government adopt proposals such as we have made in new clauses 18 and 19, which are adapted from existing United Kingdom company legislation and which build on the 1967 Act.
      My hon. Friend the Member for Hackney, Central has given the precedents upon which we have drawn. In subsection (4) of new clause 18, which refers to the ability to
      "apply to the Court and the Court may…direct that the shares shall cease to be subject to all or any of the…restrictions',
      there is a precedent there in the case of Ashbourne Investments Ltd. That provision makes the legal position clear.
      The possibility of disfranchising shares is, as the hon. Member for Chichester said, not new. It can already be written into the articles of association of companies,
      1402
      and I understand that more and more companies are doing that in any event.
      Therefore, new clause 18 would freeze the benefit in the hands of a nominee resident abroad to force him to declare who he was. If that proved insufficient one could move on to the ultimate weapon, the more Draconian provision in new clause 19 which amounts to confiscation with all the safeguards which are contained there.
      Manifestly, as is accepted by the chairman of the London Stock Exchange, self-regulation is not enough, and until the appointment of the two Department of Trade inspectors under section 172 to examine the share ownership of Consolidated Gold Fields there was no possibility of the Oppenheimer bid being revealed. There were no legal means of forcing Oppenheimer to declare himself.
      We must ask the Government, if they accept that there is a problem, how, other than through the procedures we have set out in seeking honestly to assist the Government, they will deal with it. Do they believe that they can proceed other than by building on the 1967 Act and accepting the legislative possibilities of freezing or confiscation as set out in our new clauses?
      We look to the Government for a considered reaction. We have done our best to meet the problem, and we hope that no complacency will result as there certainly appears to be no complacency among those concerned in the City, those in the company itself or, one hopes among those responsible journalists who realise the threat which could be posed to many of our major companies—perhaps sensitive companies with a strategic importance to our economy—by a form of creeping acquisition on the lines of the Oppenheimer bid. We recognise that the problem exists; the City recognises that the problem exists. We have posed a means of dealing with it, and we look to the Government to give us their considered reaction.
      5.30 pm
      Mr. Renton: I declare two interests in this matter. First, although I am not a stockbroker, I am political consultant to a firm of stockbrokers. Secondly, I declare a former interest in that I am a former employee of the Consolidated Gold Fields group.

      1403
      I followed with interest the speech of the hon. Member for Swansea, West (Mr. Anderson), but I find it slightly ironic that the Labour Party should now be up in arms about a major South African group acquiring a 25 per cent. interest in Consolidated Gold Fields. Consolidated Gold Fields is Cecil Rhodes's old company. It is the company into which he put all his stakes in South African gold mines. We should remember that it was Cecil Rhodes, along with Beit and others—as Thomas Pakenham's book reminds us—who used his money to involve the British in the Boer War.
      In recent years Consolidated Gold Fields has developed successful companies in this country dealing principally in road-making materials. A notable example is ARC. It is, however, ludicrous to suggest—and I say this with respect to my hon. Friend the Member for Chichester (Mr. Nelson)—that Consolidated Gold Fields should be regarded as a company of vital strategic importance to this country.
      Mr. Anderson: There was no attempt on my part to say that there was something specifically wrong because this was an English or Afrikaaner company from South Africa. The money might just as well have come from Arab interests or, indeed, from Soviet interests. It is a precedent and a matter of general importance. That is our point. As for strategic importance, since Consolidated Gold Fields has interests in North Sea oil and stakes in other sectors in British industry, I hope that the hon. Member will accept that that is a matter of national interest.
      Mr. Renton: I am sorry that I gave way to the hon. Gentleman. He is merely repeating his point. Consolidated Gold Fields' interest in North Sea oil is minor. It has interests in construction companies in this country which are important to it and it owns Tennants, a well-known merchant company for which I used to work, but I cannot believe that it was because of that that De Beers was interested in the company. The reason for Harry Oppenheimer's interest in acquiring this important stake in Consolidated Gold Fields was that company's interest in South African gold mines. It was for no other reason. Harry Oppenheimer was anxious to see that that important stake
      1404
      —often a minority stake—did not fall into the hands of the Afrikaans-controlled groups, notably General Mining. In a sense, therefore, it was a defensive move on the part of Mr. Oppenheimer.
      That is not to excuse the deal, but it is important to put it on the record that that was the reason for the share acquisition. Although I do not approve of the way in which this purchase was handled, it should be said that Mr. Oppenheimer has done more than any other mining magnate in South Africa to advance the cause of black labour and native management within that country's industry. He has played a notable part in helping the South African mining groups to give more realistic jobs and more responsibility to coloured people. We should remember that.
      I listened with interest to the speech of the hon. Member for Hackney, Central (Mr. Davis), and I found myself in sympathy with many of the points that he made. It is important that the announcement of a 5 per cent. holding in a United Kingdom publicly quoted company should take place immediately, whether that holding has been acquired by a foreign company or by a number of related and associated companies. The fact that in this case the holding was just under 5 per cent. in each case and that it was disbursed among a number of associated companies, was, I think, a clear breach of the intentions of company law. I have no doubt that the Minister will tell us what steps he is taking—after carefully taking note of the report of the inspector—to ensure that this loophole is plugged.
      My hon. Friend the Member for Chichester asked whether the necessity to disclose 5 per cent. holdings had gone by the board as a result of the Government having, quite rightly, lifted foreign exchange controls. I do not believe that it has gone by the board, since it is possible that if a 5 per cent. holding acquired by a foreign company is not immediately notified to the offeree company once it has been registered the offeree company could then ask for de-registration or disenfranchisement of the shares acquired by the overseas company as a result of non-registration. It is possible that the loophole could be plugged in this way, and I imagine that this is one of the aspects which my hon. Friend the Minister will consider.

      1405
      Having worked in the City before coming into politics, I am concerned that the reputation of the City should not be tarnished by this incident. I think that it is important that self-regulating mechanisms should be seen to work if we are to be content with those mechanisms. I am concerned particularly about this deal because I believe that the brokers and the jobbers involved knew for some time before February exactly what was up.
      They were aware that an overseas buyer was building up a stake well in excess of 5 per cent. and they knew who that buyer was. I feel that there was a duty on the jobbers and brokers concerned to reveal to the Stock Exchange who the overseas buyer was, and that they should have done that in discharge of their own duties as members of the Stock Exchange. I further believe that on the morning in February on which it acquired this large quantity of shares De Beers told the brokers which institutions they were to buy from. In this manner it was certainly not giving equal treatment to each shareholder in an individual class as is required by the condition laid down on page 84 of the Yellow Book issued by the Stock Exchange.
      What can we do in future? One of the provisions of the Yellow Book issued by the Stock Exchange, as stated on page 78, is that in the case of a partial offer every shareholder is to be treated pro rata. I believe that the acquisition of 25 per cent. by De Beers falls into the category of a partial offer for shares in Consolidated Gold fields. It would be much better in future—we have all adumbrated what went wrong in this instance—if we had a formula by which public tender was made for shares. This would follow the American and Canadian practice, under which it is possible to display a tender form in the press and invite shareholders to submit their shares to the offeror company. It frequently happens that offers are then scaled down. People submit their shares on tender and are finally told that because it is only a partial tender their offer has been accepted for only 30 or 40 per cent. of their shares. In that manner all shareholders of the same class are treated equally.
      Under that system we would not in future have a situation such as that in which De Beers not only indicated to its brokers the institutions from which it par-
      1406
      ticularly wanted to buy, but, conversely, the institutions which were told by the brokers that they were not the lucky ones might insist that some of their shares were taken at the favourable price or they would never do business with those brokers again. That is an example of the use of muscle by the big battalions in the City which no one in this House appreciates.
      It must be said that the period during which registration must take place-30 days—takes account of stock exchange accounting periods. It would be difficult to reduce that, as the Opposition suggest, from 30 to 14 days. The process of registration should certainly be tightened up. This is by no means the first time that a buyer has hidden his identity from the offeree company by not registering his transfers. I hope that my hon. Friend the Minister for Trade will outline a procedure for tightening up on registration within a suitable period of transfers, so that companies can know what is happening about the transfer of their shares.
      My hon. Friend the Minister for Trade has always given great attention to matters affecting the honour and reputation of the Stock Exchange, the take-over panel and the City in general, as I know from the years that I had the pleasure of working with him on, for example, the previous Companies Bill.
      Clearly the matter requires detailed consideration in order that the reputation of the Stock Exchange and the take-over panel should come out unscathed. I hope that my hon. Friend will tell us, with his customary scrupulousness, what steps he proposes to take to plug the loopholes that have been uncovered, though clearly he will have to await the inspector's report before taking action.
      Mr. Parkinson: May I say how much I preferred the approach of my hon. Friend the Member for Mid-Sussex (Mr. Renton) to this range of problems? He recognised that the Consolidated Gold Fields case had highlighted a number of problems, but he did so against the background of believing in the system and wanting to see it work better.
      The hon. Member for Hackney, Central (Mr. Davis) aired a few of his favourite prejudices—the City, foreigners and

      1407
      the colonisation of our companies. He aired his distrust of self-regulation, a distrust which was known throughout his time in Government but was not accepted by his right hon. Friend the then Secretary of State, who believed that a mixed system of regulation could be made to work. Pervading the hon. Gentleman's speech was a fundamental dislike of our system and not an anxiety to see the system improve, which is what my hon. Friend the Member for Mid-Sussex and I wish to see.
      The hon. Member for Hackney, Central was right to say that the Consolidated Gold Fields case has revealed that there may be gaps in our system of regulation and that we must look at the case carefully to see how we can eliminate some of those gaps.
      The Opposition's approach highlights the difficulties of taking precipitate action without fully thinking out the consequences. The effect of new clause 16 would be to reduce the period for delivering to the Registrar of Companies a return of allotments under section 52 of the Companies Act 1948 from one month to 14 days. The amendments to clause 33 of the Bill would similarly reduce the period for delivering to the registrar details of class rights attached to shares from one month to 14 days.
      The amendments are straightforward, but we had a little difficulty in understanding their relevance, although we had work out that they represented a peg on which the Opposition wanted to hang a debate on the Consolidated Gold Fields case. Section 52 is concerned with delivering to the registrar details of new shares alloted and has nothing to do with disclosures or transfers of shares already issued.
      5.45 pm
      There may or may not be a case for reducing the period to 14 days, but the new clause is irrelevant in the case of Consolidated Gold Fields. We want to see returns made promptly, but we do not want to impose on companies unreasonable duties to make returns. The period of one month has been in legislation, in one form or another, since section 7 of the Companies Act 1900.
      From time to time there have been suggestions about shortening the period
      1408
      and there was such a proposal in the 1973 Bill. When the previous Labour Government produced a White Paper in 1978 they specified 14 days, but when the Bill was produced in November that year the limit had been increased to one month. I do not know why that was done. Perhaps the hon. Member for Hackney, Central concluded that a month was fair after all.
      In the context of the debate on Consolidated Gold Fields the question of one month or 14 days does not matter, though perhaps the right hon. and learned Member for Warley, West (Mr. Archer) will explain when he intervenes why the Opposition have reverted to their White Paper proposals and not their Bill proposals.
      I accept that new clause 17 could be relevant to the problem that we are discussing, but it is defective and not just because of minor drafting errors. It provides that the word "person" includes a person acting alone or in concert with any other person. But that is the effect of section 33 of the 1967 Act as it stands. Of course a person comes within the section whether he is acting alone or in concert. The purpose of the new clause seems to be to aggregate the holdings of more than one person when acting in concert. We suggest that if that is the intention, it will require much more careful drafting. We recognise the effect that the hon. Member for Hackney, Central is after, but we do not think that the new clause would deal with the problem at which it is aimed.
      Leaving aside the technical defects, the purpose of the new clause is no doubt to apply section 33 to "concert parties". It seems that as concert parties are disappearing from the seaside they are reappearing in company law.
      Mr. Clinton Davis: Will they appear in the company law review that the hon. Gentleman is to undertake?
      Mr. Parkinson: It depends what sort of concert party the hon. Gentleman has in mind.
      We believe that in setting out to define a concert party the new clause is defective. A much more careful definition will have to be introduced into the law of when people are acting in concert. The words in new clause 17 are not

      1409
      sufficient. We recognise the valid objectives of the new clause and we thank the Opposition for their suggestion, but we do not believe that it would achieve the desired result.
      The Consolidated Gold Fields case has highlighted a problem. A substantial ultimate holding in a United Kingdom company has been acquired without the company being aware, or informed of, the share transactions that were taking place. It was unable to find out, until a very late stage, the identity of the new, substantial shareholder.
      A number of questions arise from that case. The first question—touched on by the hon. Member for Hackney, Central—is whether the law enables companies and the authorities adequately to identify concert parties. Can both the law and the provisions of the regulatory authorities be applied equally to United Kingdom persons and persons acting from overseas? Do new problems arise from the abolition of exchange controls? Would the existence of exchange controls have prevented the Consolidated Gold Fields case? We shall have to wait and see what facts emerge as a result of the investigation. It may be that the existence, or non-existence, of exchange controls would have been totally irrelevant in that case.
      Can there be equality of opportunity for shareholders—whether institutional or small shareholders—where a major buyer is out to make a quick, substantial purchase of shares? My hon. Friends the Members for Chichester (Mr. Nelson) and Mid-Sussex both made the problem a substantial feature of their speeches. I share entirely their view, and the view of the hon. Member for Hackney, Central. One of the most unsatisfactory features of the Consolidated Gold Fields case was the way in which the small shareholder was denied the opportunity to take part in the bid.
      As the hon. Member for Hackney, Central knows, I feel passionately that we must encourage the spread of shareholdings. I would seek to do that in every way possible. I was an enthusiastic supporter of the last Conservative Government's attempt to do that through the Finance Bills. If we are to encourage small shareholders it is absolutely vital that they have confidence in the market.
      1410
      That is probably one of the least attractive features of the Consolidated Gold Fields case.
      The final question is what action can be taken by a company, through suitable provisions in its articles, to ensure that creeping acquisition of control by unknown persons is made unattractive. Those are not new problems. The hon. Member for Hackney, Central knows that. For a while during the passage of the 1976 Act, he and I formed an unholy alliance. He was in Government and I was in Opposition, and we found ourselves in agreement on a number of matters. In that Act he reduced the level of shareholdings that needed to be reported from 10 per cent. to 5 per cent. As early as 1976 he sought to deal with some of Fields case has now highlighted, one being the problem of making sure that a company knows the identity of the person trying to acquire a substantial holding.
      The hon. Gentleman knows that both the Government and the self-regulatory authorities have the matter under permanent and continuing scrutiny. I wish to stress that, unlike the hon. Gentleman, I think that there is a substantial role for non-statutory regulation, as well as statutory regulation, in the area of securities. I use the words "non-statutory regulation" in deference to Mr. Goodison, the chairman of the Stock Exchange, who feels that that is a more accurate description than "self-regulation".
      There is a role for the Stock Exchange Council and for the Council for the Securities Industry to consider the affair from their point of view, and decide what steps they can take to improve their own arrangements. The Consolidated Gold Fields episode has raised a number of matters of legitimate concern. It is unfair of the hon. Member for Hackney, Central to say that the Department of Trade did nothing.
      Mr. Clinton Davis: I did not say that.
      Mr. ParkinsonThe hon. Gentleman did say that, but I am glad to know that he did not mean it. Within 48 hours inspectors were appointed. The Stock Exchange established an inquiry. It expressed dissatisfaction. The take-over panel is making its own investigation. There are three important bodies with a legitimate role in the affair establishing

      1411
      their own inquiries and deciding how to deal with their aspects of the problem.
      I do not understand how it can be regarded as sensible to rush into new measures which, in the time available, cannot be subjected to the consultation and scrutiny that this complex area demands. The Government, the Stock Exchange Council, and the CSI are all considering their own areas of responsibility. They will decide how they can adapt their own regulations and rules in the light of the position that has developed, and of which they are now aware as a result of the Consolidated Gold Fields case.
      The hon. Member for Hackney, Central suggested that action should be taken at this stage, and in another place. It would be unwise to do so, because we do not know the facts of the case. We may find that there was not strict compliance with the present law. That would be one position. There are sanctions available to deal with that. We may find that the law was observed, but the way in which it was observed, and the manner in which it was possible to get around the spirit of it, may give us a clue about the action that we need to take to Prevent that sort of activity in future. That is information which will become available when the inquiries have been made.
      The self-regulatory authorities will draw their conclusions. They will decide whether any changes are necessary in their arrangements. For the Government to charge in and make changes in their arrangements, in the middle of inquiries that are being treated as a matter of great urgency, would be rather foolish. We do not have a wholly statutory regulatory system. We need concerted action by the Government, the Stock Exchange Council and the CSI if we are to deal adequately with the problem. We recognise that when the results of the inquiries are known it may be necessary to take action.
      I have a long and detailed explanation of why we object to new clauses 18 and 19. There are substantial weaknesses in both clauses. The basic reason for our objection is that the matter arose three weeks ago. Urgent inquiries are taking place. The three bodies that will make changes are conducting their own inquiries. It would be foolish, at this stage, to introduce half thought out measures that
      1412
      have not been fully discussed, against a background of comparative ignorance of the facts.
      6 pm
      Mr. Clinton Davis rose—
      Mr. Parkinson: I shall give way in a moment. When the hon. Gentleman thinks about this matter I hope that he will come to the same conclusion. It is all very well to mention Ashbourne. That was a specific and small problem. As the hon. Gentleman knows, the money for the shares, the ownership of which could not be declared because of the rules of the Swiss bank, is still resting in Britain. It has never been paid over. Ashbourne made a glancing reference to this problem. Even though the Ashbourne report was available, we did not hear a word about the problem from the hon. Gentleman until the Consolidated Gold Fields case. That was what triggered off his interest.
      That is what has triggered off activity everywhere, and it is unfair of the hon. Gentleman to say "We were all aware of the problem that Ashbourne highlighted." Why did not he and his colleagues bring the matter to the Government's attention earlier? Why did not Ashbourne move him to deal with what he considers to be a major gap in our law?
      Mr. Clinton Davis: It so happens that I did make a speech about Ashbourne and Dowgate—I do not think that the hon. Gentleman was here at the time—in the early part of this Parliament. That was a somewhat irrelevant remark from him. Surely the Government do not require the Opposition to alert them to a problem. Presumably the report of the inspectors will not be available for a considerable time—months and possibly many months. In the meantime, is it not right that the precedent which has been established might be repeated and that no defensive mechanism is available in the interim? Therefore, would it not be perfectly possible for the Government to carry out their necessary consultations before the Bill reaches another place and before it completes its passage there? That is not an impossible task to fulfil. The Government have acted swiftly before in other respects. Why cannot they do so here?
      Mr. Parkinson: I do not want to repeat my speech. Obviously, the hon. Gentleman was not listening to it. By the way, I was present for his speech on Donate, and I thought that it was a disgrace. As I remember, it amounted to a personal attack on an hon. Member of this House. I would have thought that the hon. Gentleman would have been very glad to forget his performance on that occasion. The rest of us would prefer to do so.
      We believe that a thorough investigation is the right way to proceed. As I have said, three different bodies may have to change their rules and procedures to deal with the problem. We believe that considered action on the basis of knowledge, properly thought out and consulted on, is the right way to proceed, rather than to rush through half-thoughtout measures. I have already shown that in two cases the hon. Gentleman's attempt to deal with the problem is totally irrelevant. They are just examples of how ill-considered action can cause more problems than it solves.
      Mr. Anderson rose—
      Mr. Parkinson: I was just about to finish, but I shall give way.
      Mr. Anderson: The hon. Gentleman will know that we have made an honest stab at the problem in new clauses 18 and 19. Even if he cannot give a detailed reason for the rejection of the principles in those new clauses, cannot he at least do us the courtesy of showing the broad lines of the Government's unwillingness to accept them? Why does he find those two new clauses unacceptable, apart from the timing point of view?
      Mr. Parkinson: We feel that there are already substantial sanctions under section 27, and that just adding to the range of sanctions would not do very much to deal with the problem.
      Mr. Anderson: Why not?
      Mr. Parkinson: Perhaps I can remind the hon. Gentleman what those sanctions are. It is not the absence of sanctions that has caused this problem. The penalties for conviction on indictment are imprisonment for not less than two years, or a fine, or both. On summary conviction, the penalty is imprisonment for not more than six months, or a fine not exceeding £400, or both.
      Mr. Anderson rose—
      Mr. Parkinson: I am replying to the hon. Gentleman's question. The truth is that it is not the absence of sanctions which is not making section 27 work properly. Therefore, while the proposals would add to the range of sanctions, we do not believe that they would do so in a worthwhile way, because we do not believe that sanctions, or the absence of them, are the problem.
      Mr. Anderson: The Minister does not understand.
      Mr. Parkinson: I understand them perfectly, perhaps better than the hon. Gentleman, otherwise he would not have tabled the new clause in the form in which he did, or thought that in doing so he was helping to deal with the problem about which he spoke.
      Mr. Anderson rose—
      Mr. Parkinson: I shall not give way. I think that I have explained the Government's attitude. I believe that it is a reasonable attitude. I thank the Opposition for making suggestions about their approach. If I may say so, their proposals, are, not untypically, half-baked. We shall consider what has been said, and we shall deal with the problem in a satisfactory fashion.
      Mr. Peter Archer: This debate has been about the Consolidated Gold Fields case, which is what we all expected. For that reason, it is no answer for the Secretary of State to say—and in a quiet and muted way for the Minister to echo—"Well, you did nothing about it when you were in Government." From time to time events bring to light problems of which previously half the country was not aware and the other half did not believe that they constituted a serious matter. Of course, all of us knew previously that there were problems. Now, by a concrete example, we can actually see what they mean.
      Previously, we may wish to have written on the gate "Beware of the dog!", but when grandma actually gets eaten by the wolf we get round to testing the strength of the chain. Consolidated Gold Fields was a major trauma in the City, and company law can never be the same again. I think that the Opposition are entitled to say that if the Government are not impressed by the facts of Consolidated

      1415
      Gold Fields, we really do not know what will stir them into action, or what they require to instil a sense of urgency. If they are prepared to accept an indecent assault, what do they require to take action—mass rape and pillage on a Viking scale?
      It does not follow that, having been taken so completely by surprise by these facts, they had to go back to the beginning of their thinking and start again. What Consolidated Gold Fields did was to impress upon us all that the kind of matters that had been discussed in academic, administrative and City circles for quite a long time were now matters that required some action. There is a difference between saying "Now we know that action is required" and saying "Now we must go right back to the beginning of all our thinking and start again".
      This debate has been triggered by Consolidated Gold Fields, but we should not pretend that it is a totally new problem. A number of things were important about the Consolidated Gold Fields case. First, it was a take-over by De Beers, a company which already dominates the world's markets in an important commodity. It was that company which last autumn unilaterally increased the price of diamonds by about 30 per cent., and no one was in a position to intervene. Now, having swallowed diamonds, the octopus is reaching out its tentacles for gold. We all agree that this is not intended simply as an indictment of De Beers. The hon. Member for Mid-Sussex (Mr. Renton) pointed out that the company has some alleviating qualities. In many ways, it has helped to improve conditions for black labour in South Africa. I suppose that it is probably fond of good music and kind to animals. This is not an indictment of Mr. Oppenheimer. The point is that it is a lesson from which we can learn about the future. Next time it happens, it may be someone who is tone deaf and horrid to animals.
      Secondly, this happened to Consolidated Gold Fields. Again, I do not mean any disrespect to Cecil Rhodes or to the hon. Member for Mid-Sussex, but, as the hon. Member for Chichester (Mr. Nelson) pointed out, in what was a thoughtful and helpful speech—and as has been pointed out by my hon. Friends—this was one
      1416
      of the top 15 companies in the United Kingdom. That was the significant point about Consolidated Gold Fields. It was one of the top 15 companies in the United Kingdom, and the second largest gold mining company in the world. I accept the words of The Economist on 16 February:
      "After this week, can Rio Tinto-Zinc, GKN or M & S sleep sound?"
      We have heard much from Conservative Members over the last month or two about back-door nationalisation, particularly in relation to the National Enterprise Board. Metaphors about which doors we use are perhaps less important than what is visible through the window. Any measures that were taken by the National Enterprise Board were open. Everyone could see what was happening. It was explicit. The purpose behind what was done was made public, and everyone knew who was doing what, and why. Its measures were subject to challenge in the House, so there was some responsibility for what was happening. Further, when the NEB made a move, British capital took over on behalf of British people, and subject to British control, rather than foreign capital acting in its own interests. That is not chauvinist. That is not xenophobia.
      I claim to be as good an internationalist as the Minister of State. It may be that in his lifetime and mine we shall not have to talk in this manner, because the nation States of the world will have come together and seen where their interests lie. At present, nation States protect their own industries. Other nation States protect their industry, which is in competition with ours. They leave us no alternative. We cannot leave our industry unguarded. As my hon. Friend the Member for Hackney, Central (Mr. Davis) pointed out, the danger has become more insidious since the Government abolished exchange control.
      All sorts of people are at risk. It is a matter of some urgency. First, and obviously, shareholders are at risk because there is a major buyer in the market, about which they do not know. They are at risk because if a company about whose activities they have not heard acquires control of the company, decisions may be taken as to its future without regard to the interests of the existing shareholders.

      1417
      We are concerned with the small investor. I am sure that the Minister of State was not seeking to imply that only Conservative Members cared about the diffusion of property. We have been talking about it for years. I am even prepared to quote from the Communist manifesto, which said that the Commmunists had been accused of being against property. It said that they were so much in favour of it that they thought more people should own some.
      There is nothing between us on that. But we are not simply concerned with the interest of the small investor. We are also concerned about the institutional investors who carry the interests, and often the economic future, of many people who have never heard of the Stock Exchange and who have never opened the Financial Times. The practice is bad enough when it is carried out openly. It is more frightening when it is carried out by the intruder in the night. We may have differing views about concert parties, but the concert parties that I used to watch were always delighted to perform to packed houses and to be seen publicly. That is the difference in the matter with which we are now dealing.
      We are not only concerned with the shareholders. We are concerned also with the employees. Some hon. Members have had the frightening experience of talking to employees in their constituencies when something of that kind has happened. I have had two such experiences. The story builds up. There is the straw in the wind, the uneasy speculation, the vague rumour, the word of confirmation, the sudden fear, and then the panic. What is the purpose of the take-over? Will the work force be cut down? Will the new company bring in its own employees and sack the existing employees? Is it its intention to acquire the company's know-how and then to close it down and move the assembly to another place? What will become of the employees? They have a real interest.
      6.15 pm
      The hon. Member for Chichester pointed out that the reputation of the Stock Exchange is in jeopardy, and in turn, therefore, the reputation of the City of London. Invisible earnings are brought about by the reputation of the Stock
      1418
      Exchange, and hon. Members who know something about international arbitrations know how important that reputation is. It is, therefore, a matter in which the public have an interest, and in which the Government should have an interest.
      We need some controls to deal with such situations when they arise. But it goes further than that. Those situations are less likely to arise if controls exist. The existence of controls, even when they are not used, is likely to change the whole climate. They are not only weapons for use against people who behave in a certain manner. They will have a healthy deterrent effect. There may be no need to act upon the powers once they exist.
      It would be possible to exchange debating points with the Minister of State about new clauses 16 and 17. We could exchange views on draftmanship, and the legislative history of the matter. I am not sure that it would profit either of us, and I do not propose to enter into that debate. However, I am concerned about his views on new clauses 18 and 19.
      As my hon. Friend the Member for Swansea, East (Mr. Anderson) pointed out, we have gone to some trouble to face up to the problems, and to suggest solutions that we thought would hold together. All that the Minister of State has said so far is that we already have sanctions. But they are sanctions for the controls that already exist. The one essential difference between what we suggest and the controls that exist is that the existing controls necessarily bite on companies and people who are within the criminal jurisdiction of our courts. How are we to have controls with sanctions that will prevent the insidious creeping in of foreign capital? We accept that there may be genuine problems that are worth debating.
      We should like to have known the Government's proposals. In a nutshell, they are that we should wait until the result of the inquiry. After the inquiry the self-regulatory authorities may take their own action. That is a matter for them, but a combination of self-regulatory authorities and a self-satisfied Government will not begin to solve the problems. The Government's proposal is that we should then re-examine the matter and consult at some unspecified time. When the

      1419
      Lord President of the Council and the Leader of the House of Commons can slot in another Bill, we may have an opportunity to deal with it. Heaven knows when that will be.
      Mr. Parkinson rose—
      Mr. Archer: Before I give way, I should like to pose a question, so that the hon. Gentleman may have an opportunity of answering it. The hon. Gentleman is not listening, so there is no point in my posing the question.
      What is it about the problem with which we are confronted that the Government do not know? There may be facts about the Consolidated Gold Fields case which will emerge from the inquiry, but what is it about the problem that the Government do not know at present?
      Mr. Parkinson: I apologise to the right hon. and learned Gentleman. My hon. Friend made an interesting and slightly flattering comment about him, so I was distracted for a reason of which I think he would approve.
      We believe that there are strong sanctions available now. Under sections 172, 173 and 174, the Department of Trade has the right to make a range of orders dealing with shares. We feel that, as the right hon. and learned Gentleman says, Consolidated Gold Fields has introduced a new element into the whole debate. We want to concert our actions with the actions of the other two bodies that have a responsibility in this matter, and it will take a little time to do that. There is no reason for the right hon. and learned Gentleman's suggestion that it will be years and years away. As he knows, we shall be legislating fairly regularly on company law. That will include the next Session and, I am quite sure, the Session after that. There will be opportunities, therefore, and these problems will be dealt with.
      Mr. Archer: My feeling of déjà vu, which has emerged from time to time during these debates, has emerged again, I fear, for two reasons. The first is that the argument that the hon. Gentleman has just used is precisely the one that he used earlier. I suspect that we are going round in circles. Secondly, he is saying "We shall do it in the future and it will
      1420
      not be all that long." But we hear that said frequently, and those who advise us on company matters always come back and say "That is what we were promised last time."
      The new element in Consolidated Gold Fields is the one that I tried to identify—the insidious infiltration of foreign capital. That, it seems to me, is not dealt with by the existing controls and the existing sanctions.
      Suppose that the hon. Gentleman had said "The Bill has not completed all its stages yet. There will be discussions in another place. We shall be happy to discuss it with you and to see whether there is something that we could inject into the Bill at this stage, although it may not be the whole of your new clauses Nos. 18 and 19." Had he said something of that sort, we would have been responsive, but he has said nothing of the kind. He has told us that there is no hope of producing any kind of action in this Bill. In those circumstances, we have no alternative but to try to secure that action by dividing the House.
      I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 18

      AMENDMENT TO COMPANIES ACT 1976 (No. 1)
      'After section 27 of the Companies Act 1976 there shall be inserted the following section—
      "27A.—(1) If a person fails to comply with a notice under the foregoing section the company may by order direct that the shares in respect of which the notice was served shall, until that person complies with the notice or further order, be subject to the restrictions imposed by this section.
      (2) So long as any shares are directed to he subject to the restrictions imposed by this section—

      (a) Any transfer of those shares, or in the case of unissued shares any transfer of the right to be issued therewith and any issue thereof, shall be void;

      (b) No voting right shall be exercisable in respect of those shares;

      (c) No further shares shall be issued in right of those shares or in pursuance of any offer made to the holder thereof;

      (d) Except in a liquidaton, no payment shall be made of any sum due from the company on those shares, whether in respect of capital or otherwise.

      (3) Where a company makes an order directing that shares shall be subject to the said restrictions the company shall forthwith give notice in writing thereof to the person whose failure to comply with a notice under the foregoing section led to the making of the order; such notice shall be deemed to be duly given by being sent by prepaid first class post to the last known address of that person.
      (4) Where a company makes an order directing that shares shall be subject to the said restrictions, or refuses to make an order directing shares shall cease to be subject thereto, any person aggrieved thereby may apply to the Court and the Court may, if it sees fit, direct that the shares shall cease to be subject to all or any of the said restrictions in whole or in part on such terms as the Court thinks fit.
      (5) Whenever an order is made in respect of shares comprised in relevant share capital of the company under this section or under section 174 of the Act of 1948 (power of the Secretary of State to impose restrictions on shares or debentures) the company shall be under an obligation to inscribe against the name of the member in whose name those shares are registered in a separate part of the register kept by it under section 34 of the Act of 1967
      (Register of Interests in Voting Shares) the fact that the restrictions were imposed, the date on which they were imposed and, where appropriate, the date on which they were lifted.
      (6) Subsections (2) to (9) of the said section 34 (which relates to the manner in which the register is to be made up and provide for public inspection of the register) shall apply in relation to the part of the register referred to in subsection (5) above as they apply in relation to the remainder of the register, and as if reference to subsection (1) of that section included references to subsection (5) above.
      (7) In this section 'relevant share capital' has the same meaning as in section 33 of the Act of 1967 and 'the court' means any court having jurisdiction to wind up the company." '.—[Mr. Archer.]
      Brought up, and read the First time.
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 150, Noes 193.

    New Clause 26

      CONDUCT OF DIRECTORS OF COMPANIES
      '(1) A director of a company shall observe the utmost good faith towards the company in any transaction with in or on its behalf and shall act honestly in the exercise of the powers and the discharge of the duties of his office.
      (2) A director of a company shall not make use of any money or other property of the company, or of any information acquired by him by virtue of his position as a director or other officer of the company, to gain directly or indirectly an improper advantage for himself at the expense of the company.
      (3) A director of a company who, by any breach of subsections (1) and (2) above, makes a profit or inflicts any damage on the company shall be liable to account to the company for the profit or to compensate it for the damage.
      (4) This section is without prejudice to any other provision of the Companies Acts and to any rule of law with respect to the duties or liabilities of directors.'.—[Mr. Archer.]
      Brought up, and read the First time.
      Mr. Archer: I beg to move, That the clause be read a Second time.
      This new clause is about the duties that directors owe to the company. It is not the first time during the passage of the Bill that we have discussed the subject. Lest it should be said "We discussed this in Committee and it was rejected" I shall give the House a little of the legislative history of the matter.
      It is true that in Committee we debated an Opposition new clause on this subject. It is also true that the Government opposed it. Perhaps predictably, when the Committee voted it voted for the view of the Government and rejected the view of the Opposition. We were not wholly shattered by that.
      What is at issue today is not what we discussed in Committee. In Committee we sought to codify the duties of directors to the company. That debate was largely about the merits of the codification as such.
      If I may be permitted to paraphrase their argument, the Government asked, since we cannot completely summarise the duties of directors and can never totally eliminate the necessity to refer to case law, why we should attempt to codify these duties. If one cannot replace case law, why not forget the whole exercise? The House will not be surprised to hear that there are a number of answers
      1426
      to that argument. We attempted to ventilate them in Committee, but I apprehend that I would probably be out of order if I attempted to do that now, because those arguments are not part of this debate.
      What happened in the course of debate in Committee was that I ventured to tease the Minister of State. I said that his party, when in Government in 1973, had introduced something similar in a Bill which never reached the statute book. He replied that that was different, that it was not an attempt at codification. He said:
      "we set out a statement of principles, which was different from the attempt in clause 44 actually to codify."—[Official Report, Standing Committee A, 11 December 1979; c. 651.]
      Therefore, according to the Minister, what the Conservatives did in 1973 was an attempt to summarise the existing law in principle, leaving those who wished to look up the law to refer to case law as well. We went back to the Bill of 1973 and our new clause—I make no apology for plagiarism—is simply a restatement, word for word, of the Conservatives' attempt.
      I hate to spring this on the Under-Secretary if he has not been forewarned, but if he intends to use the same arguments as the Minister used in Committee I must tell him that they will not apply, because, on the Minister's own argument, what we were trying to do in Committee was quite different. What we are trying to do now is to set out a statement of the principles.
      This is not an attempt to deal with the duties which a director may owe to a company in relation to reasonable skill and care. I cannot help feeling that that is a pity, although this clause represents my draftsmanship. In Committee we had a new clause on this subject. It became submerged in the debate about our other new clause relating to fiduciary obligation, but possibly that was my fault. Perhaps at some later time we shall return to the debate on the duty of care and skill and how it can be defined. I commend to the House an excellent article on this subject in the Law Society's Gazette of 9 January 1980. I give notice to the Under-Secretary that when we debate this matter at some future date I shall draw on that article.
      However, that is not the subject of the new clause. This clause relates not

      1427
      to care and skill and professional qualifications, but to honesty. In a recent article in The Times Miss Clare Watson drew a distinction between the duties of directors in relation to care and skill in management and fiduciary duties. She said:
      "It has long been felt that a statement of the basic principles underlying the relationship between a company and its directors would be useful both to members' company boards and others concerned with business management. Such general statements of principle appear in several Commonwealth and American Acts, and it was recommended by the Jenkins committee that such a formula be incorporated into English law."
      For the benefit of the Under-Secretary, that was properly pointed out to me in Committee by the Minister of State. When I drew on Jenkins, he said "But Jenkins did not argue for a code. Jenkins argued for a statement of principle". Tonight we are debating a statement of principle.
      The new clause deals with the fiduciary duties of trustees. It may be that I shall be held to blame if, at the outset, I use a number of technical terms. Lawyers are bound to do so in debates of this kind, particularly on company law. However, I hope that we shall not get bogged down, as we have done in some debates, purely on the vocabulary, although that is one of the snares.
      Professor Gower thinks that the description of directors as trustees is misleading, so I would not want to use the expression "trustees". In Committee on the Companies Bill 1978, Conservative Members objected to the word "fiduciary". They said that it was borrowed from insurance law; that it entailed a duty of complete disclosure; that when talking about the duties of a director to a company, questions arise about those to whom he has to make his disclosure and about what he has to disclose; and was it not therefore misleading to use the word "fiduciary"? We would not go to the stake on that. However, courts in the United States have not shrunk from the use of that word or concept. They have glossed the Securities Exchange Act 1934 and said that directors owe a ficudiary duty to their companies. That there is a duty of this kind is, I should think, generally agreed. I cannot believe that will be between us.
      1428
      We all know that the Jenkins committee objected to the narrowness of the duty. It underlined that it was owed to the company—cases such as Percival v Wright underline that again—not to the shareholders, and that shareholders and other individuals have no opportunity of enforcing it. That is a different matter, and it would be a pity if that were confused with the other issues in the debate.
      The Government have belatedly, but happily, made some inroads into that problem, because we have the insider provisions, which we shall debate in due course. The Jenkins committee said that, given that there is this duty of honesty and that it is owed to the company, it would be helpful if we could extract the basic principles from the case law and embody them in legislation.
      I turn to Profesor Gower's work on the subject. Any praise from me would be superfluous and perhaps an impertinence, because it is the work to which we almost all automatically turn. He said that in this area there were basically four duties which the courts had spelt out in the case law. First, there is the duty of good faith. Not only must there be no conscious dishonesty, but the director must not use his position to take some kind of advantage for himself, even if he does so without consciously turning his mind to any dishonest intention at the time. I shall return to that matter later.
      Secondly, the director must exercise his powers for the purpose for which they were conferred. We dealt with that in Committee. We have not attempted to set out that duty in the clause, and I shall not take up more time with it now. Thirdly, the director must ensure that there is no conflict between his duty and his interest. Fourthly, the director must exercise his discretion for the purpose for which it was conferred.
      For the purpose of the new clause we have concentrated only on the first of those duties—the duty to act bona fide. That duty seems to go wider than the duty not to act dishonestly. The case quoted by Professor Gower—I am sure the Under-Secretary will be familiar with it—is in re W & M Roith Ltd., reported in Weekly Law Reports 1967. That was a case where a director, in order to protect his widow after his death, entered into a service agreement with the company, an agreement which was somewhat

      1429
      advantageous to him and to those who would be left behind on his death. It was found as a fact that he did that without any conscious attempt to be dishonest, but the court said that he was in breach of his duty because he was using his position as a director to obtain a benefit for himself which, I suppose I could say, pace Professor Gower, is the kind of duty that a trustee owes to his beneficiaries.
      6.45 pm
      That is all that we are trying to spell out in the new clause. It is a modest proposal. It is an attempt to restate the existing law. If the Government take the view that it does not accurately restate the existing law, we are prepared to listen to them. But if it is an accurate restatement of the law, is it not helpful to find the essentials of the law—not all the details, not all the nuances, but the essential principles—in one place rather than in a multiplicity of precedents? Would not that be helpful to those who have to work with the law, to those who have to advise on the law and to company secretaries and others who have to operate the law?
      In the lectures on jurisprudence to which we listened as students—and which some of us inflicted on students at later stages in our careers—we asked how far the law should be flexible and how far it should be predictable. In so far as it is one, it cannot easily be the other. If it can adapt itself to particular problems as they arise, to that extent it is not predictable. We have had examples recently —I shall not name names—of judicial decisions which were somewhat unpredictable because the judges were attempting, as they saw it, to be flexible. I say no more than that. As long as these matters are enshrined in case law it is possible for some court at some stage, taking into account the facts of a particular case, to overrule the precedents. If it is enshrined in statute law, that cannot happen. We take the view that that degree of predictability in company law is a blessing and a help to all those who have to operate it.
      We believe, with Jenkins, that it is better for everyone if directors know what their obligations are, and if company secretaries, shareholders, creditors and all those who have to deal with directors know what they are entitled to expect
      1430
      from directors. We are comforted with the thought that the Government, in a previous incarnation, took that view, because it was incorporated in their 1978 Bill. If they have undergone a subsequent change of heart, may we at least be privy to their mental processes so that we know how that change of heart came about? If they were persuaded by it, perhaps we shall be persuaded, too.
      In Committee, in another context, I said that directors were essentially professional people. In other professions it is accepted that there are standards of care, skill and professional probity. I am not suggesting that company directors, as a group, are less careful, less skilful or less honest than other groups. But, if so, why not recognise it, so that those directors who practise these standards will be able to see that others do not fall short of them and that they are not taken for a ride? Those who deal with directors should have a simple, concise statement of principle on what they are entitled to expect. This is only the beginning, because it relates only to duties in one area. Essentially, that is what the clause is about.
      The Under-Secretary of State for Trade (Mr. Reginald Eyre): The feature that I find attractive about the right hon. and learned Member for Warley, West (Mr. Archer) is that he demonstrates a quality which I think is prevailent in the West Midlands. It is a quality that I like to think I share, although perhaps to a lesser degree—namely, a preparedness to learn from past mistakes. The right hon. and learned Gentleman set out rather strongly—perhaps a little proudly—the simple fact that he acknowledged the fault of striving for impossible success with codification. He was prepared to move on—perhaps a little too triumphantly—having produced a statement of basic principles.
      Mr. Archer: I thank the hon. Gentleman for his opening words. However, I must correct him in one respect. The Opposition are not acknowledging any fault on this occasion. We are merely recognising the realities of the vote.
      Mr. Eyre: I thought that intellectually the right hon. and learned Gentleman indicated a degree of reservation about the possibility of achieving codification in the full and intellectually satisfying sense.

      1431
      The right hon. and learned Gentleman was rather pleased that he had produced a statement of basic principles. There are severe difficulties and drawbacks in what he has proposed, which I shall seek to explain.
      The new clause appears to have the effect of setting duties on a director in terms of conflict of interest in a concise form. The formulation was first presented to the House in the previous Conservative Administration's Companies Bill, which came before the House in 1973. I do not dissent from the history that the right hon. and learned Gentleman described. As he said, the formulation flowed directly from the Jenkins report of 1962, which suggested that statute law should state what it saw to be two primary obligations on directors: that a company director should observe the utmost good faith towards the company in any transaction, and that he should not use company property or information gained by virtue of his office to gain an improper advantage for himself at the company's expense.
      The clause, which I have considered as favourably as possible, represents a change of tack on the Opposition's part. I hope that the right hon. and learned Gentleman will forgive me if I review his party's record in the same way as he reviewed the Conservative Party's record. When in power, and during the consideration of the Bill in Committee, the Opposition proposed the codification of directors' duties. Their proposal achieved neither a comprehensive statement nor clarification of the continuing role of case law. We are now being asked to consider a partial listing of duties. The clause appears to be intended as a general provision rather than an amendment of the existing law, but it seems to add something, because the two duties in subsections (1) and (2) are stated not to delegate from any existing duties.
      I address my observations to the right hon. and learned Gentleman and the hon. Member for Hackney, Central (Mr. Davis)—they are both lawyers—with great respect and great seriousness, because I know that they wish to act responsibly. We cannot be sure of the effect in law of the clause until it is tested in the courts. I
      1432
      cannot see any merit in creating uncertainty. It would not be sufficient for a director to abide by the terms of the new clause—I am sure that the right hon. and learned Gentleman will agree with this—as there are other common law duties that he might break. For example, the clause has nothing to say—the right hon. and learned Gentleman acknowledged this—about directors' duties of care and skill.
      Mr. John Smith: So what?
      Mr. Eyre: The right hon. Member for Lanarkshire, North (Mr. Smith) says "So what?". That is an important issue in approaching the concept of directors' duties.
      The right hon. and learned Gentleman made a fair debating point when he argued that the Government should find no difficulty in supporting what was originally a Conservative proposal. I am happy to say that I was not personally involved in the earlier debates. I have brought an uncommitted mind to bear upon the subject.
      On further examination, I find that the effect of the clause on directors' duties is doubtful. We take the view that it is unlikely to be possible, as the Law Society said last year, to find words that define in advance the circumstances in which the duties are to apply without a serious risk that they will be found to impose a duty when it should not be imposed, or to relax a duty when it should not be relaxed.
      When the Bill is enacted, the law on conflicts of interest in part IV and on insider dealing by directors in part V will have been tightened considerably. The clauses on those subjects leave little doubt about the high standards that are expected of directors in their dealings with their companies.
      Mr. Clinton Davis: The hon. Gentleman has said that the clause would have to be tested in the courts. I thought that he found that a useful argument to adduce when we debated clause 26 in Committee. He said:
      "We shall have to see how it works in practice and to see whether a case can then be established for the wider operation of the clause or, perhaps, for its improvement in some material respect."

      1433
      Does the hon. Gentleman recall the words of the right hon. Member for Crosby (Sir G. Page), who paraphrased his argument by saying:
      "What he is really saying is 'Let us legislate by litigation and not by Act of Parliament. Leave it to the litigants, prosecutors and directors to write the law for us in front of the judges'".—[Official Report, Standing Committee A, 15 November 1979; c. 215.]
      How does the hon. Gentleman equate the two postures he has adopted?
      Mr. Eyre: The hon. Gentleman has to set my argument in the context of the general principle advanced by the right hon. and learned Gentleman when introducing the clause. The right hon. and learned Gentleman said that he was trying to help directors—an agreeable aim—by setting out a simple statement of an aspect of their duties. I must emphasise that the clause does not do that. Indeed, it could end up by being misleading. In trying to make such a statement the right hon. and learned Gentleman will appreciate that there is a great deal of common law governing these matters that is not included. Therefore, there are many other factors that could apply that govern the duties of directors. Those factors are not included in this statement and, therefore, it would not be helpful in the way that is desired.
      I was referring to the very high standard that is expected of directors in their dealings with their companies, as exemplified by the changes that we are making in the law in the Bill.
      Mr. Clinton Davis: I did not ask the hon. Gentleman about that. He has answered a totally different question. I asked him how he justified the assertion that he made not long ago that there must be objection to the clause because it would have to be tested in the courts, when that is precisely what he was arguing should be done in relation to clause 26.
      Mr. Eyre: At various stages in legislation all law that is established may necessarily and eventually have to be tested in the courts. However, the purpose of the new clause is to obtain simplification and to assist directors by explaining them what their duties are. I emphasise that that purpose cannot be effected by the clause. I have tried to emphasise that, with the improvements brought about in the Bill, the Government prefer
      1434
      the approach of setting out specific rules in particular areas rather than floating vague general statements which may or may not be declaratory of the underlying provisions of the common law, which are already complete and operative.
      7 pm
      There are two particular defects in the new clause to which I should like to refer. They illustrate the strength of the practical reservations that I have expressed. First, subsection (3) does not go as far as the common law, because it restricts itself to the restitution of profits—I hope that the right hon. and learned Member for Warley, West will pay attention to that matter, as I should like to know how it helps to simplify the explanation that is to be given to directors, which is one of the virtues that he claimed for the clause—made or damages incurred at the expense of the company. The case of Phipps v. Boardman in 1966 showed that the company could lawfully claim the profits made by directors abusing their position, even if such profits could not have been made by the company. I hope that the right hon. and learned Gentleman will consider that matter.
      Therefore, the effect of the clause is unclear. It could be intended to reverse or qualify the ruling in Phipps v. Boardman or it might be taken to be still valid. The right hon. and learned Gentleman referred to the case of W. & M. Roith Ltd., in which the director, with the aim or protecting a widow's interest, entered into a service agreement which was in breach of his duty. However, if we look at the provisions of the Bill and the duty of disclosure about agreements, we see that that sort of possible abuse becomes much less likely.
      I turn to a point which relates to the right hon. and learned Gentleman's exhortation to observe the utmost good faith towards the company. That expression is well understood in insurance law, where it implies a duty to disclose material facts. Although the phrase has a certain literary appeal as a general expression—it was obviously attractive to the right hon. and learned Gentleman—I emphasise that its effect in company law is much less well known. To the Government's knowledge, the phrase is unheard of, and therefore its legal meaning in this context is unknown. Therefore, it establishes an element of further doubt.

      1435
      For those practical reasons, I advise the House that the clause—the right hon. and learned Gentleman did not remind the House that it was rejected by the Opposition last year—is misguided. I recognise at once the good purpose of the right hon. and learned Gentleman in trying to achieve simple and clear terms for the benefit and guidance of directors on the principles with which they should discharge their duties. However, for the practical reasons that I have tried to explain, the clause would have a misleading effect and it would not be beneficial. I advise the House to reject the clause.
      Mr. Bob Cryer: I have listened to the Minister with a good deal of interest. I thought that he wriggled a good deal during the course of his remarks. We legislate to prevent abuse and the Minister may well argue that there is only a tiny minority involved in that abuse. I should like to draw the Minister's attention to an area where I believe that the new clause would materially assist.
      As he says, clause 4 of the Bill will improve matters—I hope that that is the case. On the other hand, I see everything in favour of a general statement of the position and the Minister has not persuaded me that that would be otiose or redundant if it were added to the Bill. Indeed, the notion that the phrase "utmost good faith" is unknown in company law is at complete variance with his suggestion that law has to be clarified in the courts. We know that, and we know that if new law is passed which has no precedent, there may come a time when it will be tried in courts. On the other hand, we also know that, when legislation is passed by the Palace of Westminster, that law is frequently followed for many years without challenge in the courts by virtue of the fact that it puts something in writing which people believe should be followed.
      This sort of clause would be a helpful guide to directors. Many directors carry out such ideas anyway, but we are talking—hopefully—about a minority who do not. I should like to draw attention to some of the examples that have been brought forward to the House by the Department of Trade, in which the duty of good faith and the duty to disclose material facts have not always been upper-
      1436
      most in directors' minds. The new clause might not have dissuaded those directors but I should have thought that it would have been a factor that might well have inhibited certain actions and have caused a different form of action to be taken.
      I refer particularly to the Lonrho report which was carried out at great expense by the Department of Trade. It is interesting that the new clause was included in the then Conservative Government's Companies Bill 1973. At that period of time, the Lonrho affair was being brought to public attention and was a focus of action in the courts. I shall refer to two or three persons but, first, I should like to refer to Mr. Butcher, the finance director, about whom the report said:
      "A Board of directors looks to its finance director to inform it fully and fairly upon the financial aspect of the matters upon which it must reach a decision and upon the group's position generally. It is apparent from much of the evidence set out in our report that Mr. Butcher failed to discharge his duty to the Board in this respect. In relation to Nyaschere, the Duncan Sandys' consultancy agreement and Wankel he either withheld information from the Board or allowed the Board to be misled. These were not casual acts of omission but deliberate decisions to withhold information or mislead and we condemn his conduct in this respect."
      That is a clear condemnation. Incidentally, nothing has happened to compensate the company for any damage that it suffered or any action that was taken. It may well be that Mr. Butcher, when faced with an explicit statement of his position such as that contained in the new clause, would not have embarked upon his course of conduct.
      Paragraphs 12.109 and 12.110 of the report stated:
      "As director responsible for the financial administration of the group it was Mr. Butcher's duty to bring these matters to the attention of the Lonrho Board. He did not do so and without any such disclosure he acquiesced in the use of the group's funds in Rhodesia for the development of the Shamrocke mine partly for the benefit of Mr. Rowland and the family trusts established for Mr. Ball and Mr. Ogilvy. He allowed the group's funds to be used for this purpose on a basis that in our view was unduly favourable to Mr. Rowland and to the family trusts established for Mr. Ball and Mr. Ogilvy.
      It is our view that in relation to Nyaschere Mr. Butcher put his loyalty to Mr. Rowland above his responsibility to the company, its shareholders and its Board of directors and that he failed to fulfil his duty to them."
      The Minister has said that there is a clear common law duty on directors.

      1437
      However, that duty was not upheld by Mr. Butcher in his activities as financial director. He was not concerned in a lowly back-street company that was struggling to keep its head above water. He was the financial director of a massive international conglomerate that had household names on the board of directors. The company was regarded as gilt-edged, if not touched by Royal blessing. Indeed, Mr. Ogilvy quickly disappeared from the board once these issues had become public knowledge.
      The Government say that directors are busy people. They cannot necessarily find time to look up common law provisions to see whether their judgment on a conflict of interest is in conformity with a particular judicial decision. They do not know about the ratio decidendi. They cannot distinguish the ratio decidendi from the biter dicta. They cannot, therefore, decide about fine points of law. That is the advantage of statute law. It is enshrined in only two or three volumes. Hopefully, it may be enshrined in only one volume.
      The new clause gives a summary of the position. The director can readily turn to it for guidance. The Department of Trade's report on the Lonrho incident is interesting. Several non-executive directors are praised. Those directors put forward their views. They drew attention to some of the actions that the inspectors held had been wrongly carried out by the majority on the board of directors. That board was led by "Tiny" Rowland.
      Surely this new clause would help directors. It ensures that other directors do not carry the board through force of personality. The Department of Trade had reported other cases. If the Minister looks at the Peachey report, he will find that the inspectors repeatedly point out that the board had been carried along by the strong personality of Eric Miller. I shall point out later how strong the views of "Tiny" Rowland were. It would be quite handy if directors could say that the position is set down in several Acts of Parliament. It would be helpful if they had a conduct guide and a summary of the position. Such a summary would help directors to assess their judgments.
      7.15 pm
      The report refers to Mr. Sandys, now Lord Duncan-Sandys. The Minister must
      1438
      realise that the Lonrho affair is now gathering dust on the shelves. People's memories do not store such nuggets of information for ever. No doubt, several people are happy that the mists of time have gathered round those activities. However, there will be more scandals. No doubt the Department of Trade has reports in the pipeline. The ordinary person in the street feels that there is one standard of conduct for him, and another for directors. They cannot quibble about a standard of care or a standard of duty. They have to perform their functions with the devotion and diligence that is expected. Why should that not apply to directors? The Lonrho affair is an example of such dual standards.
      In paragraph 7·68, the report states:
      "On the evidence set out above, we believe that Mr Sandys was offered £130,000 compensation because that was the sum that Mr. Sandys indicated to Mr. Butcher he would require to tempt him to accepting the Chairmanship; we believe that Mr. Rowland together with Mr. Ball and Mr. Butcher concealed the matter from the remainder of the Board because they believed that the Board would not accept Mr. Sandys as Chairman if they knew about the arrangement to pay him £130,000."
      A group of people were, therefore, busy lining their pockets with vast sums of money. The current headline concerning the man who won £960,000 on the pools looks rather insignificant when compared with the vast sums that were involved in Lonrho. The directors plotted together to ensure that others in the company did not discover that Duncan Sandys would become chairman only if he received £130,000.
      In paragraph 774 the inspectors made that clear. It states:
      "It is manifest from the evidence that we have set out above that one section of the Board deliberately withheld information about Mr. Sandys' compensation payment from the rest of the Board because they knew that Mr. Sandys would not be appointed Chairman if the information were disclosed. Mr. Rowland, Mr. Ball and Mr. Butcher were responsible for this policy of concealment. During the course of 1972 Mr. Sandys came to know that Sir Basil Smallpeice and Mr. du Cann were unaware of the compensation arrangement. He was happy that Mr. du Cann should know about the compensation arrangement but not that Sir Basil should know about it. Thus during 1972 five directors became aware of the arrangement, Mr. Rowland, Mr. Ball, Mr. Butcher, Mr. du Cann and, of course, Mr. Sandys himself. These five directors together with two of the executive directors appointed in May 1972 were the seven directors who

      1439
      supported Mr. Rowland during the course of the Boardroom dispute."
      They were involved in a conspiracy. According to that statement, they were not loyal to the company, but to the board. They conspired to gain supremacy in an internal struggle.
      It was not disclosed that significant sums of money were being spent on "Tiny" Rowland's house. The sum of £75,000 was spent. The cost of furnishings amounted to £225,000. That was a financial duty not to the company, but to "Tiny" Rowland. They worked together for their own improvement. They did not work for the improvement of the company. During the squabble, few directors were prepared to criticise such action. Indeed, this unseemly squabble only came into the public eye by chance. The new clause sets out some idea of a set of rules. The new clause states:
      "A director of a company shall observe the utmost good faith towards the company in any transaction with in or on its behalf and shall act honestly in the exercise of the powers and the discharge of the duties of his office."
      If any of those five directors had read that, they could not have made a serious claim to honesty. They had concealed information and payments of massive sums. They had made personal payments and had provided perquisites.
      About £320,000 was turned into a loan, when "Tiny" Rowland overdrew his expenses. The clause is a useful guide for directors, to try to avoid the unseemly and degenerate squabble that took place on the Lonrho board.
      Mr. Clinton Davis: I believe that my hon. Friend will agree that virtually all these personalities who appear in the reports—Dowgate, Ashbourne, Lonhro and Peachey—could hardly have advanced the entirety of their cause had they not been able to rely on acquiescent, compliant professional advisers and secondary advisers.
      Mr. Cryer: That is right, and they come in for their fair share of criticism. Whenever I could, I introduced debates on the various companies. We had a useful and informative debate on Lonrho, to which my hon. Friend replied, and such criticisms were made then.
      If anyone has the guts to stand up to these people and say that they are wrong,
      1440
      it will help them to have a piece of paper —an Act of Parliament—with a rough statement of the duties that they have towards the company and shareholders rather than to their own pockets. We are talking of controlling the greed of certain people who run companies, which they turn into a Santa Claus for lining their pockets. It would be a great help to everyone to see that the Government are taking action. However, since the Minister rejects the clause, I doubt whether we shall have action.
      Mr. Parkinson: Perhaps the hon. Gentleman would not like the Bill to get in the way of a speech that he has made about three times. However, if he looks at part IV of the Bill, he will see carefully defined a series of crimes and offences against these companies, which covers many of the problems that he mentions. We believe that that is a much better way to deal with the problem than by general declarations set out in the new clause.
      Mr. Cryer: I do not believe that the Minister was here when I specifically referred to part IV. I said that some of the problems would unquestionably be covered, but that it was no bad thing to have a general declaration. It was the Conservative Party that introduced such a clause in the 1973 Bill. Perhaps the Minister should consider whether he has heard the entire speech before intervening.
      All the reports that my hon. Friend mentions refer to strong personalities. It would not be a bad idea to have a rough guide, without the complications of part IV, which could be placed above the board room table on a little revolving pedestal to remind people what they are about.
      I wish to demonstrate the kind of person whom we are dealing with. On page 655 of the Lonrho report Mr. Rowland is asked about shares by an inspector, who is an impartial, objective person carrying out a difficult task. He replies:
      "You see, Mr. Heyman, the past, and I have got an idea what the future could be depending on whether you want to kill it. But, by God, it has got one thing, and that is it has got a protector and that is me. In other words, anybody who want to kill that company has got to have a sub-machine gun, mortars, guns all sort of ammunition, because I am going to protect it to the bitter end. Believe me, Mr. Heyman, in me you have got somebody you have got to fight when it comes to Lonrho."

      1441
      That is an extraordinary collection of words from a senior director of an international conglomerate. He refers to submachine guns and ammunition. That reflects the nature of a man with a fiery temper, who doubtless tried to obstruct and demean anyone who tried to stand in his way. He is not alone.
      It would he useful for directors to have a rough guide, as Mr Rowland reaches for a sub-machine gun from under the table. They could then remind him, before he starts pressing the trigger, of the limitation in the clause. [Interruption.]
      Hon. Members are laughing at the imagery. It was not conjured up by me but by "Tiny" Rowland when speaking to an inspector, instructed by the Secretary of State for Trade, investigating the company. That inspector had the hallmark of Parliament, through the Secretary of State being accountable to this House. It is an outlandish image, but was said seriously and incorporated in the report.
      In companies there are people with varying degrees of power who, with varying degrees of force, might use it wrongly, mischieviously, badly or greedily. They may only be a minority. Hopefully, the majority act in utmost good faith. We should not need legislation if everyone acted in good faith, but we have legislation because of the danger of the minority acting badly and without good faith. The clause would be a useful guide to encourage those people to act in good faith.
      Mr. Nicholas Baker: I apologise for not being present at the beginning of the debate. I had not intended to speak in the debate, but having heard the hon. Member for Keighley (Mr. Cryer), for whose talents, particularly in looking at legal documents, I have the greatest respect, I feel that he has gone astray a little and that I must take up what he said. The hon. Gentleman said that the clause would be a helpful guide to directors in their conduct. In Committee I strongly maintained that it was not the job of company law to try to tell directors how to manage a company, and the clause does no such thing. It is not a guide, and I do not believe that it should be. It purports to lay down legal principles, responsibilities and duties for
      1442
      directors. The hon. Gentleman gave away his argument by saying that the clause would not have persuaded directors not to do that which they should not have done, and I agree.
      Mr. Cryer: I said that it might not have persuaded them. I did not say that it would not. We simply do not know. I argued that it was a useful guide which might have prevented the events in Lonrho.
      Mr. Baker: It might or might not. We have legal principles which set out standards, duties and responsibilities for directors. The clause covers little that does not already exist in law. At one time I was sympathetic to a clause of this type. It seems, however, to have one fundamental flaw, on which my hon. Friend may have touched in his comments at the opening of the debate. That flaw is to require the standard of "utmost good faith". That would make it very difficult for anyone to act as a director of more than one company. It would be very difficult for anyone to act as a director for a company at all.
      7.30 pm
      The phrase "utmost good faith" comes from insurance law. It requires a complete disclosure of every possible conceivable fact. It is based on the principle that there is only one insurance contract between the insurer and the insurance company, but that is not necessarily the case. Many directors are directors of many companies. Some people believe that that is undesirable in itself, but I understand that that does not include the hon. Member for Keighley, who believes, as I do, that non-executive directors have a role to play. In their conduct of the management of companies they often bring an objective standard into play. In the case to which the hon. Gentleman referred, there is some evidence that the non-executive directors did just that.
      Acceptance of the clause would probably not add anything to the law, but it would certainly discourage non-executive directors. Fundamentally, what the hon. Gentleman is getting at is how to dissuade directors from wrong-doing. I believe that the only way to do that is to provide penalties which are clearly laid down and which do not prevent

      1443
      necessary, perfectly trustworthy and respectable directors from doing their duty. That, to a large extent, is what is done by the later clauses.
      Mr. John Smith: I shall not pursue at this moment some of the remarks made by the hon. Member for Dorset, North (Mr. Baker). I shall, however, return to them, because I disagree fundamentally with what he has stated as being the duties of directors under the present law and his surprising redefinition of them.
      The House will be grateful to my hon. Friend the Member for Keighley (Mr. Cryer) for bringing some practical argument to what might otherwise have been an arid debate on certain aspects of a technical Bill. My hon. Friend, as he often does, brought a touch of Technicolor and a feeling of reality to our discussions. He rightly reminded us of some of the problems in this area. It is too easy for hon. Members, particularly those on the Government Benches, to laugh at these matters and to say that they are best forgotten. Their former leader described the ugly and unacceptable face of capitalism. I do not know whether there is still the same concern in the Conservative Party about having an acceptable face of capitalism.
      I do not dispute that part IV contains some improvements. By pressure, inside and outside the House, we have gently pushed the Conservative Party towards a better sense of its responsibility. If one is to run a capitalist system, one has to clean out the stables from time to time. That is what successive Companies Bills have been about.
      I found the Under-Secretary of State's reply unconvincing. He had a difficulty. He could not say that what was contained in the new clause was not a proper statement of a director's duties. He did not attempt that. He conceded that it was a proper statement of those duties. But the hon. Gentleman was in the difficulty, as my right hon. and learned Friend the Member for Warley, West (Mr. Archer), who so competently introduced the new clause, said, that the 1973 Bill of the then Conservative Government contained these very words—not an adaptation of them, or an amendment or reference to them but the same words which, on that
      1444
      occasion, purported to be a statement of law. They are now used in this new clause.
      The Under-Secretary had the option of saying that the Government in 1973 had wrongly stated the law. He found difficulty, I believe, in coming to that conclusion. Those advising him were probably advising the relevant Minister in 1973 and perhaps experienced equal difficulty. I am sure that they advised myself and Labour Ministers on the same matter.
      Some of the difficulties supposed to exist about codification did not appear to exist at the time when the former Government introduced codification of the duties of directors. There did not seem to be all these technical difficulties that have been found in the course of preparing the brief for the Minister's speech today. Let us accept that it accurately states the law.
      I was worried about one point raised by the Under-Secretary. He said that there was the difficult case of Phipps v. Boardman in 1966. I thought that it might be a problem if the law has changed and that it might be better to withdraw the new clause and think again. But if the 1966 case affects the statement of the law here, it was signally forgotten in 1973 when the then Conservative Government drafted their statement of what they thought the law was.
      I cannot see the 1966 case as a discouragement to myself or to my right hon. and learned Friend. In that situation, the Under-Secretary of State must accept that it is a proper statement of the law as it stands.
      I was further alarmed when the hon. Member for Dorset, North (Mr. Baker) said "What is all this nonsense about utmost good faith? That is just a concept that applies to the law of insurance and the contract uberrima fidei appertaining to insurance." I am surprised that the hon. Gentleman should take that view. I understand that he is a solicitor specialising in commercial and company law. He will no doubt be familiar with Gower's book "The Principles of Modern Company Law", which, on page 575, says:
      "Directors, once their appointments take effect, are fiduciaries and must therefore display the utmost good faith towards the company in their dealings with it or on its behalf".

      1445
      I had thought that to be the law, and it is confirmed by Gower to be the law. It is a little surprising that a solicitor specialising in commercial and company law is not aware of it. It is a little surprising if he is advising his clients in that regard. There is all the more need for a clear statement of the law, because one cannot rely on solicitors to advise people on it.
      Mr. Nicholas Baker: The debate has become a little personal. I hesitate to do this when the Minister, I know, is taking advice from Professor Gower. I believe that that statement is not generally accepted as a complete and accurate statement of company law.
      Mr. Smith: The hon. Gentleman is a bold man to make such statements in the face of convincing evidence. There are others, apart from myself, who have been aware for years that this was one of the duties of directors under company law. It is so axiomatic that when it is challenged it takes my breath away. It underlines the point that solicitors from time to time should perhaps read the text books on company law. Some of them might obtain advantage by being asked for assertions about what the law is in Acts of Parliament. It is alarming that such misconceptions exist. I believe that the hon. Gentleman is wrong. It does accurately state the law. Why on earth should it not be put in the Bill?
      The Under-Secretary of State points to the problem of codification. The Labour Government tried to codify all the duties of directors. There might be argument over whether there should be codification. I am personally in favour of codifying the law as much as possible. I believe that Acts of Parliament should not be quarries delved into by lawyers but clear statements of the law that can be understood by everyone in the community. There is a great deal to be said for codification from that point of view. But that argument is not very useful to the Secretary of State on this occasion, because we are not attempting to codify in that way. The Opposition have accepted that we lost that battle in Committee, and we see little point in rehearsing it here. We are now on a different tack. The Under-Secretary must find an argument to show why a clear statement
      1446
      of the principal and simple duties of a director should not appear in an Act of Parliament.
      Our proposal does not involve difficulties about care, skill or anything like that. It simply seeks to state what the law is and to stress the honesty that is required of directors of companies and the obligation of utmost good faith. I should have thought that that was the paramount duty of directors, and that must be so since they are entrusted with handling other people's money and with responsibilities to the whole community. That should be at the forefront of their attention, and I see every good reason for this provision being written into the Bill.
      The Under-Secretary said repeatedly that it would not be helpful to make the change, and that it might in some way be misleading. I cannot see how it would be misleading to have the law stated clearly in the relevant Act of Parliament. He asked why we did not seek to state all the other duties. That is another Aunt Sally. Everyone who makes one good proposal is asked why he did not make five others. We are being modest on this occasion in putting fiduciary duties first. We can write other duties in on other occasions.
      I got the impression from the Under-Secretary's speech that a great deal of thought had gone into the preparation of his brief. No doubt he gave it a great deal of thought himself, because he had the unenviable task of trying to argue against a compelling and convincing case, trapped as he was by the precedents of a previous Conservative Government. He was therefore unable to pick over the drafting with the arguments that are available to all Ministers. No legislation is ever drafted perfectly. If it were, the courts would not now be so busily engaged in interpreting the products of this place.
      It must surely be conceded that of all the duties of directors, the one concerned in the clause is paramount. I therefore hope that the House will agree to the clause. If the Government seek to resist it, we think that it is sufficiently important to force to a vote.
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 132,Noes 178.

      Division No. 199]

      AYES

      [6.20 pm

      Anderson, Donald

      Flannery, Martin

      Marshall, David (Gl'sgow,Shettles'n)

      Archer, Rt Hon Peter

      Fletcher, L. R. (Ilkeston)

      Marshall, Dr Edmund (Goole)

      Armstrong, Rt Hon Ernest

      Fletcher, Ted (Darlington)

      Mason, Rt Hon Roy

      Ashley, Rt Hon Jack

      Ford, Ben

      Maxton, John

      Atkinson, Norman (H'gey, Tott'ham)

      Forrester, John

      Maynard, Miss Joan

      Beith, A. J.

      Foulkes, George

      Mikardo Ian

      Bidwell, Sydney

      Freud, Clement

      Miller, Dr M. S. (East Kilbride)

      Booth, Rt Hon Albert

      Garrett, John (Norwich S)

      Morris, Rt Hon Alfred (Wythenshawe)

      Boothroyd, Miss Betty

      Garrett, W. E. (Wallsend)

      Morris, Rt Hon Charles (Openshaw)

      Bottomley, Rt Hon Arthur (M'brough)

      Golding, John

      Morris, Rt Hon John (Aberavon)

      Bradley, Tom

      Gourlay, Harry

      Morton, George

      Bray, Dr Jeremy

      Graham, Ted

      Newens, Stanley

      Brown, Hugh D. (Provan)

      Grant, John (Islington C)

      Oakes, Rt Hon Gordon

      Buchan, Norman

      Grimond, Rt Hon J.

      O'Halloran, Michael

      Callaghan, Rt Hon J. (Cardiff SE)

      Hamilton, James (Bothwell)

      O'Neill, Martin

      Callaghan, Jim (Middleton & P)

      Hamilton, W. W. (Central Fife)

      Orme, Rt Hon Stanley

      Campbell-Savours, Dale

      Harrison, Rt Hon Walter

      Owen, Rt Hon Dr David

      Carmichael, Neil

      Hart, Rt Hon Dame Judith

      Palmer, Arthur

      Cartwright, John

      Haynes, Frank

      Parry, Robert

      Clark, Dr David (South Shields)

      Healey, Rt Hon Denis

      Powell, Raymond (Ogmore)

      Cocks, Rt Hon Michael (Bristol S)

      Hogg, Norman (E Dunbartonshire)

      Prescott, John

      Coleman, Donald

      Holland, Stuart (L'beth, Vauxhall)

      Price, Christopher (Lewlsham West)

      Craigen, J. M. (Glasgow, Maryhill)

      Home Robertson, John

      Radice, Giles

      Crowther, J. S.

      Hooley, Frank

      Roberts, Albert (Normanton)

      Cryer, Bob

      Howell, Rt Hon Denis (B'ham, Sm H)

      Roberts, Ernest (Hackney North)

      Cunningham, Dr John (Whitehaven)

      Howells, Geraint

      Rodgers, Rt Hon William

      Dalyell, Tam

      Hughes, Robert (Aberdeen North)

      Rooker, J. W.

      Davis, Clinton (Hackney Central)

      Jay, Rt Hon Douglas

      Ross, Stephen (Isle of Wight)

      Dean, Joseph (Leeds West)

      John, Brynmor

      Sandelson, Neville

      Dempsey, James

      Jones, Rt Hon Alec (Rhondda)

      Sever, John

      Dixon, Donald

      Jones, Barry (East Flint)

      Sheerman, Barry

      Dobson, Frank

      Kinnock, Neil

      Smith, Rt Hon J. (North Lanarkshire)

      Dormand, Jack

      Lamond, James

      Soley, Clive

      Douglas, Dick

      Leadbitter, Ted

      Stailard, A. W.

      Dubs, Alfred

      Lewis, Ron (Carlisle)

      Steel, Rt Hon David

      Duffy, A. E. P.

      Litherland, Robert

      Stewart, Rt Hon Donald (W IsIes)

      Dunn, James A. (Liverpool, Kirkdale)

      Lofthouse, Geoffrey

      Stott, Roger

      Dunwoody, Mrs Gwyneth

      Lyons, Edward (Bradford West)

      Strang, Gavin

      Eadie, Alex

      McDonald, Dr Oonagh

      Taylor, Mrs Ann (Bolton West)

      Eastham, Ken

      McElhone, Frank

      Thomas, Dafydd (Merioneth)

      Edwards, Robert (Wolv SE)

      McKay, Allen (Penistone)

      Thomas, Mike (Newcastle East)

      Ellis, Raymond (NE Derbyshire)

      McKelvey, William

      Thome, Stan (Preston South)

      English, Michael

      Maclennan, Robert

      Tinn, James

      Evans, John (Newton)

      McMillan, Tom (Glasgow, Central)

      Torney, Tom

      Faulds, Andrew

      McNamara, Kevin

      Wainwright, Edwin (Dearne Valley)

      Field, Frank

      Marks, Kenneth

      Wainwright, Richard (Colne Valley)

      Fitch, Alan

      Watkins, David

      Whitlock, William

      Young, David (Bolton East)

      Weetch, Ken

      Willey, Rt Hon Frederick

      Welsh, Michael

      Wilson, William (Coventry SE)

      TELLERS FOR THE AYES:

      White, Frank R. (Bury & Radcliffe)

      Woolmer, Kenneth

      Mr. Terry Davis and

      White, James (Glasgow, Pollok)

      Wrigglesworth, Ian

      Mr. Hugh McCartney.

      NOES

      Alexander, Richard

      Grieve, Percy

      Page, John (Harrow, West)

      Ancram, Michael

      Griffiths, Peter (Portsmouth N)

      Page, Rt Hon Sir R. Graham

      Arnold, Tom

      Grist, Ian

      Page, Richard (SW Hertfordshire)

      Aspinwall, Jack

      Grylls, Michael

      Parkinson, Cecil

      Atkins, Robert (Preston North)

      Gummer, John Selwyn

      Parris, Matthew

      Atkinson, David (B'mouth, East)

      Hamilton, Hon Archie (Eps'm&Ew'll)

      Patten, Christopher (Bath)

      Baker, Nicholas (North Dorset)

      Hannam, John

      Patten, John (Oxford)

      Bell, Sir Ronald

      Haselhurst, Alan

      Porter, George

      Bendall, Vivian

      Hawkins, Paul

      Powell, Rt Hon J. Enoch (S Down)

      Benyon, Thomas (Abingdon)

      Hayhoe, Barney

      Prentice, Rt Hon Reg

      Benyon, W. (Buckingham)

      Henderson, Barry

      Price, David (Eastleigh)

      Berry, Hon Anthony

      Heseltine, Rt Hon Michael

      Raison, Timothy

      Best, Keith

      Hicks, Robert

      Rathbone, Tim

      Bevan, David Gilroy

      Hill, James

      Rees-Davies, W. R.

      Biffen, Rt Hon John

      Holland, Philip (Carlton)

      Renton, Tim

      Biggs-Davison, John

      Hunt, David (Wirral)

      Rhodes James, Robert

      Blackburn, John

      Irving, Charles (Cheltenham)

      Rhys Williams, Sir Brandon

      Boscawon, Hon Robert

      Jenkin, Rt Hon Patrick

      Ross, Wm. (Londonderry)

      Braine, Sir Bernard

      Jessel, Toby

      Royle, Sir Anthony

      Bright, Graham

      Jopling, Rt Hon Michael

      Sainsbury, Hon Timothy

      Brinton, Tim

      Kaberry, Sir Donald

      St. John-Stevas, Rt Hon Norman

      Brocklebank-Fowler, Christopher

      Kellett-Bowman, Mrs Elaine

      Scott, Nicholas

      Brotherton, Michael

      Kitson, Sir Timothy

      Shelton, William (Streatham)

      Brown, Michael (Brigg & Sc'thorpe)

      Knox, David

      Shepherd, Colin (Hereford)

      Browne, John (Winchester)

      Lang,Ian

      Sims, Roger

      Bryan, Sir Paul

      Latham, Michael

      Skeet, T. H. H.

      Lawrence, Ivan

      Speed, Keith

      Buchanan-Smith, Hon Alick

      Lee, John

      Speller, Tony

      Buck, Antony

      Le Marchant, Spencer

      Spence, John

      Bulmer, Esmond

      Lennox-Boyd, Hon Mark

      Spicer, Jim (West Dorset)

      Burden, F. A.

      Lester, Jim (Beeston)

      Squire, Robin

      Butcher, John

      Lewis, Kenneth (Rutland)

      Stainton, Keith

      Cadbury, Jocelyn

      Lloyd, Ian (Havant & Waterloo)

      Steen, Anthony

      Carlisle, John (Luton West)

      Lloyd, Peter (Fareham)

      Stevens, Martin

      Carlisle, Kenneth (Lincoln)

      Loveridge, John

      Stewart, Ian (Hitchin)

      Chalker, Mrs Lynda

      Luce, Richard

      Stewart, John (East Renfrewshire)

      Chapman, Sydney

      Lyell, Nicholas

      Stradling Thomas, J.

      Clark, Hon Alan (Plymouth, Sutton)

      McCusker, H.

      Tapsell, Peter

      Clark, Sir William (Croydon South)

      Macfarlane, Neil

      Thomas, Rt Hon Peter (Hendon S)

      Clarke, Kenneth (Rushcliffe)

      MacGregor, John

      Thompson, Donald

      Clegg, Sir Walter

      MacKay, John (Argyll)

      Thorne, Neil (llford South)

      Cockeram, Eric

      McNair-Wilson, Michael (Newbury)

      Thornton, Malcolm

      Cranborne, Viscount

      McQuarrie, Albert

      Townend, John (Bridlington)

      Critchley, Julian

      Major, John

      Townsend, Cyril D. (Bexleyheath)

      Crouch, David

      Marlow, Tony

      Waddington, David

      Dickens, Geoffrey

      Mates, Michael

      Wakeham, John

      Dorrell, Stephen

      Mather, Carol

      Waldegrave, Hon William

      Douglas-Hamilton, Lord James

      Maude, Rt Hon Angus

      Walker, Rt Hon Peter (Worcester)

      Dover, Denshore

      Mawby, Ray

      Walker-Smith, Rt Hon Sir Derek

      Dunn, Robert (Dartford)

      Mawhinney, Dr Brian

      Waller, Gary

      Dykes, Hugh

      Meyer, Sir Anthony

      Ward, John

      Elliott, Sir William

      Mills, Iain (Meriden)

      Watson, John

      Eyre, Reginald

      Mills, Peter (West Devon)

      Wells, John (Maidstone)

      Fairgrieve, Russell

      Mlscampbell, Norman

      Wells, Bowen (Hert'rd & Stev'nage)

      Fisher, Sir Nigel

      Moate, Roger

      Wheeler, John

      Fletcher, Alexander (Edinburgh N)

      Molyneaux, James

      Wickenden, Keith

      Fletcher-Cooke, Charles

      Morrison, Hon Peter (City of Chester)

      Wiggin, Jerry

      Forman, Nigel

      Murphy, Christopher

      Wilkinson, John

      Fowler, Rt Hon Norman

      Myles, David

      Williams, Delwyn (Montgomery)

      Fox, Marcus

      Neale, Gerrard

      Winterton, Nicholas

      Galbraith, Hon T. G. D.

      Needham, Richard

      Wolfson, Mark

      Garel-Jones, Tristan

      Nelson, Anthony

      Young, Sir George (Acton)

      Goodlad, Alastalr

      Neubert, Michael

      Gorst, John

      Newton, Tony

      TELLERS FOR THE NOES:

      Gower, Sir Raymond

      Nott, Rt Hon John

      Mr. John Cope and

      Gray, Hamish

      Osborn, John

      Mr. Peter Brooke.

      Question accordingly negatived.

      Division No. 200]

      AYES

      [7.42 pm

      Alton, David

      Fletcher, Ted (Darlington)

      Morton, George

      Anderson, Donald

      Ford, Ben

      Newens, Stanley

      Archer, Rt Hon Peter

      Forrester, John

      O'Halloran, Michael

      Armstrong, Rt Hon Ernest

      Foulkes, George

      O'Neill, Martin

      Ashley, Rt Hon Jack

      Freud, Clement

      Owen, Rt Hon Dr David

      Ashton, Joe

      Garrett, John (Norwich S)

      Palmer, Arthur

      Bidwell, Sydney

      Garrett, W. E. (Wallsend)

      Parry, Robert

      Booth, Rt Hon Albert

      Golding, John

      Powell, Raymond (Ogmore)

      Boothroyd, Miss Betty

      Gourlay, Harry

      Prescott, John

      Bray, Dr Jeremy

      Graham, Ted

      Price, Christopher (Lewisham West)

      Brown, Hugh D. (Provan)

      Grant, John (Islington C)

      Radice, Giles

      Brown, Ronald W. (Hackney S)

      Grimond, Rt Hon J.

      Roberts, Albert (Normanton)

      Callaghan, Jim (Middleton & P)

      Hamilton, W. W. (Central Fife)

      Roberts, Ernest (Hackney North)

      Campbell-Savours, Dale

      Harrison, Rt Hon Walter

      Rodgers, Rt Hon William

      Carmichael, Neil

      Hart, Rt Hon Dame Judith

      Rooker, J. W.

      Cartwright, John

      Haynes, Frank

      Sever, John

      Clark, Dr David (South Shields)

      Hogg, Norman (E Dunbartonshire)

      Sheerman, Barry

      Cocks, Rt Hon Michael (Bristol S)

      Home Robertson, John

      Soley, Clive

      Coleman, Donald

      Hooley, Frank

      Stallard, A. W.

      Conlan, Bernard

      Howell, Rt Hon Denis (B'ham, Sm H)

      Stewart, Rt Hon Donald (W Isles)

      Craigen, J. M. (Glasgow, Maryhill)

      Hughes, Robert (Aberdeen North)

      Stolt, Roger

      Crowther, J. S.

      Jay, Rt Hon Douglas

      Strang, Gavin

      Cryer, Bob

      John, Brynmor

      Taylor, Mrs Ann (Bolton West)

      Cunningham, Dr John (Whitehaven)

      Jones, Rt Hon Alec (Rhondda)

      Thomas, Dafydd (Merioneth)

      Dalyell, Tarn

      Jones, Barry (East Flint)

      Thomas, Mike (Newcastle East)

      Davis, Clinton (Hackney Central)

      Lamond, James

      Thorne, Stan (Preston South)

      Davis, Terry (B'rm'ham, Stechford)

      Leadbitter, Ted

      Tinn, James

      Dean, Joseph (Leeds West)

      Lewis, Ron (Carlisle)

      Torney, Tom

      Dempsey, James

      Litherland, Robert

      Wainwright, Edwin (Dearne Valley)

      Dixon, Donald

      Lofthouse, Geoffrey

      Watkins, David

      Dormand,jack

      Lyon, Alexander (York)

      Weetch, Ken

      Douglas, Dick

      McDonald, Dr Oonagh

      Welsh, Michael

      Dubs, Alfred

      McElhone, Frank

      White, Frank R. (Bury & Radcliffe)

      Duffy, A. E. P.

      McKay, Allen (Penistone)

      White, James (Glasgow, pollok)

      Dunn, James A. (Liverpool, Kirkdale)

      McKelvey, William

      Whitlock, William

      Eadie, Alex

      Maclennan, Robert

      Willey, Rt Hon Frederick

      Eastham, Ken

      McMillan, Tom (Glasgow, Central)

      Williams, Sir Thomas (Warrington)

      Edwards, Robert (Wolv SE)

      Marks, Kenneth

      Wilson, William (Coventry SE)

      Ellis, Raymond (NE Derbyshire)

      Marshall, David (Gl'sgow.Shettles'n)

      Woolmer, Kenneth

      English, Michael

      Marshall, Dr Edmund (Goole)

      Wrigglesworth, Ian

      Faulds, Andrew

      Maxton, John

      Young, David (Bolton East)

      Field, Frank

      Maynard, Miss Joan

      Fitch, Alan

      Morris, Rt Hon Alfred (Wythenshawe)

      TELLERS FOR THE AYES:

      Fitt, Gerard

      Morris, Rt Hon Charles (Openshaw)

      Mr. James Hamilton and

      Flannery, Martin

      Morris, Rt Hon John (Aberavon)

      Mr. Hugh McCartney.

      Fletcher, L. R. (Ilkeston)

      NOES

      Alexander, Richard

      Clark, Sir William (Croydon South)

      Grylls, Michael

      Ancram, Michael

      Clarke, Kenneth (Rushcliffe)

      Gummer, John Selwyn

      Arnold, Tom

      Clegg, Sir Walter

      Hamilton, Hon Archie (Eps'm&Ew'll)

      Aspinwall, Jack

      Cockeram, Eric

      Hannam, John

      Atkins, Robert (Preston North)

      Cope, John

      Haselhurst, Alan

      Atkinson, David (B'mouth, East)

      Critchley, Julian

      Hawkins, Paul

      Baker, Nicholas (North Dorset)

      Crouch, David

      Hayhoe, Barney

      Bell, Sir Ronald

      Dickens, Geoffrey

      Heddle, John

      Bendall, Vivian

      Dorrell, Stephen

      Henderson, Barry

      Benyon, Thomas (Abingdon)

      Dover, Denshore

      Hicks, Robert

      Benyon, W. (Buckingham)

      Dunn, Robert (Dartford)

      Holland, Philip (Carlton)

      Berry, Hon Anthony

      Dykes, Hugh

      Hunt, David (Wirral)

      Best, Keith

      Elliott, Sir William

      Jenkin, Rt Hon Patrick

      Biggs-Davison, John

      Eyre, Reginald

      Jessel, Toby

      Blackburn, John

      Fairgrieve, Russell

      Jopling, Rt Hon Michael

      Boscawen, Hon Robert

      Fisher, Sir Nigel

      Kaberry, Sir Donald

      Boyson, Dr Rhodes

      Fletcher, Alexander (Edinburgh N)

      Kitson, Sir Timothy

      Braine, Sir Bernard

      Fletcher-Cooke, Charles

      Knight, Mrs Jill

      Bright, Graham

      Fookes, Miss Janet

      Knox, David

      Brinton, Tim

      Forman, Nigel

      Lang, Ian

      Brocklebank-Fowler, Christopher

      Fowler, Rt Hon Norman

      Latham, Michael

      Brown, Michael (Brigg & Sc'thorpe)

      Fox, Marcus

      Lawrence, Ivan

      Buchanan-Smith, Hon Alick

      Galbraith, Hon T. G. D.

      Lawson, Nigel

      Burden, F. A.

      Gardiner, George (Reigate)

      Lee, John

      Butcher, John

      Garel-Jones, Tristan

      Le Marchant, Spencer

      Carlisle, John (Luton West)

      Goodlad, Alastair

      Lennox-Boyd, Hon Mark

      Carlisle, Kenneth (Lincoln)

      Gorst, John

      Lester, Jim (Beeston)

      Carlisle, Rt Hon Mark (Runcorn)

      Gray, Hamish

      Lloyd, Ian (Havant & Waterloo)

      Chalker, Mrs Lynda

      Grieve, Percy

      Lloyd, Peter (Fareham)

      Chapman, Sydney

      Griffiths, Peter (Portsmouth N)

      Loveridge, John

      Clark, Hon Alan (Plymouth, Sutton)

      Grist, Ian

      Luce, Richard

      1448

      1449

      Lyell, Nicholas

      Parris, Matthew

      Tapsell, Peter

      Macfarlane, Neil

      Patten, Christopher (Bath)

      Thomas, Rt Hon Peter (Hendon S)

      MacGregor, John

      Patten, John (Oxford)

      Thompson, Donald

      MacKay, John (Argyll)

      Pattie, Geoffrey

      Thorne, Neil (llford South)

      McNair-Wilson, Michael (Newbury)

      Porter, George

      Thornton, Malcolm

      McQuarrie, Albert

      Price, David (Eastleigh)

      Townend, John (Bridlington)

      Major, John

      Raison, Timothy

      Townsend, Cyril D. (Bexleyheath)

      Marlow, Tony

      Rathbone, Tim

      Trippier, David

      Mates, Michael

      Rees-Davies, W. R.

      Trotter, Neville

      Mather, Carol

      Ronton, Tim

      Waddington, David

      Maude, Rt Hon Angus

      Rhodes James, Robert

      Wakeham, John

      Mawby, Ray

      Rhys Williams, Sir Brandon

      Waldegrave, Hon William

      Mawhinney, Dr Brian

      Ross, Wm. (Londonderry)

      Walker-Smith, Rt Hon Sir Derek

      Meyer, Sir Anthony

      Royle, Sir Anthony

      Waller, Gary

      Miller, Hal (Bromsgrove & Redditch)

      Sainsbury, Hon Timothy

      Ward, John

      Mills, Iain (Meriden)

      St. John-Stevas, Rt Hon Norman

      Watson, John

      Moate, Roger

      Scott, Nicholas

      Wells, John (Maidstone)

      Morrison, Hon Peter (City of Chester)

      Shepherd, Colin (Hereford)

      Wells, Bowen (Hert'rd & Stev'nage)

      Murphy, Christopher Myles, David

      Sims, Roger

      Wheeler, John

      Neale, Gerrard

      Skeet, T. H. H.

      Wickenden, Keith

      Needham, Richard

      Speed, Keith

      Wiggin, Jerry

      Nelson, Anthony

      Speller, Tony

      Williams, Delwyn (Montgomery)

      Neubert, Michael

      Spence, John

      Winterton, Nicholas

      Newton, Tony

      Spicer, Jim (West Dorset)

      Wolfson, Mark

      Nott, Rt Hon John

      Stainton, Keith

      Young, Sir George (Acton)

      Osborn, John

      Steen, Anthony

      Page, John (Harrow, West)

      Stevens, Martin

      TELLERS FOR THE NOES:

      Page, Rt Hon Sir R. Graham

      Stewart, John (East Renfrewshire)

      Mr. Peter Brooke and

      Page, Richard (SW Hertfordshire)

      Stradling Thomas, J.

      Lord James Douglas-Hamilton.

      Parkinson, Cecil

      Question accordingly negatived.

    New Clause 27

      TWO-TIER BOARDS AND EMPLOYEE DIRECTORS
      '(1) A company employing two thousand or more employees shall establish a supervisory board and a management board in accordance with the Code of Practices set out in Schedule (Code of Practice) to this Act.
      (2) The members of a supervisory board and of a management board established pursuant to subsection (1) above shall have the same powers, duties and liabilities as any other director of a company.'.—[Mr. Radice.]
      Brought up, and read the First time.
      Mr. Giles Radice: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker (Mr. Bryant Godman Irvine): With new clause 27 it will be convenient to take amendment No. 343, which proposes to insert a new schedule:

      'CODE OF PRACTICE
      1. Trade unions representing 30 per cent. or more of the employees in a company specified in subsection (1) of section (Two-tier Boards and employee directors) may require at any time a ballot of all employees as to whether they wish to elect employee directors on to a supervisory board directly responsible for the policy of the company which meets the minimum criteria of the provisions set out in this Schedule.
      2. If a simple majority (representing at least one third of all eligible employees voting in the ballot), supports the proposition set out
      1450
      in paragraph 1 of this Schedule negotiations to give effect to the proposition within this Code of Practice shall take place.
      3. In the event of negotiations proving unsuccessful after 12 months, a further ballot shall take place and in the event of the proposition receiving the requisite support as set out in paragraph 4 of this Schedule the Secretary of State shall impose a scheme which meets the minimum criteria provided for in this Schedule.
      4. The ballot provided for in paragraph 3 shall not be effective unless a two thirds majority in favour of the proposition is achieved, representing at least one half of all eligible employees.
      5. The minimum criteria referred to in paragraph 3 of this Schedule shall be as follows:

      (a) all employees shall be entitled to vote in any ballot;

      (b) the system adopted for employee representation on the supervisory board shall require those operating it to ensure that all significant groups of employees are adequately represented at board level;

      (c) the employee directors shall have not more than one half of the seats on the supervisory board;

      (d) the precise structure and powers of the board shall be within the scope of negotiations but shall have the following minimum powers;

      (i) the right and duty to initiate, approve, and veto policy decisions;

      (ii) access to all information relating to the company;

      (iii) the power to propose to general meetings changes in the financial structure, articles and dividends; and

      (iv) the responsibility for arranging an audit committee comprised of non-executives of the company;

      (e) the supervisory board of any subsidiary companies of the company shall not be

      1451
      able to override the decisions of the supervisory board of the parent company;

      (f) the management shall be free to establish a management committee to take day-to-day decisions within the policies laid down by the supervisory board;

      (g) the shareholders of the company shall have at least one half of the seats on the supervisory board;

      (h) the chairman of the supervisory board shall be elected by all the directors represented on the supervisory board and in the event of deadlock he shall have a casting vote;

      (i) the managers of the company (that is to say those who formulate policies) shall initially he able to choose between taking part in the elective process hereinbefore described or shall be able to select their own representative on the supervisory board, who will have the right to speak but not vote;

      (j) the preferred system of election of employee-directors shall be through an elected committee of all the trade unions represented in the company, which shall be responsible for ensuring a fair balance of representation.'.

      Mr. Radice: I am not so optimistic as to believe that the Government will accept this new clause or the schedule. They have already shown their attitude to the issue of industrial democracy by their opposition to the experiment with employee-directors at the Post Office. I have, therefore, no great hopes on that score.
      I believe that it is important that the issue of industrial democracy should be raised yet again. This is not the first time that I have raised it in this House. I accept that the last Labour Government, despite the publication of a good White Paper on industrial democracy, were not able to get any legislation on to the statute book. That was partly because of their minority status.
      I am prepared freely to admit that there is not yet an agreed view on industrial democracy in the trade union movement. Some trade unionists support the extension of collective bargaining as the way of achieving industrial democracy. Others believe that worker-directors are fine in the public sector but that they are not so good in the private sector. Other trade unionists are wholly in favour of employee-directors where the employees want it. So, there is a difference of view within the trade union movement.
      I do not believe that the system of employee-directors as set out in the
      1452
      schedule is of itself anything like enough. The system must be based on strong and effective collective bargaining. On the other hand I do not believe that collective bargaining by itself is sufficient.
      It is true that through collective bargaining employees are enabled to make up for their lack of individual power by their collective strength when they have been able to establish joint regulation over a number of vital subjects. However, the fact is that the strategic and important managerial decisions that shape the future of a company are largely outside the control of collective bargaining. That fact has converted me to a system of employee-directors on the boards of companies.
      When I was an employee of the General and Municipal Workers Union I was a collective bargainer. But when I saw the ineffectiveness of collective bargaining as, for example, when a firm made its employees redundant and I realised how little collective bargaining was able to influence major investment decisions or influence the shaping of a firm's corporate strategy, I changed my mind. I now believe strongly that something more than collective bargaining is needed and that employees need direct representation not just in the workplace or in negotiations but in the board room.
      There are at least three principles on which this representation must be based. It must be based partly on collective bargaining, since it is no good introducing employee-directors where there is no collective bargaining and where there is not a strong shop floor trade union movement. Otherwise that representation becomes a kind of tokenism.
      It must also be based on the power of trade unions because the unions are basically the only effective way in which workers can be represented in a company and in industry. That representation must not be merely a token. Employee representatives must be in the board rooms in strength.
      As to how that representation will work, I invite hon. Members to turn to the schedule, which sets out ways to deal with the problem. The schedule may not be perfectly drafted—I admit that freely since I did not draft it myself. I also accept that there are other ways in which we can advance industrial democracy.

      1453
      The schedule does not rule that out. It certainly would not rule out a parallel and complementary system that would give the right to collective bargainers to discuss strategic issues, as many trade unionists prefer.
      That was the pattern of the White Paper. Two options were held out. One could either do it through collective bargaining or, if employees preferred it, it could be done by way of employee representation at board level—or indeed by both. The scheme that I propose would depend on the successful outcome of a ballot. Representation would not be imposed from the top on unwilling workers. It would be based on a fairly stiff election in which certain minimum conditions would have to be fulfilled.
      8 pm
      The scheme is based on a two-tier board system which has a number of advantages, perhaps the major one of which is that it would establish a new basis of democratic control within companies, but would allow managements to deal with day-to-day management problems. I am borrowing from the German example, which has much to commend it.
      The system is based on parity between shareholders' representatives and employee representatives. In the end, that is the position to which we shall have to move. We may have to work up to it through a lesser proportion of employee representatives, as the previous Government's White Paper recommended, but in the end we shall have to get to a 50–50 arrangement. That immediately raises the problem of what will happen in case of conflict. Obviously the role of the chairman will be vital, and I take the view that the chairman will have to be elected by both sides in order to have the confidence of both sides. I do not approve of the German example of a chairman elected by shareholders. We must have chairmen who retain the confidence of both sides. Representation should be through a committee elected by trade unions.
      Mr. Renton: The hon. Gentleman has skated over an important point that I thought he was about to deal with in more depth. What will happen if all the shareholders' representatives vote for one person as chairman and all the employee representatives vote for another?
      Mr. Radice: I admit that my amendments do not work that out, though my Bill, to which I am pleased to refer the hon. Gentleman, proposed the use of ACAS in case of deadlock. That is probably the way to do it. In most cases the two sides would probably be able to agree on a chairman, but it may be necessary to have a neutral body to make an adjudication.
      As I was saying, representation should be through a committee elected by the trade unions. Here I borrow from the Bullock committee proposal for joint representation committees. The system must be based on trade unions, and that raises the problem of what happens to non trade unionists. I accept that that is a difficult problem, which was not solved by the White Paper of the previous Government.
      I am sure that the system will not work unless it is based on trade union power. In most firms trade unions should be able to feel that they can win all the elections if there is strong trade union representation, and they may feel so confident that they would be able to have nominally open ballots in the knowledge that they will be dominated by the unions. However, I appreciate that awkward problems are raised and are not wholly solved by the amendments.
      There are many fears and problems involved in industrial democracy. I start with the fears and worries of managers. The old basis of authority within a company has been, at least partially, undermined by events. If we can get a new basis of democratic authority and consent it will give managers new freedom and powers. For example, in Yugoslavia, managers have considerable powers, but within a system of overall democratic control. My proposed system may help innovation in this country.
      Another worry of managers is that industrial democracy could bring conflict into the board room, where there is no conflict. Of course, everyone knows that there is conflict in board rooms already. Many different points of view and interests are represented in board rooms. The presence of employee representatives would be an acknowledgement of the reality that employees have separate voices and interests that need to be represented at the level at which strategic decisions are made.

      1455
      All the experience shows that in industrial democracy systems, for example in Europe and, in this country, in the British Steel Corporation and the Post Office, employee-directors have generally played a constructive role, which has been of great use to the shareholder representatives.
      The other issue raised by managements is confidentiality. I do not believe that that is a serious problem. The research in, for example, West Germany and Sweden shows that it has not been a serious problem there. Given the interests of employees in the future of their firms, I do not believe that problems associated with confidentiality are likely to be serious.
      There are overwhelming arguments in favour of industrial democracy. There is an argument in human terms that work should be a satisfaction to employees. If they feel that they are able to have influence over the decision-makers that will make their work more satisfactory to them.
      Mr. Nicholas Baker: Do the schemes in West Germany and Sweden to which the hon. Gentleman referred put trade unions in the same position as the hon. Gentleman proposes?
      Mr. Radice: The German one does not, though trade unions dominate the works councils and employee representation at board room level in the supervisory boards. The Swedish system is based entirely on the single-channel method.
      There is a strong moral argument for more industrial democracy. All employees ought to have a bigger say in the decisions that crucially affect their lives and futures. Socially, too, there is a strong argument, because throughout society there is a questioning of the old bases of authority, whether in marriage, relationships between parents and children or the relationship between a management and employees. We need a new basis of consent within industry.
      In the difficult economic situation that we face, with a world economic crisis and problems of energy supplies, it is too great a luxury to leave all the strategic decisions to managements and shareholders' representatives. They are far too important to the nation. We should
      1456
      call on all the resources that we can to solve the problems and to put industry on a much firmer base.
      Those are the reason why I am strongly in favour of industrial democracy. It is a crucial issue for the House, and it will not go away. Whatever the Conservative Party may hope, we shall return to the issue a number of times in this Parliament, and when my party is returned to power at the next election we shall legislate on it.
      Mr. Clinton Davis: I congratulate my hon. Friend the Member for Chester-le-Street (Mr. Radice) on introducing the debate. He recognised the shortcomings of the new clause, but they are not important. It provides an opportunity to discuss a matter which he rightly says will remain on the political agenda, whatever the Government's view. We know that they are tepid about the issue, if not hostile.
      The debate provides me with an opportunity to congratulate my hon. Friend on his devotion to the subject, which resulted in a previous Bill. I served as a Minister on the Committee which considered that measure. It contained some interesting ideas, although we were not able to go along fully with them. However, the Bullock report took the matter further in public discussion, and that was followed by the previous Labour Administration's White Paper, which was the result of a great deal of thought and consultation.
      It was a matter of the greatest regret to me, as it was to both my Secretaries of State, that we were not able to progress further. It is a great disadvantage to the efficiency of British industry that we are not able to move along this road far more rapidly. I do not in any way deny the considerable problems that exist, but they are there to be grappled with and overcome. I hope that the next Labour Government, in two, three or four years' time, will be able to maximise agreements and push those who have entertained suspicions about the idea in the direction of its acceptance.
      Mr. Nicholas Baker: In the course of the hon. Gentleman's interesting prognostications, will he confirm his policy on trade unions in this sort of proposal? Will they be given the position that they are given in the new clause?
      Mr. Davis: I hope that the hon. Gentleman will allow me to develop my argument. I am coming to that matter. I have only just begun my speech. The hon. Gentleman must wait on my every word and listen carefully.
      The debate provides us with an opportunity to ask the Government about their attitude towards the draft fifth directive. There have been reports in the press that they are not enthusiastic about it. During a debate in the Legal Affairs Committee of the European Parliament a Conservative spokesman did his level best—I do not know whether he did it with the acquiescence of the Government—to prevent this idea emerging. As my hon. Friend said, whatever the position, there are forces within the EEC—and wider than that—who have been able to embark upon the experiment most successfully. I do not say that we should adopt exactly the examples of the Germans, the Swedes or anyone else—we have to build on our experience and collective bargaining arrangements—but it would be folly to ignore those.
      I do not say that to apply principles of industrial democracy along the lines of my hon. Friend's Bill, or the previous Labour Administration's White Paper, would be to provide a panacea for our industrial relations problems, but I believe that they would offer a considerable advance. There is no doubt that on both sides of industry there are views—which I happen to believe are antediluvian, although that would be challenged by those who hold them—that it is the job of management to manage and that it is not the job of the worker to intrude. In a sense, that is mirrored on both sides of industry.
      8.15 pm
      I believe that one of life's most painful experiences can be to change one's mind. The more rigidly held the belief about the value of the past and those well-tried things that have happened, the more painful it may be to recognise that those things need to be changed. I should have thought that the experience of the past few years would indicate that we need to embark upon change, and to do so with some rapidity.
      Industrial democracy is a controversial concept. It divides even Hackney. I know that my hon. Friend the Member
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      for Hackney, North and Stoke Newington (Mr. Roberts)—with whom I have an incredibly friendly relationship—takes a different view from myself. I hope that he will not feel that I have been insulting when referring to those who hold a different view. It is not intended to be personally denigratory.
      It is a controversial issue, because it aims at far-reaching changes of attitude on both sides of industry about the manner in which decisions are made and about relationships between people. Such a change of mind on these matters can be a painful process. Industrial democracy is about sharing responsibility for decisions and how one encourages that. Behind all the Government's words about industrial relations—and there were many weasel words—there is a clear preference for conflict. That was illustrated last night by their refusal to consult or invite the TUC to join the committee on the reform of company law. It indicated a process of mind on their part. They would prefer not to see eye to eye with the trade unions, but to view them eyeball to eyeball. That is a thoroughly bad way in which to proceed. They prefer conflict to the consensual approach that we should try to achieve.
      I believe that we must change the whole atmosphere in which we relate to each other in industry. We must give proper recognition to the most substantial investment that a worker is able to make in his working life to the industry that he serves, namely, the years of service that he gives to that industry. The purpose of the debate on industrial democracy is to reflect upon those issues. There is a democratic imperative that those who are substantially affected by decisions ought, as a matter of right, to be involved in making those decisions.
      That is an argument that is accepted by the European Commission. I do not agree with the Commission on a wide variety of issues, but I agree with it on that. The idea is accepted in several countries within and without the EEC, and it was accepted by both the majority and minority Bullock reports. It is resisted by those who see industrial relations purely in historic terms, or perhaps in terms of goodies and baddies.
      There is a striking contradiction between the political democracy which we

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      cherish in our society and, all too often, the authoritarian structure which a worker meets in his day-to-day existence at work. To expand the opportunities to provide the worker with a greater sense of involvement and participation, and make him feel that he is at the centre of things, is involved in the complexities of decision-making and is actively influencing the decisions, will not only promote good industrial relations, good efficiency, job satisfaction and profitability, but will mirror what is required in society if we are to sustain and nourish the political democracy in which everybody in the House believes.
      Our objective is not simply to build up new participative structures. I am not in favour of an edifice complex. I, and those who share my views, want to create something worth while for the chap on the shop floor, and for the girl on the shop floor, because we are living in that sort of age. At the same time it must produce some tangible benefits for the work force, otherwise it will not be interested in the ideas. In no sense do I say that all work forces throughout the country are clamouring for this idea—that would be totally untrue—but I believe that it is the job of Parliament and the Government to lead people towards ideas that will benefit society, and I passionately believe that this is one of those ideas.
      It follows from what I have been saying that if industrial democracy is to become a worthwhile concept, and if it is to become effective, it will be largely dependent for its efficacy upon effective communication and understanding. When we were in government we recognised that the best way forward was to try to maximise agreements between employers and employees. I confess that we ran into a great deal of violent reaction to the ideas. Perhaps some of that was exaggerated. Although Bullock performed a valuable service in that it focused attention in a vivid way on these matters, it nevertheless created some anxieties, which perhaps prevailed when we came to discuss our own White Paper, and which were unjustified in the light of the White Paper.
      I am anxious to see agreement maximised, and I do not believe that a minority should be able to stifle the value of the idea by imposing its own veto. In the
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      White Paper we emphasised the need for a flexibility of approach. We said that there would have to be a statutory fallback to ensure that the laggards who wanted to contract out were not able to do so where the work force wanted to embark upon that course, but the decision was to be left to the work force concerned. It would be its decision. The scheme that was thought most appropriate to the particular enterprise would also be left to it. Therefore, we proposed a wide measure of flexibility.
      We suggested that companies employing more than 500 people should be required to discuss with employee representatives all major proposals affecting the employees before decisions were made. That would cover investment plans, mergers, takeover bids, major organisational changes, and so on. We saw a joint representation committee, about which my hon. Friend spoke, as the most effective channel for discussion on these matters. We felt that it would have an interesting and useful side-effect, as it would be an important basis for producing more inter-union co-operation. Where those procedures could not be established voluntarily, we said that there would have to be a right to require the board to discuss the issue of company strategy.
      My hon. Friend touched on a number of the problems, including confidentiality of information. I believe that that problem is grossly exaggerated. Of course we must have some means of safeguarding confidential information, but the risks are belied by the everyday experience of trade unions and shop stewards, in whom there is reposed a great deal of confidential information, because that is the only way in which to work out solutions. They do not go blabbering to everyone about it. It is very rare for them to do so. When I went to Germany I was told that they never had a case where insider information had been divulged by the shop stewards. Plenty of insider in-formation had been divulged by the other side, but not by the shop stewards who were engaged in that form of enterprise.
      While this is a grossly exaggerated problem, I believe that there can be an agreed basis of approach to it. I agree that some topics would have to be ex-

      1461
      cluded. There are other problems associated with multinationals, but as has happened in Germany, I hope that the multinationals will seek to operate within the spirit of the law and to obey the law. The hon. Member for Dorset, North (Mr. Baker) finds that funny. If he would like to intervene I shall give way to him. I see that he does not.
      My hon. Friend said that the direct representation of the work force at board level would add a new dimension to the board's consideration of problems; that it would bring it much more into direct contact with what the work force was thinking. That is a dimension that is singularly absent from many boardroom discussions that take place at present. At the same time, it would give the work force a voice where it really matters.
      I know that there is major disagreement about that. Some argue that this is a highly esoteric area in which the workers ought not to be engaged because they do not have the equipment or the understanding to do it. That is an arrogant and patronising attitude. I heard it expressed to me when I visited a firm in Plymouth. That was exactly the view that was echoed by the managing director of, regrettably, a large multinational company with a branch there. It was an appalling way in which to approach the work force. It indicated his own view of it, and therefore reflected mostly upon him.
      I agree with my hon. Friend about the two-tier board concept. I think that that is a preferable arrangement, but that it ought to be left to the decision of the local work force and the enterprise itself to work out. Perhaps they would prefer to have the operation of a unitary board, and there is nothing wrong with that. I just happen to believe that it would be better to separate the functions of a management board and a supervisory board, provided that the supervisory board did not become a meeting place once a quarter where information of not much value was presented. It must allow people to get together to discuss worthwhile decisions. Otherwise it has no value at all.
      I have always believed that if we have that concept, directors must share legal duties and responsibilities. I do not think that one can segregate those. It
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      would also be an essential ingredient for worker-directors to keep in touch with the employees and trade unions. Other wise there could be alienation, which would be most undesirable and could destroy the whole idea.
      Therefore, it would really be for each company to devise the best method suited to it. If agreement cannot be reached, we propose that employees in a company employing 2,000 or more people should be able to claim a statutory right to representation. We worked out a process to require a request from the joint representation committee to organise a ballot of the whole work force. One did not have to be a member of a trade union to participate in that election. We wanted to see whether the work force wanted the idea, and if it said "No", that was the end of the matter. I sometimes suggest to my colleagues in the Labour Party and in the trade union movement that they should let the work force decide. If they do not want it, they do not have to have it. It is as simple as that.
      8.30 pm
      Mr. James Dempsey: I am interested in the argument that there should be employee representation in a company which employs 2,000 or more people. Is my hon. Friend aware that there is worker participation in companies which have far fewer than 2,000 employees, and that those companies perform extremely efficiently?
      Mr. Davis: I am aware that some enterprises have embarked upon radical measures of worker participation—for instance, Scott Bader and Glacier Metal —and that there are variations. However, I do not accept that worker participation is carried out on a wide enough scale. If there was evidence that the participative processes were working well—that was not the evidence that I received when I was a Minister—there would be no need to embark upon this idea. But that is an academic point, because the decision would be left to the local work force in the enterprise concerned.
      We have taken an arbitrary figure of 2,000 because we needed to start somewhere. We are not saying that enterprises with fewer than 2,000 employees should not embark upon worker participation, but it would be a more voluntary arrangement, and we would not include that within the terms of our legislation.

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      If the work force wanted to go ahead, the company would be able to reconstruct the board. It would have to do that in order to adopt a two-tier system, or to maintain the unitary board system. My hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey) touched on the numbers involved. We opted first for a one-third representation, moving up to something like 50–50. It cannot be exactly 50–50 because, ultimately, someone has to be able to determine decisions if there is a deadlock.
      I recall my former colleague, Mr. Edmund Dell, saying that he had elicited the information that in Germany, if there was a 50–50 situation, the independent chairman would normally be a priest. It was felt that by being close to God he would be able to resolve some of the decisions. Curiously, however, there have been few instances of deadlock.
      The matter of selection is difficult. Should every employee be involved in the right of selection, or should that right be limited to those workers who operate through the established system of collective representation? We have operated the latter system in British industry. However, we shall leave it open for further discussion. It would be bold of me to suggest that I have the answer. I do not.
      My hon. Friend the Member for Chester-le-Street touched on the right of appeal and whether there is unfairness in the system. That is a matter to which we referred in the White Paper. It would be total folly for the Government to ignore that idea. They should work on it, embrace it, and consult about it. Regrettably, they appear to be disinterested in it. That is the worst of all worlds. The problem will not disappear. The Government will be forced to do something about it, whether they like it or not, in the not-too-distant future. If they do not accept the responsibility, we shall, and I hope that it will not be too long before we are able to grasp those opportunities.
      Mr. Eyre: Following the attempts of the hon. Member for Chester-le-Street (Mr. Radice) to influence the previous 'Government, he has now produced the interesting suggestion of legislating a mandatory system of employee directors.
      Mr. Radice: It is not a mandatory system, because employees have to take part in a ballot before they are appointed. If there is an affirmative vote, they are appointed. It is therefore not a mandatory system.
      Mr. Eyre: The hon. Gentleman's proposals may not be mandatory, but they have a mandatory tone.
      They are interesting for two reasons. First, it appears to be a solo flight, although the hon. Member for Hackney, Central (Mr. Davis) gave some indication of rather enthusiastic support. If a Division were to be called on the proposal, it would probably indicate the low degree of enthusiasm of some of his hon. Friends for this formulation.
      Despite the fact that there are several differences from the ideas contained in the Bill that was before the last Parliament, and far from the hon. Gentleman's present proposals being even-handed, the balance of advantage lies with the trade unions to initiate the establishment of a supervisory board and directly to choose the employee-directors. The hon. Gentleman fairly acknowledged in his speech the difficulty of his proposal with regard to non-union employees.
      Mr. Clinton Davis: There is no difficulty at all about non-union employees in the initial ballot to determine whether people want to advance down this road.
      Mr. Eyre: I do not think that the hon. Gentleman has accepted the point that I made about the appointment of employee-directors under the scheme. I note, incidentally, that the hon. Gentleman is now much better at posing questions than he was at producing action when he was a Minister. On a number of matters that have come forward on Report, he has indicated quite a change of attitude from that which he adopted formerly as a Minister. He has been demanding action on a number of matters in which he was not active himself for a considerable period.
      Mr. Davis: The hon. Gentleman cannot fairly say that. I have not shielded from the House the difficulties that we encountered. We were enthusiastically supporting industrial democracy as a qualification of the adversary relationship in industry. We wanted to see industrial democracy and we wanted to maximise

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      consent about it. The hon. Gentleman cannot fairly say that we were not active. We produced a White Paper and we wanted to embark on legislation. It was in our election manifesto.
      Mr. Eyre: I am glad that the hon. Gentleman acknowledges those difficulties, particularly with regard to the demands that he made in the closing stages of his speech.
      I shall in a moment touch on some of the detailed problems involved in the clause and schedule, but many of them are related to wider criticisms which can be made of moves such as this to impose on companies by law some form of two-tier board structure. Those who seek to do this must answer a number of questions.
      A fundamental question relates to the implied inadequacy of the administration of companies, and therefore of company law as it stands. While the corpus of company law imposes particular restraints on the activities of companies—for example, the requirement to produce audited accounts, as well as enabling them to be subjected to official investigation—its underlying rationale is to permit companies to adapt their structures and procedures in ways best suited to their own circumstances.
      There is, therefore, nothing in company law to prevent companies from establishing a two-tier supervisory and management structure, dividing—for internal purposes at least—the functions between the two levels as they wish. Nor are there any obstacles to prevent the appointment of employee-directors. It is right that as many employees as possible should be involved in the development of a company. Coming from an industrial area, I agree wholeheartedly with that purpose. It is necessary so that the development of a company should move forward with as much wholehearted support as possible.
      I believe that the vast majority of companies accept this and reflect this acceptance in the way that they are run. But —and this is the crucial point—companies involve their employees by many different methods, ranging from the purely informal in smaller firms to the rather more formal system in many large companies.
      At a time when many boards realise the need to pursue policies designed to
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      encourage employee involvement, we remain unconvinced of the need to impose arbitrary rules on them.
      We have noted with interest the developments in Strasbourg, to which reference has been made, where the European Parliament is beginning to recognise that the rigid requirement of the Commis-mission's proposals for a fifth directive on company law is not the only way in which to meet the objective of greater employee involvement.
      I turn to the details of the proposals that have been put forward. I note that there is no provision for the secret ballot of employees and that the system proposed can be triggered only by the trade unions, even though only 30 per cent. of the employees may be union members. Further, it is proposed that employee-directors shall occupy half the seats on a supervisory board, which is not consistent with the one-third suggested by the Labour Government less than two years ago.
      The position of management is not so much obscured in the code of practice as reduced to that of the Victorian child who may be seen but not heard. Under these proposals the managers may have a management committee, but they cannot be represented on the audit committee, whose functions are not hinted at anywhere. If management chooses a representative on the supervisory board, he does not appear to be entitled to vote.
      In these ill-considered proposals, it is curious that, while the clause itself requires the establishment of both a supervisory and a management board, the code of practice does not once refer to a management board; it refers only to a management committee. The proposals, judged all in all, are a recipe for great damage to the largest of our companies. I recommend the House to reject the clause, together with its code, both of which are in part objectionable and impracticable.
      Mr. Clinton Davis: Is not the Minister going to deal with the principle of democracy? My hon. Friend the Member for Chester-le-Street (Mr. Radice) and I recognised that to put the whole law of industrial democracy into a schedule to the Bill is not possible. What my hon. Friend has done is to stimulate further debate on the matter. The Minister has

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      adopted a ludicrous, appalling, narrow-minded attitude to this subject. Let him leave aside his brief and give us his attitude and his views.
      Mr. Eyre: I have listened to the naive and muddled opinions of the hon. Member for Hackney, Central. I believe that it would be better if we passed on and dealt with the important business that follows in the Bill. I have dealt with the basic proposals that have been put forward and I have explained why they are impracticable and objectionable. I have indicated the strong desire of the Government to work to increase the involvement of employees in the work of their companies.
      Mr. Ernie Roberts: I want to question the need for two-tier boards, supervisory management boards and worker-directors. This I will do on the basis of my experience as a national trade union leader and of the views of my own union and others. I want to pose some questions and also give some answers.
      First, will the measures that are referred to in the new clause and the proposed schedule bring industrial democracy to working people? Let us look at the experience of existing worker-directors. There are worker-directors in the steel industry, yet we have had a nine-week strike over pay, conditions of work and mass sackings. The worker-directors in that industry are expected to help the management and the Government and to work against those whom they are supposed to represent.
      What did the worker-directors in the steel industry know about the £500 million deficit that was exposed a short while ago or about the proposed closure of the Bilston plant? The union officials said that they knew nothing about them. Clearly they had not been informed of these matters by the worker-directors. What did the worker-directors at Corby report back to the workers whom they represented? On the face of it, nothing, because they are appointed.
      8.45 pm
      British Leyland is supposed to have the best-ever industrial democracy agreement, with workers' representatives on joint management councils, on joint committees
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      concerned with running the divisions and attending conferences with the management on company problems. Yet, within a few months of signing that agreement, The Sunday Times carried the headline:
      "Leyland men warned by management 'You will kill the Midlands'."
      Mr. Radice: Will my hon. Friend give way?
      Mr. Roberts: When I have finished this further quotation:
      "Leyland bosses threaten to sack 100,000 workers."
      That was disclosed in the national press on 5 October 1976.
      Mr. Radice: My hon. Friend is putting forward a better argument against my clause than was posed by the Government. My hon. Friend is at least dealing with the principles of the issue. However, it is unfair to illustrate Leyland, because there was no system of worker-directors there. It was a system below board level. Many shop stewards argued that, if they were to have such a system, it should be possible to get at the top decisions. For example, many Transport and General Workers Union representatives were in favour of having worker-directors at Leyland.
      Mr. Roberts: What I have disclosed makes the situation worse. Even at that lower level, the workers' representatives, who were supposed to have been sitting alongside management discussing the business and future of the company were not consulted and did not take part in discussions with the management about the running of the company. It is not conceded there and it certainly has not been conceded in British Steel.
      I was going on to point out that it was said on television that an ultimatum had been issued by the management and that had done the trick. On the other hand, Mr. Eddie McGarry, the joint chairman of the British Leyland shop stewards, described the ultimatum as being stupid. To illustrate the lack of consultation with and participation by workpeople in British Leyland, the chairman of BL, on ITN on 8 January, said that there would be a cutback of 30,000 jobs. He gave the press that information, but not the shop stewards and trade unions. They said that there had been no consultation

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      on that matter or on the closure of Speke at Liverpool. That was a management decision.
      The lack of industrial democracy has been shown by a series of strikes at British Leyland, ending with the dismissal of the chairman of the shop stewards, Mr. Derek Robinson. Can that be described as an illustration of industrial democracy and proper workers' representation?
      Mr. Radice: No.
      Mr. Roberts: Obviously "No", as my hon. Friend said. That is because, within the agreement, British Leyland has stated that at all levels, from the board down to the workshop floor, executive responsibility rests with the management.
      The point is often made that a supervisory board has no right to interfere in the day-to-day running of a company. If industrial democracy means anything, it means that the workers should be consulted and should have a say in the decisions affecting the running of the company and day-to-day problems.
      The situation in the coal industry is no better. There is representation at various levels from the top to the bottom. The coal miners have been involved in industrial conflict, closures and sackings. There have been no proper consultations or joint decisions. The National Union of Mineworkers is putting forward proposals for drastic changes in the democratic control of the pits. In the public sector there is a case for instituting real joint control of undertakings with the workpeople and managements responsible.
      The Post Office is, in effect, to be wound up by the Government. There are appointed members on the board, but if we are to have democracy there must be elections. Representatives at board level, or at any level of management, who represent workpeople and trade unionists must be elected by those whom they represent. My union and the Confederation of Shipbuilding and Engineering Trade Unions, which represents about 2½ million work people in the engineering industry have gone on record against worker-directors in private industry. The TUC, which represents about 12 million workers, has voted against the mandatory imposition of supervisory boards with worker-directors and for the rights of
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      trade unionists to negotiate on these issues with their companies. However, there may be a loophole by which a means may be found of trying out the business of worker-directors.
      The fear among many trade unions and trade unionists is that worker-directors will become prisoners on the boards. If the shareholders and owners are still in majority control, it is feared that worker-directors will become Trojan horses within the unions.
      There is a clear need for industrial democracy. My union, on behalf of its 1½ million members, makes certain recommendations in a booklet that has been produced in hundreds of thousands for the membership. The summary of recommendations states:

      "(1) In the private sector we should proceed towards Industrial Democracy through an unlimited extension of collective bargaining.

      (2) We should seek to establish company bargaining on broad issues without interference in traditional plant bargaining.

      (3) In the nationalised industries we should become involved in decision making, seeking majority Trade Union representation at board level and effective control at other levels.

      (4) That we"—

      use—
      "the new Procedure Agreement"—
      an agreement that we have established with the engineering industry—
      "to establish, as far as possible, company bargaining."
      (5) Where new Workers' Co-operatives need financial support, we would consider each case on its merits."
      Industrial democracy concerns the lives and safety of individuals. The summary states:
      "Where safety representatives operate in the name of this Union they should only de so as Shop Stewards."
      Those are a few of the proposals that my union makes for the purpose of extending democracy within industry.
      In spite of all the talk—there is much of it—about the need to give workers industrial democracy, we find that they still have to take action for ordinary, basic and elementary rights. These are the rights that trade unionists had to fight for in the 1820s—for example, the right to have trade union recognition within a company. One has only to mention

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      examples such as Grunwick, the steak houses, Automats in Manchester, Dessoutters and other companies—
      Mr. Deputy Speaker (Mr. Richard Crawshaw): Order. The hon. Gentleman has been in order, but he has begun to move outside the scope of the clause.
      Mr. Roberts: The elementary democratic rights that we require as a result of making changes within industry are, first, the provision of facilities for the shop stewards to function, meet and discuss their problems and for management to provide facilities for workers. The Government could easily have given some essential democratic rights in the Bill in relation to information and disclosure. We believe that democratic rights should be given to individual workers to allow them access to the sort of information that is circulated to shareholders. They should be told the terms and conditions of their employment, including wages, hours, holidays, pensions, sick pay arrangements and so on. They should be given access to the files and the information that the company has built up about employees and employment prospects. Through the Bill, workpeople's representatives should be given information on manpower, the number of employees, job descriptions, the rate of turnover, statistics on short-time working, absenteeism, sickness, accidents, recruitment, deployment, promotion and so on.
      Those are some of the ordinary elementary matters which trade unions require for the establishment of basic democratic rights within industry. Without such facilities the idea of workers having rights as worker-directors is a hollow sham. Companies should look into such matters and ensure that such specific matters shall be included in order to give workers those basic democratic rights.
      Mr. Anderson: My hon. Friend the Member for Hackney, North and Stoke Newington (Mr. Roberts) has made a valuable contribution. He accepts the general concept of industrial democracy but he points out an alternative road to that which my hon. Friend the Member for Chester-le-Street (Mr. Radice) has outlined in his new clause. My hon. Friend the Member for Hackney, North and
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      Stoke Newington mentioned the inadequacy of the tentative steps which are being attempted in the direction of employee participation. Of course, conflicts of interest will remain, whatever structure is devised within industry.
      I congratulate my hon. Friend the Member for Chester-le-Street. He has done an immense amount of work on the subject, both in this Parliament and the previous one. If he wanted anybody to blow his trumpet, he should note the reaction of The Economist to his book "The Industrial Democrat":
      "The value of this book"—
      in which he outlined something akin to his present new clause—
      "especially since it was written by a first-rate Labour MP and former union research officer, is that it points unions in the direction of reforms, both in structure and attitude, which will be essential to successful participation."
      Having had such a useful start to the debate, we found it all the more disappointing to hear the Minister's response. He was stuck in the straitjacket of his brief and he gave no hint of personal or other willingness to escape from that brief and indicate whether the Government were prepared, in the lifetime of this Parliament, to make a positive contribution to the concept of industrial democracy. If one looks at the record of the Post Office, one may well imagine that the reverse will be the case. Any tentative steps towards industrial democracy may be set back by the Government.
      9 pm
      My hon. Friend the Member for Hackney, Central (Mr. Davis) drew attention to the decision of the Legal Affairs Committee of the European Assembly of 20 February. It rejected the fifth directive on-worker participation. It decided that the structure of company law should be left to the discretion of individual Governments within the Community. That appears to accord with the general view of the Government. It would be helpful to know whether the Government stimulated the torpedoing of that directive. The general concept of employee participation is now firmly on the agenda. Whatever the Government may say, it will not go away. We therefore require a more positive response from the Government.
      As regards the new clause that stands in the name of my hon. Friend the

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      Member for Chester-le-Street, a substantial case can be made for changing to a two-board system. However, that is not necessarily connected with employee participation. The debate about a two-board structure has become enmeshed in a debate about employee participation. The case for a two-board structure does not necessarily depend upon the view that one holds about employee participation. For example, the supervisory councils of German companies were introduced in the 1890s. They gave shareholders more effective control of the operations of management. Greater participation did not effectively begin until the 1920s. That was long after the supervisory boards had begun operation.
      As my hon. Friend the Member for Hackney, North and Stoke Newington has said, a two-board structure may not be the best or only means of ensuring employee participation. However, the concept of a two-board structure implies criticism of the existing structure. I shall give brief examples of some of the advantages of a two-board structure.
      First, it would give a more effective voice to shareholders in large private sector corporations. The wishes of shareholders come to light at present only if there is a public row. One could argue in favour of a formal process whereby shareholders could join together. At present, they have insufficient clout and influence in a general meeting. At a general meeting it is difficult to call management to account effectively. A two-tier structure with a supervisory board would mean continuing pressure on behalf of certain interests. We can define and add to those interests. The supervisory board would appoint a management board. It would, therefore, exercise effective discipline over the board.
      Secondly, the two-tier board structure allows managerial independence at operational level, separating the amateurs from the professionals. That separation is well-nigh impossible in a unitary board structure. The combination of chairman and managing director would not be appropriate. The chairman would have a strategic role, being responsible to the interests, however defined, and responsible for the general operation of the company, whereas the chairman of the management board would have more of an operational role.
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      It may also provide scope for dealing with the problems of a growing family business. That may appeal to the Government. There is the traditional syndrome of a family business declining through managerial incompetence, in part because of too much responsibility being given to family members, and then a takeover occurs. In the two-board structure, family shareholders could be on a supervisory council, leaving the professionals to get on with the job of running the business. It also does away with the need to put the operational heads of the business on the main board, when they may be quite unsuited for a strategic role.
      The two-tier board structure is particularly applicable to public sector corporations, where the Government want to influence but do not want to run the business. It is an ideal way of dealing with the problems of Government supervision.
      The case for a two-tier board can rest on bases other than employee participation. My hon. Friend the Member for Chester-le-Street was supported by my hon. Friend the Member for Hackney, Central when he said that the case for greater employee participation had in the past been linked with discussion of the two-tier hoard. It is a basic democratic principle that the status of the employee should he no less than, and often should he be seen to be greater than, that of shareholders.
      In social terms we find the role-playing irritating. People appear to lose their democratic rights and dignity when they pass through the factory gates, and are therefore, far less able to play a different role when they leave the factory. It is more appropriate that interests such as those of employees should be represented on a supervisory board and not a unitary board.
      The two-tier structure also has interesting implications for the roles of financial institutions vis-a-vis companies. It preserves accountability, yet leaves management with the task of getting on with the job of running the company on an operational basis. We could well see the development of industrial banks, with greater participation by banks on a supervisory board in running a company. At present they normally stand apart and

      1475
      do not take a share in equity. They merely have an overall oversight of the affairs of a company.
      My hon. Friend the Member for Chester-le-Street put forward an important case, which he argued well. He set the context for the debate. There must be a discussion on this important matter. I congratulate my hon. Friend. I am only sad that the Government's response has so far been negative. Although they point out deficiencies in the drafting of the new clause, they have said nothing—
      Mr. Clinton Davis: They do not have an idea in their heads.
      Mr. Anderson: They have not given us the courtesy of revealing any ideas that they may have. Do they, for example, reject out of hand a more flexible structure with employee representation on supervisory boards, beginning at a relatively small level and developing as the company wills? With the agenda for this debate set by my hon. Friend, we ought to hear some more positive response from the Government to this most important of issues.
      Mr. Archer: I should like to echo the congratulations of my hon. Friend the Member for Swansea, East (Mr. Anderson) to my hon. Friend the Member for Chester-le-Street (Mr. Radice). I do not consider that this debate has been wasted. It has been a good debate on the Opposi-tion side of the Chamber.
      It is unfortunate that the Under-Secretary of State has had to leave. I wanted to tell him that he must not confuse two separate matters. It is true that we in the Opposition are not wholly in agreement about the exact working out of these ideas. But the hon. Gentleman must not confuse that with a lack of interest. One can have a lively discussion on a matter without any absence of interest. One cannot have a lively discussion, as we have discovered from the Government side tonight, without a measure of interest.
      Discussion in the Labour movement on this issue goes back a long way. I was reading this morning a pamphlet published by the Fabian Society in 1953, picking up the German experiment and trying to draw out lessons for this coun-
      1476
      try. The discussion on the Opposition Benches, encouraged or not from the Government Benches, will continue. This is part of a general discussion of what company law is about. We have always known that it was about shareholders. I have said more than once in these debates, but will perhaps be forgiven for saying again, that part of the problem we encountered at the beginning was that shareholders were members of the company. A shareholder who last week heard about the company for the first time when he picked up a bundle of shares is a member. An employee who has devoted 50 years of his life to the company is not a member. All that exists between the company and the employee is a contract of employment.
      Company law was about shareholders. More recently and a little more marginally, it is about creditors. But, as international law was about nation States and individuals did not count until individuals forced themselves into international law, so company law is chiefly about shareholders and partly about creditors. Employees did not exist. Even in this Bill, the Government have been forced to accept that employees have a legitimate place in company law. If the existence of employees is recognised, one of the questions that is bound to arise is their right to participate in decisions, not just decisions about wage rates and working conditions but decisions not all of which are susceptible to collective bargaining.
      The TUC, in its guide to the Bullock report, says in the introduction:
      "Until we extend the machinery of joint regulation to cover issues such as investment and product development, trade union involvement at company level will be an illusion rather than a practical reality."
      Employees may have an interest in the future of the company at least as close to their hearts as that of many of the shareholders. Many of my constituents have recently known this to their cost. I echo the remarks of my hon. Friend the Member for Swansea, East. A democratic way of life includes the right of people to demonstrate that they have a measure of control over their own destiny. That control does not terminate at the factory gate. It is necessary if their role is to be more than merely demanding more and more. If we are asking them

      1477
      to face up to decisions and to decide what they will renounce as well as claim, they cannot be expected to exercise responsibility if they are not treated as responsible people.
      However, there are problems, and we all know that. They run through the whole of company law, and I suspect that they are not confined to company law. How does one give effect to the contradiction that there is within any workplace a strong community of interest? Employers are concerned with the prosperity of the enterprise. So are the employees. There is a community of interest which may be opposed to the interests of people who are not at the enterprise. But the enterprise is not homogeneous. There is also within the enterprise a conflict of interest. That is not destructive of good relations. It is recognising the fact. Given that the gross profits are constant, the higher the employeees' remuneration the lower will be the distributable profit. So there will be conflicts of interest of that kind that will have to be resolved.
      9.15 pm
      We are looking for a way in which both sides can join in the resolution of the conflicts while pursuing their common interest in the prosperity of the enterprise. First, they will require a right to information, and there will be encountered difficulties of confidentiality. However, as my hon. Friend the Member for Hackney, Central (Mr. Davis) said, I suspect that they have been somewhat over-dramatised. The very fact that meaningful collective bargaining exists entails that there must be a provision of some information, some of which is confidential.
      Mr. Dempsey: I believe that my right hon. and learned Friend is aware that employee representation has been operating in this country for the past half century. He will be aware of the example of the co-operative movement, in which employees are elected directly to the board such as the one on which I served. There is no problem of confidentiality there, no problem of questioning auditors, or of deciding whether an enterprise should go or whether it should be extended and a new edifice erected to provide more employment. Those problems do not exist. I believe that they are becoming a figment of the imagination of the Minister and
      1478
      some of his supporters. I am sure therefore that my right hon. and learned Friend will remember that model.
      Mr. Archer: I am most grateful to my hon. Friend for pointing out that model. Of course, he is absolutely right. At risk of perhaps overdoing the commercials, may I mention another Fabian pamphlet written recently by my hon. Friend the Member for Consett (Mr. Watkins), which is most valuable on this subject?
      I understand the difficulties that were alluded to by my hon. Friend the Member for Hackney, Central. All this could become a meaningless slogan, and none of us would want to participate in a merely cosmetic exercise.
      The examples quoted by my hon. Friend indicate two things. First, this proposal will work only where there is cooperation from management. My hon. Friend left open the question whether there might be merit in placing management under a statutory duty to co-operate. That is something that we can discuss. Secondly, it is important in all our discussions to listen to the experience of those who have had to make industrial relations work. I hope that we shall not overlook that. I accept, as he said, that should we ever decide on having statutory recognition of employee-directors they would not operate exactly like commercial directors. In its supplementary evidence to the Bullock committee the TUC made that quite clear. It said:
      "The objective is to find a form of representation and participation in decision-making in the private sector which provides for participation in major decisions, but leaves the lines of responsibility of the workers' representatives to their constituents. The aim must be to give legal rights to workpeople of collective participation and control over decisions which the collective bargaining and consultative process have not given them."
      We cannot expect employee-directors simply to operate in the best interests of the company in the old sense of that expression.
      That was recognised by the TUC in its summary of the Bullock report. It says that the representatives would not in a legal sense be committing the workers or the joint representative committee to company policy. However, the representatives would carry the same responsibility as shareholder representatives in that they would be required to act in what they believed to be the best interests of the

      1479
      company. That would no longer be equivalent to saying—as at present—"in the best interests of the shareholders". They would obviously have different duties, functions and interests from those they have at the moment.
      What was said by my hon. Friend the Member for Chester-le-Street is particularly applicable here. The whole experiment would have to grow out of the existing machinery of collective bargaining. One cannot conjure it out of mid-air. It grows out of what is happening already at the grass roots. The way in which the system will be moulded was indicated by my hon. Friend the Member for Hackney, Central. It would be left to the employees in the workplace to decide whether they wanted to try this experiment, what kind of experiment they wanted and how they would mould it to their particular problems and circumstances. It would be left to them to decide whether there would be a two-tier board.
      It is not true to say that companies already have the right. Of course, shareholders can authorise an experiment of this kind, but it is not true that employees have the right to authorise it. If we make it mandatory, one of the questions that will arise will be how far we should spell out the details of what the employees would be entitled to opt for. In a document published after the Bullock report, the General and Municipal Workers Union said that it would like to leave the issue fairly open so that each workplace could fill in the gaps in accordance with its own problems.
      I repeat to the Government what has been said by my hon. Friends. This question will not disappear. We can now get on with what the Minister has called the important matters in the Bill, but one day, whether he welcomes it or not, the hon. Gentleman will come to believe that this subject is important, because it will affect the future of this country and the future of this Government.
      Mr. Radice: I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 28

      SEPARATION OF POSTS OF CHAIRMAN AND CHIEF EXECUTIVE
      "In any publicly-quoted company which either employs more than two thousand people or has net assets in excess of one hundred million pounds (both figures being assessed on a group or consolidated basis), the posts of chairman and chief executive, or managing director, shall be held by separate people; and they shall be confirmed in these posts by ordinary resolution at the first general meeting of shareholders following their appointments, and they shall be reconfirmed in a similar manner at intervals of not less than five years.".—[Mr. Renton.]
      Brought up and read the First time.
      Mr. Renton: I beg to move, That the clause be read a Second time.
      The purpose of the clause is to achieve in large, publicly quoted companies—which I have defined as companies employing more than 2,000 people or having net assets in excess of £100 million—the separation of the posts of chairman and chief executive. I believe that the clause has one outstanding advantage, and that is that despite two lengthy and wide-ranging Committee stage debates on Companies Bills in the last 12 months, this is a subject that has not been touched on.
      It has, therefore, at least the benefit of originality and freshness.
      The clause also follows logically from the interesting debate we have just had on the issue of the statutory imposition of supervisory boards. I am against the legal imposition of supervisory boards, though I am all for companies, within their articles of association, developing in that way if they wish. In the holding company structure we already have many companies in this country with supervisory boards.
      I am also against the legal imposition of employee directors, although I am all for companies, by consultation between boards and works councils if they so desire, having some representatives of their workforce on the board. That is a proper decision for companies to take.
      My approach to corporate structure has always been that I prefer us to make use of the strengths within the present structure of companies. I do not believe in too much change, but I believe in using the

      1481
      positions of chairman, managing director, executive directors and non-executive directors to the full and, by implication, within a unitary hoard structure, making use of the creative tensions which can, and probably should, exist between executives and non-executives.
      That has led me to my view, which is shared by a number of my hon. Friends, that in the larger publicly quoted companies the positions of chairman and chief executive should be divorced and held by separate people. In discussions with outside organisations I have found that that view has wide support among those concerned with corporate structure.
      In large companies the chairman and the managing director have different jobs. The chairman is responsible for the social audit functions—keeping in touch with Governments and local authorities, being concerned about the environment and public relations, travelling round this country and the world meeting chairmen of other companies and forming impressions of how the industry in which he is involved is changing and developing. Above all, he is responsible to both shareholders and employees for overseeing and criticising the executive function.
      The chief executive is the most senior representative of management. His job is to maximise profits, develop new products, expand overseas and see that the company is in the market place ahead of its competitors. By definition, he cannot be the best judge and critic of himself and the performance of the management that reports to him.
      In suggesting the separation of the posts of chairman and chief executive I am introducing into the unitary board an element of the supervisory function, because if my suggestion were incorporated into the law the chairman and non-executive directors would, within a unitary board, be the supervisors of the managing director and the executive directors. We would be using to the full the strengths and tensions within the existing unitary board structure.
      In our large companies there is too much danger of the personalisation of companies. Often an individual becomes lionised and the company comes to be thought of as his creation and empire. The hon. Member for Keighley (Mr. Cryer) referred to Mr. Rowland and Lonrho.
      1482
      That is one example of a company being identified with an individual, and we can all think of others.
      The danger is that when such an individual has an accident, or dies or has to retire suddenly through ill health there may be a feeling that the whole company and its fortunes cound be in difficulties. The advantage of my proposal is that the concentration of a company's reputation and public image round one person would obviously be limited, at least halved, if the chairman and the chief executive were separate people.
      9.30 pm
      I quite understand that the chairmen who are already chief executives could complain about my proposal. Indeed, I have received some correspondence to that effect. That does not surprise me. If they consider the matter further they will realise that all my proposal calls for is a reorganisation of their functions. They would be reminded that, as chairmen, they are above all else chairmen of boards. Their primary duty is to the shareholders and the employees, whereas the chief executive or managing director has a duty to maximise the performance of management.
      The second half of my new clause calls formally for shareholders' resolutions to approve at a general meeting the appointment of chairman and managing director, and for their reappointment at intervals of not less than five years.
      It is an irony of our present position that in many articles of association the chief executive is appointed by the board, but that that appointment is not subject to confirmation by the shareholders. The appointment of non-executive directors to the board—who have a less important function in the company than that of the chief executive—must be ratified by the shareholders. That is an irony and an anomaly that should be rectified. It is one of the purposes of the second half of my new clause. Another purpose is to ensure that the appointment is checked and revalidated at the end of every five years.
      I do not wish to protract my opening remarks, but I think that it is a subject that deserves consideration. As I said earlier, it has not been brought up in Committee stages of other company law Bills in the past 12 months. I shall be

      1483
      interested to hear my hon. Friend the Minister's remarks when he replies.
      Mr. Parkinson: As my hon. Friend the Member for Mid-Sussex (Mr. Renton) said, one of the advantages of the debate is that it has an air of novelty about it. Almost every other subject that we have discussed in the past two days we have had the opportunity in Committee and in the House of discussing at least four or five times in the past 18 months. I wish to thank my hon. Friend for injecting this note of novelty into our proceedings. I am afraid that the remainder of my remarks may not be so welcome to him.
      While we accept the validity of my hon. Friend's remarks, and while it may be desirable in some cases to separate the job of chairman from that of managing director, we think that it would be wrong to impose that as a condition on companies. As a statutory imposition, it would be a mistake.
      Such an imposition may have the appearance of doing a number of the things that my hon. Friend said, but a strong chairman might, as a formality, elevate one of his colleagues to the position of managing director simply to comply with the rules. He would not be observing the spirit of my hon. Friend's remarks but merely complying with the law. That would open the door to a window-dressing operation which would satisfy the requirements of the law but do nothing to promote the objectives that my hon. Friend had in mind when he moved the clause.
      It was interesting to note that in the Watkinson report a few years ago, when Lord Watkinson was keen on the idea that there was a strong case for separation, he said that
      "experience in a wide range of companies shows that it is a matter in which some flexibility is essential."
      Once one builds into the law the sort of requirements that my hon. Friend has outlined, flexibility flies straight out of the window. Therefore, I am not attracted to the idea that we should impose this as an obligation on the range of companies that he described.
      I have much more sympathy with the points that my hon. Friend made in the second half of his speech. He said that the appointment of the chairman and
      1484
      chief executive was a fairly major event about which the shareholders ought to have an opportunity of expressing a view, and that they ought to have the opportunity to reaffirm their decision at regular intervals.
      I do not want to give my hon. Friend a cast-iron commitment, but we shall read what he has said with great interest. We shall certainly look with particular interest at the second half of the new clause and the ideas that he promotes in it. I shall keep in touch with him as our thoughts develop, and it may well be that in our next Bill, which will be introduced in the next Session, we shall be able to meet some of the points that he has made so persuasively tonight.
      Mr. Clinton Davis: I heard—I do not have to read it again—the speech of the hon. Member for Mid-Sussex (Mr. Renton). It was a most interesting speech, and the hon. Gentleman put forward many constructive ideas. But evidently those chairmen and chief executives who have written to him in such numbers will be able to breathe again and will be able to sleep in their beds tonight in absolutely security.
      I hope that the Minister will give careful thought to this idea. It has been embarked upon with some success in the United States. I am not quite sure whether it is a mandatory provision there, or whether it was something recommended by the SEC. My recollection does not enable me to recall exactly what the situation is. However, I know that in most instances there is a separation, and it seems to be something that has worked remarkably well.
      I hope that this is not something that will die with the debate tonight. The Minister said that he would look at one part of the new clause. I hope that he will look at both parts, because I believe that the hon. Gentleman has made a number of interesting points.
      Mr. Renton: My hon. Friend has given me one crutch of comfort without giving me the second. I also thank the hon. Member for Hackney, Central (Mr. Davis) for his reference to practice in the United States. He is right, in that evidently there is a separation of duties.
      I do not propose to remind my hon. Friend at quite the same length as the

      1485
      right hon. and learned Member for Warley, West (Mr. Archer) that this is a matter which will not go away. I shall be looking with great interest at what is contained in the next companies Bill. I thank him for his offer to keep in touch with me about it in the meantime.
      I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 34

      APPOINTMENT OF DIRECTORS
      '(1) No election of a director of a public company shall be a valid election unless—

      (a) he is already a director of the company, and is seeking re-election, or

      (b) a statement in respect of his qualifications to be a director was circulated to the members before the meeting at which he was elected in accordance with the provisions of section 140 of the Companies Act 1948.

      (2) For the purposes of this section the number of members necessary for a requisition under the terms of section 140 of the Companies Act 1948 shall be—

      (a) any number of members representing not less than one-fiftieth of the total voting rights of all the members having at the date of requisition a right to vote at the meeting to which the requisition relates; or

      (b) not less than ten members holding shares in the company in which there has been paid up a minimum sum, per member, of not less than one thousand pounds.'. —[Sir Brandon Rhys Williams.]

      Brought up, and read the First time.
      Sir Brandon Rhys Williams: I beg to move, That the clause be read a Second time.
      It gave me great pleasure, Mr. Speaker, to discover that there had been an amendment to your selection list for today and that you had decided to include the opportunity for me to introduce a debate on new clause 34.
      I do not need to introduce it at enormous length. The House is possibly aware by now that I believe that it is most important that public companies should appoint non-executive directors. I fully recognise the arguments of those who say that the selection of suitable people to be non-executive directors is extremely important.
      1486
      With regard to the procedure for the election of directors, the Companies Act as it stands is somewhat imprecise. All too often what happens is that when a board vacancy arises it is filled by the existing members of the board, and when the person who has been chosen as an interim measure comes up for ratification at the annual general meeting, his appointment is almost invariably approved automatically.
      If the vacancy first arises the directors will make a nomination at the annual general meeting. No other person normally will be nominated and the few shareholders present with any interest in what is happening will automatically approve the name that is put in front of them, whether or not that person is suitable for the job. I am not trying to say that boards of directors consist of unsuitable people. But we need to be more careful about the selection of non-executive directors. I have been asking myself for some time how we can solve the problem of making sure that the right people are chosen for this role. We must find a way of enabling the shareholders to play a more active and better-informed part in the appointment of directors, and we should seek to ensure that vacancies are filled after a contest, rather than by the adoption of the only name put forward.
      I have sought to devise a way in which, through a small change in the Companies Act 1948, names could be put before shareholders sufficiently long in advance for them to be able to consider the qualifications of the various candidates, and possibly to take advice through the press or from other comment that they might receive, and to make an informed judgment.
      I realise that it is difficult for a small shareholder to differentiate between the qualifications of one candidate and another. But the institutional investor could adopt the role of selection agent—if I may call it that—between different candidates for board responsibilities.
      I have often made the point that we must try to find ways of helping institutions to take a more active hand in management without becoming insider traders. This is one of the ways in which institutional investors could exercise a benign influence without stepping ahead

      1487
      of the other shareholders, or seeking to acquire inside knowledge which, inevitably, over the course of time, would colour their investment judgment. In a question of choice of personalities, the institutions could begin to play an extremely responsible and important role.
      Section 140 of the 1948 Act already allows certain bodies of shareholders to require the companies to circulate to the members notices that they think are important. I do not see why that section should not be used to require the company to let the members know in advance of an election of a candidate that it wishes to propose, so that the shareholders are warned that there is to be an election. A group of shareholders, other than the board, could also put forward a candidate, and circulate his name and particulars to the shareholders at the company's expense.
      The criteria in the existing Act are, I believe, too difficult. Therefore, in new clause 34 I have tried to suggest a way in which the conditions might be modified so that a group of shareholders could work together to bring new blood to the board, without being baffled by procedure.
      My particular recommendation is that a group of shareholders with as little as 2 per cent. of the equity might be entitled to require the company to circulate the name and particulars of its candidate. That would allow perhaps even one important investing institution, or a group of investing institutions with small holdings, to come together to suggest one or two candidates who might have a beneficial effect if they were elected to the board. I have not forgotten the small shareholders. I have suggested that as few as 10 members with a holding of £1,000 could also put up their own candidate.
      9.45 pm
      These are, of course, matters for further discussion. I recognise that it is very unlikely that a clause drafted by a Back Bencher will be in a sufficiently accurate form to be adopted as it stands. But I hope that my hon. Friend—I know that he has given the subject a good deal of thought—may be prepared to look further into the possibilities of what I am suggesting, and that a reform on these lines may be on its way to the statute book.
      Mr. Parkinson: My hon. Friend the Member for Kensington (Sir B. Rhys Williams) has, as usual, brought before the House a very interesting suggestion and has identified a problem that is, I believe, in need of an answer.
      The problem is that very few people know anything about the directors whom they elect to the boards of the companies in which they are shareholders. A name appears on the agenda saying that Mr. So-and-so is retiring by rotation and, being eligible, offers himself for reelection. The shareholders who bother to turn up hear a quick muttering and the item goes through on the nod so that there is re-elected to the board of directors a person about whom many of the shareholders know nothing.
      There is a very strong case for putting in the agenda of the annual general meeting a few details about the person whom the shareholders are being invited to reelect so that people may know for whom they are voting and for what policy—or at least have a chance to do so if they bother to read the agenda.
      The procedure suggested by my hon. Friend is very cumbersome and I do not think that it is one that I would wish to recommend to the House. But in his search to make companies more responsive to their shareholders, and in his ambition to make sure that the shareholders know something more about the people whom they are to elect as directors, my hon. Friend is to be encouraged.
      We cannot accept the clause, but we accept the spirit in which my hon. Friend moved it. We shall look at ways —perhaps a little less cumbersome than the ones he has suggested, and a little less regimented—of trying to accommodate at least some of his ambitions.
      Mr. Keith Wiekenden: Is it not the case that at present shareholders may nominate directors if they know when the annual general meeting is to be held? Provided they give the requisite notice, surely they may nominate a director. It would be a very rash shareholder who nominated such a director without circulating details to other directors.
      Mr. Parkinson: My hon. Friend is right. It is possible for shareholders

      1489
      at the moment, under the present rules, to nominate directors. It would not be a bad thing, as a matter of course, for shareholders to know a little about the people they are electing as directors of the companies in which they hold shares. After all, we all make sure that our electors know a little about us before we invite them to vote for us. We hope that sometimes it influences them.
      I have not any great ambitions about this matter, but my hon. Friend is right in constantly seeking to find ways of making companies more responsive to the views of their members and of making sure that people who run companies' affairs are properly elected by those who elect them. In those two ambitions he is to be encouraged, and it is against that background that we shall look at his suggestion.
      Sir Brandon Rhys Williams: I am very grateful to my hon. Friend, and I appreciate the welcome that he has given to the spirit that lies behind my amendment. I recognise that it would not be fruitful to press it but I hope that he will accept this much of what I have recommended, that is, that in future no election should be valid unless some particulars have been circulated beforehand of the candidate for a directorship.
      My hon. Friend is perfectly right. Shareholders can use section 140 of the Companies Act, or possibly other means, to put up a candidate for a directorship. But it is difficult and unusual for them to secure the right to require the particulars of the person they choose to be circulated in advance at the expense of the company. The more common practice is to put someone forward at the shareholders' meeting, by which time it is almost certainly too late to overcome the proxies already held by the board in favour of its own candidate.
      I should like to see the quality of all candidates for company directorships improved by the fact that boards would be ashamed to circulate the particulars of someone who was plainly not a suitable person. That would act as a barrier. More important, I am trying to provoke contests for vacancies on the boards of important companies and enable shareholders to choose between a number of good candidates.
      I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    Clause 4

      PUBLIC COMPANY NOT TO DO BUSINESS UNLESS REQUIREMENTS AS TO SHARF CAPITAL COMPLIED WITH
      Mr. Parkinson: I beg to move amendment No. 1, in page 3, line 33, leave out 'issued' and insert 'allotted'.
      Mr. Speaker: With this we may take Government amendments Nos. 5, 6, 9, 11, 12, 13, 14, 21, 51, 60, 146, 229 and 230.
      Mr. Parkinson: We now move away from the exciting parts of the Bill to the more mundane, detailed amendments. Many of these amendments represent commitments given in Committee by the Government. A considerable number of them represent undertakings given to my right hon. Friend the Member for Crosby (Sir G. Page).
      This large group of amendments has a simple and common theme running through it. They all arise from a commitment that we gave to look sympathetically at various suggestions to change "issued" to "allotted". We looked carefully at the suggestions and agreed that they were correct, and this battery of amendments is testimony to that.
      Sir Graham Page: I rise only to say "Thank you".
      Amendment agreed to.
      Mr. Parkinson: I beg to move amendment No. 2, in page 3, line 34, leave out from 'a' to end of line 39 and insert:
      'statutory declaration complying with subsection (3) below.'.
      Mr. Speaker: With this we may take Government amendments Nos. 3, 4, 8 and 23.
      Mr. Parkinson: This group of amendments gives effect to a proposal made by my right hon. Friend the Member for Crosby (Sir G. Page) in Committee. He suggested that statutory declarations required by the Bill should be able to be signed by a director or secretary rather than by not fewer than two directors of

      1491
      a company. We agreed in Committee that this was sensible. These amendments represent the fact that my right hon. Friend won this particular argument.
      Amendment agreed to.
      Amendments made: No. 3, in page 3, line 40, leave out 'written statement' and insert 'statutory declaration'.
      No. 4, in page 3, line 42, at end insert—
      '(aa) the nominal value of the company's allotted share capital is not less than the authorised minimum;'.
      No. 5, in page 3, line 44, leave out 'issued' and insert 'allotted'.
      No. 6, in page 4, line 11, leave out 'issued' and insert 'allotted'.—[Mr. Parkinson.]
      Mr. Parkinson: I beg to move amendment No. 7, in page 4, line 11, leave out 'allotted as'.
      The purpose of this amendment, which flows from a recent comment by the Law Society of England and Wales, is to widen the range of shares that can count towards the minimum allotted share capital of a public company. Under clause 4, when a public company formed under clause 3 applies for its certificate to commence business, it has to satisfy the Registrar of Companies that its allotted share capital is not less than the authorised minimum, which is at present £50,000. However, it cannot count shares allotted under an employee share scheme where the shares, by virtue of a special derogation, have not been paid up as to 25 per cent. of their nominal value and the whole of any premium.
      However, where shares allotted under any employee share scheme have been allotted as paid up to at least 25 per cent. of the nominal value, together with the whole of the amount of any premium, they can count towards the authorised minimum.
      The Law Society pointed out to us that, if an employee share scheme is allotted as paid up to less than the critical level, but before the application is made for a certificate under clause 4 it is further paid up to above that level, the subsection, as drafted, excludes it. There is no good reason for that, but it happens because
      1492
      the subsection refers in line 11 to "allotted as paid up" and so on. By removing "allotted as" the amendment removes a needless restriction.
      Amendment agreed to.

    Clause 5

      RE-REGISTRATION OF PRIVATE COMPANIES AS PUBLIC COMPANIES
      Amendments made: No. 8, in page 5, line 24, leave out
      'not less than two directors'
      and insert 'a director or secretary'.
      No. 9, in page 6, line 25, leave out 'issued' and insert 'allotted'.—[Mr. Parkinson.]
      Mr. Parkinson: I beg to move amendment No. 10, in page 6, line 30, leave out first 'the' and insert 'any'.
      This amendment changes a reference to
      "the alterations in the memorandum and articles"
      to
      "any alterations in the memorandum and articles".
      As such, it is hardly an earth-shattering event. This is necessary because, again as the Law Society pointed out, there may well be no alterations in the articles. In particular, by virtue of clause 8(7), this subsection applies to an old public company going public. The directors' resolution in such a case cannot, in fact, alter the articles. It is, therefore, more appropriate in clause 5(8) to refer to "any alterations".
      Amendment agreed to.

    Clause 6

      REQUIREMENTS AS TO SHARE CAPITAL OF PRIVATE COMPANY APPLYING TO REREGISTER AS PUBLIC
      Amendment made: No. 11, in page 8, line 9, leave out 'issued' and insert 'allotted'.—[Mr. Parkinson.]
      Sir Graham Page: I beg to move amendment No. 359, in page 8, line 19, after 'discharged', insert:
      'except by another such undertaking'.
      Mr. Speaker: With this it will be convenient to take the following amendments:
      No. 360, in page 8, line 27, after 'discharged', insert:
      'except by another such undertaking'.
      No. 362, in clause 8, page 11, line 44, after 'discharged', insert:
      'except by another such undertaking'.
      No. 363, in page 12, line 8, after 'discharged', insert:
      'except by another such undertaking'.
      Sir G. Page: This is little more than a drafting amendment. Clause 5 provides for the re-registration of a private company as a public company. Clause 6 provides that the private company has to put its share capital in order before re-registration. One of the requirements of putting its share capital in order is in clause 6(1)(c), which provides that, as a condition of re-registration, where a share has been paid up by an undertaking to do work or perform services, that undertaking must be discharged to put the share capital of the private company in order for re-registration of the company.
      The amendment would obviate the position if that undertaking were discharged by another undertaking. As I read the clause, that would be a way of getting round the Bill as it stands. The amendment would add that the undertaking must be discharged otherwise than by another undertaking of the same sort.
      It is merely a drafting amendment, but, in my view, it is necessary. The other three amendments deal with exactly the same phrases in clause 6(1)(d)(i), clause 8(11)(b) and clause 8(1)(c)(i).
      It being Ten o'clock, the debate stood adjourned.
      Ordered,
      That, at this day's sitting, the Companies Bill [Lords] may be proceeded with, though opposed, until any hour.—[Lord James Douglas-Hamilton.]
      Question again proposed, That the amendment be made.
      Mr. Eyre: My right hon. Friend the Member for Crosby (Sir G. Page) has correctly described the effect of clause
      1494
      6(1)(c). The Law Society of England and Wales has said that such an undertaking could be discharged by a further undertaking of the same sort. The same point applies to clause 6(1)(d)(ii) and clause 8(11)(b) and (c), as my right hon. Friend has shown in his amendments.
      The same difficulty could be said to arise where, for example, an undertaking to provide a non-cash consideration is substituted for a previous undertaking to pay cash. The latter would not be the subject of valuation as under clause 24. Generally, when shares are paid up by an undertaking, it is possible subsequently to vary it.
      I appreciate that the Law Society and my right hon. Friend have highlighted an area in which the statutory scheme does not cover every possibility. However, we must bear in mind that directors are under general duties towards the company. Thus, in substituting one undertaking for another, they must not prejudice the company's position. I am sure that my right hon. Friend will agree with that principle.
      In the Bill we rely on that broad duty to hack up and enhance the statutory obligation of the substitution of one consideration for another, namely, where the second consideration supports an agreement to discharge the first consideration. In deciding how far it is proper or necessary to go in statute in setting out detailed rules to cover such situations, it is entirely legitimate to rely on the common law duties of directors. I believe that taken together they provide a satisfactory answer.
      We therefore concluded—I hope that my right hon. Friend will agree—that we should not attempt to put even more complex rules into the statute. In all the circumstances, I hope that my right hon. Friend will not press the amendment.
      Sir Graham Page: I cannot help feeling that it would be even more complex to rely on half a rule and on common law for the other half. However, as my hon. Friend has put on record the way in which we may proceed, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Amendments made: No. 12, in page 8, line 44, leave out 'issued' and insert 'allotted'.
      No. 13, in page 9, line 4, leave out 'issued' and insert 'allotted'.—[Mr. Parkinson.]

    Clause 8

      OLD PUBLIC COMPANIES
      Amendment made: No. 14, in page 11, line 32, leave out 'issued' and insert 'allotted'.—[Mr. Parkinson.]
      Mr. Eyre: I beg to move amendment No. 15, in page 12, leave out lines 12 to 14.
      Clause 6(1) referred to sums being received by the company for shares. Special provision had to be made in subsection (4) for bonus shares which are fully paid up but for which no consideration is actually received. Subsection (1) was redrafted by amendment in Committee so as to refer to shares simply being paid up. Subsection (4) therefore became unnecessary and it was removed. The reference to it in clause 8(11) also needs to be removed, which is the effect of the amendment. Special provision for bonus shares was made unnecessary in the clause because of the similar drafting changes made in clause 6.
      Amendment agreed to.

    Clause 9

      FAILURE BY OLD PUBLIC COMPANY TO OBTAIN NEW CLASSIFICATION
      Sir Graham Page: I beg to move amendment No. 348, in page 12, line 27, leave out from first 'company' to 'unless' in line 28 and insert
      'shall cease to carry on business'.
      Mr. Deputy Speaker (Mr. Bernard Weatherill): With this it will be convenient to take amendment No. 349, in page 12, line 37, leave out subsection (2).
      Sir G. Page: These are amendments to clause 9, which provides for certain courses of action if an old public company fails to re-register as a new public company—what we shall come to call PLCs in due course.
      1496
      The company carries out the re-registration by delivering a statutory declaration, which was mentioned in connection with the previous amendment, under clause 8(9). That declaration shows that the company has the qualifications for the re-registration. Under Clause 9, if the company does not proceed with the re-registration of itself as a new public company, it is visited by the extraordinarily harsh provision that the company and any officer of the company who is in default shall be guilty of an offence. I cannot see the harm that is done if an old public company fails to re-register as a new public company, in itself. Of course, if the company goes on trading, it may be misleading the public.
      I should have thought that the only measure that we should take when an old public company fails to register as a new company is that it should be prevented from carrying on trading. If the directors of an old public company satisfy the conditions for the re-registration as a new public company, and if they consider that it should not apply to be reregistered, in the normal course of events they will convene a general meeting at which there will be a special resolution for the company not to be re-registered. If that resolution were not passed and if application were not made for re-registration because the directors believe that in those circumstances it is better for the company not to continue but to cease to trade, under the clause as it now stands both the company and the officers of the company will be criminals for not re-registering.
      It seems to be wrong to create a criminal offence merely for not carrying out a re-registration. Because of that, I seek by these amendments to leave out the words
      "any officer of the company who is in default shall be guilty of offence"
      and to replace them with a provision to the effect that the company should not continue to trade in those circumstances. That would mean removing subsection (2) of clause 9 which imposes the offence.
      In general, it is unnecessary in company law to create too many offences merely for not carrying out company procedure.

      1497
      If that involves harm to the public, by all means the company should be visited with stringent remedies. However, when it is a matter of not re-registering, I should have thought that all we need to say is that the company need not go on trading.
      Mr. Eyre: As my right hon. Friend the Member for Crosby (Sir G. Page) has explained, the effect of the amendments would be to remove the criminal penalties in clause 9 for old public companies which do not take the steps required of them to settle their status under clause 8 within a reasonable time. Instead of the criminal sanctions, the amendments propose that such companies should
      "cease to carry on business."
      I confess that I am not clear what is meant by ceasing to carry on business. For example, does it mean that the company has to be wound up? Does it imply that any contracts entered into by the company are to be void?
      Difficult questions are involved. My right hon. Friend will appreciate that the position of creditors, shareholders and employees could be prejudiced. For example, it is not clear whether shareholders could take any action to remedy the position. We cannot simply say that the company in question shall cease to carry on business. We cannot be certain of the effects. Such a sanction would not necessarily punish those at fault. I do not think that we should lightly impose criminal sanctions. I agree with the remarks of my right hon. Friend on that point. However, they are an appropriate penalty in this instance. It is very difficult to find another suitable penalty.
      An offence will be committed under this clause only if, after the re-registration period, the company has not taken the necessary steps to re-register as a public or private company; that is to say, the company has not applied to be re-registered as a public company under clause 8. That means that it has not passed a special resolution not to be re-registered as a public company under clause 8, or that any such resolution has been revoked or cancelled.
      If the company's officers have not taken measures to regularise the company's position, it is right that sanctions should be
      1498
      directed at them. It is therefore appropriate to have a criminal penalty that is directed at the company, and any officer in default. Perhaps it will help my right hon. Friend if I emphasise that directors will be liable only if they are in default; in other words, if they knowingly and wilfully permit the default. If a director does all that he can to regularise the position, he will not risk criminal penalties.
      My right hon. Friend also asked whether an old public company could be wound up if it failed to re-register as a public or private company. In addition, there is a power to wind up an old public company that has failed to register as a public or private company. That is set out in schedule 3, paragraph 23. It amends section 222 of the 1948 Act. In such a case, the court would be able to balance the interests of all those concerned with the company. However, as a first resort it is appropriate—as a result of the complicated consequences of default—to have a criminal sanction against the company and those officers in default.
      I understand my right hon. Friend's reservation about creating criminal offences. However, I ask him to consider that it is difficult to find other appropriate sanctions.
      Sir Graham Page: I do not understand how it will help shareholders or creditors of the company, if officers of that company are made criminals. Of course, the company must be wound up. I was under the impression that if a company ceases to trade, that is a ground for winding it up. I contemplated that point when drafting the amendment. The company should be wound up and its creditors and shareholders should be properly dealt with. However, it should not necessarily be a criminal offence, provided that the company does not continue to trade and mislead the public. The shareholders and creditors should be dealt with in a proper fashion.
      When we get the next Companies Bill—a ghost that floats before us at every debate—I hope that my hon. Friend the Under-Secretary will come forward with a more detailed clause that will cover what happens if a public company fails to re-register as a new public company. Perhaps he will merely deal with winding

      1499
      up the company rather than with prosecuting officers. In the present circumstances, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

    Clause 10

      RE-REGISTRATION OF PUBLIC COMPANY AS PRIVATE COMPANY
      10.15 pm
      Mr. Eyre: I beg to move amendment No. 16, in page 13, line 6, leave out "and".
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 17 to 20 and No. 22.
      Mr. Eyre: Once again, these amendments arise from points made in Committee by my right hon. Friend the Member for Crosby (Sir G. Page). He questioned why it was necessary to provide criminal sanctions in clause 10 when directors of public companies did not forward to the registrar the application for a public company to be re-registered as private within the relevant period. We agreed with him that that provision was misconceived in these circumstances, and said that we would reconsider it.
      The effect of the amendments that we are proposing would be that criminal sanctions would be removed from the clause. The approach would instead be analogous to that under clause 8(8). The registrar would be able to issue the certificate required for re-registration as a private company either when the period during which an application may be made to the court for cancellation of the resolution has expired or after any such application has been withdrawn or refused, if later.
      The argument against criminal sanctions in this clause is essentially, as my right hon. Friend put it when he raised the matter, that it is a rather Draconian measure for an idle director. There could be civil remedies available where the directors have ignored the wishes of the shareholders, and, of course, there would be the sanction of an ordinary resolution to remove the directors. Criminal sanctions are not provided in similar circumstances under clause 5, when directors of a private company do not apply, follow-
      1500
      ing a special resolution, to become public. Nor are there such sanctions in the 1967 Act, where unlimited companies wish to be re-registered as limited, and vice versa.
      I said in Committee that, however, we needed to ensure that a company does not seek re-registration before the time allowed for minority shareholders to apply to the court for relief. That is achieved in the amendments by providing that the registrar shall not issue a certificate until that period has elapsed. The registrar will receive notice of that resolution by reason of section 143 of the 1948 Act. The registrar will also receive note of any application to the court under clause 11 by virtue of subsection (5) of that clause. The amendments will therefore ensure that the rights provided to minority shareholders are protected.
      Finally, a minor change incorporated in the amendments is that a reference in line 12 to the memorandum and articles being "added to" as well as altered by the resolution is removed. As was recognised in a large number of amendments agreed in the Committee, an addition to the memorandum and articles is also an alteration. We were able therefore to simplify the verbiage by removing the references to additions. We overlooked that reference to additions in clause 10, and now propose to remove it.
      I believe that my response demonstrates that we try to meet my right hon. Friend's view when we reasonably can.
      Amendment agreed to.
      Amendment made: No. 17, in page 13, line 9, leave out
      "in accordance with subsection (3) below".
      No. 18, in page 13, leave out line 12 and insert
      "by the resolution; and

      (c) the period during which an application for the cancellation of the resolution under section 11(2) below may be made has expired without any such application having been made; or

      (d) where such an application has been made, the application has been withdrawn or an order has been made under section 11(6) below confirming the resolution, and a copy of that order has been delivered to the registrar."

      No. 19, in page 13, leave out lines 17 to 38.
      No. 20, in page 13, line 39, leave out from "satisfied" to "he" in line 41 and insert
      "that a company may be re-registered under subsection (1) above'.—[Mr. Nott.]

    Clause 12

      REDUCTION BELOW AUTHORISED MINIMUM OF ISSUED SHARE CAPITAL OF PUBLIC COMPANY.
      Amendments made: No. 21, in page 16, line 3, leave out "issued" and insert "allotted".
      No. 22, in page 16, line 22, leave out "(2), (3) and (4)" and insert
      "(c) and (d) and (2)".—[Mr. Nott.]

    Clause 13

      REGISTRATION OF JOINT STOCK COMPANIES AS PUBLIC COMPANIES
      Amendment made: No. 23, in page 17, line 21, leave out
      "not less than two directors"
      and insert
      "a director or secretary".

    Clause 17

      PRE-EMPTION RIGHTS
      Sir Graham Page: I beg to move amendment No. 350, in page 22, line 5, leave out
      "his right to their allotment"
      and insert
      "the benefit of the offer".
      Clause 17 gives pre-emption rights to shareholders when a company is proposing to allot equity shares. Subsection (1) provides that the company
      "shall not allot any of those securities on any terms to any person unless it has made an offer to each person who holds relevant shares or relevant employee shares to allot him on the same or more favourable terms a proportion of those securities".
      Subsection (3) provides that if
      "a company makes an offer to allot any securities to such a holder, and…he or anyone in whose favour he has renounced his right to their allotment accepts the offer,"
      Subsection (1) does not apply. The words
      "his right to their allotment"
      seem a little inappropriate here.
      The order of events will be that the company will offer to allot securities to an existing shareholder in that same group of class of shares and then renounce. He will not at that stage have had the shares allotted to him or even have secured
      1502
      the right to their allotment. But he will be transferring or renouncing in favour of someone else the benefit that he is gaining from this allotment by the company. I suggest in this amendment that the right words are "the benefit of the offer" which is being made by the company. It is that which he is renouncing and not "his right to their allotment". It is a simple drafting point.
      Mr. Eyre: My right hon. Friend correctly described the circumstances in which the view that he has advanced about the use of the words "the benefit of the offer" come into account. This is essentially a drafting amendment put to us by the Law Society. We are grateful to my right hon. Friend for raising a point of some technicality with a view to improving the Bill.
      The Bill describes renunciation as a renunciation of the right to the allotment. It is this terminology that has been criticised by the Law Society and by my right hon. Friend on the ground that the shareholder has no right in such circumstances as he has described but only the benefit of an offer. Although this point has been carefully considered and there may be room for more than one opinion, the Government are firmly of the view that the Bill is best left as it stands. I am advised that there can be no doubt about the effect of the Bill as it is.
      It is not a misnomer to describe the shareholders as having a right in circumstances where their entitlement to be offered the shares is conferred upon them by the articles. Describing them as having the benefit of an offer may be positively misleading. They have a right, although a contingent right, to the allotment of the shares. While I am, therefore, grateful to my right hon. Friend for raising this point, I hope that, in the light of this explanation, he will feel able to withdraw the amendment.
      Sir Graham Page: Although I disagree with my hon. Friend's interpretation of the words in the Bill, he has put on record the way in which they can be interpreted. In those circumstances, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Mr. Eyre: I beg to move amendment No. 24, in page 22, line 17, at end add—
      '(4A) Subsection (1) above shall not apply in relation to the allotment of any securities which

      1503
      would apart from a renunciation or assignment of the right to their allotment be held under an employees' share scheme.'.
      The purpose of this amendment is to add a new subsection that protects companies and third parties from undesirable consequences when the right to relevant employee shares is renounced or assigned. Under the Bill as it stands, a company is free to allot relevant employee shares without offering them pre-emptively. If the employee or trustee on his behalf sells the rights before the shares are allotted, they would cease to be relevant employee shares and become relevant shares. When the company came to allot the shares to the person to whom the employee had renounced his right, the company would find that it could not allot them to him because they would be relevant shares and would not have been offered preemptively as clause 17 (1) requires.
      The amendment makes clear that in such a case the allotment of the securities can go ahead, despite the absence of a pre-emptive offer, since they would but for the renunciation have been held under employee share schemes. Thus, the amendment ensures that clause 17 does not make the rights under employee share schemes unrenounceable and therefore of less value to those entitled to them.
      Amendment agreed to.
      Sir Graham Page: I beg to move amendment No. 351, in page 23, line 5, leave out "the company, and".
      This amendment is on the same subject as that which we have been discussing on the last two amendments on the subject of the pre-emption rights of shareholders when the company is issuing or allotting equity securities. This is little more than a drafting amendment, and it has some serious implications if the Bill is left unamended.
      If a company is allotting equity securities and it fails to give the pre-emption rights that it is required to give to existing shareholders, under subsection (9)
      "the company, and every officer of the company who knowingly authorised or permitted the contravention, shall be jointly and severally liable to compensate any person to whom an offer should have been made".
      It then deals with damages that those persons may have suffered through their not getting that benefit. I question that
      1504
      the company should be made liable. I agree that officers of the company who have knowingly contravened the clause should be liable, but if we make the company liable surely it means that all the shareholders have to compensate perhaps a class of shareholders, some shareholders or even one shareholder who has not had a benefit that he ought to have had. Meanwhile, someone who ought not to have had that benefit has gained it.
      That is the simple point, but as the Bill is drafted all the shareholders—that is, the company—should, out of the assets of the company, compensate perhaps a class of shareholders who have not had the benefit. Those who benefited from one shareholder being denied that benefit are the ones to whom the shares have been allotted when they ought to have been shared out between everyone. I still cannot see why the company should be made liable, because in those circumstances someone who has no responsibility for this matter will be penalised.
      Mr. Eyre: This is an important matter, but I believe that I can show my right hon. Friend that the Bill should be left as it is.
      The question is whether, when a shareholder suffers loss because he has not received a pre-emptive offer to which he was entitled, he should have a right to claim damages against the company as well as against any officer in default. It may well be that there is no officer in default, as, for example, when a junior clerk has failed to post a letter to the shareholder. The shareholder has undoubtedly lost the benefit of the preemptive offer, and is worse off to that extent compared with the other shareholders. In the circumstances, it seems to me reasonable that he should have a remedy against the company. The company may have a claim against the individual who failed to make the preemptive offer, but that is another matter to be settled under the general law.
      As to ordering compensation from the person who benefited by the contravention, that would make sense only if he had been a party to a deliberate evasion by someone acting on behalf of the company's statutory duty. In such a case, the company would have a remedy against that defaulting employee or officer, and

      1505
      also an action in conspiracy against the recipient of the shares who was a party to the wrong. That position seems to me to be entirely right. I therefore hope that my right hon. Friend, on considering my explanation, will not press his amendment.
      Sir Graham Page: In this case I disagree so much with my hon. Friend in his making the company liable that I will not ask the leave of the House to withdraw the amendment. If my hon. Friend wishes to negative it, he can do so.
      Amendment negatived.
      10.30 pm
      Mr Eyre: I beg to move amendment No. 25, in page 23, line 44, leave out "either" and insert "both".
      Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 26.
      Mr. Eyre: The Law Society suggested to us that as presently drafted the phrase
      "either as respects dividends or as respects capital"
      in the last lines of clause 17(10 was ambiguous. Shares will confer relevant rights or non-rights as respects both dividends and capital. What we wanted to achieve was that where the rights conferred on shares were the same as respects distribution by way of dividends and as respects distribution by way of a capital and also as respects voting, they must be treated as being in the same class. However, where the rights were different in any of these respects the shares were to form separate classes.
      The amendments propose to change the reference from "either" to "both". I think that this makes the intention clear and I hope that the House will accept these small amendments.
      Amendment agreed to.
      Amendment made: No. 26, in page 23, line 45, leave out "or" and insert "and".—[Mr. Eyre.]

    Clause 24

      EXPERTS' REPORTS ON NON-CASH ASSETS REQUIRED FOR ALLOTMENT OF SHARES
      Mr. Parkinson: I beg to move amendment No. 319, in page 29, line 28, after "company", insert
      "by a person appointed by the company".
      Mr. Deputy Speaker: With this it will be convenient to take amendment No. 27, in page 30, line 11, leave out
      "that is to say, a person",
      and insert "who is", and Government amendments Nos. 28 to 33.
      Mr. Parkinson: The effect of these amendments is to ensure that the expert who carries out the report required by the clause on non-cash considerations provided in the payment of shares has to be appointed by the company.
      The Law Society of England and Wales pointed out to us that, as drafted, the clause does not specify by whom the expert may be appointed and this amendment—our having accepted the strictures of the Law Society—deals with the problem so kindly highlighted for us.
      Amendment No. 27 is concerned with the requirements as to the expert who makes the report required by clause 24 on non-cash assets provided in payment for the allotment of shares. As drafted, the Bill defines the expert as an independent person—that is to say, a person qualified at the time of the report to be appointed or to continue to be the auditor of the company.
      Amendment No. 27 would have the effect that the expert would have to meet two criteria. As well as being qualified to be the auditor, he would also have to be in some other respect independent. The question is, do we really need this additional requirement? This was discussed in Committee and we promised to consider the matter further. Indeed, following that further consideration, my hon. Friend wrote to the members of the Committee in January to say that we did not think that this change was necessary. Obviously we have not succeeded in convincing the Opposition that we were right. I would, therefore, like to explain our reasons for maintaining our view.

      1507
      The point essentially is that if a person is sufficiently independent to be the company's auditor, surely he is also independent enough to provide the sort of report required by clause 24. Section 161 of the 1948 Act lays down various provisions concerning the appointment of auditors—they must have particular professional qualifications, they cannot be officers or servants of the company and so on. Indeed, as the right hon. and learned Member for Warley, West (Mr. Archer) said in Committee, section 161 contains two sorts of qualifications—the professional qualifications and the qualifications relating to independence. That is the point. Auditors will be independent of the company. Section 161 effectively provides two tests and we see no point in duplicating those, as we believe amendment No. 27 would do.
      The purpose of Government amendments Nos. 28 to 33 is to clarify the clause, which requires an independent expert to value a consideration, other than cash, which is to pay up shares on allotment. Under subsection (4) he can, if he wishes and if it is appropriate, arrange for some other person to provide him with a valuation on which he can rely, provided that the independent person complies with the safeguards built into the clause.
      It was intended that the independent person should have the power to rely on some other person to value part of the consideration in question, with the independent person, for example, valuing the rest. However, it can be argued that the clause as drafted, and in particular subsection (4), does not permit that, but requires that the other person must value all the consideration. We believe that this inflexible all-or-nothing requirement would not be sensible and therefore the amendments spell out clearly that the independent person has the power to arrange for other persons to value part of the consideration.
      Mr. Archer: We are grateful to the Minister for Trade for setting out what is in issue in relation to our amendment No. 27. The Bill provides that the report should be made by an independent person, who is defined as a person qualified to be an auditor. As some of us said in Committee, we believe that there can be
      1508
      someone qualified to be an auditor who could not be said to be independent.
      Indeed, at some stage perhaps we should have a debate on the whole question of the independence of auditors, because I have always been a little troubled by the fact that an auditor owes his work to the fact that he is engaged by the very people on whom he is reporting. But that is perhaps a debate for another time, and I hasten to set the Minister's mind at rest: we do not propose to pursue the matter tonight, because the hour is late, but perhaps we can pursue it at another time.
      Amendment agreed to.
      Amendments made: No. 28, in page 30, line 14, after 'valuation', insert
      'of the consideration, or a valuation of part of the consideration'.
      No. 29, in page 30, line 14 after 'accept', insert 'such'.
      No. 30, in page 30, line 17 after 'consideration', insert
      'or that part of the consideration'.
      No. 31, in page 30, line 32 after 'consideration', insert
      'and, as respects so much of the consideration as he himself has valued, a description of that part of the consideration,'.
      No. 32, in page 31, line 1 leave out 'the consideration' and insert
      'so much of the consideration as was valued by that other person'.
      No. 33, in page 31, line 6 leave out
      'where the valuation was' and insert
      'in the case of a valuation'.
      —[Mr. Parkinson.]

    Clause 32

      VARIATION OF RIGHTS ATTACHED TO SPECIAL CLASSES OF SHARES
      Mr. Parkinson: I beg to move amendment No. 34, in page 39, line 16, after 'three-quarters', insert 'in nominal value'.
      Mr. Deputy Speaker: With this we may take amendments Nos. 354 and 355, and Government amendment No. 35.
      Mr. Parkinson: Amendments Nos. 34 and 35 are simple drafting changes which are needed to ensure that the proportion of the holders needed for consent to the variations in rights of classes of shareholders is decided with reference to the nominal value of the shares held rather

      1509
      than to just the number of shares. That is the sole and, believe, acceptable reason behind the amendments.
      Amendments Nos. 354 and 355 in the name of my right hon. Friend the Member for Crosby (Sir G. Page) are drafting changes. The Government accept the reasoning behind them and once again my right hon. Friend is making his mark on the legislation.
      The logic behind Government amendment No. 35 and the reason for it are exactly the same as the reason behind amendment No. 34. I have achieved my mission when I thought that I was only half-way through it.
      Sir Graham Page: Perhaps I can deal with amendments Nos. 354 and 355. In thanking my hon. Friend for accepting them, I wish to put on record the reason behind them.
      Subsection (6)(a) requires as a quorum
      "two persons at least holding or representing by proxy one-third of the issued shares of the class".
      A quorum is the fixed number of persons that must be present to make valid the proceedings of a meeting. Therefore, it cannot be "at least a quorum". Either it is a quorum or it is not. That is why I have changed the position of the words "at least". They refer to the number of shares. They should come before the number of shares and not refer to the quorum, otherwise we should be using "quorum" in quite the wrong sense of the word.
      Amendment agreed to.
      Amendments made: No. 354, in page 40, line 24, leave out 'at least'.
      No. 355, in page 40, line 25, after 'proxy', insert 'at least'.—[Sir Graham Page.]
      No. 35, in page 40, line 25, after 'one-third', insert 'in nominal value'.—[Mr. Parkinson.]

    Clause 34

      OBLIGATION TO CONVENE EXTRAORDINARY GENERAL MEETING IN EVENT OF SERIOUS LOSS OF CAPITAL
      Mr. Archer: I beg to move amendment No. 39, in page 42, line 8, leave out 'public'.
      Mr. Deputy Speaker: With this, we may take amendment No. 40, in page 42, line 17, leave out 'public'.
      Mr. Archer: These amendments at least have the merit of making their purpose clear immediately on reading them. Therefore, I can spare the House a long exposition of their purpose. It is not a merit that is shared with all the amendments to the Bill.
      Clause 34 relates to the action to be taken where it emerges that there has been a serious loss in the value of the company's capital assets. Everybody agrees that that would be a serious position for any company. It would be serious for the shareholders, the creditors and the employees. It could mean that the company would not be able to meet its actual or potential obligations. It must at least raise the query whether the company could continue business.
      There may be a legitimate argument about what action the company should take in those circumstances. Certainly it is clear that it should take some decisive action. The Bill provides that the company should convene an extraordinary general meeting and that the directors should report the position to the shareholders. Although some Labour Members thought that there might be other action that should be taken, that is not at issue on this amendment.
      What is at issue is whether those provisions should apply to a public company only. What is it about a private company which makes such provisions unnecessary in its case? Surely it is just as serious a matter for a private company. It will cast just as grave a doubt over the company's future. It is important that the members of the company should be consulted.
      We discussed the matter in Committee, and it is reported in the Official Report of 15 November 1979, at column 203 and succeeding columns. Why would it impose an undue burden on private companies to make the directors keep an eye on the assets? The obligation in the Bill is not a particularly onerous duty to look at the accounts, because it arises expressly not later than 28 days from the earliest day on which that fact is known to a director. In fact, the Minister for Trade was kind enough to tell us that in his view there was not even room for the doc-

      1511
      trine of constructive knowledge. That caused some of us some anxiety, but again that does not arise on this amendment.
      10.45 pm
      It is not true that every private company is of interest only to a small family. It is not even true that every member of every family confides all his knowledge to other members. Not every family is totally intra-communicative. The right hon. Member for Crosby (Sir G. Page) echoed my puzzlement over why that distinction should be made. but, to be fair, he was questioning whether the obligation should be imposed at all, and he asked "Why this distinction?".
      As I understood him, the Under-Secretary replied that all this was at a very early stage, that we were breaking new ground and that we ought to see how it worked before we extended it to private companies. His reasoning seems to be "We are not quite sure whether what we are doing is right. We are only exploring it. Therefore, we shall apply it to some companies and not to others". That is like the reasoning of the signalman at the level crossing who said that he had his gates half open because he was half expecting a train.
      I cannot be accused—I hope that no Labour Member can—of being insensitive to the problems of small companies. We do not want to impose particularly heavy burdens upon them to no purpose. But I am still puzzled why this distinction should be imposed in this context. Surely it is an important element of protection. It cannot be said that it is to no purpose. It does not impose a heavy obligation upon them. It is an obligation which any assiduous director can take in his stride.
      The Under-Secretary has had time to reflect. He may be able to produce a more convincing reason, but in the absence of one we shall persist with our query.
      Mr. Martin Stevens: Following the comments of the right hon. and learned Member for Warley, East—
      Mr. Archer: West.
      Mr. Stevens: I beg the right hon. and learned Gentleman's pardon and that of his distinguished constituency. I should like to develop a point that he made.
      1512
      During the passage of the Bill through Committee we were all conscious that we were loading many duties on to company directors and others which should not only be tolerable and comprehensible, but also, desirably, enforceable.
      In the passage to which the amendment applies we are saying that any company director who becomes aware of a fall in the value of the company's assets, in comparison with the called-up share capital, shall be guilty of an offence if he wilfully and knowingly fails to cause a meeting to be called. It seems to me that that is a difficult point to prove in law. We are requiring the law to prove a negative. As I told my hon. Friend the Minister for Trade in Committee, if we accept this kind of amendment, can we not make it simpler to apply by making the duty to call the meeting the absolute duty of a named officer of the company, rather than a general duty of all the officers?
      If, as in the case of the depositing of the company returns with the registrar, the duty were an absolute offence, it would be something that everyone could understand. It would be easy to enforce, and if it were applied to a single officer of the company it would take it out of the area of vagueness and doubt and put it into the area of certainty. I ask my hon. Friend to consider the point.
      Mr. Parkinson: I shall consider the point raised by my hon. Friend the Member for Fulham (Mr. Stevens), but it might have the result of making one director a rather worried man, even if it made the rest rather more relaxed because they knew that they were absolved from any responsibility. I am not sure that the point is a very strong one, but we shall consider it.
      The right hon. and learned Member for Warley, West (Mr. Archer) asked why we apply this requirement to public companies and not to private ones. There is only one reason why we are applying it to any company. It is because article 17 of the second directive insists that we apply it to public companies. I cannot imagine that we would have volunteered to introduce the clause into our own company law. It is a highly experimental clause. It may prove to be of value; we do not know. It is an interesting suggestion. But I am by no means convinced

      1513
      of its value. If we are to meet our Community obligations we have to apply it to public companies, and therefore we do so in the Bill.
      That is the first reason why we have to do it, and why, therefore, we shall do it. We regard it as experimental, we are not convinced of its value, although we are intrigued about how it will work in practice.
      It does not seem to me, therefore, since it is essentially experimental, that we should impose it on the 650,000 private companies on which we do not have to impose it. If as an experiment it proves to be worth while, we can extend it to the smaller private company.
      It was the hon. Member for Caithness and Sutherland (Mr. Maclennan) who, when we discussed the previous Government's Companies Bill, pointed out that over 600,000 registered companies are exempt private companies—companies which would have qualified for exempt private status. They are essentially small companies, with a limited range of shareholders. In tens of thousands—probably hundreds of thousands—of cases the shareholders are the directors. It is utterly absurd, therefore, to impose on them a duty to call a meeting which they will attend themselves so that they can discuss the affairs of the company when they probably live day and night with them. That does not seem to be particularly sensible.
      Our attitude to these amendments is that we accepted an obligation to introduce the clause into our law, that we are sceptical about its value, but that we are willing to be impressed. However, since it is so experimental, we do not think that we should impose it on the 650,000 companies on which we do not have to impose it.
      If the right hon. and learned Gentleman were to choose to force the House to vote on the amendment—I can see that the Opposition spokesmen have kept their colleagues behind them because they feel so strongly about the matter—we should be forced to resist it.
      Sir Graham Page: I entirely agree with my hon. Friend the Minister for Trade that this provision ought not to apply to private companies. I say that because there was some implication—
      1514
      although the right hon. and learned Member for Warley, West (Mr. Archer) was quite fair to me—that I want it to apply to private companies. That is the last thing that I want.
      Clause 34(1) is most complicated, and I do not know how anyone can carry out the duties within 28 days of knowing that the company has assets of only half the amount of its called-up share capital. It means that someone will have to value the assets every day. There will be dispute after dispute on the value of the assets. What happens when the value of property changes from day to day? What happens when the rate of inflation changes from day to day? How will anyone be able to say that the assets are half the value of the called-up share capital?
      I am making this impassioned plea because I suggest that the Minister could have left out subsection (2) altogether. That is the subsection which creates this offence if subsection (1) is not carried out. Our obligation under any EEC directive or regulation is to make a law which provides that this shall be done or this shall not be done. There is no obligation to make anything an offence. That is left to each nation of the Community. We have on occasions merely made a declaratory statement to enforce a directive or a regulation and left it without making it an offence. It is ridiculous to ask us to do this. Therefore, I think that in this instance we might make some protest by leaving out the offence provision.
      Mr. Archer: I have always believed that there was merit in our membership of the EEC. Clearly, part of that merit is that otherwise we would not have had what seems to me to be an eminently sensible provision.
      I was shocked by what was said by the right hon. Member for Crosby (Sir G. Page). I hope that we shall not normally seek to comply with our international obligations by putting on the statute book duties of imperfect obligation and just leaving them there.
      Sir Graham Page: Not imperfect. It would be left for the company to enforce it. It would make it not an offence against the company or its officers, but merely an obligation on the company

      1515
      towards the company, as we have elsewhere in the Bill.
      Mr. Archer: I should hate to be counsel who would formulate a cause of action on behalf of the company. But perhaps it is a little late to become involved in that matter.
      As regards the problem of applying this in an inflationary situation, the right hon. Gentleman may recollect that in Committee his hon. Friend the Member for Kensington (Sir B. Rhys Williams) suggested a way of dealing with that matter.
      There it is. I should like to see more of a good thing. However, since it appears that the Government would not even have gone this far of their own volition, we must be grateful for such blessings as we have. We would not wish to prejudice the Government's prospects of extracting £1,000 million from the EEC. Therefore, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

    Clause 35

      ACQUISITION OF A COMPANY'S SHARES BY THE COMPANY
      Mr. Eyre: I beg to move amendment No. 41, in page 42, line 33, at beginning insert
      "Except as provided by subsection (1A) below,".
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 42, 49, 50, 52 and 53 and the following amendments:
      No. 364, in clause 36, page 44, line 11, at end insert—
      "(b) to shares acquired by a nomineee of a company in the ordinary course of its business as a trustee and when the company has no beneficial interest in the share; or".
      Government amendment No. 305, in clause 37, page 44, line 30, at end add—
      "In determining for the purposes of paragraph (aa) and (b) above whether a company has a beneficial interest in any shares, there shall be disregarded, in any case where the company is a trustee (whether as personal representative or otherwise), any right of the company (as trustees) to recover its expenses or be remunerated out of the trust property.".
      Amendment (a) to Government amendment No. 305, in line 1, leave out
      "paragraphs (aa) and (b) above"
      1516
      and insert
      "section 36 above and this section".
      Mr. Eyre: These amendments arise from a commitment that we gave in Committee to meet points made by my right hon. Friend the Member for Crosby (Sir G. Page). He pointed out that under the existing law a company may receive a gift of its own shares but may not hold them directly in its own name. It must arrange for a nominee to hold the shares, as was the case in re Castiglione.
      My right hon. Friend argued that there was no sensible reason why the company should always have to put such shares in the name of a nominee. I was grateful to him for raising this matter because although, as he said, it is hardly a vital issue, one way or the other, we agree that it is unnecessary to maintain the need for a nominee in such cases. The amendments therefore change this rule by allowing companies to acquire their own shares by way of gift. This change will undoubtedly delight new generations of law students.
      The amendments to clause 37 are called for by articles 19 to 22 of the second directive and treat shares given to the company in the same way as other shares falling under clause 37; that is, voting rights in respect of the shares may not be exercised, the company must cancel or dispose of the shares within three years, and so forth. These provisions apply only to public companies.
      The amendment to clause 35 will apply to all companies and will allow both public and private companies to acquire their own shares by way of gift. Whether companies should be allowed to purchase their shares for valuable consideration is another question. We attach high priority to relaxing this rule, mainly as a means—I think that this will please my right hon. Friend—of enabling small companies to operate and grow. A consultative document is at an advanced stage of preparation. It will set out an examination of the complex issues that are involved. This is a matter that will require careful consideration. We intend that our consultation will lead to legislation in our Companies Bill next Session.
      The amendment is a minor rationalisation which I am sure will be welcomed. I am grateful to my right hon. Friend, as I am sure companies will be, for

      1517
      prompting this useful change, which I commend to the House.
      11 pm
      Sir Graham Page: I am grateful to my hon. Friend for tabling the right amendments. I tabled amendments No. 364 and (a) to 305. My amendments are well covered by the Government's amendments and I need not argue the proposals contained in them. Amendment No. 364 is an amendment to clause 36. That is why I tabled the amendment to the Minister's amendment. Neither of my amendments is now necessary. I am grateful to my hon. Friend. It is an important issue, and it has been cleared up by the Government's amendments.
      Amendment agreed to.
      Amendment made: No. 42, in page 42, line 35, at end add—
      "(1A) A company limited by shares may acquire any of its own fully paid shares otherwise than for valuable consideration.".—[Mr. Eyre.]

    Clause 36

      ACQUISITION OF SHARES IN A COMPANY BY COMPANY'S NOMINEE
      Mr. Eyre: I beg to move amendment No. 43, in page 43, line 18, leave out 'subsection (5)' and insert 'subsections (5) and (6)'.
      Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments No. 44 to 48.
      Mr. Eyre: The purpose of the amendments is to modify the operation of what is presently subsection (5). That subsection contains two exemptions from the provisions of the clause.
      The first exemption applies where a nominee for a public company acquires shares in that company in circumstances where clause 37(1)(c) applies. That is where the company provides financial assistance for the acquisition and acquires a beneficial interest. Such assistance is of course likely to be in breach of section 54 of the Companies Act 1948, but none the less there is recent authority in the Court of Appeal that the company may acquire a beneficial interest in the shares, since recognising such an interest
      1518
      protects creditors and section 54 is intended to protect creditors.
      The first exemption deals with this case. As presently drafted, it exempts such cases entirely from subsection (1) and from subsection (2). Subsection (1) strikes down the beneficial interest of the company when the nominee takes shares on subscription from the company and where he acquires partly paid-up shares from third parties. The exemption is therefore necessary, otherwise the company's beneficial interest will be destroyed. However, in the somewhat unusual case of a nominee for the company taking shares on subscription from the company, the second directive insists that the company should acquire no beneficial interest, and therefore the exemption as presently drafted goes too wide. The effect of amendment No. 46 is to exclude from the exemption cases where subscription is involved.
      The first exemption in subsection (5) also operates at present to exclude subsection (2) in such cases. Subsection (2) imposes personal liability on those responsible for the improper subscription or acquisition, and there is no reason why they should be exempted because they have contravened section 54 of the 1948 Act. Amendment No. 45 therefore operates to restrict the first exemption to subsection (1).
      Amendments Nos. 47, 48, and 44 are simply consequential drafting amendments which do not alter the amendment before us.
      Amendment agreed to.
      Amendments made:
      No. 44, in page 43, line 25 leave out "as aforesaid" and insert "to subsection (6) below".
      No. 45, in page 44, line 9 leave out
      "The foregoing provisions of this section"
      and insert "Subsection (1) above".
      No. 46, in page 44, line 10 after "acquired", insert "otherwise than by subscription".
      No. 47, in page 44, line 11 leave out "or".
      No. 48, in page 44, line 12 at beginning insert—
      "(6) Subsections (1) and (2) above shall not apply".—[Mr. Eyre.]

    Clause 37

      TREATMENT OF SHARES HELD BY OR BEHALF OF A PUBLIC COMPANY
      Amendments made:
      No. 49, in page 44, line 20, at end add—
      "(aa) where shares in the company are otherwise acquired by the company and the company has a beneficial interest in those shares;".
      No. 305, in page 44, line 30, at end add—
      "In determining for the purposes of paragraphs (aa) and (b) above whether a company has a beneficial interest in any shares, there shall be disregarded, in any case where the company is a trustee (whether as personal representative or otherwise), any right of the company (as trustee) to recover its expenses or be remunerated out of the trust property.".
      No. 50, in page 44, line 34, after "(1)", insert (aa)".
      No. 51, in page 44, line 39, leave out "issued" and insert "allotted".
      No. 52, in page 45, line 44, at end add—
      "or are otherwise acquired by the company".
      No. 53, in page 46, line 22, after "(1)", insert "(aa) or".—[Mr. Eyre.]

    Clause 38

      CHARGES TAKEN BY PUBLIC COMPANIES ON OWN SHARES
      Mr. Parkinson: I beg to move amendment No. 54, in page 46, line 40, leave out "taken by" and insert "of".
      Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 55 and amendment No. 365, in page 47, line 11, at end insert—
      "(e) in the case of a company acting as a trustee, any lien or equitable charge which it acquires over its own shares, in its capacity as such trustee".
      Mr. Parkinson: As you can see, Mr. Deputy Speaker, I am having great difficulty in containing myself as we tear through this exciting part of the Bill. In the Department we describe clauses such as clause 38 as "Page country". It is an area into which Ministers venture rarely and where my right hon. Friend the Member for Crosby (Sir G. Page) romps around with absolute confidence and serenity.
      1520
      The amendments, as one might guess, are technical amendments to clause 38 (2)(b), and seek to broaden its scope somewhat. Clause 38 implements the directive requirement and provides that liens or other charges taken by a public company over its own shares, whether taken expressly or otherwise, shall be void unless permitted by subsection (2). Subsection (2)(b) is one of the exceptions and operates for what may broadly be called financial institutions. It refers to a charge taken by the company on its own shares, whether fully paid or not, as security for the purposes of a transaction entered into by the company in the ordinary course of its business. The problem is that certain liens arise in the course of dealings and it is hard to say that they are taken by the company as security for the purposes of a transaction, but, rather, they tend to arise in connection with such transactions.
      Therefore, as drafted, it might be held that as such they did not come within clause 38(2)(b). To ensure that they are protected the amendment would change the relevant phrase to:
      "a charge of the company on its own shares, whether fully paid or not, which arises in connection with a transaction entered into by the company in the ordinary course of its business."
      With your permission, Mr. Deputy Speaker, I should like to comment on the amendment which is shortly to be moved by my right hon. Friend the Member for Crosby. I hope that the House will forgive me if I refer regularly to my notes on this technical amendment. The amendment raises the question of the lien which a trustee company may have over a trust property, where the trust property includes shares in the trustee company. Whether this would be prohibited by clause 38 depends on a number of circumstances. The prohibition in clause 38(1) bites only on public companies.
      Many trustee companies are wholly owned subsidiaries of other companies. Where the trustee company has a lien over the shares in its parent, that is not affected by clause 38. In the unusual case where the trustee company is a public company and has a lien over its own shares because it is a trustee, the validity of the lien will depend upon whether it comes within clause 38(2)(b). I understand that certain banks carry on

      1521
      their trustee business in their own name as a department of the bank rather than as a subsidiary. In that case, they seem to come within the defence in subsection (2)(b). If their ordinary business is not such as to bring them within subsection (2)(b), the lien would be void unless it came within subsection (2) (c) or (d). However, I am advised that a specific defence for trustees' lien would not be within the directive. I therefore hope that my right hon. Friend will not press the amendment.
      Sir Graham Page: I am grateful to my hon. Friend for amendments Nos. 54 and 55. They cover what I have tried to achieve in amendment No. 365, which states:
      "in the case of a company acting as a trustee, any lien or equitable charge which it acquires over its own shares in its capacity as such trustee".
      I was convinced that amendments Nos. 54 and 55 achieved that which I had tried to achieve in amendment No. 365. I thought that they had achieved the same end neatly, and by using only a few words, but my hon. Friend has now sown doubt in my mind. I understand from his comments about my amendment that he does not like it. He seemed to be saying that his amendment did not cover it. However, I think that he has satisfied my aims. I shall therefore be satisfied with amendments Nos. 54 and 55.
      Mr. Clinton Davis: I was troubled by the initial remarks of the right hon. Member for Crosby (Sir G. Page). Rarely have the people of Hackney, Central felt so strongly about anything. They are delighted that the Government have responded by improving this Bill in such a meaningful and direct way. We in Hackney, Central are therefore delighted. I can now call the demonstration off.
      Amendment agreed to.
      Amendment made: No. 55, in page 46, line 41 leave out
      'as security for the purposes of'
      and insert
      'which arises in connection with'.—[Mr. Parkinson.]

    Clause 39

      PROFITS AVAILABLE FOR DISTRIBUTION
      Mr. Eyre: I beg to move amendment No. 325, in page 47, line 18 leave out '41(3)' and insert '41(1)'.
      Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 338, 326, 327, 328, 429, 330, 331, 332 and 333.
      Mr. Eyre: Clause 41 takes advantage of a derogation in the European Community's second directive, obtained by the United Kingdom on behalf of the investment trust companies. It deals with the problem that could arise if the rules in clause 40, dealing with capital maintenance, were applied to investment trust companies. The articles of investment trust companies prevent them from distributing capital profits. If such a company invested substantial sums in shares whose market value had subsequently fallen, the net asset shown in its accounts could fall below the aggregate of the called-up share capital and the undistributable reserves.
      The company would therefore be unable to make a distribution out of current income. Furthermore, an investment company which failed to distribute its current income would lose its special position under tax legislation regarding capital gains tax. Clause 41 applies different rules to investment companies in order to overcome that problem. However, as drafted, the clause envisages a continuing role for my Department in issuing certificates and in monitoring companies to which certificates had been given.
      In Committee we announced that this group of amendments would be put down on Report. They will achieve a simpler administrative solution. They will provide greater flexibility of distribution for investment companies. They will secure the derogation for, and provide a clear definition of, the investment trust company for which the derogation was sought. Finally, they will provide means whereby other companies—within the scope of the directive's derogation—may obtain investment company status if there are sound reasons for that.
      Amendments Nos. 325, 326 and 328 are merely consequential to the following amendments.

      1523
      Amendment No. 327 maintains the same definition of distributable profit for investment companies as contained in clause 41(3) but, as allowed by the directive, gives a relaxation by providing that a company which falls within the revised definition of investment company, and meets the criteria, will have the option of making a distribution on the basis of the asset ratio test in clause 41 or the capital maintenance test in clause 40. The conditions in paragraph (a) and (b) of clause 41(5), which are required by the directive, are not affected by this amendment and must be met if a distribution is made under clause 41.
      Amendment No. 332 relates subsections (8) to (12), and thereby does away with the certification procedure envisaged in those subsections which, as I explained, are replaced by a simpler administrative solution.
      11.15 pm
      Because no certification procedure is required, it will fall to the directors, in conjunction with their professional advisers, to decide whether the company meets the definition and criteria for an investment company and to ensure that it complies with those requirements. As a safeguard, amendment No. 329 provides that the company meeting the requirements shall give notice to the registrar of its intentions to carry on business as an investment company and has, since the date of the notice, continued to comply with the requirements.
      Amendment No. 330 changes the definition of an investment company. The reference to "land or other assets" is deleted, thus restricting the definition to investment trust companies whose business it is to invest in shares and securities with the aim of spreading investment risk, which is the specific class of company for which the derogation in article 15 of the European Communities second directive was sought and obtained by the United Kingdom.
      Amendment No. 331 deletes the power envisaged in clause 41(7)(b) for the Secretary of State to prescribe conditions by regulations. The conditions are now set out in the primary legislation by these amendments. They are similar to certain of the criteria in section 359, as amended, of the Income and Corporation Taxes Act 1970, which defines an investment trust
      1524
      and are designed to ensure that, subject to later provisions in this amendment, companies which are not recognised by the Inland Revenue as investment trusts will not be able to take advantage of investment company status under the Bill. The amendment also provides that necessary consequential provisions of the Income and Corporation Taxes Act will have effect for the purpose of this clause as they have effect for that Act.
      The amendment continues by providing that an investment company may not make a distribution unless its shares are listed on a recognised stock exchange. That is a minor change to the clause, which, as drafted, makes the listing requirement a condition for investment company status.
      The process of obtaining a listing by a newly incorporataed company will usually take some time and the amendment will allow such a company, provided that it complies with the requirements, to achieve investment company status before being listed. When listed, it would be able to distribute on the basis of clause 41 if it so wished.
      Two further restrictions are placed on an investment company before it can make a distribution. These require that, during the period from the start of the accounting reference period preceding that in which the distribution is made to the time of the distribution, the company must not have distributed any capital profits and not have applied the profits specified in cluase 41(4) in the manner prohibited by that subsection.
      The period is necessary to prevent the possibility of companies adopting investment company status merely for the purpose of a particular distribution, and then revoking that status and adopting it again for the purpose of the next distribution.
      The prohibition on the distribution of capital profits parallels the earlier condition in the amendment—that the company must have such a restriction in its memorandum or articles of association—and is designed to ensure that the breach by the company of such a restriction will also disentitle the company from making a distribution.
      The second prohibition concerning the application of unrealised or capital profits has the same effect as clause 41(4), which is a corollary to clause 41(3), and is designed to prevent amounts not directly

      1525
      available for distribution under that subsection to be distributed indirectly.
      Furthermore, the amendment provides that an investment company may not make a distribution under clause 41 unless the company gives the requisite notice before the period commencing with the start of the preceding reference period. As I explained earlier, this is designed to stop companies moving in and out of investment company status at will. Appropriate provision is made for those particular cases where that period began before the appointed day and where the company was incorporated on or after the appointed day.
      The amendment also contains a provision that the notice by a company to the registrar of its intention to carry on business as an investment company may be revoked by the company giving notice to the registrar.
      Finally, the amendment contains a power whereby the Secretary of State may, by statutory instrument, subject to affirmative resolution, extend the status of investment company to other companies. This power enables different classes or categories of company to be specified as investment companies and allows different rules to be made for the conduct of business, the direction of affairs, and the making of clause 41 distributions by those companies. But, as I stated earlier, the Secretary of State will need to be convinced that there are sound reasons for extending the definition and scope of investment companies under this power.
      Amendment No. 333 to schedule 3, which embodies the directive's requirement as to publicity, is merely consequential on the new procedures contained in this group of amendments.
      As I indicated earlier, this group of amendments will provide a simpler administrative scheme, give greater flexibility of dividend regime, express a clear and comprehensive definition of investment trust company and provide means whereby the class of investment company may be extended with modifications to the requirements.
      These new proposals have been circulated to the Association of Investment Trust Companies, which agrees that they are an improvement to the clause as presently drafted, and to other interested
      1526
      parties, who have not raised any objections. The Government believe that the amendments provide for a practical scheme which complies with the second directive and contain the appropriate safeguards. For these reasons I recommend to the House that they should be adopted.
      Mr. Clinton Davis: I shall make a suggestion for the reform of government. When the hon. Gentleman comes to move non-contentious clauses, those advising him should put on his brief "Resist". He will then say nothing.
      Sir Graham Page: I want to ask my hon. Friend a question on this admirable new amendment. I should be precluded from doing so if the suggestion of the hon. Member for Hackney, Central (Mr. Davis) were adopted. Have the Government in mind any particular companies, or class of companies, to which this amendment would be extended by order? Power has been taken in the amendment to extend the list. The Minister must have something in mind. I wonder whether he will let the House into the secret. Will some companies come within this amendment soon?
      Mr. Eyre: Not to my special knowledge, but it may be for the convenience of some companies to come within this investment company status. Means will be provided for them to do so in proper circumstances.
      Amendment agreed to.
      Amendment made:
      No. 338 in page 47, line 28 after first "of", insert "all".—[Mr. Eyre.]

    Clause 40

      RESTRICTION ON DISTRIBUTION OF ASSETS
      Amendment made:
      No. 326 in page 48, line 13 at beginning insert "Subject to section 41 below," —[Mr. Eyre.]
      Sir Graham Page: I beg to move amendment No. 393 in page 48, line 24, leave out 'accumulated'.
      Mr. Deputy Speaker: With this it will be convenient to take amendment

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      No. 391 in page 48, line 25, after "previously", insert
      "distributed before the appointed day to shareholders in dividends or".
      Sir Graham Page: The clause puts a restriction on the distribution of certain assets. It provides that a company cannot distribute in dividends the undistributable reserves. That it should not distribute something that is undistributable sounds reasonable enough. We then come to the definition of undistributable reserves. According to the Government's interpretation of the EEC directive, with which I disagree, undistributable reserves include something already distributed.
      If, for example, a property company has found that in the past—there is no limitation on the number of years so far as I am aware—its property has increased in value and it has revalued the property and included that as part of its assets—or, indeed, as part of its profits—and distributed the enhancement in value, it can never again, if the clause is passed, distribute anything in dividends until it has made up what it has previously distributed in the way that I have described. That puts many property companies in an extremely difficult position. Therefore I tabled these amendments to ensure that the clause is not retrospective.
      I think that everyone accepts that in future this type of distribution of assets as profits should not occur. So far it has been perfectly legal and perfectly proper for a company to do it. It is not a good practice, but it is certainly a legal practice. It is accepted that in future this shall be illegal, but it imposes an extreme burden on companies to make it retrospective, so that a company must put back all the money that has been distributed before it can distribute another dividend.
      I hope that there is some way round this directive. I wait for my hon. Friend to disclose the way round it, if there is one. That will make it possible for me to withdraw my amendment.
      Mr. Eyre: I believe that there will be a solution to the problem raised by my right hon. Friend. As this affected certain investment companies, my right hon. Friend will remember that I promised that I would meet the representatives of those companies. Accordingly a meeting took place between officials of the Department
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      and the British Property Federation. It was agreed that, in principle, the affected companies could overcome the problem by a change in accounting practice. The British Property Federation is now holdful discussions with the Inland Revenue. which I understand are proceeding well, and that a satisfactory outcome is expected. I am sure that the answer will please my right hon. Friend.
      Sir Graham Page: I am grateful to my hon. Friend for carrying out the assurance and undertaking that he gave to the Committee. I hope that the solution will prove satisfactory. It has been reported to me that the property companies are happy with the discussions which they had with the Department and believe that they will have similarly fruitful discussions with the Inland Revenue. In those circumstances, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Further consideration of the Bill adjourned.—[Mr. Parkinson.]
      Bill, as amended (in the Standing Committee), to be further considered tomorrow.

EDUCATION POLICY (BEDFORDSHIRE)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Boscawen.]
11.27 pm
Mr. John Carlisle: I welcome the opportunity to bring to the attention of the House the disturbing nature of some features of the education policy of the Bedfordshire county council over the past few months, and to seek the guidance of my hon. Friend the Minister.
Before I begin to heave too many bricks through the double-glazed windows of the authority—it seems deaf to most noise outside—I must congratulate it on having just announced the second lowest rate rise in the shire counties of England, about 15·5 per cent., and at the same time leaving £8 million in the balance. Great credit is due to Philip Hendry, the leader of the council, and his colleagues, and I express to them the great appreciation of the people of Bedfordshire for what has just been announced.

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My duties in respect of the education department are not quite so pleasant. I wish to draw attention to the great concern that has arisen over problems in my constituency. One problem that we have suffered greatly since May concerns the change of catchment areas. Many parents now find themselves outside the area of the school of their original choice. Many of them bought houses in particular areas, but with the stroke of a pen in county hall the areas have been changed with very little notice and without consultation with the parents. Quite rightly there have been many protests from my constituents. It seems that in many cases the authority has refused to listen to the protests. Soon after the general election several meetings were held. Appeals were made for councillors and the chairman to attend those meetings to hear some of the parents' anxieties over the change in the catchment areas, but they fell on deaf ears.
The authority seems determined to follow its education policy through on a basis of pure numbers. Choice seems to play very little part in what it is doing. That is particularly disturbing for me, given the spirit of the excellent Education (No. 2) Bill, which is now in the other place. The Government were right to place before the people the criteria of choice, but the authority in Bedfordshire seems to be disregarding the Bill. The economists in the authority have juggled their figures with complete disregard for the merits of particular schools. There are several rules of selection in the authority. Brothers and sisters are given preference, as are medical cases.
I am particularly concerned about the Challney boys' school, for which there were more applicants than places. The school has an excellent academic record. At the start of the school year about 20 children were on the waiting list. I take issue with the council over the fact that the list was apparently kept secret from the parents and many councillors who wished to examine the chances of children to go to the school. Great anxiety was caused to the parents of children on the list.
I question the policy by which that list was compiled by a form of lottery, with the chairman of the authority pulling numbers out of a hat to determine which
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children should go to the school of their parents' choice. The school is a fine school, as is the Challney girls' school. They are unique in the town in that they are the only single-sex schools there. They have a fine academic record and they attract fairly high numbers of applicants. But I fail to see how, by topping up the numbers in other schools, to the detriment of those other schools, the council can implement any policy of parental choice. I appeal to my hon. Friend the Minister to see that his Department issues a recommendation to the authority about the way in which it draws up its list.
I also complain that there has been a direct lack, or breakdown, of communication between the authority and the chairman, and my constituents and myself. Letters have gone unanswered and many telephone calls have been ignored. The Minister will know that one reply from the department took about 36 days to reach me. If there is little co-operation between the chairman and his Member of Parliament, what chance have constituents further down the line? This has, unfortunately, created a rather bad feeling among some of the parents and a suspicion that all is not well with the authority.
I bring the attention of the House to one child in particular, an 11-year-old boy called Clive Ramscar, who, until a few days ago, had been kept away from school since last September simply because the authority persistently refused to listen to the request of his parents that he should attend a certain school. He was caught up in this secretive waiting list to which I have referred. Not many days ago a visit was made to his home by a local official, with the purpose of serving an attendance order.
A meeting of the schools and special services sub-committee—which I understand is the only committee which can enforce such an order—was held a week after the official visit. The chairman refused to have this matter brought before that committee, knowing full well that the committee would not meet again until April. I am suspicious about this because, if the order had been implemented, the Secretary of State would have had to decide the matter, and it may be that the authority was frightened of the

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eventual result. It is surprising, considering the enormous amount of excellent publicity that some of the local papers have given to this case, that it should be shelved in this way.
Looking ahead to the next school year, I am concerned because it appears that we shall be in for the same sort of trouble. Rumours begin to abound that catchment areas are about to be changed. Obviously parents are worried. In a letter from my hon. Friend the Under-Secretary on 30 November he said:
"it is the authority's intention to retain the intake level at the Challney boys' school at 210".
In times of falling rolls, I hope that the authority will keep to its word.
I am wary of some of the changes which the authority might bring in. These practices of changing areas, refusing parents the right to choose a school, of operating a lottery, and the whole atmosphere of secrecy that has surrounded some of the authority's policy, are completely contrary to the spirit of the Education (No. 2) Bill which has now passed through this House. I look forward to the institution of the appeals system, which is a reasonable way of dealing with the matter. The authority has probably kept to the proper procedures, but the spirit in which it has carried out its policies has left much to be desired.
It is probably unusual for a Member of Parliament to call upon the chairman of the local education authority to resign when the chairman belongs to the same political party, but I did this some days ago, and I do not regret doing so because the patience of my constituents is beginning to run out. The facts in the case that I have mentioned, and in other cases, highlighting as they do the policy of the council, speak for themselves. Parent reaction has been fairly violent. I wait to hear what the Minister will say about it.
We want to restore freedom of choice the the parents in my constituency. I believe that the Government were elected, among other things, on two counts. The first that of restoring freedom of choice, political and financial, and the second was that of cutting expenditure. Those two factors are compatible. To ignore parents' wishes, as the council has throughout the last few months, is con-
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trary to Conservative policy. Where places are available at good schools it is not unreasonable that parents should want their chilren to fill those places. The policy of taking pupils from good schools to fill places elsewhere is a bad one, which I abhor. To take from mediocre schools and keep up numbers in good schools must be the policy of the council in future. Schools stand on their own merits. They stand on pupil behaviour, on the quality of the teachers, and on their academic reputation. It must be wrong to take from the good to fill up the bad.
I ask the Minister to take note that education in Bedfordshire has, to a certain extent, been by lottery over the last few months. I think that this easy allocation of numbers and the policy which the authority has followed should cease. I look forward to a new policy next year and possibly this debate and the remarks of the Minister will go some way to explain why that is needed.
11.40 pm
The Under-Secretary of State for Education and Science (Dr. Rhodes Boyson): I am sure that we are grateful to my hon. Friend the Member for Luton, West (Mr. Carlisle), who has given us the opportunity not necessarily to resign but to discuss the question of parental choice, which is important not only in the Luton area but throughout the country.
I am grateful for the infomation given to us by my hon. Friend that the rates in his area—presumably under a good Conservative-controlled authority—will increase by only 15·5 per cent.
I welcome this debate because I know that my hon. Friend has been closely involved with the issue of parental choice in schools in Luton. I do not wish in any way to detract from my welcome to his vigorous assertion of the right of parents to have a real say and a real choice in the education of their children.
As my hon. Friend has reminded the House, that is a cardinal feature of Conservative policy for education, and it is at the heart of the Education (No. 2) Bill, which, having been considered at great length over the past few months in this House—it seems years to me—received a Second Reading in the other place this week.

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It is important to understand that though the Education Act 1944 stated in section 76—a section often referred to—that children should be educated according to their parents' wishes, it contained no provisions whereby those wishes could be carried out. It is widely and incorrectly assumed that a Secretary of State has powers under the present law to step in at will and settle disputes between parents and local authorities on school allocations. That is not the case.
If, as things stand, a parent wants to complain to the Secretary of State about the decision of an authority, he must show that the authority's action is unreasonable under section 68 of the 1944 Act. Hon. Members will recall the Tameside case, on which the previous Government—if one may say so—blunted their horns. Since then, Governments and the Department have been very careful of the use of that section.
The test of unreasonable behaviour is extremely stringent, and this provision affords little effective control or support to the aggrieved parent. The Bill that is now in the other place provides, for the first time, a statutory right for parents to express a preference and places a statutory duty upon local authorities to comply with that parental preference, subject to specified limitations.
I am sure that we would all agree that there can be no absolute freedom of choice. We do not live in a world where complete freedom of action is always possible. We have to accept that physical, financial and geographical constraints preclude absolute freedom of choice. We accept that a balance must be struck between the wishes of parents and the need for local education authorities to husband their educational resources in a satisfactory way for the benefit of all the children in their area. The absence of absolute freedom of choice does not mean that we should not have the maximum freedom of choice attainable, and it is the policy of the Government to give that maximum choice wherever possible.
I should not like to give the impression that the principles of parental choice and the efficient provision of education are not always practised by certain local authorities. The Bill will apply a consistent and structured system as widely as
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possible. What we have tried to do in the Bill is to develop the practice where it has been used and to structure it so that all authorities will follow similar good practice.
It is not a matter of sowing seeds on previously barren ground. In general, most local authorities do their best to be fair to parents and to achieve a high level of "first preference satisfied" year after year. But this has never been an easy task and it is not getting any easier with falling school rolls. I am sure that the Bedfordshire education authority would concur in that view.
In formulating our legislative proposals we have endeavoured to strike a more equitable balance between the legitimate wishes of parents and the need for LEAs to use precious educational resources in a satisfactory way for the benefit of all children in their area.
Before I turn to particular points made by my hon. Friend about arrangements in Luton—an area whose best interests I know my hon. Friend has been pursuing assiduously since his election last year—I should like to say a few words about two other provisions of our proposals for promoting parental choice. I am sure that they will be of interest not just in the Luton area, but throughout the country.
The first is that authorities and, where appropriate, school governors will be required to publish for each school year the arrangements for school admissions, appeals against admission decisions and the arrangements for enabling parents to express preferences. The published details must give particulars of the number of pupils to be admitted in the year and of arrangements that the authority has for filling places at non-maintained schools and at schools maintained by other authorities. The Secretary of State may make regulations about the manner of publication of this information, and prescribe in regulations other information about schools, such as examination results.
My hon. Friend referred to two schools and stated how excellent they are. If parents are to exercise real choice, it is important that they are given maximum information, particularly in city areas, where there is often a wide variety of schools, over no great distance, so that

1535
they know the emphasis, achievements, values, discipline and approach of the schools.
Secondly, when parents are dissatisfied with the school allocated to their child, they may have recourse to an appeal committee, which will be constituted of persons other than those who took the original decision and the appeal committee's decision will be binding on the authority. If parents in Luton did not get the school of their choice, they can appeal to the committee.
I do not expect my hon. Friend to be convinced by every detail of our proposals—I have looked up in Hansard his characteristically frank contribution to the Second Reading debate on the Education (No. 2) Bill—but I am sure that he will agree that our proposals provide a much-needed framework for giving greater parental choice.
If I have taken a little time to get to the questions that my hon. Friend raised it is only because I believe, and I hope that he accepts, that our policy in this area is of the greatest relevance to the wishes and anxieties, not only of his constituents, but of parents throughout the country. I am conscious, too, that the case to which he referred is concluded, in the sense that the boy concerned is now attending school, having been kept at home by his parents for several months. My hon. Friend has properly pointed out, however, that the issues will not disappear with the settling of a particular case. We are now nearly at the time of applications for the coming September in local education authority areas throughout the country.
I turn to the Luton case to which my hon. Friend referred. He came to see me about Clive Ramscar and has been in correspondence with my noble Friend the Minister of State. I already know quite a lot about the background of the case. The school preferred by the parents—Challney school for boys—was not the school serving the area in which the family lived, according to the catchment area policy which the Bedfordshire authority considered it necessary to operate. I understand that it is a popular school and is regularly the subject of more applications for places than the authority considers that it can accom-
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modate, having regard not only to the accommodation available in these schools, but to the efficient use of other school accommodation in the area.
The authority is prepared to consider applications from outside the catchment area if there are places available after catchment area demand has been satisfied. Such applications are considered according to prescribed criteria, which I understand are well known and of long standing. These are, in order of priority, medical grounds, whether brothers or sisters currently attend the school, whether brothers or sisters have recently attended the school, by drawing lots, to which my hon. Friend referred, among those who have not fulfilled the three previous qualifications. but wish to attend that school. It is only fair to the authority to make clear that that last criterion, the drawing of lots, is used only when the other criteria have been applied.
Any spare places are allocated to the pupils in the order of priority established by those criteria, until the planned intake figure for the year is reached. It seems to me that my hon. Friend may have a strong point in suggesting that proximity or accessibility to the school of the parents' choice would be a useful additional criterion—it is a criterion which is used in many other authorities—perhaps supplementing or taking the place of the lottery, which might be considered by some to be rather arbitrary. We are a great gambling nation, but I do not think that parents would welcome the idea that they will be allocated a school by a lottery or raffle draw. It is entirely a matter for the local education authority to consider, and I do not want to appear to be intruding on its responsibility.
These arrangements are made known to the parents concerned in good time each year and are properly followed. As the law stands they cannot be considered unreasonable, and the Minister of State, having examined the material submitted by my hon. Friend on behalf of Mr. and Mrs. Ramscar, made this known in her letter to him of 30 November.
I wish to refer to the school attendance orders. My hon. Friend and I have had a previous discussion about the matter. My hon. Friend has said that the LEA was reluctant to take this action in the case which concerns him of serving school

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attendance orders. I cannot comment on that, for I am not privy to the authority's inner deliberations. We all have our views, but without some form of X-ray we cannot see what is in the mind of a local authority. It is its responsibility to decide what action, if any, to take in such cases.
The House will be aware that it is one of the purposes of the Education (No. 2) Bill to amend the provisions relating to school attendance orders—section 37 of the 1944 Act—to correspond with the new provisions on school admissions. This is not closing our opportunity to exercise choice. Section 37 was never designed as a means of securing parental choice, but as a procedure for ensuring school attendance. Because of the way in which it is operated, parents have begun to use it as a means of exercising choice. That is why, under the Education (No. 2) Bill, we have included the question of parental choice, information for parents on the way in which the allocation is to be made, and the right of appeal for parents. The parents can then use the proper procedure instead of removing their children from school over a long period as the only means, as they sec it, of exercising choice.
We cannot continue to condone the practice whereby parents who keep their children out of school for two or three terms are at an advantage compared with law-abiding parents who ensure the attendance of their children at school. Our proposals will ensure that all parents are on an equal footing in future, by building into the initial provisions of section 37 of the 1944 Act a new duty on authorities to comply with expressed preferences, and the appeal provisions for cases where authorities consider that there are good reasons why they should not comply.
I know that my hon. Friend feels strongly about parental choice, as I do, and as do all Conservative Members. In the case that he has mentioned, I ask him to accept that there are no grounds on which we could determine that the LEA had acted unreasonably by using section 68. That procedure was used in the
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Tameside case. He and his constituents can, however, take comfort from our proposals for school admissions, which will, I hope, allow such questions to be settled quickly and fairly at local level, without the strains which were evident in the Ramscar case, and from which no one benefits.
These new arrangements cannot operate for the coming school year but will, I hope, be in operation the following year. It is our intention to put into being this part of the Education (No. 2) Bill when it passes into law, for the entries in September 1981.
I thank my hon. Friend for this useful reminder of the great relevance of the Government's measures to large numbers of families. I commend to the House what he has said. We have established the Education (No. 2) Bill to develop the practice whereby there is more parental choice, to follow the best practices of local authorities and to make them more widespread. All local authorities know that the new procedures will not apply until September 1981, and that the way in which they deal with their allocations and parental preferences this year is entirely within their control. However, I should be very surprised if local authorities have not read the Education (No. 2) Bill. I should also be surprised if indications were not made by those authorities that they wish to move as soon as possible to the procedure that will become mandatory from September 1981.
I am sure that my hon. Friend, as well as all hon. Members, will be pleased to know that, as a result of that Bill, I trust that the sorts of cases that have been brought to light tonight will become rarer and that parental choice of school will become paramount throughout the country.
Question put and agreed to.
Adjourned accordingly at four minutes to Twelve o'clock.

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

LORD McALPINE OF MOFFAT
Sir Robert Edwin McAlpine, Knight, having been created Baron McAlpine of Moffat, of Medmenham in the County of Buckinghamshire, for life—Was, in his robes, introduced between the Lord McFadzean and the Lord Hunt of Fawley.

THE SUB-POST OFFICE NETWORK
2.50 p.m.
Lord MILFORD: 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 plan to close down a large number of rural post offices throughout the country; and if so, how elderly people in rural villages will be able to draw their pensions.
The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trenchard): My Lords, no. The Government made very clear in another place on 19th February that they are determined to preserve the sub-post office network.
Lord MILFORD: My Lords, I must admit that I am very surprised by the definite Answer that the noble Viscount the Minister has given. Most people in the Post Office think that the rural post offices will be closed. Are the Government going forward with altering the payments of social security to the people in the villages and putting it on a fortnightly basis or a banking or Giro basis?
Viscount TRENCHARD: My Lords, this anxiety, which my right honourable friend fully understands, stems from one of the many inquiries carried out by the Government with the advice of Sir Derek Rayner to look for economies in every area of Government activity. In the report (which has not yet been published) my right honourable friend made it clear that Sir Derek and the staff who examined this situation looked at the economies that might arise from payments fortnightly rather than weekly, and also studied the effect of allowing those who wanted to use bank accounts—and the number of the bank accounts, as noble Lords will know, is rising—to do so. Quite big savings are potentially possible. The cost of the administration of social security as a whole is £750 million per annum, and of making the payments is £250 million per annum. But this in no way means that decisions have been taken; and, after publication, my right honourable friend will consult with all interested parties, including the sub-postmasters.
Baroness VICKERS: My Lords, may I ask my noble friend whether he would, in dealing with sub-post offices not in rural areas, give us some idea of how many people do draw their pensions, other than social security benefits, through sub-post offices? Could he also say whether the Giro system would be a help to any of them?
Viscount TRENCHARD: My Lords, I cannot answer my noble friend as regards the total number of payments made by different methods. The total of payments is £1,000 million in a year and that costs the £250 million. We are certainly looking at economies throughout the system, in the Crown offices as well as in sub-post offices. Also my right honourable friend made clear that one possible way of permitting a steady flow of business to go through the sub-post offices, including those in rural areas, would be the use of the Giro system, which could enable beneficiaries to draw what they wanted when they wanted it from the local post office, even, if necessary, more than once a week. This is one idea that is being studied.
Lord BLYTON: My Lords, is the Minister aware that if he takes away from

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working-class people their weekly income of pensions or supplementary benefits there would be a terrible outcry in the country because working-class people live on their pensions by the weekly budget and any change from that would be disastrous?
Viscount TRENCHARD: My right honourable friend is fully aware of the situation, and the study has considered in great detail the reliance of different kinds of beneficiaries on the current system; but, in view of the size of the figures I have mentioned, I think it would be quite wrong to suggest that no changes should be studied and no economies looked at.
Lord HYLTON: My Lords, I was delighted to hear my noble friend's original Answer and his reply to the supplementary. However, can he say whether the Government fully appreciate how much one village amenity such as a post office, or a school, or a shop, reinforces all the others? Do the Government understand that villages need a full set of amenities?
Viscount TRENCHARD: My Lords, I think the Government really do understand these things, not only because many of their members are very conversant with the enormous social and practical importance of the local post office, but because my right honourable friend the Prime Minister was actually the daughter of a sub-postmaster.
Lord WELLS-PESTELL: My Lords, the noble Viscount the Minister mentioned in his reply the retaining of "the network". Would he explain what he means by "network"?—because it is possible to maintain a network of post offices and at the same time to close a number of them.
Lord TRENCHARD: My Lords, my right honourable friend, in deliberately using that phrase, wished at this stage of the inquiry, and before publication of the report and before consultation there-after, not to commit himself to no changes in the system. But he meant what he said in the other place: that substantially it is intended to maintain the existing network of sub-post offices.
Lord DAVIES of LEEK: My Lords, is the noble Viscount aware that a party without vision perishes? Is he further aware that, after considering British village life, at another moment we talk about defence? In the last war the British villages were part of the defence of Britain, and any money spent on maintaining the amenities of British villages represents an expense that helps to increase the defence of Britain. This is a hidden factor in village life—that the City of London may live if some silly people get their way with a nuclear war.
Viscount TRENCHARD: My Lords, I think we are fully aware of all those points but there is a need, in the economic situation of this country at the moment, to look at every area of expenditure, because we have to economise.
Lord JANNER: My Lords, may I ask whether the noble Viscount is aware not only that the post offices which we have available are insufficient to cover the needs of aged people and people with children to bring with them to the post office, but that in cases where the post offices are situated so far from each other—less than a quarter of a mile but nevertheless so far from each other—people have to come down steep slopes in order to collect their pensions, and parents have to bring their children down those slopes because no other post office is available? Will he please inquire into that situation so that it may be remedied, even though at the present time there is an economic crisis?
Viscount TRENCHARD: My Lords, I think this kind of problem with the existing network is being constantly examined by the Post Office.
Lord WELLS-PESTELL: My Lords, the noble Viscount has referred in one reply to people who receive pensions having them paid through their bank. May I ask the noble Viscount whether he is aware that the four major banks will have made £1,500 million profit this year before tax? Many of the banks require their clients to pay bank charges unless their current account maintains a level of £100. If it is intended to encourage retired people to be paid through banks, perhaps the Government

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could ask the banks to look at that requirement.
Viscount TRENCHARD: My Lords, I think that the main part of the noble Lord's supplementary is really a separate question.
Lady SALTOUN: My Lords, may I ask the Government to consider one small social aspect of the weekly payment of pensions, particularly to elderly pensioners living alone, through village post offices? Most village postmasters and postmistresses are inveterate gossips, and if old Maggie Smith has not been in to collect her pension one week they will notice and will gossip about it to the neighbours. Somebody will then go to see whether old Maggie Smith is all right. This is a service, which is, of course, combined with the postman's knock and the milkman's delivery, which at present is being given at no extra cost to the Government. It seems to me that if any of these services were to be withdrawn, the Government would need to provide social workers to go and visit elderly people who are living alone, every day or very regularly, to make certain that they were all right. This would be very expensive and very unwelcome, because the elderly people would consider them to be Government busybodies nosing into their own affairs, and I hardly see that there would be very much saving.
Viscount TRENCHARD: My Lords, may I just say to the noble Lady that I have never known a village where the daily movements of every inhabitant are not known to every other inhabitant. I think that the risk of old people living on their own and not being discovered is far greater in the towns.
Lord LEATHERLAND: My Lords, may I ask the noble Viscount the Minister—and I must declare an interest at the age of nearly 82—whether he can give us an assurance that nothing will be done to prevent people from drawing their pensions week by week?
Viscount TRENCHARD: My Lords, I cannot give that assurance in those terms. I have already drawn the attention of the House to the debate in the other place and my right honourable friend went over
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this ground many times. We are looking at the possibility of less frequent payments. We are also looking at the use of Giro which could allow more than weekly payments of the amounts required. What my right honourable friend has guaranteed is that when the study is published there will be full consultation.
The MINISTER of STATE, MINISTRY of AGRICULTURE, FISHERIES and FOOD (Earl Ferrers): My Lords, clearly this is a sensitive subject, but I wonder whether your Lordships might think that 12 minutes on one Question is sufficient. If so, we might pass on to the next.

INQUIRIES INTO ROAD SCHEMES
3.3 p.m.
Lord AVEBURY: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will amend the law relating to inquiries on trunk roads and motorways following the case of Bushell and Another v The Secretary of State for the Environment, so as to make it clear that objectors have the right to challenge the validity of forecasting methods used by the department, in order to show that the proposed road is not needed.
Lord MOWBRAY and STOURTON: No, my Lords. The noble and learned Lord, Lord Diplock, and his noble and learned colleagues, restated with, if I may say so, admirable clarity the purpose and scope of public local inquiries into trunk road schemes as the Government had believed it to be. This is also consonant with the policies set out in the Report of the Review of Highway Inquiry Procedures, which the previous Administration undertook jointly with the Council on Tribunals.
An inquiry into an individual scheme is the right place for discussion of the details of the proposal—the route and so on—and of the application of the assumptions and methodology adopted nationally, but not of those assumptions and methods themselves.
Lord AVEBURY: My Lords, since the judgment is so clear to the Minister, can he explain whether it means that the whole question of need is to be excluded from cross-examination as being a matter of Government policy; or that inspectors should hear evidence on need but make no recommendations on it; or, finally, that the Minister has the power to restrict the scope of the inquiries in any manner he sees fit? Is the noble Lord aware that the inspector in the Aire Valley inquiry ruled just the other day, on 19th February, that he would make recommendations on need, but only because in that case he was considering a self-contained scheme and that, in the case of a motorway or a trunk road which was part of a larger operation, this evidence would not have been able to be put? Therefore, Ministers can exclude any evidence of this kind simply by dividing up the road into little bits.
Lord MOWBRAY and STOURTON: No, my Lords. I do not think that is true. Of course, local need can be taken into account and inspectors welcome people pointing out to them how the national methodology—to use that horrible word—applies locally. They are quite prepared to explain to an inquiry what are the national assumptions, and they are also quite prepared to hear arguments as to why they should not apply in a certain case. Anyone can object to their application in a particular case. As the noble and learned Lord, Lord Diplock, said, the methodology is a very complicated matter which the ordinary layman is not competent to deal with at an inquiry.
Lord AVEBURY: My Lords, if one cannot deal with these matters at a local inquiry, where can one deal with them, bearing in mind, as the Minister knows, that the forecasts that were made in 1960, 1962, 1965, 1969, 1972 and 1974 all turned out to be wildly over-stated, and that if we had relied on those entirely we should have built thousands of miles of trunk roads and motorways at the expense of millions of pounds to the taxpayer, which subsequently turned out to be unnecessary? Does the Minister not think that, if you exclude objectors from raising matters which are of importance to them at local public inquiries,
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they will seek unconstitutional means of raising their cases?
Lord MOWBRAY and STOURTON: No, my Lords. What the noble Lord exaggeratedly calls wildly over-calculated, is not necessarily the case. There is a steady growth. If there are mistakes, then the people who conduct these matters learn by their mistakes. Parliament is the obvious forum for dealing with these matters, and there is a permanent ongoing inquiry in the form of the Standing Advisory Committee on Trunk Roads Assessment, under Sir George Leitch This is going on the whole time.
Lord HANKEY: My Lords, are the Government aware that some sections of the M.25 have been delayed by the fact that the public inquiries have been disrupted by objectors brought from afar, some of them not even connected with the locality, causing very great distress to the people who live in the neighbourhood and who are pestered by the heavy traffic? Are the Government aware that the need for the M.25 is really very great, because the heavy traffic from Tilbury cannot get to the M.1 and the M.4 at present, without going through parts of London and this greatly reduces the amenities of London.
Lord MOWBRAY and STOURTON: My Lords, as the noble Lord and the House will be aware, the M.25 has priority in the Government's thinking and we want to get it right. We do not want any part of the M.25 to affect local inhabitants badly, if that can be avoided. But national need is there and that is what is continually under assessment. Local objections must point out that the assessment about one place or another may not be satisfactory. It is for the inspector to report, and for my right honourable friend then to consider how to mould all these things together and issue a balanced judgment.
Lord AVEBURY: My Lords, can the Minister finally say whether the ruling by the inspector, Mr. Chance, in the Aire Valley inquiry on evidence relating to need is correct, because, as the Minister is no doubt aware, counsel for the department, when pressed on the matter in the inquiry, declined to say what the Minister's interpretation of the judgment is?
Lord MOWBRAY and STOURTON: My Lords, if I heard the noble Lord correctly, I think that he is asking me about a particular case. If I may look at the report of what he said, I will write to him. I do not know the answer at the moment.
Lord HALE: My Lords, will the noble Lord say whether—and I regret putting a reactionary point of view—the Government have considered just how much public cost is incurred by inflation in the process of building a road, when an inquiry has sometimes continued almost interminably and when both local government and other authorities have power to make representations? Is it not a fact that vast and costly schemes are held up, often for very long periods, with immense additional cost to the country? Will the noble Lord consider, while preserving fully the democratic rights, the necessity of having really competent inspectors who know what they are there to do, who know the rules and who try to avoid litigation of that kind?
Lord MOWBRAY and STOURTON: My Lords, I fully accept what the noble Lord says and I totally agree with him. The cost to the country of getting valuable goods from one part of the country to another is also an important point.

CIVIL DEFENCE AND FIRE SERVICE EQUIPMENT SALES
3.10 p.m.
Lord ORR-EWING: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper. Perhaps I could draw the attention of the House to the fact that "brought" in the second line should read "bought".
The Question was as follows:
To ask Her Majesty's Government when the Home Office were instructed to sell off equipment brought for civil defence or the auxiliary fire service, how much was realised from the sales and how this sum compares with the cost of replacing this equipment.
The PARLIAMENTARY UNDER-SECRETARY of STATE, HOME OFFICE (Lord Belstead): My Lords, in 1968 when the Government decided to put home defence on a care and maintenance basis and to disband the civil defence corps and auxiliary fire service it was agreed that equipment surplus to requirements should be sold. In 1971 Ministers directed that remaining equipment which was no longer cost-effective to retain should be disposed of. Total receipts from scrap and surplus materials since 1968 exceed £5 million. No useful purpose would be served by comparing this sum with the cost of replacing the equipment, as much of it was unserviceable, obsolescent or of a kind no longer necessary to stockpile.
Lord ORR-EWING: My Lords, is my noble friend aware that shortly after the Labour Government decided to disband civil defence the Soviet Union took steps in exactly the opposite direction and has continued to expand its civil defence, particularly since 1972? Is he also aware that the USSR believes that it can reduce deaths and casualties by at least 75 per cent. by the steps it has taken? Why, when the whole of Western Europe is taking measures, are we lagging so far behind, both in our plans and in our resolution?
Lord BELSTEAD: My Lords, my noble friend may be aware that Her Majesty's Government participate fully in the work of the NATO Civil Defence Committee, in which these matters are kept under regular review. But I must say to my noble friend that it is because the Government take very seriously indeed what my noble friend has just said that several months ago they instituted a wide-ranging review of civil defence; my right honourable friend the Home Secretary hopes to be able to report to Parliament soon after Easter.
Lord SHINWELL: My Lords, can the noble Lord say whether there is any record of the people in the other place or in your Lordships' House being informed of the Government's decision in 1968? Is there any information furnished at all about this deplorable act?
Lord BELSTEAD: No, my Lords, I have not looked back at previous State-

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ments which were made since 1968. I am answering the Question which is being put to me now.
Lord SHINWELL: My Lords, is the noble Lord aware that this was a remarkable and deplorable thing to have done without the House being informed about it?
Lord DUNCAN-SANDYS: My Lords, is the Minister aware that many people feel that insufficient attention is being given to civil defence? Can we be assured that the Government recognise that the effectiveness of civil defence is a most important factor which a potential aggressor will take into account in assessing the credibility of Western defence?
Lord BELSTEAD: My Lords, I agree with what my noble friend has said. May I just say to the noble Lord, Lord Shinwell, that, when the care and maintenance basis decision was taken in 1968, it was announced, as I understand it, by the Prime Minister of the day in another place.
Lord SHINWELL: My Lords, is the noble Lord aware that a debate is to take place next week on the subject of civil defence—a very important debate? By that time could the noble Lord gain some information about what actually happened in 1968?
Lord BELSTEAD: My Lords, mercifully I was not responsible in that year.
The Earl of KIMBERLEY: My Lords, can my noble friend say whether the report which his right honourable friend is going to get out will appear before we have the debate next week in your Lordships' House?
Lord BELSTEAD: My Lords, when I replied to my noble friend Lord Orr-Ewing, I said that my right honourable friend hoped to be in a position to make an announcement to Parliament soon after Easter.
Lord ORR-EWING: My Lords, can my noble friend say whether or not the widespread leakages in the Press last week about what the Government decision was in this respect are correct? Perhaps we
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could have a Statement before our debate so that we can base our discussion and our debate upon the points contained in that Press release. Can my noble friend say whether all the radionic equipment was sold at that time in the early 1970s, or whether there are enough radionic measuring sets to man up the posts which still continue under the care and maintenance basis?
Lord BELSTEAD: My Lords, stocks of operational radiac equipment for detecting and measuring radioactivity are currently held in the Home Office stores for issue in an emergency, and indeed they are retained and maintained in serviceable order. I do not want to be unhelpful to the House but perhaps it would be for the convenience of noble Lords if I drew their attention to the fact that my honourable friend the Minister of State answered an Adjournment debate in another place on the 20th of this month. I do not think that I should be able to add to anything that my honourable friend said, but I will do my best when your Lordships debate this vital subject next Wednesday.
Lord PEART: My Lords, will the noble Lord not heed what I think is the view of all parts of the House, that a Statement should be made—a positive Statement—before the debate?
Lord BELSTEAD: My Lords, I shall be ready on Wednesday of next week to make a positive statement. Before then, no.

IMMIGRANTS: INFORMATION FURNISHED TO THE AUTHORITIES
3.16 p.m.
Lord AVEBURY: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, following the judgment of the Court of Appeal in the case of Regina v. Secretary of State for the Home Department, ex parte Mangoo Khan (in which it was held that an immigrant who was given an entry certificate as a dependent child was not an illegal entrant within

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the meaning of the Immigration Act 1971 by reason of his omission to volunteer the fact that he had married since the award of the entry certificate to the immigration officer at the port of entry) they will now grant indefinite leave to remain in the United Kingdom to any other persons alleged to be illegal entrants on the spurious ground that they failed to disclose a change in their marital status which had not been the subject of questioning by an immigration officer; and whether they will now review the law so as to make it clear that a person seeking leave to enter is obliged to give only the information requested of him or her.
Lord BELSTEAD: My Lords, the court held on the particular facts of the case to which the noble Lord refers that deceit was not employed to gain entry and that the appellant was therefore not an illegal entrant. It does not follow that the courts would take the same view in other cases where a change in status was not disclosed and where the facts were different. In cases where the validity of a leave to enter is in question the Home Office will continue to seek to follow the decisions of the courts in these matters, and in any future legislation most careful consideration would be given to any proposals for clarification of the law in this regard.
Lord AVEBURY: My Lords, does the Minister agree that the only difference between this case and that of Zamir was that the court held that no deceit was involved in the case under review? Did they not hold that a person who enters in breach of the immigration rules is not an illegal entrant, because Section 33 makes him so only if he is in breach of the law, as opposed to the rules; and, secondly, that a person who arrives at a port of entry with a valid entry certificate is not obliged to volunteer any information about himself but only to answer truthfully all questions that are put to him by an immigration officer? Therefore, would the Government accept that paragraph 3 of the new rules, which says that everybody arriving in the United Kingdom must furnish the immigration officer with such information as may be required, means such information as the immigration officer may require and that the passenger is not meant to find out, by
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extra-sensory perception, what questions the immigration officer might have liked to put to him but forgot to do so?
Lord BELSTEAD: My Lords, in answer to the noble Lord's first question, as I understand the decisions of the Court of Appeal, as best I can, the difference between the cases of Mangoo Khan and Mohammed Zamir is that Mangoo Khan was over the age of 21 and was held to have entered this country outside the immigration rules, whereas Mohammed Zamir was aged under 21 and was held to have entered this country within the immigration rules. So far as the important second question which the noble Lord has asked me is concerned—namely, what is expected of an entrant arriving in this country?—may I draw the attention of the noble Lord to the White Paper of my honourable friend, where, in paragraph 14, the noble Lord will notice that it is permissive for an immigration officer to examine an entrant in order to determine whether any changes in circumstances have occurred since the entry clearance was issued abroad. if after that the entrance is in dispute, then it is a matter for the courts.
Lord MORRIS: My Lords, would not my noble friend agree that it should never be forgotten that British firms and nationals are often at the mercy of the whims and greed of corrupt immigration ministries abroad? Furthermore, would not my noble friend agree that, other than the protestational neurotics, the people of this country believe that the privilege of living and working in this country should be vigilantly guarded?
Lord BELSTEAD: My Lords, I think my noble friend is going a little wide of the Question originally asked by the noble Lord, Lord Avebury.
Lord BROCKWAY: My Lords, may I ask the Minister this? Before a review is made of legislation, would it not be possible to make a statement in simple language so that the immigrants who are ignorant of their conditions and rights might learn? When they make an application in countries abroad, this simple statement can be made to them in order to compensate for the absence of knowledge from which they so often suffer when they come to this country.
Lord BELSTEAD: My Lords, I did not actually say that a review of the legislation was taking place. We have undertaken a review of the immigration rules and these have been the subject of a long debate in your Lordships' House. I should like to draw the attention of my right honourable friend the Home Secretary to what the noble Lord, Lord Brockway, has said on the second point. I would not wish to appear unhelpful on that point.
Lord G1SBOROUGH: My Lords, can the noble Lord say whether this Question is in order and in accordance with the customs of the House, in that the word, "spurious", prejudices the Answer? Therefore, is this question not totally out of order?
Lord BELSTEAD: My Lords, I think the Question was a little long. It was certainly extremely difficult to understand, but, so far as I know, as always with the noble Lord, it is in order.
Lord AVEBURY: My Lords, is the Minister aware that the Question was rather longer than I intended because I felt it was necessary, in order that your Lordships might understand the Question, to put the basis of the judgment into parentheses rather than simply to ask a question about Mangoo Khan and leave it to your Lordships to look up the original judgment in The Times? But in reference to paragraph 14, which the noble Lord has mentioned, does that not merely say that the immigration officer may make any inquiries of the passenger which may seem to him to be necessary to determine whether any of the exceptions in the previous paragraph apply and that this right of an immigration officer to put questions to a passenger is even broader than is laid down in paragraph 14? It is a very general power given to him in paragraph 3. What I was asking was this: May I assume that if the immigration officer fails to ask a particular question, and the passenger does not disclose the information which would have led the immigration officer to refuse him entry, that does not mean that he will subsequently be treated as an illegal entrant because of the failure of the immigration officer to ask that question?
Lord BELSTEAD: My Lords, I have already answered the noble Lord on that point. Paragraph 14 is permissive; if afterwards the matter is in dispute, then it will be for the courts to decide.

EEC COUNCIL OF MINISTERS: MARCH BUSINESS
Lord DENHAM: My Lords, a Statement is being made in another place about the business to be taken during the month of March by the European Economic Community Council of Ministers. With the leave of the House, I shall as usual arrange for this Statement to be made available in the Official Report.
Following is the Statement referred to:
With your permission, Mr. Speaker, I will make a statement about the main business to be taken by Ministers of the European Community during March. The usual written forecast of business was deposited in the House yesterday. Heads of State and Government will meet in the European Council in Brussels on 31st March and 1st April. At present four meetings of the Council of Ministers are scheduled for March.
The Agriculture Council is expected to meet on the 3rd and 4th and again on the 26th and 27th to continue discussion of the Commission's proposals on CAP prices for 1980–81; the proposed economies in the CAP to help balance the markets and streamline expenditure and proposals on policy regarding agricultural structures. Ministers are also expected to discuss the common organisation of the market in sheepmeat and French import controls; the extension of the application of the European Currency Unit in the CAP and proposals to extend current arrangements for the distillation of wine.
The Finance Council is expected to meet on the 17th to resume discussion of the Commission's latest paper on Convergence and Budgetary Questions. The Council is also likely to consider the report on the European Monetary Fund; the Commission's first quarterly review of the economic situation in the Community and the proposal for a second tranche of loans under the Ortoli loan facility. Ministers will also continue their consideration of the financial effects of Commission proposals for CAP economies and the annual agricultural price-fixing.
The Foreign Affairs Council will meet on the 17th and 18th and is expected to discuss preparations for the next European Council, at which our main concern will be to find an adequate and lasting solution to the budget problem. Foreign Ministers may also discuss Community reaction to the Soviet invasion of Afghanistan; the Community attitude to the global negotiations on international development issues, which are to be launched by the special session of the United Nations General Assembly late this year; safeguard action on synthetic textiles; the Community's external steel policy; a report on Community relations with the Gulf States; the conclusion of the European Community/

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Yugoslavia co-operation agreement; a follow-up to the meeting of the European Community/ Turkey Association Council on the 5th of February and a review of progress in negotiations on adaptation protocols for Greek accession. The Council will also examine the short list of developers' projects selected by the Belgian Government for the construction of a new building to meet the Council's accommodation needs following enlargement.

TREES (REPLANTING AND REPLACEMENT) BILL [H.L.]
Lord SOMERS: My Lords, I beg to introduce a Bill to oblige local authorities to plant trees in their areas to replace trees felled or destroyed by them; and for connected purposes. I beg to move that this Bill be read a first time.
Moved, That the Bill be now read 1a.—(Lord Somers.)
On Question, Bill read 1a and to be printed.

ENGINEERING: THE FIN NISTON REPORT
3.24 p.m.
Lord GREGSON Lord GREGSON rose to call attention to the Finniston Report, Engineering Our Future (Cmnd. 7794); and to move for Papers. The noble Lord said: My Lords, I was delighted when I saw from the list of speakers this afternoon the tremendous response to the debate which we are having in your Lordships' House. I must also say, of course, that this brings problems and the essential problem is that of time. I promise your Lordships that I will try to set an example in keeping my remarks as brief as possible and I am sure you will forgive me if I appeal to those who follow me, as the wish of the House has been expressed in resolutions, to keep their remarks, please, as brief as possible in order that those who follow late in the list may have a chance to make their contributions.
The committee of inquiry chaired by Sir Monty Finniston was set up by the then Secretary of State for Industry because of the concern that was felt at the continuing decline of British manufacturing industry, recognising the essential part that must be played by engineers and technologists if any recovery was to be
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attempted. But in parallel it should be remembered that prior to the committee of inquiry being established, considerable disquiet was expressed regarding the disagreements that existed between some of the multiplicity of learned institutions, particularly regarding the registration of engineers. This lack of agreement of the institutions on important questions was significant since in the main the institutions set the standards for engineers in this country.
The committee started its work right at the end of 1977 and reported in January of this year and a very interesting, important and formidable report they have produced—a report which must be of crucial concern to all sections of the community. They have enquired closely into a wide aspect of the problem and have dealt with a tremendous quantity and range of evidence. I think we owe a great debt of gratitude to Sir Monty Finniston, his committee and their secretariat for the very considerable effort, time and trouble that they have devoted to producing this report.
The committee's work has been concerned with what it calls the engineering dimension; that is, the engineering functions in all aspects. The report seeks to establish that engineering is essential to the economic and material wellbeing of an industrialised country such as this and that in more recent times we have not encouraged engineering to develop and to play its full role that is so essential. The report goes on to analyse the reasons for this and to make recommendations for the better utilisation of engineers, their education and training and the organisation of the profession. The report inquires into all these aspects in great detail and in fact it contains some 80 recommendations. It would be impossible for us in this debate this afternoon to discuss all those recommendations, even in a cursory manner, and I will confine my remarks to some of the major questions that I think the report raises. I know that the noble Lords who follow in the debate will provide comment on many of the areas that I do not touch upon and with far more expert opinion than I could bring to bear. I am particularly pleased to see that two maiden speeches are to follow early in this debate from two people with such extensive knowledge of the

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engineering industry, and I look forward very keenly to hearing those contributions. I also found it a delight that we saw the Introduction today of another noble Lord, Lord McAlpine of Moffat, whose extensive knowledge and experience of the civil engineering industry I am sure will be of great benefit to the House.
I believe that there is now a clear understanding that the accelerating decline in manufacturing industry poses a serious threat to the social and economic wellbeing of this country; but I think the statistic that really brings it home to me most clearly is the statistic of the ratio between our manufacturing exports and our manufacturing imports, since we virtually earn our living by our trade. In 1963 the surplus of exports of manufactured goods over imports was some 50 per cent. In 1979 the surplus was little more than 4 per cent. It is in fact rapidly approaching zero. The direct effect of this is that over the same period our standard of living, measured by GDP per capita, has reduced by some 25 per cent. compared with other industrialised countries in Europe. There is little doubt that, if it were not for the accident of North Sea gas and oil, we should by now have moved out of the twilight of comparative decline into the darkness of absolute decline.
One can already hear the call for import controls and tariff barriers, but for a trading nation that depends so critically on its exports to pay for 50 per cent. of its food and nearly all its raw materials the repercussions of such a course would, I believe only make matters worse, although, as the report points out, much more could be done in this country in the field of licensing, and I personally believe that we should now look more closely at some forms of mandatory local manufacture.
I believe that the Finniston Report has clearly established that there is an urgent need to take action. Chapter 2 of the report concerns itself with the need to bring about changes within industry and the need to bring about a change in the national attitude to the engineering dimension. The present Secretary of State for Industry has voiced his concern about the anti-business culture that pervades the attitude of this country in all walks of life. But I further believe that even
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within the business community there is a tendency for an anti-industry culture, and the combination of these two lies at the root of the problem of national attitude to economic improvement.
If we are to see an increased engineering dimension in industry in order to develop the new products and new processes that are necessary to rejuvenate our industry—and this need has been clearly shown by the recent report of the ACARD committee on innovation and the Corfield Report on design for manufacture—then it must by some means be paid for. We cannot have an increased engineering dimension in industry without somebody paying for it, and at a time, as the report points out, when industrial profitability is at an extremely low level, and from the squeeze of 18 per cent. inflation and 20 per cent. interest rate, and the very high exchange rate, profitability is being squeezed even smaller. We have an enigma of the chicken and egg variety.
I do not believe that the solution to this problem receives the attention that it should in the report, I believe we require a radical change in our approach to the assessment of company performance. We need to emphasise the extent to which development monies are being spent to ensure the future wellbeing and profitability of any enterprise. The report suggests that the Government should take the initiative to encourage and foster this investment in industry, but I believe that industry could do a lot more for itself, with the assistance of the accounting profession and those sections of the City which influence investment. Development money spent in the year should be considered to be of equivalent importance to historical profit, and investing institutions, particularly the pension funds and insurance companies, must be encouraged to put more weight in their assessment of a company on the development expenditure in terms of being assured of future performance and not short-term profit. I believe that only if the engineering dimension is measured and shown this way will industry stand any chance of recovery from its downward spiral. Development expenditure within the present accounting standards is normally written off in the year it occurs and must, therefore, be paid for directly out of

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profits. Given the present low profitability, the situation is in fact self-inhibiting, which I believe is a root cause of the critical problem of the lack of product development in this country.
I therefore believe that some pump priming will be necessary, and would suggest that this could most readily be injected if development costs properly verified ranked for additional tax relief. As I have said, it is only North Sea oil and gas which support us above the pit of absolute decline, but in economic terms North Sea oil and gas have a comparatively short life before they too begin to decline—maybe less than 10 years, and in terms of the problems we are facing that is an awfully short time.
It is, I believe, a regrettable situation that in view of our need to expand engineering activity we are today faced with a shortage of engineers and supporting technical staff, which will intensify if we make even a small step down the road to recovery. All sections, be it industry, academic establishments or the learned institutions, must take some part of the blame for this situation, and urgent measures must be taken by them all to try to rectify the position. The shortage of technicians is probably the most critical and urgent problem. This almost certainly stems from the badly organised change from part-time to full-time education brought about by the application of the Robbins Report. I regret that the Finniston Committee did not consider it within their mandate to investigate and recommend on the urgent problem of the shortage of technicians. I would therefore urge the Government to institute an inquiry without delay into this problem, as recommended by the report, because I consider it is a constricting restraint on the ability of manufacturing industry to break out of the constriction and the decline which British industry has been experiencing for many years.
The Committee spent considerable time and report in detail on the future education and training for the engineering profession. I believe that what they recommend goes a considerable way towards correcting a fundamental fault in the present situation. That is the lack of industrial
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experience that is built into present programmes. Industrial employers must this time play a major part in determining the requirements and providing training. We must not get it wrong a second time. Although I support very firmly that we must provide as quickly as possible the best education and training routes that can be devised, we must remember that this starts at school around the age of 12 and is a 10-year cycle, so that we really have to regenerate with the engineers we have got or those who are already in the pipeline, which makes the task even more formidable. I would at this stage pay tribute to the work that has been carried out in the past by the Engineering Industry Training Board, but I will say no more of that because I fully expect that in the speeches which follow more will be said of this organisation.
The real minefield that Sir Monty and his committee were asked to enter and negotiate was the question of the organisation of the profession, which, considering the rapidly deteriorating situation of the manufacturing industry, clearly shown in this report, is probably the least important problem that was considered, but undoubtedly it is the most contentious. However, for the sake of status and the future wellbeing of the profession, including the importance of updating technology, I consider that the organisation of the profession must be improved. The profession suffers, like the trade union movement in the United Kingdom, and probably for the same reasons, from a multiplicity of organisations covering various aspects of its activity. This, of course, has created difficulties in the past, but I believe that the institutes took an important step when they established, first, the Engineering Institutions Joint Council, which body eventually changed its name to the Council of Engineering Institutions—the CEI—when it secured its own Royal Charter in 1965.
For many reasons, some of which are self-evident, it has taken a great deal of time to get anywhere with the CEI, but I believe that it is now beginning to shape itself. However, there are still many problems to be solved. Within the organisation of the profession there is an important job for a central organisation to carry out—namely, the qualification and registration of engineers and the control

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of engineering practice and conduct. This leads me to one of the most important recommendations of the Finniston Report, which is the setting up of a new statutory engineering authority to deal with the education, qualification and registration of engineers, and to influence the policies of employers, the Government and others concerned with engineering. In the words of the report:
"The authority would play a key part in correcting the historical neglect in Britain of the engineering dimension and creating a climate in which it can thrive".
It would have the task of monitoring the progress of the changes recommended by the industry and of reassessing its proposals in the light of changing circumstances and practical experience.
The recommendation for an engineering authority was considered by the committee to be essential to the introduction of many of the other proposals mentioned throughout the report. I agree that something must be done to bring together the various common interests that are at present acting in relative isolation from one another. These include working engineers and their institutions, employers, engineering teachers, public agencies and the Government. It is unfortunate that the media, in highlighting this recommendation, have labelled it with the ugly title of "Quango", because I think there is a strong case for self-regulation, which could be self-costed, and which would not be a Quango by its present definition.
However, whatever name one gives to a co-ordinating body, whether it is "authority" or "commission"—as the Chinese have just announced in their interpretation of the Finniston Report—is a question for debate. I might say to the noble Viscount, Lord Trenchard, that the Chinese have appointed a vice-Prime Minister as the chairman of their commission. But it is important that there should be an organisation playing an essential propaganda role for the engineering dimension.
Nevertheless, there are many problems to be solved, including the question of civil engineering and engineering consultants whose requirements differ greatly from those of manufacturing industry. There is the need to harness the tremendous voluntary effort that supports the work of the learned institutions, and there is an
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absolute need to draw in the engineering employers who have largely been shut out in the past, to the detriment of the engineering profession and the industry as a whole.
As I said at the beginning of my speech, there are 80 recommendations in the Finniston Report, some more important than others. Many would have a profound influence on the various organisations and institutions, and, properly applied, could result in a vastly improved future for the economic wellbeing of this country beyond North Sea oil. Some have likened the recommendations to a proposal for revolution, but then I believe that something needs to be done urgently. The Department of Industry has launched an urgent consultation exercise, which I applaud, but it will take time to resolve the differences of opinion and, in fact, to get it right, as we must this time. I believe that there is also a conciliation and arbitration task to be performed. I also believe that this would be better done outside the executive.
I would, therefore, suggest that the Government should set up a steering committee, with a target of bringing about a resolution to the problems involved in setting up an organisation in the image of the proposals of the Finniston Committee's Report, with a time limit of 12 months. The terms of reference should be fairly wide and based upon the initial stage of the consultation that is already under way. The steering committee, while moving firmly towards its purpose, could continue the consultation exercise, and it would help the debate and the public understanding if the steering committee were to issue interim reports, say, on a quarterly basis. The committee should consist of a small number of people and be chaired by a leading industrialist. In order to save time, the Government should consider whatever legislation may be necessary in advance of the establishment of an organisation in 12 months' time.
We have had many reports on comparable subjects in the past, stretching back nearly 150 years, most of which are still lying on shelves, gathering dust. We now have the Finniston Committee Report—a brilliant analysis of a critical problem which faces this nation. We also have a host of recommendations

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towards a solution. They may not be perfect and they may not be all-embracing, but we must do something. It may, indeed, be our last chance. My Lords, I beg to move for Papers.
3.48 p.m.
Lord AVEBURY: My Lords, I should like to join with the noble Lord in expressing our warm congratulations to those who have served on the committee with Sir Monty Finniston, and to Sir Monty himself, for all the hard work that they have done. I should like to thank them for the thoroughness of their examination within the terms of reference that they were given, and for making their report so readable and free of jargon. It would also be right to express our thanks to Mr. Arthur Palmer, M.P., the former chairman of the Select Committee on Science and Technology in another place, who probably did more than anyone else to set the Finniston inquiry in motion. I would remind your Lordships that it was Mr. Palmer who wrote to the then Prime Minister in July, 1976, suggesting a broad inquiry into:
"the education, training, organisation and representation of engineers";
and I took that phrase from the memorandum which he then submitted. His call was taken up by the Electrical Power Engineers' Association, the union of which he is a distinguished member.
We may not be as good as the Germans, the Japanese or the Americans in translating the work of engineers into products that will sell on world markets, but we do have some talent for producing well-argued reports, identifying the mistakes that we have made in the past and the steps that we need to take to put matters right in the future. The trouble is that after a brief chorus of acclaim, these reports are nearly always consigned to dusty pigeonholes, while their recommendations are quietly forgotten.
During the 1960s, as Sir Monty himself reminds us in his report, there was a series of masterly reports bearing on what Sir Monty calls the "engineering dimension"; and I think it is worth giving the definition of that in full from Sir Monty's introduction. By the "engineering dimension" he means:
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"the effectiveness of manufacturing organisations in translating engineering expertise into the production and marketing of competitive products through efficient production processes".
On this subject and related matters we had in the 1960s Dainton on the flow of candidates in science and technology into higher education; Swann on the flow of graduates from these faculties into employment; Feilden on Engineering Design; Jones on the brain drain; and Zuckerman on technological innovation. Those were all first-class diagnoses, and yet today, as Sir Monty shows so clearly, we have slipped even further behind our main competitors in this engineering dimension.
Why is this? I think—and the noble Lord, Lord Gregson, mentioned this en passant—that engineering ranks pretty low down among the list of occupations in public esteem. About two-thirds of the people questioned in a survey specially conducted for the Finniston inquiry believe that an engineer is somebody who does manual work. The design and manufacture of goods is thought of as being in some way morally reprehensible, particularly if it happens to be profitable, while among those who were not hostile to business, the model which is held up for admiration is the manipulator of financial assets, like Mr. Jim Slater, rather than the originators of great engineering concepts, whose names remain virtually unknown to the general public.
Millions of children emerge from our schools almost totally innumerate and few people care a damn. The ones who take the chemistry, physics, mathematics route in the upper reaches of the secondary educational system have been directed by their teachers towards the pure sciences rather than to engineering, which has been viewed as the soft option for the less gifted students, and certainly not a career path suitable for a girl. It is disastrous for the nation that, as Sir Monty showed, only half a per cent. of the stock of engineers are women. We have thus excluded half the talent which the profession ought to have been able to recruit. Even today only 3 per cent. of engineering students are women. This is one of the most shocking statistics in the whole report.
These of course are not the only reasons why Britain is the sick man not only of Europe but of the whole developed world, but I think they are some of the most important. We would do better,

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my Lords, to concentrate on the practical steps that have to be taken now to improve our manufacturing performance rather than to imagine that rescue is to be sought from monetary gurus like Professor Milton Friedman, or that salvation demands an armageddon between the Government and the trade union movement.
That is not to say that I entirely agree with the diagnosis in the Finniston Report. I do not believe in the "long-term growth of the economy" because I think that energy and material supply constraints, coupled with pressure from the newly industrialised nations in the Third World, are going to mean the levelling off or even the decline of output in Western countries, measured in conventional terms, although perhaps at the same time the "use value" of the products we manufacture will continue to rise. If I can take an example, the 1980 model Ford family cars in the United States weigh about 350 kilogrammes less than the previous year's equivalent without any sacrifice in performance or space, thus saving material and giving better specific fuel consumption.
If my view of the future is correct, the engineer's role becomes even more vital, because we shall be struggling to maintain a reasonable share of a diminishing world manufacturing output, and our success in doing that will depend not only on the labour productivity of industry, on which the whole of the emphasis is all too often laid in these discussions, but equally on the efficiency of the material technologies we apply and the economy in use of the goods that we are offering on the world market. The Finniston Report does register the point that problems of resource supply call for engineering-led responses, but I do not think that one paragraph in the whole report really does justice to the importance of the engineer's role in making the best use of materials as they become scarcer and more expensive.
There is a lot more one would like to say about the Finniston diagnosis of these problems, but in the time available I am going to limit myself to some remarks only on the management of change, which is referred to in Chapter II. The brake which is preventing the application of known technologies is the human fear of immediate redundancies, and the natural reluctance of the workers affected to accept that in the long run the persistence of antiquated
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work practices can lead to the death of a whole industry. I believe that we no longer make many typewriters in this country; the motor cycle industry has almost vanished. Shipbuilding has shrunk disastrously, and now our major car manufacturer seems to be heading for disaster. I noticed that British Leyland has published an advertisement in today's Guardian showing in very striking manner the way in which the share of the domestic market in various engineering products has declined over the last few years.
As unemployment rises there is a tendency to fight even harder to protect the jobs that still remain, entrenching old technologies still more firmly and thus enabling our foreign competitors to make yet more devastating inroads into the British market. Getting this alarming diagnosis across to the public is not merely a matter of using the NEDC machinery more effectively, as is suggested here. It is surely a political question and the lead has to come right from the top. It has to be accompanied by a sympathetic understanding of the problems of the unemployed, and far more vigorous action than we have seen so far to alleviate them wherever possible.
I make one concrete suggestion here. As the committee point out in paragraphs 3.29 to 3.31—and the noble Lord, Lord Gregson, has already referred to this—the question of the acute shortage of technicians was not strictly within the terms of reference of the committee, but it may prevent the initiation of engineering projects altogether, or it may have the effect of causing employers to recruit or divert professional engineers into support work, thus wasting scarce talent and perhaps starving other employers of the professionals they could use as such. Why not offer special payments to mature students on technician courses so as to make up their income to the amount that they were receiving in their last employment? This might well tempt former steelworkers, for example; and though it might look expensive on paper this scheme would be more likely to remedy the shortage of technicians, which is costing industry and the nation, as the noble Lord, Lord Gregson, pointed out, such a very large sum in lost output.
I must now turn to the central recommendations of the committee; the creation

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of a new Engineering Authority, the registration of engineers, and the new model of engineering "formation"—a word used in the report to describe the combination of education and training. The Confederation of Engineering Institutions dislikes the idea of a single authority to undertake the two very different functions of acting as the registration body on the one hand, and at the same time being the "engine for change" in altering national attitudes and priorities for the engineering dimension.
The CEI is opposed to statutory registration, believing that the principle of self-regulation should be retained. But the members of the profession, it appears, are overwhelmingly in favour of statutory registration, according to a survey conducted among 5,000 members of the electricals and the civils. They considered that a national authority was needed to set uniform standards of education and training, to improve the level of qualifications and to uphold professional standards. These objectives have not been achieved by the existing system, under which the engineer acquires the title "Chartered Engineer" when he becomes a member of one of the CEI institutions, but certainly there is no uniformity between the formation of chartered engineers of different kinds.
May I just refer to the views which I have received only this morning from the Institution of Mechanical Engineers, the institution of which I have the honour to be a member. I understand that they prefer the system of self-regulation described by the noble Lord, Lord Gregson. I can only say to my colleagues in the mechanicals that we have not been very good at self-regulation in the past, and one of the ways I see of combining the best features of self-regulation with the existence of a statutory authority would be that in the legislation, when we come to consider it, the Secretary of State could be obliged to consult with the major engineering institutions in appointing the members of the new authority, in much the same way as we did in the case of the health and safety executive.
The level of academic attainment varies widely between one engineer and another and the postgraduate training offered by employers is more uneven still. One
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young man I read about who got a first in chemical engineering was driven out of the engineering profession altogether by the appalling training scheme offered by his sponsors, British Gas. A very close relative of mine is equally derogatory about British Steel, and I am afraid that if these large and prestigious employers have so little idea of how to maintain and stimulate the enthusiasm of graduates, it is hardly surprising that so many qualified men drift away from industry. We desperately need an organisation with the power to monitor the training offered and to insist on improvements where necessary.
In this connection, since a large number of engineers go on in the end to become managers, training in management should be a recognised part of their formation. It is disappointing to find hardly any recognition of this in the report. There is a vague mention of engineers' need to understand management principles at the start of their careers, in paragraph 4.25, and a recommendation that support for TOPS courses in management should be extended, in paragraph 4.109. The committee say it is too early to pass judgment on the enhanced courses now being offered at ten institutions, which include some management science. In my view that is not an adequate response to our needs, and one would hope that in whatever follow-up is organised by the Government—whether in the form of a steering committee as suggested by the noble Lord, Lord Gregson, or some other means—the management dimension of engineering formation is given greater emphasis.
I now come to the proposals for acquisition of engineering qualifications in the future. The committee want to divide engineers into three groups: the Registered Engineer (Dip) who takes a four year Master's degree followed by two years' practical training; the Registered Engineer who takes a Bachelor's degree followed again by two years' training; and the Registered Associate Engineer, who takes an HNC, HND or the new TEC qualifications, plus three years' experience. Here I have to agree with Lord Howie's footnote which describes this three-tier structure as an unnecessary upheaval. To do what the committee suggest would mean scrapping every single engineering degree course

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now offered, and the number of man-years of precious engineering talent that would have to go into planning the new courses defies the imagination. In any case, if we are to set up an authority with powers to regulate standards, would it not be better in principle to allow it to do this job for itself rather than to present it with a fait accompli before it has even come into existence? Far better, surely, that we should adopt an evolutionary approach and allow the authority to consider what can be accomplished within the framework of the resources available to the universities.
In this connection, I have to say that while your Lordships and many other interested bodies are discussing these valuable ideas for boosting the contribution of engineering, the engineering faculties of many universities are suffering catastrophic damage from the indiscriminate cuts in higher education. Since engineers tend to be fairly mobile, and since to an extent there are still more attractive jobs available to them outside the universities, more engineers are leaving their posts than dons in other disciplines. And as many universities are dealing with the cuts by a policy of natural wastage, I know of certain institutions of higher education where engineering is bearing the brunt of the cuts. So if the Government want to do more than pay lip-service to the importance of engineering, they should be prepared to offer the institutions of higher education a special payment equal to the amount needed to replace any losses of engineering teachers they may sustain.
This brings me to the task the authority would have of promoting the engineering dimension. It would have to start at the top and persuade Ministers to make exceptional decisions showing their own recognition of the priority if we are to have any success with industry. The Government treated defence as so important that it had to be not only exempted from the public spending cuts, but actually favoured with extra resources. If we are not prepared to do the same for engineering, we shall have nothing worth defending.
I hope the authority would not become too involved in tea parties with the Manpower Services Commission, N EDO, Government departments, employers'
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organisations and so on, merely adding another cog to the bureaucratic wheel. Of course it will need to form a broad appreciation of what is going on in all those bodies, but if it is to wake them up from their slumbers, it should be totally independent, vigorously missionary, highly visible, and even sometimes uncomfortably provocative. I do not expect to see anything quite so extreme, but I hope that in the future the engineering profession may be able to look to someone as powerful, eloquent and forthright as Sir Monty is himself to keep them and their vital work constantly before the public.
4.6 p.m.
Lord SCANLON: My Lords, I am fortunate indeed that a subject as important as the Finniston Report has enabled me to make my maiden speech and, perhaps more important still, because at times the report is controversial, not in a party political sense but as a result of the conflicting interests of all the organisations and institutions which at present make up the means by which we produce professional engineers. Your Lordships must have heard from time to time apologies from beginners like myself for possible indiscretions, and I am no exception in notifying the House of that in advance. I also wish to declare not a pecuniary but a very vital interest in the outcome of the Government's consideration of the Finniston Report.
The noble Lord, Lord Gregson, was kind enough to refer to the EITB, of which I have the privilege to be chairman, and which has statutory responsibility for the training of all persons in the engineering industry. It is usually considered that this body does training only for the shop floor, but I repeat "everybody". It trains craftsmen, technicians, clerical workers, foremen, managers and, certainly by no means least, the professional engineers who were the subject of consideration by Finniston.
We must not consider the training of professional engineers in the abstract, for I agree very much indeed with the noble Lord, Lord Avebury, in emphasising as does Finniston, the need for academic training to be associated with practical training. An intellectual was once described as a person educated above his

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intelligence, and although that is a gross exaggeration, like most exaggerations it contains a germ of truth. Too many very well qualified engineers spend their time in research and development and not in the practical application of their knowledge.
We should therefore welcome the very careful and detailed analysis which the Finiston Report contains regarding the present position of engineers in our society. The measures to improve the training and deployment of those engineers, and their status, are essential if we are to regenerate our manufacturing base and improve the competitiveness of British industry. But—and there are always reservations—there are certain reservations or questions about some of the report's proposals. If I stress these, however, it is only because the subject is so crucial and because action on the report's recommendations is so important that we really must get it right this time.
Much has been said about the three R's in our elementary education; and I am pleased that it is no longer regarded as reactionary to emphasise this part of the school curriculum. But there are also three R's in connection with Finniston. The first is concerned with the role of the new authority. The report says much —and in precise detail—about the role of the new authority, but it is less clear about—indeed it leaves very vague—the relationship which the new body, if it is set up, would have with existing bodies. This is the first of my reservations. If the engineering authority were set up and operated in such a way that it became a new bureaucratic body supervising the EITB's or any other organisation's work, it would not help, indeed it could hinder, the very achievement of the objectives set for it. If, on the other hand, it were to operate in such a way as to involve all those organisations, drawing on their experience, and delegating authority in appropriate areas, it could indeed become the "engine of change" we all seek.
My second "R" is on the question of resources. The report suggests that the new authority should be directly funded by the Government and that its annual cost would be in the region of £10 million. But where will the funds come from? The training of professional
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engineers is a very expensive operation, and employers need cash incentives as well as exhortation if they are to undertake it. The report talks about "badgering" employers, but our experience is that this is not enough. The EITB has spent £5 million on supporting initial training—and this is but a small proportion of the total cost which is borne in the main by industry. Therefore, it will become more and more difficult for the training board to find this sort of money. The Government cuts w ill make it difficult; indeed, they may not only make it difficult for us; they may even make it impossible. How then is this training to be financed in the future? It is unfortunate that this question was outside the remit of the Finniston Committee, but the Government are undertaking a review of the 1973 Employment Retraining Act, and they will have to address themselves to the problem of funding if Finniston's proposals for action are to be made a reality.
My final "R" is on the question of remuneration; and here I wish not so much to make a reservation; but to put forward a reminder of what Finniston had to say about remuneration or rewards. I quote from the report itself:
"Industry must establish the rewards and prospects for good engineers which will attract more of the country's most able young people into a lengthy and demanding engineering formation and thence into manufacturing industry".
Unless that is done, no central agencies, no academic institutions, no professional institutions, and certainly no training organisations can succeed in tackling the problems we face.
My reservations may seem a backhanded compliment to Finniston, but let me assure your Lordships that this is certainly not my intention. We have within our shores—and sometimes I become despondent over the constant cry that we are a poor nation—some of the finest brains and skills, and Concorde, carbon fibre and the Hovercraft are indications of this. We have, additionally, another immense resource. It has been said many times that we are an island built on coal, floating on seas of natural gas and oil, and surrounded by plentiful supplies of fish. We are perhaps the only nation in the world who can create a shortage of all four at the same time. But if we can apply these brains and these

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wonderful assets of energy and natural resources—the real wealth of our country —to our wealth-producing manufacturing industry, then we should indeed be a wealthy nation. However, unless we do that, rising living standards, care of the sick and the aged, new roads and hospitals, and a decent standard of education for our children will be but a dream.
Many of us have given a lifetime trying to ensure that our manufacturing industry —and in particular the engineering industry—plays such a role as I have described. Future debates both in this Chamber and in the other place will create much dissent and acrimony about how we should run the economy. But Finniston, in my view, and in the view of my board, points the way to harnessing this wonderful wealth that we have, and if we harness it in such a manner as to ensure that it is shared by all, there can indeed be a happy future for us all. Therefore, I hope that the Government will give a general welcome to Finniston, but will seek clarification on its operation. In my view we have but a short five or 10 years in which to reestablish ourselves as a leading industrial nation. Finniston is but a start to that process, and I hope that the Government will give it the means of fulfilling its recommendations.
4.18 p.m.
The Earl of BESSBOROUGH: My Lords, it is indeed a signal and unusual honour to congratulate the noble Lord, Lord Scanlon, upon a most impressive maiden speech. He will certainly be a very great asset in your Lordships' House, and I hope that he addresses us frequently. Since he is the Chairman of the Engineering Industry Training Board, it was particularly pertinent that he should speak in this debate. I am glad to say that he and I were born in the same year, and I hope that we may get together on this subject on another occasion. I am glad, too, as a good European, that the noble Lord is President of the European metal workers.
We are all grateful to the noble Lord, Lord Gregson, for calling our attention to this report, which we must recognise as a very important, and indeed stimulating and comprehensive, piece of work. We must offer congratulations upon it. I ought to say at the outset that I am glad to see the noble Lord, Lord Shackleton, back on the Opposition Front Bench.
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I see that the noble Lord, Lord Peart, is still there. I wondered whether there had been a little reshuffle lately; but it is just like old times, if I may say so.
It so happens that I first met Sir Monty while I was Under-Secretary of State with my noble and learned friend the Lord Chancellor, who I think regrets that he is not in the Chamber at this moment, because I have discussed this matter with him. My noble and learned friend was then President of the Council and Minister for Science, and together we made preparations for the establishment of the Council of Engineering Institutions and Chartered Engineers. It was also about that time—and I am glad to see the noble Lord, Lord Robbins, here—that the Robbins Report was presented in this Chamber by (if I may be so immodest as to say so) myself, making my maiden speech as a member of the Government on that occasion. Of course, that report produced certain changes, to which Sir Monty has said industry has not become accustomed. Others may say more about that later.
At that time Sir Monty was the inspiration of international research and development in Newcastle, and I may say that he used to hold me spellbound. In this second Elizabethan age, I thought of him as another Dr. John Dee, the hermetic magus or (shall I call him?) secret alchemist of the first Elizabethan age. I felt when talking to him that I could be back in Renaissance England with a philosopher-magician who was nonetheless a respected practical scientist and engineer—a man who certainly came near to being the kind of universal man it is so difficult, if not impossible, for any of us to be today. Dr. Dee was my favourite Cambridge mathematician and astrologer, not least because of his clever engineering stage-effects in his production of "Peace" by Aristophanes. That was in 1546; but it was in 1963 that my noble and learned friend Lord Hailsham and I were thinking deeply about how to enhance the status of the engineer in our society, and together, as I say, we laid the foundations of the Council which was finally set up in 1965 by noble Lords opposite, including, I think, the noble Lord, Lord Shackleton—and, as has already been said, there were no party politics involved here.

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If I may continue for half-a-minute on a personal note, ever since I took a degree at Cambridge in English literature and history, with a year of economics in between, I have regretted that in my day most of my friends and contemporaries were not interested in engineering. Although I lived very near Jesus College, where many of our best engineers were taking their degrees, very few of my friends in Trinity, whether classical scholars, historians or even scientists, saw much of them. It is horrifying to recall that they were perhaps considered as a kind of breed apart. The arts and the sciences, yes; the humanities, the theatre, they were approved: but mechanical engineers were something different. I am even more disturbed to learn that even today there is still something, if not so much, of this attitude persisting in some of our universities, even if we do all know that the engineering department at Cambridge is in the very front rank.
In the United States, Japan, Germany, France, Holland and other countries, the fundamental importance of engineering to the economy of a country is I think appreciated by all. Yet here, unlike in Germany or the United States, an accountant or financial adviser is paid considerably more, very often, than the engineer, on whom the industry basically depends. That is why, in the 'fifties and 'sixties, I was filled with remorse that one had not recognised the value of the engineer. Mind you, it seemed that those disciplines were perhaps harder, more difficult, than some others. Not that a classical education or learning Middle English is not a hard discipline; and I would of course entirely deplore it if a university education resulted in taking too narrow a view, or specialising too closely. It is for that reason, if I may say so, that the Bessborough Prize at a famous Canadian university goes to a science or engineering graduate who also produces a good paper on the arts.
At all events, my noble and learned friend Lord Hailsham and I laid the foundations of the CEI, which we thought, with its charter, would enhance the status of the engineer. I hope that to a certain extent it has done so; but I certainly feel, reading Sir Monty's report, and especially perhaps between the lines (if anyone can
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ever read between the lines), that he and his colleagues consider the Council has not done as much as might have been hoped. There is so often in this kind of debate a sense of déjà vu. The topics have been hardy perennials over many years: how to ensure that the education system gives people an education geared to the demands of an industrial career; how to encourage employers to create an environment in which engineers and others become central players in industrial enterprises; above all, how to realise the undisputed wealth of creative engineering talent in the form which matters—that is, as the noble Lord, Lord Scanlon, said, producing competitive products efficiently and made to satisfy world market demands—and, of course, how to attract talent into the technical side of industry.
How long have we been talking about these things? How many official reports and inquiries have there been into them? The Finniston Committee traces their lineage back to 1852; I trace them back to Dr. Dee in the 16th century. But even my own 1973 report on industrial research touched on them. Your Lordships have only to read pages 15 to 20. All these reports have been dealing with much the same question. But what has happened? What improvements have all our learned analyses and brave words brought about? If we read the analysis in the opening chapter of Finniston, the answer must be: not much; certainly not enough.
Obviously, this is a large and complex subject. The issues are inextricably bound up with one another, like one of those carved nests of Chinese spheres within spheres, which we all examine with such care. Finniston found he had to invent this new term, the engineering dimension, to embrace them all. Within this dimension a great many people, working through only slightly fewer organisations, have expended their energies and time to seek improvements within particular areas. They have achieved successes. Why else would British engineers be in such demand among foreign employers? I know personally how much German firms appreciate the quality of British engineers working for them. And why would Japanese entrepreneurs be so avid in seeking out new developments from United Kingdom engineering schools? But the fundamental problems persist. We have not "got it all together"; and I agree that the end

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results of our past efforts have proved, if anything, less, perhaps, than the sum of the separate contributions which have been made.
Sir Monty, as we have heard, argues strongly for new machinery, based upon a new engineering authority, which would provide a focus for activities in different areas within this dimension—in education, in industry, in government and in the profession. I was, as I say, among those who sought to create just such a focus over 15 years ago. Since its inception, we have seen the CEI grow so that it now embraces 16 member-institutions and another nine affiliates. It has achieved much within the area of professional qualifications and organisations. It has built the Engineers' Registration Board which seeks to do many of the things Finniston advocates should be functions of his high authority—especially in devising common standards for the formation of engineers and in working to encourage engineering teachers and employers to provide young engineers with the kind of experience and education which will meet those standards.
There is one thing that cannot be ducked. For all its efforts, the CHI has not had so much success in two critical areas: raising public understanding of the importance of excellent engineering and able engineers to people's working lives and economic welfare; also it may not have been sufficiently successful in educating employers to appreciate that if they want to have high-calibre, motivated and properly prepared engineers to support their enterprises then the onus lies with them to create the attractions which will bring them into engineering.
Before making up my mind about the necessity to establish a new body—and I recognise the cogent arguments of the electrical engineers on this subject and of the Institute of Chemistry—I should like to say this. The report seems to me to some extent to distract attention from the real problems of industry which have so little to do with engineering and much more with economic and social problems. It is true that the report proposes the establishment of an authority with two distinct and very different functions: one, to regulate the engineering profession; and, two, to act as an engine for change in altering national attitudes and priorities.
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Some people believe these two roles are so different that a body properly constituted for one would be unsuitable for the other. I think it is true that the proposals could be disruptive and certainly costly in terms of public funds, as we have already heard.
The proposals also may be said not fully to acknowledge the important principle of self-regulation to which the noble Lord, Lord Gregson, referred and which is a characteristic of all professions in this country. I like Lord Gregson's idea of a steering committee or a working party to be set up; and I hope that my noble friend Lord Trenchard may say something on this point.
Sir Monty's report describes the situation in other countries. I think I shall not go into them at the moment, except to say that, in each of the major cases, there is some State involvement. I am not certain whether, necessarily, in this country State involvement would be altogether desirable; I am not certain whether in this country it would not be preferable to base our moves on what already exists. I think that there is something to be said for alternative proposals which would be less costly and quicker-acting and would avoid an extension of Government intervention. I think that in this particular case a council with a Royal Charter may be more appropriate than a statutory authority and that there is something to be said for building on and strengthening the arrangements that now exist through the present, or a reformed, CEI and also the existing registration board. I certainly think that the term of the chairmanship of the council should be extended beyond one year and that, generally, the council should be more like what the General Medical Council is to the medical profession.
Frankly, my Lords, in coming to the end of my remarks, I do not think that the main problems of manufacturing industry are going to be resolved by organisations of this kind—whether it be a continuing council, registration board or a new authority. They may help; but our present economic problems are much more deep-seated. They have been discussed at length in your Lordships' House, especially by my noble friend Lord

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Trenchard, and I will not go into them now. I hope, therefore, that my noble friend will study the report with care and consult all those interested before the Government take a definite position. Maybe they will think it desirable to set up the kind of steering committee which the noble Lord, Lord Gregson, suggested.
We must all agree that there is a need for changes and especially a deeper understanding of engineering during the academic training process. I certainly believe that there should be more incentives to encourage our young to go in for what I believe to be the harder disciplines rather than the arts and humanities. I am sure that this would make an important contribution to the recovery of this country from its present grievous economic ills. What I have said should not detract from my appreciation of a most significant report, which is of great value in this continuing debate. I trust that within a limited time-scale action will be taken and that the report will not be pigeon-holed. As previous speakers have said, particularly the noble Lords, Lord Gregson and Lord Avebury, we must do something; and, above all, the point about the shortage of technicians and technical training should be taken fully on board by Her Majesty's Government.
4.37 p.m.
The Earl of ILCHESTER: My Lords, having already received a great deal of kindness and understanding from all quarters in this House in the time that I have been privileged to be part of it, I have an uneasy feeling that I may be overdoing things by now asking for that indulgence which is invariably extended to maiden speakers. My credentials for intervening in this debate are, unlike those of the noble Lord, my maiden partner today, and in spite of the very kind remarks earlier from the noble Lord, Lord Gregson, slim. However, I have decided to take part today because I have spent my working life in an engineering environment; that is, some 40 years in the Royal Air Force. I am a chartered engineer and a member of two of the professional bodies represented on the Council of Engineering Institutions. I have, at least, therefore, an interest to declare and some experience with which to support a hopefully brief contribution.
I am sure that the House is grateful
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to the noble Lord, Lord Gregson, for introducing this debate at what is a comparatively early stage in the life of the Finniston Report, that quite outstanding product of an exhaustive two-year inquiry of crucial importance to manufacturing industry and the engineering profession as a whole. As the initial response to the report has already shown, although there is general support for its central theme there is by no means a consensus among the many individuals and organisations in industry and outside concerning some of its 80 recommendations. That is hardly surprising in view of the radical nature of the most important of the proposals. The Secretary of State for Industry has already made clear that the Government are anxious to respond quickly and constructively to the report, and has called for the views of those concerned by 1st April.
In the circumstances, it is perhaps understandable that there are some who are finding the timescale difficult to meet. Mindful of my licence to practise today, I should like now to turn to the report itself and select just two of its proposals for comment. My remarks will of course represent my own views and not necessarily those of the professional bodies with whom I am identified. The Finniston Committee's most important single recommendation, as we have already heard, is the establishment of a new statutory body—a national engineering authority, no less. On the existence of this statutory organisation rest many of the remaining 79 recommendations and, according to the report, the only real hope of providing the necessary focus and impetus to achieve the desired aims.
There is no denying the depth of the analysis nor the strength of the argument which led the Finniston Committee to this conclusion. The recommendation is bold—some might say breathtaking—and certainly positive. Implicit in it is a determination that there shall not be a repetition of the fate experienced by similar inquiries over the past 150 years. But there are certain drawbacks apparent in some quarters. Again, we have heard these. Very generally, the debit markers include the substantial public expenditure plus an extension of Government involvement; the upheaval with possible loss of morale caused by revolutionary rather than evo-

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lutionary change; and a negation of the principle that professions in the United Kingdom are largely self-regulating.
These are all serious issues and should not, I feel, be dismissed as mere bellyaching by those with a vested interest in maintaining the status quo, always provided that those same interests have a viable alternative to the Finniston authority to propose. Although the Finniston Committee saw no prospect of any existing body or amalgamation of bodies meeting the need for such an authority, it seems to me to be at least conceivable that CEI may be able, with perhaps a radical alteration of its constitution, and by making the optimum use of its established machinery and experience, to find some alternative which would meet the challenge. The current consultative process may throw up such a proposition. In the meantime, I remain open-minded on the issue, convinced of the logic and principles expressed by Finniston and waiting anxiously—but, I confess, not too hopefully—to see whether a superior solution tailored to the national interests, is forthcoming.
I do not equivocate on my second point: the need for a statutory register of qualified engineers. Finniston would have this regulated by the engineering authority. CEI already has, and has had for some time, an Engineers' Registration Board (ERB) which regulates the affairs of chartered engineers, technician engineers and technicians. Whatever the outcome of the engineering authority issue, I believe that a national register, with all that this implies, rather than the voluntary system now in being, should be established.
The Finniston inquiry was, as its terms of reference required, primarily concerned with manufacturing industry. However, as Finniston has said, the report is relevant and applicable, in the context of national economic needs, across all areas of engineering activity. My Lords, I speak as a retired RAF engineer branch officer. At the risk of appearing to pontificate, I endorse that statement from the serviceman's point of view. It prompts me to express to your Lordships one disappointment and one hope arising out of the report. But first, if your Lordships will allow, a snippet from my curriculum vitae by way
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of partial explanation of my attitude to these matters.
At the age of 15 I became what is known in the RAF as a "Trenchard brat". In deference to the noble Viscount, the Minister who is to reply for the Government, I hasten to explain that this expression is a term of endearment and respect for the late Lord Trenchard, father of the RAF and founder of the RAF aircraft apprentice scheme. I am proud to share this background with, and bask in, the reflected glory of one of this country's most eminent engineers and jet engine pioneer, Air commodore Sir Frank Whittle. All that may sound like a classic in "line shoots", as of course it is.
I am therefore somewhat disappointed that the Finniston Committee's remit did not include a review of engineering technicians and that there are therefore no proposals for the formation and progression of this most important element of the engineering dimension. The report does however draw attention to the acute shortage of technicians and to the serious weakness in manufacturing industry that will exist so long as the technician gap persists. I concur absolutely with what the noble Lord, Lord Gregson, says. I also hope that an urgent and complementary review of this area is instituted without delay.
My second point—my hope—is that Finniston will inspire the Ministry of Defence to think again about engineer representation on the Air Force Board. The previous and very brief incarnation of such a post at this top policy-making level, known as the Air Member for Technical Services, ended after five years in 1951. I feel sure that the restoration of this post, or a similar opportunity for career engineer officers, would not only boost recruitment but encourage industrialists to take comparable action.
Finally, my Lords, no less an authority than the Vice-Chancellor of Aston University is reported to have suggested not so very long ago that the aristocracy was to blame for giving engineering a poor image. This was a reference to the notion that historically the aristocrat only did fine arts and science, and regarded people who made things as unimportant. I am sure your Lordships agree with me in saying that Sir Monty Finniston has not

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been so hard on that section of the Community as perhaps on others. However, a picture has been painted of this nation's past and her attitude to engineering which is at once fascinating and disturbing. We have now a blue-print for an engine for change, designed to reverse the decline in British manufacturing industry. As Finniston has warned us, this engine, or any other built with similar design aims, will not on its own get us anywhere. This engine needs a driver and, moreover, the concerted efforts of everyone—Government, institutions, industrialists, engineers and non·engineers alike —with the national will to win, to ensure that we emerge intact and on top once more from the industrial revolution ahead.
4.51 p.m.
Baroness LOCKWOOD: My Lords, I congratulate the noble Earl on his speech. He tells us that he has spent 40 years in the engineering world. I think he has shown to us this afternoon that in this House he will be an excellent advocate not only for the engineering profession but also for the Air Force as well. I think perhaps this is the first time that we have welcomed a "Trenchard brat" into the House, but if that is a term of endearment then I am sure the House would endorse it. It is very rarely that we have the benefit of hearing two maiden speeches, and from such experts on the subject that we are considering. I should like to add my congratulations to those which have been already extended to the noble Lord, Lord Scanlon, by the noble Earl, Lord Bessborough.
I suppose it is appropriate that this House should wish to consider and debate a report of such importance as the report of the Finniston Committee on engineering and our future. Noble Lords have spoken of different aspects of the engineering dimension. I want to concentrate on a limited section of the report, but nevertheless one which I think is of the utmost importance. The noble Lord, Lord Avebury, said that he found the statistics on women in engineering the most shocking statistics in the whole report. I want to refer to those sections of the report on attracting more women into engineering—a mere page and a quarter of a very long report. I should like to quote from one paragraph:
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"…less than 1/2 per cent. of the current stock of engineers are women. Engineering has thus been recruiting from only half of the population."
That is something we must surely take very serious note of, and I welcome that forthright statement in the report. I think it is obvious that this situation is a contributory factor to the problems faced by the engineering industry, a contributory factor both qualitatively and quantitatively. I am glad that Sir Monty Finniston himself has not only featured it in his report but also in public statements, where on a number of occasions he has referred to the recognition of the crucial importance of women to the future of the industry.
Having said that, I hope it will not seem churlish to add my regret that the issue has not been brought out more clearly in other sections of the report. It is, as I say, concentrated into a page and a quarter. There are implications throughout the report, and in particular in the education and training sections, but this is the only specific reference, except for one important exception: that is in the recommendation for the establishment of an Engineering Authority, which outlines four important issues which that authority will have to tackle. The last of those four items is:
"…attracting more women into engineering and the provision of conditions assisting women to maintain their careers in engineering."
I think that again underlines the importance that the committee obviously attached to this: the fact that they brought it out as one of the four most important functions of the proposed new authority.
I am glad to say that some of the statistics show a slight improvement on the position indicated in the report. For example, in the latest statistics we have available on the intake of undergraduates, we find now that 4·9 per cent. of all undergraduates in engineering are women. That is a slight improvement but it is not a sufficient improvement, because if we look back over the whole of the past decade we find, for instance, that women undergraduates in the universities have increased from being 30 per cent. to being 40 per cent. of the total intake, across all the faculties; but in the engineering faculty they have increased from being 2·1 per cent. to only 4·9 per cent. So we are not

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getting the proportionate increase in our universities of women who are tackling this very important subject.
There are some suggestions in the report as to how the situation should be dealt with, and the report refers to what it calls "sex differentiation in the curricula". It suggests that it may be possible at a later time in a student's history for both young men and young women to switch, for example, from doing a degree in mathematics to doing a degree in engineering. What the report does not do, though, is to bring out a point made by the noble Lord, Lord Gregson, in his introduction; that it is at the age of 12 when options are begun to be made which will affect the future careers of young people. I would suggest that in the interim period, until we can eradicate these so-called" sexual differentiations in the curricula", which are not going to be easy to eradicate, it would be helpful if, for example, the Department of Education and Science were to look at the possibility of offering extra facilities to young people with qualifications in 0 and A-levels in Arts subjects and helping them to switch to science and the practical subjects. This is a matter which has already been brought to the attention of the Secretary of State, and J think it would be helpful if this House could underline the importance of helping young people who have made a wrong choice, perhaps because they have not had the right career guidance at the right time, to change over to more suitable courses.
I am particularly pleased that the noble Lord, Lord Scanlon, was able to participate in the debate today. The report does not make any mention of some of the initiatives which the Engineering Industrial Training Board has made to help women overcome the handicap that they have in the engineering field. I should like to say how glad I have been at some of the initiatives which they have taken: in particular, to encourage girls into technician training. Several noble Lords have mentioned the fact that technician training is not mentioned in the Finniston Report—it was not within their terms of reference—but the EITB has taken very useful initiatives in this area. It is important that we not only recognise this, but underline the need for the experimental initiatives that have been taken to be widened and made more broadly applicable.
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I would also mention an initiative which has been taken by the West Midlands Engineering Employers' Federation. They have sought to become a designated training body, under the Sex Discrimination Act, which enables them to put on positive training for women in engineering. They are just starting out on the provision of courses for women in management in engineering, which is another very important initiative. I should like to think that other regions of the Engineering Employers' Federation might follow the path of the West Midlands Association.
Another aspect of the report which I welcome is the acknowledgment that is given to the importance of helping women who have taken a break from employment to come back into the industry. They may have left because of family responsibilities. But the report acknowledges that such women should be given help in the form of the provision of part-time employment and also of refresher courses. It is very encouraging for me that the report should be so forthright and so enterprising as to mention part-time employment, because so often we regard part-time employment as a filler-in, as it were, between the job that a young woman does on leaving school and the job that she might do later on in life.
This report seems to recognise it as part of the career structure and, if we are spending money on the training of women in the engineering field, it is essential that we maximise that expenditure by using the services of those women in this way. Of course, it recognises the fact that we do not necessarily have to have just one career pattern—the normal career pattern that most men have followed in the past —but that there can be a career pattern which is more suitable to the needs of women.
So I would say that if the recommendations of this report are accepted and are worked on with some urgency, we could see an improvement in the situation of women in engineering in this country, which, at the very least, might bring us into line with our competitors in Europe and in North America. I am quite sure that the House will endorse the fact that we cannot afford not to be competitive with Europe and with North America in any way, particularly in the utilisation of our human resources.
5.5 p.m.
Lord BAKER: My Lords, I wish to thank the noble Lord, Lord Gregson, for giving us the opportunity of this debate. My noble friends on these Benches are grateful that it did not take place a week ago, as I understood it might have done, in which case it would have preceded the talk that we had last Thursday from Sir Monty Finniston, and we should not therefore have been so well informed as we are today. It is good that this debate. has attracted two maiden speakers, whose speeches were of such distinction, and it is my great pleasure to congratulate them both.
When, in 1977, I heard that the Finniston Committee had been set up, I was shocked that engineering —the most venerable of our modern professions, going back to 1818 —should be subject to a Government inquiry. That seemed to me a disgrace. Then I realised that, for the last 30 years, I had travelled this country wherever I could find an influential audience, telling them of the doom to come if we did not change our suicidal attitude to productive industry and attract some of the best brains into engineering. This, of course, was criticism of the profession, but mine was a solo voice. It was not the only one and there were many more distinguished, but they were all soloists.
Now we have this great orchestrated work of the Finniston Committee, which covers most of the complex scene and makes far-reaching recommendations for change. I should like to congratulate Sir Monty's team on so thorough a review, and for presenting it in so digestible a form. I believe that the report is one of the most important ever produced on the industrial scene, and I trust that the Government will act on it, particularly on the setting up of the Engineering Authority, which seems to me to be its novel feature.
Like the noble Lord, Lord Gregson, I am going to draw attention to a few of the main points in the report, particularly those dealing with engineering itself. The first three chapters are a masterly summary of the present industrial position, particularly in manufacturing industry. The civil and constructional engineering scene is not considered. On the whole, they manage things perhaps rather more
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efficiently. It covers much the same ground as we did in your Lordships' House in the three debates held in the second half of 1978, beginning with that proposed from these Benches on the need to encourage innovation and enterprise. Finniston's main concern is to find ways of doing just that and to plot a course of education and training —called, as we have heard, "formation" —for the engineers who are the prime movers in these activities.
As the noble Lord, Lord Gregson, has said, the first chapter pulls no punches. It points out that our relative industrial decline, if allowed to continue, will lead to a growing impoverishment in the years to come. The report confirms what we have already heard here, that the best United Kingdom firms are excellent, but there is a wide spread in the level of productivity between them and the worst. Finniston found one common characteristic among the best firms. They had built on excellent engineering, integrated with enterprising and forward-looking market and product strategies. Their management regarded engineering as the common factor linking the various functions within the organisation into the engineering dimension which has already been defined.
Finniston confirms that the United Kingdom is acknowledged internationally as rich in inventiveness and creative talent. Unfortunately, this is not harnessed effectively by manufacturing industry because, compared with continental Europe,
"there have been neither the cultural nor the pecuniary rewards in this country to attract sufficient of the brightest national talents into engineering in industry."
Financial rewards, or the lack of them, I know all about, but the word "cultural" defeats me. The dictionary definition of "culture" is intellectual development. Engineering, as I am sure the Finniston Committee realises, provides all the intellectual challenge that anyone could desire. What I believe they mean is not "cultural" but "social"or" snobbish." The value attached to the engineering dimension among our successful rivals abroad is reflected by the high earnings of engineers and by the presence of engineers in top policymaking councils of industry and the nation. Improved standing of engineers will only come with enhanced recognition of the nature and importance of engineer-

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ing, but the Finniston Committee has no more idea than I have, I believe, of how this essential recognition can be brought about in this country except through the activities of the Engineering Authority which it proposes should be set up.
Finniston then turns to innovation, which must become the way of life for successful manufacturing companies, and it is a very long way from becoming that. The committee says that innovation is largely handicapped in this country by the predominantly non-technical background of the directors of engineering firms from whom the decision-takers are largely drawn. I must agree to some extent with that, but, as an innovator, I have found that the not very bright practical man is about as difficult to persuade as any financier.
Chapter III deals with the supply and demand of engineers. There is a most revealing diagram in Fig. 3.1 which underlines the changes that have taken place in the past 15 years since Robbins opened higher education to all. This removed, at a stroke, the source of supply of most engineers employed in productive engineering. Up till then it had employed a capitve class, fully employed in the works during the day and studying in their spare time, mostly in night schools. They had a thorough understanding of industry, or at least a thorough understanding of the firm in which they worked, if not of much more. It was a wicked system. But Fig. 3.1 shows that even now 70 per cent. of those 40 years of age and over came up this hard way. The majority of those at the head of manufacturing industry must therefore be in this class. They are attempting to carry out a very tough job under, to them or to anyone, insurmountable difficulties: the loss of a captive, well-trained labour force.
The complaints of these hard pressed men bulk too large in Chapters III and IV of the committee's report. They do not understand, and so fear, university education and they are naturally somewhat resentful of the beautiful opportunities now given to the young. Their comments, echoed by Finniston, show some bias against brains. As the report says, and I have heard this so many times myself:
"Many employers made the observation that their best engineers sometimes had poor academic
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qualifications. They preferred to recruit well-rounded individuals with perhaps a 2.1 or a 2.2 degree than an academically bright but personally less capable Ph.D. or first class Honours man".
Of course, an engineer must be well rounded, but to my knowledge there is no correlation between brains and the lack of practical ability. The truth is that the first-class man may be less tolerant of an inefficient employer and he may be foolish enough to show it. What industry and engineering needs is what they have abroad: ready access to the best brains in their countries.
Chapter IV deals with courses of instruction and it may appear to be highly technical to some of your Lordships. It covers what the report calls "formation" —what we used to call education and training. It proposes that more "practical" work should be introduced into university courses. No engineering professor worth his salt would object to this. In fact, the report generously says that many already provide excellent design and practical problems, with emphasis on synthesis rather than analysis. But this approach to education is much more difficult than the old-fashioned methods, and many education institutions will need help from industry —a branch of industry that cannot help itself now by providing the sandwich courses that they like. But the help will —indeed, must —come from the proposed Engineering Authority.
I am going to resist discussing any further the courses that Finniston proposed. I do implore the committee to look again at this chapter. I agree with the noble Lord, Lord Avebury, and with the footnote written by the noble Lord, Lord Howie. We have some very distinguished schools of engineering in this country. They are quite capable of dealing with all that is required here, without some of the disruptive moves that there would be between existing stock and new entrants; so with great self-control I am not going to enlarge on this any more. All I would do is to implore the committee to look again at paragraph 4.50 in particular which deals with the way they would treat three-quarters of the output of this invaluable profession, described so glowingly in the first three chapters of the report. What they say merely aims to provide manufacturing industry with the fodder it learned to deal with in the bad old days of evening part-time study.

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I was sorry to hear that the noble Earl, Lord Bessborough, was so unfortunate as to move in such narrow circles when he was up at Cambridge. Engineers in Cambridge never were a breed apart. I can assure the noble Earl that at Trinity in his day at least 10 per cent. of the undergraduate population would be engineers.
After graduation, the formation process to which I have briefly referred will continue. What is sketched is ideal and it would be the responsibility of the employer. But the employer, as I think the noble Lord, Lord Avebury, said, will in few cases be qualified at the moment to take this responsibility. Again this is where the Engineering Authority must step in. It must be there to co-ordinate effort, to promote the whole exercise, to accredit academic courses and the formation process in industry which we talked about in the academic field and register as the qualified product of the system.
May I assure the noble Baroness, Lady Lockwood, that the question of women in enginering, while close to my heart, is a very great worry. All I can say is that the last active job I did for the Institution of Civil Engineers —I think in 1970 —was to chair a working party on women in engineering. All the evidence we got showed, of course, great enthusiasm, but I realise that we are not doing anything like enough. As women outnumber men by two to one among my grandchildren, I am very much concerned about this.
I want to make one last point. I feel that the Finniston Report makes the right decision about leaving the professional engineering institutions with the job they do so well; that is, to continue their work as learned societies and not to have the responsibility of accrediting courses and so on. If this is a source of disappointment to them, it is a source of great sadness to me because from 1936 until 1973 I was continuously involved with one or other governing bodies of these institutions. While they have done so well as learned societies I feel they have always hidden behind the Royal Charters that made them such, and so have been ineffective in preventing the depreciation of our profession until it ranks so low in public esteem.
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They have been equally ineffective in caring for the material wellbeing of their members —at least of their younger members. Other professions analogous to engineering, such as medicine and architecture, have learned societies but this has not prevented them from raising and jealously guarding the status of their professions. I have known many able secretaries of the major institutions but we never found one with real statesmanlike qualities; engineering was unfortunate in not finding a MacAlister to serve it, although we once came very near to doing so. Medical men in your Lordships' House may remember Sir Donald MacAlister of Tarbert who virtually ruled the medical profession for 27 years from 1904 to 1931 (when it was quite a respectable thing to do) as President of the General Medical Council. By 1905 his younger brother John had formulated a scheme for amalgamating the medical societies of London and then of all in the country into the Royal Society of Medicine, of which he became secretary. John's son Ian was Secretary, from 1908 to 1943, of the Royal Institute of British Architects and made that the effective profession with high status that it is today.
Even in those days some of us were very worried about the profession of engineering and a group of us just before the Second World War were determined to attract a member of this remarkable family (who were kinsmen of my wife) into engineering administration. We set our sights on one or other of Ian's three sons. Sadly, all were war casualties, two being killed on active service, so our plans came to naught.
There is one small matter I should like to put in, remembering that I was a member of the University Grants Committee for 10 years. In section 4.91 something is said about UGC funding and I should like to give one warning. In what I feel were the "good old days" we thought of engineers as people who produced "hardware"; now of course there is something almost equally important, and that is "software". All engineering departments deal with computers but the basic fundamental work, the development of computer languages, is more often the work done in departments of computer science and it will be important to remember this when applying for additional funds (which I

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hope will be forthcoming from the UGC) for engineering, otherwise, university bureaucrats being what they are, the funds may go astray.
I have made clear my support for the proposals to set up an Engineering Authority. As the report says in chapter 6:
"A fundamental shift is required in national priorities at many levels".
"An engine of change" is required to overcome the inertia and negativism of prevailing attitudes and to press for actions to advance the national economy through the engineering dimension. We need an authoritative champion. I realise that there is a danger that this engine may produce a lot of gas and may not move —no one could fear bureaucrats more than I do, but our efforts for a century and a half have been so fruitless that we must have this authority and we must see that it is effective.
5.25 p.m.
Lord HOWIE of TROON: My Lords, I rise to speak as a member of the Finniston Committee and like the noble Lord, Lord Baker, I am a member of the Institution of Civil Engineers, so therefore I may be thought to have some interest in whatever comes out of what the Government decides to do after reading the committee's report. I must begin by adding to the congratulations which have been offered to the two noble Lords who have made their maiden speeches today.
The speech of the noble Lord, Lord Scanlon, was great —the experience of one part of engineering and, more recently, the training of engineers. He drew our attention to one part of the report which really we did not make very prominent —money. He said that an important element in the status of engineers and the place they take in society was related closely to remuneration. So it is. Perhaps all our difficulties about getting better engineers and more of them could be solved quite simply if employers just paid them more and we did nothing else. I am not sure whether that is the whole answer, but it is certainly part of the answer and it is a part which we mentioned in passing in the report.
Also in passing we mentioned another part of it which is very close to the early
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life of the noble Lord, Lord Scanlon. We touched on trade unionism in relation to professional engineers. We quite rightly did not descend into the great battlefield between the contending trade unions. In the report we do not say that this trade union is more suitable for professional engineers than the other one but we endorse the general attitude of the Council of Engineering Institutions that trade unions are here to stay and that where professional engineers feel it appropriate to join trade unions they certainly should not be hindered or discouraged from doing so. I myself would not only not hinder them; I would actively promote it.
The noble Earl, Lord IIchester, is a most interesting addition to our ranks. He is yet another chartered engineer. The interesting thing which we notice is that the means by which we come here, whether it be by the hand of patronage or by the hand of providence, seems to produce a much larger proportion of chartered engineers in this House than the more democratic procedures produce in the other House. I can see sitting in front of me a fellow chartered engineer who has had the same experience as I have; namely, of having been raised into the other House by the hand of democracy and ejected from it by the same hand —although not quite at the same time —showing that democracy, like the rest of us, has a left hand and a right. I add to the congratulations which have been offered to these two recruits to our ranks.
Before I say much about the report, I should pay some tribute to my colleagues on the committee; I think it right that this should be publicly and sincerely done. In the two years of our deliberations we owed a great deal to the dynamic zest with which we were led by Monty Finniston. I am not sure that I always felt that he was leading us in the right direction, but he was always leading us somewhere. He did not sit back in his chair and allow the committee to lead him. It is largely due to his energy and drive that the report was completed in virtually two years. Sometimes I thought we might have taken just a little longer to do it, but Monty wanted it quickly and under his lash we produced the report in two years. That says a great deal for the dedication of my colleagues on the

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committee and for the manner in which they tackled this extremely important, very complicated and wide-ranging inquiry.
The committee has given some leadership to the Government and to the nation as a whole. I hope it will lead engineering into some kind of promised land. Whether or not it will I have some doubts, but my doubts may be set at rest when we see what the Government eventually produce. I signed the report, although I had some doubts in the course of our two years deliberations about certain decisions we were coming to. Here and there I felt the committee was mistaken, and elsewhere I felt it was bluntly wrong. But felt that, regardless of my occasional disquiet, the total strategy of the committee and of its report was unquestionably correct, and for that reason it seemed to me important that everyone should sign the report and support the strategy, whatever doubts we may have had on lesser matters, matters of detail, important detail but matters of detail none the less.
The committee's strategy was right. It was to produce better engineers and to make better use of those engineers in industry, and the result of that would be better engineering and a stronger and more effective economy. Of course, that is only part of the economic problem. We know, as I think Lord Bessborough said earlier, that the economic problem is much more complicated than that; it goes far beyond mere engineering. There are all sorts of difficulties and complications and dangers in the economy, some of them quite out of our control. But in so far as engineering is responsible for the difficulties, the committee felt that it was producing solutions which would lead to improvement and to economic strength. The report, I think it fair to say, pays more attention to producing better engineers than it does to industry making better use of the engineers it gets. I think the balance was slightly wrong there and I think that was a pity.
Since I am going to disagree with some parts of the report, I should first of all indicate those parts with which I do agree, and your Lordships will find that there are more of those than of the ones I disagree with. I think the committee was right to propose a new engineering author-
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ity. I very strongly support this. The institutions have been in existence since the first one —Institution of Civil Engineers —was founded in 1818. I think it fair to say that although they have done all sorts of things extremely well they have in the end failed, much as Lord Baker said a moment ago. It is not their fault. Hundreds of men, and women too, throughout this period have played a dedicated part in trying to impress on industry the things that they were trying to do to improve the art of engineering and the science of engineering. Dozens and dozens of committees, endless meetings, proselytising, learned papers, conferences, seminars, books, are some of the endless list of activities through which the institutions have tried to promote engineering and to improve it. If they have failed it is not their fault. It is quite clearly a failure on the part of employers who have been unwilling or unable to appreciate what the institutions were trying to do and have been unwilling to use the institutions as a yardstick for engineering success and engineering excellence.
The committee accepts that the institutions have failed and that is why we propose a new authority. If the institutions had been successful a new authority would not have been needed. It is because they have failed that it is needed. But, unfortunately, the report does give a slight impression, unwittingly, that all the institutions have failed equally. It is not at all true. The Institution of Chemical Engineers plays a very powerful and strong part in the chemical engineering industry. The Institution of Civil Engineers and the other institutions in the construction world are very influential and successful in that world. And let me say this: if the other major institutions had been as successful in influencing their industries as the Institution of Civil Engineers has been in influencing its, this inquiry might not have been needed, and certainly a new authority would not have been needed.
Turning to education, it is right to propose that engineering courses should be more practical than they are now. Many courses are already as practical as need be and we say that in the report, but despite what Lord Baker says about PhDs, (and I am sure he is right) it is engineers that are needed, not quite so many engineering scientists. There is a need for engineering scientists, but in

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science not in engineering. Some balance has to be found between them. The committee was right, I think, to demand that engineering teachers particularly should have considerable, and preferably lengthy, experience in engineering in industry, in commerce, before they became teachers, and should be prepared from time to time to change Box and Cox between the academic world and industry. It is not easy, of course. People have got their careers to follow; they have got promotion to seek, and they cannot just jump about. Nevertheless, the principle that people should move more readily from the academic world into industry is a very serious one. I think the committee is absolutely right about that.
The committee is right, too, to stress very strongly the need for continuing education among engineers themselves. We get a little bit fancy about it; we call it "ontinuing formation", but we really mean continuing education or in-career training, as it is often called. But the important proposal we make there is not merely that engineers should pursue education throughout their working lives; the point we make is that engineers should have a statutory right to time off to pursue continuing education where the courses are available and where they want to follow them, and the new authority would be encouraging them to follow these courses.
The committee is right, too, to ask for registration of engineers beyond the scope of the ERB as it now exists. The real reason for doing this is partly that the ERB only registers people who are in institutions and therefore misses out a good many who are not; and many of them are excellent engineers whether they are in institutions or not. But much more important, the engineering employers have very largely ignored the work of the ERB and it seems very unlikely that they are going to change their tune, so a new statutory registration system might help there.
The committee hope that the register will become, in effect, a licensing system. I very strongly endorse that. But there is an element of pious hope about that. I incline to the belief —I may be wrong; I hope I am —that since engineering employers have paid scant respect to the ERB, which is a voluntary register, there is little certainty that they will pay much
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more respect to yet another voluntary register, even though a statutory one. The committee felt that its statutory nature would give it a kind of dignity which would compel engineering employers to pay heed to it. The committee may be right. I merely say that I am slightly sceptical. I think that some compulsion might well be needed and we might well have to extend licensing in the future much further than we have been doing.
Where has the committee gone wrong? I think it has gone wrong in not paying sufficient attention to the construction industry. The committee, quite rightly I think, regards engineering as one profession right across the disciplines. But it is a profession with differences. Civil engineers are not exactly the same as electronic engineers. The differences between them are not merely matters of size; it is not just that one deals with a tiny electronic piece of equipment while the other deals with a massive power station or dam or large structure.
As I have already said, one major difference is that the institutions in construction have been effective and influential, and that should not be merely cast aside or forgotten. In fact, the qualifications of the Institution of Civil Engineers are so regarded in the construction industry that last year's president of the ICE was able to say in a public address that a system of licensing by consent existed in civil engineering. That might have been a slight exaggeration, but it is an exaggeration with a very great element of truth in it.
Another difference is that the construction industry is very largely run by engineers. That is a great difference between it and manufacturing industry. It is not always the case that manufacturing concerns are run by engineers, although they are sometimes. It is almost always the case that construction concerns are run by engineers. That is one difference, and it is a very clear and large distinction between construction and the rest of the engineering world.
There is another difference. The economic failings of construction are of a different order. Manufacturing industry sometimes fails because it cannot meet a market of the consumer kind. Construction sometimes fails because its market has

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been taken away. To a very large extent its market consists of public expenditure, and to a very large extent the construction industry is in the hands of Government or local government which, when dealing with their economic problems, utilise construction as a regulator. That is a great difference. It is a different kind of failure to meet the market because the market is of a different kind.
There is another difference which can be much more in mind. When people criticise the performance of the engineering industry —as very well they might —they should find time to reflect that the export performance of the construction industry is second to none. That results in a difference between the construction industry and the rest of engineering in terms of measuring economic success or failure.
I now turn to the proposals for education. I think that they are too complex and that they are also unnecessary. I have put a rather brief footnote on page 116 to that effect. I am extremely pleased to have the support of the noble Lords, Lord Avebury and Lord Baker, for my footnote. I hope that that will be taken into account by anyone who happens to read Hansard in the next few days. I believe that we fell into a fairly elementary error here. Naturally, as a committee we looked at structures and tried to analyse them, and thought that we could replace an existing structure by a new and presumably better one. In a committee it is extremely easy to deal with something about which you can draw a diagram. Uses of engineers are rather more difficult. However, the education structure can be analysed, examined and redrawn. That is what is said.
I shall now explain the elementary mistake that we made. We went abroad in batches all over the world. We saw that Germany had an engineering education structure of one kind —indeed, our proposals are largely based on the German pattern; perhaps I should say that they are influenced by the German pattern. We visited France and saw that France has an engineering formation which is totally different from that of Germany. It is at the exact opposite end of the spectrum from that of Germany. In Germany it is highly theoretical and practical; in France it is highly theoretical. The difference is
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as wide as possible. We saw that the United States has another form of engineering formation, and that Japan has something between that of France and the United States.
But the lesson we should have drawn is that, despite those differences in the structure of engineering formation, good engineering resulted in the end. Therefore, prehaps the structure was less important than we took it to be. I think we dealt with structure because it was something with which we could deal easily; we produced an enormous chapter —which I believe has damaged our report because it is so large (and it could not escape being large for it went into great detail) —so that the report looks like a report on engineering education with additional frills. The frills are, in fact, far and away the most important part, as the engineering authority is far more important than the actual shape of the engineering formation, important though that is.
Without going into any great detail, I believe that the existing two-tier structure ought to be retained. Broadly speaking, chartered engineers and their equivalent —whether or not they are chartered —should be one tier and engineering technicians the other. I think that the institutions are on the right lines —although we might argue all day about the precise details which they have put forward —in that they believe that qualifications for the upper tier, the chartered engineers, should be raised, so that the threshhold between chartered engineers and technician engineers is raised a little. Surely that is the sensible, correct and most economic way of dealing with that difficult problem. In any case, I am by no means certain that our universtiies —admirable though they are —can reliably select the leaders of the engineering industry at the age of 19. There are some things that they can do, but I do not think that that is one of them. This is what we have asked them to do in the report. I am fairly sure that the universities can sort out those who are likely to succeed in the M.Eng. degree, but in the report we are asking them to go ahead and lead the engineering industry. I do not think that that can be done, and it is a mistake which we have made.
I should like to say a few words about

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the organisation of the profession. As was said earlier, it has traditionally been self-regulating. I do not, in fact, believe that the engineering profession changes that all that drastically; undoubtedly, it changes it a little. Let us not forget that if the proposals of the committee are put into effect, a majority of the new authority will still be practising professional engineers. To that extent at least the profession will be self-regulating, although it is true not in the old way. This is where I dissent a little from my colleagues on the committee, this time in an anonymous footnote —I felt that one footnote at a time with a name on it was more than enough. I believe that there should be reserve places on the authority for the institutions, and that to make that sensible —and you could not have anymore than four or five reserve places —the institutions should be encouraged or even badgered into amalgamations or confederations, in which the construction group could come together. We do not really need all the civil engineers, structural engineers, the water engineers, the highway engineers, and the municipal engineers —I do not know if I have missed any out. We need some kind of construction group. If architects could be induced to come in, so much the better and —let me utter an engineering heresy —even the quantity surveyors, because they are quite important in the construction world. I see that the noble Lord, Lord Baker, does not go with me all the way, but it is something to be thought about. Places should be reserved on the authority for the institutions to restore, to a greater extent than our proposals do, some element of self-registration.
There are also difficulties about existing stock, which is a very difficult problem; I believe that it is almost impossible —I may be wrong —to fit the existing stock of engineers (such chartered engineers as, for example, are in your Lordships' House) into the proposed three-tier system. If we stick to a two-tier system, there is not much difficulty about it; the chartered engineers would go into the top tier and the others into the second tier. However, it is a difficult question and the committee, realising the difficulty, marched straight up to it, looked it squarely in the eye and then turned and fled. If noble Lords read the report, they will notice that we do not actually make a proposal. We make
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three or four different proposals which we think the authority might adopt or think about.
Let me now turn to the Government. There are apparent signs —although I know nothing about this really —that the report might not be pigeon-holed, provided there is a sufficient demand from engineers and engineering for its proposals to be put into operation. I believe that the Government's time-scale is too short. It took us two years to digest this material and produce proposals. I think that industry should have been given more than 21/2 months to examine these proposals, think about them, and come back with counter-arguments, perhaps, or even with agreements. I do not think that we are in all that much of a hurry that we cannot spare another fortnight, or even another month. The "Titanic" may be sailing across the Atlantic, but we have not quite hit the iceberg yet.
What should be done then? I am hesitant about Lord Gregson's proposed steering committee, despite what I have said about taking a little longer. We have just had a committee to look into the whole of this business. To set up another one right away before the ink is properly dry on our report is over-egging the pudding. What Sir Monty's committee has proposed should be looked at by the Government, studied and examined, and they should go ahead with the legislation, provided that they have the demand they want from industry.
They should go ahead with the legislation needed to set up the new engineering authority. But they should try to fit the institutions into the authority rather better than our proposals do. They should also study the special relationship between the construction industry and the rest of the engineering industry, and look at that problem rather more sympathetically than the committee felt able to do. With those minor reservations from the proposals of Sir Monty and my colleagues, I would commend the report to the House.
5.53 p.m.
Lord HINTON of BANKSIDE: My Lords, I think that I should, first of all, express my gratitude to the noble Lord, Lord Gregson, for giving us the opportunity of debating the Finniston Report

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at this early stage. Having said that, I should like to offer my sincere thanks to the noble Lord, Lord Scanlon, on what I thought was an absolutely brilliant maiden speech. If the noble Lord maintains this standard, he will be one of the people who sends Members hurrying in from the refreshment rooms whenever they see his name go up on the monitors.
If ever a committee or a commission was set up publicly to inquire into a profession which everybody thought was good I have never heard of it. I think it follows from this that when a commission is set up to inquire into a profession a large number of people think that there must be something sadly wrong with that profession and so I believe that the terms of reference that were given to Sir Montague Finniston's Committee were perhaps a little unfortunate.
They can be read as implying —and they certainly have been read by some people as implying —that Britain's unsatisfactory industrial performance is due to the fact that our engineers are, at the best, indifferent and, at the worst, incompetent. Nothing could be further from the truth than this. There are of course bad British engineers and in some fields of industry our British engineering has not been at all good, but by and large professional and technician engineers in the United Kingdom are quite outstandingly good; and the tragedy is that this is realised and recognised in pretty well every overseas country and the only place where it is not recognised is in our own country at home.
I do not think that it is right to make a claim of that sort without giving some sort of supporting evidence, so I should like to take up a few minutes of your Lordships' time in giving a few examples, taken quite at random, to show what is done by British engineering. They add to the few examples given by the noble Lord, Lord Scanlon, which indeed were very well chosen. Let me go lower down the scale than he did and look at the road vehicle industry; the motor industry, if you like to call it that. It is an industry where we are outstandingly unsuccessful; where we lose money. But if you look at the engineering in that industry you will find that there is a firm on the South coast which acts as design and development consultants for pretty nearly every motor
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manufacturer in the world; motor manufacturers not merely in this country and in other European countries but also in Detroit and Japan.
If you go a little further into this unsuccessful motor industry and see what British engineering can do, you find that it has produced the one really imaginative post-war design of motor cars. I refer of course to the Mini Minor with its pioneering system of suspension and its transverse engine layout, which has been copied by manufacturers all over the world. When you look at our railways you find that our railway engineers are used as consultants all over the world on railway modernisation and on new railways. When you look at their more detailed work you will see that the system of suspension which was evolved by the engineers at the British Railways research station at Derby solves a problem which had bedevilled railway engineering since the time of George Stephenson.
If you move outside the field of mechanical engineering and look at structural engineering, there is not any difficulty in finding similar examples of excellence there. The principles of design which were evolved by British engineers and were first used by British engineers on the Severn Bridge solved a problem that has bedevilled suspension bridges for centuries. It was the application of those principles which enabled the British consultants to obtain the contract for the design and supervision of construction of the great bridge over the Bosphorus.
In civil engineering you can still again find plenty of examples. Having worked for the World Bank I can assure your Lord-ships that, with their knowledge of consulting engineers in most countries, it was not without absolute confidence in their performance that they appointed a firm of British consultants to act for and on behalf of the World Bank in co-ordinating and supervising that greatest and most complex of all civil engineering projects in recent years, the great Indus Basin scheme, with its huge dams at Mangla and Tarbela, with its link canals and with its barrages at Chasma and in other places. One can find these and other examples of excellence all over the world.
The truth is that in most cases where British industry is unsatisfactory, this

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lack of success is not primarily due to bad engineering. The chief causes are lack of business vision, lack of entrepreneurial ability, lack of a steady purpose and the all too frequent adoption of "stop-go" policies.
There are very few good engineers who are satisfied to see the results of their work only on paper which they know is predestined for the wastepaper basket because the work they are doing has been badly directed. Good engineers like to see the outcome of their work in tangible artefacts, and if they cannot see that they are likely to move to other employment or other countries where they are likely to get more satisfaction. What is perhaps worse, or at least as bad, is that they are likely to advise their bright young friends against entering a profession which has failed to give them satisfaction.
Engineering is a very old profession, indeed much older than the noble Lord, Lord Baker, suggested when he dated it back to 1829, because although they were often military or canal engineers, there were engineers working 2,000 years ago. However, most of the great engineers of the past were first and foremost craftsmen who had supplemented their craftsmanship with theory which, to the modern engineer, is simple. Developments in engineering theory and practice have outdated the earlier methods of training which produced those engineers and changes have been made in the system of engineering training and education to produce something which is suited to a profession which not merely uses more sophisticated theory but also lives —and this is important —in a different social environment.
When many changes have been made, it would be surprising if every one of them had been a change for the better, and in the last two years the Finniston Committee have examined the pattern that has evolved to see where and whether there is need for adjustment. Our thanks are due to them for the painstaking and thorough job they have done. I strongly suggest, however, that their report should be regarded as a Green Paper; it should on no account be regarded as a White Paper.
The important recommendations of the report are that the education and training of engineers needs to be reviewed, and
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there I would emphasise that, in engineering, education and training go hand in hand. It would be fatal if it were said that training is an industrial matter and is the responsibility of the Department of Industry while education is a matter for the Department of Education and Science. In engineering these two things must go hand in hand and it would be fatal to divorce them from one another.
The report recommends that the competence of engineers should be validated at appropriate stages in their careers and it recommends that the relationship between industrial engineering and engineering research should be examined. These are important recommendations —they are are not the only recommendations of the report —and in principle I support all of them. But it is being assumed by some people that the recommendation of the report which is of outstanding importance is that an engineering board should be established to regulate the profession. I suggest that the need for such a board should be thought of as being contingent on the action which is found to be necessary in regard to the report's other recommendations. If what is found to be necessary there can best be achieved by establishing an engineering board —and my inclination is to believe that a board with chartered powers is necessary —then a board should be formed, but the formation of a board should be regarded as a means to an end and not as an end in itself.
If a board is found to be desirable, it must be so constituted that it does not take the control of the engineering profession out of the hands of engineers, any more than the GMC, which controls the medical profession, takes the control of that profession out of the hands of the doctors. I believe that the question of registration, which is a complex one, should be left until it has been decided whether the formation of a board is necessary, because whether compulsory registration or some other form of registration is practicable I think depends on whether it has been decided that it is necessary to form an engineering board.
As I have already said, I hope we can regard this debate as little more than a First Reading. We should not go too deeply into the detailed recommendations of this carefully prepared report until the

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many bodies concerned —the institutions and institutes, the vice-chancellors' committees, and the many other committees which are concerned in this —have had an opportunity of examining and discussing the report. I hope that will be done without delay, because delayed decisions undermine morale.
6.10 p.m.
Lord NELSON of STAFFORD: My Lords, first, may I add my gratitude to that already expressed to the noble Lord, Lord Gregson, for introducing this very interesting subject today, at a very timely moment, in my opinion, as I am sure that the collective wisdom of your Lordships coming out of this debate will be a great value to all those who will be discussing this matter over the next few weeks. I also wish to add my congratulations to the noble Lords who have made maiden speeches. The noble Lord, Lord Scanlon, spoke in his usual vigorous fashion, which was very good to hear, on a subject on which he has very great knowledge and to which he has made a very considerable contribution. I was glad that the noble Earl, Lord Ilches-ter, in his speech drew our attention to the fact that all engineers are not necessarily in industry. He referred to engineers in the Services and, if I may, I shall return to that point a little later.
I think that Sir Monty Finniston and his team are to be congratulated upon the immense task that they have performed in bringing this report forward to us. I should like to join most warmly with the noble Lord, Lord Baker, in complimenting Sir Monty Finniston on the excellent readability of the report. It would have been very indigestible had it not been presented in the way it was. First, I am sure that we would all agree very much with the economic analysis with which the committee opened up the subject, and I for one am delighted that in doing so they drew attention to the immense importance of our wealth-creating industries in meeting some of the economic problems which were referred to; and within that to the important part which engineers have to play in ensuring success.
I shall confine my remarks mainly to the industrial side of the problem as touched on in the report, but that does not in any way mean that I do not agree
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with the educational proposals; I agree with them very much —in particular the recommendation made about starting education at an early age with an adequate standard of mathematics and physics teachers in schools. There is another small, but important point; namely, the need for those who do technical subjects to be educated with an ability to communicate as well as to understand their technologies.
I was most interested in the comments of the noble Lord, Lord Baker, coming before the noble Lord, Lord Howie of Troon, on the latter's minority report on the three-tier proposals for higher education. I hoped that he would develop his argument a little more, and I look forward to developing it perhaps on another occasion. My own thoughts were very much along the lines of those of the noble Lord, Lord Howie. Here was a proposal for a very considerable upheaval; was it really necessary? I think that that can be judged only by those who are kneedeep in the higher educational system. The noble Lord, Lord Baker, was one of those, but he shied away from the subject, though I think that he made it clear where his sympathies lay in regard to this matter. I wish to refer to another small point regarding the report itself. I do not see the point of changing the title "Chartered Engineer". We have all got used to it. We all know what C.Eng. means. Why bring in another row of titles? I hope that some means can be found of sticking to what we all now know about.
I now turn to industry's role in all this. The report emphasises the important part industry must play in the solution of this problem, and I wholly endorse that view. This is basically where the short-term problem lies. Certainly, in the long term, education and other matters come into it, but in the short term it is industry that must rectify such problems as there are.
I find myself very much in sympathy with the noble Lord, Lord Hinton of Bankside, in thinking about this. The report and discussion on it tends, if we are not careful, to denigrate our engineering performance, and I should like to emphasise what the noble Lord, Lord Hinton, has said to us. Many of our problems have nothing to do with technology or standards of engineering. They are due to other matters of a deeper and

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(shall we say?) of a more economic or management nature, rather than due to technology. In fact, I am very puzzled—and I am sure that many of your Lordships are—because if you look around British industry, you will see that there are many areas of very considerable success. The noble Lord, Lord Hinton, has touched on these.
Now, why in certain areas do we have great success, touching the heights in the world markets, the best in the world in their field—and there are a number of different ones? Yet in other fields we seem to lag behind and are not able to stand up to the competition. The reason cannot lie in the supply of engineers because they are showing what they can do in the successful area. So why is this success not happening elsewhere? I do not believe that it is all Finniston; I do not believe that it is all training and producing engineers. In saying this, I do not in any way wish to denigrate the report—it is a very important contribution to the subject, but it is not the whole problem.
Looking at the matter from an industrial point of view I think that much of the responsibility for early action rests with industry. I was most interested to hear the noble Earl, Lord Ilchester, refer to industry and to the fact that engineers are not all employed in industry; they are certainly not all employed in productive industry. They are employed in a whole variety of areas. The Services were referred to. They are also employed in the public services, in service industries, the nationalised industries, Government departments, local authorities, civil engineering and consulting engineering. Engineers are everywhere, not just in productive industry. I think that the report, perhaps due to its terms or reference—which were to review manufacturing industry—rather focused on manufacturing industry in relation to engineers. In fact, the solution to the whole problem is everywhere where engineers are employed, not just in industry. That is one of the points that I want to make.
Within industry itself what must we do? I am a firm believer in the recommendations in the report about getting closer associations between industries and schools within their own communities, and between industries and the relevant universities. I think that this is most desirable
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and that we must do much more of it. It must go both ways. It is something which we must develop, and it is up to those in industry to see that this is done. We have to go out, go into the schools and get in touch with the teachers and with the universities.
I should like to see many more exchanges between universities and industry—and I include polytechnics in that, too. Many of us have tried this, and I do not know why it has not worked. It is not a new idea, I might add. I think that this is terribly important, but why has it not worked? I think it has not worked because I am not sure that when it comes down to the working level either side particularly want it; it is an inconvenience, an embarrassment in some respects, and is difficult to fit into organisations and so on. But I believe that because of its importance it is up to us in industry to see that it is made to work.
Within industry itself, the noble Lord, Lord Scanlon, touched upon the keystone to my mind when he said that industry must reward engineers adequately. That is the fundamental of the situation. My experience of young people is that they are fairly canny in choosing their careers. They make inquiries among their parents and their friends as to where they should best set their course. They look at the progress of this person and that person, and they ask, "Where am I going to be at the age of 30?" They have a look around, and I do not think that they think that where they are going to be at the age of 30 in the engineering professions is nearly good enough. We must look at this question in industry, in all branches of engineering employment. I am referring particularly to the high fliers, because we complain that we are not getting the high fliers into engineering. The high fliers are the ones who will look to the heights. They are the ones who will be asking, "Where will I be at age 30?" If we want the high fliers, we must show them that there is a reason why they should choose engineering. Again, I think that is a job for industry.
My Lords, we must also do more in the way of training and progressive training, career progression. This is not good yet, by any means. I think the EITB has done a first-class job and, if I may say so,

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I hope it will continue to do so, as part of the structure which Finniston is proposing. I would also hope that the system which was introduced whereby those firms or organisations which did not spend adequately on education had to put funds into the kitty, to pass it on to those who did, will continue under any new scheme which is introduced.
But, if I may say so, I think a key point here in training is the point which was made by the noble Lord, Lord Baker, which is that industry has not recognised what has happened to it since the Robbins Report. We have seen the disappearance of the Higher National Certificate and the people who came up, as he said, the hard way, and I do not think any of us has really worked out the effect of that, though we are beginning to see it now. Those men played a key part in our engineering scene, and for some reason or other (I do not know why; it may be that it is a reflection on our university training) the same types are not being produced, or we in industry have not adjusted our training to cater for the new type of person who is coming into our hands. I think we have got to grasp that problem, and grasp it hard.
We talk about engineering resources. I think we have to ask ourselves: Do we use them properly? Again, I think the answer must be, No. The stock of engineers is limited; the stock of able engineers is limited; and we have got to see that we use them. The supply of technicians—and that is a matter which has been touched upon during this debate—is very important, because if you do not have an adequate supply of technicians then you find engineers doing technicians' jobs, and therefore you are not using your stock properly. Equally, I think there is unnecessary duplication, sometimes—too many competitors, you might say; too much duplication. Sometimes there is too much duplication between customer and supplier; sometimes there is too much duplication between consulting engineers and those who are supplying the equipment. That is very expensive. It is expensive in money and it is expensive in that rare commodity, engineers.
I think that free movement is a very important and desirable factor, but there can be too much free movement. Again,
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I think we must adjust for that; the men themselves must not lose out, of course. But it is a fact that an engineer becomes competent by living with the job, by growing with the job and by getting it into his fingers, in his feel. If he keeps on moving from one activity to another to advance his career, he loses that feel and he has to start all over again. In this respect, I must say one thing on behalf of manufacturing industry. They get a bit tired of the service industries, and particularly, if I may say so, the nationalised industries, who are continually topping their pay scales in order to attract men out of productive engineering. As a result, we lose the experienced fellows to a job in which they are not experienced, I think to the detriment of the whole.
Finally, there is one point to which I would draw your Lordships' attention. Again, I do not think this is fully understood; and it is the important role, in the context we are talking about, of the monopoly buyer. The monopoly buyer is a very important force in this country. A great deal of the engineering effort of the country is dictated, in fact, by the monopoly buyer. Therefore, he has a tremendous responsibility on his shoulders. He has the responsibility of directing the vast engineering teams of a whole range of supplying industries. What is more, and what is vitally important, he is determining what products those industries are going to have to supply to the rest of the world. My Lords, the rest of the world does not buy unproven equipment: it buys equipment which is proven in the home market. If the equipment which is proven in the home market is unsuitable to their requirements, they do not buy it—and you can only afford to do the development once. I think the power or the importance of the monopoly buyer is not yet, even today, fully realised, after 25 or 30 years of living with a monopoly buyer; and I think we must look at that, particularly in the context of using our engineering resources to their best effect in the national interest.
So much for the role of industry in this very important subject—and I think this is very much the key. But there is finally the question of the organisation of the profession, and I should like to touch on that. It is a very important recommendation by the Finniston Committee.

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I think it is important that there should be a register which is recognised by employers and by the profession itself, and which commands the necessary respect. The report started by expressing doubt, and I will quote it to your Lordships. It expresses doubt as to
"whether the existing system is constituted in a manner which can adequately achieve the critical objectives".
This is referring to registration. A little further on it comes to a firm conclusion, because it firmly concludes that
"a register based on the existing machinery cannot achieve this ".
So they have gone into this pretty closely. I think the profession itself, or many in the profession—in fact, I know—will say that it can be achieved through self-regulation, through the existing system and an adaptation of it. Fine—let them prove that it can. If so, well and good. But that does not seem to have been the case up to now.
Then the Committee goes on to outline a further role for the authority—that of approval of courses, and promoting and overseeing the advancement of the engineering dimension. Is that not a good term, by the way? I think the term "engineering dimension" is first-class; it covers the whole multitude of things that we are talking about. I think it is vitally important that this role is carried out equally effectively, and I think that this is really where the statutory authority needs to come in. Such a body must be able to go for the Ministry of Education and get something done about teachers and schools, and so on. It must be able to go to the universities and speak to the vice-chancellors with authority, and similarly in other quarters. Therefore, I am very much of the opinion that this authority is the right way to go about it; and, if so, then I think it should take aboard the registration role as well.
One has a certain amount of reservation about this. It will be debated, I am sure, ad nauseam; but I think my noble friend Lord Bessborough brought this very much to my notice when he said, "This has all been said before". He referred to his own study on the subject, and others have referred to the fact that it has been said before. Therefore, what must come out of this is not just another report which goes on the shelf, but something which is
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going to lead to action—and I think the authority is probably what is required in order to see that there is action. In this respect, if this whole debate is not going to be lost in a flood of rhetoric—and there is a devil of a lot of rhetoric on the subject, I can assure your Lordships, in all areas of the engineering world at the moment—it has got to be done pretty quickly; otherwise, it will all disappear in a fog. My own view is that I would go for the authority. I would get it set up, and I would let it deal with a lot of the detail which is amassed in this report. I do not know how quickly it can be set up, and I hope that perhaps the Government can tell us. These things take a long time, sometimes. One thinks something is going to happen quickly, and it does not always; but I would support the authority idea if it can be established quickly.
Finally, I should like to make one point about the steering committee suggested by Lord Gregson. I was going to make another suggestion, but my suggestion and his are not very far apart. I was going to suggest that the Government, in considering the welter of advice that they will get on this subject (and I am sure there will be a welter of advice; just as much as the committee itself has had, and probably a bit more) might be well advised to have a small group to help them, which I was going to call an advisory group. I should like to suggest that they consider calling on the Fellowship of Engineering, which represents the leading engineers of this country from all disciplines, to provide such a small group or cross-section of engineers to be available to advise them on the great deal of advice which they will get from many quarters, and to help them to arrive at the right decision.
6.30 p.m.
Lord MISHCON: My Lords, may I join with others who have expressed appreciation to the noble Lord, Lord Gregson, for having given us the opportunity to debate this interesting and important report, and may I join with those who have congratulated the two maiden speakers. I owe your Lordships an apology immediately for intervening in a debate when I have no specialist knowledge whatsoever in regard to engineering or the engineering industry, interesting though I find it. I can best earn your Lordships' forgiveness by delivering

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possibly the shortest speech on record. The professions are very anxious about one aspect of this report, and it will not require a lot of your Lordships' imagination to know which one it is. It is the recommendation that sets up a statutory authority and, having set it up, disposes of the professional body or bodies who at the moment regulate most of the affairs of the engineering profession, including those which deal now with professional ethics and professional discipline.
The suggestion made in the report which has not yet been detailed in this debate —and therefore I will be forgiven if I draw your Lordships' attention to what is involved—is set out on page 155, at paragraph 6.19, of the report and says that the leader and members of this suggested statutory authority will constitute an executive board of the authority. The suggestion is that it be of some 15 to 20 members and that, initially, these should all be appointed under statute by the Secretary of State for Industry. There is then a requirement in regard to consultation; there is a reference to the fact that the condition should be that a majority of the members should be qualified engineer and that at least three should be non-engineers; and that after the authority has been established for a while (and I am paraphrasing paragraph 6.20), and is deemed to be sufficiently representative of the profession, consideration should be given for a system of elections whereby a proportion—and I emphasise the word "proportion"—of the members of the authority should be elected from the register by registered engineers.
I have said that I am not competent to talk as an expert in regard to the engineering profession. Indeed, in the report the committee seeks to differentiate in some way the engineering profession from other professions by saying that it was clear from the evidence that they collected and from their survey results that the professional status of engineers is not generally acknowledged in this country by the public and by employers to the extent that it is for doctors and lawyers. That may be so; and it may be a question of exception being made for the treatment of engineers. It is not for me, as I have said, with my lack of specialised knowledge to contribute usefully to a debate on that
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matter. I only want to tell your Lordships that I speak in the interest of my own profession and at the wish of the Law Society. I have it on the best authority that the views I express are those views which the Bar Council would, in much more eloquent and erudite language, want to express and I am also associated in my views by members of other professions.
It is part of the vital professional fabric of this country that the professions are regulated by their members who look after their ethical code and their discipline; and that they have their independence. This is the first time that I can remember—although others more experienced than I am may tell me that I am wrong—that one is seriously considering taking one of the professions and regulating its discipline and its affairs by nominees of a Minister of the Government. This is an extremely serious step and a very serious precedent. I humbly agree with those of your Lordships who have talked in terms of caution being exercised in regard to consideration—certainly, I hope of this aspect of the report—before one plunges into a very dangerous move indeed.
It would be, in my judgment, a sorry day for this country and for the learned professions if this precedent were ever to be followed in the future and that we were discussing in this House or elsewhere the management of those professions by ministerially-appointed nominees, be they members of that profession or not. I shudder to think of a Minister of Justice appointing those who would, in fact, be in charge of my profession and I would hesitate also with the utmost anxiety before I saw a Minister of Health appoint those who would be in charge of the medical profession in regard to their ethics and the conduct of their affairs. My Lords, I undertook that my speech would be short. I hope that its shortness will not make it any less effective in regard to the point I am trying to make.
Lord SHACKLETON: My Lords, before the noble Lord sits down, may I ask him if he will give an absolute assurance that if this analogy would not apply to the legal profession, would he still have made something like the speech he made? And does not the noble and learned Lord the Lord Chancellor appoint the judges?
Lord MISHCON: My Lords, if I merely had to deal with an intervention of that kind by dealing with the parallel of the Lord Chancellor appointing the judges I should not have to detain your Lordships for very long. My profession, I am proud to say, is not regulated by any Minister. The fact that, quite obviously, our judges, who are completely independdent, are appointed by the Lord Chancellor (as I understand it, on the recommendations of the Bar Council with whom he usually confers) and matters of that kind have nothing to do with the regulation of my profession. The legal profession is not regulated by the judges. We are independent of them, as they are of us.
Lord SHACKLETON: My Lords, will the noble Lord answer the first part of my question?
Lord MISHCON: My Lords, perhaps the noble Lord will repeat it.
Lord SHACKLETON: My Lords, were he given an absolute guarantee that this analogy would not apply to lawyers, would he still have made his remarks relating not to his own profession but generally about professions.
Lord MISHCON: My Lords, I am obliged to the noble Lord for repeating his question. I had not understood it at first. Certainly I would have made this speech. If I had got the guarantee that my own profession was safe, I would have made it on behalf of other professions who, with honour in this country, have managed to look after their own affairs—and to look after their independence, too, which in my view is one of the most valuable assets they have.
6.40 p.m.
Lord FLOWERS: My Lords, I should like to add my voice to those of other noble Lords who have thanked the noble Lord, Lord Gregson, for initiating this debate so quickly and who have complimented Sir Monty Finniston and his committee. Unlike a number of reports produced in recent decades, Sir Monty's comes at a time when one feels instinctively that it must be acted upon. The industrial state of the nation demands it. The engineering institutions have been struggling with professional standards long enough, and
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the education sector is posed for change. We need effective leadership; and Sir Monty has proposed an Engineering Authority to provide it. I hope he gets his way. Before I go on, however, I must add my congratulations to the noble Lord, Lord Scanlon, and to the noble Earl, Lord Ilchester, for putting their great experience of engineering and industry to the service of the House for the first time, and with such grace and force.
I am not an engineer, my Lords, although I am grateful to be an honorary one. My desire to speak in the debate derives from the fact that as head of one of our largest university institutions of science and technology I am privileged to have among my staff some fine engineers. Many of them have spent long periods in industry or as consultant engineers. For several years they, together with their students, have been experimenting with new engineering courses which approximate to what is now being recommended for the master of engineering degree. It has taken them out into industry, and it has brought industry into the determination of our academic affairs as never before, to our mutual benefit.
It is on the basis then of my experience at Imperial College that I dare to speak about the engineering profession. The first thing I would say is that an authority, broadly representative of the profession but free from loyalties to individual engineering institutions, can express much clearer views to industry, education and Government that the Council of Engineering Institutions has done. The essence of a profession is that it should be self-governing. The CEI has struggled valiantly to provide self-government, but it is essentially, it seems to me, a confederation. Confederations are often too divided to provide strong guidance. We need a federal body, and this is how I see the major recommendation. The main direction of the committee's investigations and the emphasis of its conclusions are focused, as other noble Lords have said, on maufacturing industry. However, engineering activities and the engineering profession itself are much broader than this, as the noble Earl, Lord Ilchester, in particular has already emphasised.
The report shows that fewer than 40 per cent. of graduate engineers are employed in manufacturing industry, and many of the professional bodies are only indirectly

1411
concerned with manufacturing. Civil engineers, mining and metallurgical enginers, structural engineers and municipal engineers, together with a large proportion of other branches of the profession, fall well outside the ambit of manufacturing industry As the noble Lord, Lord Howie of Troon, has said, they each have their distinct characteristics, as do the industries that they serve. Even in the central disciplines of mechanical and electrical engineering a substantial proportion of engineers are concerned with installation, operation and maintenance, and not with manufacture.
The committee, of course, was well aware of this, and in his personal preference the chairman says:
"We hope that all engineers and all employers of engineers will read this report. It is relevant and applicable in the context of national economic needs across all areas of engineering activity ".
That is a passage has already been quoted. In one sense this is the most important paragraph in the report because the engineering profession, despite its internal differences and disagreements, has a coherence and natural unity which make it quite unrealistic to assume that changes in its fundamental structure could be effected piecemeal. The task of implementing the report is therefore much greater than may be appreciated by those who think of it purely in terms of manufacturing industry. I doubt whether it can be done without an authority having some kind of statutory power—a federal authority, as I venture to describe it.
At the same time, I am anxious that there seems to be in inconsistency in Chapter VI which deals with the nature of the Engineering Authority. In paragraph 6.17 it says that the authority
"must have the independence and authority necessary for it to command national and international respect and to overrule vested interests where these contradict the national interest ".
In paragrah 6.28 it says that
"Government ought not to be able to issue strategic directions to the authority ".
Who is to be the judge of the national interest, especially when it differs from that of the engineering profession? I doubt whether any Government will delegate to an independent authority their right to judge the national interest. One cannot have it both ways, and I sympathise with the misgivings of the noble Lord, Lord Mishcon.
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However, I now turn to my proper "last", which is the educational sector. Education begins in the schools, and I heartily agree with the committee's recommendations 33 to 36. It is especially necessary that all school children should have a sound grounding in mathematics. Many syllabi nowadays teach the power and the beauty of mathematics, and this is a good thing. It is part of our culture. Too many syllabi, unfortunately, leave our young people unable to perform practical calculations and unable to appreciate physical magnitude. I well remember two students of mine fresh from school, one of whom stated with confidence that the earth was 3,000 miles from the sun and the other that the diameter of an atom was 109,737 centimetres!
We all look forward to the outcome of the Cockcroft committee of inquiry into the teaching of mathematics in the schools. It is in the schools too that young women must be attracted into engineering—a matter on which the report places great emphasis and to which especially the noble Baroness, Lady Lockwood, has drawn attention. From Imperial College I can offer the encouragement that in terms of first-class degrees and graduation prizes our women students do twice as well as the men. The only thing stopping them is prejudice, in the home and in the schools, based upon ignorance of what modern engineering actually entails. The links proposed in paragraph 4.9 between industry and the schools will be very important here.
The report draws attention in paragraph 3.29 to the shortage of technicians but leaves it to others to deal with it. I agree with other noble Lords that this is a pity. The educational system has failed the nation in the training of technicians because so many of the institutions that used to produce them were allowed to ape the universities instead. This is much more serious than many of the matters considered by the committee. I hope that the Engineering Authority will give immediate attention to filling the "technician gap".
Coming now to the proposed degree courses, I rather welcome the fact that the committee did not attempt to lay down—or perhaps failed to lay down—precise syllabi. Nor should the Engineering Authority, although it should certainly

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provide guidance, particularly on objectives and standards. A university course, to be any good at all, has to be a living thing. It has to evolve with time. It has to reflect the attitudes and personalities of its teachers. It is far better that a teacher has fire in his belly and that he speaks with conviction than that he conforms to a set syllabus. But the tenor of the report is clear enough. The courses proposed reflect the needs of industry more accurately then most of those now available. The B.Eng. stream will offer a supply of practically orientated engineers to fill the gap left by the disappearance of the pre-Robbins part-timers. The M.Eng. stream will cater for those who show leadership potential as well as academic brilliance at an early stage. Both combine engineering and training into what the committee call "formation", and this is good. It is what we are doing in several universities at present, including my own.
As the noble Lord, Lord Baker, has said, it will not be easy to design the new courses nor to run them in many existing academic departments. Probably most academics do not have the personal appreciation of "the engineering dimension" to be able to offer such courses with conviction. An analogy is often drawn with medicine. Just as medical schools do not presume to educate their students without extensive help from practising doctors and surgeons, so engineering schools should require a significant injection of practising engineers.
But teaching is a profession too. It is not everyone who has the skill and the will to undertake it. Not long ago one of the foremost engineers in this country, the head of a great industrial firm and a former professor, told me how, as a student in Cambridge, he had been inspired by sitting at the feet of Rutherford. I asked him whether he would occasionally let our students sit at his feet, and he hastily withdrew. I hope that the engineering authority will contain great men like him, but I also hope they will occasionally let our students sit at their feet. Second-rate engineers—people for whom industry no longer has a useful role—will be worse than useless as teachers; and perhaps that is the answer to the point made by the noble Lord, Lord Nelson of Stafford, about the difficulty of exchanging engineers between education and industry. The authority itself must give the lead.
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The success of the degree proposals will depend on industry confirming the different roles envisaged for the B.Eng. and M.Eng. streams and the correctness of the 3–1 ratio between them. If confirmed, we shall then face the problem of producing and maintaining courses for the two streams in the right ratio. The report does not provide a convincing picture of how this can be done. It is obvious that academics will aspire to offer the M.Eng. stream. B.Eng. courses will not be forthcoming for the majority of students unless the message that they are the ones most needed is insisted upon by the Department of Education and Science, the University Grants Committee and those responsible for the polytechnics, guided of course by the views of the Engineering Authority.
I believe that the number of institutions offering the M.Eng. degree should be severely restricted to at most 8 or 10, and those institutions should concentrate their efforts on this kind of course. My reasons are two-fold, and are from experience. First, it is very expensive to run alternative courses in parallel. Secondly, the degree of industrial involvement necessary for the M.Eng. course is very great. The experimental 4-year courses that we offer at Imperial College in chemical, electrical and mechanical engineering involve the closest participation of over 40 major industrial firms. They take part in the selection of the students, in the planning and monitoring of the syllabus and in the provision, supervision and assessment of project work. To spread such courses thinly over—
"48 universities and university college, 28 polytechnics and 12 other institutions "
would simply be counter-productive, as the report rightly implies. I predict that there will be great difficulty in choosing the institutions allowed to offer the M.Eng. degree. Nevertheless, the choice must be made, however harsh.
Lord AVEBURY: My Lords, may I intervene? Would the noble Lord not agree, on this very important point on selecting institutions which would be able to offer the M.Eng. course, that it places a further barrier in the path of the professional engineer in that selection will be at the age of 18, when he comes into the university, rather than at 19, after the first year? In practice, any young man

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who goes to an institution which has not been chosen to offer the M.Eng. course could not switch at the age of 19 if he finds he has the aptitude to do so.
Lord FLOWERS: My Lords, that is always the difficulty in higher education. The Finniston Report recommends that there should be some possibility of transfer between courses. I think there ought to be some possibility of transfer between institutions also, to meet this point. These chosen institutions, it seems to me, should also play a major part in the continuing education of top-flight engineers, through short courses and collaborative research.
The committee's main suggestion regarding research is the creating of an engineering design and development council. This seems to me to be a significant reversal of the Rothschild principle, because it implies that priorities for applied research and development would be determined by "technology push" rather than demand pull ". The council would stand between the "customer" and the "contractor", in Rothschild language. I think it is an unnecessary piece of bureaucracy.
The report in fact does not have a great deal to say about research. As two of my colleagues, Professor Swanson and Professor Sayers, have written:
" The proposals for engineering education rightly stress the importance of young engineers knowing about present manufacturing techniques and their organisational implications; but it would be easy to put the proposals into effect so as to turn out people competent in today's technology but inadequately equipped to invest tomorrow's. Indeed, the Committee's proper insistence on the importance of engineering teaching and research being closely related to the practical problems seems to have led it to forget about the more fundamental research programme of many engineering departments in universities which underly the more directly applied research of the future ".
New developments in engineering, as in other activities, do not simply happen: they grow from a complex assembly of fundamental researchers, application scientists and engineering experimentalists, interacting so as to provide a corpus of ideas and knowledge which is the source of progress. The educational system must produce these people and it must propagate the new understanding they contribute. This means specialist work at
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the highest level, and it is not provided for merely by an M.Eng. course which is—
"heavily oriented throughout towards design, synthesis and engineering applications ".
The committee, it seems to me, have let their enthusiasm run away with them here, even to displaying an aversion to fundamental research and a disregard for science which will certainly contribute no cure for the ills of engineering. Other countries, our competitor countries, know that scholarship begets progress and that the universities are the fountainhead of scholarship. We cannot afford to deny that knowledge to ourselves. This should be understood by all engineers, but the top-flight M.Eng. stream, at least, must be one in which scholarship is prized as well as practicality, and is unmistakably seen to be prized.
6.57 p.m.
Lord MAIS: My Lords, before I say my few words, may I add to what has already been said by other noble Lords and congratulate the noble Lord, Lord Scanlon, and the noble Earl, Lord Ilchester, for the superb maiden speeches they have made this afternoon. May I also thank the noble Lord, Lord Gregson, for giving us the opportunity to discuss what is a vital matter at this particular time.
Much has already been said for, and some against, the Finniston Report. I hope that my comments will avoid, so far as possible, covering ground which has already been covered very adequately, but as a civil engineer who has spent nearly 50 years in the profession and in the industry I am a little disturbed that much of the evidence given to the Finniston Committee by the Committee of the Institutions of Civil Engineers and Structural Engineers, particularly in relation to the education and training standards which have been achieved by these institutions in respect of engineering practice in the construction industry, appears to have been omitted from the report. I feel that what has been done in that particular field was of great importance and, in some respects, it was the beginning, almost implementing some of the recommendations in the report.
I do not for one moment wish anyone to assume from what I am going to say that I do not consider the Finniston Report to be a most important document,

1417
looking as it does at some of the root causes as to why Britain's manufacturing performance has fallen behind that of her international competitors. Few would in fact question the assumption that in proving the engineering excellence embodied in the products offered by British companies and in their manufacture is a task demanding national priorities, and is one of immediate importance to us.
Page 3 of the Finniston Report states that:
"Since a modern industrial society of this sort is, in essence, an engineering society, prosperity depends on engineering excellence in its broadest sense, including design, marketing and servicing. British industry's response to the growing challenge from its overseas competitors through the last century has been manifestly inadequate and Britain has been outpaced in many areas where once it led the world ".
As an engineer, I am a little concerned that this form of comment might imply that the reason why British industry has lagged behind its competitors is the fault of the engineers. Of all the countries the one that has, I feel, to some extent disregarded the engineering qualifications and the value of an engineer's contribution as an acceptable qualification for senior appointments in industry, whether they be technical or not, is this country. For years, Continental countries, particularly France, have given considerable encouragement to their engineers to seek senior executive positions in all walks of industry, and it is something that I should very much like to see here.
Whenever I am asked what my profession is, I say with some pride that I am an engineer. But when you look at the person—and it does not happen often—you can almost see his mind ticking over. He looks at your hands and is somewhat surprised that they are not covered in grease and a little dirty. That is very much one of our problems. People in this country do not look upon engineers as other than those who go around in dungarees and attend to machines.
This country has been behind many other countries in recognising the qualifications and training which fit an engineer for senior executive positions. Therefore, it is most encouraging to find that the report states that our future prosperity depends upon engineering excellence in its broadest sense. But engineering excellence is, to a very great extent, already
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here. We have it. We have had it for a very long time. The trouble is that it has not been properly used and for that you cannot blame the engineers or the engineering institutions. It is, I am afraid, very much an attitude of mind in this country and I welcome the report's reference to this fact.
Again, quoting from the report, it states,
"… that it is not enough for engineers to be on hand as tame technocrats. They must be integrated into the company's effort at all levels of authority and decision-making in these activities ".
With this, I wholeheartedly agree, but, with all respect, to achieve this I cannot see that we need another Government department. The report goes on to say that insufficient use has been made of engineering talents available in the country. Your Lordships will hardly be surprised if I tell you that engineers have been saying that for a very long time, but, again, you do not need a completely new Government department, with all that it would cost, to implement that proposal.
I agree with the report when it states that,
"engineers in general need a wider perception of their role in business enterprise. Too many seem satisfied to remain in a technical role ".
I have met few engineers who would agree with that statement. The majority consider that they should have more say in the running of the business that they are in, or in business generally. In any profession, whether it be engineering or any other, you will always have to face the fact that there will be a number who do not want to get involved in the rough and tumble of management. They are very happy to sit at their drawing board and to design. I was never capable of doing that, so I went into management. Nevertheless, you have to produce engineers for two specific roles. There will be those, we hope, who take a much greater and much more active part in the management of business in the future, but we also have to provide those who can produce and design new ideas and see them through to fruition.
Leaving the general for a moment, and turning to the particular, what fills me with some alarm is the statement that the new authority will be the champion of change in engineering dimensions.

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The authority will deal with the education, qualifications and registration of engineers and will have an important role to play in influencing the policies to be pursued. That sounds remarkably like a takeover bid for all the professional institutions. I am sure that it is not intended and I doubt very much whether it would succeed even if it were.
I hope that I have not appeared to criticise the report too much. May I say that I entirely agree with one particular aspect; that is, the recommendation that if the authority is established it will play a key part in correcting the historic neglect in Britain of the engineering dimension and in creating a climate in which it can thrive. But as was asked by the noble Lord, Lord Scanlon, in his very excellent speech, can this not best be achieved by possibly establishing a steering committee? I do not believe that a major revolutionary change of this nature should be made without having such a committee sitting and, at least, having an opportunity to study the snags and to make final recommendations.
It is extremely important that the existing professional institutions in this country are fully consulted. The engineering profession has never really received the assistance, support and recognition which are given to it in other countries. I read a letter from the Department of Industry addressed to one of the well-known engineering institutions. One of the paragraphs stated that the Secretary of State for Industry had already made it clear that the Government were anxious to respond quickly and constructively to this report. I was about to say that that might be a change, but on this occassion, for once, I beg the Government to take this a little slowly. One can make haste and achieve very little. I was very glad to hear the words of the noble Lord, Lord Gregson, who also referred to the question of the steering committee.
There is in this country an excellent engineering profession. There is an excellent engineering industry, as a whole. You must be careful not to take it up by the roots. To establish a statutory register of qualified engineers is also something which causes me a little concern. It appears to me to be unnecessary for the new body to do this. We already have a
1420
register of engineers in all the professional institutions. The report also mentions that one of the objects would be to have control over engineering practice. Again, this is taken care of at the moment through the professional institutions.
There is much in the report which could be, and I hope will be, of great service to the engineering profession as a whole. We have professional institutions covering every field of engineering and long established examination structures. I accept that perhaps there is a proliferation of these institutions, but there are many forms of engineering. All these institutions are well organised and well run for the benefit of the members of the institution, the general public and the country as a whole. The work that has been undertaken by their members all over the world, for the benefit of this country, stands as a record of their achievement.
Is it proposed that all these institutions, and their examination structures, will come under the review and control of the new body which is suggested? If so, before any good comes out of it a period of uncertainty will exist. If it is felt that all these various institutions should have a co-ordinating body, I would not disagree; but I would say that we have in existence —it may not be in its perfect form, but it is there and it is a foundation upon which to build—the Council of Engineering Institutions. Secondly, young though it may be, there is the newly formed Fellowship of Engineering.
It is good engineering practice to be sure of your foundation before you build a structure. Even though these two bodies to which I have referred are not old in time, they are very old in experience. They are set up on a firm base. I feel that they should be consulted and that they might well be the vehicle by which these proposals could be established.
This is a very big step to take. The institutions, the engineering profession and the engineering industry in this country earn a very considerable sum of money overseas for this country. Their reputation is probably second to none. Whatever rules are made as a result of the Finniston Report, I do earnestly suggest that we should avoid in any way disturbing or disrupting the existing organisation. Nevertheless, I agree entirely with

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the recommendation that it is very necessary indeed that the status and standing of the engineer individually and the engineering profession should be raised to a level in this country which it is fortunate enough to have in many other countries of the world.
7.14 p.m.
Viscount HANWORTH: My Lords, as a Cross-Bencher I have been fortunate in hearing a talk given to us by Sir Montague Finniston himself. Everything said in the report on the present state of affairs would, I think, be agreed by most people. The report is one of many, stretching back nearly to the beginning of this century. They all analysed our defects in much the same way but few of their recommendations were ever implemented. As an inventive nation we still hold our own, but in developing new ideas and in marketing them we fail. The development of new ideas is, of course, the responsibility of engineers but the right climate for their work is essential. Radar is a classic instance. It had to go to America to produce a usable product. Admittedly, this was in the war, but nevertheless it is typical of our later performance.
What worries me about the report is that many of the recommendations, however good in theory, are never likely, in my view, to be adopted, and the time-scale to reap their benefits is far, far too long. I simply cannot imagine any Government setting up a completely new and powerful engineering control body in the teeth of opposition from the major engineering institutions and other similar but smaller bodies The Government have more pressing battles to fight. I am afraid that the best should not be the enemy of the practical good. We must build on what is there, by perhaps giving greater power to the major institutions. Direct consultation with the numerous smaller institutes may be democratic but takes too long and is apt to lead nowhere. Affiliation with the major institutes could be a practical solution.
As to university education, the ivory tower which I bitterly attacked some years ago still exists, but much has changed. I hope that the attitude that, because they were universities, whatever they taught and however badly they taught it was self-justifying, is no more. It is important
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that universities realise that they, and they alone, should not be the sole arbiters of what should be taught in disciplines that have a direct bearing on the requirements of their students when they leave university.
I am afraid that criticism can be levelled at industry. Their view—that they prefer to train recruits direct from school rather than from universities—is suspect. In the first place, they often tend to provide no useful training at all, and in the second they condition the younger men to accept what should not be accepted. "Does his face fit?" sometimes means, "Does he upset the managers who should long ago have been demoted or retired?"
Finally, and in conclusion, I think that in this emergency—and it is one—we should try to persuade the able mandarins of the Civil Service to forsake their files and normal methods of consultation. They should take positive action on this report, or some items of it, on the basis of informal consultation alone. It may be necessary, perhaps, to have a Green Paper. However, to consult on this report overall, will, I am sure, once more lead to no action whatsoever. Correspondingly, the institutions, who are informally consulted at times, must be able to give their advice without necessarily the delay which occurs when everything has to be referred to their councils—meeting, in some cases, at three monthly intervals. I believe most strongly that effective action to improve the present situation is needed, and that the Finniston Report can provide a basis for taking now some effective action.
7.19 p.m.
Lord LUCAS of CHILWORTH: My Lords, I start this evening from a viewpoint rather different from the one I had earlier this afternoon, because it seems to me that running through our debate is the theme of urgency—not only urgency in so far as the overall problem is concerned but urgency to deal, one way or the other, with the Finniston Report. I find it quite extraordinary that the Department of Industry can really expect the institutions to respond to the report published just a few weeks ago by 1st April.
The report is essentially in two parts, one dealing with the organisation and one dealing with the training, and yet we

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have the Department of Education and Science having set up a working party some many months ago to organise a conference which is to take place in October of this year on engineering education and training. How can a proper judgment of Finniston in terms of the education and training of engineers be taken when the institutions will not have made their considerations nor submissions until probably a time when that conference has taken place? I am tempted to suspect that a decision has already been taken. Perhaps that is an unworthy suspicion and I hope my noble friend Lord Trenchard, when he replies, will disabuse me of that.
The suggestion throughout the report is that the engineer's role is not fully appreciated. Being one of the lower orders of engineers I can fully appreciate that, but I suggest that that is not because the engineers are not good enough. It is because industry, particularly in the postwar years, has not deemed the engineer to be as valuable in the organisation as the manager with the financial and economic background and disciplines. Consequently, the engineer has been removed from any great managerial role and put into that described in the report as "the technocrat"—almost, as the noble Lord, Lord Mais, described, the man in the overalls with dirt under his fingernails.
I think that is really the trouble, because there is no doubt that there are institutions which have grasped the nettle of opportunity for their members quite firmly and have changed their practices, their structure, and indeed the method by which their entrants will qualify for the higher orders within the institutions. I think particularly of Mr. Breedon's efforts on behalf of the Institute of the Motor Industry and of a committee set up by the late Lord Rootes to examine that particular industry's lack of professional managers—and engineers were part of it. It was a matter of minor impact in the great national affairs of engineering, but in that particular industry fairly traumatic; and it took six years to design the new training scheme which was basically a formation scheme, as Finniston suggests, one of progression through the career. It meant a total change in the method of admission to the institute. It was so reasonably successful, as it started a year or 18 months ago, that the employers are taking
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note of it and many advertisements featuring vacancies in that industry particularly invite institute members to apply. As the noble Lord, Lord Howie of Troon, said, perhaps the answer is to pay them more. Certainly the IMI are encouraging the employers; if they employ corporate members and graduates of the institute they deserve more and it is for the industry to pay more.
There is in the summary a nasty, spiteful little piece which I think is a quotation from the Prince. I am going to say that it is really quite wrong to suggest that those who have done well under an old order would be the enemies of a change. I think that is absolute nonsense. Those who have done well under an old order may well see how much better they might have done had the order been changed. I do not believe that those who are currently resisting some of the recommendations in the Finniston Report are necessarily enemies of change.
Lord SHACKLETON: My Lords, which is the quotation? And did the noble Lord say "the Prince"? Is he referring to Machiavelli?
Lord LUCAS of CHILWORTH: My Lords, I am sure that the noble Lord, Lord Shackleton, has correctly identified the quotation.
Lord SHACKLETON: My Lords, perhaps the noble Lord can give me the reference.
Lord BOWDEN: It is there, my Lords.
Lord SHACKLETON: I am sure it is, but I just wanted to look at it.
Lord LUCAS of CHILWORTH: It is on page 6, the second paragraph. The actual quotation is on page 6 of the summary.
Lord SHACKLETON: Oh, the summary.
Lord LUCAS of CHILWORTH: I did say that it was in the summary.
Lord SHACKLETON: My Lords, that is why I was asking the noble Lord to help me. The big version is blank—I do not have the summary.
Lord LUCAS of CHILWORTH: My Lords, turning to the new degree structure, and having already introduced that by virtue of speaking about the conference in October, I find at this stage that my thinking runs that creating a new, as it were, elitist degree could seriously put in imbalance those awards in other disciplines. I should think that the argument as between degree awards as a result of purpose training and purely for scholarship—the point made by the noble Lord, Lord Scanlon, in his very interesting maiden speech—might be destroyed. It seems to me here that this sets another hare running, whereas the degree award system as between one discipline and another might well be complementary, and I find myself more in agreement with what was said by the noble Lord, Lord Howie of Troon, on this point.
Certainly when he was speaking about the differential between the chartered engineer and the technician engineer (I happen to be one of the latter) I could fully appreciate that. This differential between one group of people and another —or this lack of differentiation which has happened since the end of the war, I believe is one of the root problems of our industrial failure. We have not encouraged excellence and the differentials have become smaller and smaller.
It is late, but perhaps I may turn to the other main point, the organisation. I can see no justification whatsoever for a new engineering authority. I am tempted to quote from Romeo and Juliet—
"A rose by any other name ",
because I cannot see it performing any different function from that which a revised council of engineering institutions could perform. One noble Lord earlier this afternoon described it moderately as a "Quango". I would have suggested that it was going to become one of the super-Quangoes. I cannot see that there is any justification whatsoever for the Government to be invited to put 10 million per annum, including pump priming, into an organisation which has, in the generality of everything, a very narrow meaning. Their role is to put such money into education and training overall. Governments' role in these matters, I believe, is very much wider. It is their responsibility to make policies that provide,
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and encourage industry to take advantage of, those opportunities which are available to it. It is, I believe, industry's own responsibility to fund any organisation which is going to bring industry a direct reward by virtue of having better qualified and more people. I hope that the noble Viscount, Lord Trenchard, will be able to tell us something of the Government's views with regard to that kind of responsibility.
So far as I remember, having listened to most of the speeches, it was my noble friend Lord Bessborough who in fact made perhaps the only plea for a re-examination of the Council of Engineering Industries. There is a lot of criticism—it may be implied, but it is there all the same—in the Finniston Report of the CEI. Certainly it has not done well, but I think before the CEI is totally condemned one wants to examine why it has not done well. I think one of the reasons is probably the reluctance of individual institutions to give up their sovereignty to another power. I invite your Lordships to wonder whether those same institutions are likely to give up any sovereignty to an even larger super-power, the new Engineering Authority.
The inconsistency I found within this context was that the report advocates the wider use of the NEDC and the Fellowship of Engineering. Indeed, it says we should build on these two organisations. Why, then, not build on the CEI? It seems to me that it is far better to go with the devil you know than the one you do not know. It is rather better to make something of what we already have than to tear it down and start again, with no certain guarantee of success and with all the dangers implicit in the delay this will entail. I think it was the noble Lord, Lord Mais, who made this point.
Within that authority's range of responsibility is the registration of engineers. Many noble Lords have spoken about this. There can only be one thing wrong with individual institutions registering their engineers, and that is that registration following membership: there might well be some way of the institutions amalgamating so that there were fewer of them embracing more potential engineers and making a registration. Individual branches of engineering do demand separate requirements, and I believe it is

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better for the institutions of each branch of engineering to determine what those requirements are rather than a massive central bureaucratic organisation.
My Lords, obviously I am not terribly enthusiastic about the new authority, but whether Finniston's solutions are right or not they focus attention on it. Out of the kind of conversations that are going to take place—not only in the next few weeks; I do urge the Government to allow these debates and conversations to take place over some months—solutions may well be found, and the country and the manufacturing and engineering industries may well find themselves even more indebted to Sir Monty Finniston and his committee.
7.34 p.m.
Lord PERRY of WALTON: My Lords, I am no engineer, and I will not at this hour spend any time on the detailed proposals, educational or otherwise, in the report. I should like only to emphasise two messages which I think are implicit in it. The first is that as a nation we are ultimately dependent upon our engineers for our prosperity. The second, which is in my view just as important, is that as a nation we have consistently undervalued our engineers. We have accorded to them, as noble Lords have said, the status of only second-class citizens. This cannot be corrected by improving the education of our engineers or by a reorganisation of the structure of the profession. It can only be corrected by educating the public. It is, moreover, a task that in England is a formidably difficult one because of the backdrop of history.
In England, to be in trade has always been definitely non-U. Most of the professions have been definitely U, but engineering because of its association with trade has never been so regarded. Many will claim that this is a changing situation, but I do not believe that. We even make jokes about it. All chief engineers in ships are Scotsmen. It is because educated Englishmen would not get oil on their hands? The attitudes of middle class parents and of school teachers are, of course, very important forces in moulding the careers of the brightest of our young people. All too often these attitudes enbrace four things. First of all, that a
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degree in humanities is the only really liberal education; secondly, that if you must study science let it be pure research or let it be medicine, never let it be technology.
A recent report in The Times indicated that of our very brightest young people, those with the best results in A-levels, the largest number applied for veterinary medicine and medicine itself, not for engineering. The third aspect of this attitude is, avoid a career in industry at all costs, for there is nothing noble or edifying about the profit motive, which in industry is all-powerful; profit becomes almost a dirty word. Fourthly, in any case, industry does not offer a safe career, there is a risk about it. You can have security in other jobs, like education or the Civil Service. The ultimate nonsense about security is that at about the age of 23 or 24 in a university you can achieve tenure till the age of 65, and you cannot be got rid of in some universities unless you indulge in gross and continuous moral turpitude.
It seems to me that these attitudes have to be got rid of, and the only way of getting rid of them is by training teachers; and I do not think we should waste time about it. It is not only that school teachers must teach mathematics and technology to children so that they can become engineers; they have also got to teach them to be enthusiastic about industry and to look forward to careers in industry. Without that we cannot hope to attract the brightest young people into engineering. My Lords I do not think there is much time. I think we need an emergency programme, not just the long-term programme which has been the subject of most of this debate. I think that emergency demands that we update the existing engineers that we have, and we should also update our existing school teachers to do the things I have been describing. We might then hope to improve the situation in the short term. I think, too, that we must use every method that the Finniston Report suggests.
But perhaps I may be forgiven if I end with a plug for one particular method; namely, the use of the mass media for distance learning. By using the mass media for communication it is possible to reach both engineers and school teachers while they still remain in full-time employment, thereby keeping scarce manpower in full employment. This is

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seen as a major hurdle in the Finniston Report, the hurdle of releasing people to go back for continuing education. Such methods also maximise the use of skilled but very scarce teachers in new engineering principles. They are also cheap, and they make a maximum impact because of the immediacy and drama of television as a pedagogic signal. Even at this difficult time, I hope that the Government will act quickly on at least this one of the recommendations of the Finniston Report.
7.41 p.m.
Lord BOWDEN: My Lords, the hour is indeed very late. Some time ago I went to China and when I was there a Chinese sage said to me, with great feeling, that in his experience the brain could continue to absorb only for as long as the seat can endure. With that as a background, I shall be very brief indeed. This has been an extremely informative, most helpful and useful debate. The report itself is a very great State document and—although it is slightly unusual to say this—I believe that the author is within earshot, and it is therefore appropriate that I should mention the fact in the hope that he will overhear it. I should like to thank the noble Lord, Lord Gregson, for introducing the subject to us and add my congratulations to our two maiden speakers. The noble Lord, Lord Scanlon, was once a member of my council and I made him negotiate with the trade unions. He gave them the worst time that any man ever gave trade unions in history because all the tricks they knew he had taught them, for he had learned the counters and they had not.
However, it is difficult to know what I can add to this already very useful, informative and helpful debate. But there are one or two points that I must make. First, people are used to not going into industry, and we wonder why. At the moment very little manufacturing industry in this country is paying more than about 2 per cent. or at the most 3 per cent. on its invested capital. Why should anyone ever want to go into an organisation which is doing as badly as that when it is obvious that so much more money can be earned by selling off the property of a bankrupt firm. These days that is where the money is made and people realise it.
It is not reasonable to expect schoolboys
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to go into industry out of a sense of what I might call public duty in order to improve the lot of their peers. If industry is as poor as it seems likely to be at the moment, it will never attract good recruits, Finniston or not. That is my first and most important point. We can never expect the number of recruits we need until there is a chance of improving the prospects for manufacturing industry by some means, which undoubtedly must be fiscal in the first place.
I was interested to look up the very first speech I ever had the privilege of making in this House about 17 years ago; it was on the Industrial Training Act. I spoke to your Lordships then about the acutely embarrassing problem of educating engineers; I hesitate to say this, but many of the points which have been raised today are points that I raised in my maiden speech. I spoke of the extraordinary importance of combining both the academic and the practical experience. I said that any member of any profession has to undergo this kind of experience. A lawyer is subjected to the instruction of his pupil master; a doctor, after he has graduated from medical school, has to go to a hospital and practice the profession under skilled supervision. So does any member of any other profession, including an engineer. I also said that in my experience no man can count himself an engineer until he has been frightened out of his wits at least twice. In other words, engineering is sometimes embarrassingly, dangerous, and people must be prepared to accept responsibility for their actions and not try to cringe behind a committee structure elsewhere.
In Manchester in my time there was the best system which the world has ever seen for educating engineers. It was in Metropolitan Vickers in the days when that great organisation was so called. It was organised by a man called Fleming, whose name should be revered but who has, in fact, been forgotten. It started in 1902 and went on until he retired, when he was succeeded by Lord Jackson of Burnley, whom many noble Lords will remember.
In those days the best graduates from the best universities in England went to serve their time, to use a perfectly proper phrase, as graduate apprentices at Trafford Park. There they were exposed to all sorts of manufacturing processes. They

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learned what it feels like to test a turbine which might explode; they learned what it is like to be involved in the casting of great steel ingots; they learned what it is like to be responsible for turning those ingots. This system educated all the best engineers in the world. We had a saying in Manchester in my time that all the engineers can be divided into two categories: those who work at Metropolitan Vickers and those who used to work there. That was perfectly true. They reckoned to keep only about 40 per cent. of the graduates of this training school; the remainder went to run the rest of British industry and the rest of world industry.
For example, if you went to South America, South Africa or Australia, you found that the man in charge was an ex-Met. Vickers apprentice. I met the chief engineer of Trans Canada Airways who was an ex-Met. Vickers apprentice. The chief engineer of the Pickering Nuclear Power Station, about which I spoke to your Lordships some time ago, was an ex-Met. Vickers man. They can be found all over the world.
However, admirable though it was, the scheme was closed down because the accountants got at it. Their view was that we could not expect one firm to educate men for the rest of industry. In a sense I suppose that that is true. On the other hand, if industry could revive something half as good as that, nearly all the problems to which the Finniston Report draws attention would almost certainly go away.
There is one particular matter to which I must draw attention, because when I was trying to run an engineering school it used to exercise me very greatly. We went to enormous lengths to try to persuade people to move in and out of industry and in and out of the academic world. To my knowledge the only man who did it often and successfully was Lord Jackson. The reason was a very simple but also a very irritating one, and I should like specifically to ask the noble Viscount, Lord Trenchard, whether the Government will take this on board, because it will do an enormous amount to help solve the problems of integrating industry with universities. It is a simple question about the portability of pensions. Noble Lords may think that it is trivial,
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but it is true to say that any engineer who has considerable industrial experience and moves out of industry into a university loses a great deal of credit with his pension scheme. Years ago when I was a Minister of State I tried to get this problem examined, but the Treasury flatly refused to have anything to do with it. They said that it would be too expensive, by which they meant that if a man went from Trafford Park to Manchester Tech., with a reasonable sort of pension, that pension would come from the Treasury. The fact that he would bring with him an absolutely invaluable experience did not seem to be financially significant to them. I should have given the noble Viscount notice of this question but I am afraid I forgot. I ask the noble Viscount to see whether or not this matter can be looked at again, because it would do more in a single, quite simple administrative action to integrate industry with universities than any one other action one can think of.
To summarise, engineering was invented twice—it was invented by George Stephenson in England and by Vauban in France. Vauban was, of course, a military engineer and aristocrat, and ever since then engineering in France has been associated with the military, the aristocracy and with the Grandes Ecoles. It is completely élitist and utterly unlike engineering in this country. We have suffered greatly in England from confusing the two sorts of engineering. The other thing from which we have suffered—and this is a silly thing to say—is the fact that the great technical universities on the Continent were called technische hochschule "and this was translated, "technical high schools". That was a totally misleading concept. If we had only taken the French example and called them Great Schools, we might have got on better.
There is no doubt at all that the education of engineers on the Continent, involving, as it always has done, a much closer integration between universities and industry than we have had, has been much more successful in many ways. The university of Aachen, which I used to know very well, was most intimately mixed up with the industry of the Ruhr. I remember going with the late Lord Hives when he was chairman of Rolls-Royce. He went to buy some machine tools. I

1433
went with him to the firm of Schiess. I asked him how many graduate engineers they had recruited that year. The answer was 137. The entire British machine tool trade that year had recruited two engineers altogether, ever since when they quoted that as the base in terms of which they rated their percentage increases.
I make the point that industry on the Continent has always been closely associated with education. There has been a constant interchange of staff between the one kind of institution and the other. The rector magnificos of the University of Aachen had himself been a consulting engineer. The Ruhr brought its problems to him as a matter of course. So Aachen is part of the Ruhr. I remember when I first went to Manchester Tech. someone asked me what was my greatest ambition. I said this: "I hope for the day when someone will come to me in a state of great confusion and say, 'I cannot tell where the Tech. ends and Metropolitan Vickers begins'." There had been a time when that was true. Arthur Fleming used to use the principal's office as an extension of his own to run courses in the Tech. for graduate apprentices, for ordinary apprentices, and undergraduates.
Professor Miles Walker, who was at that time the professor at Manchester Tech., was the best known professor of electrical engineering in England. He was the chief designer for Metropolitan Vickers protecting machinery section. The links were intimate, effective and enormously valuable to everybody—and the whole system was abolished by the accountants. Accountants have a great deal to answer for, but I cannot think of a worse thing than that.
So we have an opportunity to bring at least some of these old traditions back. The Finniston Report realises the enormous importance of the pupillage as well as the undergraduate courses. One point I would make is this. It has been said several times this evening that the institutions behave differently. This is true. The Institute of Civil Engineers in particular, has an extremely well and highly organised system of pupilage. So good is it that Dutchmen like to come here from the technical university of Delft, which I know well, to study under the auspices of our own institution of civil engineers which is so very good.
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It is quite different in character from many other of the learned institutions. I have been bitterly disappointed all my working life with the way in which some of these institutions have failed, in my view, to rise to the extraordinary opportunities they have of taking the lead in creating, out of a collection of quite ill-assorted people, what ought to be a very distinguished learned profession. It is partly due to our tradition. To the Stephenson tradition as distinct from the Holbein tradition. It is partly due to the collapse of a good deal of industry.
Do remember always that in the time when Lancashire was prosperous it was not prosperous because its universities were good. Lancashire became the wealthiest part of the world when it had probably the most illiterate population to be found anywhere. Men married and signed their name with a cross at a time when the textile trade was sweeping the markets of the world, and people came with their qualifications from Zurich, from Delft, from Charlottenburg, and settled in Lancashire because there they found the conditions which made it possible for them to exercise their talents.
British industry became prosperous not because of what it did to educate its men, but because it provided opportunities for educated men who flocked here from all parts of the world. I must say again that it cannot become prosperous only by educating engineers. It has to do other things too. One of the things it must do is to make it possible for industrialists to make a reasonable profit and pay more than the 2 per cent. or 3 per cent. they get at the moment, when you can get 15 per cent. on gilts. This is a very curious contribution to this debate, and I apologise for it because the hour is so very late.
7.55 p.m.
Lord SHACKLETON: My Lords, first of all may I, on behalf of the noble Lord, Lord Scanlon, make his apologies for not, as a maiden speaker, being here. I think that perhaps some other noble Lords who have spoken might also well be here. I do not know that the standards have gone up since I had the privilege of leading your Lordships' House. The noble Lord, Lord Scanlon, is in fact meeting the graduates for the EITB Fellowship, so his is a very respectable alibi. I should like to congratulate him

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really genuinely. I think we all thought his speech was most notable. The noble Earl, Lord Bessborough, was fortunate to be in the position to congratulate him.
May I also congratulate Group Captain Lord Ilchester. If, as I suspect, he is a product of Halton, then I have a very high opinion of him. He made a point about the Air Force Board. It always was a slight mystery to me when I was an airforceman why everybody had to be "general duties", and this is again part of this generalist concept. Some of them were actually engineers too; but that is another point. I could tell you one or two stores about Halton, but I will not do so tonight. I expect the noble Earl could tell more.
May I also take this opportunity to make a small apology—only a small one —to the noble Lord, Lord Lucas of Chilworth. He quoted from Engineering Our Future, the shortened version. Is it arrogant to say that I have read only the long version, which does not contain that particular quotation? That is what I was looking for. But having said that, may I press on and perhaps enter one or two defences of the Finniston Report. We all have great difficulty in criticising it because so many of us are personal friends and are very fond of Sir Monty, but none the less, there are things to be said.
I think the greatest achievement the committee had—and this is a point made by the noble Lord, Lord Howie of Troon, who does not seem to be here was that they did proceed with great speed. This in itself was a great virtue, but therefore inevitably there are defects. It is rather unfortunate, but perfectly right, that a member of a committee of inquiry can make a speech criticising the commission of which he is a member (he cannot expect the Government to reply to that) but the unfortunate chairman and others, about whom we cannot even take notice of the fact that they might be somewhere in the offing, are unable to reply.
There has been some implication here of this, and while inevitably in a report of this kind people will not exactly misinterpret it, they may get the emphasis wrong. Certainly Sir Monty Finniston and the report did not put all the blame
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on the engineers. They did blame, if anything, industry and our social system rather more delicately than I am about to do myself. Nor did he say that engineering companies were not good enough. There are representatives of companies involved in engineering who are doing extraordinarily well in the world. There have been examples of companies which have been run entirely by engineers, like Rolls-Royce, which have not done so well at certain times, and we cannot really blame that on the generalist. There has been some superficial misunderstanding. But if one is going to have an "engine for change", which is what Sir Monty and his friends have said, then in fact you cannot throw it out.
Let us accept also that there are what might almost be called social anthropological tribal aspects of this matter. "Why", say the chemists, "should the engineers have an authority? Why cannot we have one too? "I know there is an answer to that but I have not time to give it. My noble friend has actually given it to me. There are those who may find something divisive about this. Actually the Institute of Marketing probably will not ask for an authority. It takes a brave man someone rather like Sir Monty Finniston to do so. But they will none the less wish to put their point in. The Royal Institute of Chemistry will be making its submission to the effect that it does not want to be separated off, and there are others; I am not sure where the metallurgist comes into this situation.
That brings me to the point, to refer to the remarks of my noble friend Lord Mishcon, about professional standing. There is an enormous difference between the professional standing of the lawyer and that of the engineer; kindly, one could say that the engineer produces wealth while the lawyer does not, but that is not the difference I see. The profession is different because the engineer is frequently a man under authority, although he may be occupying a managerial role, and indeed one of the criticisms I have heard of civil engineers is that they tend to try to be too professional and do not move directly enough into project management.
I will give an example because I operate personnel systems in a large organisation. The only people who do not report for policy to a principal, to a director, in that

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company—I actually drew this up—are the lawyers; they report for pay and rations, but I deliberately excluded them, though I would not dream of doing so for the engineers. If one looks at the report, one sees that they say the CEI and the professions, for understandable reasons—they put it rather politely—have failed to some extent in this matter. Certainly, this is something the Government will have to look at, and it is in the context of the nature of the authority.
I know that Sir Monty Finniston attaches considerable importance to the opening chapter, and while I support the main thrust of the report, dare somebody who is not an engineer—perhaps because I am not an engineer—comment that the language is so strange that one of my friends who is an engineer said it could have been written only by an engineer? In my simple way I thought a dimension was an actual linear measurement, but I gather it is not; it is something that is imprecise, and perhaps this comes from the questions of the fourth and fifth dimension. It is just arguable whether, instead of talking about the "engineering dimensions", we should be talking about the "engineering syndrome". There are obviously grave psychological anxieties; I will not say they are any more paranoid than lawyers at certain moments, but nevertheless I am surprised that apparently they are supposed to suffer from inferiority complexes.
They may not be appreciated and perhaps they have good reason for feeling that, and I shall demonstrate that they have not been paid enough and, as for a feeling of not being appreciated, I think it is true in our technological society that that can happen. But I should have thought that the professional man, the last man I should have thought would have suffered from a feeling of inferiority and lack of appreciation, was an engineer, many of whom are fulfilling a most creative and specific role and are very often able to see the fruits of their work. However, if we do not appreciate our engineers enough, then, as I say, they are not alone, and that is to some extent—the noble Earl, Lord Bessborough, touched on this—the product of our history and social system. It so happens that we had one distinguished speaker today—I am not certain, but I think the noble Lord, Lord Baker, was the trinity
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—who spoke about this, and I must say that when I was at Oxford, although nobody ever mentioned engineering, I reckoned that scientists and engineers were people who walked down the road and some of my culture brushed off on them.
Lord BAKER: My Lords, am I to assume that the noble Lord is comparing Oxford engineering with Cambridge engineering?
Lord SHACKLETON: My Lords, I knew I was on dangerous ground, but I wanted to bring the noble Lord, Lord Baker, into my winding-up remarks since I had the privilege of knowing him for a number of years. It is a problem because we live in a society which has still failed to cast off the old traditions. The concept of the gentleman has a good side but it also has a bad side. I am old enough, as is the noble Earl, Lord Bessborough, to know that there was a time when a gentleman did not indulge in trade, and we are not talking just about Jane Austen.
Lord ROBBINS: My Lords, is the noble Lord not going a little far in attributing all these attitudes to history? In the 17th century there were not the same inhibitions. The younger brother of the noble and learned Lord the Lord Chancellor, Lord Guildford, who became Sir Dudley North, went into trade at a very early age and made a colossal fortune, and he, I fancy, was typical of many. I suspect that these inhibitions, the nature of which I do not deny, date from much later and are chiefly Victorian.
Lord SHACKLETON: My Lords, the noble Lord, Lord Robbins, is a very good attender in your Lordships' House and usually chooses to make his speech by way of an intervention at this stage in the evening. I had not of course finished my remarks, which I was about to qualify. Of course, there are exceptions and I was going to say on another aspect that this concept is, I think, relevant to our time. After all, reports about superiority and some of these developments have been coming up time and again, and noble Lords have referred to them today, and this is one of the consequences of our never having been subjected to the pressure of invasion and losing a war. I do not want to call Corelli Barnett and others in

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support, but unfortunately we still have not adapted our attitudes enough, and that politely has been said by Sir Monty. I hope the noble Lord, Lord Robbins, who is an economist rather than an historian, will also admit that some of us have read our history.
That brings me to the point that there are aspects of the report which worry me a great deal. I am worried at the emphasis on the need to get away from the use of the word, "arts ". The Royal Society of Arts is an institution devoted very much to technology. One noble Lord referred to "artefact". I can see the point of having higher degrees of excellence—and I agree with the noble Lord, Lord Avebury, and others who emphasised some of these points—but I wonder whether a Master of Arts suffers gravely from the fact that he is called a Master of Arts rather than a Master of Engineering; or a Bachelor of Arts or Bachelor of Science.
I think our obsession with failures is in danger of leading us into superficial and indeed unscientific and philosophical concepts. One talks about the "industrial arts", and if one goes back into history one finds the educated man—the educated gentleman, if I may say so—being deeply concerned either with turnips or doing his experiments —he may actually be making his coachman fly in the glider for Sir George Caley and a member of the Royal Society on a much broader basis. We should therefore be careful about reading too much into some of the anxieties which engineers have felt about this.
I have, I regret to say, to make some criticisms—I think it is important that they should be made—of the economics in the report. For example, take paragraph 1.2 (I hope I shall have the noble Lord, Lord Robbins, with me on this); manufacturing does not generate 30 per cent. of the nation's wealth, but 30 per cent. of the annual income. That is quite an important distinction, and, after all, I must not look below the Bar because nobody is really here except us to listen to this.
Paragraph 1.7 shows the decline in Britain's share in world trade in manufactures, but it actually excludes the United States. It is a rather convenient omission. There are a number of aspects
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to this matter. Paragraph 1.10 would be more correct to say that Britain's gross domestic product had grown less rapidly than those of the European countries, but it does not make us automatically the poorest country. I would just say that this is where my engineering friends say that it must have been written by an engineer. There are certain technical sides to this report which it is proper to criticise and which I am surprised have not been picked up.
Let me say a little more about the status of the engineer. When I was Civil Service Minister I had, not once but twice, deputations from the CBI complaining that we were paying our scientists and engineers in the Government service too much. I remember that each time I said, "Is it possible that industry is not recognising their worth or paying them enough?" On another occasion I took a seminar in Oxford, still under a ministerial hat, in which we discussed the application of science and technology in management. Many people, distinguished academics, managers from industry and civil servants were discussing how you take an engineer and convert him into a manager. Do you catch him at the age of 21?—as the noble Lord, Lord Baker, tried to do with some of his management activities. I think that that is too early. Do you do it when he is aged 35? The ICI man came along and said, "Well, we don't have any problem". We then discovered that 70 per cent. of the staff in ICI at that time were either scientists or technologists, and only 30 per cent. were generalists. The simple fact was that the black men outnumbered the white men. I hope the analogy is apparent: that in fact in this sense engineers and scientists were still regarded as a less worthy and rather special class. Are the standards of the civil engineer too high? Is he too professional? I take the point that there is some very high quality engineering, but is it a fact that he is reluctant to move into managerial responsibility to which I have referred?
I shall move on as quickly as I can. I am sorry for the educationists who are waiting anxiously for me to finish—
Several noble Lords: The Bishops.
Lord SHACKLETON: Bishops—and

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cathedrals. I apologise. Let me turn to the principal proposal, the setting up of an engineering authority. I and others have been involved with reports—the noble Earl, Lord Bessborough, mentioned one—and, to put it politely, nothing very much happened. The dynamic gradually goes away. People talk about it, they deal with bits of it. We have had report after report, doing something about the engineering professions; they were not going to solve our problems but they might do something towards that. Perhaps an Engineering Authority will in fact ginger the professional institutions into doing more. There is nothing like a bit of competition—and I take the point of the noble Lord, Lord Lucas of Chilworth. It is very easy to condemn them. It is very easy to condemn the CEI. I think that I should be very reluctant to condemn the CEI, rather than the components who make up the CEI. I certainly would not blame their officials, some of whom I know and who are admirable.
When it comes to the appointing of the authority, I know that we have a dilemma here. There are suggestions that it should be a chartered body. There is a vague idea that if the Privy Council appoints it, the Government would have no hand in it. This is not true, because, of course, the Privy Council does not really exist in this way and the departments have to comment. But frankly, from my experience, and I shall even say from my experience of this rather over-enthusiastic Government under which we now live, I would rather trust Ministers and their civil servants, even if the odd mis-appointment is made, to make the best appointment and not necessarily just leave it to particular institutions.
The Government are going to have to look at this matter in detail and they may be able to evolve a formula. Therefore, I support the constructive suggestion of the noble Lord, Lord Gregson, modified a little by the suggestion of the noble Lord, Lord Nelson of Stafford; namely, that if something is to be done, we ought to get on with it. It is even for consideration as to whether if the Government in principle decide to set up an authority, and recognise any amount of harmonisation to be achieved, it may well be that there could be an embryo organising committee, not composed just of engineers—
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on that I think all of your Lordships would agree; one could even add an economist as well, though I am no economist.
I should like to touch on two points. The Fielden Report stressed that we ought to find a way to do something for engineers in the way that "All Creatures Great and Small" has done something for vets. The veterinary schools, we are told, are crowded out with people trying to join them. I think that there should be some sort of drive—and some parts of industry are doing it. Curiously enough—this is a small point—in the mining industry an organisation called NIMCU is doing a very good job, not necessarily in recruiting mining engineers, but in putting across the background and the significance and the importance of the mining industry. It is on the importance of industry that I am sure Sir Monty Finniston and the members of the committee, as well as the Members of this House, agree most.
May I also express my appreciation of the Warner Report. I happen to be President of the British Standards Institution, and I am personally worried in this regard. I hope that the suggestion that NEDO will begin to involve itself is taken up. The report refers to the machinery of the National Economic Development Council, and says that the new engineering authority should be used to bring together the relevant official bodies, institutions and industrial sectors to develop a national policy for standards in quality using the Warner Report as a starting point. This is a matter of increasing concern: the need for more work in the field of quality assurance There is nothing wrong with standards; the need is to apply them. British Standards are very good, and I have been told that in many cases the European Commission look to us for standards.
I do not want to take any more time. I end with one point which may have a political feel to it. It is a fact that those countries which are held up to us as the most successful countries, whom we should emulate—I am talking about France, Germany and Japan—are all countries where there is much more government intervention than we have in this country. I appreciate that the Government are following a philosophy—and let me say that, although I think much of it is wrongheaded, they are following it with courage.

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But I think that somehow, in some of these areas, we must use the power of Government to move things along, and that in a sense is what the Finniston Report is about.
8.19 p.m.
Viscount TRENCHARD: My Lords, may I echo what all of your Lordships have already said, and thank the noble Lord, Lord Gregson, in particular for introducing this Motion at this time. It fits exactly and neatly into the Government's consultation period. May I also thank the noble Lord for the tone that he set in the debate, which was totally non-political; a tone which I think has been kept by every speaker since. This has shown this House at its very best. I shall even promise not to comment upon the remarks of the noble Lord, Lord Shackleton, about intervention. We also owe to the noble Lord, Lord Baker, thanks for this Motion, in that I watched in the No Day Named section of the Minutes this Motion, or words very similar to it, which had been set down for a very long time, which indicated his never weakening interest in this immensely important subject.
Next let me again pay tribute from the Government's point of view, as my right honourable friend has already done, to Sir Monty Finniston and his committee. It is perhaps almost impertinent to pay tribute to them; but after he had published his report I and my colleagues were fortunate in joining Sir Monty and his committee for a dinner, and the enthusiasm and bubble among all the members of that committee was indeed a tribute to the chairman and to their own dedicated efforts. It was a highly enjoyable evening. There were three lady members of the committee present, and I think that the need to encourage engineers from the fair sex was well understood by the committee, but it is, of course, a general subject well outside this particular area.
I must add my congratulations to the noble Lord, Lord Scanlon, and to the noble Earl, Lord Ilchester, on two really magnificent maiden speeches. Funnily enough, both of them were connected with what the noble Earl, Lord Ilchester, told us; namely, the Halton-brat or the Trenchard-brat training. I was delighted that there was a mention of this in this
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debate. I was opening a factory in Newcastle not long ago and was completely failing to understand some new control switch gear. I said to the chap who had invented it, "Where on earth did you learn all this?", and he said, "I was a Trenchard-brat". One does run into them during one's industrial career; I have run into them all over the place.
The link between the two maiden speeches is that I can remember, when I was literally the height of this Table, or very little higher, the predecessors of the noble Lord, Lord Scanlon, coming to tea with my father, when he was trying to persuade them that the Halton training must be accepted by the trade unions so that the large numbers of technical people needed in the Air Force could find jobs and be accepted thereafter in civilian life. He also regarded it as vitally important that this link with civilian life should be maintained in what he always called a technical service. I think even Sir Monty Finniston would be amused by one of his old letters, which I gave to Trenchard Hall at Cranwell some years ago. It contained the lovely phrase,
"Engineering is not just putting a crankshaft in a bearing. We have the photographic engineer, the wireless engineer, the clothing engineer and many other kinds of engineer".
Indeed, although the areas have changed, that it still true.
I do not know whether it is in order for me to say so, but when the noble Lord, Lord Howie, made his interesting contribution—and I looked up to make sure that I had not missed some minority report in the Finniston Report—I thought at first that he was perhaps damning with faint praise; then I thought that he was praising with faint damns; and finally I thought it was another tribute to Sir Monty that he had a unanimous report and only the odd footnote of exception.
Lord HOWIE of TROON: My Lords, I wonder whether the noble Viscount would allow me to say that I am by nature a compromiser. The only trouble is that sometimes the other fellows will not compromise enough.
Viscount TRENCHARD: My Lords, again I recall a remark of my old father when he said:
"I don't want very much in this world; I just want my way".

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I do not know whether it is in order, but, anyway, I should like to say that I have noted with great interest that Sir Monty has spared five hours to listen to every speech in this debate.
For me this really could be a complete holiday, and indeed it is, because in the middle of the consultation period I have to be virtually totally non-committal; and I could simply wind up the situation by saying what a wonderful debate it has been and we will read it all again carefully.
Unfortunately, I have had 30 years as an industrialist, and I cannot entirely resist the opportunity to make a few comments, both from the Front Bench and at times a little embellished as a result of that long industrial experience. But, first, we are in the consultation period, and I have noted what a number of noble Lords have said, that we may be hurrying this too much. I noted what my noble friend Lord Lucas said, that we seem to have got the consultation period out of gear, in that we in the Department of Industry had asked (and we have asked) for certain comments on a limited number of recommendations, which include the Engineering Authority, by the 1st April; and the Department of Education and Science has said that it intends to respond to a great deal of the detail in relation to the educational recommendations at a conference in October.
We are, of course, in constant touch, and we shall be consulting each other on all aspects of the report, but some clearly affect industry more than education. I do not think, therefore, there is any hiatus of consequence. There is the question of how fast we should move. I believe there is merit in moving as soon as possible. There is an inertia about this kind of affair, and water does not stay on the boil; it goes away in steam. This whole area is now under the spotlight. We are all interested in it, we have all read it and we are all looking at it. Let us try to move on with the maximum possible speed while it is in everybody's mind.
I am not going to comment in any way on the points that the noble Lord, Lord Shackleton, has made in relation to the statistics used about the serious industrial situation in this country. I believe (and I accepted the way in which the noble Lord,
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Lord Gregson, led into this debate) there are so many statistics to show how badly we have done in industry that it does not really matter which ones you take. My own favourite current one—and I admit that it changes from time to time—is that if, from 1979's balance of payments figures, we subtract the credit that arises out of the North Sea oil and gas that has come on stream over the years we have a deficit left in those figures of £10,000 million. So I do not think that any of us wishes in any way to question the seriousness of the industrial situation. I also agree with the noble Lord, Lord Gregson, about the importance of oil; and it is indeed the reason that half the population still has not really realised how serious is the situation. It may be that we would get very much prompter action, very much more automatic action, from both industry and from the educational area, and even perhaps from the engineering institutions, if everyone realised just how serious the situation would be without North Sea oil and gas.
Lord SHACKLETON: My Lords, may I interrupt the noble Viscount? On the subject of North Sea oil and gas, I think it is fair to say that an enormous amount of effort and investment, which conceivably could have gone elsewhere, have gone into the development of these fields. I am sure that he did not want to give the impression that it was manna from heaven. I accept the value, but none the less there was very heavy investment, and even risk of life.
Viscount TRENCHARD: My Lords, I did not want to give the impression that the oil companies and all the supporting expertise has not been a miracle of modern industry by both British and international companies, nor that it is not of enormous importance; but merely to point out that the rest of industry on which we will depend when oil and gas run out is in every bit as serious a situation as the Finniston Committee Report implies. We also accept the importance, not the total importance but the very great importance, of the manufacturing industry within industry as a whole. Of course, all of us in this debate have accepted the vital importance of what the Finniston Committee have christened the "engineering dimension". While it is vital for all manufacturing businesses, the number of

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vital cogs that the engineering side provides is quite different in different kinds of business; and I shall, if I may, return to that a little later.
I note that I missed one suggestion that the noble Lord, Lord Lucas, made: that the decision in relation to the central authority might already have been taken. Let me assure him that that is not so. Let me first say that there seems total unanimity with the Finniston Committee's conclusion that we have far too few engineers although we have some of absolutely first-class quality. I want to assure the House that the Government accept that premise: that we are up against a very serious shortage and that, however hard we work, it will take a long time to solve. Therefore, we also accept that it is vital that the current engineering stock is used to the best possible advantage and that all the supporting echelons of that stock are therefore also important.
Lord AVEBURY: My Lords, before the noble Viscount continues, would he deal with the question I raised of the run-down of engineering faculties in the universities? If the Government accept the serious position and the inadequacy of our engineering stock, what steps are they taking to ensure that where important engineering lecturers and staff leave universities, they have the funds to replace them?
Viscount TRENCHARD: My Lords, I will come later, if I may say so to the noble Lord, Lord Avebury, to the question of those we are losing, where engineers go and also what might be done in the shorter term. But, in general, the Government's position at the moment is the acceptance of the seriousness of the position. At this stage, we are open to consultation—of which this debate is an important part—on the methods of putting it right.
If I may come to the institutions—and we are aware that they are not happy on some aspects of the Finniston Committee Report and that the committee has raised major questions in relation to the role of those institutions and to the possible changes in it—I want to assure the institutions that in our review and in this consultative period, we shall be taking great care to try to ensure that the good
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work, the accepted good work, of different institutions is retained. I know that Sir Monty Finniston would have wished that that was done. Having said that, I think at this stage I can say that the Government take note of the very unsatisfactory situation, and that I, today, have taken note of the remarks made by the noble Lord, Lord Baker, and others in describing the existing institutions as not having been fully effective in looking after their profession. I accept that we are dealing at the moment with an unsatisfactory situation, and I hope that the institutions, in giving us their views about what we should do, will start from that point and will therefore give us constructive advice—either along the lines of the Finniston Committee Report or along alternative lines; but on lines which are determined to recommend change and improvement for the future.
Lord HOWIE of TROON: My Lords, has the noble Viscount any comment on the notion that there is a different relationship between the Institution of Civil Engineers and its industry and the relationship between some of the other institutions and their industries; and does he draw any conclusion from that?
Viscount TRENCHARD: My Lords we shall read with interest the views of each individual institution. The noble Lord, Lord Mishcon, has raised a point which clearly is an important and broader one outside this particular area. We shall certainly consider what he has said. But let me just point out that, as I read the Finniston Committee Report, they have started from the premise that all is far from well and, against that, have recommended (if you like) an intervention at this stage and in this current situation. I have found myself making these notes with some interest in order to say them to a noble Lord on the other side of the House; nevertheless the Committee has not recommended that this body should be left permanently at the dictate of appointments of Government. There could be an analogy in the "hospital" role of the NEB that we have retained: namely, that one keeps the patient there until such time as he is fit to be returned to private enterprise. Nevertheless, we will consider carefully the general point made; but I want to stress that, as I read the Finniston Report, the

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recommendation is temporary. I have noted various suggestions that have been made to give the institutions a bigger part in the nomination of the authority or in consultation with the Secretary of State; and all these suggestions will be looked at by my right honourable friend.
Let me now turn just to the Quango—and let me call it a Quango—recommendation itself. Let me say quickly that there is no dogma in this area on this subject. We felt that there were far too many Quangos, generally. We have axed a number of them, but we have kept a large number and have paid tribute to the work that a large number of them are doing; so that this issue is not going to be decided on philosophical grounds as to whether one likes Quangos or not.
I should like to draw to noble Lords' attention that what I think the Finniston Committee recommended here is an authority which is not a big bureaucracy but which is made up of figures of immense standing in industry and in the profession, who would decide policy and who would very much work through the existing organisations in this field. We need to view the recommendation and make our comments to Government in the light of that.
The cost figure: Sir Monty has been very careful to add up all possible costs and contingencies. The cost figure is one that I do not think we should necessarily either accept or often look at. We need to look at whether a relatively small authority of highly distinguished people could take a major step forward in putting right a situation which at the moment is not right.
The employers' situation: we have had some excellent contributions in this debate. I know that employers are taking the Finniston Committee report very seriously, and some of them have asked us—as some of your Lordships have—to allow more time for consultation because they really want to thrash it out among themselves. This is a very healthy sign. I noted, reading the report, that most of the individual engineering companies that I know gave evidence to the Finniston Committee. I also noticed that a very large number of the more general processing companies—where although engineering is vital it is perhaps a smaller cog in the
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whole wheel than in engineering companies—did not individually give evidence.
This enables me to introduce a point which those who are giving us views might care to bear in mind; that is, that we have very different degrees of importance—weighting—in different kinds of businesses: for marketing, for science in its broadest sense, chemistry, microbiology, for general production matters, for selling and for market research. The weighting is different and all are always interrelating. The successful business is the one where the specialist of one kind looks across his own frontiers to the business as a whole and talks with his colleagues.
I raise this because I think that we need to consider whether this question of the standing and the pay of the engineering profession as a whole in this country is due to the shortage of the engineers—and I w ill describe how I think that might be—or whether it is in fact the other way round. The high flyers go when there is a shortage—and there are high flyers in our engineering professions, as noble Lords have made very clear today. They go to the engineering businesses because there they can see that there are already chairmen of some of those businesses who are engineers, and they I think will do very well.
I also believe that it is probably not true to say that those high flyers or high quality engineers in our biggest and strongest engineering businesses are paid very badly. What is left over is available to the wide range of processing industries where, though engineering is vital, it is a lesser component part. While I am sure many mistakes and lack of recognition of status exists, I also wonder whether, taken as a whole, those that are left over in this serious shortage are in fact underpaid: I find this difficult to accept because certainly in my own experience one has seen clearly what one needs in different areas. It may have taken time sometimes to see it. One has said: "We must have an engineer of that kind". I personally believe that the shortage is the predominant point here. The pay and the standing follow a little from the fact that there are just not enough properly qualified engineers in the bulk manufacturing industry as a whole.
Whether this is so or not, let me make a quick comment or two on the subject

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of whether we have snobbery against industry and against engineers in particular. I would join those who believe that the degree of snobbery generally against industry has declined, and that it is perhaps no longer much more of a major factor than it is abroad. I have told this House once before that my wife's American grandmother refused point blank to tell all her American relations outside Chicago that I was a soap salesman in Canada when I was a soap salesman. She told them instead that I was in a secret diplomatic job.
I believe that the main area where snobbery has hung on is actually in our educational establishments. This is where we are different from other countries. This is where we have a problem in that we do not have the emphasis that we should have on mathematics right through higher education to industry. I believe that we are all agreed on that. I took note of the remarks made by the noble Lord, Lord Perry of Walton, on the fact that first there have to be many more teachers and also teachers who do not just teach mathematics as such, but who can encourage the children to really see industry and engineering as an exciting, worthwhile and rewarding job. This brings in the anti-profit notion which has gone deep into our educational establishments.
In the time left to me—without keeping your Lordships very long—let me say that the Government welcome all the efforts made at present to link schools and local business communities, to link industry and university education. My noble friend Lord Nelson of Stafford mentioned this today. His company with Bath University have been pioneers in this area. We have less of it again than other countries of which I have experience—much less of it not only in this field, but we have much less in teaching computers, microprocessors and the like.
The Committee's report bears on the question of innovation. At this late hour all I want to say on that is that it should not be assumed that we are not centrally supporting innovation to a pretty high degree. Here I include the energy area But in all the Department of Industry schemes amount to about £100 million a year. About £25 million a year is
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devoted to non-nuclear energy, and then £125 million to nuclear energy. These are not inconsiderable figures, and there is considerable backing for research and development and for innovation. I believe that this will increase and it is not entirely dependent on the current cash flow position of certain businesses. If, as some noble Lords have said, industrialists can see quite clearly that if they do get ahead in a certain area there are going to be no impediments, no price controls and the like to take away from the eventual return, I believe that money will be forthcoming.
Let me echo also that the Government entirely accept that we are still inventing many new things. When I first came into Government, I questioned whether the heavy period of our inventions had not been before the war and in the early years after the war. I am assured from all sides that this is not so, that clearly we do have an immense talent and we clearly have had it for a very long while.
Recently I went to a famous Swiss firm called Sultzer, which makes marvellous marine engines, and I said: "You are nowhere near the sea and you have to ship each engine. Why are you in the marine engine business?" They said: "Our predecessors tried to engage Mr. Watt: he would not come but he sent Mr. Brown"—and that is why Sultzer are in marine engines. This process is still going on and there have been important and interesting letters in the newspapers concerning it.
Finally, let me say two things. This debate will be a very valuable source of information and suggestions, right through from the suggestions for a Steering Committee and suggestions not quite on the same lines, but on other lines. We shall weigh all the information and look at it carefully. Against the background of history which your Lordships have drawn on today, it would make little difference to your Lordships for one junior Minister to follow his brief and say, "I guarantee that we will not let dust collect on this report." I can only say that I know of that history. That makes one humble. However, we shall do all we can to see how we, the industry and the institutions can contribute towards arriving at some solutions to this major problem.
Lord BOWDEN: My Lords, before the

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noble Viscount sits down, may I ask him whether there is any hope at all of getting some relaxation of the Treasury rules which immobilise industrialists and prevent their going to universities?
Viscount TRENCHARD: My Lords, I will write to the noble Lord on that. I personally am a believer in the interchangeability of pensions.
Lord SHACKLETON: My Lords, may I also intervene, because I think I may have been the Minister who refused to agree at the time? I would say that the noble Lord would be very unwise to make any promises of any kind at all.
8.52 p.m.
Lord GREGSON: My Lords, may I first say that I draw comfort from the final remarks of the noble Viscount in his suggestion that hopefully the Government will not let dust settle on this report. As the noble Viscount has already said, I think we have had one of the outstanding debates of this Session and I must thank all noble Lords who have taken part in it. It has stood up to the highest standards of your Lordships' House. I must especially thank and add my praise for the speeches made by the noble Lord, Lord Scanlon, and the noble Earl, Lord Ilchester. Recognising beforehand that they were engineers, I, in my opening remarks, predicted the standard of their contributions and I must say that I feel fully justified in what I said.
May I also say that I feel very keenly for Sir Monty Finniston, in that he has sat through six hours of debate without being allowed to contribute—and that must have been very, very difficult. My Lords, I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

ENGLISH CATHEDRALS AND TOURISM
8.54 p.m.
Lord SUDELEY Lord SUDELEY rose to ask Her Majesty's Government whether they intend to take any action on the English Tourist Board's report on English Cathedrals and Tourism (March 1979) and its implications in the light of the increased number of visitors to cathedrals and the importance
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of providing Government grants to compensate for visitor damage. The noble Lord said: My Lords, the subject of this debate is the English Tourist Board report on the impact of tourism on cathedrals and one or two other of the much-visited ecclesiastical buildings, especially St. George's Chapel, Windsor, and King's College Chapel, Cambridge.
The problem posed by the tourists and considered in this report is that hitherto deans and chapters have succeeded in looking after their cathedrals without any direct aid from the Government. Over the past two years VAT has come to be introduced on repairs to cathedrals and there has been a great increase in the number of visitors to cathedrals. These visitors, by their very numbers, have created an unprecedented amount of damage to ledgers, brasses and the like on which they tread. Because of taxation, and the foreign exchange which these visitors bring to the Government, and because of all the employment they provide, the Government ought, as far as they can, to help cathedrals provide for the needs which visitors to our cathedrals have created.
Being a department of the Government, the English Tourist Board cannot lobby the Government, and it falls to a BackBencher to do this for them; and I will illustrate their problem more fully. When the first of our present Acts to preserve historic buildings was introduced in 1913, cathedrals were very nearly included and, if they had been, they would almost certainly have been looked after by the State. But the Church of England preferred to keep its independence in this sphere, and so cathedrals were specifically excluded from such Acts until 1953. It is true that in 1953 they were not, in theory, excluded from the Ancient Monuments Act, which set up the Historic Buildings Council, but in practice they have continued to be so. The Historic Buildings Council has merely given aid to historic churches since 1976 and to buildings which, though not cathedrals, run very close to being so—for example, the Cloister at Wells.
In the meanwhile, the English Tourist Board's report bears witness to the great increase in the number of visitors. While 15 million visitors a year visit stately

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homes, as many as 20 million go to our cathedrals; and while half these cathedral visitors are still concentrated on Westminster Abbey, St. Paul's Cathedral, Canterbury, York Minster, St. George's Chapel, Windsor, and King's College Chapel, Cambridge, it is the lesser cathedrals which have attracted the largest increase—an increase, for example, of 100 per cent. at Norwich and of 500 per cent. at Rochester.
The financial advantage to the Government of this great increase in the number of visitors to our cathedrals is considerable. In Preservation Pays, which was published in 1978 by Save Britain's Heritage, Marcus Binney and Max Hanna have shown the staggering importance of tourism to the Exchequer's revenue and our balance of payments. The authors show how, in the year before their book came out, overseas visitors spent something like £2,763 million, including £584 million on international fare payments in this country. At least £250 million of this money has accrued to the Government in the form of taxation on petrol, liquor and cigarettes, and also in the form of VAT. As a draw to such lucrative visitors from overseas, our cathedrals are virtually unrivalled. Marcus Binney and Max Hanna show how, apart from Stratford-upon-Avon, the places which most attract foreign visitors are Windsor, where they see St. George's Chapel; Cambridge, where they see King's College Chapel; Canterbury and other cathedral towns.
Moreover, our cathedrals help the Government to create employment. They have created direct employment in the form of shop and refectory managers, and assistant tourist and information officers, guided tour secretaries, admission attendants and so on. The English Tourist Board cites how in York Minster alone tourists have created direct employment for 24 permanent and 6 seasonal staff. The English Tourist Board report and Marcus Binney and Max Hanna in their book also stress the indirect employment created by these cathedrals in the form of jobs in hotels, restaurants, pubs and shops, all in the neighbourhood of the cathedrals. They have shown how most tourists approach Salisbury through the High Street, and they estimate that they provide 21 per cent. of the annual
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retail catering turnover, compared with 7 per cent. in Salisbury's main shopping area. About 860 jobs in the service industries in Salisbury are due to the tourists, whose principal aim is to come and visit the cathedral.
But to be set against these facts of the great increase in the number of visitors to cathedrals and the revenue and employment they provide is the bill which they leave to be paid. Much more needs to be spent on the facilities for visitors to cathedrals. Cathedral closes are unique to this country and parking there should be discouraged. At about half our cathedrals parking is inadequate during the summer season, often because local authority car parks are too small and too far away. Especially bad examples are in York, Carlisle, Oxford, Rochester and Wells, and because lavatories do not generate any income only four cathedrals have them. It is true that at St. David's there are three lavatories and one urinal, but, obviously, this does not suffice for its quarter of a million visitors. The bill for installing the lavatories which should be installed at Canterbury has been put at some £60,000.
The main burden of the English Tourist Board's report is the damage created by the feet of so many visitors, especially through their use of the stiletto heel. The buildings worst affected are Westminster Abbey, St. George's Chapel, Windsor, Canterbury Cathedral and St. Paul's. According to the English Tourist Board's report, no viewing platform has been provided for seeing the famous tiles in the Chapter House at Westminster Abbey, and the heels of visitors come over the ill-fitting shoes provided for them there. Furthermore, at Westminster Abbey some stones in Poet's Corner have been obliterated and the damage to the stones in the Cloister is especially noticeable.
No proper record has been made of the stones recording those buried in Westminster Abbey. Over the past 20 years, some of the evidence for such a record has been obliterated beyond recovery and much further evidence is disappearing fast. Much the same has happened to the ledger stones at St. George' Chapel, Windsor, and the tombstones of Henry VIII and Charles I have been put in particular jeopardy. The whole floor of the nave at Canterbury Cathedral will

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have to be taken up in a few years' time and at St. Paul's the English Tourist Board reports that there has been a good deal of damage to Wren's brass ventilation grills. the ledger stones around the monument to Wren and the pavement around Nelson's tomb.
The English Tourist Board report also mentions the wearing out of ledger stones at Salisbury and Winchester and the damage to the Cosmati floor in the sacrarium at Peterborough and the 19th century tesselated pavement at Ely. It would be tedious to multiply examples any further, but, very naturally, the English Tourist Board's report urges, among this list of recommendations, the recutting of inscriptions on ledger stones to be kept under the scrutiny of the Cathedrals Advisory Committee and the recording of all legible inscriptions and coats of arms on ledger stones and tombs, with a plan of their location.
The question is how the bill left behind by visitors for the damage which they have created is to be paid. Some of our cathedrals now charge for admission of visitors and tourists, and in many cathedrals areas have been developed for the sale of souvenirs, books and gifts. The revenue drawn from visitors has provided about half the money needed for the repair and maintenance of Coventry Cathedral and York Minster, and a third of what is needed for the maintenance and repair of King's College Chapel, Cambridge, St. Alban's and Tewkesbury Abbey. Still more revenue might be drawn from visitors if further cathedrals charged for admission, and if cathedrals did more than they already do to show their art treasures and lay on interpretative exhibitions.
For the rest, some help has already been provided by the Government. The Government already give some relief in the form of capital transfer tax exemptions and income tax relief on covenanted donations. The Government also enable cathedrals to reclaim on payment of VAT for repairs, to the extent that visitors are charged for admission. Westminster Abbey can reclaim as much as 85 per cent. Others, less given over to charging for visitors, can reclaim rather less.
Then, under Section 4 of the 1969 Development of Tourism Act, the English Tourist Board is entitled to make loans or
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grants to cathedrals and Carlisle, Durham and Liverpool have already benefited. These loans or grants are used for the creation and improvement of facilities for visitors, rather than for repairs to the cathedral fabrics themselves, and they apply in certain specified development areas where there is high unemployment. Moreover, under existing legislation the Government already provide scope for assistance from the Area Museum Service. This service exists to offer grants for the setting up of museums, and cathedrals can benefit from it for the exhibition of their manuscripts, vestments, sculpture and other valuables and displays of the historical development of their buildings and their methods of construction and repair. Because the essence of architecture is the command of space, these exhibitions should not take place inside the cathedrals where they would detract from the architecture of the cathedrals; they should take place outside. If they were to be outside this would, anyway, lessen the amount of damage already created by visitors once they get inside our cathedrals.
However, there are various ways in which Government aid to cathedrals might be altered or extended. Hitherto, English Tourist Board grants under Section 4 of the 1969 Development of Tourism Act have, to a good extent, prime pumped hotel and catering facilities for tourists to cathedrals. Now these facilities have largely been got under way and they should anyway attract private enterprise. So there is something to be said for the directions, under Section 4 of the 1969 Development of Tourist Act being changed, so that English Tourist Board grants can be orientated more towards the cathedrals themselves. Meanwhile, the provision of proper car parks should be left strictly to the local authorities.
These specified areas of high unemployment, where at present English Tourist Board grants apply, do not always cover those cathedrals which receive most visitors. English Tourist Board grants ought to be concentrated on those cathedrals which do receive most visitors. Whether, in the present atmosphere of economic stringency, Government aid could be extended is a question for the Department of Trade rather than for the Department of the Environment. But having regard to the taxation and foreign

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exchange which visitors to cathedrals bring, and the employment which they provide, the Department of Trade could very well advise on more Government aid to cathedrals not as charity, but as a very sensible form of investment, just as the Government spend large sums of money on overseas aid in order to create a market for our own goods and to generate our own prosperity.
The principal way in which Government aid might be extended to cathedrals is through the abolition of VAT on repairs to ecclesiastical buildings and this, I suspect, will be a very familiar theme in the debate. I am very sorry that the right reverend Prelate the Bishop of London cannot be present this evening, as the chairman of the Churches' Main Committee, so I should like to spend a minute or two giving the point of view of this committee about VAT on repairs to ecclesiastical buildings.
Before the introduction of VAT, cathedrals paid no direct taxation nor any selective employment tax, and they were hardly affected by purchase tax which was a tax on luxury items rather than on building materials. The VAT was brought in to replace selective employment tax and purchase tax, and as part of the Government's attempt to shift away from direct to indirect taxation. The tax was given a broad base on a wide range of goods and services and reliefs were limited to those items which can be justified on the most stringent social and economic grounds—for example, food, public transport, house prices and rents. It was felt that if repairs to cathedrals were exempted this would encourage pressure for similar concessions on repairs to historic houses and even ordinary domestic repairs which, on social grounds, might be considered to be very deserving.
Against these theoretical considerations must be set the practical consequences to cathedrals of changes in the Government's tax policy. The reduction in direct taxation means that cathedrals receive considerably less in the form of relief on income tax on covenanted donations. It cannot be claimed that the incidence of indirect taxation in the form of VAT on repairs to cathedrals is offset by State aid to ecclesiastical buildings generally. Cathedrals were deliberately excluded
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from such aid because churches needed it more and, anyway, the amount of State aid given to historic churches is quite out of proportion to the amount reclaimed by the Government in the form of VAT on repairs to ecclesiastical buildings generally. While the Government give some £2 million a year to our historic churches, they reclaim between £7 million and £9 million a year in the form of VAT on repairs to ecclesiastical buildings generally.
Further ways in which Government aid might be extended to cathedrals are through the Historic Buildings Council or, more probably, the proposed National Heritage Fund which, incidentally, might act as a co-ordinating body for the aid already available from the English Tourist Board and the Area Museum Service. Under the National Heritage Fund Bill, there is nothing to prevent grants being made to cathedrals if the will should be present.
In providing money for cathedrals the attention of the Government should be deflected from straightforward repairs. Deans and chapters can usually find enough money for their roofs and walls, but nobody wants to launch an appeal which is going to fail, so appeals for repairs to cathedrals are considerably less in most cases than is actually required. The public are not sufficiently convinced of the need for more money for such highly specialised fields as stained glass, wall painting and sculpture. It is here that the mind of the Government should be concentrated.
Examples of grant-worthy external sculpture are provided by the west front at Wells—the 12th century figures on the west front—the 13th century figures on the south-east portal at Lincoln, and the west doorway at York. Examples of grant-worthy sculptural monuments within a cathedral are provided by the mediaeval and baroque sculpture at Peterborough and the Saxon header stone there. The £10,000 already provided by the Pilgrim Trust to the Dean and Chapter of Peterborough will provide only about one-third of the ultimate sum which will be required.
Then, however much the Government may be tempted to say that cathedrals should help themselves, one area in which they could not be expected to do so is in

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the now much needed work of providing conservators and craftsmen, especially in such highly specialised fields as stained glass, wall painting and sculpture. It is here that the Government should consider the needs of cathedrals in conjunction with those of stately homes.
Two immediate steps which the Government might take are, first, to reconsider the withdrawal of TOPS money from the embryo course in sculpture conservation at the School of Art and Design in Croydon. The withdrawal of this money has placed the course in sculpture conservation at Croydon in real jeopardy. Secondly, the Government should consider the implementation of the report of the Civic Trust recommending a register of all craft skills in the building industry. For reasons which it would take a little too long for me to go into now, the Civic Trust has identified the need for such a register very clearly and the Crafts Council considers that the information for such a register should be collected and made available at a local level.
It has been said so often in the past that if the Government help cathedrals then cathedrals should be subjected to planning controls. The subject is a very old one which raises many hackles so, if I felt that I could, I should refrain from flogging it all over again and simply confine myself to pressing the Government for aid. But if I do not touch on this theme of controls it is not unlikely that other noble Lords who are to follow me would do so. Therefore I feel bound to conclude with a few words on this awkward subject.
To cite too many instances of mistakes made by deans and chapters, because their cathedrals are not subject to planning control, might have the effect of resuscitating old battles rather than leading to a constructive debate. Moreover, other noble Lords may feel restrained from citing instances which have come to their attention for fear of souring their relationships with deans and chapters and so of losing any influence over those deans and chapters which they may already have. So I should just like to make two general observations.
First, the autonomy of deans and chapters and their control over the furnishings and fabrics of their cathedrals is an anomaly if it is compared to the faculty jurisdiction governing parish
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churches and the stringent controls imposed on secular buildings, even if these secular buildings receive no State aid at all.
Secondly, down the centuries many of the more philistine alterations to our cathedrals have been due to liturgical changes of one sort or another. Many of our finest screens were destroyed in the Reformation or under Cromwell. Then, in the last century, the fashion for screens reappeared, only to disappear again today, and we have seen the fine screens at Hereford and Salisbury taken away against the advice of the Cathedrals Advisory Committee.
Today the Church of England is going through a greater period of liturgical ferment than has happened since the Reformation. Liturgical changes manifest themselves in the form of the clergy celebrating westwards, members of the congregation standing instead of kneeling to receive Holy Communion and communicants administering the sacrament to one another. The architectural changes which have ensued have not been confined to the removal of screens, which since the time of the primitive Church have separated the clergy from the laity. Many altars have been made free standing. The best restraint which could be imposed on the autonomy of deans and chapters would be through the Cathedrals Advisory Committee. It has a distinguished membership and has given much useful advice in the past. So I should like to welcome very much the current negotiations for making the Cathedrals Advisory Committee into a statutory body and I hope for the time being it may suffice that where deans and chapters do not take its advice they should be obliged to publish their reasons for not doing so. So mild a requirement of the deans and chapters should have a good chance of being accepted by them, although I know how strong the feeling is among many deans that the cathedrals are local affairs and should not be interfered with by civil servants at the centre. So let me conclude with the observation of an unusual dean—a retired one and a distinguished aesthete. This dean has always thought that the Cathedrals Advisory Committee should be made statutory and remarked that, where deans and chapters disagree with it, the matter should be referred to

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an appeals committee. The decision of this appeals committee, he said, ought to be final.
9.17 p.m.
The Lord Bishop of CHICHESTER: My Lords, I hope that in addressing your Lordships' House for the first time I may have your indulgence, and particularly if I should unwittingly transgress any established custom or tradition of the House. All who have any connection with cathedrals must be grateful to the noble Lord, Lord Sudeley, for introducing this report to the House and providing the opportunity for this debate. I speak particularly from the experience acquired in five years as Dean of Worcester Cathedral, but in addition to that of course I now live only a few yards from Chichester Cathedral, and last year concluded a formal visitation, spread over a period of six months.
From this experience I should like to draw attention to certain points in the report which I think do not receive the prominence there which I should like to see. First, I think it can be misleading to describe the multitude of visitors simply as "sightseers", because that can obscure the spiritual impression made on them by these great buildings. I think it is the fairly general experience of those who work in cathedrals that many of the visitors who come want to talk and to ask about spiritual matters and, in the anonymity of those surroundings, to seek help in personal and spiritual problems.
At Worcester we had a board at the entrance to one of the chapels on which people could pin requests for prayers and it was a very moving experience to watch that board week by week and to see how many of the visitors to the cathedral used it to express their anxieties and their cares. A touchingly high proportion were from children expressing their fears about the break-up of their parents' marriage.
The ladies who ran our cathedral bookstall found that their work was not just commercial but was a splendid ministry to inquirers, and very often they were used as a link between the visitors and the clergy of the cathedral, who were enabled thereby to give spiritual help. Therefore, these great churches, through their ministry to the visitors, make a
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most important contribution to the spiritual and moral life of the nation; but, as this report shows, it is done against a continuing financial anxiety. I should like to draw attention to something in the report which the noble Lord, Lord Sudeley, has not mentioned. On page 47 of the report there is a section dealing with concerts, and it is said there:
"Cathedrals make a major contribution to the musical life of the country, not least because of their own choirs and organists and the service of evensong".
The music which has come from the cathedral and collegiate choral foundations is of very great importance in the whole musical and cultural tradition of England.
Five years ago I led a delegation to the Department of Education and Science on behalf of the deans and provosts of the organists and choir schools. We presented a memorandum arguing at some length the case for what I have just said. The force of that argument was accepted by those whom we saw at the department, and subsequently Miss Joan Lestor, who received us, and Mr. Mulley, the Secretary of State, gave us an assurance that proposals by local authorities to take up places or assist with fees for pupils in non-maintained choir schools would be sympathetically considered by the department if the pupils concerned had obtained places by virtue of their musical ability, not their academic ability. This assurance was repeated in 1976 by Mr. Mulley's successor, Mrs. Shirley Williams.
The expense of maintaining a choral foundation is a large item in a cathedral budget. I realise this is a bad time to ask local authorities to accept any additional expenditure, but I hope at least that this matter might be regarded as non-controversial and that the present Government will reaffirm the assurances given by their predecessors, and, if possible, draw the attention of local authorities to them. This would be a most valuable and helpful way of assisting cathedrals. May I add that we are concerned not only with the cathedrals of the Church of England; this particular matter would relate to, for example, Westminster Cathedral, which has an established choir school, and to the Roman Catholic cathedral at Portsmouth, which is in the process of establishing one.
The noble Lord, Lord Sudeley, mentioned another very valuable way of

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helping cathedrals, in the way of VAT, and I must say I find it difficult to follow the reasoning by which if a cathedral charges for admission it can get remission of VAT and if it does not charge it cannot. A cathedral is the mother church of a diocese. I am strongly opposed to charging for admission to it. At Worcester Cathedral a charge is made for admission to the eastern arm, which contains the tombs of King John and Prince Arthur and the Norman crypt, and that I think is wholly reasonable. But I am convinced that entry to at least a part of every cathedral should be free and open to all who want to come to pray. I am sorry that the tax law gives an incentive to charge for admission.
In the last part of what I have to say I touch on the final remarks of Lord Sudeley, and I speak as chairman of the commission recently appointed to survey the operation of the faculty jurisdiction. Our terms of reference clearly include cathedrals, although, as has been said, cathedrals are not subject to that particular jurisdiction. As Dean of Worcester I was involved in the attempts to give to the Cathedrals Advisory Committee a greater degree of control over the freedom of deans and chapters to make alterations. I am, therefore, familiar with the delicacy and the difficulty of this matter, and I am glad to be told that agreement between deans and chapters and the Cathedrals Advisory Committee is on the point of being reached.
However, I wish to assure your Lordships that over the next two years my commission will watch very carefully the operation of this agreement and will not hesitate to make its own proposals if it is not satisfied with what is being done. I am grateful to the noble Lord, Lord Sudeley, for giving us the opportunity to discuss this very interesting and important report, and I thank your Lordships for the patience with which you have listened to me.
9.26 p.m.
Lord KENNET: My Lords, I know that I shall express the opinion, wishes and response of the whole House in congratulating the right reverend Primate the Bishop of Chichester on an excellent, moving, moderate, factual and constructive maiden speech. If that is how he
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will chair the Faculties Commission inquiry, then it is born under a good star and is likely to lead to a good result.
The House is also grateful to the noble Lord, Lord Sudeley, for raising this complicated topic, and I am sure that the House in general is as impressed as I was by the immense wealth of knowledge that the noble Lord has amassed on this topic and which he marshalled in such an orderly fashion in his opening speech. I have been put down to speak rather early in the debate because, with their customary omniscience, the Whips know that I am a member of the Cathedrals Advisory Committee, and in what follows I must be careful to distinguish between what I say in conveying the committee's opinion and what I say in conveying only my opinion.
I should like to say a few words about the Cathedrals Advisory Committee which will lead me to distance the committee from what was said by the noble Lord, Lord Sudeley. It has been on the ground for quite a few years. It is what its name says it is—it is advisory; that is, it only gives advice to deans. It cannot, of course, give advice unless its advice has been sought and unless it knows what is going on in a cathedral. At present it has no constitution and no set procedure, and there is not even a list of subjects with which it is competent to deal. As the right reverend Prelate said in his speech, we are now putting that right and we hope very shortly—this year—to have an agreed constitution and an agreement whereby the Cathedrals Advisory Committee, signalling the fact by assuming the somewhat grander name of Cathedrals Advisory Council, will enter into a binding relationship with the deans and provosts of England and Wales.
Whether it would be right to say that this is statutory is something I leave to lawyers. I do not think that we are too much bothered about that in the Cathedrals Advisory Committee. But we want to agree a list of topics on which our advice ought to be sought by deans. The list should not be tremendously extensive. There are many things that deans do on which we have no expertise whatever. The cathedrals Advisory Committee is mainly a device for putting deans in touch, not so much with one another—they do not need any special device to do

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that—but with people who have experience of some unfamiliar problem into which they have run. I shall not invent anything, but they do run into the most extraordinary problems—on bells, on organs, on forgotten skills, on newly necessary skills—where sometimes it is possible for the Advisory Committee to put them in touch with the right person who already has experience of their problem. Essentially, that is what we do.
In the future, when we have our formal constitution, we hope to have this list of subjects on which we are competent to give advice and on which the deans, for their part, agree not to act without obtaining our advice. In his speech the noble Lord, Lord Sudeley, adumbrated a situation where our advice should be binding—that is to say, it would no longer be advice; it would be permission—and where the deans would agree to seek the permission of the Cathedrals Advisory Council before doing whatever it was.
The committee as at present constituted would not favour such a regime. We think that we are advisory and that we must stay advisory, and we do not seek a change in the law of the land which makes the dean the ultimate decider on what happens in his cathedral. Nor would we necessarily favour—I cannot say that we have deeply considered it—having a tribunal to arbitrate between the Cathedrals Advisory Council and a dean if there was an irreconcilable difference. It is hard to think who should sit on such a tribunal; to arbitrate between an executive authority and one of his advisers is an unusual suggestion. I do not think it should be undertaken.
We would like to remain advisory, but we would like to make sure that we know what is going on in cathedrals and do have an opportunity to proffer advice which, in the end, may be rejected by the dean concerned. Of course, if the advice is given and, after discussion, rejected and the dean continues to do what the advisory council has advised against, then we would expect both sides in the disagreement—that is, the advisory council and the dean concerned—to be free to publish their reasons for having in the one case advised as they did, and in the other case done as he did.
What I have to convey to the House in
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this debate on behalf of the Cathedrals Advisory Committee is its view about VAT. The incidence of VAT on cathedrals has to be seen in the context of its incidence on fine old buildings of every sort—heritage buildings, as they are increasingly and malapropistically called. That, in its turn, has to be seen in the context of the effect of VAT on the building industry as a whole. It is the view of the Cathedrals Advisory Committee that it is a great pity on general grounds, of which cathedrals are only a particular example, that VAT should penalise the maintenance of ancient buildings while steering everybody towards the construction of new ones.
We are among those very many bodies in the country who have considered this matter and believe it is a complete mistake that tax should fall on the repair and maintenance of existing buildings and should not fall on the construction of new buildings. It distorts the entire building industry into unnecessary building, and it distorts the owners of old buildings, existing buildings of all sorts, and planning authorities into an excessively favourable attitude towards demolition and rebuilding when that is not necessary. This is bad economics.
The Government, like all Governments, are basically reasonable people, and here I depart from my CAC brief and give you my own views. I believe that the Government are reasonable men and women, and that in time they will come to see this and that a change may be brought about. We add our tiny featherweight towards the day when that change may be expected. Within that general context, there is the effect of VAT on repairs on the fine old buildings of the country in general. In this case there appears to be an aggravated burden laid on common sense by taking away from a listed building, or a church in use, or a redundant church, or a cathedral, a castle, or whatever you like, money from the necessary repair of that, and then handing it back again in the form of grants from the Historic Buildings Council or, in the future, from the Heritage Memorial Fund, or whatever Government source it may be. This is a particular distortion within the major distortion of the entire industry.
Within that, again, there is the peculiarly acute distortion in the case of cathedrals where, as the right reverend prelate the

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Bishop of Chichester pointed out with exemplary mildness, the situation is unjust almost beyond belief. A detail he did not add is that a cathedral, church, castle or indeed any building has to gross an income of £10,000 a year plus before it gets the relief. This is the clearest example of tax the poor and exempt the rich of which I have ever heard in looking at the incidence of taxation, and that it should fall particularly on churches is the most bitterly ironical circumstance which can be added to that unjust incidence.
The right reverend Prelate was absolutely right in saying that this exemption for the cathedrals and wealthier churches will push them to charge, as opposed to not charging, for entrance to more of the bits of their cathedral than they might otherwise have charged for entrance to, and it will push them to raise a higher charge than they might otherwise have demanded. What sort of a burden is that to place on a cathedral or on any major church? It appears to be absolutely topsy turvy, in that of all buildings, churches should be spared the fate of being forced into an example of tax the poor and exempt the rich, and as a perfectly concrete matter of Christian ethics, to put it at its mildest, the Churches should not be compelled by Government to take the pennies of people who go into them if they do not want to.
So much for VAT. In conclusion, I wish to make the point once again in relation to the Cathedrals Advisory Committee that we are not, as a committee, asking for State aid to cathedrals; we think that is not our job, but a job for the deans, and we are listening carefully to see whether the deans and bishops will ask for it. If they do, then no doubt we shall have an opinion on the matter, if we were asked for it by the only people whom we exist to advise and serve; namely, the deans and provosts of this country.
9.38 p.m.
Earl WALDEGRAVE: My Lords, I too wish to commence my remarks with congratulations to the right reverend Prelate the Bishop of Chichester for his maiden speech, full of wisdom and perhaps rather a rare speech, because just as town and gown are always supposed to be at variance, bishops and deans are supposed
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to be at variance often, and here is a bishop who was a dean, also a rather rare occurrence, or it used at one time to be. Therefore, his contribution as an ex-dean and a present bishop was of immense practical value and we hope he will often speak again on these matters. I also wish very much to thank the noble Lord, Lord Sudeley, for having brought this report to our notice. It is an extremely good report which repays reading. They do not have a great many copies in the Printed Paper Office, but there are some, and it is not all that dear as books go today for others to buy. It is also, as so many reports are not, reasonably up-to-date and it argues its case very well.
I come straight to what is perhaps the most important matter that has been raised so far in this debate; namely, the relationship between the Cathedrals Advisory Committee and Government and Church generally. I was delighted to hear what the noble Lord, Lord Kennet, as a member of the Cathedrals Advisory Committee, said. I was glad to hear he feels that this should be an advisory committee, and will be in future, I hope, as long as he has any influence on it. The deans and chapters must retain their autonomy. It is vital that they should work in harmony with the Cathedral Advisory Committee and not see it as a planning authority under another name to be got round or attacked. This is not at all the way that it appears today.
Any remarks that I make this evening I should like to base upon my slight experience with Wells Cathedral, which is referred to a great deal in the report, as it is I think very typical of the smaller and less known cathedrals which have benefited quite extraordinarily from the influx of tourists. I do not think that the report is at all unfair to tourists. It does not dismiss them as mere visitors to be "milked" or to be treated as "cannon fodder". The foreword of the report, from which I should like to quote a short extract, makes that very clear. The foreword of the report comprises statements by deans, and the first one is by the Dean of Canterbury. He says:
"We would therefore want to respect each visitor's right to appreciate the Cathedral in his or her own terms and at the level which he or she finds the most natural. The difficulty is in ensuring that the vast numbers of visitors do not spoil this opportunity for one another".

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This is the point. I do not think that today the deans and chapters are feeling endangered by the influx of tourists, except perhaps physically when they wear out the stones of the floor. I think that they are all recognising them as the modern counterparts of the pilgrims. I am not at all sure that Chaucer's pilgrims were not tourists, too. In fact, I am fairly sure that they were. Over and over again tourists are finding in the cathedral when they get there a message which they did not seek to find, and I think it is very important that we should not try to keep them away because they are wearing out the stones; nor should we "milk" them too heavily.
In Wells we are in the middle of a situation. I am president of the appeal which is to raise, I hope, £2 million or £3 million in the end for the west front. I am also chairman of the Friends which give an annual grant— and we are able now to give as much as £18,000 a year—towards the work of the dean and chapter on the structure of the cathedral. At Wells we are charging. The report says, without I think producing much evidence, that the best way to charge is to charge for the whole cathedral, as is done at Salisbury. This is open to question, and I do not think that there was much evidence produced in the report to substantiate this view. Anyway, at Wells we could not do that because it would be practicably impossible. We have three entrances: one through the cloister, one through the north door, and one through the west door. It would be quite impossible to set up three paying entrances, or to limit the entrance to one place. But at Wells— as is set out in the report, so I am not giving anything away, but I should like to bring the figures up to date — we charge for admission to the east end; we charge for viewing the clock, which is a very interesting astronomical clock; and we charge for going into the library, that brings in only £250 a year, because we really restrict that to scholars; and we have a shop.
It may interest noble Lords who have not perhaps had time to study the report (which quotes figures from about 1977) to learn that admissions to the east end brought us in £20,500 a year. That was charging 30pfor an adult, 15p for a
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child or a pensioner. It was also liberally handled. My own daughter sits one day a week at the table, and if somebody is offended and says that we ought not to charge then they are told, "Please go in"; but it is extraordinary how the rest of the queue start clucking and tut-tutting. It is not very popular to ask to go in free in that way, but they can go in free if they like. That produced £20,500 and the figure has now reached £22,500. That, I think, is something like a 10 per cent. rise, which I think is pretty good. Then, we now charge l0p for adults and 5p for children to see the clock. They see the clock strike. That brought in £12,000, now up to £13,500. The shop, which sells all sorts of things (not only cards and guide-books, but all sorts of nice things) produced a profit of about £20,000, now up 25 per cent. to £25,000.
My Lords, that produces altogether £60,000 or more, and I really do not know what Wells Cathedral would do without that system today—it is an unendowed cathedral—though I do know what was happening about five or six years ago, before this system of charging was, with great trepidation and with some opposition, introduced. We have found, as they also found in Bath Abbey, that charging brings many other benefits. It was known that there were cases of children being turned into the Abbey for the day while their mothers went shopping. This seemed to stop. Then, there are cases quoted in this report of deans and chapters finding to their surprise that, whereas people used to come in regularly and sit about, and even smoke "pot" in one of the cathedrals, that automatically stopped when there was a charge to go in and there were stewards about enforcing it. It was interesting that that actually happened.
My Lords, we must never allow this whole idea to degenerate into a method of making money out of tourists. It was a cathedral architect who, knowing that I was going to take part in this debate, wrote to me and said, "Of course, the visitors actually pose a very interesting pastoral challenge to the clergy of the cathedral", as my dean would absolutely agree. "It is quite extraordinary how much of a real pilgrim there is in a proportion of the tourists, and nothing must ever be done to hinder that". But our

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trouble is that the very fact that they are being charged makes it difficult to ensure that we give them a proper service.
One immediately gets into a problem here which I think differentiates cathedrals from stately homes or the big country houses. If you go to Longleat on a tour operators' tour I assume that a fairly large parking fee is charged to the coach and that those in the coach can well and truly think, "We have paid through our coach operator; we do not have to pay any more at any of the turnstiles". I do not know whether or not they do, but they can at least think that. Our car parks are not under the control of the dean and chapter. Our car parks are municipally-owned and, in Wells, are at the other end of the city. Even the road through the cathedral green is not under the control of the dean and chapter. Any parking on it is controlled by the parish council of Wells. That constitutes a problem. We could not have a closed car park; we could not have one on the cathedral green. Therefore, we cannot get at the coach operators.
That is brought out in this report. Coach operators are perhaps—and I do not want to offend them— getting a little something for nothing. They are people who can be disruptive. Their timetable is close. In our district, they have a quarter-hour in Wells and then have to go on to Cheddar, Wookey and Longleat, and then go round. If they arrive in the middle of a funeral or a wedding or matins or evensong, it is a bore for them. They have their own guides. That does not happen with ordinary tourists. There is this problem of what can be done.
This is where we ask the Government to take some action to help us. They must surely recognise the amount of foreign currency which is being brought in by overseas tourists. One of the things that overseas tourists want to see are cathedrals, and we must enable them to see them. The Government must do this as good business. The grant should be made to the local authorities (because it is they who must produce the lavatories, the car parks, and the restaurant, which do not pay if you do them in an amateur way) and not to the cathedral clergy themselves. We, in Wells, try to think in terms of self-help. We think the charges are necessary. They have many advantages as well as money.
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People do not now find charges objectionable; and we have found this an absolutely essential means of trying to finance this very expensive and un-grant aided work of maintaining cathedrals.
My Lords, I think that I should mention one small point made by the noble Lord, Lord Sudeley. He said that the cessation of the TOPS grant was causing embarrassment. Some noble Lords may not know what he meant. TOPS is short for the Training and Opportunities Scheme. It was a Government scheme under the general umbrella of the Manpower Services Commission. The withdrawal of TOPS money from the conservation field has endangered a very good experiment that was going on at Croydon. In Wells, we are in the process of setting up a small conservation unit of perhaps three or four people. We have been promised money under an anonymous trust, but at this stage and at the later stages of our little unit we should have liked something like TOPS to be still in existence. We, too, should like TOPS back.
I say no more except to emphasise that I believe in the way we are trying to deal with our appeal for the Cathedral West Front. We have already raised more than £1 million. Three things are important to bear in mind if you are trying to raise money by appeal. First, be absolutely sure not to be spending most of it on your own administration. That is what people ask about. We have got down to one secretary and voluntary helpers; and the money is pouring in. You must start with professional advice; and then carry on yourself. The second thing is that the Americans, if you go to them, will always want to know how and what you are doing and they will want to see the accounts.
The third is that one must not be long-winded—as I am in speaking now and for which I beg your Lordships' pardon. One must say, for example, "This cathedral costs l0p a week "— or, 20p a minute, perhaps— "to be kept open for you". Then have a large arrow pointing to the box. It is no good saying: "This cathedral was built to the glory of God and we hope tht you will be generous ". You must put down: "This costs l0p per second" or "20p per minute", or whatever it may be. The money will come pouring into that box.

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Even now, in the dead of winter, we have boxes with messages like that on them, and we are every week collecting £20, £100, £50 and £300 from boxes like
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that which have never brought anything in them before, when they have just had a notice on them saying "Do be kind". I commend everybody to read the report if they have not yet had time to do so.
9.55 p.m.
The Lord Bishop of ROCHESTER: My Lords, the common feature of all historic cathedrals, North and South, is not only that they attract visitors in large numbers, but also that they still evoke a considerable loyalty over quite a large area, and some even have as well quite effective overseas associations. It was for these reasons, as the noble Lord, Lord Sudeley, has said, that cathedrals were quite specifically excluded in 1977 from the arrangements agreed for State aid to historic churches that are still in use.
I have had the responsibility of chairing the working party appointed by the General Synod which, after nearly six years of negotiations with three successive Governments, including happy periods with the noble Lords, Lord Kennet, on the one side, and Lord Sandford on the other, eventually resulted in it being agreed that £1 million a year at 1973 prices would be made available through the Historic Buildings Council for the historic churches of all denominations. As a result of this agreement, grants totalling over £41/4 million have already been offered to 1,669 churches of all denominations in all parts of the country. In Suffolk alone, for instance—a county with many historic churches— grants totalling £8,850 have been made to 86 churches. The grants made are usually for 50 per cent, of the costs involved so that from the start this has been a partnership of Church and State, to help those who are ready and willing to help themselves in the task of maintaining churches that are of outstanding historic and architectural interest.
Many of these churches that have been helped under this scheme are in small and remote places from which the bulk of the population has long since moved away. As a diocesan bishop, I regard it as nothing short of a miracle that so many of them have been kept going for so long entirely by voluntary efforts. Only a very few of the 1,600 churches concerned could possibly have mounted the kind of appeal that cathedrals can make to a community covering many parishes as well as to those of all denominations and of none, and to the pilgrims and visitors who pass through their doors on weekdays as well as on Sundays.
State aid is not given to help reorder the
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interior of churches to meet present-day needs, nor to assist patrons with their legal responsibilities for the maintenance of chancels. That is a matter which, if I may say so, all those concerned—not least the deans and chapters of cathedrals —hope that the Law Commission will be getting around to before too long, because few parts of the statute law as it affects the parishes of England are more urgently in need of reform.
In expressing our concern today about the financing of cathedrals, I hope we shall not lose sight of the difficulties which confront many of our historic churches and will appreciate the special reasons which have led successive Governments, after the most prolonged and exhaustive inquiries, to agree that the present modest amount of help being made available should help those ecclesiastical buildings in this country which have not had the benefit of a careful inquiry and an elaborate report by the English Tourist Board. Such buildings are the responsibility of parishoners, who also have an increasing task of contributing to the payment of their clergy and to the continuing work of education and mission in their own area.
Therefore, any help to be given to cathedrals will, I hope, as the noble Lord, Lord Sudeley, suggested, be an extension of the grants made possible through the Tourist Board, leaving the Historic Buildings Council to continue to be responsible for grants to historic parish churches, to the local churches of the Roman Catholic community and the Free Churches of England.
10.2 p.m.
Lord ROBERTSON of OAKRIDGE: My Lords, I, too, should like to thank the noble Lord, Lord Sudeley, for initiating this debate and to commend him for the competent way in which he introduced it. I should like also to say how much I appreciate the English Tourist Board report, which is full of information and is a help to the problem. I am afraid I must talk about that dreariest of subjects, inflation; but I make no apology for doing so because those whom I have consulted and whose work it is to operate in cathedrals tell me that this is at the root

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of many of the financial problems and may indeed bring about a serious financial situation, if not a crisis, within the next 10 years or so.
As I see it, the special nature of the problems facing cathedrals is that not only are they one of the most valuable parts of our national heritage but they are also vitally important living church fellowships. For these fellowships, it is, of course, a joy and a privilege to live and work in such surroundings but it also brings a financial burden that would not exist if they used modern purpose-built buildings. The task of maintaining cathedrals—already great because of their age—is made all the more hard by a modern environment which includes the building of roads too close, juggernaut lorries on those roads and, in the skies above, low-flying helicopters and jet aircraft. Also, the fact that technical advances now make it possible to undertake repair work hitherto not feasible, although of course, welcome, does increase the pressure to spend more money on repairs and maintenance.
The English Tourist Board Report rightly draws attention to the problems as well as to the opportunities posed by tourists. However, I am advised that if you take, on the one hand, the cost of wear and tear by tourists and the provision of facilities and, on the other hand, take at a general level the money you get in from tourists, the scales are fairly evenly balanced. Therefore, if there is a case for help from public funds it does not lie quite here. Of course, there is a longer-term aspect to the tourist question: if you do not repair and maintain cathedrals, there will in due course be nothing left for people to visit. That means not only making repairs as you go along but also making adequate provision for likely future major repair works, and here you run right up against the problem of inflation.
The heart of the matter is that because of inflation, expenditure, including provision for future expenditure, is rising faster than income. This can be illustrated by the experience of one fairly typical cathedral in the South of England, where I am told that the annual budget rose from £90,000 in 1970 to £300,000 in
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1978. At present rates of inflation, the figure will be over £500,000 by 1982 and will reach £1 million well before the end of this decade. Only last week, we have seen Wakefield and Truro launching public appeals and St. Albans has had to increase its appeal target from £1 million to £11/4 million, because of inflation.
On the other side of the matter, unfortunately, as most of us know from our personal finances, inflation does not benefit income as much as it affects expenditure. Neither corporations nor individuals have proportionately more with which to respond to appeals. Furthermore, the general decline in the level of the country's prosperity affects the response to appeals and it also—and I know this from my work as a stockbroker —affects the return on investments which underlie, for example, the contributions to income from the Church Commissioners and from endowments. In the 1970s, as the ETB report points out, cathedrals were successful in finding new sources of revenue by running bookshops, brass rubbing centres, refectories, car parks and other tourist amenities. In the 1980s, there may be less scope for increasing income in this way. If cathedrals are not to be forced to cut down on services, maintenance and repairs, where are they to find the necessary income?
First, there is scope—and, indeed, one might say a need—for encouraging tourists to pay something more in line with the value which they receive. It seems to me quite wrong that one should expect to visit a major cathedral, or indeed any similar building, at the cost of a few pence. No cathedral should feel at all embarrassed at obtaining from visitors an appropriate contribution in any way that, in the judgment of the dean and chapter, is consistent with the life of the cathedral as a place of worship.
The next possible source of revenue is the church community at large. Of course, each diocese will straight away say that they are already overstretched in meeting their existing commitments, and this is undoubtedly true. However, the general level of our giving in the church —certainly in the Church of England—is still extremely low. The latest figures that I could obtain were for 1978, and in

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that year the total voluntary giving in the Church of England, including gifts and bequests, was a mere 59p per week per person on the church electoral rolls; in other words, just about the then price of two pints of beer per week.
Before we turn to outside sources for help, we in the Church really must ask whether we can do more ourselves. Even so, unless inflation slows down it seems likely that existing sources of income will prove inadequate to run and preserve our cathedrals, and they will have to turn to the nation for help. Inevitably, this will mean the surrender by deans and chapters of some of their autonomy. However, I believe it is vitally important that they retain as much control as possible over the life of their cathedrals.
At a time when the church faces unprecedented challenges and opportunities, it would be disastrous if our cathedrals became mere museums and ceased to be places of worship and places where the Christian good news is proclaimed. They must not be allowed to become places where one can easily obtain aids to tourism, but not find aids to salvation. For that reason, one would hope that official help, if indeed it becomes necessary, could be limited to such matters as grants in aid for specific major works of restoration or the training of craftsmen, a reduction in the burden of VAT or, indeed, the provision of facilities for tourists.
In preparing for this debate, the more research that I did the more I found that there was to learn and understand about cathedral finance. And in any case, the problems vary from cathedral to cathedral. For this reason, and if only so that these problems can be more widely understood, it seems to me that they should be the subject of examination on a national level.
It has been suggested to me, and I feel that this is a suggestion worthy of consideration, that this might be done in the form of a business study by, for example, management consultants. Such a study could, first, try to identify the problems; secondly, indicate possible ways of meeting them; and, thirdly, recommend any adjustment needed in the system of control of cathedral finance. In my view,
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such a study would not only be helpful to the Church and its advisers but would also be a prerequisite if help is to be sought from public funds on a major scale.
To summarise, I draw the following conclusions. First, the financial situation of cathedrals is likely to deteriorate quite soon, and sharply, unless inflation slows down. Secondly, the problem is not so much how to cope with the present flow of tourists but rather how to ensure the long-term future of cathedrals as a place for visitors to come and see and as places of worship. Thirdly, the problems need further study and definition—and that quite urgently.
10.12 p.m.
Lord SANDFORD: My Lords, we all have to thank the English Tourist Board in the first case and the noble Lord, Lord Sudeley, in the second case for enabling the House to turn its mind from the decline and decay of heavy engineering industry to the buoyancy and liveliness of cathedral tourism.
I think it is worth pausing for a moment to study this phenomenon of cathedral tourism. I suppose it ought really not to surprise us. After all, all through history pilgrims have been flocking to holy places in large numbers— all through the Old Testament, all through the New Testament, all through the times of Chaucer. And now that they have jumbo-jets and tour operators to help them, we really should not be surprised that our finest and most accessible cathedrals are swamped by visitors. However, I think it is worth going a little further than that and analysing the phenomenon further.
The numbers are indeed remarkable. Our cathedrals—and that is not all our cathedrals;it is just the few that bear the brunt of this great modern pilgrimage—receive in visitors more than all the properties of the National Trust, and the ancient monuments, put together. The trends of increase in those numbers are faster for the cathedrals and the major churches than for any other part of the heritage. That also is remarkable.

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it is tempting to think that tourists visit these places because it is cheap to get in, or out of idle curiosity. But one of the most significant findings of the report is that that is not so. Most of the visitors go there because of their intention to go to that particular cathedral, and many of them—some one-third or one-half—are visiting the cathedral specifically because their tour includes it, and for the second or the third time. So we are not dealing with this number of visits because they are cheap and we are not dealing with idle curiosity. We are dealing with people who are seeking a particular experience.
Therefore I think the problem that is before us is how to combine and reconcile this modern form of pilgrimage, cathedral tourism, with the original purpose of a cathedral; namely, as a place of worship, a place of evangelism and a place for pastoral care, which the right reverend Prelate the Bishop of Chichester first mentioned as being his experience at Worcester. That is indeed a taxing problem, but I would put the problem as one of seeking how to provide a really rich experience for each and every visitor to these holy places and, because I very much agree with my noble friend Lord Waldegrave that this is a practical possibility, at the same time to enrich the resources of the cathedrals and our great churches, so that they may increase still further their already very great potency for good to each and every person visiting them. This therefore is the task which faces the deans and their chapters.
There are two guiding principles which I should want to support and, in doing so, echo what has already been said by the noble Lord, Lord Kennet; namely, that in the long run and from every point of view it is far better if the autonomy of the deans and chapters is safeguarded. I do not think there is any evidence that they are falling down or have fallen down badly in the very heavy responsibilities that they shoulder. Another principle, eloquently voiced just now by the noble Lord, Lord Robertson of Oakridge, is that the cathedrals and the great churches must at all costs remain places for which they were originally designed—houses of God, places of worship and places of Christian evangelism and witness.
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I believe that the task can be done. We owe a great debt of gratitude to the English Tourist Board for having analysed the task so carefully. First of all they set before us a number of practical problems and these, I think, are all soluble. They relate to congestion, car parking, litter, disturbance, pilfering, tour operators—because they are a problem—and so on. I would venture to say that deans and chapters have not by their training or experience all acquired the necessary expertise to deal with these problems, and it is very helpful to have a Cathedral Advisory Council which, if not versed in these matters themselves, are at least capable of passing deans and chapters who inquire on to the source of advice in these areas. That is all made much easier by the existence of the report itself.
What I think is much more exciting, stimulating and challenging is the way in which the cathedrals and great churches and the deans and chapters can take up the challenge of meeting the opportunities that modern cathedral tourism presents to them. It is largely a question of visitor management. That is the broad context in which it can be seen. Visitors can be attracted to cathedrals and not encouraged at other times according to the publicity which is put out on their behalf. Most cathedrals do not, on the whole, engage in publicity in the way that other tourist attractions do; but there is no reason why they should not, and if facilities have to be provided for the peak periods and peak seasons, then of course it is much better that they should be used as evenly as possible throughout the year, and that can be secured by properly designed publicity. That is all part of the kind of management plan to which the noble Lord, Lord Robertson of Oakridge, was alluding.
There is the whole business of which kinds of guides and how many types of guide there should be and whether there should be audio guides or written guides, or guides in the form of audio-visual aids or personally guided tours. There is a whole range of options here, I think demonstrated most clearly in the report by the experience of the cathedral of the right reverend Prelate the Bishop of Norwich and the cathedral of Canterbury, but there are many other examples.

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It would be tedious and unnecessary to go into all this at great length now because it is all so well covered in the report; but I think the implication behind the report is—and I hope this is the way in which the mind of the Cathedral Advisory Council is going at the moment, and I take it from what the noble Lord, Lord Kennet, said that it is—that deans and chapters which have not already looked at the whole issue comprehensively, should be encouraged to follow the advice of the noble Lord, Lord Robertson, and draw up, as it were, a visitor management plan encompassing all these problems and all these opportunities. I should have thought if would be well worth investing £4,000 or £5,000 to get a really thorough job done, which, if then implemented, would prove to be a very satisfactory investment.
10.20 p.m.
The Lord Bishop of NORWICH: My Lords, the encouraging thing about this debate is that we are actually dealing with the problems of a growth industry and a living industry and a success story throughout the land, rather than anything which is declining. I should like to support those noble Lords who have congratulated the right reverend Prelate the Bishop of Chichester on his maiden speech. We are fortunate to have his experience both as dean and bishop at our command in this House.
I think it has also been a very suitable day. Many engineers have spent most of the day talking in this illustrious Chamber, some of them with Scottish Presbyterian accents, and have left it to us to get on with English cathedrals afterwards. It is very proper to deal with engineering and cathedrals on one day. At Norwich we have just held an engineering exhibition for young people and all the different firms have been represented there in the nave. When a Lotus was seen sitting in the middle of the nave some people thought this rather odd, until it was explained by our friends from Lotus—it is made just around the corner from us—that a Lotus is planned for a 10-year obsolescence and they noticed that our cathedral was planned for a 1,000-year obsolescence. They took comfort from this and we did also.
There is a tremendous sense in which today—and in Norwich we pay tribute to both our former dean and our present
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dean for the openness and liveliness of our own cathedral—people really do want to come to cathedrals, and do come in large numbers, particularly the children; and the visitors officer, a very fine deaconess, is making imaginative plans for tours for children. The very fact of this success produces its own problems. I think it is true that most cathedrals are now working to a tremendous emphasis on voluntary labour, so that we are no charge on those who think we simply want money to pay people; though it is worth saying that if we are going to have large numbers, as we do have increasingly, of straightforward tourists/visitors, whom we hope will become momentary pilgrims, there are a certain number of cathedral officers who must be paid simply to care for the sheer weight of work which the tourists produce. But it is encouraging in this report to see that the volunteer aspect is clearly set out.
I hope your Lordships will forgive me for only speaking on what I know best, from Norwich. We have only five vergers and three staff in the shop, but 25 volunteers in the shop, 40 volunteers in our visitors' centre for the refreshment service, 60 volunteer guides, and in the summer season a regular stream of clergy who act as day chaplains and who pick up the sort of points the noble Lord, Lord Robertson, and the right reverend Prelate the Bishop of Chichester were making. A cathedral is a very special place where in a quiet anonymity people are searching for God, searching for meaning and searching for a rekindling, perhaps, of a childhood faith that needs to be strengthened, matured and deepened. So we are dealing with a very exciting part of our English life today.
At the same time, it is important that the Government should recognise that in the traditional partnership of Church and State they have a very real part to play. I think that they must give their thoughts to it much more deeply, and actually come up with much more money in clearly defined areas. I do not have the time, the ability or the expertise to describe what those areas are, but it is quite plain to me that deans and chapters are gradually coming to realise that their financial problems in cathedrals are escalating beyond the present pattern, which was suitable in the past. Even though every cathedral has a large number of friends—I believe that Norwich, with

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4,000 is one of those with the largest number of friends—its rolling programme for the general upkeep of the building cannot really keep pace with inflation, escalation of costs or, if I may use a phrase which I hope is parliamentary, this iniquitous use of VAT in relation to cathedrals. If the word "iniquitous" is considered to be theologically improper in this case, I am sure that the noble Lord, Lord Mowbray and Stourton, will seek to put me right, and in so doing help us to know that that iniquity will be purged in some suitable way in the future.
However, there is the problem that we are dealing with a local situation in which we must have our cathedral doors wide open to all and sundry. We are dealing with a religious situation whereby people must be welcomed to the worship of the cathedral. I was glad to hear the right reverend Prelate the Bishop of Chichester speak about the choirs of the cathedral, which are, of course, one of the great treasures not only of religion but of the whole quality of life of this country.
We are dealing with a growing number of straightforward tourists who need to be welcomed with courtesy and with enthusiasm. None the less, as the noble Lord, Lord Sudeley, reminded us, they wear out the ledger stones with their stiletto heels. I was not very good on ledger stones until I started researching for this debate, but they are these large slabs with carvings on them, and they are gradually being chipped and broken away. I hope that it is not just stilettos; men's shoes are just as dangerous as the ladies' stilettos. It is not in any sense a sex problem; everyone is to blame. But someone has to do something about problems of that sort.
Therefore, we keep on facing the question—and this report keeps facing it squarely—whether cathedrals should charge. I am sure that psychologically the main doors of every cathedral must be open to the people. Secondly, we must look carefully at whether there should be selective charges of one sort or another. But before any such charges can be made, the deans and chapters will need to make it very plain to their local community that there are strong, clear and mounting financial reasons why such charges may have to be imposed, and I need not mention
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the VAT situation again, having touched lightly on it already.
There are two ways in which this can be done without causing unnecessary offence locally. One is the suggestion made by two or three noble Lords this evening, that certain areas of the cathedral could be opened on a paying basis. In fact, sometimes areas are opened for help beyond the seas. Our former dean had the idea of opening our treasury and suggested that when people have seen some of the priceless and beautiful Norwich silver on display, they should give generously to Christian Aid as they left. That box is only for the outreach of the Church overseas; and each year on Advent Sunday the hundreds and hundreds of pounds that are given in that way are given directly to Christian Aid. So sometimes this is for outreach.
None the less, there is the sheer hard fact that money is needed for the upkeep of our great cathedrals. It is quite possible to arrange for guided supertours three times a day within the building at a straightforward £1 a head, so that people who are on a tourist route can be taken round and shown the great points of the cathedral. But the excitement of this report lies in the fact that we are dealing with a success story, not a failure story, and we are dealing with one of the new and revived modern opportunities for the proclamation of the Christian faith.
As I close, I notice that it was Sir Mark Henig himself, whose death we all grieved over in recent times, who wrote the first foreword to the report. He, as noble Lords will remember, was of the Jewish faith. I remember when once speaking to me about this whole opportunity he said to me: "Bishop, you have a good product. But you have got to go into the market place if you are to present that product to people, else your mission will fail". This was his rather delightful way of saying that we have to take the riches of the Gospel to people. We cannot therefore just put up the shutters. We cannot simply shut the doors, and simply hope that somehow this problem will die away. We must face it with resolution, and we must expect that Church and State together may make something beautiful, something lasting, something wonderful of this special opportunity.
10.31 p.m.
Lord PONSONBY of SHULBREDE: My Lords, first I should like to thank the noble Lord, Lord Sudeley, for his initiative in allowing us to debate the English Cathedrals report by the English Tourist Board this evening. I am only sorry that this debate has come on at such a late hour; I feel a duty is put on me not to be overlong in my remarks this evening. The only quarrel I took with his introduction to the debate this evening was the remark which he made that the English Tourist Board cannot lobby for aid. My knowledge of the working of the English Tourist Board is that they are continually in and out of the Department of Trade lobbying for additional aid. I should also like at the beginning of my remarks to congratulate the right reverend Prelate the Bishop of Chichester for his thoughtful maiden speech, with which I found myself largely in agreement. I very much hope that we shall be hearing from him again soon.
It is difficult at this point of time in the debate not to be repetitive, but I would perhaps tend to speak rather more from the tourist point of view. The cathedrals and the major churches are certainly an important part of our tourist scene. As the noble Lord, Lord Sudeley, said, around 20 million people a year visit our major churches. Some cathedrals indeed have shown fantastic growth rates. This has brought with it the problems not only of wear and tear but of litter and other associated problems such as car parking, as has been mentioned.
The report highlights these problems but also says that this should be regarded as a time of opportunity for the churches and cathedrals to harness this increase in tourism to the cathedrals for the benefit of the cathedrals themselves. Of course, the central problem is how the financial resources resulting from the visitors can be harnessed to maintain the fabric of the churches which they visit. As the report shows, each cathedral examined in detail has found its own answer as to how to try to solve this problem. I am sure it is right that each cathedral should continue independently to try to find its own answers to solving these problems.
I am sure that the plea made by several noble Lords for the continued independence of the deans and chapters is right.
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A parallel was drawn in the report between the cathedrals and the stately homes. At stately homes visitors may be charged admission of a pound or more. I think one can equally well have a parallel between the cathedrals and the museums. In the large State museums no entrance fee is charged, but charges may well be made for entrance to special exhibitions which are mounted. My feeling is that that is probably the way forward for the cathedrals —to charge for entry to the special parts but not to charge for entrance to the whole. Of course, not all cathedrals are built in the same way and it is not always possible to do that.
One can also think in terms of charging for special services, such as guided tours, a subject which has been mentioned. I am particularly mindful, having only last week attended the 30th anniversary service of the Guild of Guide Lecturers in Westminster Abbey, of the very splendid work which the qualified tourist guides do in showing people around all the different parts of our national heritage. I am concerned that we should ensure as a nation that the quality of guiding that people receive when they visit cathedrals or wherever is of the highest, and that trained guides are used for this purpose, as opposed to the coach driver who may try, rather ineptly, to take a party round a particular cathedral. That is the super tour for which one can charge.
There is also the question of book and souvenir shops, and I was interested to note in the report that four times as much money is spent by visitors to cathedrals on souvenirs as on donations to the work of the cathedral. There certainly is a ready source of potential finance; and I have always been told that, so far as Westminster Abbey is concerned, it is an essential part of the income of that splendid church. The question of charging for car parking and tourist coaches is, again, a problem which can be tackled in different ways by different cathedrals. Westminster Abbey, which has a forecourt, can charge tour operators when they are discharging their coaches in the forecourt, whereas St. Paul's Cathedral, not having a forecourt like the Abbey, cannot levy a charge in that way.
Having said that, and having accepted the fact that there is a tremendous role for the cathedrals to play in the tourist

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scene, one must remember, and ensure that people remain aware, that cathedrals are still places of worship, and the idea which is followed at Westminster Abbey, of having a silent prayer on the hour to remind visitors that they are in a house of worship, is one which I should have thought could well be followed by other cathedral churches. As has been mentioned, many of the tourists today should be seen in the same way as Chaucer's pilgrims, and I am sure that is right.
We come back to the central problem which, as posed by the report, is whether one should charge for general admission. As the report states, there are powerful reasons why this should be done: it yields very much more than does any other way of charging. It yields much more than what the report refers to as a "Ministry of Welcome", in which the individual is welcomed at the door of the cathedral, is given a leaflet, and is told that the cathedral costs 20p a minute to keep open, and that that is the size of the donation expected. That is a successful way, but it is not as successful as charging directly for admission. I also gather that in the report there was shown to be a very great resistance by visitors to receiving a ticket when they had paid for their admission. I think that people would regard this as a tinge of commercialism which they would not expect upon entering a house of worship.
Despite these arguments, we must look to the other ways of raising money for the great churches, rather than go in for admission charges. When it comes to admission charges there is this argument, this very curious argument, which has gone back and forth across the Chamber this evening. I hope that the noble Lord who is to reply to the debate will put this argument to his colleagues. It is the argument concerning VAT. Of all the anomalies in the law, it is very odd that if you charge for admission, you receive back a considerable percentage of your input on your building works to your church. In the case of Westminster Abbey it is 85 per cent., based theoretically on the period of time for which there is no charging and on the period of time for which there is some charging in some parts of the building. I gather that elsewhere the matter is calculated in regard to area: parts of the church are charged for, other
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parts are not charged for. The noble Lord, Lord Sudeley, spoke very authoritatively about this.
I am sorry that the noble Lord, Lord Cockfield, is not with us this evening, though I did not expect him to be, because I recall the exchange across the Chamber last Thursday when he was asked a Question about VAT on theatre seats and about the difficulty of drawing a line between charging and not charging. The noble Lord voiced the view that it was better not to have the problem of where to draw the line on charging VAT, but instead to be able to make grants where one wished and therefore effectively reduce the price of theatre seats. I personally found that a very odd argument, but it is an argument which one could use in regard to State aid for cathedrals. One could say that if one is collecting this substantial amount of VAT, why can it not be given back through additional grants? I hope that the noble Lord, Lord Mowbray and Stourton, will be able to bring this point to the attention of the noble Lord, Lord Cockfield.
Equally as powerful an argument about VAT is the argument that my noble friend Lord Kennet put about the distortion in regard to the building industry, in terms of the line that is drawn between VAT on new building and VAT on repairs to old buildings. This, too, is a matter which has caused great concern.
Reference has been made to the fact that the English Tourist Board is able to make grants to cathedrals in the development areas, and one hopes that it will be possible for this to be extended, particularly to all ecclesiastical buildings which it is shown cannot support themselves in the various ways which we have been discussing this evening. The right reverend Prelate the Bishop of Rochester spoke of the aid to churches in the rural areas.
Finally, my Lords, I should like to add my remarks to those which have already been made about the quality of this report by the English Tourist Board. It is full of information. The right reverend Prelate the Bishop of Norwich, to whom I am almost tempted to refer as my kinsman, referred to the earlier debate and drew some similarities between the two debates. I should also like to refer to the earlier debate, when noble Lords referred to the great restraint of Sir Monty Finniston in

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remaining silent throughout that debate. I equally should like to refer to the restraint of the two authors of the report of the English Tourist Board, Max Hanna and Tyrrell Marris, who have remained silent throughout this debate while they have heard the results of their research being hurled back and forth across this Chamber. We are very grateful for the opportunity to discuss this useful report this evening.
10.42 p.m.
Lord MOWBRAY and STOURTON: My Lords, I very much welcome the initiative of my noble friend Lord Sudeley in providing us with this opportunity to debate the problem of our cathedrals, and I congratulate him on the debate which we have had even at this late hour, with 10 speakers and none "scratching". I, too, should like to add my name to the list of Peers and Prelates who have congratulated the right reverend Prelate the Bishop of Chichester on his maiden speech. In doing so, I am sorry I am only the eighth Peer to speak after him, because his predecessor as the Bishop of Chichester was the first person speaking after me when I made my maiden speech from some point on the other side of the Chamber, if I remember rightly.
I, too, most certainly share the view that cathedrals are the very summit of our architectural heritage, of incomparable work, and must at all costs be preserved and cherished. Things which are built for the love and worship of God are not things for everyday man to destroy or let go. All lovers of art and Christianity will be united in this. I am grateful to the right reverend Prelate the Bishop of Rochester for the acknowledgment of moneys that do come from the Government in a positive way, such as the Historic Buildings Council grant. The ETB, as of course noble Lords know, is also contributing in various ways, with Government money, to the solution of this problem. The importance of cathedrals to the economy of the nation in attracting tourists has been acknowledged by all noble Lords tonight without any qualification, and it is only right that we should do all we can to maintain them in good order for future generations. How pleased I was to hear the noble Lord, Lord Kennet, speak about his work with the Cathedrals Advisory Committee. He always brings common sense and fresh air to this House, whatever
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may be the subject on which he speaks; and I, for one, am very glad to know that they have such a very useful person on their committee to help advise them.
The publication of the English Tourist Board which we have been discussing is a splendid document, I think we all agree. It is sensible and, above all, it is practical. Its advice is expert, and it is to be commended to the authorities of all cathedrals. However, I must point out that the report does not in fact recommend or advise any action by central Government.
The concept of special grants for cathedrals to help them meet the costs of coping with visitors and the damage they cause to the sensitive fabric of these buildings is an attractive one, but let us examine it more closely. The funds which the ETB is given for the scheme of selective assistance to tourism projects are only modest—some £4 million in the current financial year. And, as noble Lords know, the Government are determined to reduce public expenditure. Tourism has had to take its share of the cuts, I fear, though these will be quite small.
My noble friend Lord Sudeley spoke of the English Tourist Board transferring its funds from things like hotels to our cathedrals. But we must remember, because funds are limited, that the problem we face is that of putting limited resources to work in the most effective way. Accordingly, project assistance is presently confined to the areas of greatest need, the assisted areas. Moreover, under this scheme, ETB can assist only with capital expenditure; that is to say, the money must help to provide a tangible asset. It cannot be used to help with manning costs, or with maintenance and repairs. So both the rules of the project scheme, and the modest amount of funds devoted to it, would make it an unsuitable vehicle for the sort and scope of assistance the noble Lord has in mind. But I know some will still say, quite understandably, "Are not cathedrals a special tourism case?" It has been said tonight by a number of speakers. What about similar pleas, equally justified on tourism grounds, from spa towns, or historic houses, or theatres? Any one of these types of project, if assisted as of right under the ETB scheme, could take up the total amount allocated to it many times over.

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Turning for a moment to the wider issue of major repairs to cathedral fabric, the report points to cathedrals like Exeter, St. Albans and Lincoln requiring vast sums of money to carry out extensive repairs. But noble Lords will have gathered that to fund repairs resulting from the wear and tear of the centuries themselves, rather than from 20th century visitors, would be even further beyond the scope of the project scheme.
However, it is really splendid to see, when appeals for a particular cathedral have been made, how great has been the response—not only in providing money (as in the case of York where over £2 million has been raised) but also in raising local enthusiasm and pride in their cathedral. My noble friend Lord Waldegrave talked about his £2 million appeal for the West Front of Wells Cathedral. I wish him well; and would like to congratulate him on his really constructive and exciting speech, which I would commend to any noble Lords. In particular, I hope that the noble Lord, Lord Kennet, will bring it to the attention of his dean and chapter as being a real example of what sensible self-help can do. I was impressed to hear that they were raising funds of some £60,000. The right reverend Prelates, the Bishops of Rochester and Norwich, and others talked about exciting opportunities. How right they are! The right reverend Prelate the Bishop of Norwich talked about super-tours at £1 a head. All these ideas are worth following up. They are sensible and bring enthusiasm in their wake.
That is what we want, my Lords, because the main thrust of my argument is this. Surely, it is reasonable that the tourists themselves, who find much to enjoy and to wonder at in the cathedrals, should help to provide a significant proportion of the revenue needed to maintain them. Two of the aims of the admirable ETB report were to illustrate ways of increasing revenue to support these very expensive buildings, together with the many facilities they provide for visitors; and also to demonstrate ways of effectively managing tourism, so as to minimise the problems it brings for cathedrals. As my noble friend Lord Sandford said, this great modern pilgrimage in numbers far exceeds all other tourist attractions put together.
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Taking revenue first, among the figures I the report quotes is one which I found quite illuminating, if not fascinating. It is that the average expenditure by each visitor to cathedrals is 22p. Twenty-two pence, my Lords! And to think that a visitor will probably spend that same sum on buying himself, herself or the children an ice cream once they leave the cathedral precincts! My noble friend Lord Waldegrave said he was not in favour of "milking" the visitors to our cathedrals too heavily. I do not think that he can think that at 22p they are being "milked" too heavily. That is the average. He, I am sure, is "milking" them more successfully at Wells.
Surely there is scope here for cathedrals to raise more funds, either through making an admission charge for visitors or encouraging them to make donations as has been suggested. Those cathedrals that have already experimented with admission charges have found that the vast majority of visitors do not resent paying. Here I agree with the right reverend Prelate the Bishop of Chichester, who said he had a natural reluctance to seeing people pay to go into places of worship. The noble Lords, Lord Robertson and Lord Sandford, also pointed out that these were places of God. I think it was the noble Lord, Lord Ponsonby of Shulbrede, who pointed out, however, that there could be parts put aside as places of quiet and prayer. In Westminster Cathedral when they have it open for exhibitions, they have the Blessed Sacrament chapel exempted from an entrance charge. Every cathedral, as the noble Lord, Lord Ponsonby, said, has its own problems in finding such a place. The idea in itself is not offensive.
I believe that Lincoln is shortly to introduce such a charge and that Ripon is to operate a "Ministry of Welcome", where each visitor receives a personal welcome to the cathedral and is encouraged in a more persuasive way than was hitherto the custom, to donate to its upkeep. The noble Lord, Lord Ponsonby, referred to this. Some, like Chester, have appointed a tourist liaison officer, while others have organised fund raising events, like flower festivals or concerts. And, of course, as recommended in the report, shops if well managed can provide a useful additional source of extra revenue to cathedrals. I was very glad to hear

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the right reverend Prelate the Bishop of Chichester in his maiden speech say that trading can include the maintenance and spreading of faith among the shoppers. This is a good point. Religious biographies, prayer books and other matters, can bring in a lot of money and give useful literature to the general public. My noble friend Lord Sandford talked about visitor management. This is all part of that.
Turning now to measures to lessen or prevent visitor damage, I was heartened to learn from the report that, although it points out that, with 20 million visitors to our cathedrals each year, there will inevitably be problems of wear and tear, the report does not, in fact, say that visitor damage is yet a major worry. It says at page 11:
"Whilst the amount of wear and tear caused by visitors has as yet reached serious proportions at only a handful of cathedrals or greater churches, further protective measures will be necessary to safeguard those parts of the fabric most at risk".
There is no doubt that, if the very practical advice given in the report is followed, such damage will be reduced to a minimum or obviated entirely, and I endorse this strongly. Among the simple but very practical measures it suggests are the roping off of vulnerable areas, the signposting of recommended routes around the cathedral, restricting access to parts of it, and the provision of copies of brasses for rubbing enthusiasts—a valuable source of revenue, as well.
The Government's view is that the principle to be followed is that visitors should pay for any damage they do. This can be achieved partly through the imposition of entrance fees. Everyone, therefore, would do well to follow the examples of Bath Abbey, Winchester and Salisbury Cathedrals, where, as the report says, revenue from tourists is obviating the need for appeals for fabric repair. Grants from central Government towards the repair of visitor damage are not the answer. Apart from anything else, cathedrals would be less likely to follow whole-heartedly the advice of the English Tourist Board's report if they felt that the Government would pick up all, or part, of the bill.
The need for providing facilities such as lavatories, car-parks, et cetera, for visitors is acknowledged, but it is a problem which
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by its nature must remain in the hands of the cathedrals and local authorities. Moreover, there is the problem that the provision of additional car-parks may, in some cases, be incompatible with the preservation of the architectural and historic integrity of the town and the cathedral area itself.
The points that I have mentioned tonight are some of the areas which, if effectively managed—and the tourist industry, tourist boards, and local authorities, as well as the cathedrals themselves, have their part to play— can provide the finance and the care needed, even in the face of the problem of inflation, to which the noble Lord, Lord Robertson of Oakridge, drew our attention.
It would be wrong of me to close my remarks on the tourism issues without drawing attention to the positive ways in which the ETB and the other tourist boards already help cathedrals. Eighty-five per cent, of the national tourist boards' budgets is used for promotion and marketing; cathedrals benefit fully from this and from publicity by the regional tourist boards of cathedrals in their areas; indeed, some cathedrals are already members of their regional board. Under the project scheme, the ETB has assisted tourist facilities at several cathedrals within the assisted areas—for example, toilet facilities at Durham, and an invalid car park and lift in the Anglican cathedral in Liverpool. The ETB undertakes or promotes research into tourism matters to help those involved to plan for the future—the report which prompted this debate is a fine example of such research. And the board can help individual cathedrals with advice on their policy towards their areas sensitive to visitor damage. It can even help with the design of things like notices to advise or inform visitors. This debate will, I hope, encourage cathedral authorities, who have not yet already done so, to make full use of this expertise which is freely available.
Now we come to the third question, VAT. The right reverend Prelate the Bishop of Norwich wanted my opinion on whether the word "iniquitous" was allowed, and the noble Lord, Lord Kennet, I think, called it "unjust beyond belief". My noble friend Lord Sudeley, though he did acknowledge the many tax reliefs which the cathedrals were able to get

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from the Government, was uneasy about this question. Of course, nobody likes taxes, and nobody likes the idea of taxing churches—and VAT in this context is another tax, is it not? The strong feelings about the effect of VAT on the maintenance and repair of historic buildings in general, and cathedrals and churches in particular, are recognised.
I am well aware of the high cost of repairing historic buildings, but we have to look at proposals for VAT relief in a broader context. I appreciate what the noble Lord, Lord Ponsonby, said about tax anomalies in VAT, but we must remember that VAT was designed as a broad-based tax and reliefs have been limited to those which can be justified on the most stringent social and economic grounds —food, public transport and so on.
On the question of the exemption of new building from VAT, new construction work was treated as a special case from the start of tax to avoid the addition of VAT to the cost of new homes. Building alteration work was zero-rated by analogy, to cover people who extend their homes as an alternative to buying a new one. Repair and maintenance work, particularly of the more routine kind, was not thought to merit special treatment in the same way; and the difficulty of giving relief now is the cost. However, I should like to reassure all right reverend Prelates and noble Lords that my colleagues at the Treasury are well aware of the problems that we are discussing and have undertaken to review them.
Lastly, I should like to draw your Lordships' attention to the fact that there is a dearth of skilled stone carvers, sculptors, restorers, wall painters and other such skilled men or women, partly because such work is expensive and commissions have been few. Without the prospect of steady work, few are likely to be attracted to such trades and skills. Therefore, the Monuments Training Centre set up at Little Oakley, near Corby, by the Orton Trust is to be warmly welcomed and commended. We, in my department, have several skilled people being trained and used on national monuments of great importance—Stirling Castle, the Royal Banqueting Hall and other such buildings. My noble friend Lord Waldegrave talked about the TOPS
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scheme and the problems which are surrounding a continuation of the conservation course at the Croydon College of Art and Technology. I will find out more about this and write to my noble friend.
This has been a most useful and helpful debate. We have covered many varied issues tonight, and I hope that the cathedral and other ecclesiastical authorities, as well as the various local and tourist authorities, will consider and act upon the admirable recommendations contained in the English Tourist Board's report; and not least, the valuable and exciting ideas generated in this debate. I again thank the noble Lord, Lord Sudeley, for giving us this opportunity.

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