Sitting of 6 April 1981

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS

  GREATER MANCHESTER BILL [Lords] (By Order)
  Order for consideration, as amended, read.
  To be considered tomorrow at Seven o'clock.

  GREATER LONDON COUNCIL (GENERAL POWERS) BILL (By Order)
  LONDON TRANSPORT BILL (By Order)
  HUMBERSIDE BILL [Lords] (By Order)
  COUNTY OF KENT BILL [Lords] (By Order)

  EAST SUSSEX BILL [Lords](By Order)
  Orders for Second Reading read.
  To be read a Second time upon Thursday 9 April.

Oral Answers to Questions
  INDUSTRY

    Mexborough (Jobs)
    Mr. Edwin Wainwrightasked the Secretary of State for Industry if he will take urgent steps to provide more new jobs in the Mexborough and district travel-to-work area of South Yorkshire.
    The Under-Secretary of State for Industry (Mr. John MacGregor): I fully recognise the current difficulties in Mexborough, which are recognised by the development area status accorded to it. The main contribution Government can make to job creation is to get the rate of inflation and interest rates down and to encourage a more competitive environment, which is what we are doing.
    Mr. Wainwright: Does not the hon. Gentleman agree that the Government's policy does nothing but create further unemployment in the country as a whole, and increase unemployment in the Mexborough district? Is he not aware that the financial inducements that may be offered to anyone bringing work into Mexborough appear to be of no value and have had no effect? What will the hon. Gentleman do about unemployment? Is he not further aware that the Manvers coking plant closed down recently and that Mexborough power station is to be closed down? When are we going to get more jobs?
    Mr. MacGregor: The hon. Gentleman seems to ignore the fact that the problems in Mexborough occurred before
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    1979. That is why we upgraded it to development area status, which gives it a whole range of financial incentives. The hon. Gentleman fails to recognise that, as elsewhere, much of the trouble in his part of the country is due to much higher wage increases than were justified by production and to higher inflation than many other countries faced. We are having to pull the economy around from a previous poor economic basis.

    British Steel Corporation
    Mr. Chapmanasked the Secretary of State for Industry what total amount of public subsidy was received by the British Steel Corporation from April 1971 to April 1981; and what is his latest estimate for the next financial year.
    The Minister of State, Department of Industry (Mr. Norman Tebbit): Over the 10 years to the end of March 1981, the Government have provided or guaranteed finance to BSC amounting to about £5,700 million to finance its capital investment programme, working capital requirements, redundancy costs and revenue deficits. The latest estimate for 1981–82 is about £750 million.
    Mr. Chapman: Is my hon. Friend aware that on average over the past 10 years every man, woman and child in this country has subsidised BSC to the tune of over £90 each? Is that not a considerable sum? More money is called for. Although the House should not be concerned with the day-to-day administration of the corporation, have we not a right to ensure that that money is used for sound capital investment? Will my hon. Friend undertake to survey BSC spending continually?
    Mr. Tebbit: I am painfully aware of the expenditure involved. My hon. Friend will be interested to know that, following the appointment of Mr. Ian MacGregor and the improved practices that he has instituted for managing the corporation, the Department has far better monitoring practices. Although it is not possible to say that money can be used only for capital investment, we believe that we are getting better value than before from the money invested in BSC. My hon. Friend may have noticed an article that appeared in today's edition of the Financial Times on the remarkable increases in productivity that parts of the corporation are achieving.
    Mr. Campbell-Savours: Of that £5,700 million, was not £10·5 million spent on the Distington foundry, which is supposed to be closing? As the closure decision has been referred to the Select Committee on Industry and Trade, which has asked Mr. MacGregor to produce a report to substantiate the need for it, would it not be better if BSC suspended the closure decision pending the publication of the report and any recommendations that may be made?
    Mr. Tebbit: I would sooner trust Mr. MacGregor to manage the British Steel Corporation than the hon. Gentleman, the Select Committee or even my Department.
    Mr. Michael Brown: Will my hon. Friend confirm that the amount of public funding given by this Administration far exceeds any public assistance given by the Labour Administration? Would he also care to speculate on when the British Steel Corporation will move into profit?
    Mr. Tebbit: We have put a substantial amount of money into the corporation. Much of that was necessary

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    because previous investment was wasted because of political interference and reluctance to adopt more efficient management and working practices. I cannot predict when the corporation will move into profit. That is dependent not least on when the European market in steel is restored to a level where even the most efficient steel manufacturers can cover their costs.
    Mr. Roy Hughes: Are the Government taking into consideration the lessons learnt the hard way by previous Governments? For instance, we closed many coal mines because we thought that we could bank on a continuous supply of oil from the Middle East. The same now applies to steel. If we rely on overseas suppliers and close down our works, when the upturn comes they may not be able to guarantee supplies.
    Mr. Tebbit: The hon. Gentleman must be very optimistic to believe that 14 million tonnes of steel capacity from the British Steel Corporation will leave us short in the near future. There is capacity to increase steel making beyond that again, if necessary.
    Mr. Hal Miller: In the light of the funds that have been made available to the British Steel Corporation to increase its competitiveness and activities, what advice would my hon. Friend give to people in the private sector who are considering whether to invest to renew plant?
    Mr. Tebbit: The private sector's future, like that of the public sector, depends more critically upon the level of prices in Europe as a whole than on anything else. Therefore, it must look with the same anxiety as I do to the meetings between European steel manufacturers to see whether an improvement in prices can be achieved by reductions in excess capacity. Equally, it must also look to the meetings of the Council of Ministers, which I have been attending—I shall be attending another tomorrow—which aim to remove public subsidy to the steel industry in the reasonably foreseeable future.
    Dr. John Cunningham: Is the Minister aware that in the Select Committee hearing recently Mr. MacGregor pointed out that no company of any consequence was making any profits in the steel industry worldwide? Does it not come ill from Government Members to criticise investment in our manufacturing industries, particularly when the Government are committed to the modernisation and greater efficiency of industry? Even in the present world climate, have not the Japanese just announced further large tranches of investment in their steel industry? How could we hope to compete without this level of investment in a basic and strategic industry?
    Mr. Tebbit: I am inclined to agree with the hon. Gentleman. We need investment to make the steel industry profitable and effective. That is what we are giving it. My hon. Friends are criticising not investment in the steel industry, but the subsidisation of steel production in the public sector, because that leaves the private sector, which faces similar problems but without such a long purse of taxpayers' aid, in an extremely difficult position.
    Several Hon. Members rose—
    Mr. Speaker: Order. We have taken nearly eight minutes on this question. We shall have to move much quicker on the rest.

    Manufacturing Industry
    Mr. Stoddartasked the Secretary of State for Industry what estimate he has made of the decline in output in manufacturing industry in the last 12 months.
    The Minister for Industry and Information Technology (Mr. Kenneth Baker): Manufacturing production in the 12 months to January 1981 was about 11 per cent. lower than a year earlier.
    Mr. Stoddart: Is that not frightening and disgraceful? Is it not a condemnation of the policies followed by the Government since they were elected in 1979? Will the Minister now take up the TUC's demand for additional public expenditure and reflation of private demand? Will he also try to ensure that our oil revenues are used for manufacturing investment to protect us when the oil supplies run out? It would be far better—
    Mr. Speaker: Order. The hon. Gentleman has asked three questions and was getting on to his fourth. Perhaps the Minister will answer on what he has been asked so far.
    Mr. Baker: I do not agree with many of those comments. It was not lack of demand that led to the drop in manufacturing last year. Consumer demand was buoyant last year, as the figures show. The central reason for the drop in manufacturing was that destocking in 1980 amounted to £2,000 million. That is the largest recorded drop in our history. All those in the chain—retailers, wholesalers and manufacturers—are holding less stock.
    Mr. Robert Taylor: How valuable and accurate are these statistics? A company in my constituency has reduced its work force by 20 per cent. but maintained the same productivity. Does its productivity count as stagnant, or as having increased by 20 per cent.?
    Mr. Baker: My hon. Friend has put his finger on an important point. What he describes as happening to a firm in his constituency is common throughout industry. The statistics lag behind events. It is difficult to estimate what is happening to productivity.
    Mr. Orme: Does the Minister agree that 750,000 jobs have been lost in manufacturing industry alone in the past 18 months? That is serious for industry. In view of mounting opposition to the Government's policies, confirmed recently by the Bank of England, which said that no upturn seemed likely in the near future, what do the Government propose to do?
    Mr. Baker: If the right hon. Gentleman is urging us to change course and to abandon our determination to deal with inflation, I do not accept his recommendation. If we abandon that strategic objective, we shall never break out of the cycle of increasing inflation and unemployment.
    The business survey that appeared in the Financial Times this morning showed that the recession is slowing and that in certain areas there is a pick up in demand. That supports the latest CBI "Monthly Trends Inquiry"—[Interruption.] I hope that the right hon. Gentleman will welcome good news when he hears it.

    Engineering Industry (Capital Investment)
    Mr. Kenneth Carlisleasked the Secretary of State for Industry if he is satisfied with the level of capital investment in the engineering industry; and whether he will make a statement.
    The Under-Secretary of State for Industry (Mr Michael Marshall): I am not satisfied with the level of capital investment in the engineering industry. The Government's aim remains to create a climate in which productive investment can flourish, and in the first place its major task must be to bring down the rate of inflation. We must also strive to achieve a higher utilisation of existing capital investment by better management and improved labour practices.
    Mr. Carlisle: Does my hon. Friend agree that in the past during a recession low levels of investment have meant that the engineering industry has not been able to meet demand after the recession? Does he believe that will happen now? If so, what can the Government do to prevent such an occurrence?
    Mr. Marshall: My hon. Friend has put his finger on an important point. It is difficult to judge when an upturn will come. The climate of opinion which encourages investment is important, and it might be greatly facilitated if the Opposition took a more balanced view of these matters.
    Mr. McNally: Does the Minister accept that it was a major error to remove assisted area status from an engineering centre such as Stockport which, since that decision was taken, has seen unemployment double? In fact, only five engineering companies in that town are now working a full week.
    Mr. Marshall: The Government are willing at any time to look at the criteria governing development area status. If the hon. Gentleman wishes to bring particular points to our attention, we shall look at them.

    Textile and Clothing Industry (Grant)
    Mr. Woolmerasked the Secretary of State for Industry what has been the percentage change in the level of production over the latest available 12-month period in the textile and clothing industry; and if he will make a statement.
    Mr. MacGregor: Production in the textiles and clothing industry, as measured by the seasonally adjusted index of production, was 17 per cent. lower in the 12 months from February 1980 to January 1981 than in the previous 12 months.
    This fall is part of the general decline in manufacturing output due to a number of factors, including the world recession, and substantial destocking by producers and retailers. We shall continue our efforts to help the industry within the framework of our international obligations and broad economic policies.
    Mr. Woolmer: Is the Minister aware that the disastrous decline in those industries is reflected in a 116 per cent. increase in unemployment in West Yorkshire and a 170 per cent. increase in unemployment in the heavy woollen district, which includes Batley? In view of the Financial Times survey, to which his hon. Friend the Minister of State referred, which shows that two-thirds of textile firms intend to reduce employment and to reduce
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    investment in the next 12 months, what does the Minister intend to do about the textile and clothing workers in the regions?
    Mr. MacGregor: The industry already receives substantial financial aid, and, as the hon. Gentleman will know, is covered by more protection than any other manufacturing industry in the United Kingdom, with more than 400 quotas already established and other restraints on textile imports from more than 40 low-cost sources. We have stated our intention to negotiate a tough successor to the MFA, which is a major factor in the textile industry. The Government are doing a great deal to try to help the industry in difficult times.
    Mr. Fletcher-Cooke: Is this not another example of statistics being rather behind events? Is it not true that the Financial Times survey, 'which we are all quoting, suggests that there is a chance—indeed, a substantial chance—that the domestic industry is picking up, has more orders and has already turned the corner?
    Mr. MacGregor: I am grateful to my hon. Friend. We must all hope that that will continue.
    Mr. Barry Jones: Is the Minister aware that 380 Courtaulds jobs in my constituency will disappear by July? Is he aware that in Flint town male unemployment stands at 32 per cent? Where will the new jobs come from?
    Mr. MacGregor: I am aware of the problems faced by many industries that have been declining for years. The whole range of Government regional aid, which is concentrated much more than in the past on new jobs, will have its increasing effect as the upturn comes. Although I do not suggest that that will make a significant difference, in the Flint area all the measures to encourage small firms will gradually greatly aid many areas.
    Mr. Maxwell-Hyslop: My hon. Friend said that the industry receives financial aid. What financial aid is received by those firms in industry which are not in assisted areas—for example" those in Tiverton?
    Mr. MacGregor: They receive aid through other Government measures, as distinct from financial aid. Selective financial assistance in major schemes is available to industries in areas other than assisted areas.
    Mr. John Garrett: Does the Minister agree that the collapse of the clothing and textile industries is due as much as anything else to the uniquely deep recession engineered by the Government and their economic policies? What is he saying to the managers and workers of the textile and clothing industries about when it will end? He and his colleagues have said that sooner or later things will look up, but is he aware that these industries deserve a better answer than that?
    Mr. MacGregor: The hon. Gentleman knows that we have been suffering from declining industrial competitiveness for years. Dealing with that problem at a time of world recession has caused the present difficulties. The industries to which he has referred have already received financial and other assistance. They will benefit, too, from the steady course being pursued by the Government to get inflation and interest rates down, both of which have been major factors in our difficulties in the past.

    Finniston Committee
    Mr. Palmerasked the Secretary of State for Industry, what correspondence he has had with the directors of the General Electric Co. Ltd., concerning the implementation of the recommendations of the Finniston committee on the engineering profession.
    Mr. Michael Marshall: Unless letters were published by the sender, we regard all the correspondence we have received on the Finniston report as confidential.
    Mr. Palmer: Is the hon. Gentleman aware that it has been widely stated in the technical and educational press that Lord Weinstock and the General Electric company have greatly influenced the decision of the Government not to bring in legislation to implement the Finniston report?
    Mr. Marshall: The hon. Gentleman will be aware that, as legal action has been initiated in that case, I cannot comment on the circumstances of the GEC correspondence, as I have explained. I hope that he will recognise that, as we hope to be pulling together our final conclusions on the negotiations, I do not wish to prejudice that either.
    Mr. McQuarrie: I must declare an interest in the question, as I am a member of the council of the Society of Engineers. Although that correspondence is confidential, can my hon. Friend tell me whether there is a reference to the timing of setting up the general council proposed under the Finniston report?
    Mr. Marshall: I hope that my hon. Friend will forgive me, but I do not think that it is right to give details of that correspondence. He will be aware that we are pursuing the setting up of the council as a matter of urgency. We appreciate the constructive views that we have had from my hon. Friend among others.

    Public and Private Industry (Support)
    Mr. Neubertasked the Secretary of State for Industry what is his estimate for the year 1981–82 of the cost of his Department's committed and contingencies support for public and private industry, respectively.
    Mr. Marlowasked the Secretary of State for Industry if he will calculate the amount of grant by his Department to private industry as a percentage of the public money agreed by his Department for public industries, including ICL, over the last 12 months.
    The Secretary of State for Industry (Sir Keith Joseph): Estimated expenditure in support of British Shipbuilders, British Steel, BL and Rolls-Royce is about £1,970 million for 1980–81 and a similar amount for 1981–82 at out-turn prices. The equivalent estimates for other industries are £870 million an 1980–81 and £915 million in 1981–82.
    ICL is of course in wholly private ownership. The Department's contingent liabilities include not only the £200 million guarantee for ICL announced on 19 March, but also guarantees under such schemes as the shipbuilding home credit scheme and the exchange risk guarantee scheme for EIB and ECSC loans. The actual costs of these liabilities cannot be estimated.
    Mr. Neubert: I thank my hon. Friend for those significant figures. Are there firm prospects of a shift in
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    emphasis from support for traditional industries in decline to creating conditions conducive to prime investment in those high technology and high added-value industries on which our long-term future must depend?
    Sir Keith Joseph: That is our hope and intention, but I do not want the House to forget that companies are relieved of about £5 billion a year in taxation of income used for capital investment.

    Purchasing Policy
    Mr. Gwilym Robertsasked the Secretary of State for Industry if he will take further steps to encourage British industry to buy British when purchasing manufactured components, capital equipment and raw materials whenever possible; and if he will make a statement.
    Mr. Kenneth Baker: The Government hope that both the public and private sectors will seek to improve the competitiveness of their United Kingdom suppliers. But purchasers should not "buy British" regardless. Suppliers must produce what is required at the right time, at the right price and to the right standard.
    Mr. Roberts: Does the Minister accept that our public sector purchasing policies are a shambles compared with those of most of our industrial competitors? In view of the evidence with which I supplied him recently about the way that British Leyland knocked Lucas about over headlamp purchases, will he now consider the purchasing policy of British Leyland?
    Mr. Baker: I am aware of the correspondence that the hon. Gentleman has had with my Department. I have been told that BL buys 95 per cent. of its components from British sources. That is a high percentage for any company. I completely refute his allegation that public purchasing by public corporations and Government Departments is a shambles. We have initiated a new drive in Government Departments and nationalised industries to get suppliers and customers to work more closely together. That is the most effective way to improve the Government's purchasing policies.
    Mr. Emery: Will my hon. Friend consider that both in the private and the public sectors there is no point in buying British unless what is bought is of proper quality? Should we not encourage all buyers in all industries to "TBBB"—"think British before buying"? Is not that the best approach to getting the best buy?
    Mr. Baker: My hon. Friend is correct. Last week the Debenhams group announced that it is following that policy and is advertising it. That is the best way to achieve the results we all want.
    Mr. Arthur Lewis: Will the Minister appeal to hon. Members and to everyone in the Palace of Westminster to buy British rather than foreign cars to help the taxpayers? Is he aware that the joint leader of the so-called Social Democratic Party, the doctor who is not present and who claims to be a great Common Market supporter—the only part of his policy that anyone knows anything about—has bought a Volvo, which is the only car in Europe not made in the Common Market?
    Mr. Baker: Each hon. Member must decide for himself what he buys. My wife has bought a Metro, so we have put the rather slender resources of the Baker family where the Government's mouth is.
    Mr. Squire: Will my hon. Friend ensure that the resources of his Department are brought to bear on the purchasing policy of other Departments? Many Departments, including the Ministry of Defence, as I know from constituency experience, often buy abroad when eqivalent and appropriate materials are available in this country. They do us a disservice and we should stamp on them.
    Mr. Baker: I am grateful for my hon. Friend's encouragement. In the next three or four months I shall be seeing Ministers in the main purchasing Departments to deal with that problem.

    Research Assistance (Schools)
    Mr. Nealeasked the Secretary of State for Industry if, to encourage awareness of industrial needs in schools, he will ensure that schools are eligible for industrial research assistance sponsored by his Department.
    Mr. Kenneth Baker: The Department, working closely with the education departments, supports a variety of projects aimed at improving the attitudes of young people to manufacturing industry and their awareness of new technology. My right hon. Friend the Prime Minister has announced today the Department's scheme to assist local education authorities to provide a microcomputer in every secondary school in the country by the end of 1982. This important scheme, which is specifically designed for the education sector, is a more appropriate form of support for schools than the Department's industrial research and development schemes.
    Mr. Neale: I congratulate my hon. Friend on his part in that welcome initiative. Can he enlarge on the practical effects that it will have for schools?
    Mr. Baker: The Department of Industry is making money available for hardware for secondary schools. Our object is to have at least one microcomputer in every secondary school by the end of 1982. They will be British. The British companies concerned are Acorn and Research Machines, one in Oxford and one in Cambridge. There is no doubt that the younger generation wants to work microcomputers, particularly those attached to television screens. Evidence shows that there is a considerable improvement in basic learning curves when that happens. It is a step for the future and should be welcomed by all.
    Mr. Spearing: As the Department and the Prime Minister have seen fit to recognise this new information tool, will the hon. Gentleman give equal recognition to production by ensuring that every secondary school has a sufficient supply of basic machine tools used in production?
    Mr. Baker: I shall certainly consider what the hon. Gentleman says, but, as the Minister for Industry and Information Technology, I was particularly concerned to make a start in this direction with microcomputers, which can be used for production processes. We saw a demonstration this morning of some schoolchildren using a microcomputer to drive a small engine.
    Mr. Greenway: I welcome the initiative announced today concerning the provision of computers in schools, but may I remind my hon. Friend that the pressure on these computers will be enormous and they will probably be available only for children in fifth and sixth years? Will
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    he bear in mind that the more widely computers can be made available to children in lower years, the more likely we are to get our children turned into the boffins that we need for the future?
    Mr. Baker: I hope that the computers will be available not only lower down, but across the curriculum, rather than only in maths and science labs, so that every child who leaves school at 15 or 16 will be aware of how microcomputers work, what can be put into them and what can be got out of them. That is the objective of the scheme.
    Mr. Eastham: In view of the Minister's desire to improve the liaison between schools and industry with sophisticated equipment, would it not be a good idea for him to try to persuade the Department of Trade to give a firm decision on imperial measurements, as against metrication, because the present situation is causing great confusion?
    Mr. Baker: That is a much wider question which should be directed to another Minister.

    Industrial Strategy
    Mr. Douglasasked the Secretary of State for Industry when he next expects to meet the Confederation of British Industry to discuss the Government's industrial strategy.
    Sir Keith Joseph: I hope to meet the CBI in the near future to discuss industrial policy matters arising from its paper "The Will to Win".
    Mr. Douglas: When the Secretary of State meets the CBI, will he discuss the phenomenon of the disagreement over whether or when the recession has bottomed out and particularly give a view on why other nations at the bottom of the recession, such as Japan, are making substantial investment in their industry, while we are not making any real investment?
    Sir Keith Joseph: There can be honourable disagreement between observers and participants on the exact point at which the recession bottoms out, but there seems to be strong evidence that we are in the bottoming-out phase, or very closely approaching it. On the second part of the hon. Gentleman's question, I must emphasise that Japan's share of national revenue taken by public spending is very much less than the share here. In addition, the rate of profit in Japan is far higher in proportion to national revenue.
    Mr. Michael Morris: When my right hon. Friend responds to the CBI report "The Will to Win", will he be able to give any encouragement to British industry? Is he aware that the report, in the section dealing with public purchasing, points out that, for example, lift specifications that are set centrally by the DHSS are not followed in the regions, and that the same applies to the PSA?
    Sir Keith Joseph: An immense effort is being made throughout Government to raise awareness of the value of enlightened public purchasing by all public agencies. I certainly take seriously the point made by my hon. Friend.
    Mr. Spriggs: Is the right hon. Gentleman aware that there is a deep and growing suspicion throughout the country of Government policy and private industrial policy? Is he aware that I learnt on Saturday night that BICC at Prescot in Lancashire has just completed its own

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    telecommunications department, giving it private facilities to speak to sister firms all over the world, and that it completed that department by buying all its cable from Taiwan, while cable workers in St. Helens and elsewhere are being put on the dole?
    Sir Keith Joseph: The hon. Gentleman's indignation cannot remove the reality that we live in a competitive world. People will have to survive by being competitive. The hon. Gentleman's constituents choose to buy the best value in the high streets of the towns in which they live. We have to become competitive in order to survive.
    Mr. Forman: Will my right hon. Friend take every available opportunity to reassure the CBI and anyone else who needs reassuring that the Government have an industrial policy?
    Sir Keith Joseph: I am tempted to inflict on my hon. Friend the 33-page speech that I made on that subject last Thursday.
    Mr. Orme: Will the right hon. Gentleman publish, before he meets the CBI, a considered reply to its document "The Will to Win", which contradicts basic Government policy? We are entitled to know where the Government disagree with the CBI and the TUC. May we not have the Government's attitude in writing before the right hon. Gentleman meets Sir Terence Beckett and his friends?
    Sir Keith Joseph: Is there really the disagreement to which the right hon. Gentleman refers? We await with interest the CBI's identification of the savings in public spending that it believes the Government should be able to make. Its purpose is the same as the Government's—to enable a fall in interest rates and a fall in inflation, because those are the prime conditions for industrial prosperity.

    Private Engineering Industry
    Dr. Mawhinneyasked the Secretary of State for Industry if he is satisfied that the effects of Government policies are to make the private engineering industry more competitive.
    Mr. MacGregor: I am satisfied that the policy of reversing inflation and seeking to free resources for productive investment will contribute positively in the creation of a more competitive industry. To a large extent competitiveness depends on management's skill and drive and co-operation by the work force, including reasonable pay settlements and reductions in restrictive practices.
    Dr. Mawhinney: Could my hon. Friend find time to say a kindly word of encouragement to the workers and management of Perkins Engines, Baker Perkins and Peter Brotherhood in my constituency which have greatly increased their competitiveness over the past 18 months in difficult circumstances? Does he agree that, if they are to continue that desirable trend, they must have as much help as possible from a favourable exchange rate and favourable interest rate levels?
    Mr. MacGregor: I certainly pay tribute to the firms to which my hon. Friend referred. He will know that among the difficulties facing them have been the worldwide recession and the problems in overseas markets. It has been demonstrated in other countries, as well as here,
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    that large-scale intervention on exchange rates has only short-term effects. Often it would undermine our efforts to control inflation. There are serious difficulties in intervening on exchange rates. My hon. Friend will know the course on which we are embarked in relation to interest rates, and MLR has come down five percentage points in the past few months.
    Mr. Foster: Is the hon. Gentleman aware that his policies have been so successful in making private engineering competitive that a 2,000-signature petition on unemployment was completed in one week in Newton Aycliffe, which was formerly an oasis of prosperity in South-West Durham? In view of the great fears about unemployment in that town and the rest of South-West Durham, will he consider regrading Newton Aycliffe and the rest of South-West Durham as special development areas?
    Mr. MacGregor: That is a separate question. The hon. Gentleman will know that stability in grading is an important part of the special development area policy. It is important that industrialists know where they stand. Where there are clear indications of a long-term change in the structure of an area and its levels of unemployment—I stress "long-term"—we are prepared to consider them.
    Mr. Ioan Evans: Will the Minister study the long list of private engineering firms that have closed down since the Government took office? How can such firms be competitive when they are ceasing to exist?
    Mr. MacGregor: Apart from the recession, one of the factors that hit many engineering firms was the effect of pay settlements of earlier years. One of the important elements now is the mood of greater economic realism in approaching pay settlements.

    European Community (Steel Industry)
    Mr. Colin Shepherdasked the Secretary of State for Industry what progress is being made in his discussions in the Community on the problems of the steel industry.
    Mr. Tebbit: As I said in my written answer on 30 March to my hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown), I attended a special meeting of the council on 26 March to discuss steel. A resolution on steel recovery policy was agreed calling for restructuring with capacity reductions as the only lasting solution, strict market discipline between producers, and the phasing out of State aids under Commission control. Steel is among the subjects to be discussed at the informal meeting of Industry Ministers which I shall attend tomorrow.
    Mr. Shepherd: Is my hon. Friend aware that some of the remarks that he made in the written answer gave considerable encouragement to those involved in the steel industry? Will he say a word or two more about the private sector, especially the "Phoenix" companies? What assurances is he able to give the "Phoenix" companies that their competitive position will not be undermined before State aids are withdrawn?
    Mr. Tebbit: The first of the "Phoenix" companies, Allied Steel and Wire, has been formed. We hope that the company will be trading under that name and in that context before too long. Other companies are being discussed by the possible participants. Until there is an agreement on sensible prices, capacity reductions and the

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    phasing out of State aid, the sectors of the steel industry that are unsubsidised, whether in Britain or in other countries, will be at great risk. That is why I am so anxious to get this business done with as soon as possible.
    Mr. Michael Brown: May I congratulate my hon. Friend on the robust stand that he has been taking in the Commission in recent days? However, I must press him on the extent to which he feels that he will be able to obtain an agreement from France in particular in ensuring that there are genuine capacity reductions in other Community countries.
    Mr. Tebbit: In this respect, France is not the main problem in Europe. Progress has been slow because no one wants to reduce capacity, least of all Britain. We have already reduced our capacity greatly.

    National Economic Development Council
    Mr. Michael Morrisasked the Secretary of State for Industry what is the role of his Department in following through the recommendations of National Economic Development Council reports.
    Sir Keith Joseph: I believe my hon. Friend must be referring to the periodic reports made to the NEDC by the economic development committees and sector working parties. The Department looks closely at all recommendations addressed to it in these reports and the normal procedure is for the departmental representative on the committee to give the Government's response to the appropriate recommendations.
    Mr. Morris: My right hon. Friend will be aware of the report on comparative energy costs and the implications for British industry. Is he particularly aware of the 30 per cent. disparity in foundry coking coal costs? What representations have been made to the Department of Energy on behalf of our foundries?
    Sir Keith Joseph: My right hon. and learned Friend the Chancellor of the Exchequer announced in his Budget Statement the Government's response to the report to which my hon. Friend has referred. There is still considerable pressure from industry, which considers that the Government should further consider the matter. No doubt the debate will continue.
    Mr. Orme: When will the right hon. Gentleman respond to the debate on energy costs? He said that he would consider the NEDC report. There was a reference to energy costs in the Budget but the Government have taken no action. Is he aware that this is having a disastrous effect upon the steel industry, both private and public?
    Sir Keith Joseph: The right hon. Gentleman is ignoring the substantial step that has been taken in conditions of considerable constraint because of the level of public spending that has been set by my right hon. and learned Friend in his Budget. Industry is still making its voice heard, not only on electricity and gas but, as my hon. Friend the Member for Northampton, South (Mr. Morris) has reminded us, on foundry coke. The debate continues.
    Mr. John H. Osborn: Will my right hon. Friend bear in mind that when the Industry Ministers meet tomorrow to discuss industrial problems there will be a need to ensure that the task force's report is correct and that competitors of Sheffield steel do not have an energy advantage in electricity and gas?
    Sir Keith Joseph: My hon. Friend asks what on the face of it is an extremely reasonable supplementary question. However, relationships between energy costs in various countries are complicated by exchange rate movements that are transitory.

    Nationalised Industries (Performance)
    Mr. Michael McNair-Wilsonasked the Secretary of State for Industry if he will introduce new means for monitoring the performance of the nationalised industries for which he has responsibility.
    Mr. Michael Marshall: We continually seek to improve performance monitoring. For instance, we have just set in hand new monitoring arrangements to assess the British Steel Corporation's progress towards the targets set in the corporate plan.
    Mr. McNair-Wilson: Is my hon. Friend satisfied with the concept of four-year corporate plans? Most of industry appears to believe that two years is as far into the future as anyone can reasonably look, and even then with a six-month update. Why should nationalised industries suppose that they can look four years into the future with any accuracy?
    Mr. Marshall: There is a danger in generalising. Each industry should be considered separately. I recognise that there may be some variety in the period that different industries can look ahead. In general, I lean towards the idea of trying to get as long a look ahead as possible.
    Mr. Stokes: Is not the answer to the long-term problem of nationalised industries to denationalise as many of there as possible as quickly as possible?
    Mr. Marshall: This is not the first time that my hon. Friend has put his finger on the answer. We are progressing rapidly down the road that he has described—for example, British Aerospace, the National Freight Co. and the British Transport Docks Board. The list continues and there will be many more before this Session is over.

    Nothern Region (Industrial Assistance)
    Mr. Dormandasked the Secretary of State for Industry what estimate he has made of the aid given to industry in the Northern region since May 1979.
    Mr. MacGregor: In the financial year 1979–80, and the first nine months of the current financial year, aid to industry in the Northern region from central Government sources is estimated to have totalled £255 million. This figure covers regional assistance of all kinds and payments under section 8 of the Industry Act.
    Mr. Dormand: Is the Minister aware that in spite of the figures that he has given unemployment in the Northern region still remains the highest in the country? In view of the manifest failure of the regional policies introduced by his right hon. Friend the Secretary of State in 1979 and his refusal to establish a northern development agency, will he now undertake a complete reappraisal of his policies? Finally, will the Secretary of State accept my personal invitation to meet hundreds of Northern trade unionists who will be lobbying Parliament tomorrow, who are incensed by his policies? Will he explain to them why he thinks his policies are so good?
    Mr. MacGregor: I am aware that the Northern region is facing great difficulties because of the problems of structural industrial change. I have already visited parts of the area. I do not think that the hon. Gentleman can deny the heavy concentration of Government aid on the region. Regional aid per head last year was nearly £48 in the North compared with £36 in Wales, £23 in Scotland and a good deal less per head in all other areas. Those figures demonstrate that a much higher priority is being given to the area despite there not being a northern development agency. If such an agency were introduced, that might lead to other areas demanding similar agencies for themselves and demanding more Government aid to take account of Government aid to the North. That would not necessarily help the Northern region.
    Mr. Wrigglesworth: Is the Minister aware that comments have been made recently to the effect that investment in the Northern region of funds from the Common Market are being delayed by hold-ups in Whitehall? Will he look into those suggestions and see whether the hold-ups can be overcome?
    Mr. MacGregor: I am not aware of any hold-ups, but if the hon. Gentleman writes to me with details I shall have them examined.
    Mr. Radice: Is the Minister aware that Washington new town, started by the Conservative Government in 1964, and the white hope of the Northern region, has lost over 2,000 jobs in the past 14 months? Is it not time the Government revised their whole regional policy?
    Mr. MacGregor: The point of the change in regional policy was to concentrate the aid much more specifically on a much smaller number of parts of the country which face particularly heavy difficulties. I am sure that that will be to the Northern region's long-term benefit.

  ATTORNEY-GENERAL

    Birth, Marriage and Death Certificates (Microfilms)
    Mr. Newensasked the Attorney-General when he expects the completion of the feasibility study announced by the Lord Chancellor in another place on 8 December on making microfilms of registers of birth, marriage and death certificates available to the public for research purposes; and when it will be possible to implement any recommendations which he finds acceptable.
    The Attorney-General (Sir Michael Havers): The feasibility study is expected to take about six months. I cannot anticipate its outcome.
    Mr. Newens: Does the Attorney-General recognise that the fact that the valuable archives held by the Registrar-General remain closed, in contrast to all other public records, is a serious handicap to research work, and that it is not removed by the fact that individual certificates can be purchased for a considerable fee? How soon does the right hon. and learned Gentleman think this information, which is available, and which should be made available to the public at large, can be made accessible? Does he not think that there is a necessity to get on with the matter for the benefit of many people engaged in research—genealogists, biographers and others?
    The Attorney-General: The hon. Gentleman is mistaken. These are not public records, and they have never been treated as such. But the whole matter is under review by the Lord Chancellor, and we hope to have some information in the summer.

    Witnesses (Anonymity)
    Mr. Christopher Priceasked the Attorney-General if he will introduce legislation to define the circumstances in which anonymity may be granted to witnesses or potential witnesses before the courts.
    The Attorney-General: No, Sir. The general rule is that a witness must be identified, but statutory provision already exists to protect the identity of witnesses in rape cases and cases concerning children and young persons. A court has the discretion, which is rarely exercised, to allow witnesses to give their evidence without their names being made public in other exceptional circumstances—for example, in blackmail cases. This discretion, which provides both flexibility and sufficient safeguard in the interests of justice, will be made statutory by clause 10 of the Contempt of Court Bill now before the House.
    Mr. Price: That is, of course, if that Bill goes through.
    Without going into the merits of the Hollis case and whether MI5 is capable of finding spies, I should like to ask the right hon. and learned Gentleman whether he does not think that the one issue in the Hayman case that has not been cleared up is why one particular witness in that case was allowed—when in all other respects he was on all fours with every other witness—not to have his proper name—
    Mr. Arthur Lewis: He wore the old school tie.
    Mr. Price:—disclosed to the court? Is there a rule that ensures that senior civil servants are given preference in this matter?
    The Attorney-General: There is no such rule, and the hon. Gentleman does not have his information right.
    The crux of the case against O'Carroll and others, all of whom were members of the executive committee of Paedophile Information Exchange, was that they were encouraging criminal offences by publishing "contact" advertisements. Sir Peter Hayman was never a member of the executive committee, and was therefore not made a defendant in that trial. To obtain the necessary evidence of the purpose of the contact adverisements, Treasury counsel advised that witness statements should be taken from a number of persons who had advertised. Of those who as a result of this advice made witness statements three—two of whom subsequently gave evidence at the committal proceedings—had been among the eight persons who were named as possible defendants along with Sir Peter Hayman in the first report referred to in my answer to my hon. Friend the Member for Huddersfield, West (Mr. Dickens)—[19 March 1980, c. 139–40]. Treasury counsel had not included the name of Sir Peter Hayman as a potential witness because there was no evidence to suggest that he had ever been an advertiser or that he had attempted to obtain access to children so as to commit offences against them through his membership of PIE or otherwise.
    At the committal proceedings Hayman was referred to by a number of witnesses under the name of Henderson

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    because that was the only name by which they knew him. No mention was made of him at the trial of O'Carroll under his true or assumed name, although counsel for the defence were aware of his true name and could have adduced this in evidence if they had considered it to be relevant.
    Mr. Maxwell-Hyslop: Since sending obscene material through the post, even without financial gain, is a statutory offence, are not my right hon. and learned Friend and the Director of Public Prosecutions perilously close to following the precedent set by King James II, who used prerogative action to dispense with laws with which he disagreed rather than asking Parliament to change them?
    The Attorney-General: If my hon. Friend believes that every time there is evidence of a criminal offence the person concerned should be prosecuted, he should look at the records over the past few years. In fact, in this case two others were charged in respect of much more horrifying material, and the court in its wisdom granted them each a conditional discharge.
    Mr. Jeffrey Thomas: Does not the Attorney-General agree that the case raised by my hon. Friend the Member for Lewisham, West (Mr. Price) does not lie easily within the parameters that the right hon. and learned Gentleman indicated a moment or two ago? Does not he agree that there is widespread disquiet and that the matter of chief public concern is that there appears to be a clear violation of the doctrine of equality before the law? Can he say whether others have been shielded in this way, and, if so, who and in what circumstances?
    The Attorney-General: I regret that the detailed answer that I gave to the first supplementary question does not seem to have been absorbed by the hon. and learned Gentleman. There is no question of Sir Peter Hayman or any of the other eight concerned in the ring with him being given special treatment. What happened was that when it was necessary to consider whether those contact advertisements were having any effect some of those who had advertised were called as witnesses. Sir Peter Hayman had not been an advertiser; he had not used the contact side of the magazine.
    Mr. Christopher Price: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of that answer, I beg to give notice that I shall seek to raise the matter again on the Adjournment.

    Race Relations Act 1976
    Mr. Dubsasked the Attorney-General how many prosecutions he has sanctioned in each of the last two years for incitement to racial hatred under section 70 of the Race Relations Act 1976; and how many such prosecutions were successful.
    The Attorney-General: During the period 5 May 1979 to 4 May 1980 I did not consent to any prosecutions for offences contrary to section 5A of the Public Order Act 1936. During that same period, a total of six persons pleaded guilty or were found guilty of offences contrary to section 5A, or of offences of conspiracy to contravene section 5A.
    During the period 5 May 1980 to date I have consented to the prosecution of three persons for offences contrary to section 5A, and two persons for conspiring to
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    contravene the section. During that same period, the two conspiraors have been found guilty. Proceedings under section 5A against the other three are still outstanding.
    Mr. Dubs: Is the right hon. and learned Gentleman aware that in recent months there has been an alarming increase in the amount of racist literature in circulation, that some of it is as depraved as anything that was seen in Nazi Germany, and that people cannot understand why more prosecutions are not brought? If the Attorney-General is not satisfied that he has the legal powers to achieve successful prosecutions, why does he not bring to the House suggestions for amending the legislation?
    The Attorney-General: I expressed my feelings about one of the publications in a recent answer. But it is not simply a matter of publication; there are other problems. Quite often the offence is extremely difficult to prove. The existence of a grossly offensive leaflet or magazine does not by itself prove the offence. There must be somebody to prosecute, an identifiable and identified publisher or distributor—in some cases the publisher appears to be in the Republic—who is not simply distributing to members of an association of which he is a member, because that is specifically excluded by the section. For example, if an anonymous door-to-door caller pushes offensive literature through letter boxes, whom can one prosecute unless one can identify the person who has done it? The other difficulty is the language of the section
    "having regard to all the circumstances".
    Often the material is put through the letter boxes of leaders of the community, offices of Jewish organisations, and so on. In such circumstances, it is impossible to say that racial hatred would be stirred up.
    Mr. Biggs-Davison: I share my right hon. and learned Friend's horror at the material he mentioned. Since for centuries it has been an offence to stir up hatred between different sections of the community, does not he agree that the long-established law is enough and that the section is unnecessary? Will he review the whole of our race relations legislation?
    The Attorney-General: I imagine that my hon. Friend has in mind breach of the peace. The section is important because it is essential to clamp down on such publications. I am anxious to make certain that such matters come before the courts wherever possible.
    Mr. Archer: Does not the right hon. and learned Gentleman's answer to my hon. Friend the Member for Battersea, South (Mr. Dubs) confirm that it is necessary to consider amending the section? Does not he agree that one of the problems is to establish that the words are "threatening, abusive or insulting" and that a skilful troublemaker may use words that are not "threatening, abusive or insulting" but which may be more likely to stir up racial hatred than words that are less clearly considered? Will he invite the Home Secretary to consider the point that when words are clearly intended to stir up racial hatred it should not be necessary to prove anything further?
    The Attorney-General: There are two problems. The first is to find someone to prosecute, and the second has been correctly identified by the right hon. and learned Gentleman. Often the person who made the complaint is, for example, a responsible leader of the community, and it is no good putting him in the witness box and saying that

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    he is likely to be stirred up by it. I shall certainly look at the matter again. We have been studying the problem. It
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    is a constant worry to me and to my Department that we are not getting the convictions that we need to stamp on trouble of this kind.

SITTINGS OF THE HOUSE
Resolved,
That this House do meet on Thursday 16 April at half-past Nine o'clock, that no Questions be taken after half-past Ten o'clock, and that at half-past Three o'clock Mr. Speaker do adjourn the House without putting any Question.—[Mr. Thompson.]

Adjournment (Easter and May Day)
Motion made and Question proposed,
That this House at its rising on Thursday 16 April do adjourn till Monday 27 April and at its rising on Friday 1 May do adjourn till Tuesday 5 May and that this House shall not adjourn on Thursday 16 April until Mr. Speaker shall have reported the Royal Assent to any Acts which have been agreed upon by both Houses.—[Mr. Thompson.]
3.30 pm
Mr. Donald Coleman: Before agreeing to the motion for the Adjournment of the House for Easter and May Day I wish to draw the attention of Ministers to matters that affect my constituency. First, there is the threatened closure of the Rheola rolling mill at Resolven, in my constituency. It will be recalled that I sought to move the Adjournment of the House under Standing Order No. 9 on 23 March last so that the House might discuss the threatened closure of that plant by British Aluminium.
The announcement of the closure decision took everyone by surprise. It was announced to the work force at about 2 pm on Friday 20 March. In its announcement, the company said that it intended to close the Rheola mill at the end of June 1981 because the company's rolled products division had suffered a sharp decline in sales and profit margins due to the United Kingdom recession and international competition, which it said had been intensified by exchange rate movements. As a result, it said, the company's rolling mills at Falkirk, in Stirlingshire and at Rheola were seriously underloaded, and the Rheola factory, the smaller of the two, was particularly hard hit, despite the co-operation of the employees, which had improved the efficiency of that plant.
The decision means that 500 employees at Rheola will lose their jobs. Of course, other jobs in the company will be lost at Falkirk and at the head office in Twickenham. A total of 700 jobs will be lost.
In Neath, as a result of the loss of jobs, unemployment will undoubtedly rise to over 20 per cent. That is not acceptable to the area or to the employees at Rheola. The workers are determined to fight the closure, and the decision is backed by their own trade union, the Transport and General Workers Union, their fellow workers at Falkirk, the Wales TUC and miners' lodges in and around the area. The closure is being resisted, because too many knocks have been sustained (luring the past two years, and not to make a stand now would be to ignore the serious situation in my constituency and the area as a whole.
A lobby is taking place this afternoon involving transport workers. Some workers are coming from my area because of a decision taken by the National Bus Company, through its South Wales subsidiary, the South-Wales Transport Company, to close the bus depot in Neath. That, too, will add to unemployment in my constituency.
We have been deprived of our special development status by the Government. When the Government came to office, unemployment in my constituency was about 7 per cent. Now it has more than doubled. The West Glamorgan county council calculated that the percentage of unemployment in the Neath travel-to-work area will reach 20 per cent. by the summer, and the closure of Rheola will guarantee that figure. It will be not just a calculation but a fact of life.
When I met the workers at the factory last Friday week they told me that they had evidence that the British

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Aluminium Company was importing from Italy aluminium circles, which are used in the making of kitchen utensils, and are used also by the motor industry. Those items are being produced at Rheola. It is odd that a company should import products that could be manufactured in this country, thus ensuring jobs, while running a campaign with the slogan "Buy British Aluminium by British Aluminium".
I hope that I can be assured that the allegations made by the work force will be fully investigated by the Minister who is responsible. I hope, too, that the development status of the Neath travel-to-work area will be brought to the attention of the Prime Minister and the Secretaries of State for Industry and Wales. We must have our special status returned to us now because circumstances in the area are going from bad to worse.
I conclude with this warning. If Rheola is allowed to close there will be bitterness that could affect a much wider area in Wales. I do not utter this warning irresponsibly; I utter it because I am very well aware of the mood of people in the area. If Rheola closes it will not be long before aluminium production in Britain goes the same way.
3.40 pm
Mr. J. Enoch Powell: It is now well over a month since the Prime Minister, in Belfast, made one of the most important and helpful statements—so far as statements go—that have been made in respect of Northern Ireland for a long time. Her undertaking was that it was the Government's intention to bring the price of electricity in Northern Ireland more closely into line with that on the mainland and, having done so, to keep it there.
It is hardly believable—certainly it is a cause of great puzzlement to the people of Northern Ireland—that more than four weeks have elapsed without any indication appearing about what precisely the Government have in mind and the future rates which might be expected to prevail in the supply of electricity. It would be regarded as difficult to understand if this House adjourned for the recess without the i's having been dotted and the t's crossed on the Prime Minister's statement. I hope that the fact that the Northern Ireland Office and, I believe, the Leader of the House have been given notice that this topic would be raised today will ensure that the information which is urgently needed is forthcoming.
There have been some sounds of the fluttering in a dovecote from inside the Northern Ireland Office, but no more, except an indication, welcome though it was, that the cost of carrying out the undertaking would not fall within the present parameters of intended Government expenditure in Northern Ireland but would represent a net addition.
I am sure that it will be clear to the Leader of the House that businesses—not only those which are struggling to survive in Northern Ireland but those elsewhere which may be contemplating commencing operations in Northern Ireland—regard the prospective cost of electricity as a vital and in some cases a crucial factor. It is little short of cruelty to withhold from Northern Ireland and from those most directly affected the basis of making that estimate.
I will not enter into the method whereby it is proposed that the Government's objective, as announced by the Prime Minister, should be achieved. What is most
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essential and most urgent is to know what and when, rather than why and how. Nevertheless, it is perhaps worth putting on record again what my hon. Friends and I have stressed before, namely, that to provide a straight subsidy year in and year out for the purpose of holding down prices would be the least satisfactory of the options which are available. We trust that the Government are considering seriously more satisfactory methods of achieving the intention which the Prime Minister expressed.
A more satisfactory method, obviously, would be the integration of the financing of electricity production and supply in Northern Ireland with that in Great Britain as a whole. After all, there is considerable internal subsidy inside the supply of electricity in Great Britain. But the fact of it and the quantity of it are not thrown up into stark relief either by a Prime Ministerial statement or by a separate entry—as it might be if it were a mere subsidy—in the Estimates for that part of the United Kingdom. It would be all to the advantage—and it would give a much greater sense of confidence if it were by an allocation of costs within the electricity industry of the United Kingdom as a whole—if the desired result were obtained.
Standing upon that proposition, it is obvious that more logical and practical still would be the physical linking of electricity production and supply in Northern Ireland with that of the rest of Great Britain. It is, after all, in the last resort artificial and, if artificial, inherently unstable that the approximation of charges in Northern Ireland should be achieved merely by an ad hoc financial operation.
There is no reason why the linking of electricity production and supply in Northern Ireland to that in the rest of the United Kingdom should not bring with it economies—and economies felt not only in the Province but on the mainland. That is far and away the most important matter which I want to bring to the attention of the Leader of the House. I emphasise again the practical urgency, and the urgency in the context of employment and unemployment, of the earlist possible statement and, if possible, a precise statement before the House rises for the recess.
But there is a linked matter to which it may be permissible to refer—the kindred source of energy, namely, gas. I can illustrate the urgency of a decision here from circumstances—they are in the domestic sphere—in my constituency.
In one of the towns in my constituency there is a housing estate belonging to the Housing Executive where the heating and energy are supplied by gas. Not surprisingly, the tenants have found this so intolerably expensive and uneconomic that the Housing Executive had a scheme on the stocks to replace the gas supply to those houses by solid fuel heating. That has been held up, much to the dismay of the tenants, the reason being—it is not a reason with which I can, in isolation, quarrel—that the Housing Executive is waiting to know what is the future of the gas supply in that town and in Northern Ireland as a whole.
The Government may have been under a misapprehension that when they made their thumbs-down announcement in July 1979, soon—perhaps too soon—after coming into office, they had settled the matter of the future supply of gas in Northern Ireland. The debate, which has continued not merely unabated but in an increasingly lively manner since then, must have shown them that they were mistaken. Now, ironically enough, it

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is the Government's own decision to include the supply of gas in Northern Ireland among the topics rumoured to be under discussion in the ill-fated inter-governmental studies which followed from the Dublin talks of last December which has made gas supply in Northern Ireland once again a directly live issue.
Clearly, it is unreasonable to expect the Housing Executive or anyone else—be it a private or a public corporation or industry which depends for its operations at present upon the use of gas—to live in this state of suspended animation, not knowing whether Northern Ireland is finally to dispose of—I was about to say by euthanasia, but it will hardly be a process painless enough to be so described—its existing gas industry or whether that industry is, as we believe both essential and in the long run inevitable, to be replaced by a supply of natural gas which would put Northern Ireland in many respects upon a level and competitive footing with the rest of the kingdom.
Here again, lack of information and the length of time taken to review what an increasing number of people regard as a mistaken decision of 1979 is having a direct and visibly harmful effect upon the maintenance and the stimulation of industry and employment in Northern Ireland.
I thought for a moment that the hon. and learned Member for Leicester, West (Mr. Janner) wished to intervene. It is simply the natural impatience of Leicester while Down, South is carrying on. I assure the hon. and learned Gentleman that other parts of the United Kingdom will have their innings in a few minutes, if not seconds.
I cannot say that the time scale of urgency in this matter of the gas supply is quite on a level with that of the matter of electricity costs. The statement should not have been made—we are all glad that it was made by the Prime Minister—if the Government were not ready promptly to follow it up with firm information. That could be, and I hope will be, forthcoming this afternoon. Not long behind it there should be firm information about the intentions of the Government in regard to the competitive or alternative source of energy, natural gas. I hope that this afternoon the Leader of the House has been provided by the Northern Ireland Office with a little more than the formulae used too frequently already in the past four weeks.
3.51 pm
Mr. Christopher Murphy: Before we adjourn for the Easter Recess I should like to draw to the attention of the House some of the problems associated with commuting. I should perhaps admit to having indulging in the pastime myself between Westminster and my constituency, and I therefore declare an interest. I should like to make it clear that although a number of my comments have general application to that endangered species, the captive commuter, I intend to draw largely on the experiences of the many people from my constituency who daily travel to London and sometimes manage to return.
The Government are to be congratulated on having referred the subject of London and South-East commuter services to the Monopolies and Mergers Commission. This gave the travelling public the opportunity for a full investigation to be made of what seems to many to be so much dependence placed by so many commuters on so few services. I also congratulate British Rail on the initiative that it launched last year with its publication "Towards a
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Commuters' Charter". This, as was to be expected, led to considerable debate, which should be of great benefit to the rail users themselves. Both initiatives have produced publications that have the additional value of keeping the carriage-incarcerated commuter fully occupied on his travels.
I should like to quote two conclusions from the commission's report which are particularly worrying. First, it says:
"The quality of service in terms of punctuality and level of cancellation is currently below that offered in 1974."
Secondly, it says:
"Performance in general falls well short of the standard suggested in the Board's publication 'Towards a Commuters' Charter' in punctuality, cancellations and cleanliness'
It comes as no surprise to say that many of my London-bound commuters find these statements alarming, although not unexpected. It comes as no surprise, equally, to say that they regard these as the most disturbing of the findings of the report. Travelling to work is a necessary evil, and one that it is to be hoped can be achieved with the minimum of inconvenience. The public, paying both as rail users and through taxation, have a right to expect a certain level of standard to be achieved at reasonable cost. Indeed, the commission's report suggests that
"The Board should consult customers to ascertain the value they place on changes in loading, reliability and frequency of service relative to fare levels."'
I am certain that my local commuters would concur with that view.
The last of my quotations from the "Good Book" is the observation:
"We find that to some extent the Board could reduce their costs by improved efficiency without reducing the quality of the service which they provide. To some extent also, the quality of the service provided could be improved without any increase of the Board's costs".
I am equally certain that my local commuters have a sneaking feeling that this has been the case for a long time past. The quality of service need not be strained.
The actual cost of purchasing a season ticket is, naturally enough, a contentious subject, made all the more so for travellers living in Welwyn and Hatfield, because they have to suffer what are termed "above average" fares created by above-average increases. This appears to be in consequence of the electrification of the service giving rise to the gloriously entitled Great Northern Electrics. Glorious though their new station in life—if one may dare use such a phrase—may be, their reliability has been accepted by British Rail as being most unsatisfactory, because of rolling stock design problems compounded to some extent by train crew shortages. It is a poor exchange for hard-earned extra cash, as seen by my constituents.
I know, however, that British Rail Eastern Region is very much aware of the difficulties that are being encountered and is determined to do all that it can to alleviate the situation. Once more, the value-for-money concern is inevitably in local people's minds.
I should like to make a special plea to the Leader of the House to give urgent consideration, once again, to the concept of tax relief on commuter fares, perhaps linked to season tickets. It could be simple to administer—the old ticket being submitted as proof—and an effective help to the hard-pressed rail traveller. For many families, travel to work is almost as essential as a roof over one's head. Tax relief on mortgage interest is, thankfully, in existence. Commuter relief awaits to be born.

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We are all made aware that this is the age of the train. Sometimes, on a windswept rainy platform, with the clock ticking remorselessly on and no sign of approaching lights down the track in the gathering gloom, one is entitled to wonder whether it is not more of a case of being "aged by the train".
3.57 pm
Mr. David Winnick: This motion is being discussed much earlier than usual. It seems strange, as my right hon. Friend the Leader of the Opposition remarked last week, that we should be debating the motion today, 10 days before the House rises. That is not, however, my reason now for addressing the House. Certain issues could, of course, arise within the next week when hon. Members will have been deprived of raising them on the motion for the Easter Recess. I hope that on future occasions the motion will be discussed during the week when it is proposed that the House should rise.
We shall go into recess with continued rising unemployment and all indications showing that the economic position will become even worse. The Budget has been debated. I do not think that there can be any doubt that events will prove the Opposition right. The effect of the Budget will be to produce even higher unemployment, more deflation and more hardship and misery for the people whom we represent.
I intervene in this debate principally to refer to the situation in Poland. I believe that Opposition Members can speak with clean hands. My right hon. and hon. Friends and I have always opposed intervention and agression. I have opposed such action by British Governments and I have opposed other Western intervention on numerous occasions, so I cannot be accused of being a hypocrite when I speak against Russian intervention. That cannot be said of hon. Members on the Conservative Benches, who are at times willing to condone aggression by Western Powers, such as the United States' action in Vietnam, but set up a hue and cry when similar action is taken by the Soviet Union.
The situation in Poland is alarming. I do not believe that the Russian leaders wish to use force, although they have clearly considered intervention since the events of last summer. However, there is now a greater possibility of armed intervention than at any time since last summer. Intervention and aggression against an independent State would be totally without justification. I cannot emphasise too much that whatever the trouble, difficulty and crisis, they are for the Polish people to resolve. No outside Power should intervene with force. An invasion would be a tragedy for the Polish people. Many interventions have occurred in the country's history—some, tragically, in this century. Armed intervention, as in Czechoslovakia in 1968, would leave a legacy of fear and hatred.
We may need to debate the matter before the House rises, because an invasion of Poland would do immense harm to the possibility of improving East-West relations. It would escalate tension between the East and West, especially in Europe, and make more remote the negotiation of an agreement between the Soviet Union and the United States in the strategic arms limitation talks. The Russia leaders should bear in mind that an intervention in
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the next few days or weeks would be a godsend to the Western cold-war warriors, who do not want relations to improve.
I have always believed that the United States must learn not to intervene. Labour Members have protested bitterly many times about the way that the United States acted not only in South-East Asia but in Latin America, which it looks on as its own back yard. The United States has no moral right to intervene in Latin America, and the Soviet Union has no right to intervene in Eastern Europe, as it did in Hungary in 1956 or, 12 years later, in Czechoslovakia.
The situaton in Poland is serious. I hope that the Soviet Union, too, will realise that there is no justification for armed intervention. The Poles should be allowed to resolve their own difficulties.
4.4 pm
Mr. James Kilfedder: The House should not rise for the Easter Recess until the Government make a statement on a regional policy for Northern Ireland to combat unemployment, which now stands over 100,000, including 6,000 school leavers.
Ministers and officials all too often talk in terms that mean nothing to people out of work. Bureaucrats juggle with statistics, definitions and concepts that do not give hope to the unemployed. They do so either out of ignorance of the reality of unemployment or deliberately to cloud the harrowing consequences of Government policy. The dreadful jargon of the social scientist deprives debate on unemployment of true feeling, humanity and charity.
The matter is urgent, and the Government should make a statement before the Easter Recess. The Ulster people are suffering from the consequences of terrorism. They need all the support that they can get, but they are treated by the Government as mere cyphers. They are not graphs and statistics; they are human beings. When people have no work, wages or hope, and especially when they are young, immature and relatively defenceless, they need all the help that we can give. With unemployment at over 100,000 it is scandalous that the Government are still not ready to offer hope to the unemployed, some of whom are out of work for the first time in their lives.
About 6,000 school leavers are out of work, and their future is uncertain, bleak and uninviting. A young person leaves school full of hope, enterprise and idealism, and it is sad that all that the Government can offer is a place in the dole queue. It is not good enough. The House should not rise until the Government make a statement announcing a regional policy for the Province to attack the scourge of unemployment.
Last month in Northern Ireland there were only 66 vacancies for young people, compared with 165 12 months ago. That is an indictment of the Government, considering that the Province has a population of 1½ million. The vacancies were snapped up, and, with the state of the order books in Ulster, no more jobs are likely to be available for a while. Welfare workers fear more family breakdowns, delinquency and violence.
The Government's policies are not doing much to provide young people in the Province with useful and interesting occupations. They must offer hope. Will they consider extending two schemes that can provide more opportunities for the young? The job release scheme attracted only 1,050 applicants for early retirement. Retirement should be encouraged at an age younger than

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64 for men and 55 for women, which would significantly increase the number of applicants and so provide more jobs. The short-time working compensation scheme has saved about 20,000 jobs. With 100,000 unemployed, a part-time job is preferable to no job, and that scheme should also be extended.
There is a third way in which the Government could help. There are many others, but I mention just three. The vast cuts of £13 million a year ago, following two other serious cuts in housing finance, have so starved the Housing Executive that it is now building far fewer houses than it should and thus failing to provide the homes that are desperately needed in Northern Ireland. The Government should provide that money so that housing may be provided, particularly for young families. Jobs would then be available for those in the construction industry who are out of work. Only a week ago I spoke to a young man who had served one and a half years of his apprenticeship. He has now lost his job, because the building firm by which he was employed has no orders. That firm would be able to employ him and many others if the Government put money into the building industry rather than paid people to queue for the dole.
I wish to deal briefly with two further matters. The young people of Ulster already suffer from the consequences of the Government's economic policy and the high level of unemployment, but they also suffer in another way. They suffer from the religious apartheid in education, which has existed for far too long, as a result of which Protestant and Roman Catholic children are divided during their most formative years. It is ludicrous for the Government to say that they wish young people to get to know one another when they continue to justify a religious ghetto mentality in education.
A week ago the Minister responsible for education in Northern Ireland spoke of the value of shared holidays for young people, which the Government were prepared to finance, but the value of such schemes will be limited and of short duration, because when the boys and girls come back from the holidays very few of them will get together again. The money invested is therefore of little use in ending the religious divide in the Province. The real answer is for the Government to have the courage to decide that taxpayers' money shall not be used to support segregated education, which divides the community. The future of Ulster largely depends upon changes that we make now to eliminate sectarianism wherever it is found. It is entrenched in education and it must be rooted out, certainly with the abolition of the three teacher training colleges.
Finally, before the House rises for the Easter Recess the Government should make a statement about the Anglo-Eire study group. It is possible that the discussions at present taking place pose a threat to the constitutional position of Northern Ireland in the long term. The Government's silence means that people in Northern Ireland are afraid of the consequences of those talks. Certainly, the Eire Prime Minister and his Ministers interpret the talks as a means to achieve a united Ireland in five or 10 years. Indeed, Mr. Haughey is prepared to abandon Eire's neutrality in horse trading with the United Kingdom.
The day may not be far off when Eire will abandon neutrality to play a more active role in Europe in return for something from the United Kingdom and the Common Market. I believe that Northern Ireland may well be
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traded, as Mr. Churchill was prepared to abandon it during the last war. It would be disastrous if, as a result of the present negotiations, cruise missiles were sited in the island of Ireland when the people of these islands should be working for a nuclear-free Europe.
4.15 pm
Mr. Greville Janner: Before the House adjourns for the Easter Recess we should consider, briefly if necessary, the insidious effects of unemployment and other factors on good race relations in this country. I hope that the Leader of the House will take this opportunity to provide some reassurance. Unfortunately, when people are unemployed and suffering deprivation they are far less likely to accept differences of opinion and differences between people than they are when economic conditions are more favourable. As unemployment grows and deprivation increases, and people become more unsettled and ill at ease, they become less inclined to accept the democratic process which is the basis of all our freedoms. In those circumstances, one would hope that the Government would be trying hard to set at rest the anxieties of minority communities. Unfortunately, that is not occurring.
The march and rally of Asian people yesterday was forthright in its condemnation of Government policy. I use the term "Asian people" advisedly. It would be wrong to call them immigrants, as many of them were born in this country. They are citizens of this country, they are entitled to the same treatment as anybody else, and they object fiercely to any legislation which creates differences between our citizens.
In addition to the unease created by the present unemployment and economic disaster, there is acute anxiety created by a series of developments which greatly increase the worries of citizens who consider that it is a fundamental job of the Government to ensure that they enjoy the same rights as anyone else in this country. When those rights are attacked and outbreaks of Fascism or racism occur, they expect the courts to come to their aid. Those of us who were present at Question Time earlier today were saddened by the statistics that the Attorney-General gave showing the great difficulty of bringing the few prosecutions that are brought and by hearing the problems that he explained in obtaining convictions.
None of this helps to provide a settled atmosphere in which people can continue to work together for happy community relations. In the city of Leicester, part of which I am privileged to represent, we have a very large, good-natured Asian community, which has built itself into the structure of our society as an admirable family community, law-abiding and kindly. It looks after its old people and is willing to do jobs that others are not prepared to do. It is scarcely surprising that that community is anxious about the developments to which I have referred.
In Leicester there is a growing realisation of the dangers that the downturn in the economy and the upturn in unemployment bring. For example, when an unpleasant and dangerous organisation called the New National Front recently decided to hold one of its provocative marches through our city the chief constable called for it to be banned. I am pleased to take this opportunity to congratulate him on taking that step.
Unfortunately, however, that is not the end of the matter. I wonder whether the attention of the Leader of the House has been drawn to the remarkably full and

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courageous exposé in today's Daily Mirror of a new organisation which, alas, has its headquarters in Leicester, in what is alleged to be an illegal drinking club. It is headed by a former National Front figure of some stature. The organisation is made up of people devoted to Nazism, racism and Fascism and to the creation of hatred in a city which is notable for good will.
At present minority communities of all kinds are showing a cool, sensible and intelligent appraisal of the dangers. They are not demonstrating alarm. They retain their faith in the democratic system, the police and the courts. The Government should carefully consider how that attitude can be built upon and helped in a time which is becoming increasingly difficult for people who are concerned in so many ways with the maintenance of good relations between the many communities in this land.
Before we adjourn, a related matter should also be considered by the Government—the good relations and clear understanding of Britain's policies which have for so long been fostered by the BBC World Service. That service has contributed to the great understanding which many of our citizens, including the majority of hon. Members, have been privileged to obtain because, as a bonus by-product of the service, we have been able to listen to the broadcasts, particularly at times in the night when there is seldom an alternative to music that enchants our children but drives us to distraction.
The notification that the service is to be restricted abroad should strike dismay into the minds of anyone who is concerned with the perpetuation of that picture of Britain which was built up during the war and which the BBC World Service has magnificently preserved since. People who benefit from the service will be equally upset that a new transmitter will beam signals further and faster across parts of Europe but narrow the beam so that it is kept away from many parts of the United Kingdom.
I ask the Leader of the House to give both those matters his attention. It would be sad for the House and for us all if either situation deteriorated before the House resumed.
4.23 pm
Mr. David Mellor: Before the recess the House should discuss the continuing charitable status of the so-called Moonies, or Unification Church. The House should also consider the operation of the Charities Act in the light of the recent statements by the Charity Commissioners, their understanding of the law regulating charities, and their power to remove from the register of charities such organisations as the Unification Church and the Sun Myung Moon Foundation, its associated body.
I raise the topic, heartened by the fact that within 48 hours of a motion being tabled calling forthwith for the ending of the charitable status of the organisations it was signed by no fewer than 140 hon. Members. I hope that more will sign.
Last Tuesday in the High Court the longest libel action on record ended. At the end of six months of careful consideration before a highly experienced High Court judge, the jury took what was, in the context of a six months' trial—and, from the Moonies' view—a derisory amount of time—only five hours—to find that the Daily Mail was fully entitled and truthful when it set out a horrific picture of the cult's activities.
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I do not propose to rehearse the details of the allegations against the organisation. I am satisfied that any commonsense person who follows events will have had the opportunity to consider the evidence against the sect published by a wide range of newspapers, including The Times, which also faces an action for libel but which I hope will not now be pursued.
Evidence has also come from the other side of the Atlantic. Each body that has had occasion to investigate the sect's activities has come to the same conclusion—that its activities are evil and contrary to the public interest. Evidence shows not merely that the sect is damaging to vulnerable individuals but that, through the tentacles of its operation, it poses something of a threat to organised society.
The matter was considered by a high-powered committee appointed by the House of Representatives, and the Fraser report contained a scathing indictment of that cult's activities in America. All the evidence available suggests that the same is true of the cult's activities here.
We have reached a point at which I fear that the House may have to become embroiled in the issue. My purpose is to argue that it should not be so. It is so only because of a particularly obtuse statement by the Charity Commissioners, issued with unseemly haste following the verdict by the jury on Tuesday.
I have two propositions. First, I believe that the Charity Commission is wrong to say that it does not have legal powers fully to investigate the activities of the sect and thereafter, if what was said at the trial is true, to remove it from the register of charities or, peremptorily and without recourse to further investigation, to remove it from the register. In refusing to do that it is acting in ignorance of its true powers in such a way as to call into question the effectiveness of that body as the guardian of a status that should not be abused. It is a scandal that that status is being abused by the cult.
Secondly, if it is true that the 1960 Act does not give the Charity Commission power properly to investigate such matters and to come to the conclusion that I suggest it should come to, the House should take an early opportunity fully to investigate the law. We must ensure that we draft a more cogent statute, which enables a body of commissioners, properly instructed and properly intending to carry out that purpose, to take the action that any man in the street believes to be appropriate.
What did the Charity Commission say? It issued a statement on 3 April saying that it had carefully considered the rider by the jury in the recent Daily Mail case
"to the effect that the Unification Church should cease to have charitable status because it is a political organisation."
The statement said that the Commission has
"power under the Charities Act 1960 to remove a charity from the Register of Charities on the ground that it no longer appears to the Commissioners to be a charity."
It set out details of the two registered charities—The Holy Spirit Association for the Unification of World Christianity and the Sun Myung Moon Foundation—and their alleged aims and objects. The commissioners stated:
"After careful consideration the Commissioners remain of the opinion, in the light of the information available to them, that these objects are exclusively charitable in law and that the two institutions have not ceased to be charities. Accordingly, there are no proper grounds on which they can be removed from the Register."
The statement went on to dilate on the question of political activities. Finally, it stated:

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"Concern has been expressed about another aspect of the alleged activities of the Unification Church, namely, the complaints that impressionable young people are 'brainwashed', and that they leave their homes and are subjected to a harsh regime, and in some cases make over property. It is argued that this cannot be for the good of the community, and must be contrary to public policy, and that the advancement of a religion involved in such methods should not be a charitable purpose. However, this is not a question that can be finally determined by the Commissioners. It is one for the High Court or for legislation by Parliament."
If that were an accurate statement of the law, the law in that respect would be an ass. However, that is not the law. I have arranged a meeting for 11 o'clock tomorrow morning with the chief commissioner in an attempt to persuade him that his view of the law is wrong. I shall take up a few moments of the time of the House to persuade hon. Members that the commissioners' view of the law is wrong.
While it is fair to say that the chief commissioner has accepted with proper speed the request of a group of colleagues and myself to see him, I am not encouraged about his attitude to the matter, as a result of some interviews that have been relayed on the radio today. It appears that he is saying that those of us who have criticised him do not understand the law. By one or two off-the-cuff remarks he appears to be implying that this is yet another instance of publicity-crazed Members of Parliament and lurid newspapers getting together to denounce a body, namely, the Charity Commission, which is carrying out a responsible job according to the guidelines in the statute.
Mr. Christopher Price: I wish to strengthen the hon. Gentleman's resolve at his meeting with Mr. Fitzgerald tomorrow morning. A Select Committee, of which I am one of the few remaining members, investigated the Charity Commission in 1974. I do not know whether we were publicity-crazed. The Select Committee was disappointed with the attitude of the Charity Commission towards its responsibility in law to charities. If the hon. Member were to be critical of the Charity Commission he would only be reflecting the views of a Committee of the House.
Mr. Mellor: I am grateful to the hon. Member. I am familiar with the Committee's 1975 report. Recent events have established how unfortunate it is that earlier action was not taken on that report. We might have been spared having to raise the matter now. I should make it clear that the chief commissioner did not use the phrase "publicity-crazed MPs", but the implication was clear to me and would have been clear to anyone listening to the broadcast.
I am encouraged that my view of the law is right. No sooner had I arrived back at my office, having done the broadcast to which I referred, than I was telephoned by a senior member of the Chancery Bar regularly practising in charity matters. He was at pains to describe his distress at the complacency and inaccurancy of what the chief commissioner said about his powers. He said that he believed that my view of the law was right, as does The Times in an interesting leading article today.
Therefore, the Charity Commission, in taking its present stance, opposes not only a large number of hon. Members but a virtually unanimous view throughout Fleet Street that it is not acting as it is entitled. Added to those voices should be the voice of Mr. Hugh Francis, QC, a distinguished lawyer, who was responsible for carrying
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out the last investigation that the commission ordered, under section 6 of the Act, into the activities of the Exclusive Brethren. In the Daily Mail today he expressed considerable surprise at the way in which the commission had acted.
Mr. Francis said:
"I should have thought this matter is worthy of investigation and I am surprised that they haven't been struck off the register. I don't believe the very fact that the object of the organisation is religious necessarily means that it is a charity. In order to be a charity you have to carry out your purpose in a manner which is beneficial to the community."
Mr. David Stoddart: Is the hon. Gentleman aware that those of us who live near Stanton Fitzwarren, which is near my constituency of Swindon, have had firsthand experience of this sect? We have been unhappy and have been in touch with the Charity Commission and the Treasury over the years, but without any good result. I hope that the commission realises that hon. Members are concerned about that organisation. Something ought to be done about it, as such different treatment was meted out to the Exclusive Brethren, which was investigated in depth. I assure the hon. Gentleman that he has much support in the matter.
Mr. Mellor: I know that if other parliamentary duties had permitted the hon. Gentleman would have wished to meet the chief commissioner tomorrow. I shall pass on his views to the commissioner. The hon. Gentleman has considerable knowledge of what the cult gets up to.
I shall consider what the Charity Commission said and where I believe that it is wrong. I challenge its use of the phrase "after careful consideration". It issued the statement after a mere 72 hours. What did it do within that 72-hour period? Did it review all the evidence given in the trial which led to the jury's forthright verdict? What did it consider, and how much investigating did it carry out?
Yesterday, one of the commissioners told the press that the talks had been "short—but not hurried". Reading between the lines, that suggests that the most peremptory consideration was given to the matter. Nothing that could be called an investigation, in any decent use of the English language, was carried out. That is dereliction of duly by the commission.
The commission also said that the objects of the charity were exclusively charitable in law, as if that were the end of the matter. I adopt the line of argument advanced by Mr. Francis, the distinguished lawyer to whom I referred. I have read the Act with care and the relevant section several times over. There is nothing in the Act that says that the commission is restricted, in its view on the matter, to the aims and objects set out. It would be nonsense if it were.
As the Daily Mail rightly says in its leading article today, a Satanic cult, provided that it dressed up its ambitions in the right phraseology and apparently was religious, and provided that its aims and objects were to promote a religion, albeit a religion that would be repugnant to almost everyone, would qualify as a charity. Is that what the House intended when the Act was put on to the statute book, or is it what the law is? The Charity Commission is wrong to say that only the aims and objects matter. I shall later quote from the statute to show why that is wrong.

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The commission then dealt with brainwashing. I am glad to note that that aspect of the matter is to be taken up by the Department of Health and Social Security. The commission said that:
"It is argued that this cannot be for the good of the community, and must be contrary to public policy, and that the advancement of a religion involved in such methods should not be a charitable purpose."
When considering that passage in the commission's statement, The Times said:
"Here the commissioners come to the heart of the matter, and suddenly they fade away. It is not … a question that can be finally determined by them: it is one for the High Court or for legislation."
The Times takes issue with that interpretation, and so do I.
I shall quote briefly from the 1960 Act in support of my argument. Section 4(3) says:
"Any institution which no longer appears to the Commissioners to be a charity shall be removed from the register".
The Act then gave reasons why a charity might have been removed—for example, a change of purpose, or the fact that the charity had ceased to exist. The remainder of the clause does not in any way modify the absolute power of the commission to remove an institution that no longer appears to be a charity. That is the basis for what The Times, Mr. Hugh Francis and I say. Without more, and merely having received the verdict of the jury and having seen, as common-sense people, how carefully the court considered those matters, the commission could have removed both organisations from the register of charities. It could have said that if those organisations dissented from what had been done they could go to the Chancery Division and prove that it was wrong. One rather hopes that this organisation would have been good enough to recognise that another visit to the British courts would not be in its interests or the interests of anyone else.
But let us say that the Charity Commission took the view "Yes, there is a prima facie case for concern about the allegations of brainwashing and the rest of it, but we would like to know more." Then one turns to the power that the commissioners have under section 6—and a very wide power it is. There may be some hon. Members present who can recall the debates when the Act was passed into law in 1960. I have reread the debate on the Second Reading of the Bill and there is no question but that the House thought at that time that section 6 gave to the commissioners the widest powers to institute wide-ranging inquiries into any aspect of a charity's work that they saw fit to investigate.
Section 6(1) says:
"The Commissioners may from time to time institute inquiries with regard to charities or a particular charity or class of charities, either generally or for particular purposes".
There could be no wider power than that.
Subsection (2) provides:
"The Commissioners may either conduct such an inquiry themselves or appoint a person to conduct it and make a report to them."
That is a wide power to do as they see fit in terms of appointing a commission of inquiry.
Subsection (3) goes into detail as to how the commission can institute the inquiry. It says that it can
"require any person … to furnish accounts"—
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that would be particularly useful in the case of these charities, having regard to the vast sums of money that seem to flow into their coffers, some £1·8 million last year—
"and statements in writing"
and further, that the inquiry can
"require any person … to attend at a specified time and place and give evidence or produce documents in his custody or control which relate to any matter in question at the inquiry"—
that is, it can require any fellow citizens to appear before it.
Subsection (4) strengthens that power by saying:
" For the purposes of any such inquiry evidence may be taken on oath".
I do not know what the commission expected Parliament to do. How could Parliament reasonably have given it a more all-embracing power, if it thinks that there is something wrong with a charity, to investigate it?
The saddest thing about the lamentable way in which the commission has conducted itself in this matter is that the commissoners are convicted out of their own mouths. One has only to contrast what they have done in this matter with what they did a few years ago, when the question of the charitable status of the Exclusive Brethren arose. I have before me a press notice issued by the Charity Commission on 11 May 1976 in which the commission sets out impeccably the law as I, The Times and many other people see it. The commissioners say:
"It is an overriding requirement of every charity that its purposes must be for the public benefit. There is a presumption that a trust for the advancement of religion is charitable, but it is a presumption which can be rebutted."
That is a succinct statement of common sense, because we all know that it is not good enough for a charity or any body just to describe itself in glowing term; its actions must live up to its words. As a statement of law, it is simplicity itself and clarity itself, and it is absolutely right.
The commissioners go on to say why they invited Mr. Hugh Francis to look into the Exclusive Brethren. They say:
"The purpose of the inquiry was to obtain evidence of the doctrines and practices of the Exclusive Brethren, including any separate sub-divisions of the sect and to advise whether any of the said doctrines and/or practices were contrary to public policy and, if so, whether they were so contrary to public policy as to render the trusts non-charitable."
It is clear what the commission is saying there. It is saying that it can look at the way in which a body is operating in practice and, regardless of what is said in its objects, it can, if it is so minded and if it is persuaded by the way in which the charity is conducting itself that it is not in the public interest, remove that charity from the register. If it was right in 1976 to take that view, why is it so wrong to take that view today?
That is why, although the consequence may be that I obtain publicity for saying so and would therefore appear publicity-crazed, I say that the Charity Commission is failing in its public duty in taking the stance that it is taking over this issue, and that it should do more. It should either peremptorily remove this organisation from the lists, as of now, or announce an inquiry with a reputable QC to conduct it. He would need to do no more than merely consider the evidence as it was given in the libel trial, because there one has an inquiry before the High Court into the activities of the sect.
I do not want to weary the House, but I should like to make one other point which arises directly from what the hon. Member for Lewisham, West (Mr. Price) was

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saying.It is true that this matter was looked at in 1975. A number of my colleagues, including the hon. Member for Lewisham, West and my hon. Friend the Member for Ravensbourne (Mr. Hunt) have kept an interest in the matter. One man who kept an interest in the matter is no longer with us—driven into retirement, some say, not least because of the harassment that he received from the Moonies. That is Paul Rose, who will be remembered with affection by many who knew him in the House and by those of us who did not know him here but knew him as a practising barrister.
Mr. Rose raised this issue several years ago, in words which can only be called prophetic in relation to the present debacle concerning the Charity Commissioners. In 1977, he said in the House that the Charity Commissioner
"refuses to consider the interlocking matrix of organisations which take advantage of the charitable status of the parent charity, the Sung Myung Moon Foundation, and the other charity and which promote political propaganda. He takes no cognisance of the pattern of fraudulent collecting and the convictions for collecting without permits … He is blissfully content to ignore the heart-rending letters of parents and families torn apart by their activities".
He went on to say that the Charity Commissioner had wider powers than he admitted to. He claimed that no one had bothered to examine the Moonies' source of finance and the relationship between the charitable and commercial aspects of the cult. He said that Moon's British followers were paying for their leader's luxurious lifestyle
"through the benevolence of the Charity Commissioner, who has eyes but will not see."[Official Report, 23 February 1977; Vol. 926, c. 1587–90.]
How well that ties in with what has been happening in the last few days, and the revelation in a newspaper today of a brand-new Rolls-Royce, costing £50,000, locked away in a garage in premises owed by the cult merely in case the Reverend Moon himself should try to descend on these shores, and—even more relevantly—be allowed in by the Home Secretary, which one hopes he would not be. That is the charitable purpose for which people go out in the streets and collect money, although many of them are dunned, by a quite different description, into contributing.
Therefore, even at this eleventh hour, I hope that the Charity Commissioners will have the good sense and wisdom to change their mind on this issue. I believe that if the commissioners did so they would have the broad support not only of those who have studied this matter closely but of anyone who is concerned that charities should be an important part of our life and should not be abused, degraded and brought into disrepute by the activities of such bodies. If the Charity Commissioner does not change his mind, we would be very wrong to let the matter lie where it does, as we did six years ago, because assuredly it will not go away; assuredly there are other bodies, equally unattractive, which are climbing on to the back of the Moonies' kind of organisation and being registered.
These religious cults are already an unnatractive disease in America. They are spreading across the Atlantic to us. This House would be very foolish if it did not take firm steps to make sure that, even though in a free society people must be free to disseminate matters, even if they are nonsense, they should not do so hiding behind the cloak of respectability of a charity and at the public expense, bringing in vast sums of money which should,
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in truth, be taxed, just as all of us are taxed, and which at present, owing to the turpitude of the commissioners, is going untaxed.
4.49 pm
Mr. David Stoddart: I am glad that the hon. Member for Putney (Mr. Mellor) brought the subject of the Moonies to the attention of the House. As he said, the cult of the Moonies has exercised our minds for some time, but without result. I wish him well in his attempts to bring their activities into the open and to ensure that they are not granted charitable status. They are probably not entitled to it. Although l cannot join him tomorrow morning when he visits the Charity Commissioners, I should be happy to render him any assistance that he might require in the course of his campaign.
A great thing about the House is that it enables individuals to seek redress. I shall oppose the Adjournment of the House—both for the Easter Recess and for May Day—until a constituent of mine has received redress. It may seem a small matter but it is important to me and it is certainly important to my constituent. He was arrested and put in a cell for 19 hours for a peccadillo. My constituent, Mr. Malcolm Hancock, had the temerity to turn right at a "no right turn" sign. He was caught, taken before the court and fined £20. As was his right, as a Britisher, he thought that the penalty was inordinately great. I do not know whether I or other hon. Members agree, but he thought so. He decided to protest, not by refusing to pay the fine—he was prepared to accept the court's judgment—but by making a small gesture.
Mr. Hancock wrote out a cheque on a piece of toilet paper. It was a very reasonable piece of toilet paper. It took the ink and the cheque was legible and legally drawn. However, the clerk of Swindon magistrates' court would seem to be a mountebank of the worst order. He decided not to accept it. My constituent sought advice from his solicitor, who said that the cheque was legally drawn and that there was nothing wrong with it. The solicitor said that anyone could draw a cheque on anything. My constituent also contacted his bank manager, who said that he would honour the cheque.
In those circumstances, Mr. Hancock decided to send the cheque back to the court. When he returned the cheque he told the clerk of the court of the advice that he had received from his solicitor and from his bank manager. He heard nothing more about it until he received a summons to appear for non-payment of fine. The summons stated that if he had paid the fine he could ignore the notice. As Mr. Hancock had heard nothing from the court about his cheque—which was properly drawn and which would be honoured by his bank manager—he decided that he had paid and that the matter was at an end.
The matter was not at an end. Not long afterwards a couple of policemen arrived at his house, arrested him and took him to the cells. They kept him there for 19 hours. Mr. Hancock suffered the indignity of being arrested in front of his neighbours and of being incarcerated. He had his freedom removed for 19 hours simply because he had turned right at a "no right turn" sign. He was imprisoned for nothing, because he had paid the penalty.
I was greatly perturbed by the case. Justice should be tempered by mercy and administered with wisdom. The clerk of the court obviously lacked wisdom. If he had any sense, he would have accepted the cheque, paid it into the bank and drawn the money on behalf of Her Majesty. My

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constituent came to see me about this issue. I decided that I should write to the Lord Chancellor and to the Home Secretary asking that the matter by investigated and put right. I believed that a grave injustice had been done to my constituent.
I have not yet heard from the Home Secretary. He is taking quite a long time to reply and I imagine that he is undertaking an in-depth inquiry into the actions taken by the clerk of the court. I wrote a most respectful letter to the Lord Chancellor. I did not even say that I should be obliged if he investigated the matter. Like Uriah Heap, I said that I should be grateful if he would investigate the matter. However, he wrote me a letter that made all sorts of suggestions against my constituent. He even suggested that my constituent had insulted Her Majesty. But Mr. Hancock is the most ardent royalist. The letter also said that the incident might teach my constituent that the manners of a gentleman are not incompatible with a sense of humour. I had not expected such a comment from the Lord Chancellor. I have replied and I do not intend to reply further.
I regret that Her Majesty has been brought into this issue. She has not only a sense of humour but the wisdom to ensure that such incidents do not result in subjects being arrested and incarcerated for 19 hours. She has too much wisdom for that. In addition, Her Majesty has good business sense and knows that when any form of money is offered it should be accepted with alacrity and placed in the bank or spent on a good cause. I am concerned about the way in which my constituent was treated by an intolerant and oppressive clerk of the court. That employee of the court took a decision that led my constituent to suffer indignity. It should be made clear to the clerk of the court that he acted unwisely and that he should not do so again. He should not act in an intolerant and oppressive fashion against those who pay their fines, even if they do so in a way that he had not expected. It has to be made clear that he has no right to stand on his dignity because, by so doing, he may undermine the dignity of the court which he serves and of which he is not the master.
I hope that by bringing this matter to the attention of the House we shall get more circumspect actions by the clerk to the Swindon magistrates' court and that it will be made clear to him that Parliament does not approve of his oppressive attitude.
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Sir Ronald Bell: It is a pity that the House is to adjourn for Easter without a proper debate on the matter raised by the hon. Member for Swindon (Mr. Stoddart) or on that raised by my hon. Friend the Member for Putney (Mr. Mellor).
I invite the attention of the House to a different matter. I suggest that it is wrong that the House should adjourn for the Easter Recess without having a debate on immigration and its related subjects. It is becoming the forbidden subject. I do not remember when we had the last debate on immigration in Government time or, indeed, on a Supply day. Occasionally, the matter is raised by hon. Members on one side or the other, but it is usually on special and almost adventitious occasions such as Adjournment debates or on the Consolidated Fund Bill at about 4 o'clock in the morning.
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I suggest to my right hon. Friend the Leader of the House that avoidance of the subject should continue no further. Views on this matter differ considerably. Today we heard the hon. and learned Member for Leicester, West (Mr. Janner) give his opinion about race relations and the conduct of people in regard to immigration. I do not agree with much of what the hon. and learned Gentleman said, but that is beside the point. We should express our views on immigration and race relations legislation and practice instead of being subjected to this conspiracy of silence. The public, who feel strongly about this subject, are bound to feel that Parliament is not representing their anxieties or currents of opinion.
The strength of public opinion on the matter arises from manifest and recorded facts. This is not the time to record them. This is more the time to say that they should be debated before the House rises for the Easter Recess. My right hon. Friend should bear in mind the state of affairs revealed by the Registrar General's statistics. He should reflect on the startling increase in the immigrant or immigrant-descended population, its concentration in certain areas and the consequences which flow from that concentration. We saw one of the consequences yesterday, when 10,000 people of apparently Asiatic extraction took part in a procession through the centre of London. A few weeks ago there was an alarming procession which was brought about by a feeling of indignation about a fire incident in South London. There have been other such demonstrations. My right hon. Friend must therefore realise that a great deal of suppressed feeling is not being given expression in Parliament.
The Office of Population Censuses and Surveys tells us that in the whole of the Greater London area, including the residential suburbs which used to be in Hertfordshire, Surrey, Kent and Middlesex, one birth in every three is to a mother not born in any part of the United Kingdom. When such figures are revealed, who can say that Parliament is entitled to ignore the matter indefinitely? One-third of all births is not necessarily to coloured immigrants but to immigrants or immigrant-descended mothers, whether white, Asiatic or black, not born in the United Kingdom. We should also bear in mind that children born to mothers who were born in the United Kingdom but whose parents came here as immigrants go on the other side of the statistics. Therefore, we are talking of one-third of all births, representing a change inside one generation. Figures for certain parts of London are much higher. In Westminster the figure is about 63 per cent.—two births out of three. In Kensington and Chelsea the figure is about 65 per cent. That represents a staggering rate of change in our population.
The House has not directed its attention to this matter for months—indeed, almost years. It is almost beyond belief that we adjourn for the Summer, Easter, Whitsun and Christmas Recesses without talking about this subject. I know why no one wants to talk about it. It is because it has drifted on for 25 or perhaps 30 years and it has always been awkward. No one has wanted to do anything about it. We can take action on this subject only by being discriminatory. Only by discriminating between X and Y can we do anything about it.
One of the oddities of our generation is that "discrimination" has become a bad word. It used to be a good word. I have often said that discrimination is the characteristic of life—animal, vegetable or whatever. Life is discrimination. Without discrimination, there is no life.

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We cannot do anything significant in almost any sphere of human affairs except by discriminating. If we are concerned about the rate of change in our population we can slow it down, stop it or reverse it only by what can be called discriminatory action. Because that word has been lost, as it were, to a particular school of thought, nothing is done.
In the end, we reach the point where only minorities have any rights in this country. Nothing is being done and nothing will be done unless the House compels it, because it is too awkward to think of what should be done.
Immigration and the natural increase in the immigrant-descended population are increasing the coloured population of this country by about 110,000 a year. The white indigenous population is declining by about 110,000 a year, taking one year with another. I am using real, not imaginary, statistics. If nothing is done the result will be calculable. Nothing will be done unless Parliament has the courage to face the problem, to discuss it and to decide what should be done, how much we accept and how much we do not accept. That is why I make the brief protest that, yet again, Parliament will adjourn for the Easter Recess without a debate on this vital subject.
5.10 pm
Mr. Michael Neubert: My hon. and learned Friend the Member for Beaconsfield (Sir R. Bell) will perhaps forgive me if I do not pursue the issue of New Commonwealth immigration. That is not because I lack respect for the importance of his arguments but because the debate is traditionally varied in the relative importance of the subjects raised. If I try to assess where my subject falls between Commonwealth immigration on the one hand and the perils of paying one's fines by cheques written on toilet paper on the other I place it somewhere in the broad middle of that spectrum. It is the Civil Service dispute.
For at least 500,000 people today the best news will be that the civil servants have decided not to strike over the Easter holidays. Those people will be travelling through Britain's airports or seaports at that time. They will be relieved to hear that decision. The decision is well-advised, because nothing is more likely to make enemies and influence people against what is already an unpopular cause than a further bout of the spiteful sport of disrupting travel arrangements on bank holiday weekends.
We are told that the dispute is about an offer of 7 per cent. made by the Government to the Civil Service. In all the circumstances, that offer is entirely reasonable. We are told that in the past two years civil servants have, on average, enjoyed an increase in remuneration of 50 per cent. To add a further 7 per cent., making a total of 57 per cent., is a substantial increase, whatever the initial salary or wage received at the beginning of that time.
When everyone in public and private industry business and commerce is being asked to exercise restraint and to accept, at the most, single-figure settlements, it is correct for the civil servants also to take that view in the best interests of the country and their own reputation as loyal servants of the Crown. Civil servants enjoy considerable job security—far greater than is enjoyed by those who were made redundant in recent months by private industry. In return for that security and the many perquisites, especially index-linked pensions—something that makes many angry, because they have not a hope in 1,000 years
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of such a provision for their retirement—the Civil Service might be advised to settle gracefully, as so many others have had and will have to do.
Comparability, as an issue in the dispute, is a matter which must be raised again by the Government in the negotiations. That concept has been more observed in the breach than in the implementation in recent years. There is a certain inconsistency in the Government's commitment to priority for the creation of wealth that they are persisting with the idea that conditions in the public service should be comparable in every way with the conditions of those who create the wealth to pay for the public service. Surely, if we are to give the necessary priority, that must imply that those whose welfare depends upon the wealth created by others must give higher priority to those who created the wealth in the first place. Without wealth there can be no welfare. That sums it up in a few words.
The dispute has raised suggestions about the need for "no strike" agreements for key workers in essential industries. It is clear from the nature of the strike action that the time is ripe for serious consideration of that. My right hon. Friend the Leader of the House will be reassured that I am not raising the issue solely with him. I have raised it at Question Time with the Prime Minister, the Chancellor of the Exchequer and the Minister of State, Civil Service Department. All have been fairly robust in their response to the idea. But all that the Minister of State would say was that the matter was not excluded from the negotiations but that the unions did not wish it to be considered, or did not give the idea any approval. I do not think that that is good enough.
The dispute has, for the first time, raised the issue of the traditional loyalty of our public servants to the nation's interests. If those loyalties are in question, now is the correct time to broach the issue whether "no strike" agreements should be built into the conditions of employment for the relatively few people in the public service who can greatly damage the nation's interests. A few are able to push the Government's economic strategy off course or to reduce the nation's defence capability. if they wish. It can be argued that in a democratic society we must depend on restraint and, ultimately, on consent. That is true, but we are reaching the point where those leading the Civil Service unions have decided that they will pull out all the stops in a highly selective, sophisticated strike action which concentrates on those few pressure points where a limited number of people can do the most damage.
We have seen a handful of people involved in action—only three are said to be out at Portland naval base, and nine at the Ministry of Defence pay computer. Those are the small numbers who have the power that in the past the House has sought to redress because an imbalance of power in society is where tyranny begins. We cannot accept the tyranny of people well placed by the use of computers to throw the switches and disrupt the country's life day by day and do lasting damage.
Less than two years ago a dispute in the billing services of the Post Office caused problems with the borrowing requirement. That involved about £100 million. We are now told that up to one-quarter of the Government's revenue in the past month may have been lost by the civil servants' action. The unions will claim that it was more, but that will probably be bluff.
In The Sunday Times yesterday it was reported that the limited nature of the action meant that of those called out

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each individual was able to affect the Government's revenues by as much as £800,000. That is putting a figure on the power of one individual to influence economic events.
I hope that my right hon. Friend will be able to assure me that the lesson is not lost on the Government. Although it may not be diplomatic or appropriate to pursue that as part of the current negotiations, it will be recognised that the issue will not go away. It will become increasingly important. The Government give ample scope for further introduction of computers. It is a matter of grave indictment that we have not made further progress in Government and with the unions in bringing computers into activities that are crying out for that application. PAYE is one example.
The more we go over to computers, the more individuals will have the power to disrupt our daily life and the Government's business. In the last week we have seen a dramatic example of how one man with his finger on the button can influence the world. The officer carrying the bag with the code that could mean atomic annihilation was separated from the presidential finger by the would-be assassin's bullets last Monday. The President was separated from the code for half an hour and by a mile. One hesitates to think what might have happened in that half an hour had there been an attempt by the Soviet Union to start a world war. That should bring home to us that we must come to terms not just with computers but with computer personnel.
I am not encouraged by the Government's reaction, represented by seven or eight perfunctory paragraphs in the Green Paper on trade union immunities. Those milk and water sentiments suggest that the issue will be put aside and left to gather dust. Is that the way to respond to the commitment in our manifesto:
"In consultation with the unions, we will … seek to conclude no-strike agreements"
with key workers in essential industries?
Of course there are difficulties in identifying those who would be subject to such agreements. The number could be limited and there are precedents in the Armed Forces, who cannot strike in law, and among merchant seamen, who may not go on strike while at sea. A similar situation is developing in our civil life and I hope that efforts will be made to negotiate no-strike agreements.
If the dispute is not settled this week it is likely to continue through the Easter Recess and perhaps even past the May Day bank holiday. I hope that the Government will give the matter serious attention and will lay their cards on the table, even if the unions do not seem prepared to play the hand at this stage.
Faced with the evident intention of civil servants to disrupt life and to make things as difficult as possible for democratic government, we surely have a right to insist that no-strike agreements should be on the agenda. I look to my right hon. Friend the Leader of the House and his colleagues to make progress on the commitment in our manifesto.
5.21 pm
Mr. D. N. Campbell-Savours: I do not wish to follow the hon. Member for Romford (Mr. Neubert) down the route that he sought to take us, but I remind him that his Government were elected on a
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platform of free collective bargaining, to which many of us took great exception, because we realised that they would not implement it, and indeed they have not done so. Much of the exception taken by civil servants has been to the fact that the Government have sought to withdraw from their commitment and have introduced cash limits which are causing such discomfort to so many.
I oppose the Adjournment and wish to speak on a matter similar to that raised by the hon. Member for Romford, concerning the Government's commitment to spend money in areas of great concern to our people.
If hon. Members left the Chamber and walked into the Central Lobby or into the streets of Westminster they would find many thousands of trade unionists who have come from all parts of the United Kingdom to express their view that our transport industry is being subjected to heavy pressure, which is damaging the transport infrastructure.
The delegations have come not so much to press the need for higher wages—that is the Conservatives' traditional interpretation of the role played by trade unions—as to take a far more important role in referring the public and Parliament to the need for changes that have a direct bearing on trade union members and on the public services that they provide.
The transport workers who are lobbying hon. Members draw attention to the fact that in the past one and a half years £204 million has been taken out of the Government's transport budget and that a further £220 million is to be withdrawn over the next two years. They also point out that only 29 per cent. of British Rail's budget is met by the public purse, whereas 39 per cent. of Germany's railway budget is supported by the State and that the figures are 44 per cent. in Holland, 45 per cent. in France, 50 per cent. in Belgium and 68 per cent. in Italy.
By refusing to support British Rail with adequate finance the Government are damaging the infrastructure by forcing up fares, with the result that travellers can no longer afford to use that vital public service. That is the reason for thousands of trade unionists being at Westminster today. They are drawing attention to the considerable damage to BR's infrastructure.
Those workers say that they are supported by the chief inspector of railways, who has drawn the attention of Parliament to the fact that safety standards of British Rail are endangered. The right hon. Member for Taunton (Mr. du Cann) drew attention during the Budget debate to the need for a massive public expenditure programme and proposed a major investment in British Rail's electrification programme. The right hon. Gentleman is supported by the review body, which has assembled an immense amount of information to justify early investment in electrification.
The right hon. Gentleman is also supported by the Railway Industry Association, which says that there would be a considerable export spin-off of orders worth perhaps £250 million if Britain set up a shop window of what is possible in an electrification programme. The right hon. Gentleman, or perhaps his hon. Friend the Member for Hornchurch (Mr. Squire), also supported the idea of developing the Channel tunnel programme, which is supported by the Transport Select Committee, which has pointed out that the spin-off to the British construction industry would be considerable and would provide the vital jobs that the trade unionists lobbying hon. Members are demanding from the Government.

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The trade unionists also request an examination of the Monopolies and Mergers Commission's report, which suggested that additional Government money should be fed into London commuter services, not only to protect jobs but to provide additional services for London commuters.
I have a constituency interest that would benefit from increased expenditure. It would be ill-advised for the House to go into recess before decisions are taken and recommendations made about Government commitments in the matters to which I wish to refer.
The Leyland-National plant in my constituency produces the Titan bus, which was previously made at the Park Royal plant of British Leyland in London. The Workington factory has also undertaken the construction of the new rail bus, which is to replace the diesel multiple units that are in operation throughout the United Kingdom. Many of the DMUs are between 17 and 20 years old; they are out of date and due for renewal
I asked the Secretary of State for Transport what action he intended to take to ensure that essential branch lines in rural areas throughout the United Kingdom should continue and he replied that he was not prepared to see substantial cuts in the rail passenger network. He added:
"I am glad to see that the board is now looking at new ways of reducing costs on rural branch lines. I am now discussing with it a demonstration project for developing and proving low-cost operating techniques, including the running of lightweight rolling stock, on a rural line."—[Official Report, 11 February 1981; Vol. 998, c. 369.]
That lightweight rolling stock is the rail buses that are to be produced at the Leyland-National plant in Workington. Before we go into recess the Government should decide to bring forward major orders for the plant to help it during a particularly difficult period.
Unemployment in my constituency is due to accelerate dramatically over the next few weeks so we look to public expenditure, in the absence of consumer demand, as the only way of creating conditions in which people can be put back to work.
I wish to refer to rural lines in Cumbria as a whole, because British Rail's regional representatives recently invited Cumbria Members to a luncheon in London. During that meeting it was drawn to our attention that track, signalling and rolling stock maintenance in Cumbria stood at £13 million in arrears and that total expenditure last year was only £400,000. That is the measure of the problem in one small locality. It is a problem that stems from the unwillingness and inability of the Government to create a sufficient investment programme for British Rail.
The implications of the Transport Act 1980 have caused problems in rural areas. The effects of the Act are feeding through the system. It is incumbent on the House to review the operation of the Act in rural areas before we go into recess and to establish the considerable damage that is being done to bus transport networks throughout the United Kingdom. These are matters that are referred to regularly in correspondence to my right hon. Friends and they must be referred to in correspondence to Conservative hon. Members. I hope that the Government will take fully into account the vital needs of the British transport industry before they seek to adjourn the House.
5.31 pm
Mr. Peter Bottomley: I intend briefly to raise two or three issues. Before taking up those issues, I refer to part of the speech of my hon. and learned
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Friend the Member for Beaconsfield (Sir R. Bell). He talked about calculable effects—I am not sure whether he was talking about immigration or births—but did not calculate what the effects would be on the population. If we have the debate for which my hon. and learned Friend asked I hope that the Government will produce long-term figures and not merely births for this year.
I give notice that I shall raise in the House the plan to expel pensioners, or those of near pensionable age, from council houses in which they have lived for many years while supporting elderly members of their family—for example, caring for a mother of 99 years of age. Having done that, their reward from the community is to be told that they must leave the house in which they have lived for perhaps over 40 years. I shall raise the matter i n the House but I shall bring it especially to the notice of the local council in Greenwich.
I turn to two of the issues that I wish to raise briefly. First, the debate is in part about whether the House should take May Day as a holiday. I renew my plea that the so-called May Day should be changed. It will not have escaped the notice of the House that from 1979 to 1999 May Day will not fall on a Monday except in two years—1989 and 1995. On two occasions May Day will not fall on the Monday on which we normally take our day off.
We should get rid of this day off, move it back a week or move it closer to January, so that there are four weeks between the so-called early May holiday and the Whit sun holiday. It seems ludicrous that except for the years when Easter falls remarkably late we should have a holiday in May.
I hope that it will be possible to have discussions between those who have an interest—namely. the Government and the Labour Party, which introduced the May Day holiday—on whether it is possible to have the May Day holiday in the week before the one in which we have learnt to have it. I recognise that May Day means a lot to the Labour movement and to those who knew that there was a holiday on or about May Day in earlier years. It seems that it would be to the convenience of both the House and the country if we had the holiday a week earlier. If we had it a week earlier—I am sorry that my hon. and learned Friend the Member for Beaconsfield is not in the Chamber—it would fall nearer to St. George's Day, which means a great deal to some parts of the United Kingdom, although not necessarily to all
The second issue that I wish to raise, which is far more important to the country generally, takes account of the fact that many trade union conferences are held over Easter and during that time of year generally. It is clear that members of trade unions and many others have a great interest in reducing the rate of inflation. It is clear that there is an association between the level of pay settlements and what happens in the rest of the economy, irrespective of the Government's monetary stance.
It is not my intention to say anything about monetarism or monetary policy. I merely say that we all have a common interest in the consequence of pay settlements being discussed rationally. That applies to specific industries and to the combined effect of pay settlements throughout the United Kingdom. I have noticed no motions at trade union conferences that argue for a general reduction in pay claims or the desirability of getting lower pay settlements. If we have average pay increases of 10 per cent. during the current year we shall be in a worse

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position, given the Government's monetary stance, than if we had settled for an average of 5 per cent. or even 0 per cent.
We have a trade union movement, a Trades Union Congress and a Government that are opposed to an incomes policy. However, that does not mean that we can all chase pay claims without any regard for the effect that the settlements will have on our jobs or on the jobs of others. If we ignore the consequences of pay settlements generally, it will be necessary for central changes to take place in the rest of the economy. That will follow if the Government do not give way on their monetary strategy. I hope that members of the Government will be joined by members of political parties in talking about the importance of trying to generate at least an understanding within trade union conferences of the combined effect of their intentions.
We have all known from the days of Keynes and others about the difference between investment intentions and what actually happens. The same applies to pay intentions. I hope very much for the sake of jobs in Britian—
Mr. Winnick: The hon. Gentleman should recognise that the Government's incomes policy is undoubtedly high unemployment. It is the same policy as the one that was operated in the 1930s. How can he explain how many low-paid workers—for example, those in the textile industry—have been made redundant? No one can argue that they have priced themselves out of their jobs.
Mr. Bottomley rose—
Mr. Speaker: Order. I hope that the hon. Member for Woolwich, West (Mr. Bottomley) will link his remarks to the Adjournment of the House and will not engage in a broad economic debate.
Mr. Bottomley: I am grateful, Mr. Speaker. I do not intend to respond to the intervention of the hon. Member for Walsall, North (Mr. Winnick). It was not related to my argument. This is one of our few opportunities to make a plea, to engage the interest of the Front Benches and try to persuade the country to recognise the importance of getting the unions to debate and realise the consequences of their actions.
I recognise that the right hon. Member for Down, South (Mr. Powell) and I do not always have the same views on what Members of Parliament should be paid. I hope that he will not disagree with me too strongly. Members of Parliament are likely to vote themselves a pay increase of 6 per cent. in the summer, on the ground of setting an example. Surely it would be more sensible if we set the example earlier in the pay round. Even if the increase came into effect in June or July we could discuss a motion a long time before June, preferably at the beginning of the pay round, and set our change in salary for three, six or nine months ahead. In that way we would be able to set an example rather than follow behind.
5.39 pm
Mr. John Silkin: I have found the debate of unusual interest, as I looked upon it as a test of whether, despite what successive Governments have done, we should have Adjournment debates of this nature immediately before Consolidated Fund Bill debates. I have come to the conclusion that we should not. We
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cannot blame those hon. Members who, seeing that they are likely to have their Consolidated Fund Bill debates late at night or early the next morning, decide that that inconvenience may be circumvented by talking about the subject in a debate such as this. Other speakers will tend to say "There are hours ahead of us, so we can speak at length in this Adjournment debate".
Today's debate has shown that many constructive speeches—and some destructive speeches—can be made in a relatively short time. Today there have been 12 speeches in just over two hours, and all of them, whether or not one agreed with them, were very interesting.
The most important and topical matter was that raised by my hon. Friend the Member for Walsall, North (Mr. Winnick)—the question of Poland and the possibility of Soviet intervention in that unhappy country. When Soviet troops entered Czechoslovakia in 1968 the House was in recess, and it was recalled. I hope that the Leader of the House will bear that thought in mind if there should be, as I hope there will not be, another intervention.
I was not so much in sympathy with the interesting point made by the hon. and learned Member for Beaconsfield (Sir R. Bell), that we have not sufficiently debated the question of immigrants or the immigrant-descended population. Short of spontaneous generation somewhere in these islands thousands of years ago, I should have thought that virtually everyone in the history of the United Kingdom was an immigrant-descended person. You, Mr. Speaker, and, I understand, the hon. and learned Gentleman himself, may be termed English immigrants at least, as both of you hail from the Principality. The hon. Member for Woolwich, West (Mr. Bottomley), who so eloquently discussed May Day, got the wrong patron saint. It is not St. George but St. David who is the hon. and learned Gentleman's patron saint.
Sir Ronald Bell: May I correct the right hon. Gentleman? I am of purely Scottish descent, although it is true, Mr. Speaker, that you and I had a geographical conjunction early in our careers.
Mr. Silkin: Yes, but I believe that the hon. and learned Gentleman first saw the light of day in Cardiff, so he has two immigrant-descended processes in his background. The Scottish part makes him immigrant-descended in Wales, and as he was born in Wales that makes him immigrant-descended in England. The hon. and learned Gentleman's fears about lack of debate on the subject can easily be allayed by his taking part in Report stage debates on the British Nationality Bill, when all these matters will certainly be discussed.
My hon. Friend the Member for Swindon (Mr. Stoddart) raised an interesting question about one of his constituents, inevitably putting those of us who were fond of reading A. P. Herbert's "Misleading Cases" in mind of the milk-white cow that was presented to the Inland Revenue in full payment. I believe that the cow was properly endorsed, as I am sure the cheque that my hon. Friend quoted was properly endorsed. No doubt the Leader of the House will take my hon. Friend's just worries to heart and reply to him.
An interesting point about the Moonies was made by the hon. Member for Putney (Mr. Mellor). I am sure that the Leader of the House will have something to say about it. The definition of charitable trusts and what is a religion

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for the purposes of charities has plagued us and our ancestors since the days of Queen Elizabeth I, in whose time the original definition of a charity was established.
The other matters raised in the debate fell into two basic camps, apart from the skirting of the two by the hon. Members for Romford (Mr. Neubert) in his reference to the Civil Service dispute. The two themes were the Government's intervention in the nationalised industries and the question of unemployment. If one asks the Prime Minister to carry out her undertaking about the price of electricity in Northern Ireland, that means Government intervention. I believe that the right hon. Member for Down, South (Mr. Powell) was right, particularly in regard to a Province that is suffering more desperately than any other part on the United Kingdom, but the Government will have to intervene.
The hon. Member for Welwyn and Hatfield (Mr. Murphy) talked about the plight of commuters. In reality, he was talking about the Government's intervening, which I believe to be right. It is interesting that both he and the right hon. Gentleman are asking for Government money, in the last resort. I know that the right hon. Gentleman says that the matter can be dealt with by a mere allocation, but suppose it cannot; suppose that it can be done only by the expenditure of taxpayers' money. To my mind, it will still be right to do it.
Mr. J. Enoch Powell: I understand that is is likely that that is how it will be done. What I was suggesting was that there were much better and more reliable ways of doing it, by integrating the electricity industry in Northern Ireland with that of the rest of the United Kingdom.
Mr. Silkin: I understood what the right hon. Gentleman said. I merely said that "in the last resort" he would go for fairness rather than any other means.
The hon. Member for Welwyn and Hatfield said that in order to bring about fairness we should make commuters' fares tax-deductible. In other words, the taxpayers should subsidise the commuter. The hon. Gentleman said that, after all, the taxpayer subsidised, at any rate to a certain degree, those who bought houses on a mortgage. I understand the hon. Gentleman's point, but it would be better if the taxpayer subsidised the industry. My hon. Friend the Member for Workington (Mr. Campbell-Savours) quoted the subsidy of British Rail, which is what we are talking about in Welwyn and Hatfield. In the United Kingdom the railways receive 29 per cent. of their revenue from the public purse, compared with 60 per cent. in Italy and various figures in between for Germany, Belgium and France. Those figures show clearly the way in which we should be going.
All the other speeches came down, in one way or another, to the question of unemployment. In Great Britain there is the terrifying figure of 20 per cent. in the Principality. I do not know what the figure is in Northern Ireland, but it is certainly the worst in the United Kingdom, and one that we should be ashamed of. When we see what is happening in that unhappy part of our country, we cannot blame—rather, perhaps we can blame, but we can at least understand how it arises—people who, given that degree of unemployment and despair, tend to take the gun into their hands, when they should be dealing with the matter in other ways. [Interruption.] I did not say that one should sympathise, but one can understand.
Mr. J. Enoch Powell: I said that the incursion into Northern Ireland of individuals who are determined to change the political status of that part of the United Kingdom by violence had nothing to do with unemployment.
Mr. Silkin: I do not dispute that. That is not what I was saying. I was saying that such unemployment and despair are bound to encourage those who seek extreme solutions to problems that might not otherwise exist.
I come back to what is happening in Great Britain and to what was said by my hon. and learned Friend the Member for Leicester, West (Mr. Janner). He said that the outbreak of racial violence and insults was allied to a great extent to unemployment and the lack of Government aid to those areas where unemployment was highest. I am not saying that it is the only factor, or that it is the only factor in Ulster, but it is a factor. The right hon. Member for Down, South and I lived through and served against a monstrous tyranny which grew up 45 years ago because there was so much unemployment that men resorted to extreme methods. We spent much of our youth trying to stop that tyranny.
Mr. Powell: I am glad that the right hon. Gentleman treats the matter so seriously, but I must point out that violence in Northern Ireland progressively diminished during the years in which unemployment increased
Mr. Silkin: No doubt that is an important issue, but I repeat that unemployment and bad conditions encourage those who use or want to use extreme measures. From that I shall not resile.
This important debate has shown why the House should not adjourn for the Easter Recess. We all know, of course, that it will adjourn, but we also know that the problems will still be there when we return after Easter and that the country requires them to be dealt with as expeditiously as possible. More than half of those who have spoken in this debate have spoken about unemployment and the economic difficulties that need to be solved.
The right hon. Gentleman the Leader of the House rightly criticised the then Labour Government when, during the debate on the motion for the Easter Adjournment in 1978 he spoke about the high unemployment that existed at that time. He now represents a Government under whom unemployment has nearly doubled since that time. It is now up to him and his Government to see that unemployment comes down as quickly as possible.
5.53 pm
The Chancellor of the Duchy of Lancaster, Paymaster General and Leader of the House of Commons (Mr. Francis Pym): I thank the right hon. Member for Deptford (Mr. Silkin) for what he said in his opening remarks about the nature of this debate and the way in which a dozen or so right hon. and hon. Members have in a short time presented important issues. He said that he thought it right not to have the debate before the Consolidated Fund Bill.
The hon. Member for Walsall, North (Mr. Winnick) talked about the timing of the debate, being about 10 (lays before the recess. In my view, the motion ought to be taken at the time and on the day that is most convenient to the business of the House during the two weeks before the recess begins. In the light of the business that I have

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announced and that we expect to take place next week, I believe that this is the best time. No principle is involved here. It could have been next Wednesday, Thursday or Monday.
The hon. Member for Walsall, North—like the right hon. Member for Deptford—thought that what was happening in Poland was the most startling and significant event affecting the world. He said that the Russians would not wish to use force if they could avoid it. I am sure that he is right. He spoke about the harm that could be done to East-West relations, and I agree with him. Her Majesty's Government have emphasised in statements, and in concert with our European partners, that Poland must be allowed to resolve her problems without outside interference of any kind. It has been stressed at every appropriate opportunity that any intervention would have grave consequences. All of us in the Community have said that. We have also shown sympathy for Poland's plight. We have provided interim help in the form of new export credits for the purchase of food and we have assisted in debt repayment. We hope, none the less, that there will be no invasion and no attempt by anyone to interfere with events in that country.
As the right hon. Gentleman said, unemployment was the anxiety most frequent mentioned in the debate. High unemployment has many causes. This debate is not the place in which to analyse its causes, but unemployment has been caused—in part, at least—by the worst world recession that we have had for 50 years. I do not say that that justifies it, but it is a major contributory factor to the increase in unemployment. The root causes are the deep-seated low productivity and poor labour relations that successive Governments since the war have tried to combat. In the face of the worst world slump that there has been for a long time, the British economy has been at a greater disadvantage than many other economies.
The hon. Member for Neath (Mr. Coleman), who opened the debate, was the first to draw attention to a particular closure and its effect on his constituency. I assure him that we are acutely conscious of the serious consequences of that closure—if it takes place—to employment in that area. I understand the impact that it will have on Neath and the surrounding area. There is no doubt that the cause is the unacceptably large financial loss of the mill. The decision to close is the decision of a private company, and it is not one in which the Government are involved, although the Department of Industry was told about it.
We have told the company that if a way can be found to re-establish the plant on a sound basis we shall be happy to assist in whatever way we can. However, any selective assistance could relate only to a programme of new investment aimed at safeguarding or expanding employment. I repeat that we are acutely conscious of the effect of the closure and that we shall help in any way that we can.
The hon. Member for Down, North (Mr. Kilfedder) spoke about the serious unemployment in Northern Ireland. Unemployment there is perhaps worse than anywhere else in the United Kingdom. It is a serious problem, added to all the other worries that affect the Province. New jobs can be established only in a stable and viable economy, and it is the Government's objective to follow policies that will have that result.
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We have sought and will continue to seek new investment for Northern Ireland, whether from home or overseas, and I assure the hon. Gentleman that in the mind of the Government, and especially in the minds of my right hon. Friends the Secretary of State for Northern Ireland and the Secretary of State for Employment the needs of Northern Ireland are extremely important.
I mention the hon. and learned Member for Leicester, West (Mr. Janner), who is not now in his place. He referred to some of the social consequences of unemployment, which again are very much in our minds. He stressed the fact that good race relations could conceivably be put in jeopardy if we were not very careful. The desirable aim of achieving good, sound and easy race relations is the objective that all Governments wish to follow, and we are no exception. We are committed to a society in which all individuals, whatever their race or creed, have equal rights and equal opportunities. Members of the ethnic minorities who are born here and who have settled here have as much right as anyone else to live here peacefully. Britain is their home. I assure the hon and learned Gentleman that we have this problem very much in mind.
My hon. and learned Friend the Member for Beaconsfield (Sir R. Bell) raised the matter of immigration, which is a subject related to race relations. He complained that the House had not had a substantial debate on this subject for a long time. He made the very fair point that the different views held about it and its different aspects should find expression in the House. He mentioned the report of the Registrar-General and other aspects of the subject. He made a very strong case for a debate, and I shall take it on board as a request from him.
Over the years there have been a great many debates, although I agree that there has not been a substantial one lately. But there will be opportunities for one limited aspect of the subject to be debated during the Report stage of the British Nationality Bill. I should not like to hold out any undue hope of a debate in the near future, because that would be misleading my hon. and learned Friend. However, I thought that he made a very strong case, and I shall take it on board for the future.
The right hon. Member for Down, South (Mr. Powell) raised two matters of importance to Northern Ireland. I say at the outset that I am grateful to him for giving me notice of his intention to refer to them. He spoke of the undertaking given by my right hon. Friend the Prime Minister about the supply of electricity in Northern Ireland and said quite fairly and truly that, since that statement, nothing had been heard. He pointed out the urgent need for a decision and an announcement about how this would be done, what was to be done, and when it was to be done.
One of my right hon. Friends—I think it was the Secretary of State for Northern Ireland—hopes to make a detailed announcement before the end of this month. If that proves to be the case, it will have been approximately two months from the time that the announcement was made. Whereas one would always hope to achieve a more rapid response, I think that the right hon. Gentleman will feel that that is a reasonable response. The matter is being attended to and prepared for as urgently as possible. I think that that is the earliest time when we can give a detailed statement.
As for the right hon. Gentleman's own comments about how the Government's objective might be achieved, I assure him that I shall pass them on to my right hon. Friend

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the Secretary of State while he is considering the methods to be used. If we can get this statement by the end of this month I hope that that will allay the uncertainty at the earliest possible moment.
The right hon. Member for Down, South then referred to gas supplies and the announcement made in 1979 by the Government that we would not provide funds for building a natural gas pipeline from Scotland to Northern Ireland. The draft order empowers the Department of Commerce to set up a scheme to aid consumers to convert their appliances to other fuels. The right hon. Gentleman was correct when he pointed out that, since then the possibility has arisen that natural gas might be supplied from the Republic of Ireland. That possiblity is being followed up as a matter of urgency. However, in view of the uncertainty surrounding this option the Government are continuing to plan on the basis that the gas industry in Northern Ireland will be run down. That does not answer the right hon. Gentleman's point, but a further definitive statement about it will be made as soon as possible.
The right hon. Gentleman may like to know that for planning purposes the Government are not assuming that the possibility of a supply from the Republic will not be pursued. If, in the end, it turns out to be a viable, sensible plan of action, there will have to be a change. But the uncertainty about it justifies us in approaching it in the spirit that we are adopting towards it.
Then we had two matters about British Rail. My hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy) spoke about commuters. Commuters in his part of the world, which I know fairly well, are, in terms of service and comfort, probably better served than are many other commuters, even if they have to pay a little more. Obviously I cannot make any comment about tax relief on fares, or the alternative suggested by the right hon. Member for Deptford, but I shall see that my right hon. and learned Friend the Chancellor of the Exchequer is seized of the remarks of my hon. Friend and the right hon. Member and considers them. I think that it is unlikely, just after a Budget, that such a change would be contemplated, but my hon. Friend's point is noted.
The hon. Member for Workington (Mr. Campbell-Savours) is one of those Opposition Members who wanted more and more money to subsidise British Rail, and I think that the right hon. Member for Deptford gave some support to his hon. Friend in that regard. Taxpayers feel that they are probably paying enough taxes at the moment. I am not sure whether they want to find any more money. However that may be, it is fair to point out that this Government have done rather well by British Railways. We have adjusted the board's external financial limits for 1980–81 and 1981–82 to take account of its worsening business position due to the recession. We have provided that assistance, and we have maintained the board's investment ceiling at the same level, in real terms, as that judged adequate by the last Government.
At the moment the important question of the infrastructure is very much a live issue with my right hon. Friend the Secretary of State for Transport. It is under active consideration, and in due course a statement about it will be made to the House. It is all very well to say how easy it would be to provide this industry or that industry with more money; the question is how it is to be provided. The Government have provided more finance for the nationalised industries than they would have liked to provide. We have done so because of our belief that those
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decisions were in the best interests of the country and in the best interests of the economy, private and public. In the circumstances of the recession, they were unavoidable.
My hon. Friend the Member for Putney (Mr. Mellor) raised, in a particularly interesting speech, the subject of the Moonies, their charitable status and their activities. He expressed opinions about them that drew much support from both sides of the House. My hon. Friend will not expect me to answer his points now. I am not competent to do so. All that I can say is that this case and all the circumstances and details surrounding it will receive a great deal of attention inside the House and outside it, from lawyers and all kinds of bodies. There is no doubt that what has been revealed by the case has caused a great deal of anxiety. My hon. Friend made a useful and important contribution to the consideration of those issues.
I do not wish to be drawn far into the problems of an individual constituent of the hon. Member for Swinclon (Mr. Stoddart). I notice that this triviality—it does not seem like that to the hon. Gentleman's constituent. but it must be admitted to be a small matter—has been elevated to a high level, and I have no doubt that in due course my right hon. Friend the Home Secretary will reply to the hon. Gentleman about it.
My hon. Friend the Member for Romford (Mr. Neubert) talked about the Civil Service strike and the desirability of negotiating no-strike agreements. He rightly drew attention to the importance of the work of civil servants and assured me that this issue would not go away. I agree with him. The subject of no-strike agreements is not excluded from any discussions about future pay arrangements, which is at the heart of the negotiations now taking place with the Civil Service unions. Obviously, no-strike agreements raise substantial issues. However, they are not excluded from the discussions. We are anxious to pursue the possibilities and to discuss the subject with the trade union side.
The offer of 7 per cent. is, in the Government's view, reasonable, more especially following the increases that civil servants have rightly received in the last two years. They had been affected by the previous Government's pay policy. There were adjustments to be made. We did our best to make them. In the light of all the circumstances, some of which have been mentioned, the Government believe that the offer is reasonable.
My hon. Friend the Member for Woolwich, West (Mr. Bottomley) also raised the importance of restraint in pay claims. He referred to the issue of the pay of hon. Members and how the timing might be adjusted. I am doubtful whether that proposal would be practical, but I shall consider the possibilities. Getting inflation down is fundamental to the aims of the Government and, indeed, to the economic needs of the country. Unless we can get back to a time of sound money, the future is bleak. In the end, this is one of the fundamental necessities for creating real jobs. The Government will continue that campaign.
This has been an interesting debate. All the points raised have been important. It is right, however, that the House should pass the motion. The recess is the normal length of the Easter Recess. It comes at the end of the longest term that most hon. Members, I think, will have experienced, being the combination of a rather early return after Christmas and a late Easter. Fourteen weeks will have elapsed. Although the problems will not go away I believe that a pause for a period of 10 days will be acceptable to the House. I do not think that I can do

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anything about the date of the May Day bank holiday. Whenever it falls, the House of Commons will probably not have any great enthusiasm for meeting on that occasion. I am, therefore, sure that it is also right that we should agree not to meet on Monday 4 May. With those remarks and assurances, so far as I have been able to give them, I ask the House to approve the motion.
Question put and agreed to.
Resolved,
That this House at its rising on Thursday 16 April do adjourn till Monday 27 April and at its rising on Friday 1 May do adjourn till Tuesday 5 May and that this House shall not adjourn on Thursday 16 April until Mr. Speaker shall have reported the Royal Assent to any Acts which have been agreed upon by both Houses.

Orders of the Day
  Insurance Companies Bill
  As amended (in the Standing Committee), considered.
  Insurance Companies Bill
    New Clause 11

      COMMISSIONS
      The Secretary of State may by order made by statutory instrument prescribe the maximum amount of commission that may be paid by an authorised insurance company to an agent or broker.".—[Mr. John Fraser.]
      Brought up, and read the First time.
      6.13 pm
      Mr. John Fraser: I beg to move, That the clause be read a Second time.
      The new clause enables the Department of Trade to have power to control the commissions which are paid on the sale of insurance policies. I am not opposed to the payment of commission to those who sell insurance. All hon. Members, I am sure, have met constituents whom they dearly wish had insured. We meet people whose homes have been flooded after a water main has burst. There may have been a burglary or a fire in their property. They have no redress because they have not effected an insurance policy. One wishes in those circumstances that someone had knocked on their door with an incentive to earn money by way of commission through selling those people a policy.
      However, there are occasions when I am concerned about the distribution and rate of commissions on long-term insurance policies. There may be a point at which the method of payment of a commission and the rate of commission begin to distort the operation of a truly competitive market and could operate—I emphasise the word "could"—against the interests of the consumer, the insured person. Ideally, the purpose of competition should be to give the insured person the best possible bargain. It would be wrong if the objective of a competitive market in insurance—to give the best possible bargain to the insured—was overruled by competition to pay the greatest commission and the duty on the agent or other intermediary thereby conflicted with his personal interest in earning commission.
      It might sometimes not be in the interests of the agent or the intermediary to point out the substantial commission that may be received at the beginning of a long-term policy and the consequences for the insured person. Let us assume that someone is taking out an endowment policy for 20 years and that he has a choice between two companies. Let us assume that the premium is £100 a year. One company may not pay commission, while the other does. By going to the company that pays commission, the first premium on that long-term policy could be payable as commission. The effect is that if £100 is paid, nothing is invested for the endowment in the first year. If, however, £100 is invested on a 20-year endowment with a company that pays no commission, with compound interest rates of 10 per cent.—that is not unusual in the present economic situation—it produces £647 at the end of 20 years. One bargain, therefore, involves £647. In the

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      other bargain, where £100 commission is paid, there is nothing at all for that money at the end of 20 years. That is not far-fetched.
      I declare an interest as a solicitor. On first becoming a solicitor I took out a 20-year policy called an income protection policy. A well-known insurance company quoted me a premium, which was reasonable at the time, of £10 a year. I asked about the commission and the reply was, "Are you an agent?" I promptly signed up and became an agent. The first two and a half years' premiums on that policy were paid to me by the well-known insurance company. Payment of one year's premium only on a 20-year long-term policy is not entirely out of the way.
      Mr. R. A. McCrindle: Is the hon. Gentleman not just a touch behind the times? Is it not correct to say that when he effected that policy the commission was paid on the basis of the sum assured under life assurance policies? As a result of considerable pressure, not least from consumer bodies, the amount payable today is related to the premium. The situation to which the hon. Gentleman draws attention cannot happen in 1981.
      Mr. Fraser: I understand that changes have taken place. It does not alter the principle, even if the commission is related to the premium. If the commission payable is equivalent to the first year's premium, it is a substantial loss to the insured as against another kind of policy. I am not suggesting that the first year's premium is the order of the day. I have recently come across long-term business where 50 per cent. of the first premium goes in commission. I do not think that that is unusual.
      There is, perhaps, a duty on the intermediary to say how far that means a loss of accumulated capital at the end of the period of an endowment policy. To take an extreme example, if the first two years' premiums were payable by way of commission, the sum of £1,200 in the example that I have given would not have accumulated to the benefit of the insured peron, whereas it would have done if invested with a company that paid no commission.
      There may be many arguments in the opposite direction. I am not arguing against the payment of commissions on policies, but it is conceivable that there could be a conflict of interest between the interests of the insured person and those of the intermediary. If such an acute conflict arose, or if the market was being distorted by the payment of high commissions, particularly in the early years of the policy, there might be a case for the Department of Trade having a power to intervene. I ask for no more than a power to intervene. I do not seek to interfere in the insurance market, but there is a point at which it may be necessary to intervene in the interests of consumers.
      I am interested to know the Minister's views on the payment of commission. Does he believe that a prospective insured person who goes direct to a company and not through an intermediary should get a discount—a cash-and-carry arrangement? Does his Department frown upon the payment of a standard commission to agents?
      Insurance companies make great play about imposing a duty of the utmost good faith on the person taking out a policy, but I am not sure that they go to a great deal of trouble to point out the commission paid on the effecting of long-term business and the financial consequences if the
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      money is not paid out in commission but is invested and accumulated over a long period. I ask for no more than a power to regulate the payment of commissions, leaving the Department of Trade to make a judgment having regard to the circumstances of each case and the state of the market.
      Mr. McCrindle: I oppose the new clause, for a variety of reasons. Far and away the most important is that controls are not desirable in a highly competitive and commercial business. I hope that my hon. Friend the Minister will forgive me if I say that although I have substantial regard for his Department, and particularly the insurance division, I am not persuaded that it is, from day to day, sufficiently in touch with the commercial pressures that permeate the insurance business to know at any given moment what should be the correct levy of commissions. In short, if the Department took the powers suggested, it would be interfering in a highly commercial business without always having or being able to have the most up-to-date information.
      The hon. Member for Norwood (Mr. Fraser) conceded that intermediaries can be of great advantage to the insurance public. Unless we wish to discourage their operation we cannot allow a long lapse of time within which the intermediary becomes progressively less adequately remunerated, until he reaches the point where he cannot continue to provide the service that the public rightly expects.
      The hon. Gentleman spoke darkly about the method of paying commissions, and mentioned his own experience. He said that the commission that could be received under a policy could equal more than the first full year of the premium, and in some cases two years. That was once the case, and it led to abuses. Indemnity commission was paid before it had been earned. frequently with a discouragement to provide other than a fast sales service, which obliged insurance companies to listen to consumer bodies that wished to have the situation changed. However, as I pointed out, in 1981 that is no longer possible. Commisssion on life insurance is now related to the first year's premium, so in the first year an intermediary can only receive a maximum of a percentage of the first year's premium. It is not now possible to go beyond that. The hon. Gentleman was out of date, and put too much emphasis on an abuse that no longer exists.
      There are intermediaries and intermediaries. A Lloyd's broker, for example, may take upon himself the responsibility not only of collecting premiums but of annual visits to the person or firm insured, and will deal with claims as they arise. That is quite different from a part-time agent who from time to time introduces a friend to the insurance company. It would not benefit the consumer for the Department of Trade to decide which level of commission applied to which class of intermediary.
      The hon. Gentleman made no reference to the present position of the Life Offices Association—and I am restricting my remarks to life assurance. That association has a maximum commission agreement. Some member companies do not like the agreement and have resigned. The scheme is not perfect, but it may be better than any operated by the Department of Trade. A trade association is at least in day-to-day touch with what is happening in the insurance market.
      Mr. John Fraser: Does the hon. Gentleman object to self-regulation? The Life Offices Association could establish a maximum rate of commission and invite the Department of Trade to turn it into a rule of law.
      Mr. McCrindle: I should prefer the new insurance ombudsman—whom I welcome—perhaps over a period of time, to become responsible for all insurance companies. The LOA can be responsible only for its own members. I should not object if that arrangement had to be underpinned by a statutory code which gave broad guidance instead of laying down specific amounts of commission.
      The hon. Gentleman said that a conflict would exist when an intermediary was attracted by a higher rate of commission from company A, whereas the best bargain was likely to come from company B. I belatedly declare an interest. I am parliamentary adviser to the British Insurance Brokers Association. Insurance brokers have a statutory duty to exercise all the preference in favour of their client. If the client asks what commission the broker is being paid, he is obliged to reveal it. Those two facts together begin to provide an assurance for customers of an insurance company, agent or broker that was not there until recently.
      The hon. Gentleman seemed to eulogise those insurance companies which pay no commission, implying that one was bound to get a better bargain by placing life insurance business with such a company than with one which pays commission. That simply is not so. A mass of Scottish Mutual Life offices which pay commission to intermediaries for introducing business time and again produce a return on an equal premium over an equal period better than anything that the non-commission-paying offices can produce. Those are facts, and I refer the hon. Gentleman to them.
      6.30 pm
      The final point with which I seek to persuade the House, whose Members seem rather thin on the ground, to listen to this learned dissertation, relates to the hon. Gentleman's reference to the utmost good faith being shown. As one who has long been associated with the industry, I entirely accept the necessity that the utmost good faith should be expressed by both the insured person and the insurance company. I would not challenge the hon. Gentleman on that for one moment. He seemed to suggest, however, that good faith need not be shown by intermediaries. I draw his attention to The Insurance Brokers (Registration) Act 1977, which imposes a clear duty, written into the statute and passed by the House, to maintain the utmost good faith in relation to both insurance companies and brokers' clients.
      For all those reasons, I suggest that the new clause is unnecessary. It would lay a responsibility upon the Department of Trade, which I believe is less capable of carrying it than either the Life Offices Association or, perhaps, the insurance ombudsman. The House would therefore be well advised to reject the new clause.
      The Under-Secretary of State for Trade (Mr. Reginald Eyre): I fully understand the concern that underlies the new clause. The worry is that high commissions pose a conflict of interest for the intermediary between his short-term financial interest and his clients' interests and that some intermediaries may be led into recommending policies because they carry high
      726
      commissions rather than because they meet the particular needs of a policyholder. The hon. Member for Norwood (Mr. Fraser) expressed the concern for the interests of consumers that arises in these circumstances.
      This concern is not new. It was considered by the committee, chaired by Sir Hilary Scott, on property bonds and equity-linked life assurance. That committee reported in 1973. I will come back shortly to its findings, many of which are relevant to insurance generally, and not just to linked life business. Last year, the Wilson report on the functioning of financial institutions suggested that there may be a case for more formal agreements on maximum commissions payable to life insurance brokers and other intermediaries. There have also been studies in other countries—for instance, recently in Australia by the Australian Law Reform Commission.
      Interest in commission in this country has been muted since the Scott report in 1973. One factor in this has been the commission agreement of companies in the Life Offices' Association and the Associated Scottish Life Offices. My hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) referred to the benefits of that kind of agreement. Several companies have recently left the LOA, giving as their reason the wish not to be restricted by this agreement.
      It is perhaps, in the abtract, rather curious that intermediaries such as brokers, who hold themselves out as offering disinterested advice to their clients, should be remunerated by commission paid by the insurer. But that system is a long-standing fact of life and no doubt it has taken root because on the whole the customer is well served by the industry. Probably the most radical way of cutting out the conflict between interest and duty inherent in the present system would be to prohibit all ways of remunerating a broker by an insurer and making the broker obtain his income from fees. But this would be a drastic step indeed, cutting right across traditional and well-established practices in the market.
      The proposal in the new clause is rightly a more restricted one. However, it seems to me that the relevant Scott report findings are as applicable now as when the report was made in 1973. That report rejected the idea of a statutory limitation on commission payments for the following reasons:
      "Some life companies engage in extensive advertising, which can be expected to bring to the notice of the general public the existence of the particular policy and its basic nature: other life companies may prefer not to advertise and may expect their agents to spend longer in explaining the policy to prospective policyholders. Life companies also expect agents to undertake varying amounts of paper work connected with issuing a policy. It seems to us reasonable that life companies should, as at present, be able to pay rates of commission which may vary with the work involved in selling."
      In brief, I consider that the Scott report was right in pointing to the difficulties of laying down standard or even maximum rates of commission that would apply equitably in all cases. I believe this to be particularly so in the context of statutory control, which would need to be demonstrably fair to all the parties involved.
      The Scott report also considered disclosure to the policyholder of the amount of commission that the salesman would receive if a particular policy were purchased. The report doubted the value of this, partly because of the difficulties of putting a figure on commissions and partly because the policyholder would not be much wiser; he would need not only the figure for

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      the policy in which he was interested but the figures for other policies. I should add that since then the code of conduct for registered brokers, made under the Insurance Brokers (Registration) Act 1977, requires them to disclose—but only at the request of an individual client—the amount of commission paid by an insurer.
      I would also point out that it needs to be considered whether regulation of commission, such as the proposed clause seeks to provide, would not achieve control at an excessive price to the policyholders. We should bear in mind that control risks stifling innovation and inhibiting sales.
      There is a great deal to be said for leaving commissions to the market, as they are essentially a commercial matter. My hon. friend the Member for Brentwood and Ongar underlined the wisdom of this. While it is the policyholder who ultimately foots the bill on commissions, what matters to the policyholder at the end of the day is the total sum that he has to pay for his policy rather than its breakdown as between insurer and intermediary. The House may be assured that the Department is keeping a watch on the situation, in view of the various implications for the policyholder, but I am not convinced of the case for statutory intervention, especially in the way proposed in the clause. I therefore recommend the House to reject the new clause.
      Mr. John Fraser: There must be people in every Department who write speeches explaining why the Minister should not do anything. On this occasion, they have done particularly well. They have convinced the Minister, although they have not convinced me. I do not propose to press the matter, but I thought it right to air the subject. Reference has been made to the attitude of some insurance companies to high commissions and their decision to break away from the Life Offices Association. In the light of that, I hope that the Minister will at least keep an eye on the situation and perhaps put further proposals before the House.
      I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 14

      REQUIREMENTS TO INFORM THE ACTUARY AND OBTAIN HIS REPORT
      'After section 22A of the Insurance Companies Act 1974 there shall be inserted—
      "22B (1) An authorised insurance company shall at all times provide the person who for the time being is its actuary under section 15(1) above or section 3(5) of the Insurance Companies Amendment Act 1973 with—

      (a) such information as that actuary has informed the company that he reasonably requires in order that he would be able to carry out an investigation under section 14 above at any time; and

      (b) information about intended changes in the financial conduct of its long term business of a kind which that actuary has informed the company would in his opinion significantly affect the result of an investigation made under section 14 above.

      (2) An authorised insurance company shall not make changes in the financial conduct of its long term business of a kind referred to in subsection (1)(b) above without first obtaining a report from the actuary referred to in subsection (1) above—.'.[Mr. Roper.]
      Brought up, and read the First time.
      Mr. John Roper: I beg to move, That the clause be read a Second time.
      The Chairman: With this it will be convenient to take new clause 15—Offences under Part II of 1974 Act.
      Mr. Roper: The new clauses cover requirements to companies carrying out life assurance business to inform the actuary and to obtain his report on certain matters. Under the Insurance Companies Act every insurance company carrying out long-term business—that is, life assurance business—has to appoint an actuary who has to certify annually that the long-term business is solvent. An actuary is required for that purpose because the obligations under life assurance policies can stretch many years into the future. The actuary has to calculate whether, in reasonably foreseeable circumstances, the company will be able to meet those obligations.
      Unfortunately, an actuary's solvency certificate given on one day can be invalidated on the next by a switch to unsuitable investments or by the issue of a block of life assurance policies on unsound terms. The Insurance Companies Act 1974 provides for elaborate annual returns for insurance companies but they are after the event and do not prevent an insurance company issuing life assurance policies on unsound terms or improperly speculating with the investments.
      The terms that apply throughout the existence of a life assurance policy are fixed at the outset. Once an insurance company has issued a large block of life assurance polices on unsound terms, or has invested a large proportion of its life assurance funds in an unsuitable investment, no subsequent reporting, however elaborate, can prevent that company being in serious trouble if conditions become adverse. I am not saying that the company would necessarily be in difficulties but that it could he if conditions turned against it. The most that can be achieved by the elaboration of the returns is the early detection of the company's being in financial difficulties.
      Two life assurance companies failed in 1974, causing hardship to thousands of policyholders who had invested substantial parts of their life savings with the companies. London Indemnity failed because it issued large numbers of single premium policies on unsound terms, and Nation Life failed because it invested too high a proportion of its life assurance fund in a speculative property investment that failed.
      The Department of Trade recognises that. It is aware that it does not have the powers to prevent irresponsible acts by fringe insurance companies that will render the companies liable to failure in adverse but foreseeable circumstances. In an address to the Financial Times world insurance conference on 3 December 1975 the official then in charge of the insurance division said:
      "When it comes to supervision of the solvency of an existing company, we are inevitably to some extent behind the game. We obtain much information about what has happened but not until after it has happended, and too often our task is to try to pick up the pieces."
      The Institute of Actuaries and the Faculty of Actuaries in Scotland became concerned about actions by fringe insurance companies that might imperil their solvency. They issued a guide to actuaries appointed by insurance companies under section 15 of the Insurance Companies Act 1974. The guide states that although, as a statutory requirement, an investigation into the solvency of the life assurance company is to be made only at specific intervals, the profession regards it as the appointed actuary's duty to

      729
      take all reasonable steps to ensure that he is, at all times, satisfied that if he were to carry out such an investigation the position would be satisfactory.
      The guide goes on to say that to enable the actuary to be satisfied about the continuing financial state of the company he is required to secure that he is given adequate information concerning the terms and conditions on which new contracts are being issued, and on the company's continuing investment policy and marketing plans.
      6.45 pm
      The Department of Trade has commended the actuaries' guide to insurance companies. However, there is, unfortunately, no obligation on an insurance company to inform its actuary if, during the year, it changes its investment policy or changes the terms or conditions on which new life assurance contracts are being issued.
      If an insurance company makes such a change and acts unsoundly the position may not come to light until the next annual return is submitted. The position by then may be irrevocable and the insurance company may be in an unsound position when it is liable to failure if it runs into seriously adverse economic conditions. That, indeed, is what happened with London Indemnity and Nation Life.
      The then Under-Secretary of State for Trade, in an address to the Faculty of Actuaries in Scotland, referred to the guide to actuaries and said:
      "It is the Government's intention to support this by requiring a certificate from the appointed actuary to the effect that he has been receiving the necessary information from time to time. It has also been suggested to us that the directors should be asked to certify that they have in fact kept the actuary informed on those vital matters, and we are considering that suggestion."
      That was some time ago, but no such requirement has been made by the Government.
      In Committee I proposed a new clause that would have closed the serious gap in the protective legislation by requiring that an insurance company should not issue or alter life assurance policies, or change the investments of its life assurance fund, on terms that the appointed actuary to the company considered would imperil the solvency of the company. The feeling of the Committee was that the new clause was cumbersome and unnecessarily elaborate. The Committee believed that it would hamper sound insurance companies in the normal transaction of their business. The Institute of Actuaries wrote to the Department of Trade to that effect and sent copies of the letter to members of the Committee. The institute stated:
      "If, however, it is felt that legislation should be more specific about the company's responsibility vis-a-vis its appointed actuary a practical approach might be to study the possibility of placing a duty on a company to provide the appointed actuary regularly with such information as he may reasonably require about the financial conduct of its long-term business and to obtain a report from him before making significant changes in that conduct."
      The clause that I now propose follows the suggestion by the Institute of Actuaries. It will achieve virtually the same end as I proposed in Committee, but by simpler means. In Committee I proposed to prevent an insurance company changing the financial conduct of its life assurance business in a way in which the appointed actuary considered would imperil the solvency of the company. Although the clause that I now propose does not of itself prohibit unsound actions by the insurance company but merely requires a report from the actuary, the practical effect is likely to be the same. If the company is
      730
      determined to go ahead with actions that the actuary considers unsound, he is under a professional obligation to inform the Department of Trade, which has power to intervene.
      The Life Offices Association has kindly informed me that although part of my new clause might meet its problems it has some reservations about other parts. I am pleased to learn that subsection (1)(a) might be acceptable as a means of giving statutory backing to the guidelines for appointed actuaries issued by the institute and the faculty in 1975. However, the association has two reservations about subsection (1)(b). The first is that the expression "financial conduct" is not defined. However, the words in paragraph (b)—
      "of a kind which that actuary has informed the company would in his opinion significantly affect the result of an investigation made under section 14 above"
      in effect define the intended changes in the financial conduct of an insurance company's long-term business which I seek to bring within the ambit of the new clause.
      The association's second reservation is that new paragraph (b) does not require an insurance company to provide information about intended changes in the financial conduct of its long-term business that the actuary has not specified in advance. It seems that the association is saying that to this extent the clause does not go far enough. I am aware of that possible objection, but I had hesitated to go as far as to require a company to provide information on intended changes in the financial conduct of its long-term business additional to that which the actuary had informed the company was significant, especially as failure to do so would constitute an offence.
      When we considered that matter in Committee the Under-Secretary was kind enough to say that the proposals that I put forward then represented a radically different approach to insurance legislation. I am not sure whether he would say the same about the new formulation of the proposal that I am putting forward today. However, it represents a new approach, in that it seeks to protect the savings of life assurance policy holders by preventing insurance companies from taking action that would imperil those savings. That is in contrast to almost the whole of the existing insurance legislation, which simply finds out that an insurance company has done unsound things after it has done so. It shuts the gate after the horse has bolted. Therefore, I hope that this approach will commend itself to the Under-Secretary and to the House as an attempt to deal with a problem that is of considerable concern to those who take an interest in those matters.
      Mr. Eyre: As the hon. Member for Farnmouth (Mr. Roper) explained, the amendment is different in nature from those that he tabled in Committee. I accept that it avoids many of the pitfalls of his earlier proposals. In particular, it avoids placing new burdens on the staff of my Department and new bureaucratic, supervisory controls on companies. I appreciate the hon. Gentleman's efforts in that respect.
      The new clause confines itself to placing an obligation on companies to keep their appointed actuary informed of matters which might affect solvency. New clause 15 goes on to make failure to keep the appointed actuary informed in the prescribed fashion a criminal offence.
      I emphasise to the hon. Gentleman that his proposal is as serious as to make neglect of the provision a criminal offence. It is common ground that an appointed actuary needs access to the information that he requires to fulfil

      731
      his role in a company. However, there are great difficulties—I ask the hon. Gentleman to consider this carefully—in defining in statute precisely this or other aspects of the relationship between a company and its appointed actuary. It is not only the Government who consider the amendments to be unnecessary and difficult, but representatives of the insurance companies and the actuarial profession who are opposed to such change.
      The guidance for appointed actuaries issued by the Institute and Faculty of Actuaries in May 1975 already covers the same ground. I believe that that is a later date than the date to which he referred, when his former hon. Friend, the Member for Hackney, Central (Mr. Davis), who was the Minister responsible for insurance, made a speech on the matter. The guidance stipulates that the actuary must have all the relevant information at his disposal to enable him to be satisfied as to the continuing financial state of the company. In my view, those matters are best dealt with in that sort of professional guidance note.
      I cannot accept that we should impose new statutory duties on companies and create a new criminal offence without the fullest opportunity for consultation and comment by those affected. The hon. Member for Farnworth will realise that his proposals have been available for only a matter of days. He will appreciate that there has been no opportunity to consult, although I believe that much evidence will be gathered against his proposals, on the grounds which I have mentioned. I know that the hon. Gentleman will appreciate the emphasis which I have placed on professional guidance and present practice, which are much improved on earlier years.
      The hon. Gentleman pressed me to agree to a study of the possibility of such future legislation requiring companies to keep their appointed actuary informed of matters affecting solvency. There has been reference again to the Institute of Actuaries' letter. I emphasise that the Institute of Actuaries did not propose a study. It said only:
      "if it is felt that legislation should be more specific about a company's responsibility vis-á-vis its appointed actuary."
      I do not feel that need. Neither does the Institute of Actuaries or the faculty.
      As I said in Committee, if the profession or anyone else were to study the matter and bring forward proposals, my Department would consider such proposals carefully. But in the first instance, I think that the ground should be gone over by the profession and representatives of the life offices.
      For the reasons that I have given, I ask the hon. Gentleman to consider whether it would be right, in these circumstances, to press his amendment.
      Mr. Roper: I am grateful for the Under-Secretary's opening words. I am glad that he accepts that we have moved, since the discussions in Committee, to a proposal which gets around a number of the objections which were put forward. I also accept his point about the relatively short time available for consultation with the Life Offices Association and other professional bodies. It is interesting to note that the Life Offices Association says that new clause 14(1)(a) may be acceptable as a means of providing the statutory backing which is sought.
      Mr. McCrindle: The hon. Gentleman would not wish to mislead the House. Neither during his last speech nor
      732
      on this occasion has he led us to the conclusion reached by the Life Offices Association, which is that we should reject the new clauses which he is proposing.
      Mr. Roper: For the reasons that I gave before, the Life Offices Association is not satisfied about other points in the new clause. As the Minister said, it therefore feels that it should be rejected. I did not wish to mislead the House on that point.
      There is an opportunity for a continuing discussion on the matter by the Department, the faculty, the institute and the Life Offices Association. I was glad that the Minister referred to "anyone else". Sometimes there is a danger of too cosy a relationship between the professions and the companies. One or two other persons may wish to take advantage of that request.
      It must still be considered whether there is a need for a statutory backing for the guidance which the Institute of Actuaries has given. My contention is that there is a need for such a backing. While the vast majority of good insurance companies will provide their actuaries with that information, there is the risk that some may not. In those cases, the savings of ordinary people could be put at risk.
      Therefore, I hope that there can be continuing discussions to try to find out whether a satisfactory statutory backing could be found. There will be opportunities for the matter to be further considered in another place. However, in view of what the Minister has said, I beg to ask leave to withdraw the new clause.
      Motion and clause, by leave, withdrawn.

    Clause 2

      RESTRICTION ON CARRYING ON INSURANCE BUSINESS
      7 pm
      Mr. Eyre: I beg to move amendment No. 1, in page 2, line 27, leave out '1, 2,'.
      Mr. Deputy Speaker (Mr. Ernest Armstrong): With this it will be convenient to discuss Government amendment No. 30.
      Mr. Eyre: In Committee, the Member for Hackney, Central (Mr. Davis) raised the question of the range of business that banks may write
      "solely in the course of carrying on and for the purposes of banking business."
      I agreed to consider the matter, and these amendments are the result.
      The comprehensive classification of insurance business, which was first introduced by the Companies Act 1967, endured until the Insurance Companies (Classes of General Business) Regulations were made in 1977 as part of the implementation of the non-life establishment directive. Those regulations naturally included transitional provisions for converting authorisations for the old classes of business into the new with as little disruption for the industry and my Department as possible. I am advised that a number of insurance companies insuring against medical expenses had been authorised for the old class, known as "pecuniary loss insurance business." For that reason, the transitional arrangements to which I have referred converted "pecuniary loss" into class 1 accident and class 2 sickness, as well as classes 14 to 17 where the correspondence was obvious. That extension of pecuniary loss to cover accident and sickness applied to banks as it did to others concerned with that class of business.

      733
      My officials have held discussions with representatives of the banks, who have explained that it is their common practice to waive or defer repayment of personal loans in cases of death, sickness or other adversity. That practice is clearly beneficial to consumers. The banks expressed concern that deletion of classes 1 and 2 from clause 2(4) might preclude them from this practice in future. My officials have explained to them that if one waives a debt due or reschedules its repayment that is not insurance business, and there is no need on that account to leave classes 1 and 2 in the exemption for banks. Nor is there any other reason for doing so. This amendment therefore removes those two classes from clause 2(4).
      It is also necessary to make the identical amendment to paragraph 1(b) of schedule 3, which deals with section 12(5) of the 1974 Act. Section 12 exempts banks from the requirements of part II of the 1974 Act even if they carry on certain classes of business
      "solely in the course of carrying on and for the purposes of banking business."
      The amendment removes classes 1 and 2, accident and sickness, but leaves in place classes 14 to 17.
      Mr. Clinton Davis: I am very pleased that the Minister has agreed to deal with this matter, as he said earlier. It makes a great deal more sense. I am sure that it will commend itself to the House.
      Amendment agreed to.
      Sir Graham Page: I beg to move amendment No.2, in page 2, line 29, leave out subsection (5).
      Mr. Deputy Speaker: With this it will be convenient to discuss amendment No. 14, in page 12, line 1, leave out Clause 16.
      Sir Graham Page: I am sure that many right hon. and hon. Members pay a subscription each year to a motoring organisation in order to put a little label stating "Relay" on the back of their cars. Of course, our motoring organisations are reputable concerns. The label ensures that if our car breaks down or if we have an accident our car will be returned home or sent to its destination. That is a form of insurance. However, I understand that on the Continent there is fierce competition between organisations for this business, and that one organisation recently failed and caused some hardship to people there.
      It is not surprising, therefore, that the Community would wish that form of so-called insurance—insurance which gives benefit in kind, and not necessarily in money—to be under insurance control. The directive from the Community in 1973, which imposed considerable control on insurance companies, has been carried into our law in subsequent legislation, but now we have a draft directive, 4335/81, from the Community to extend that control to insurance which gives benefit in kind. It seeks to amend the first directive, 73/239/EEC, on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct insurance other than life insurance, particularly as regards tourist assistance. That is the sort of assistance about which I have been speaking, which is offered by our motoring organisations here and is offered on the Continent in a far more competitive way by organisations there.
      734
      I understand that in Britain the practice is to treat assistance of that kind as not coming within the control of the insurance legislation, and that seems to be confirmed in clause 2(5). Clause 2 provides, in subsection (1):
      "Subject to the following provisions of this section, no person shall carry on any insurance business in the United Kingdom unless authorised to do so under section 3 or 4 below"—
      that is, unless authorised by the Secretary of State, or unless it was duly authorised under the 1974 legislation. But there is an exception to that in subsection (5):
      "Subsection (1) above shall not apply to … insurance business … under which the benefits provided by the insurer are exclusively or primarily benefits in kind."
      That seems to confirm the present practice that we do not think of this kind of service as part of the insurance law under which we submit to the sort of controls desired by the Community.
      But there is a contradiction between the draft directive and the Bill. It would be most unfortunate if we passed the Bill in its present form and then, perhaps a year later, had to obey the EEC directive to delete this exception to the rule and bring our motoring organisations providing this service under strict insurance company control. It would be not only unfortunate but rather ridiculous when one thinks of the sort of controls that we would have to have. For example, the AA and RAC—this is not a commercial; it is by way of example—would have to show that they had funds sufficient to return cars home or take them to the desired destination for all their members throughout the year, and they would have to show that they were maintaining those funds. I do not know how it would apply.
      This is, of course, a probing amendment. I would not wish clause 2(5) or clause 16 to be taken out of the Bill. However, I should like an assurance that the Minister is confident that the Government will be able to get the draft directive amended so as to comply with the Bill before it is accepted by the Community. Otherwise we shall be in great difficulty, because we shall be unable to obey the directive without repealing recently enacted legislation.
      Mr. Eyre: I am grateful to my right hon. Friend the Member for Crosby (Sir G. Page) for moving this probing amendment. In my explanatory memorandum to the Select Committee on European Legislation &c., which commented on the draft directives on assistance insurance, I drew attention to the provisions in clause 2(5) and in clause 16. I confirmed that it was our intention to use those powers to exempt organisations offering roadside assistance and no other insurance contracts from the authorisation and supervisory requirements of insurance legislation.
      My right hon. Friend rightly drew attention to the possibility of conflict between the draft directive and the envisaged exempting regulations. This provision does not pre-empt the application of the directive in the United Kingdom, if and when it is adopted. If the directive were adopted in its present form it would prove necessary, within the time scale laid down for its implementation, to revoke the regulations. Such revocation would entail the difficulties that I referred to on Second Reading and in Committee. In that connection, my right hon. Friend fairly referred to the valuable services rendered, for example, by the AA, which would not be helped. It does not seem sensible to anticipate those difficulties by not making changes in the law now. The changes are desirable and sensible and should be made.
      Mr. Clinton Davis: The hon. Gentleman said "if and when" the directive was adopted. Is his Department likely to endorse the directive? What time scale does the hon. Gentleman have in mind?
      Mr. Eyre: I try to be as helpful as possible. I was about to consider that point.
      It does not seem sensible to anticipate those difficulties by not making these changes in our present law. The underlying principles in the draft directive have yet to be appraised, let alone approved by the council working party of Government representatives. Certainly its individual provisions are open to amendment.
      In my explanatory memorandum on the directive I pointed to the inappropriateness of attempting to apply to assistance organisations measures embodied in existing Community legislation. The non-life establishment directive of 1973 was clearly intended for the supervision of insurers offering financial benefits. It is too early to speak with any certainty on the degree of possible conflict with the Bill.
      Doubts have been expressed to the effect that clause 2(5) and clause 16 allow for a wide range of exemptions from authorisation and supervision. I emphasise that our present intention is to exempt only roadside assistance and vehicle recovery.
      On the point raised by the hon. Member for Hackney, Central (Mr. Davis), I stress that we are still at an early stage in the proceedings on the directive. As he will know from his ministerial experience, decisions in the Council of Ministers are generally taken by consensus. In practice, the question, for example, of veto does not arise. If a member State feels that very important discussions are at stake, it may ask for discussions to continue until all member States are in agreement. Therefore, it will be some time before we can speak authoritatively about the directive's eventual form.
      7.15 pm
      Sir Graham Page: I am grateful to my hon. Friend the Minister for his remarks. I had hoped that he would say that we should try to resist the directive in this respect. There may be a debate on the report from the Select Committee on European Legislation &c. If so, I am sure that the proposition that such a provision should not be included in the directive will receive the backing of the House, provided that it is possible to negotiate its exclusion. It is right not to give way by removing the clauses from the Bill. Let us include them in the Bill and thereby pre-empt the application of the directive. I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

    Clause 5

      SUBMISSION OF PROPOSALS ETC.
      Mr. Eyre: I beg to move amendment No. 3, in page 3, line 39, after "applicant", insert "in writing".
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 8 and 17.
      Mr. Eyre: The hon. Member for Hackney, Central (Mr. Davis) moved an amendment similar to amendment No. 3 during the second sitting of the Committee. With his usual style and understanding, the hon. Gentleman kindly asked leave to withdraw that amendment when I agreed to
      736
      table an amendment of equivalent effect. Our common objective is to ensure that if the Secretary of State refuses an application for authorisation he should be obliged to set out his reasons in writing. That is the simple effect of the amendment.
      In Committee I mentioned that there were implications for clauses 11 and 25. I have tabled parallel amendments. Clause 11 deals with the withdrawal of a company's authorisation in respect of new business. Clause 12 already requires the Secretary of State formally to serve on a company a written notice of the particulars of the ground on which he is considering withdrawing a company's authorisation.
      However, at present the Secretary of State is not required to tell a company for which reasons he has withdrawn it. They may have been narrower than the grounds that he was considering. The amendment to clause 11 fills that gap and requires him to inform the company in writing of his reasons. That does not, of course, need to apply when the withdrawal is at the company's request.
      Clause 25 deals with the transfer of general business policies subject to the approval of the Secretary of State. He is already obliged to give reasons for refusing an application for a transfer. The amendment ensures that these reasons are communicated in writing. I hope that the hon. Gentleman is pleased that my undertakings have been discharged.
      Mr. Clinton Davis: The Minister never goes far wrong when he follows my prudent advice. I wish that he did it more often.
      Amendment agreed to.
      Mr. John Fraser: I beg to move amendment No. 4, in page 3, line 39 at end insert:
      "(3) The Secretary of State shall make provision for a right to apply to the courts should there be any refusal but such right to apply shall not include an appeal save on a point of law.".
      Article 11 of the directive on which the provision is based states that member States shall make provision for a right to apply to the courts in the event of any refusal. I stress the words "any refusal". In Committee the Minister said that he would like to think about this subject. Therefore, I have tabled an amendment in a similar form so that he can give the House his revised thoughts.
      The words in the directive are capable of three interpretations. They could mean that in the event of any refusal a person has a right of appeal to the courts. All of us agree that that is not desirable and that the Secretary of State should make an administrative decision. There should be no right of appeal on the facts. Nevertheless, the words are capable of that interpretation. Many people think that the right to apply to the courts when a refusal has been given means a right of appeal.
      The second interpretation is that even if there is no appeal an aggrieved person has the right to apply to the courts in the case of a refusal. In other words, each and every refusal would give a right of application to the courts. That is a fair, literal interpretation of article 11.
      The words in the directive are capable of a third interpretation—that placed on them by the Department of Trade to the effect that in the event of a refusal an aggrieved person has the right of judicial review. Judging from what I know of the law, the number of opportunities for a judicial review will be rare compared with the refusals received.

      737
      I tabled the amendment to clarify the words in the directive. We are no longer sovereign in these matters. The directive can have legal force. In my view, we should eliminate any doubt by translating this important phrase in article 11 in the way that we want it translated in the statute. I hope that I have made it clear that there should be a right of application to the courts which would not encompass a right of appeal. In that way we would make the statute more certain, understandable and reconcilable with the appropriate article in the European directive.
      Mr. Eyre: I appreciate the care with which the amendment has been drafted by the hon. Member for Norwood (Mr. Fraser) to make it clear that what is proposed is not an appeal on the merits of the case. The hon. Gentleman and I are at one on that issue. It would be wrong for the court's discretion to be substituted for that of the Secretary of State.
      The amendment seeks to ensure that someone aggrieved by the Secretary of State's decision not to issue an authorisation should have the right to apply to the courts for a review of that decision, to establish whether the Secretary of State has erred on a point of law.
      I do not dispute for a moment that an aggrieved applicant should have that right. The point is that he has it already, given the right to apply for a judicial review. That is a substantial right. It comprises the historic remedies of the prerogative writs of certiorari, mandamus and prohibition and the equally important remedies of declaration and injunction. I suggest that this is an adequate and proper answer to the points raised by the hon. Gentleman.
      Amendment negatived.

    Clause 7

      UNITED KINGDOM APPLICANTS
      Mr. Eyre: I beg to move amendment No. 5, in page 5, line 11, after 'means', insert
      ', subject to such exceptions as may be prescribed by regulations under the 1974 Act,'.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 6, 7 and 28.
      Mr. Eyre: One of the innovations in the Bill, to which I referred on Second Reading, is the requirement that the more important underwriting agents of a general business insurance company—the "main agents"—be fit and proper. I suggested then that I had in mind that the threshold beyond which an underwriting agent became a "main agent" should be 10 per cent. of the company's general business premium income.
      Clause 7 provides at present for the dividing line between "main agents" and others to be laid down by regulations. In Committee I stressed that I considered it important for this boundary to be drawn in primary legislation and that I would table an amendment on Report.
      These amendments fulfil the undertakings that I gave in Committee. They establish the basic rules for determining whether an underwriting agent is a main agent. Simplifying somewhat, an underwriting agent will be a main agent in any financial year either where his authority to enter into contracts on behalf of the company
      738
      exceeds 10 per cent. of the premium income of that company, as determined by the schedule, or where that authority is without limit.
      This latter provision is important, since it blocks an obvious loophole. But, as I explained in Committee, there are many well-established agents who, whilst they have no limit to their authority, clearly operate on too small a scale to prejudice the solvency of an insurance company. I accepted that for insurance companies to have to revise the authorities of large numbers of such agents would involve expense and inconvenience. I undertook to seek an effective way of dealing with the problem.
      I should like to explain how these amendments meet this objective. In Committee I suggested that it might prove possible to use the commencement order under clause 37 to exclude these small existing agents or, alternatively, that an amendment could be made to clause 7. Further consideration has led to a different approach.
      Amendment No. 5 allows for exceptions from the basic rules to be prescribed by regulations. Work on the detailed amendments being proposed on this clause have shown that it is a difficult area, and it would be a pity if a rushed provision on the exception for existing agents were to prove ineffective. The provision is to be used to relax the constraints imposed by the general rule, not to tighten them. I can give the House a substantial indication of what the broad content of those regulations is likely to be. The intention is to except an existing agent with an unlimited authority at some specified date other than where that agent has written business accounting for more than 10 per cent. of the company's gross premium income in the year covered by the last set of accounts submitted to the Department or where in any subsequent year the agent exceeds the 10 per cent. limit. The details of these regulations have yet to be worked out, including the date to be specified. There is no intention to require insurance companies to research their records of business written by underwriting agents for years back. Nor will there be any question of making retrospective the application on the requirements. We need to define appropriately the scope of the exemption from future requirements. Of course, there will be the usual full consultation with the industry when the proposed regulations have been drafted. I believe that this will prove to be the best way of dealing with this aspect of the matter.
      Mr. Clinton Davis: Again, I am sure that the Minister is right on his further reflections on this matter. It is appropriate for the matter to be dealt with in this way rather than in the way initially proposed by the Department. In Committee the Minister was frank enough to say that he would follow this route rather than the initial route presented to him.
      Amendment agreed to.
      Amendments made: No. 6, in page 5, line 13, leave out `either' and insert—
      'in any financial year—(a)'.
      No. 7, in page 5, line 14, leave out from 'or' to end of line 16 and insert—
      `(b) with a limit in excess of 10 per cent. of the premium limit as determined in accordance with Schedule (Determination of premium limit) to this Act.'.—[Mr. Eyre.]

    Clause 11

      WITHDRAWAL OF AUTHORISATION IN RESPECT OF NEW BUSINESS.
      Amendment made: No. 8, in page 9, line 14, at end insert—
      `() After giving a direction under this section otherwise than at the request of the company concerned the Secretary of State shall inform the company in writing of his reasons for giving the direction. '.—[Mr. Eyre.]

    Clause 14

      OFFENCES UNDER PART I
      Mr. Clinton Davis: I beg to move amendment No. 9, in page 11, line 20, leave out `two' and insert 'five'.
      Mr. Deputy Speaker: With this it will be convenient to take the following amendments: No. 10, in page 11, line 23, leave out `£1,000' and insert '£10,000'.
      No. 11. in page 11, line 26, leave out `£1,000' and insert T10,000'.
      Mr. Davis: This group of amendments enables us to consider the penalties prescribed in clause 14.
      In Committee I suggested that the prescribed financial penalties for conviction on both summary trial and indictment were inadequate and that the penal provision for conviction on indictment was also inadequate. The Minister agreed to examine the situation, especially the other cases involving crimes in relation to commercial matters, to see whether these were appropriate sentences.
      The quality of the offence is of a different character from that which relates to many other commercial offences. It will be interesting to see the comparisons that the Minister will draw. I advise him that exceptions are made from time to time. I remember that during the passage of the Merchant Shipping Act—when dealing with pollution, which is a grave offence—it was thought appropriate substantially to increase the penalty on summary trial; far more substantially than that prescribed in amendment No. 10.
      7.30 pm
      To obtain authorisation as a result of false information provided recklessly is an extremely serious offence. Its consequences can do enormous damage and adversely affect a large number of people. I hope that the Minister will not say that in the review of certain white collar crimes he considers that a certain consistency should obtain. In a sense, that is far more serious than anything that I can think of in relation to this offence. However, the Minister will have the information. I am sure that his Department will have undertaken a good deal of research. I shall be interested to hear what he has to say.
      Sir Graham Page: I appreciate that the length of sentence, whatever length is made statutory, will be the maximum. Seldom does the court impose a maximum sentence. The general feeling is that long sentences are neither deterrents to this sort of crime nor rehabilitative. Shorter sentences prove just as effective. By "shorter" I mean two to three years rather than sentences of more than three years' imprisonment, and, for this type of crime, no more than 18 months. Although it is wrong to fit our punishments to the accommodation of prisoners we must recognise that we no longer have the prison space for long
      740
      sentences. We cannot accommodate prisoners on long sentences unless the sentences cure criminals. The general feeling is that long sentences are not doing that.
      Mr. Clinton Davis: Will the right hon. Gentleman address himself equally to the substance of the other two amendments? Those amendments relate to what I believe to be the inadequacy of financial penalties in relation to a matter which is tried summarily. Perhaps the right hon. Gentleman agrees that if the court of summary jurisdiction were empowered to impose a heavier penalty to deal with a serious matter, it would save much time instead of forcing the Crown to take the matter to trial on indictment.
      Sir Graham Page: I agree. We should concentrate on the fine. We should give greater power in the lower courts to impose heavier fines than the figure in the amendment. I disagree only on the length of imprisonment. I agree wholly on fines.
      Mr. Eyre: I hope that I shall not undermine the natural modesty of the hon. Member for Hackney, Central (Mr. Davis) by admitting that I agreed to reflect on whether the maximum penalties laid down in the Bill were appropriate compared with those for other commercial offences. I have considered the revised penalties for offences under the Companies Acts, which were reviewed and revised by the Companies Act 1980.
      A comparison of the offences is more naturally with those under the Companies Acts rather than with the pollution offences under the Merchant Shipping Act, to which the hon. Gentleman referred.
      I have written to the hon. Gentleman about the matter. I emphasised that Companies Act penalties for conviction on indictment exceed two years' imprisonment only where there is a clear element of fraud. The two offences in clause 14 do not in themselves imply an attempt to defraud the public. They may presage an attempt to do so, but that is another question. I ask the hon. Gentleman and my right hon. Friend to consider that when they judge appropriate penalties.
      If fraud were committed a prosecution under the clause would doubtless be accompanied by other charges which would carry appropriate penalties—that is the penalties would be in the more severe category, as would the nature of the crime. The option of conviction on indictment in sentencing to two years' imprisonment someone guilty of offences represent a substantial penalty. I am not persuaded that the penalty should be increased. Nor is the maximum fine on summary conviction inadequate for the offences in that category. In future it will be increased to take account of inflation.
      I ask the hon. Gentleman and my right hon. Friend to consider that the penalties are adequate in relation to the nature of the offence, as I have explained, but if the commission of the offence led to the commission of a more serious offence involving fraud, the penalties then involved would be more serious.
      Mr. Clinton Davis: I am much more persuaded by the Minister about the penal provisions but less convinced about the other matter. However, I shall not press the amendment to a Division. Suffice it to say that I know that the penalty is to be increased in line with inflation. Therefore, as the Government's economic policies go sadly awry and inflation rises again, I assume that there will be a substantial increase in penalty.
      Amendment negatived.

    Clause 15

      RESTRICTION OF BUSINESS TO INSURANCE
      Mr. Eyre: I beg to move amendment No. 13, in page 11, line 40 at end add—
      `() For the purposes of subsection (1) above any activities of an insurance company that are excluded from the definition of insurance business by section 34(c)(ii) below shall be treated as carried on in connection with its insurance business.'
      Mr. Deputy Speaker: With this we may take Government amendments Nos. 20, 21, 22 and 24.
      Mr. Eyre: The amendment to clause 15 paves the way for the amendments to clause 34(c). In Committee I moved an amendment to clause 34 to enable an insurance company to enter into a contract to manage the investments of a pension fund for its own employees without needing an authorisation for class VII business. I acknowledged that that amendment might not deal with `group' pension funds—those covering employees not only of the insurance company itself but of other companies in the same group, and I agreed to consider the matter further.
      I believe that the reasons that I outlined in Committee in favour of that amendment apply equally to these amendments. Any non-insurance company is free to manage the investments of a pension fund without an authorisation for class VII business, but the general rule is that an insurance company must be authorised and maintain, where appropriate, a solvency margin in respect of such business. I have no quarrel with the general rule, but it is not necessary or appropriate to apply it to the management of funds for the benefit of the company's own employees, even when that fund covers other employees within the group. The amendments have the simple objective of broadening the scope of the exceptions to that general rule to cover such "mixed" pension funds. The insertion of the words "officers or" will avoid a difficulty where such a fund includes directors who are not employees of the company.
      I should explain briefly why the amendment to clause 34 necessitates a change to clause 15. Once the management of such pension funds by an insurance company is no longer insurance business it is doubtful whether such an activity would be
      "in connection with or for the purposes of its insurance business"
      as would be required by clause 15 unamended. The amendment to the clause ensures that there is no conflict between the two clauses.
      Mr. Clinton Davis: I am grateful to the Minister for having enabled his officials to confer further with the industry. The result of that is the group of amendments, which are helpful.
      Mr. Eyre: I ought to add that if anyone concerned were to propose a way not already suggested for making a widening amendment that did not conflict with the directive I should be prepared for officials to consider it. However, any such provision seems bound to be in conflict with the directive and I hold out little hope of being able to go further in this area. I am grateful to the hon. Gentleman for acknowledging the progress that has been made.
      Amendment agreed to.

    Clause 17

      ACTUARIAL INVESTIGATION OF LONG TERM BUSINESS
      Mr. Eyre: I beg to move amendment No. 15, in page 12, line 24, after 'holders', insert 'to participate in profits'.
      The amendment meets an undertaking that I gave in Committee, in the light of which the hon. Member for Hackney, Central (Mr. Davis) asked leave to withdraw a similar amendment. It meets a small point of concern to the industry.
      The only difference between my amendment and that discussed in Committee is that this relates to rights to participate in profits rather than rights to participate in surplus. That will avoid any possible confusion with the term "established surplus", which is defined in the 1974 Act.
      Amendment agreed to.

    Clause 22

      GROUNDS FOR INTERVENTION
      Mr. Clinton Davis: I beg to move amendment No. 16, in page 18, line 8, leave out 'generally accepted practice' and insert
      `generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurance companies'.
      Mr. Deputy Speaker: With this we may take amendment No. 37, in clause 23, in page 19, line 29, leave out 'generally accepted practice' and insert
      'generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurance companies'.
      7.45 pm
      Mr. Davis: The purpose of the amendments is to obtain consistency between the Bill and regulation 4 of the Insurance Companies (Accounts and Statements) Regulations 1980. The matter was drawn to my attention by the Consultative Committee of Accountancy Bodies, which was disappointed by the response of the Department to its repeated plea for the avoidance of confusion.
      On 18 March a letter from the Department said, in effect, that it had considered the Committee's comments further and was not persuaded that the phrase "generally accepted practice" was likely to lead to confusion. It refused to consider the inclusion in the Bill of the lengthier formula used in the regulations to which I have referred.
      I hope that following further representations, and on reflection, the Department has revised its view. I agree with the accountancy bodies that there is some risk of confusion, however slight, and it would be better to avoid that risk by adopting the formula that I have suggested as a result of the representations made to me.
      Mr. Eyre: The amendments have been pressed on the Department in consultations with the industry and accountancy bodies. The hon. Member referred to the Department's being satisfied with the amendments. In fact, my officials have not been persuaded of the need for such changes, because they believe that the shorter formula would be interpreted as meaning the longer.

      743
      However, I have been impressed by the fluency of the hon. Member for Hackney, Central and the strength of feeling of the industry and the accountancy bodies, and by their firm attachment to the formula included in regulation 4 of the accounts and statements regulations, to which they have become accustomed. On that basis, I am prepared to accept the amendments.
      Mr. Clinton Davis: I am grateful to the Minister, though I expected that response, because he knows that the whole House would have been against him. There would have been a massive revolt on the Conservative Benches, as one can see, and heaven knows what the Social Democrats would have done.
      Sir Graham Page: I do not want to make waves in the flattery with which my hon. Friend the Under-Secretary favoured the hon. Member for Hackney, Central (Mr. Davis), but it was not only the hon. Gentleman's fluency that persuaded the Government to change their mind. The British Insurance Association and the acccountancy bodies pressed the Government. The whole industry was asking for the change, and I am glad that my hon. Friend has given way.
      Mr. Davis: The whole country was in turmoil.
      Amendment agreed to.

    Clause 23

      POWERS OF INTERVENTION
      Amendment made: No. 37, in page 19, line 29, leave out "generally accepted practice" and insert
      "generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurance companies".—[Mr. Clinton Davis.]

    Clause 25
      APPROVAL OF TRANSFERS OF GENERAL BUSINESS
      Amendment made: No. 17, in page 21, line 5, after "transferee", insert "in writing".—[Mr. Eyre.]
    Clause 34

      INSURANCE BUSINESS
      Mr. Eyre: I beg to move amendment No. 18, in page 24, line 30, after 'body', insert
      `not being a body carrying on a banking business'.
      Mr. Deputy Speaker: With this we may take Government amendment No. 19.
      Mr. Eyre: The amendment corrects an unintended consequence of the present wording of paragraph (c) of clause 34, which has come to light since the Committee stage. The overall intention of paragraph (c) is that capital redemption and managed pension fund business should be subject to the authorisation and supervisory requirements of the legislation only when carried on by a company that is already an insurance company.
      Inadvertently, banks have also been caught. A bank carrying on business permitted by clause 2(4) is carrying on business which is insurance business apart from clause 34(c) and would, on the present wording, require the appropriate authorisation. The amendment simply excludes banks from the bodies described in lines 30 to 32,
      744
      on page 24. Amendment No. 19 is also concerned with the circumstances in which capital redemption and managed pension fund business is to be treated as insurance business. Our overall intention is to treat such business as insurance business only when carried on by an insurance company. The change from section to paragraph corrects the anomaly.
      Mr. Clinton Davis: Once again the Minister has been moved by the possibility of many difficulties. I have had representations from my constituents, and my hon. Friends the Members for Norwood (Mr. Fraser) and Norwich, South (Mr. Garrett) have received representations from their constituents about this tremendously important matter. I was impressed by the way in which the hon. Gentleman explained the case. I could not understand a word of it.
      Amendment agreed to.
      Amendments made: No. 19, in page 24, line 32, leave out 'section' and insert 'paragraph'.
      No. 20, in page 24, line 35, after second 'funds', insert `solely'.
      No. 21, in page 24, line 36, after 'own', insert 'officers or'.
      No. 22, in page 24, line 36, after 'dependants', insert
      `or in the case of a company partly for the benefit of those persons and partly for the benefit of officers or employees and their dependants of its subsidiary or holding company or a subsidtaiy of its holding company'.—[Mr. Eyre.]

    Clause 35

      INTERPRETATION
      Amendment made: No. 24, in page 24, line 40, al: end insert
      "'holding company" shall be construed in accordance with section 154 of the Companies Act 1948 or section 148 of the Companies Act (Northern Ireland) 1960;'.—[Mr. Eyre.]

    New Schedule

      DETERMINATION OF PREMIUM LIMIT
      (1) Subject to the following provisions of this Schedule, the premium limit for the purposes of section 7(6) above is the aggregate of the amounts of gross premiums shown in the annual accounts relating to the business of the applicant in the United Kingdom last deposited under section 18 of the 1974 Act as receivable in respect of general business in the financial year to which the accounts relate.
      (2) If the accounts so deposited relate to a financial year which is not for a period of 12 months, the aggregate of the amounts of gross premiums shown in the accounts as receivable in that financial year shall be divided by the number of months in that financial year and multiplied by twelve.
      (3) If no accounts have been deposited under section 18 of the 1974 Act the aggregate amount of gross premiums shall be the amount or, if more than one amount, the lower or lowest amount, shown in respect of gross premiums relating to the business of the applicant in the United Kingdom in the financial forecast last submitted by the applicant in accordance with regulations made for the purposes of section 5(1)(a) above. '.—[Mr. Eyre.]
      Brought up, read the First and Second time, and added to the Bill.

    Schedule 3

      CONSEQUENTIAL AMENDMENTS
      Amendments made: No. 30, in page 30, line 32, leave out '1, 2'.
      No. 31, in page 32, line 37, at end insert—

      745
      '—.In section 20(2) of the Insurance Companies Act 1958 for the words "the amount required by section 44 of the Insurance Companies Act 1974" there shall be substituted the words "£50,000".'.
      No. 32 in page 33, line 25, at end insert—
      '—. In paragraph 11(10A) of Schedule 5 to the Finance Act 1975 for the words from "Part I" to "1974" there shall be substituted the words "section 3 or 4 of the Insurance Companies Act 1981".'.
      No. 33, in page 34, line 21, at end add—
      '.—()In Article 101(1) of the Road Traffic (Northern Ireland) Order 1981—

      (a) for the words "in Northern Ireland a motor vehicle insurance business" there shall be substituted the words "insurance business within group 2 in Part II of Schedule 2 to the Insurance Companies Act 1981" and

      (b) for "1974" there shall be substituted "1981".—[Mr. Eyre.]

    Schedule 4

      REPEALS
      Amendment made: No. 34, in page 35, line 8, at end insert—

      `1970 c. 10.

      The Income and Corporation Taxes Act 1970.

      In section 19(2)(a)(ii), the words from "or of" to "Northern Ireland"; and the words from "or as" to "1968".

      In section 323(2), in the definition of "insurance company", and in the definition of "periodical return", the words from "or" to "1968".'—[Mr. Eyre.]

      Mr. Eyre: I beg to move amendment No. 35, in page 35, line 35, leave out class"' and insert relevant"'.
      The amendment rectifies the simple error in the repeal of certain words of section 56(2) of the 1974 Act. There was a reference to a class of business relevant for the purpose of part I of the 1974 Act. That part of the Act is repealed by the Bill and references to it fall to be repealed as well. The repeal as it stands merely disposes of three words too many, and the purpose of the amendment is to restore them.
      Amendment agreed to.
      Amendment made: No. 36, in page 36, line 55, column 3, at end insert—
      'In Part I of Schedule 2—

      the words from "The Insurance Companies (Accounts and Forms) Regulations 1968" to "1571).";

      the entry relating to the Insurance Companies (Accounts and Forms) (Amendment) Regulations 1975;

      the words from "The Insurance Companies (Accounts and Forms) (Amendment) Regulations 1976" to "869).";

      the words from "The Insurance Companies (Accounts and Forms) (Amendment) (No. 3)" to "721)"; and

      the entry relating to the Lloyd's (General Business) Regulations 1979.

      In Part II of Schedule 2, paragraphs 1 to 7 and 15.'.—[Mr. Eyre.]

      Bill read the Third time and passed.

  International Computers Ltd.
  7.56 pm
  The Minister for Industry and Information Technology (Mr. Kenneth Baker): I beg to move,
  That this House authorises the Secretary of State to undertake to pay, in respect of guarantees by way of financial assistance to International Computers Limited under section 8 of the Industry Act 1972 (as amended by the Industry Act 1975, the Industry (Amendment) Act 1976 and the Industry Act 1980), sums exceeding £5 million but not exceeding £200 million.
  The motion is being made under section 8 of the Industry Act 1972. It provides, as my right hon. Friend the Secretary of State for Industry announced to the House on 19 March, for a Government guarantee of loan facilities advanced by banks to International Computers Ltd. The proposed loan guarantee is limited to an amount of up to £200 million for a period of up to two years. ICL's principal banks are themselves continuing their support for the company in an amount of £70 million as part of this arrangement.
  As my right hon. Friend also said on 19 March, the Government have a special interest in ICL as a major customer of its products. The company's equipment, to a value of over £300 million, supports vital operations in some 20 departments, including defence, revenue assessment and collection, agriculture, health and social security. ICL also has a significant place in this country's information technology industry, employing some 23,000 people in the United Kingdom, many of them highly skilled, and contributing substantially to the balance of payments.
  In recognition of the company's importance to the functioning of Government, we have thought it right to respond positively to the proposal that we should join with the banks to provide a limited, temporary measure of support for ICL.
  ICL can point to significant achievements since its formation in 1968. The company's productivity, turnover and profitability have risen impressively over the years. In 1980 its overseas turnover exceeded £300 million for the first time—a sixfold rise since 1973. Through sustained development work and acquisitions the company is now able to claim that it is offering its most comprehensive and competitive range of products ever. The value of ICL's world-wide customer base is well over £2,000 million in 80 countries. Apart from IBM, this is the biggest customer base, outside America and Japan, of any computer manufacturer.
  Despite this record of success, the company reported a sharp drop in profit in the second half of the year ending 30 September 1980. It has since announced that current trading is running at a loss and that the adverse conditions could continue well into the current year. This downturn has been caused primarily by the impact of the world-wide recession—which, notwithstanding their long-term prospects, has hit high technology industries like the computer industry particularly hard. For a company like ICL, which is geared to growth and a high level of expenditure on research and development, a severe and prolonged flattening out of sales and hence of profitability gives rise quickly to financial problems. I have been interested to note recent press reports which suggest that other

  747
  multinational computer manufacturers have experienced similiar difficulties, extending to operations in this country.
  ICL is taking vigorous action to contain costs, including 10 per cent. redundancies already announced across the work force in the United Kingdom and a proposal to the unions for a zero pay increase in 1981. Redundancies are unfortunate but, I fear, necessary. The company is therefore responding to its difficulties positively and with determination.
  Despite the adverse trading conditions, it is continuing to secure success in the market place, including significant new orders in the past few weeks. I have been delighted to note also the recent statement of confidence in the company by the ICL computer users' association.
  The assistance envisaged by the motion is of limited amount for a limited time. No public expenditure will be incurred unless the guarantee is called, and there is therefore no effect on the public sector borrowing requirement. The sum of £200 million that we propose as the maximum of the guarantee—which covers only borrowing beyond the point at which ICL has drawn on existing facilities from its principal banks of £70 million—is judged by the banks and the company as sufficient to enable the company to review its longer-term business opportunities in the light of its current trading position.
  Mr. Nick Budgen: Has any inquiry been made in the City as to what it would cost to buy such a guarantee from a private source?
  Mr. Baker: Not as far as I know.
  Given a revival of markets, the company expects to return to profitable operations. At the end of the two years our guarantee lapses. The measure is therefore temporary and the circumstances exceptional.
  I am in no sense apologetic in approaching the House for approval of this support. I believe that it is a constructive but limited measure of Government involvement in an important component of a key industry which has excellent long-term prospects. As a Government we have never set our face against sensible ways of encouraging success. To have refused the approaches made to us would certainly have risked a destructive and very expensive outcome, which would have benefited no one and would have damaged our own computing operations in particular, together with those of many other major users. As the 1979 Conservative manifesto made clear, the national interest sometimes suggests that the Government should help a firm in difficulties, provided that help is of a temporary nature.
  If the House approves the motion, the Government will of course enter into a formal agreement on the loan guarantee with ICL and its principal banks. I do not believe that it would be right for me to make public the details of that agreement, as I have already been asked to do in questions tabled by two hon. Members. By its very nature, such an agreement will contain information of a commercial nature, which should properly remain confidential. Successive Governments have followed the policy of not publishing the detailed conditions and terms of loan guarantee assistance given to private industry under section 8 of the Industry Act 1972.
  I should like to give the House an indication of the broad principles that we have established for our
  748
  relationship with the company during the period of the guarantee. First, we shall of course wish to monitor the business activities and performance of the company very closely while the guarantee is in operation, and the company have agreed to this. Secondly, we shall expect to keep in close touch with the progress of the review of longer-term business opportunities that ICL is conducting. As Minister for Industry and Information Technology, I meet frequently all major companies in this industry, to discuss plans and prospects, and it is essential for companies in such a fast-moving sector to review their strategic position in the market from time to time in the light of their expectations and trends in the industry.
  The Department's discussions with ICL will be on a more formal basis, in recognition of our financial support for the company, but the background will be the same as for our wider interest in information technology developments in the United Kingdom. It is in this context also that we shall be continuing our support for the company's R and D activities under selective schemes available to industry in general. Thirdly, we expect the company to consult us on any major organisational and management changes during the period of the guarantee.
  Of course, I cannot predict at this stage what the outcome of ICL' s review of its business opportunities will be. There has been press comment on the possibility of association with another company. ICL, like most companies in the industry, regularly examines ways of cooperating with other companies. Indeed, it has several cooperative arrangements already with both United Kingdom and overseas concerns. The information technology industry is one which thrives on change, not least because of converging technologies and changes in market behaviour. In these circumstances, it would be both proper and prudent for ICL to examine the scope for new arrangements, which might strengthen its commercial position, provide a better means of spreading the heavy R and D load inseparable from computing, and secure the interests of the all-important customer base.
  But this is speculation about the future. The immediate need, for which I seek the approval of the House, is to provide ICL with the guarantee of additional banking facilities of up to £200 million for up to two years, as the prerequisite of this strategic review of this company's business opportunities.
  8.5 pm
  Mr. John Garrett: The Opposition agree with the proposed Government assistance to ICL. We believe it to be a welcome recognition of the need to support and develop a vital national industry. However, we have some questions to ask.
  The motion is a lesson for our times. A company prospers under the surveillance of the National Enterprise Board and so, according to the prevailing doctrine that only under private ownership can it be free and dynamic, the State holding is sold off. Within 18 months the company has to be bailed out by the Government, and up to £200 million in public money is put into it so that it can be made profitable again for the benefit of private shareholders. It sounds to me a poor deal for the taxpayer.
  The decision to sell the public stake in ICL now looks to have been thoroughly unwise, even to the City. As the Financial Times said on 20 March, the Secretary of State's critics

  749
  "will now argue that the sale was made too soon; certainly it will be argued that the current rescue attempt might well have been easier to mount from the NEB's headquarters than from Sir Keith's own offices."
  It might have added that the necessary future close supervision of the company would have been carried out more competently by the NEB than by the Department of Industry. Indeed, ICL now meets the criteria that the Government have invented for assistance from the NEB. It is in a high-technology sector, it is in a market with potential for exceptional growth, and it is a business of crucial national importance.
  As The Times commented:
  "Had the NEB not been instructed to dispose of its holding in ICL, the present crisis would probably not have arisen. Not only would access to the required facilities have been facilitated, but the monitoring of the company's operations, which forms a routine part of the Board's activities with any company in which it has a holding, could well have given an early warning of the deteriorating position and could have led to some corrective action."
  The pursuit of one element of the Government's ideology—the sale to private interests of State holdings—has led to an embarrassing defeat on another element of Government ideology, non-intervention in industry. The Department of Industry is gripped by policy schizophrenia—whether or not to intervene. Luckily, it is seeking a cure in intervention. As the Financial Times commented,
  "there is now virtually nothing credible left in Sir Keith's avowed policy of non-intervention in industry."
  The Act under which these funds are to be made available is a relic of a similar U-turn by a former Tory Government. In 1971 they repealed Labour's Industrial Expansion Act in a fit of non-intervention, and in 1972 they replaced it with an even more interventionist Industry Act, for which we have had reason to be grateful ever since. Conservative Governments are always in the process of eating their words on this issue after 18 months in office, at a terrible cost to British industry.
  We know that when the problems of ICL became apparent the company was hawked from one potential purchaser to another—Shell, BP, GEC. There was no luck there. Then it was suggested that Control Data, Sperry Univac, Philips, Nixdorf, Siemens, Hitachi and Fujitsu might be interested in getting the Government off the hook. There was no luck there, either.
  Are the Government still trying to find a partner or an owner for ICL? The Minister referred simply to cooperation. A number of us believe that something deeper is needed. The American Sperry Univac or NCR could be interested. What they want, of course, is ICL's expertise and its customer base on the cheap. They could now acquire them for about £60 million. They particularly want its customer base in 20 Government Departments and its 35 per cent. market share in Britain. I very much doubt whether they would want to retain all its 24,000 employees in Britain in the long run.
  If such a takeover went ahead, we should be back in the familiar position of having a few worthless guarantees from a foreign multinational to maintain the work force. After a few years there would be the virtual closure of the one European computer company that is a force in the world computer industry. Skills essential to technological advance in this country would be dispersed for ever, and in this field we should slip behind and finally out of the
  750
  race to develop computers. Any Government who countenanced such a solution would be regarded as doing irreparable damage to our standing and competence as an industrial nation. Perhaps the Minister will be more forthcoming about his intentions when he winds up. Does he regard it as unacceptable that ICL should ever be taken over by a foreign company?
  On the other hand, I cannot see that Government assistance is likely to be "limited or temporary"—the Secretary of State's words. A little while ago, the phrase was "temporary and tapering". The Secretary of State is more likely to be temporary and tapering than the assistance to ICL. The use of ICL equipment in the key Inland Revenue application will lock the Government and ICL even closer together.
  In fact, ICL has been a succesful company in a murderously tough business, dominated by one company, IBM, which has 15 times its turnover. Half of ICL's sales are overseas. Its new range of middle-sized computers, advanced processors and file stores are as technically advanced as any of the products of its competitors. Over the years, it has spent about £500 million on developing its 2900 series, and that investment is beginning to pay off. Its turnover rose from £150 million in 1972 to £624 million in 1979, and its profit from £3 million to £45 million. The sale of the Government holding produced a profit of £24 million. That, of course, was before the Government's economic policies began to bite.
  The company's present problems arise primarily from the Government's economic policies, which, as all the world knows, are based on reducing inflation somewhat by destroying British industry totally. The chairman of ICL said that the company had been hit by a combination of inflation, high interest rates and uncompetitive sterling. He said:
  "I lay most weight on the speed of change of the real effective exchange rate".
  In addition, ICL has had to compete with companies which have been able to raise money at half the interest rates that ICL has had to pay.
  On top of that, from January 1979 IBM started price cutting on a scale which led the EEC to charge IBM with offences against its competition rules, after complaints by four European computer makers. Have the Government joined in those complaints against IBM? What is their attitude to the pricing policy of IBM, and what do they intend to do about it?
  Now that the Government have come to the rescue of ICL they have to participate in its future. So the Government must answer a number of important questions. There has been severe criticism of ICL's management and its product strategy. It is accused of trying to do too much, and carrying too large a range. The company's leasing arrangements, too, have been criticised. Difficulties seem to have developed so suddenly that everyone has been caught off guard. The board was far too optimistic about the growth in demand for its products. Clearly, the board needs more outside directors of a high calibre. How do the Government view these criticisms? Do they propose to see that something is done about them—at least by appointing new outside directors?
  The company has to spend about £60 million a year on research and development. That obligation makes it exceptionally vulnerable to a downturn in activities. The Government provide only about 10 per cent. of that research and development funding—far less than is given

  751
  by other Governments to the company's competitors. Do the Government recognise any further obligation to support the company's research and development costs? The Minister mentioned this matter, and I do not understand why there should be any secret. What do the Government feel about putting money into research and development at ICL?
  Do the Government accept that the company is vital to a strategy for the development of the data processing and transmission industries in Britain—industries which France, Japan and the United States accept as essential to industrial growth? Government support for the computer industry in France is double our level, in Japan it is seven times our level, and in the United States it is greater still.
  We now have a Minister for Industry and Information Technology. He is responsible for a number of schemes, for example, for the development of microprocessors. After months of dithering, the Government have supported Inmos. The NEB has subsidiaries in information technology equipment and software. Now the Government have taken ICL again under their wing. So we have an array of ad hoc developments in an area where we need a comprehensive strategy if we are to take advantage of the potential for rapid growth. As was said in Computer Weekly on 12 February, the United Kingdom computer industry has been hampered by the lack of an appropriate Government policy.
  Will the Government develop a strategy for this and related industries, as the National Economic Development Office has urged them to do? Foreign import penetration is increasing inexorably. In computer and allied fields, import penetration from foreign manufacturers has risen from 20 per cent. to 60 per cent. over the past 10 years. Should there be an EEC strategy using public procurement and support, before world markets are carved up by the United States and Japan, both of whom are protectionist at home and aggressive abroad?
  While I am on the subject of the EEC, I should like to know whether it is true that the French and Irish have complained in Brussels about this Government's guarantee to ICL. It is rich that the French should do that, after having poured money for 20 years into trying to build an ICL of their own.
  The managing director of ICL said that if Europe's computer requirements were met by the United States and Japan, those two countries would have their hands on the means to control Europe's social and economic development.
  The rescue of ICL, which we welcome, makes it imperative that the Government should swallow their ideology again—by now, they should be accustomed to doing that—and produce a policy and a plan for the future of this country in a crucial sphere of industrial development. How long shall we have to wait for such a strategy and plan for such a crucial industry?
  8.16 pm
  Mr. Tom Arnold: I apologise to the Minister for not being here when he started his speech, and I congratulate him and the Government on having taken such a wise step—as I said when my right hon. Friend the Secretary of State for Industry made the initial statement to the House.
  This is not a matter on which the House should take an ideological view, because it is a practical matter. As a Member who represents part of Greater Manchester I am
  752
  greatly concerned about the future of ICL—as are all hon. Members who represent the area. My constituency, which used to be part of Cheshire, has always taken a practical view, so I am glad that the Government have taken a similar view on an issue which poses a number of complicated questions.
  There is one issue that the House should consider this evening. I hope that my hon. Friend will be able to assure me about the policy that the company proposes to fellow. The Government have given the company a breathing space, but no more. The problems of ICL are not new. The company has faced difficulties for a number of years, as the House has been told on previous occasions.
  There appears to have been some confusion among the management—the hon. Member for Norwich, South (Mr. Garrett) mentioned the company's management—about whether ICL is competing with what I shall call the big boys or whether it intended to concentrate on specialist areas in technology where it could make a contribution. There is a choice here, and it is not one that can be ducked. I hope that the company will make good use of the time that it is being given by the Government to resolve the issue.
  If the company continues to try to get the best of both worlds it will remain a headache for its employees, shareholders and the Government. I am convinced that Greater Manchester—perhaps the whole county, because many of its employees and directors live in all parts of the county—can and will benefit from this wise Government policy, provided that everyone recognises that difficult decisions need to be taken and to be taken soon.
  I hope that my hon. Friend the Minister will answer one or two of the questions that I have raised. I repeat that I welcome this step, and I am sure that the Government have taken the right decision.
  8.20 pm
  Mrs. Gwyneth Dunwoody: I intervene in this debate because, frankly, the story of ICL greatly concerns my constituents. Until recently, many of them worked at the ICL factory at Winsford, which, although in the constituency adjoining mine, has provided a great deal of employment.
  When I came into the Chamber this evening I wondered how the Minister would manage to explain this extraordinary volte face. Of' course, I can see why he was put up to do this job. He sounds very reasonable. To put forward such an extraordinary case, a Government need someone who at least sounds faintly coherent.
  This company was created with taxpayers' money. It was developed with taxpayers' money. In the Winsford area it received enormous support from the local authorities. As soon as the Government came to power, however, even though this was an industry which manifestly was of tremendous importance and manifestly one of the new technology industries which were likely to develop greatly in the future, they could not wait to sell off the shares to anyone who was prepared to take them, irrespective of the national interest.
  In the comparatively short time that this Government have been in office a situation has arisen resulting in their having to come back here and say that the people who took over total control and benefited from the taxpayers' past efforts to create a new industry are unable to cope unless they have their present operation underwritten once again by the taxpayers' money.

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  What are we being offered? The hon. Member for Hazel Grove (Mr. Arnold) says that the Government's proposal is very sensible because it will guarantee employment and produce a great involvement in the area of Greater Manchester. But let me tell the hon. Gentleman a cautionary tale about what happened to ICL in the Cheshire area. Unfortunately, this present measure comes too late for my constituents because they have already lost their jobs. But the reality is that here is a company which, competing as it does in a growth industry, and which is capable of developing an enormous number of new jobs, has failed dismally to protect the interests of those who supported it in the past.
  When Winsford was a new town it welcomed the advent of this new industry and made a great many efforts to accommodate the firm. It offered large industrial sites and considerable assistance in terms of rate holidays. It sterilised suitable parts of its industrial estate so that the firm would be able to develop. Indeed, that was one of the conditions on which the firm originally set up in the Winsford area.
  Despite the money spent in providing housing and the encouragement given the firm by the local authority, when it came to the point, the firm suddenly announced, almost without consultation, that it intended to close the entire factory and move elsewhere.
  Thinking about it, this is an extraordinary history. Only last August ICL came to the North-West group of Labour Members of Parliament in great travail. It said that it was very concerned that the Government were not interested in awarding a major contract for the Inland Revenue computer to a British firm and it wanted hon. Members to do all that was possible to ensure that that contract went to the firm, because it would provide employment and because it represented the future of the British computer industry.
  Labour Members from the North-West undoubtedly had a specific interest in trying to save jobs, and they did their best to make sure that Parliament discussed the implications of the Inland Revenue computer contract and that everyone involved knew what the price would be if the contract went to another firm. Yet, even while those talks were going on, there was a dramatic change in ICL's order book and the company seemed unable to cope with the changing processes of open competition.
  I am prepared to accept that most of the difficulties which ICL faced were the result of direct Government policies. There is no doubt that many actions of the Conservative Government as soon as they came to office made it virtually impossible for ICL to compete in overseas markets. But it is also true that the management of ICL seemed to be astonishingly little concerned about the future of its employees in the Winsford area.
  To those who think that their future has been safeguarded by the Government's guarantee, I say "Beware. You may find that ICL has not sufficient flexibility to retrain or to recreate new lines. You may find, as I think very soon other constituences in the North-West will find, that even those people in the Winsford area who have been retrained will not retain their jobs."
  There is a strong suspicion amongst those who work in the computer industry that ICL would still be prepared to do a deal that meant that it imported a great many parts and simply made up goods here with a large American
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  partner. That will not safeguard employment, and it will not safeguard the interests of the British taxpayer. Certainly it will not help create the British computer industry.
  When my hon. Friend the Member for Norwich, South (Mr. Garrett) said that the difficulties that had arisen were likely to prove dangerous to the British as a whole he was not exaggerating. Modern government works in such a way that the computer is becoming the one tool by which not only the unions but anyone who controls the machinery of computers will control the future of day-to-day administration. If we in this country ever reach the stage that ICL was created specifically to avoid, where all that computer control is in the hands of a foreign company, we shall have to consider seriously where our best interests lie.
  If I speak bitterly it is because, in an area in the North-West, where we know what unemployment is like, where we are losing jobs in traditional engineering faster than we can recreate them, where there are far too many young people out of work and where there is difficulty even in getting proper apprentice training for many of the people who were halfway through that sort of education, we thought that at least we had one new and burgeoning industry which provided some hope. What has happened in Winsford can happen elsewhere.
  If we do not retain a manufacturing interest in the computer industry there is no indication that there is any future for those who want to work with computers. The implications are great, both politically and industrially. I do not believe that the people of Winsford and its surroundings and my constituents who worked for ICL have been well served. I record my extreme dissatisfaction with the manner in which the Minister has skated over all the implications of his announcement. I hope that those who work for ICL in the future will be treated better than those who worked for the company in the past.
  8.28 pm
  Mr. Hugh Dykes: It behoves me to be brief. I apologise to the Minister and to the House for missing the start of the debate. This was due to a perhaps over-optimistic estimate of the time when the debate would begin. The business of the House is proceeding extremely rapidly. That is perhaps an additional reason for keeping my speech short.
  The hon. Member for Crewe (Mrs. Dunwoody) concentrated mainly on a grievous local issue. All hon. Members have sympathy for constituents confronted with local closures. I wish, however, to refer to ICL as a national company and an international company. I shall carefully read in Hansard tomorrow what my hon. Friend the Minister said. I assume that he expanded on the comments of my right hon. Friend the Secretary of State recently about the need to give this emergency assistance to the company. There is a big difference between what may be short- and medium-term emergency support given until the financial situation becomes clearer and the longer-term, fundamental support that the State, in a mixed economy in the advanced world, has to give this sort of industry.
  I welcome the assistance, although it has arisen in rather sad circumstances. I am glad that the Government saw the need to give the support. ICL is our leading computer manufacturer. The assistance enables the company to continue within the ambit of a private sector

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  company with private shareholders while the particular difficulties in current circumstances last. I thank the Government for taking this essential step and providing a vital breathing space.
  There will need to be careful thought about the longer-term future of the computer industry, particularly in individual countries of Europe and, indeed, in the whole of Europe. I become increasingly fearful—it is no exaggeration to use the word—of the horrendous danger of Western Europe falling badly behind—principally behind Japan but also behind the United States—in the highest advanced developments of telematics and information technology and in the intrinsic nature of the machinery and equipment now being developed. We in Europe are getting very primitive. That worries me a lot.
  While ICL has developed a pristine range of machines from the small and medium to the large, that company, no less than others in Britain in this industry, needs to do some heart-searching and re-thinking in coming months and years about the products on which they will concentrate. I believe that they should get together with their European counterparts. My reasons go wider, but I believe that co-operation over size will be essential.
  I am also glad to support the assistance that has been provided when I reflect upon the modest Government support that will have been given over the period 1966 to 1984 in comparison with other countries. The whole industry will have received aout £260 million over that lengthy period. ICL itself will have received only about £70 million. Incidentally, ICL has only one quarter of the United Kingdom market. It is not the giant in British terms that some people imagine. It is simply the largest single company.
  In France, even though there is a substantial private interface, the State invested about £600 million over that same long period, while in Germany the figure was over £1,000 million. In Japan the figure was nearly double the size of the German figure, although constructed in a different manner, which we, in the West, should examine closely to see whether there are lessons to be learnt. The total United States figure, federal and local, is enormous in an economy and an economic system regarded as par excellence the premier private enterprise economy. This shows the return to the good old common-sense, old-fashioned but equally valid and modern conclusion that one cannot say, in a complicated mixed economy system, that private is heroic and public is wicked, or the other way round. That applies above all to the computer industry.
  Some people—they would not include my hon. Friend the Minister—may have hesitated about that concept at an earlier stage in the life of this Government. I welcome the fact that it is not so now. An extremely welcome form of assistance and support has been provided for ICL just at the time it is needed.
  The company was clearly taken by surprise. It cannot be criticised for that. Hon. Members do not know enough about the internal details of what happened. Over the critical summer months from July and August onwards, for a short period, the company and its management were taken by surprise by a sudden collapse in new ordering and the return of some of the leasing contracts. It would have been catastrophic if an old-fashioned conclusion had been drawn from what was a short-term though admittedly grotesque and sizeable accident. The Government have taken the right course of action.
  Mrs. Dunwoody: I do not want to interrupt the hon. Gentleman's apologia. He is speaking warmly of the company, and I am sure that he has a deep feeling for it. Does he really believe that it is a good deal for the taxpayer, who has created and supported the company, still to underwrite the guarantee now that it has been sold to private enterprise and he no longer has an interest?
  Mr. Dykes: The hon. Lady will always provide a shrill and tendentious description of history. I am dealing briefly with the motion on the present plan. I welcome public sector support up to the maximum of £200 million, which I should have thought was right up the hon. Lady's street, so I am surprised by her attitude.
  I thank my right hon. Friend for supporting and promoting this action. I hope that we shall soon have an authoritative statement from ICL on its plans for 1981 and beyond.
  8.36 pm
  Mr. Kenneth Baker: The hon. Member for Crewe (Mrs. Dunwoody) was kind enough to say that I sounded reasonable.
  Mrs. Dunwoody: I did not say that the Minister was reasonable.
  Mr. Baker: I was about to assert that obvious verity—not only do I sound reasonable; I am reasonable. We have had a sensible and reasonable debate.
  My hon. Friend the Member for Harrow, East (Mr. Dykes) raised the much wider question of the strategy for the industry. The computer industry is only part of a much larger range of industrial and commercial activity known as information technology, which ranges from satellites to television games. It is one of the great growth areas. 'We have a world lead in parts of it but we cannot expect to have a lead throughout. The main part of my responsibilities is to ensure that we do not miss the boat. ICL is not the entire British computer industry, which covers a range of small, medium and even some reasonably large companies.
  The Prime Minister today launched the micro computers-in-schools scheme, which is an important step forward. It aims to bring microcomputers to every school, and is an important element in microtechnology strategy. The two companies supplying the machines are British. Neither existed in 1977. One started in that year and the other in the following year. They make exceptionally good small microcomputers. It is a vast and immensely complicated industry. Big and small and hardware and software work side by side.
  The hon. Member for Norwich, South (Mr. Garrett) asked about the sale of the NEB's shareholding in [CL. When that took place there was no reason to question the company's future performance. It had just turned in a healthy annual profit of £46 million, an increase of 22 per cent. The decision to sell the shares was part of the Government's wider plans to dispose of the NEB's assets. The NEB never took an active role in ICL. We see no advantage in taking out a new shareholding or involving the NEB again. ICL should primarily determine its own future.
  The hon. Gentleman also asked about the Government's attitude to an overseas buyer. Such questions are speculative. It is primarily for the company

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  to decide how it can most satisfactorily secure its position, having regard to its large and remarkably loyal body of customers.
  Mr. John Garrett: Can the Minister confirm that discussions are not going on between the ICL board and any other company with a view to the other company taking a shareholding in ICL?
  Mr. Baker: As I have said, this is a speculative matter. It is really a matter for the board and for the management of ICL.
  I was about to say that the Government, as an important customer accounting for between 6 per cent. and 8 per cent. of ICL's total turnover, wish to see, in any association which ICL might wish to effect, relevant assurances on the continuity of facilities, including research and development, production, support and marketing operations.
  The hon. Gentleman asked about ICL's leasing arrangements and whether its leasing business was a matter for concern. I confirm that it is not. Leasing is a useful alternative means of making a sale where the user does not wish to purchase outright. The disadvantages are that ICL must find backers to finance the leasing companies and make provision in its accounts for the repurchase of equipment from them and for the depreciation of equipment, but ICL considers that there is no serious risk in its leasing activities.
  The hon. Gentleman and others asked about the level of research and development. It is not our normal practice to reveal the details of applications made to us for research and development assistance. I am sure that the hon. Gentleman understands why that is so. We are currently considering a range of proposals from ICL which could lead to our doubling the current level of support for the company's product development activities in the coming year.
  Mrs. Dunwoody: Will the hon. Gentleman forgive me—
  Mr. Baker: I could forgive the hon. Lady almost anything.
  Mrs. Dunwoody: I am deeply moved by the Minister's kindness. He has announced that the Government may well wish to undertake an even greater involvement in research and development. On that basis, how can the Government justify the fact that they will have no control, beyond the most general monitoring, over the way in which the money is used?
  Mr. Baker: The hon. Lady seems unaware of the way in which we handle approaches in relation to research and development. We receive such approaches from a wide range of companies in the technology industries across the whole spectrum of British industry. It is a fairly regular occurrence for the Department to examine R and D programmes and projects. I assure the hon. Lady that when we approve such projects in other industries we do not think of taking a shareholding in the company. It would be quite inappropriate to do so.
  Mr. Barry Henderson: Is it not true that out of about £230 million provided to the industry for research and development work only about £70 million has actually gone to ICL, which is perhaps the only one in which the Government had, in effect, taken shares?
  Mr. Baker: Over the years the Government have provided research and development funds for ICL. I undertake to confirm the exact amount to my hon. Friend. Under the science and technology measures, in arrangements for research and development schemes the money must be matched, or more than matched, by the company involved. ICL has maintained a high level of research and development over the years over the whole range of its products. I think that that is recognised. In certain areas, such as the content addressable file store and the distributed array processor, it has undoubtedly done very well indeed in research and development.
  As I explained, we believe that the difficulties faced by ICL are temporary. The company was hit by the decline in orders for large computers in the autumn of last year. That decline is now beginning to hit other large computer companies throughout the world. A company such as ICL, which was geared for high growth, is hit very hard by a downturn in the inflow of orders.
  The hon. Gentleman and others, including my hon. Friend the Member for Hazel Grove (Mr. Arnold), referred to the strategic reviw of ICL. The strategic review is the most important way of examining where ICL should go in the future.
  Hon. Members asked whether ICL should try to develop and market a range right across the board, from the large to the small computer. Back in 1968 ICL made only large computers. Since then it has developed an extensive range down to the small mini-computers.
  The proportions in ICL's order book in the year ending last September were, for the large machines, 11 per cent. by value, for the medium machines, 26 per cent. by value, for the small and communications machines, 34 per cent., for software, 13 per cent. and for other orders, 16 per cent. That illustrates the way in which ICL has moved into the medium and smaller range. If it had not done that in the middle of the last decade it would not have survived at all.
  I hope that with support the company will be given a breathing space in which to examine its strategic objectives and to overcome its temporary problems.
  Mr. John Garrett: I fear that the Minister may finish his speech before dealing with my question about the Government's attitude to IBM's pricing policies in Europe, which have led several European computer makers to complain to the EEC about unfair competition.
  Mr. Baker: I have noted what the hon. Gentleman said and I shall examine it. The complaint was made about 12 months ago, when IBM brought out its range.
  Question put and agreed to.
  Resolved,
  That this House authorises the Secretary of State to undertake to pay, in respect of guarantees by way of financial assistance to International Computers Limited under section 8 of the Industry Act 1972 (as amended by the Industry Act 1975, the Industry (Amendment) Act 1976 and the Industry Act 1980), sums exceeding £5 million but not exceeding £200 million.

  European Community (Biomolecular Engineering)
  8.47 pm
  The Under-Secretary of State for Industry (Mr. Michael Marshall): I beg to move,
  That this House takes note of European Community Document No. 4460/80 on Biomolecular Engineering Research and of the explanatory memoranda dated 19 February 1980 and 8 December 1980; supports the Government's intention to ensure that Community research in this area should be beneficial in terms of the policy priorities of both the Community and the United Kingdom; and supports the intention to ensure that there is no duplication of effort in this area.
  The debate this evening is held on the recommendation of the Select Committee on European Legislation, &c. and is for the purpose of considering the European Commission document on a proposed research programme on biomolecular engineering. This proposal is still being considered in Brussels at official level by the appropriate Council working group.
  To put the proposal into context, I should like to deal briefly with biotechnology, the subject of the proposed research. Biotechnology is the industrial application of biological processes or systems. It is not new. Processes such as brewing and cheesemaking have been used for centuries. But recent developments have extended the range of products and processes that can be based on this technology. Advances in the understanding of enzymes, in methods of growing cells and in the understanding of cell structures have enabled many new processes to be developed. New organisms have led to methods of manufacturing insulin synthetically and great strides are being made in other areas of pharmaceutical processing. There is great potential for further applications in agriculture and medicine in particular, for the manufacture of food and animal feeds and for the production of non-fossil fuels.
  It is recognised as an area of science and technology likely to assume a key importance to the world economy in the next century and will clearly demonstrate its potential in the next decade.
  Mr. Tam Dalyell: The Minister is right to say that in agriculture there is great potential for future applications. Why has the Ministry, of Agriculture, Fisheries and Food chosen this moment to get rid of the post of chief scientist and to retire prematurely the man who occupied that post? I am not being unreasonable. I do not expect the Minister to answer immediately, but perhaps later he will explain how assessment is made in the Ministry.
  Mr. Marshall: I am not responsible for that Ministry, and it is difficult for me to give the answer which the hon. Gentleman seeks. I take note of what he says and I shall ensure that his comments are made to the Minister of Agriculture, Fisheries and Food.
  Many companies have long been aware of the opportunities offered by biotechnology and have readily exploited them. However, we recognise that a Government role exists in encouraging research and development in this field. In total we are already helping research in this area by a Government spend of some £5 million per annum. Recently the National Enterprise
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  Board and four companies joined together to set up a new company, Celltech. That will bridge the gap between the scientific and commercial worlds of biotechnology.
  The United Kingdom is aware of the benefits of sharing the cost of research, where the economies of scale can be seen to be greater than the inevitable costs and delays inherent in European procedures, and it is therefore bound to give careful and sympathetic consideration to the concept of a European programme and the benefits that might occur from such collaborative research. In space research, where my responsibilities cover the work of the European Space Agency, I have had ample evidence of the way in which that collaborative research can work to the benefit of our industry. An increase in the total European effort in biotechnology would be one of these advantages, but in this respect let me first put the proposed biomolecular engineering programme into some sort of perspective.
  It is estimated that in the six areas of activity described in the proposal the United Kingdom is currently spending upwards of £3½ million of public funds and it is probable that that is matched by the private sector. Under the Community programme as originally proposed the annual expenditure would have been about £3 million—5·2 million European units of account. However, the supplementary explanatory memorandum submitted by my noble Friend on 8 December shows that it is now proposed by the Commission that Community expenditure should be limited to between £1½ and £1¾ million—2½-3 million EUA—per year of which only half would be spent on research work. Our contribution to Community research in this area would thus come to a small percentage of our national research effort.
  Discussions on a possible Community research programme have been taking place for a long time, including early consideration prior to the Commission's proposals to the Council last January. That time scale is somewhat inevitable when the programme being formulated must avoid impinging on known commercial activities on the one hand and being too academic on the other.
  Mr. Frank Hooley: I apologise if I misunderstand the Minister. I think that he said that the programme would cost £1½ million. The document of 8 December mentions £7 million. Have I got the figures wrong?
  Mr. Marshall: I think that the hon. Gentleman is referring to the original proposal, which related to £3 million of public funds. I now refer to the latest, revised proposal. Our contribution to Community research would thus come from a small—
  Mr. Hooley: Will the Minister give way?
  Mr. Marshall: I shall have a chance to reply in the winding-up. Perhaps I shall return to the point. I would appreciate it if the hon. Gentleman would allow me to continue, as other hon. Members would like to speak.
  Mr. Hooley: I thought that the Minister referred explicitly to the document of 8 December 1980. I was quoting from that document when I referred to £7 million. The Minister said £11½ million. They may be two different figures, but I am confused.
  Mr. Marshall: The difference arises because I spoke of £1½ million per annum. The other figure refers to a fourand-a-half-year period.
  Mr. Hooley: I understand now.
  Mr. Marshall: I am glad that we are at one.
  Discussions on a possible Community research programme have been taking place for a long time. I shall concentrate on three areas where Community effort could be valuable.
  The first is the area of health and safety. All member States will want to pursue highly responsible policies in that regard, so the area of safety is one which we think could feature in common research. That should lead to the establishment of international standards to which we can all subscribe, thus avoiding the need for much of waste and frustration in protracted and separate negotiations.
  Secondly, there is the area of agriculture, where common research into the application of biotechnology to the development of appropriate technology can lead to good new agricultural practices which would be encouraged to spread rapidly to common benefit. The value of quickly grown new types of crops which can be shown to be tested in a wide range of climatic conditions can be readily identified.
  Lastly, there is the less easily quantifiable benefit of sharing experience in some of the research in the industrial sphere. A balanced European programme of reasonable scale could best provide an added stimulus to Community scientists whilst not conflicting with existing national work.
  We were amongst the countries to consider the original proposal to be over-ambitious in both scope and expenditure—at least as the Community's first venture into this field. We suggested that it should be cut and concentrated so that it conformed with the objectives I have just described.
  The revised proposal, while meeting our requirement for a cut in expenditure, involves a shift of emphasis away from research and towards training. This shift is of an extent not hitherto contemplated. We do not share the view of at least one other country that there is a significant lack of training opportunities, particularly when one considers what is available within the context of the European Molecular Biology Organisation or the Community's own scientific and technical training programme, and we do not believe that the extent of the training element is thus justifiable.
  I emphasise that the Government are still considering whether the programme as recommended is worthy of European support. We shall, however, continue to discuss it further in a spirit of co-operation to see whether a programme that we can accept as suitable for such support can be produced. In reaching our final position, I look forward to hearing the views of my parliamentary colleagues.
  8.55 pm
  Mr. Tam Dalyell: The Select Committee on European Legislation &c., chaired by my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman) and including my hon. Friend the Member for Newham, South (Mr. Spearing), was absolutely right to recognise the importance of this subject and suggest that it should be debated on the Floor of the House.
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  What is not at issue in this debate is the central importance of biomolecular engineering to the future of our country. I have just returned today from a conference to which I was invited long before we knew of this debate. It was held at Eastbourne and was sponsored by the Society of the Chemical Industry and the European Federation of Biotechology. There were over 1,000 delegates. That is some indication of the importance that is now attached throughout Europe to this important subject. Indeed, judging by the number of Japanese faces, it is attached to it throughout the world.
  Micro-organisms can be used to enhance the recovery of materials from low grade ores and from effluents containing undesirable quantities of metals or other toxins. It is especially important at a time when ore deposits are becoming scarcer and more expensive to recover from the earth's crust. Biological processes can be and are being applied to a range of effluents from all types of industry in an effort to recover otherwise wasted resources and to reduce the pollution burden. Anyone who talks about pollution must clearly understand that biotechnological processes offer a very important avenue in overcoming pollution problems, through biotechnical treatment of waste.
  A cheap, plentiful supply of enzymes, together with new immobilisation techniques, could lead to a reduction in energy requirements, by the analysis of chemical conversions in industry which currently require high pressures and temperatures to operate at an economic level. Just think what that can do for potential energy saving.
  Again, for many years the conversion of cellulose to sugar has presented a challenge to chemists, but until recently this was not a matter of pressing commercial interest. Now we are in a different ball game. The very possibility of converting the enormous quantities of cellulosic material into a sugar-based feedstock for fermentation to alcohol or protein has a renewed appeal as energy costs rise.
  I have seen some of the elegant research being undertaken to elucidate the requirements for biological enzymatic-hydrolysis for such materials as straw and wood to a carbohydrate in an accessible form for use as a substrate in fermentation.
  Until 1980 one might have been forgiven for thinking that this research was rather way out. With the chilling prospect of yet another lurch forward in hydrocarbon feedstock prices, few will smirk at way-out research in this area. Even the production of artificial leaves to fix solar energy may be seen as a sort of biologists' answer to the solar panel.
  Even more mind-boggling could be the effects of biomolecular engineering on the resources available to health. Last month my hon. Friend the Member for Whitehaven (Dr. Cunningham) and I visited Professor Donald Boulter at Durham university. We saw work of a type that could lead to much cheaper human insulin and interferon. Indeed, developments have already taken place in Switzerland and in the United States of America. Sir Ewart Jones, professor of chemistry at Oxford, guesses that interferon that would today be valued at £2,000 might—depending on which of the various 30 types is deemed relevant for use—cost as little as 50p in five to 10 years' time. I am told by Professor Ken Murray, from Edinburgh, that with biotechnological developments and

  763
  techniques that could be true in two or three years. I leave it to hon. Members to guess what price drug companies may charge for 50p-worth of interferon.
  The reduction in real costs as the result of biotechnological techniques could be dramatic. But—it is a jumbe-sized "but"—the Opposition are a bit puzzled about the proposal before us. Let us not pretend that it is anything like the original proposal, which I understood was once the Government's preferred solution. Like anybody else, the Government are entitled to change their mind. However, we are entitled to refer to the original proposal. In the original proposal the Government—like the Commission—seemed to want to spend 26 million units of account, or about £17 million, plus 23 million units of account from member States. We are now faced with a proposals that involve 11·8 million units of account over four years.
  In the original proposal the emphasis was on research on a Community basis. The present proposals are geared not to research but to training. Why has this change taken place? A shorthand answer might be that, at the highest level of the French State, the brilliant elite of the Ecole Nationale d' Administration and of the Ecole Polytechnique have come to the correct conclusion that biotechnology is one of the key growth areas. They may have decided that it behoves the Government of France to get an agreement that hardly deviates from the French national interest.
  Whether that is right, half-right or wrong it remains fairly certain that the documents before us, by pooling training, hand over British expertise to the French for little or no return. That is the net effect. It is for the Government to convince us that they have not been taken for a ride by the French negotiators. Has Paris calculated that this is the best way of scuppering a programme for which, on a European basis, it has little enthusiasm? After all, £9 million of French Government investment has gone into biological energy production that is specifically geared to alcohol as a dilutant to petrol. Indeed, Mr. Kourilsky and others made that clear at the Institut Pasteur.
  Mr. Dykes: Will the hon. Gentleman clarify that point? On the one hand he has argued that the French want a small programme because they want to operate on a national basis, and on the other he has implied that they want a programme that will involve handing over British expertise. That needs to be explained. Can the hon. Gentleman have it both ways?
  Mr. Dalyell: I am not trying to have it both ways. the explanation is simple. The French did not like the original proposal. I am putting this in question form. Do they like the proposal before us, which would give them the training? Alternatively, they might want to scupper the programme and have nothing. It may be equal for them between those two options. I suggest that someone must explain why they did not want the original package honourably put forward by the Commission. The Commission and Dr. Schuster, who is known to the hon. Gentleman and me, and Crest put forward an honourable proposal. We must have an answer to the question: why did the original package prove to be unacceptable?
  Alternatively—because this is complex—Professor Hartley, of Imperial College, sees some hope that the programme may compensate for the pallid response of the White Paper on biotechnology. New university posts in
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  this area are desperately needed to maintain the slight advantage that the United Kingdom retains. If the EEC initiative succeeds, it could provide something. A direct response to this key concern of the Spinks report would have been better.
  The suspicion is that the French reaction was to scupper the programme by changing it and putting it forward in a form that was less than acceptable to us. My reply to the hon. Member for Harrow, East (Mr. Dykes) is that there were these two alternatives, and I understand that they did not mind very much, between the two, as long as it was changed from the original package.
  We can understand why the original project 2—the development of bioreactors for industrial and human detoxification—was dropped. That may be a rational change in view of detoxification being put into the EEC environment programme. I should like to hear why, in the Government's view, proposal 2 was dropped.
  The House will forgive an uncharitable aside. One wonders whether this proposal may not have been acceptable to France since the new emphasis on the agricultural element may channel money to the French work on seed development, giving money to French research which they were going to carry out anyway. That is one view. We have no means of knowing the motivation, but those interested in the subject would like to pursue it and would welcome any comments by the Minister.
  Why was proposal 4 dropped? That relates to the development of cloning vehicles. Cloning is the selection of a line of individual organisms with genetic composition identical to a particular parent. Of all the projects, project 4 covers an area which may lead to patentable discoveries directly.
  Was proposal 4 dropped because it had the potential to create commercial problems? We constantly run into the conundrum whether to carry out research on a European basis in areas where individual firms can reap significant commercial advantage.
  Was proposal 4 dropped because the patent law is confused? The Government will be aware of the test case involving General Electric and Cherabsky in the patentability of a patent application. How far one can patent living organisms and improvements on living organisms is a tricky question. The British Patent Office does not claim to have all the answers. In this area it may not be much use taking out patents because in such a fast-moving development patents can be overtaken by events.
  It is clear that patents in France, the United States and Japan—I do not say that they are turning a blind eye maliciously to patents—are not hindering the impetus and forward thrust of research. Therefore, any comment by the Government on biotechnology and patents might he useful either in reply to the debate or when we discuss the White Paper.
  Alternatively, was proposal 4 dropped because we had had an intelligent assessment and so much work had been done on cloning vehicles that it was, in effect, already in progress? Of all the projects from 1 to 6, project 4 comes into an area which may lead to patentable discoveries directly—that is, the new cloning vehicles.
  I couple with that an issue that, in the view of Sir Michael Stoker and others, is an important one. What is being done to help research into monoclonal antibodies? Those are the purification techniques which may reduce costs by changing the ways of measuring drugs and using

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  molecules as a targeting system. What support is being given to monoclonal antibodies? What is the Government's view about patents in this sphere? Some of those who did the original work in Britain see patents being established in the United States. They are sick about it. They wonder why we have been so slow off the mark and are inclined to blame the NRDC. Again will the Minister comment?
  I offer a rather more detailed scenario of the birth and childhood of some of the documents. Conception took place in the minds of people such as Dr. Schuster, the agreeable director of research. Those of us who were on the committee of the indirectly elected European Parliament know that around him he had some very talented people. The hon. Member for Sheffield, Hallam (Mr. Osborn) knows that that group was determined to make good developments on a European basis without advantage to an individual company or country for the sake of the progress of European science. I do not doubt that that was done in good faith.
  Why has the Department of Industry, under both Labour and Conservative Governments, said time and again to the Commission that it must wait for the Spinks report? Was it necessary, in such a fast progressing area of work, to say "We must wait for a Government report"? Far too often the Government of the day have given either the excuse or the rationalisation that they must wait for an expert report before taking action. That does not happen to the same extent in France, the United States, Japan or Germany. We may be at a disadvantage to our competitors in fast-moving areas if we for ever take refuge in waiting for this or that committee, however prestigious and distinguished, to report.
  The D-G XII motives were wholly honourable, believing that the Community had to concern itself with finite resources and that that should be done on a Community basis. As an example of what has happened in delay I quote Professor Malcolm Lilley, of the University College team in London. He says that non-aqueous enzymes or multiphase environments are an area in which the United Kingdom has the most expertise. The work at University College London is now being supported by the Science Research Council. Professor Lilley says:
  "Unfortunately the delay in the EEC programme has held back the work and the group at UCL are in danger of being overtaken by a group of Japanese workers, one of whom visited UCL for a period several years ago."
  Here again is the old story of Britain doing so much of the original work and others taking advantage of it.
  That leads me to ask, what does the training programme amount to? It is claimed that it will provide an opportunity for postgraduate and post-doctorate studies and promote mobility in the scientific community. What is special about that?
  I was a member of the energy committee of the indirectly elected European Parliament. Is it not a fact that any scientist who is a national of one of the member States has a right to apply to D-G XII in Brussels, provided that his work falls within an existing EEC research and development programme? Therefore, what is different about the special training grants, and who will administer the money that comes to the United Kingdom? Will it be
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  done from Brussels, through D-G XII, or by the Department of Industry? Who will make the allocation between university departments and research groups?
  We understand that if a biomolecular engineering programme were approved some training opportunities would follow, but a training programme by itself will not greatly help in attacking the bottlenecks in the biomolecular engineering programme that have been identified by experts.
  Whether we like it or not, training is the transfer of technology. Are we not in danger of setting up a programme to train post-doctoral graduates who may eventually gain employment in the United States or with Japanese companies in Europe? Is that not a possibility, in the light of the fact that our industry is not as advanced, certainly in the financial sense, as those of many of our competitors?
  The Under-Secretary referred to Celltech. We applaud its work, but some hon. Members know that, so far, that work is on a small scale and the scope for post-doctoral employment is limited. It is certainly beyond argument that the training programme does not solve the problems that the original plan set out to solve; nor does the Government's response in the form of a somewhat disembowelled White Paper, whose ideas, I gather, were changed from the ideas of those who originally drafted it.
  The basic difficulties have soon emerged. First, is fundamental science best done, and ought it to be done, on a Community basis? With that, we have to ask whether biotechnology is a fundamental science, because the borderline between applied science and fundamental science is grey at this stage.
  Secondly, since the lead and lag times between basic science and commercial exploitation are perhaps uniquely short in biotechnology, and certainly different from those of physics, it was wondered whether work on biotechnology should be done on a Euro-basis. As with many other industrial processes, the time from conception to commercial exploitation of biological processes is usually between five and 10 years. Thus, any delays in supporting vital basic studies put us at a further disadvantage against our competitors—for example, the United States and Japan—especially in view of the response to the excellent ACARD report that is encapsulated in the White Paper.
  There are difficulties and not conclusive objections to the proposals before us, but on the other side of the coin something had to be done about pre-development work following the Spinks report and if the European effort on biotechnology was to keep abreast of the United States and Japan. The Government must ensure that Britain has a strong representation on the advisory committee on programme management, which will consist of the Commission and representatives of member States. At what level are we to be represented on that committee?
  Paragraph 3.29 of the ACARD report states:
  "As an example, we would cite the development in the United Kingdom of an efficient immobilised enzyme process for converting maize starch into a sweet syrup … that competes effectively with sugar for many processes. Although this process promises new markets for maize farmers in the EEC, levies on the new product designed to protect sugar beet farmers have resulted in one firm in the United Kingdom going out of this business, and the development and use of an alternative sweetener and preservative being inhibited. The business remains profitable in the United States where the technology will doubtless be further developed.

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  3.30 If EEC policies continue to obstruct developments such as isoglucose, our ability in Europe to replace petrochemicals by producing basic chemicals from carbohydrates will be hamstrung. We are therefore concerned that all Member States in the EEC, and the Commission, should consider the value of biotechnology in transforming agricultural surpluses, and should seek to amend Common Agricultural Policy legislation that threatens this end."
  That was the view of the ACARD report. The White Paper did not really respond to that point. As we are discussing EEC aspects, tonight may be an occasion for the Government to respond.
  At this stage a fearfully awkward question must be introduced. What do we mean by "European industry"? Nippon Electric is coming to Livingston, in my constituency. It will not be part of European industry. No one doubts that it will report back to Japan anything that it can learn—and understandably so.
  Japanese firms in Wales are members of the CBI, and quite properly so. Does anyone in his right mind suppose that they will not report back to Tokyo developments at the frontiers of knowledge and their scientific discoveries from what they learn in Europe? Of course they will.
  The present SEARLE at High Wycombe is locked in legal combat with Celltech. Does anyone propose that it should not report back to the United States? This question is rhetorical. However, what is to be the difference, for our purposes, between European industry and industry in Europe? I fear that this is not a clever-clever question. It is a dauntingly substantial issue for anyone who wants to promote biotechnology nationally or internationally rather than on an international company basis. We must clarify our minds when considering what we mean in this context by "European industry".
  As Dr. Spinks said this afternoon at Eastbourne, we should not encourage regulatory agencies as an excuse for yet more regulatory delay. There is the grave problem of how many regulations, causing delay, one introduces in the name of promoting a European industry which in this area might be chimerical.
  The Opposition will swallow their reservations and not take them into the "No" lobby in the belief that some stimulation must be given now to biotechnology in Europe and that half a loaf is better than no loaf at all. It may be peanuts, but as Professor Brian Hartley put it,
  "British researchers and industry in biotechnology want their peanuts soon."
  That is because they urgently need financial help in the present academic climate. It is on those grounds that we swallow our reservations. We shall not oppose this measure.
  9.23 pm
  Mr. John H. Osborn: First, I congratulate the Committee on European Legislation, &c. on referring this matter to the House for debate. I thank my hon. Friend the Under-Secretary of State for Industry for introducing the debate. As the hon. Member for West Lothian (Mr. Dalyell) said, he and I were on the Energy and Research Committee for a number of years in the European Parliament. We worked not only with Dr. Guido Brunner but with Dr. Schuster. The issue that we are discussing has been discussed by the directly elected Members of the European Parliament. Of course, the problem, whether national or international, is of immense complexity and to resolve it in one evening's debate in the House of Commons is almost impossible.
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  I intervene tonight because the Chairman of the Select Committee on Education, Science and Arts—the hon. Member for Lewisham, West (Mr. Price)—asked me to state categorically that the Committee has had in mind the report of the Select Committee on Science and Technology published in April 1979. It has had it on the agenda, and it will find this debate a useful start to its deliberations on biotechnology and biomolecular engineering, which will take place before the end of this year.
  Biotechnology, biomolecular engineering—however we may describe it—could be a tremendous force for the survival and benefit of mankind, whether by making better use of resources, developing new products, improving health or feeding mankind. It has immense commercial potential, which perhaps, as various reports suggest, we in this country have not yet appreciated. The chemical industry, the pharmaceutical industry and a variety of others will be affected.
  Internationally and nationally there is the problem of health, safety and security. If there are opportunities for mankind there are also opportunities for there to be abuse and accident. The patent position also enters into the matter.
  The hon. Member for West Lothian brought out the whole question whether we should embark on more collective Community research to make the best use of resources. When he and I were nominated Members of the European Parliament, the first item to be cut when the budget was cut was not the common agricultural policy but research, whether in this or other fields. I suspect that the same pressure has faced the Commission, the Council and present Members of the European Parliament.
  The whole question of industrial opportunities has been raised. Dr. Spinks addressed the Parliamentary and Scientific Committee on this matter only a few months ago. The report by ACARD, which he chaired, shows that in the United States the application of what is already known has immense commercial opportunities. To what extent are commercial opportunities handicapped by collective research, whether national or international? These are complex questions that cannot be readily answered.
  The Select Committee on Science and Technology submitted the excellent interim report "Recombinant DNA Research", on 3 April 1979. One or two members of that Committee are present, so I shall not go into its report, which unearthed a number of problems, including in vitro fertilisation and experiments involving cell fusion. The Committee had the benefit of a great deal of evidence and a visit to the United States.
  I do not want to go into the question why we no longer have a Select Committee on Science and Technology. There is an equivalent Committee in another place which would take up the subject if this House were not to pursue it through the Select Committee on Education, Science and Arts, the successor to the Select Committee on Science and Technology. It has dealt with higher education and with libraries, at present it is dealing with the curriculum for 14 to 16-year-olds, and it is making a full study of the arts. The Committee has to decide its order of priorities. Certainly, this subject has been considered and will be the subject of a full study later this year.
  The excellent report produced by a joint working party on biotechnology under the chairmanship of Dr. Spinks, chairman of the Advisory Council for Applied Research and Development, published in March 1980, shows us that

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  there are many lessons for us nationally. The report referred to a number of bodies, including the National Enterprise Board and the National Research Development Corporation. I regret that the commercial opportunities are not being better exploited, and perhaps this should now be through licences from other countries.
  The working party said in its conclusions and recommendations:
  "Some of our competitors—West Germany, Japan, the United States—are already investing substantially more than this country in the development of biotechnology."
  It identified some reasons for the
  "lack of response and a number of constraints on the growth of biotechnology"
  in this country. It referred to the work of research councils, and made several recommendations in that connection. In last year's report of the Science Research Council, in the section on biological sciences, on pages 51 and 52, there is little reference to the opportunities that lie ahead.
  We as Members of Parliament are dependent on the work done by experts. The work of trying to find out what can be done internationally and what can be done on our own is not confined to the European Parliament. In June, the fifth parliamentary and scientific conference, run by the Council of Europe, will take place in Helsinki, the first conference having been held in the early 1960s in London. A paper will be presented by a Mr. Mark Cantley, based on the FAST sub-programme bio-society Research activities, of which I have a copy. In Helsinki he will lead the discussion on this subject, as one of many other subjects. The Council of Europe already has reports on the subject, but the emphasis is on caution and safeguards, because of the opportunities for abuse.
  This debate concerns how much should be spent nationally and how much should be spent through the Community. As the Under-Secretary said about the settlement, our contribution to Community research would be small compared to that spent on national research. Although we have a fund of information at our disposal in the House, it is difficult to judge whether the compromise reached by the Council of Ministers is right.
  I am sorry that the Chamber is so sparsely attended on this occasion, but I am glad that this matter has been brought to its attention. I regret that many hon. Members do not realise the importance of this subject to the future of our country, Europe and mankind. I hope that the House in future will give it the attention that it deserves.
  9.34 pm
  Mr. Frank Hooley: The debate demonstrates the weakness of the House and its procedures in dealing with subjects of this nature. I believe that such a matter and any recommendations about it should be dealt with by a Select Committee and not on the Floor of the House, though no doubt that would be necessary at some stage.
  I was sorry that the work of the Select Committee on Science and Technology on genetic engineering was chopped by the 1979 election. It is possible that a new committee on education and science will take up the subject. I hope that that committee will turn its attention to matters of fundamental scientific importance, though I recognise the importance of the matters dealt with so far.
  That raises the nice argument again about whether we need a science and technology Committee over and above
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  the basic departmental structure of Committees that we have at the moment. As a fervent advocate of the departmental structure, I cannot press the argument too far. Once the departmental Select Committee system has settled down—and it is settling down very well, I think—we might look again at the need for some cross-subject Select Committees which could deal with matters of the kind that we are trying to discuss in this debate.
  Biotechnology, genetic engineering, biomolecular engineering, or whatever we call it, is a subject which terrifies me. I find the capacity to manipulate the basic structure of life even more terrifying than nuclear physics and, goodness knows, they pose us enough political, economic and social problems. It is a subject to which the House will have to give a great deal more attention in the years to come.
  I have no intention of trying to compete with the knowledge which my hon. Friend the Member for West Lothian (Mr. Dalyell) obviously has of the subject. It is clear that he has given it very careful study, and I cannot claim to have done that. But it has enormous possibilities, repercussions or consequences for agriculture, medicine, animal breeding and energy matters, and a range of scientific and technological possibilities that as yet we have scarcely begun to exploit.
  We have the usual irony that it was British scientists who, some years ago, were in the forefront of molecular biology not only in Europe but in the world. It was at Cambridge that the double helix was unravelled which gave us the key to DNA and was the basis of this genetic engineering process.
  The Government's document dated 19 February refers to the joint working party on biotechnology set up by ACARD, but it does not say very much about it. At that time I think that it was waiting for the report to be considered, or perhaps it was about then that the report was published. Certainly it was published after that document. Although I tabled a number of questions arising from it, I did not get much response from the Government.
  The major response to suggestions for scientific and other work in this area has been the Government's attempt to clobber university finance, which will make it more difficult for biology departments, like all other university departments, to extend and develop this work and to provide the young men and women to carry on the outstanding work of men such as Brenner and Kendrew. It would be interesting to know, if the Minister had time, what became of the joint working party recommendations, what, practically, if anything, the Government have done about them, and to what extent picking up those recommendations, using them and doing something about them would be a sensible substitute for getting mixed up in this European exercise.
  My hon. Friend the Member for West Lothian touched upon the aspect of patents. This is an extremely complex and very tricky subject, but it could have implications if we launched into a joint European enterprise. Let us suppose that the European programme threw up something quite fundamental. Who would patent it? Who would have the right to enjoy the patent, the profits, and so forth that arose from it? Who would have the right to set up the industrial or productive capacity based on that patent? Would every member State do so, or only one of them? Would it be sold to private industry? Would public enterprise be allowed to use it? Whether one can patent living matter is a problem that wanders almost into the

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  field of ethics and philosophy. It is certainly a formidable legal problem. I do not think that it has yet been resolved in the United States, although important cases are pending.
  I should like the Minister to comment on the question of safety. The recommendations of the genetic manipulation advisory group are wide-ranging and, I believe, reasonably observed. There has, however, been a rather disquieting tendency, in my opinion, to downgrade safety requirements. It is unfortunate that members of the scientifc community seem to be accomplices. That is rather disturbing. As a layman, I am not competent to say whether the change in attitude is justified. There seems to be a slightly indecent haste to reduce the regulations and the safety requirements which I thought were properly introduced when the first implications of this new technlogy were beginning to be realised.
  I should like to refer to an article by Sir John Kendrew about the European Molecular Biology Laboratory. He said:
  "One final example of our service is that we have a containment facility where it is possible to carry out recombinant DNA research—the so-called genetic engineering—at the highest levels of containment (P4 of the American system, or L4 of the German system)".
  That is the most rigorous safety system. Sir John adds:
  "We built this at the request of scientists in our member states who had not got these facilities at home. In the event things have turned out a little differently from expectation. What has happened now all over Europe, as well as in America, is that the guidelines for recombinant DNA research are being revised and are now less stringent: consequently, fewer people require this high level facility. But the facilities are not being wasted because meanwhile we have built up our own research in this field. Recombinant DNA research is one of our strongest research activities in the Laboratory here."
  The laboratory is at Heidelberg. I have read out a statement of fact. As a layman, I am not enthusiastic that within a short time the very stringent and exacting safety requirements of four main categories of experiment have been relaxed to the extent that an important international laboratory that had developed, as Kendrew says, the highest level of containment required should find this virtually unnecessary for its work because the safety rules have been downgraded.
  My hon. Friend the Member for West Lothian referred, I considered fairly, to the narrow line in this field between what is basic science and what is technology—in other words, the application of it. The transfer from the fundamental discovery and fundamental analysis of the structure and work of living cells into using the knowledge to create new industries was extremely rapid.
  The line between what the fundamental scientist was doing and what the engineer was doing became increasingly fine. It is difficult to know why what is envisaged in the European Community's plan could not have been, or is not being, carried out by the European Molecular Biology Organisation itself. My hon. Friend was right in saying that the exchange of scientific knowledge and expertise through EMBO, its conference and its laboratory was equivalent to international training in this field. It is not self-evident to me that one needs to superimpose on that some sort of European scheme. That is even more so, since EMBO goes beyond Europe and includes Israel and countries such as Austria, the work of whose scientists is equal to and in some respects in advance of our own.
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  Why is it necessary to spend even a modest £1½ million on a new research scheme or programme when we already have a 10-year-old organisation of the highest prestige? Few men are more prestigious than Professor Kendrew, the director of EMBO. The organisation does valuable work. It has the new laboratory at Heidelberg, and a regular apparatus for consultation, exchange and fellowship, so why duplicate the work with an EEC scheme?
  There is an alarming possibility that biological research could be used in warfare. The problem concerns the conference reviewing the convention on the non-use of biological weapons, which last met in March 1980. It considers scientific developments that could be used for biological warfare, and it devoted some time to recombinant DNA. On balance, the findings were not terrifying, The secretariat states:
  "From a technical standpoint, recombinant DNA techniques could be used in an attempt to develop micro-organisms or toxins as warfare agents."
  However, it states that as we already have a wide range of deadly organisms there is not a great incentive to develop others by genetic engineering techniques. I suppose that that is some comfort. It continues:
  "recombinant DNA techniques might be used to modify the characteristics of an existing organism to increase its potential as a biological warfare agent or its ability to produce a toxin. For example, efforts might be made to: (a) convert a non-pathogenic micro-organism into a pathogenic one by giving it the ability to produce a highly lethal toxin; (b) change the antigenic structure of a highly pathogenic micro-organism, thus allowing, it to overcome human immunity; (c) make a micro-organism resistant to the antibiotics normally used against it; or (d) make a microorganism easier to produce or store. In the past, such efforts would have used the techniques of classical genetics alone."
  There are therefore possibilities for use in biological warfare. I hope that the arrangements reached under the European scheme will be fully covered by the convention on the prohibition of biological warfare, and that they are no way seen as a let-out.
  The secretariat also states:
  "None the less, developments in the ability to manipulate genetic material intentionally should be followed closely and periodically re-evaluated."
  That is a useful warning.
  This subject might more profitably have been examined by a Select Committee. It is of fundamental importance, and we shall hear more of it. I am not sure that we should embark even on this modest venture without knowing a great deal more.
  9.49 pm
  Mr. Anthony Nelson: It is a pleasure to follow the hon. Member for Sheffield, Heeley (Mr. Hooley), with whom I had the pleasure of serving on the Select Committee on Science and Technology in the previous Parliament. His incisive questions raised even in those days caution us about the need for and desirability of messing about with genes and the dangers of biological and genetic engineering. He raised again today the same fascinating and basic question, which I am sure many hon. Members have asked themselves. He pointed to the health hazards, the defence implications and perhaps even the moral justification of gene splicing and genetic manipulation.
  Having considered the matter to the best of my ability, I am strongly of the opinion that this area of science must be progressed and must succeed, for two reasons. First, as many other hon. Members have said, it has major

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  implications for the cost base and variety of products in the future. Secondly, and more importantly, the process of scientific discovery cannot be reversed. If science has one characteristic above all others it is that one cannot "de-invent" something. Once progress has been made, one can only advance from that new position. If we took such a restrictive step, unilaterally or even on a European basis, we could not prevent other countries from developing the new technology and eventually undercutting us in competition with some of our major industries.
  I am therefore convinced, not only because of the inevitability of scientific progress but because of the immense benefits that these new disciplines can bring to mankind, that we should be involved in them, and indeed try to recapture the lead that we had in the early days.
  I, too, welcome the document, as far as it goes. But I am disappointed. I suspect, like many other hon. Members, that the amount of money being allocated for this research has been so substantially cut. Even 10 times the proposed sum would probably still not begin to make the kind of contribution that is needed. A figure 50 times as great might just begin to make some impact and to turn the tide of laggardness in our research on a European and a national basis. Immense progress has been made by companies such as Cetus Corporation and even more by a number of Japanese companies in recent years, as evidenced by their prolific applications for patents. This demonstrates how far the innovators in this science have fallen behind and how in the future we shall be worse off industrially and economically through being unable to employ this new technology for the benefit of our peoples.
  It is paradoxical that on an evening when we have approved financing of up to £200 million for ICL we should question whether 11·8 million European units of account is marginally too low or too high an amount in this context. Far too often we pump huge sums into historic loss-makers but deprive the industries of the future of funds that they desperately need at the embryonic stage. One of the most influential occasions for me since I have been in Parliament was when I had the privilege of visiting Japan as a member of the Select Committee on Science and Technology. The hon. Member for Sheffield, Heeley was a member of the delegation) as was the hon. Member for Havant and Waterloo (Mr. Lloyd), who is also present tonight. We visited 21 companies in the high technology sector. The experience left a lasting impression on me in terms of the direction of Government assistance that we should be considering for British and European industry, the advantages that we retain and the deficiencies that are sadly prevalent.
  Above all, I brought back three impressions from Japan. First, this country cannot begin to compete in the future simply by improving the productivity of our labour force.
  It was, is and will be vitally important to automate at an increasing pace. It is clear that development capital in Japan, and to a large extent in America, is available on a scale that is not evident in Britain. The funds in terms of venture capital from private investment, in terms of debt capital from major banking organisations, and organically derived sources from the companies themselves enable companies to invest such a high proportion of turnover in research and development that great strides have been made.
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  In addition, I came back with the conviction that many people abroad still respect the innovative abilities of British scientists and that it is not too late to try to make up some of the ground that we have lost.
  The documents that we are discussing give us the opportunity to express our keen desire that the Secretary of State should be made aware that the political pressures are not always for major expenditures on historic industries that are in decline. There is also strong pressure—pressure that will continue—for larger sums to be made available on a national and European scale for the industries of the future, whether they are involved in electronic, genetic or biological engineering.
  The applications of enzyme and genetic engineering will be wholly beneficial. Enzyme engineering can be used, as the hon. Member for West Lothian (Mr. Dalyell) said, to produce a number of important products such as amino acids, high fructose syrups and synthetic penicillin. It has important future possibilities for petrochemicals, pesticide removal and antibiotics.
  Genetic engineering involving recombinant DNA technology can be used to produce new antibiotics. Many of the problems of cloning foreign DNA into unrelated host mechanisms can be overcome if sufficient resources are made available for some of the projects which were proposed, even though that programme has been cut. The applications of genetic engineering progress include the mass production of insulin—which is the best known—and other products such as prolactin and antibodies.
  The Community has a particular role in facilitating progress to be made on an international basis. On a national basis there are neither the resources nor the laboratory infrastructure to facilitate such progress.
  Members of the Select Committee are aware that if we are to guard against one of the potential hazards of research in this area, all those involved should work together and should be closely aware of all the ventures and problems. As the hon. Member for Heeley said, the genetic manipulation advisory group gradually declassified some of the hazardous categories of work. I think that it was right and that there was an over-classification to begin with. It is evident that even with that de-control there are anomalies between European countries and countries outside Europe in the classification of hazardous materials, and between the requirements placed on certain types of research work in genetic engineering.
  It would be valuable if as much research as possible were conducted on a European basis rather than on a national basis.
  Mr. Dalyell: Nobody in his right mind would want to underplay the safety considerations. Hazards that were thought to exist five years ago have been found not to exist, or ways have been found to overcome them.
  Mr. Nelson: I agree with the hon. Member. That is why I said that I felt that the process of de-control by GMAG was justified. However, public affairs and, perhaps, ignorance remain. There is also a difference of practice between various countries. Some have higher standards. As far as possible, the process of research and development projects should encourage the harmonisation of classification of hazardous research. That would be to the benefit of those who seek to advance those new forms of technology.

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  Over 1,000 firms in the world now specialise in genetic engineering, most of which are in Japan and the United States. That blossoming of new industries is evidence of the commercial future of that technology and the contribution that it can make towards satisfying the health, food, clothing and many other demands of a huge and growing world population.
  Whenever I hear the phrase "biological revolution" it sounds like a detergent. However, we are discussing a biological revolution. Unlike the hon. Member for Heeley, I believe that the right place to discuss that matter is the Floor of the House where we can promote a little more awareness of the potential of that science than we would be able to do in a Select Committee.
  I shall mention one small example which I have seen during the last few weeks, which demonstrated some of the practical benefits of encouraging and utilising biological agents. I visited the Badische Anilin Soda Fabriken A.G. which is a major German chemical company at Ludwigshafen. It has about 200 square kilometres of industrial chemical complex. Unlike ICI and other chemical companies which are diversified, that company is concentrated in one location.
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  All the industrial effluent from the various factories which make up that complex is channelled into an effluent treatment plant where it is mixed up with a biological microbe. Gradually, the sedimentary layers are deposited, scrapped off plates, caked together and recycled by burning them into a form of fuel. In that way, the company will not only conserve energy but has already been able to make a major contribution towards environmental safety and to reducing the level of pollution in inland waterways. That has enabled an expansion of the activities of the company, which otherwise would not have been undertaken. It was a marked and most impressive example of the benefits which biological developments can have for some existing industries.
  I have great hopes for biological and genetic engineering. I hope that we shall return to that subject in the future. While I regard the amounts of money which we are discussing as niggardly, I take confidence from the fact that the Under-Secretary not only has a deep and long experience of industry but has on many occasions been a champion of new industries. Many of us will look to him to champion the cause of research and development in those exciting new areas, which will be of benefit to this country and to the world at large.
  10.4 pm
  Mr. Nigel Spearing: The hon. Member for Chichester (Mr. Nelson) mentioned exciting new areas. He emphasised that much of the development was taking place in Japan and in the United States. If discoveries there reduce much of our activity in industry and make many of our workers redundant, I suggest that we need not so much European co-operation as world cooperation.
  As scientific knowledge and technology appear to develop in geometric progression, I would have thought that their impact on societies, old and new, should be, if not controlled, at least dealt with on a worldwide scale. That is perhaps one of the reasons why I would prefer to see those matters being dealt with on that scale rather than that of the Community. I am not worried that the small sums mentioned in the document will go to the Community, because substantial sums are still being expended in this country, as the documents state, although those sums are not as great as those in the United States or Japan.
  I should like to question the Minister about the competence of the Community in this area. I believe that, technically, the proposal is a communication and that perhaps, after it is agreed, it will become a decision. But I assume that there is no absolute compulsion in this area. It is an optional extra to our membership of the Community and it could have been carried on whether or not the Community existed, either through some specific treaty or intergovernmental organisation or in the institutions that have been mentioned by my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley). Therefore, if this is cited as one of the constructive and cooperative facets of the Community, I suggest that it might be carried on extra-treaty and, therefore, does not rely upon the Treaty of Rome. Perhaps the Minister will clarify that matter.
  Tonight we have had a number of very important West Lothian questions. My hon. Friend the Member for West Lothian (Mr. Dalyell) never fails to surprise us with his assiduity and his knowledge in these scientific matters. He is almost a walking Select Committee on Science and Technology. I am sorry that he is not present to hear that praise. But, in that respect, I join him and other hon. Members in saying that we need a Select Committee to digest this sort of material. I am not suggesting to the hon. Member for Chichester that that would debar the House from debating it, but the absence of such a Committee, and its combination with that for education, is an unhappy Whitehall accident.
  I support departmentally related Committees, particularly in their watchdog, inspectorial, spot-check function. However, I have said previously, and I repeat, that the chances of history and the organisation of Whitehall often put different areas of human endeavour under certain Ministeries quite arbitrarily, and, where those are unhappily chosen or where there are important subjects which transcend those departmental divisions, the House of Commons should not be bound by the errors, mistakes or practices of Whitehall. I believe that this is a case very much in point.
  Mr. Nelson: Just for the record, I should like to make it clear that at the beginning of this Parliament I was a
  778
  signatory to an amendment which sought to retain the Select Committee on Science and Technology. I would not wish my remarks to be taken as being opposed to that.
  Mr. Spearing: I am grateful to the hon. Gentleman. I am glad that he has made that clear. I was not suggesting otherwise. The exchanges today will give food for further thought to the Leader of House. If I recall correctly, the Select Committee on Procedure did not rule out further ad hoc Committees, as they might have been called, and I believe that this debate makes a case for them. Being very much a layman, and perhaps the least knowledgeable of our speakers in this debate, I seem to ascertain that we are talking about the frontiers of scientific knowledge which could turn out to be of enormous and fundamental significance. Perhaps other hon. Members will correct me if I am wrong, but, as I read it, we are talking about new techniques of joining together genetic chains that otherwise would not be joined in nature.
  The results of that can be startling. We have seen such results in crop yields, in new types of plant and in plant breeding as we have it today. I understand that these techniques could develop those results very considerably. I understand that it might even be possible with these techniques to make mineral oils as digestible by human beings as some vegetable oils. A new source of protein might magically appear overnight. That is within the realms of possibility in this virtually new science. If that were to happen, the opportunities for mankind would be mind-boggling. Therefore, control over discoveries, and the skills that make the use of such discoveries possible are of fundamental international significance.
  I was interested when my hon. Friend the Member for West Lothian referred to training. Alas, we all know that discoveries depend on skills and on the ability to put them into use. If our abilities are to be transferred to others who may not always have shown the greatest spirit of international understanding, we should be told about it. Who will license processes that are discovered as a result of research? Will the DG XII of the Commission or the advisory committee license them? The use of the word "advisory" suggests that the committee does not make decisions. If it does not, who does?
  Risks to safety have been mentioned. Will the codes covering laboratories in the programme be harmonised? I am not saying that they should not be, but, if they are, will they be harmonised on an EEC, or on a worldwide, basis? Obviously, the latter is preferable. Will the Minister elaborate on the type of laboratories that may be eligible for grants?
  Paragraph 17 of the sixty-sixth report of the Select Committee on the European Communities states:
  "Going back in time to 1967–71 when much of the 'prior art' of today's activities was developing, some 35 per cent."—
  that is a reference to patents—
  "came from the United Kingdom, yet by 1975 not one of the patents recorded came from the United Kingdom. The Committee was informed that other countries have capitalised on the earlier research done in the United Kingdom which has been slow to move from discovery to development."
  Will laboratories that make important discoveries be eligible for these grants? Will they be regarded as less eligible because they are already ahead?
  The Minister should explain. The words of the motion are somewhat tentative. The motion states:

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  "research in this area should be beneficial in terms of the policy priorities of both the Community and the United Kingdom; and supports the intention to ensure that there is no duplication of effort in this area."
  The question of control is raised. Who is to decide policy priorities? We have got three programmes out of six, but who will choose where the work goes? My hon. Friend the Member for West Lothian referred to a privately funded organisation—namely, the EMBO. If it is well set up, will that not pre-empt—I am not saying that it should not—much of the research money available?
  Mr. Hooley: Initially the organisation was privately funded, but it now receives Government finance.
  Mr. Spearing: I am grateful to my hon. Friend for that information. By "Government finance" does he mean finance from the German Government in Heidelberg?
  Mr. Hooley indicated assent.
  Mr. Spearing: It seems a pity that that organisation could not spread its wings and become the organisation. Perhaps it was set up privately in the hope that the European Community might subsequently come to its aid. Perhaps the Minister will tell us whether that is so. If not, it may be a happy accident that it is ready.
  The House is right to be cautious about this matter. The material has not yet been thoroughly digested by hon. Members who are skilled and capable of understanding the technical terms and translating them into language which the generality of Members, let alone the public, can understand. For that reason, I am not happy with the programme, limited though it is, that is to be approved. I understand that the Government have many reservations because of the terms of the motion.
  The final reason for approving the motion given by my hon. Friend the Member for West Lothian is unworthy. My hon. Friend deplores the niggardly approach of the Government to scientific research. He hinted that the only reason why we should not oppose the motion was that funds might be made available—we do not know whether they will be—for some of our research institutions. Otherwise, he would think differently about this proposal.
  The approval that is sought, even in the limited terms of the motion, is a little premature, but I shall not seek to divide the House on this issue because the debate has been worth while. If nothing else, if it has shown that the House would like to know more not only about the EEC proposal but about the worldwide implications of this mind-boggling scientific industry which has been displayed tonight.
  10.17 pm
  Mr. Richard Page: Looking at the opportunities offered by biomolecular engineering, I am irressistibly drawn to the American space programme and the development of the silicon chip. No one at that time envisaged the opportunities that would come from that invention. While there may be a few devotees of biomolecular engineering, not many of us appreciate the potential opportunities which can flow from this exciting development or, as the hon. Member for Sheffield, Heeley (Mr. Hooley) pointed out, the dangers.
  I can appreciate my hon. Friend's difficulty in reaching agreement with our EEC partners on a co-ordinated programme. Nevertheless, in view of the time that has gone by—the time that has almost been wasted—I am disappointed. The hon. Member for West Lothian (Mr.
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  Dalyell) has already made that point. I hope that progress will be made and that this proposal will be put into operation as soon as possible.
  I am disappointed at the time loss for two reasons. One is the huge advances made by the Americans and the Japanese. They can be typified by the numbers of patents that have been taken out during the past 12 years or so. Those two countries together have taken out about 85 per cent. of the patents compared with 15 per cent. within the EEC. The comment was made that patents in this area are not as watertight as in other areas of engineering. Nevertheless, they indicate the level of activity taking place in America and Japan compared with the EEC.
  The second reason for my disappointment at the time loss is that within this area are solutions to many of our national and international problems of pharmaceutical supply and harmful waste products. I hope that my hon. Friend will push the proposal into operation as soon as possible.
  Before I say a few words about the various research projects, I want to re-emphasise some of the comments that have been made on safety and training. I appreciate that the original worries and dangers have, to a large extent, been mitigated, but we should be wise to take the new technology slowly. Let us not move away from any form of development into commercial production until we have thoroughly satisfied ourselves that what we are doing will be safe for the country and for the world. I know that it is not directly technologically applicable, but the lesson of thalidomide must remain with us for all time.
  Mr. Dalyell: I have sympathy with the hon. Gentleman's sentiment, but developments are taking place so quickly in Japan and elsewhere that if we are over-careful we may be disadvantaged commercially.
  Mr. Page: I agree, but because other countries are reckless that does not behove us to follow willingly down the same path.
  Our debate has covered two main areas of the proposals. I shall mention an example from both as they typify our goals and aims. The first goal for which we should aim is that of the production of insulin. If we can take an insulin gene and splice it to a bacterium, then teach that bacterium to multiply, we can produce commercial insulin. That would be a tremendous advantage to anyone suffering from diabetes. It would avoid grubbing around in abattoirs for pancreas tissue, which is our present source of supply. The hon. Member for West Lothian mentioned other aspects, especially that of feron and the way that that type of advance can bring relief to the suffering of many people. That should be encouraged.
  My second example is that of enzyme reaction. If we can use those as biological catalysts, we can detoxify vast amounts of industrial waste. The original document mentioned the conversion of sucrose to fructose The system is extremely simple. One immobilises the enzyme into a tube and passes liquid through it. It changes as it goes through. I hope that the House will grasp the tremendous opportunities and advantages to be brought to our society if we can develop this form of engineering.
  I shall resist the impulse to give further examples and advancements, because I know that at least one hon. Gentleman has been waiting patiently to speak. I am extremely disappointed that the five-year programme will be provided with only £7 million from the EEC. I shall not

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  follow the route of my hon. Friend the Member for Chichester (Mr. Nelson) and his £350 million programme, because in these days of stringency that is a little excessive.
  With this vast area of biomolecular engineering it is ridiculous to be debating a grant of only £7 million that we shall share with other countries of the EEC. We are missing a golden opportunity to keep our country in the forefront of a brand-new technological revolution.
  I hope that my hon. Friend will be prepared to discuss how he sees the money being channelled into the research establishments in the United Kingdom and how that will link with the Celltech company. How are we to deal with commercial discoveries? Will patents apply to the whole EEC or only to the countries in which discoveries are made? We must pinpoint that matter now in order to save a great deal of embarrassment and trouble later.
  We have had the advantage of debates in the House and Select Committee reports, but the subject of the motion is so important that it should come up regularly on the Floor of the House. I hope that as the programme develops we shall have regular reports to the House and that, as it is proved to be advantageous, we shall vote more money so that it can expand.
  Mr. Spearing: The hon. Gentleman may be right in wishing more public money to be devoted to the programme, but is he advocating that it should come through the EEC or, as he said earlier, that Britain should be at the forefront, in which case should not public funds be devoted to research in universities and institutions in this country, which is not the Government's present policy?
  Mr. Page: I regard genetic engineering and biomolecular technology and engineering as so important that I do not care where the money goes in, as long as it goes in. I see enormous advantages for mankind resulting from it and party bickering on the issue will only hold back the programme.
  We have only peeped under the cover of a brand-new world which could provide many solutions to human and environmental problems. I urge the Government and the EEC to get on with the proposal as soon as possible.
  10.27 pm
  Mr. Tim Rathbone: It has been suggested that this subject should be dealt with in a Select Committee rather than on the Floor of the House, but I join my hon. Friends who advocate debates such as this, partly because of the importance of the subject and partly because it is only through debates on the Floor of the House that we can look behind the technical details and discover the Government's attitude towards development in this area and help for that development.
  I fear that the somewhat tentative approach of some Labour Members towards Government support in this sector is influenced not by their appreciation of the importance of the subject but by their innate qualms about any aspect of British co-operation with our EEC partners. That is a great pity, because in this area, as in so many others, it is impossible for us to do everything that we want to do, or should do, without co-operation from EEC partners.
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  I have some qualms about the motion. It is admirable in every detail, but, taken as a whole, is it indicative of less than enthusiastic support for Government subvention and support for this activity through industry in this country and in The EEC? Of course, research and development must be, as the motion says:
  "beneficial in terms of the policy priorities of both the Community and the United Kingdom".
  I would add that it should be beneficial not only to the nations but to industries in those nations and beneficial to the developing world. That aspect has not been mentioned so far, but I shall mention it more than once.
  I question whether the adherence to non-duplication is quite so clear. On the face of it, we all want to eliminate wasteful duplication between nations and between institutions. However, where does the positive benefit of competitive development give way to wasteful duplication? When we put that in the context of time loss, which leads in turn to competitive loss, that is an area of the motion that the Government should be wary of applying with too draconian an attitude.
  The central importance of the debate lies in biomolecular engineering. It is a new and immensely exciting growth area which is deserving of national support, national encouragement, European development and national development. There is nothing that I can think of where Government support can be so directly beneficial towards energy saving, the diminution of pollution, scientific innovation, cost reductions and beneficial developments in not only the developed world but the developing world.
  It seems to me, as to my hon. Friend the Member for Chichester (Mr. Nelson), that we have had a somewhat sorry contribution from the Government. We have seen a massive application of Government funds to ICL and in recent months we have witnessed equally massive applications of funds to declining historical industries. Is this not an area of endeavour where seed corn can be encouraged by seed corn finance from the national Government?
  My hon. Friend the Under-Secretary of State accented the fact that the motion advocates a shift from research into training. We have been too reticent about training, and I cannot but endorse the need for greater funding for training. When the resources become available, it should be a question not of a switch of funding from research into training but of an addition of training to a substantial and well-established basis of research. If we do not give that type of lead to this scientific innovation and encourage it within the European Economic Community, we shall be doing no service to ourselves, the Community or the world. With that proviso—namely, more funds more quickly for all aspects of this science—I suggest that the Government are deserving of our support for the motion.
  10.33 pm
  Mr. Dalyell: It is more than a dutiful comment to say that this has been an extremely interesting debate. However, with the leave of the House I wish to address myself to the comment of the hon. Member for Hertfordshire, South-West (Mr. Page) when he said that he did not mind very much where the money came from as long as it went into biomolecular engineering. That is a crucial phrase and one that bothers me greatly. This is why I rise for the second time to put it to the Minister.

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  We welcome contact and relations between industry, the universities and the research laboratories that are doing the work. That is common ground. However, there comes a point where, if the work becomes dependent for its very existence on industrial money, we are in a different situation.
  Those who put forward the industrial money naturally want something in return. That something may not even be in the form of the words "You must not publish papers." It may be in the form of "We want something of a moratorium so that we can get the benefits of your research work before anybody else." But it raises a crucial question, one that bothered Sir John Kendrew and many others very much: at what point does dependence on industrial money interfere with those tenets of academic freedom and the freedom of publication that we have paid lip service to for a long time? All that I do tonight is to put down a marker that there is a problem and that it behoves us to pay attention to it. I do not even ask the Minister for an off-the-cuff comment.
  Time and again in high-technology research there arises the question of the exact point at which the level of industrial money challenges academic freedom. It is no good the hon. Member for Lewes (Mr. Rathbone) shaking his head. If researchers become over-dependent on industrial money, the freedom of information that hitherto those in the universities have always taken for granted is put in jeopardy.
  In Japan and Germany there are strict rules. No one suggests that the great research centre at Braunschweig Stockheim or the Max Planck institutes will make all their results freely available to industry throughout Europe. If there is doubt about Braunschweig Stockheim, there is even more doubt about the findings of the Institut Pasteur in Paris and the university of Compiegne, or whosoever is doing the research in France.
  If we are to make available all the research that we have done in this country—[Interruption.] It is no good the hon. Member for Harrow, East (Mr. Dykes) tut-tutting. The truth is that the French in this whole sphere have put the interests of the French State before the interests of Europe as a whole. If it were not so, they would have accepted this package in toto as it was put forward by the Commission.
  Other people base themselves far more on national interest than we British have been. Therefore, I am entitled to ask this general question: what do the Government think about the point at which the industrial money dictates the very nature of the research? Once industrial money dictates the nature of the research, there are major questions for British universities to answer.
  It may be that in such a field national policy and national requirements should go along with this kind of inhibition. If so, it is a new departure, and there should be a ministerial statement on any change of policy. That is why the question of the hon. Member for Hertfordshire, South-West is very pertinent and important.
  10.38 pm
  Mr. Michael Marshall: This has been an interesting debate. The hon. Member for Sheffield, Heeley (Mr. Hooley) suggested that it might be better if the matter went before a Select Committee. I quarrel with that suggestion, because we have had a constructive debate. It has been almost a reunion of the Select Committee on Science and Technology, and that has been very agreeable. A number of hon. Members have spoken with great knowledge and
  784
  interest. It is no bad thing if from time to time we have on the Floor of the House constructive debates of this kind, which perhaps rather offset the kind of criticism that we hear expressed outside of some of the late-night activities for which we are perhaps becoming rather more notorious than some of us might wish.
  I take this early opportunity of greeting the hon. Member for West Lothian (Mr. Dalyell), who spoke first for the Opposition. I know that he has been on the Front Bench for some time now, but he has, as it were, returned in an industrial sense. We felt a little easier a-night when he went on to other things, but here he is back again, and I congratulate him on a thorough and constructive speech. I appreciate the spirit in which he has approached this subject, recognising, as I think he does and as I made plain at the outset, that we have not reached a final decision here. We are still considering whether the Commission's proposal, in effect, is worthy of our support. To that extent, as I said, I was anxious to have the views of colleagues on both sides of the House. I have had the chance to hear them, and I am grateful for it.
  I shall now do my best to reply to some of the points which have been raised. Obviously, they have covered so vast a range that it is impossible to cover them all now, but we shall, no doubt, return to these matters from time to time. I take, first, the specific question posed by the hon. Member for West Lothian about why there has been a change from the initial proposals to those before us now. The hon. Gentleman asked, in particular, why research area 2 had been dropped. The answer is that reduced funds could be spent on, in effect, only a reduced number of areas, and the other research areas were considered to be of higher priority. I think that this concentration of funds makes sense.
  I was asked about research area 4. This, in a sense, suffered similarly, but the Community is also trying to avoid areas where there might be a problem of ownership of patent rights—we have heard reference to that tonight—and it is realised also that there are problems in Community work in sectors close to market exploitation.
  Mr. Dalyell: I think it reasonable to ask the Minister to write to me about the vexed question of monoclonal antibodies and the difficulties of patents arising from it. Will he kindly do that?
  Mr. Marshall: Since I am unable to give the hon. Gentleman much of an answer now, I readily undertake to write to him about it.
  The hon. Gentleman made a point also about waiting for Spinks. It ought to be said that this is not true of our national effort. A good deal has gone on, and I shall return to that.
  On the question of training, I think that the hon. Gentleman and the Government are very close in their thinking. We agree that training need not be provided specifically for this subject. As I said, we think that there are already ample opportunities under the existing Community science and technology training programme administered by the director-general DG XII. We also agree on the importance of the role of the advisory committee on programme management. The precise level of representation will, of course, depend on the form of the programme.
  The hon. Member for West Lothian, his hon. Friend the Member for Newham, South (Mr. Spearing) and my hon.

  785
  Friend the Member for Hertfordshire, South-West (Mr. Page) spoke about the way in which this programme would work through to laboratories in this country. I think that my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) was right to emphasise that the total contribution of the Commission's programme to what is already going on in this country is very small. We should look at it in that light. The way that matters will work in practice is that in reaching decisions the Council of Ministers will, as it were, set the broad policy framework, beyond which it will be up to the Commission to put forward proposals.
  The Community programme will provide finance for projects to be carried out in research laboratories in member States. The laboratories must bid for funds, in response to invitation to tender issued by the Commission, to carry out specific projects which will fall within the broad ambit of whatever programme might be decided. Typically, the Commission pays 50 per cent. of the expenses.
  Mr. Hooley: If a university laboratory bids for funds and gets them, will the Government lop them off that university's grant, or will it be able to get the money in addition to its existing pool?
  Mr. Marshall: The hon. Gentleman raises questions which go beyond my departmental brief.
  Mr. Spearing: Oh.
  Mr. Marshall: I need to consider the point but, on the face of it, I imagine that that would be a pretty surprising reaction. However, that would be a decision to be taken outside my sphere of responsibility.
  There have been several references to the question of patents. Part of the thinking which has influenced the Government in these matters is that university workers in the United Kingdom have not always had enough of an eye for the commercial potentialities of their work. The trend is, I believe, improving. That is an encouraging sign for the future of this important subject.
  My hon. Friend the Member for Hallam raised a number of important points. I agree that we need to take full account of the discussions in all multinational fora on such issues. We seek to profit where possible. We consider that the reference to the Community FAST programme is appropriate and timely. We are playing our full part in its work.
  The hon. Member for Heeley referred to the development gap. I remind the hon. Gentleman that the Government's interest and involvement through the NEB in setting up Celltech is designed to counter the effects of the tendency he warned against. The hon. Gentleman also referred to safety matters. The Government consider GMAG to be a highly useful and successful body. Careful scrutiny of developments is maintained. No relaxation of safeguards is entertained unless we are satisfied that they are justified by experience.
  My hon. Friend the Member for Chichester (Mr. Nelson), in an interesting speech, spoke of his experience in examining Japanese opportunities and development. His remarks in many respects were valid. It does not seem, however, that there is much major injection of public money by the Japanese Government in research and development in biomolecular engineering. I believe that MITI makes a small contribution.
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  The hon. Member for Newham, South is a familiar figure at this hour of the evening when the House discusses Community matters. The hon. Gentleman had some pertinent question to raise. I have given the broad parameters under which we are discussing this decision. It is an issue for the Council of Ministers on which the Government have not reached a final view.
  The European Community research and development programmes derive from Article 235 of the Treaty of Rome and the relevant provisions of the Treaty of Paris and Euratom and are an integral part of the co-operation between member States. The hon. Gentleman is at liberty to argue that this matter might have been set up outside the Commission. If he reflects on his proposal, he will perhaps realise that it would be a cumbrous process. The mechanism that exists helps in moving towards agreement in a difficult area over what I agree is a long time scale. The hon. Gentleman will perhaps agree that an approach on a bilateral basis would be even more extended.
  I was also asked about property rights. This will depend on the individual contracts negotiated between the research laboratories in member States and the Commission. Who would benefit? This depends on the shape of the final programme. We would expect United Kingdom authorities to be well placed to obtain a good share of available business that is placed.
  Mr. Richard Page: I should like to ask my hon. Gentleman a question about this point and the whole issue of patents. He may care to write to me. When something of commercial value that can be patented arises from an order placed by the EEC with a particular research establishment, will the patent be held by the EEC, which placed the order, by the country where it is placed, or by the research establishment? I recognise that it is a difficult question to which my hon. Friend may care to respond later.
  Mr. Marshall: I am grateful to my hon. Friend for putting his question in that manner. I undertake to write to him. My hon. Friend, together with a number of hon. Members, tries to take me fast down a path to discover what happens following an agreement that has not yet been reached.
  I should like to try to bring together the strands of what is happening in the United Kingdom. Running through the debate has been an assumption that we have been lagging. The issue should be put in better perspective. I have already mentioned Celltech, which, in some ways, is an interesting example of the pump-priming and what has been described as the seed corn. It shows how private finance can come together with the NEB, in this case, to use taxpayers' money to put together proposals of great importance.
  It is also interesting that that example involves an agreement with the Medical Research Council, giving the company access to MRC know-how. The company is about to market its first product, an anti-Interferon drug, based on research in MRC laboratories at Cambridge and Warwick universities. The work is on a small scale, involving a staff of only 25, but that should not hide the fact that it is an important development which appears to have a considerable future.
  Some hon. Gentlemen argue for major Government funding. I accept that the pre-emption of resources by ICL means that we have less scope in other areas, but the same

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  could apply to other items of major public expenditure. However, if biotechnology is to develop successfully in this country it must primarily be through private sector funding and initiative. The signs are encouraging. ICI's Billingham plant is about to manufacture animal feed from methanol. Then there is the Wellcome Foundation work on a process for Interferon, an anti-virus pharmaceutical agent, Eli Lilly's work with synthetic insulin, Rank Hovis McDougall's work on a microbiological source of protein for human consumption. and Glaxo and Beecham's work on antibiotics by biotechnological processes. These are all important initiatives. In addition, Government support is provided at least at the level recommended in the Spinks report. I have mentioned the £5 million investment in Celltech through the NEB. Other support through the Department of Industry, the research councils and the NRDC totals about another £5 million.
  We watch carefully the policies of other Governments. We recognise the importance of the developments and the need to take a close interest in what is happening in the world at large.
  Mr. Dalyell: The Wellcome Foundation, for example, has benefited greatly from State-financed research. If Interferon, which now costs £2,000, can be produced by the new techniques for 50p, will the Government take a close interest in the price at which firms sell such substances to the NHS? If their original research benefited greatly from State finance, the State should watch the price charged to the NHS like a hawk when production becomes much cheaper.
  Mr. Marshall: With his uncanny flair for timing, the hon. Gentleman raises the question at the very moment that my hon. Friend the Under-Secretary of State for Health and Social Security is in the Chamber. He will have noted carefully what has been said, as it is a continuing concern of his Department.
  The hon. Member for Heeley and others mentioned fears about developments in genetic engineering. When the methods for changing the structure of genes were first developed, there was understandable fear about genetically engineered micro-organisms escaping from the laboratory and causing disease, as the population would have no natural resistance to the changed microorganisms. To prevent this from happening, tight restrictions were placed on genetic engineering experiments. As the science has advanced, it has been realised that many of the initial fears were unfounded. Most genetically engineered micro-organisms can live only in the special conditions of the laboratory and would not survive in the environment.
  It has, therefore, been appropriate to relax generally the guidelines for genetic manipulation experiments, though any change is made only after the authorities are fully satisfied that there is no risk to the public. In this country the bodies responsible for the surveillance of genetic
  788
  engineering experiments are the genetic manipulation advisory group and the Health and Safety Executive. There are important developments in hand in this area, but so far development has been a step-by-step process of looking for safety safeguards while trying to strike the proper commercial balance.
  Mr. Dalyell: I hope that the Minister will forgive this, my last intervention of the night. May I plead with him to be a bit careful on the health and safety requirements? Some of us are reliably informed that whereas in 1979 the number of animals used for experiments and testing was 4,719,000, if some of the new regulations are brought into force according to the research director of ICI the figure will rise to up to 25 million. First, there is the question of costs. Secondly, what will the animal lobby say about 25 million rather than 5 million, animals in laboratories?
  Mr. Marshall: I take note of what the hon. Gentleman says. It reminds us that part of the thrust of the order before us is the way in which health and safety aspects should be examined. I hope that in the wider debate that will take place these matters will be given full weight. It is certainly right that the scientific community should be required to ensure an appropriate degree of safety in this work.
  The possible application of biotechnology in medicine has been mentioned already in relation to Interferon, insulin vaccines and diagnostic testing materials. I emphasise that this does not form part of the revised Community programme. During discussions on the original proposal, it was clear that two member States were not in favour of proposals which would have encompassed, inter alia, the research funding of the medical applications of biotechnology. As I have stressed, in the United Kingdom research and development are being carried out and funded by the public and the private sectors, and the results of that activity are already starting to produce commercial results.
  In short, I think that we have a situation in which we shall seek to work constructively in the Community for an agreement which is consistent with our requirements and which complements the work already being done with Europe in biomolecular engineering.
  I conclude by saying that the Government certainly recognise the importance of biotechnology and hope and believe that a Community programme can be drawn up that will be beneficial both to the Community and to this country. In doing so, we shall, of course. take fully into account all that has been said tonight.
  Question put and agreed to.
  Resolved,
  That this House takes note of European Community Document No. 4460/80 on Biomolecular Engineering Research and of the explanatory memoranda dated 19th February 1980 and 8th December 1980; supports the Government's intention to ensure that Community research in this area should be beneficial in terms of the policy priorities of both the Community and the United Kingdom; and supports the intention to ensure that there is no duplication of effort in this area.

  Infectious Diseases (Transport of Patients)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Mather.]
  10.58 pm
  Mr. Hugh Dykes: I am glad to have the opportunity tonight to raise what was originally a local constituency issue which confronted me at the turn of the year but which raises wider questions of a general London and indeed a general national interest. I am glad that my hon. Friend the Under-Secretary of State is present to deal with the debate. I am sorry that it is at a slightly later hour than we had originally expected.
  On 16 September last, a constituent of mine, Mr. Coulter, who is a taxi driver from Kenton, was asked through his company's radio system to go to a doctor's surgery in Pimlico to convey a passenger to St. Pancras Way. I have a copy of the taxi company's docket which specifies that, without referring to any medical institution or hospital. That is an important point. A letter dated 26 September from the managing director of the taxi company to the BMA describing the incident states:
  "Upon arrival"—
  that is, at the surgery—
  "our driver was asked to convey a patient to St. Pancras Hospital for Tropical Diseases."
  except that this was done by referring only to the name of the street.
  "When our driver arrived at the Hospital"—
  which he was not originally expecting—
  "the doctors there requested that he should remain until tests for malaria and lassa fever had been carried out. They also stated that should the tests prove positive then they would have to keep our driver in under observation.
  The doctors at St. Pancra said that an ambulance should have been used, and that they would inform Doctor Marheine of this fact."
  That was a misquotation of the name of the doctor who had sent the patient in the taxi, but that is not the important point.
  The letter continues:
  "Fortunately the tests proved to be negative, and our driver was allowed to return to work. We subsequently complained to the Gloucester Street surgery"—
  belonging to Dr. Marheine or Dr. Mohan and Dr. Clark—
  "but was met with an attitude of 'its none of our business what happens once a patient has left our surgery.' I question the responsibility of this particular doctor in allowing a possible carrier of a serious tropical disease to ride in a vehicle that carries members of the public. I also question his total lack of concern after the event."
  That is the background. I decided to make various inquiries. The British Medical Association, slightly later, replied to the managing director of the taxi company saying, reasonably, that it was not directly a matter for the BMA since it is so to speak the doctors' trade association. It suggested that the General Medical Council might be interested.
  On 5 January the General Medical Council replied to the managing director of the taxi company, saying:
  "In reply, the Chairman has asked me to explain that although he is concerned about the matters which you have brought to his attention, he has been unable to identify the doctor concerned."
  That is because of the confusion over the name.
  The letter went on to say that if the names could be supplied correctly perhaps the matter would be considered further. It is important to note that the chairman appeared
  790
  to be extremely concerned about the incident because by then Mr. Coulter and his taxi company were extremely frustrated at the rather casual attitude. At the hospital the tendency was not to remember the incident. That is understandable in some ways, but it adds to my own concern.
  I wrote to the Minister for Health on 19 January and said:
  "Mr. Coulter and the taxi company are very disappointed that the BMA and the GMC do not appear to be very interested as is shown by the accompanying enclosures"—
  that is, in the letters which I have just quoted—
  "although I appreciate the GMC may be in difficulties because of the confusion over names."
  I welcomed the Minister's detailed answer. However, the procedures for complaint through the family practitioner committee system allow only for a direct complaint from someone who is applying for medical treatment.
  The general provisions for a complaint from someone who is indirectly affected—in this case the taxi driver—are too wide and general to be applicable.
  This was a potentially alarming incident. An ordinary taxi-cab was used to transfer someone who could have been a carrier of a serious and terrifying disease. The mode of travel might have been suggested by the medical practitioners concerned, Dr. Mohan and Dr. Clark, on the basis that they were not quite sure. That would be understandable. However, the idea that a person could be conveyed in an ordinary conveyance which could be used later by others, and what would have happened to the taxi driver if the tests had proved positive is unnerving and terrifying. Thank goodness that the tests were negative.
  There is serious cause for concern at the highest levels—in the Health Service, in the Department and in the medical committees. I hope that the Minister shares my view. What might seem to have been a small, passing incident which fortunately did not have disastrous consequences could have been a tremendous matter of public importance, particularly since there had been a lassa fever scare. Britain, with its natural and historic worldwide links, is bound to take people who may be carriers of non-temperate diseases which could have a lethal and devastating effect if they were to spread.
  I commend the fact that our medical authorities have been good at isolating individual incidents in care. However, it must surely be an obligation on all medical practitioners and anyone engaged in such matters--including the nurses and the staff in surgeries—who deal with members of the public who may come to them on a casual basis to make sure that they know the procedures for the transportation of people suspected of suffering from tropical diseases. Otherwise per se strict procedures should be laid down. That is my main reason for raising the matter.
  I hope that the Minister will give a public reassurance that strict procedures either are in existence now or will be laid down in the future to make sure that that sort of incident cannot happen again. Inevitably, in those circumstances there should be a decision by a medical practitioner to summon an ambulance or a similar vehicle containing the necessary medical protection system so that someone could be conveyed in the appropriate protected manner—protecting both himself and the rest of the public.
  The procedure for admission to a hospital should include a proper sense of record and memory so that

  791
  someone like my constituent who was harassed to frustration by being unable to find anyone to recall the incident will be sure that there is a clear record of what happened.
  My hon. Friend will agree that Mr. Coulter and the managing director of the taxi company, Mr. Kaley, are to be highly commended. It would be understandable, even if one was temporarily alarmed at such an incident, subsequently to shrug one's shoulders and forget it. However, Mr. Coulter not only made his own investigations into the case, but, feeling a sense of frustration that he was not getting anywhere and was facing a series of bureaucratic replies from the medical committees, came to me as the Member of Parliament. He said that he was so disturbed by the potentialities of that unfortunate matter that he thought that it should be raised. I entirely agree with him.
  I was grateful for the ministerial reply which I received, but I believe that we need to have more of an official Government response to such a matter so that the public may be reassured. There has already been widespread interest in the affair in the media. It behoves the Minister to try to give us a greater sense of confidence in the future that such an occurrence will not be allowed to happen ever again, short of the very remote possibility of an accidental procedure. Even that would be too much for the public to accept.
  I hope that my hon. Friend will give us renewed confidence that in a country to which many people are coming from all parts of the world and from which many people are going we shall be careful in future to avoid incidents of this sort. I hope that the doctors concerned will give a proper explanation of why they seem to have been negligent and careless in their procedures on the occasion of which I have spoken.
  11.8 pm
  The Under-Secretary of State for Health and Social Security (Sir George Young): I am grateful to my hon. Friend the Member for Harrow, East (Mr. Dykes) for raising the matter. My hon. Friend, his constituent Mr. Coulter and his employer have had to go to considerable lengths to pursue their concern on that matter. They are all to be congratulated on their perseverance.
  I know that my hon. Friend's concern goes much wider than the immediate personal risks to which his constituent feels he was or may have been subject. I have every sympathy with Mr. Coulter and his sudden predicament. I appreciate the concern that has been shown over the wider public health implications of the case. I am glad that we shall have the opportunity to consider them tonight. I hope to give my hon. Friend the assurances which he rightly seeks.
  In reply, I should like to refer briefly to the facts of the case and the follow-up to it and then to say something about the arrangements generally for the control of infectious diseases, including those concerning the transport of patients.
  As I shall explain, we are still waiting for a further report on the facts and circumstances of this case from the family practitioner committee concerned. But we know that my hon. Friend's constituent, Mr. Coulter, a taxi driver, was called to the premises of a general practitioner on 16 September to take a patient—a young girl aged 7—to the Hospital for Tropical Diseases, St. Pancras. The girl was accompanied by her father. She had apparently
  792
  arrived in this country on 13 September and became ill on 16 September with vomiting, headache and a temperature. The general practitioner accepted her as a temporary resident before referring her to the hospital. We made inquiries about what happened at the hospital, but without the name, age, sex or address of the patient concerned, which were not available at the time of the inquiries, the hospital was not able to make a definite identification of the patient from the out-patients' records of 16 September last. That explains why—as my hon. Friend said—the hospital could not be of great help. However, we shall let the hospital have this information and we shall seek any further details that it can give us about the case.
  It so happens that the staff nurse on duty that day remembers this episode happening, and the following sequence of events appears to have occurred. Upon arrival at the hospital on that afternoon, the taxi driver brought the patient into the foyer. No warning appears to have been given to the hospital of the patient's arrival. The patient appeared to have a slight fever and it is thought that she had been abroad in a tropical country within the previous three weeks. In such circumstances, it is standard practice to carry out tests as a precaution in order to exclude certain serious diseases.
  If, after the tests, there had been grounds for suspecting some serious communicable disease, the taxi driver would have had to be traced as a contact. Since he had accompanied the patient into the hospital, he was, quite understandably in the circumstances, asked to stay in the hospital until the preliminary results of the tests were known. In the event, those tests gave no grounds for concern and the patient was discharged. The staff cannot recall whether the hospital doctor on duty did, in fact, subsequently telephone the general practitioner concerned.
  I do not know—I shall explain why—whether there was any suspicion in the mind of the general practitioner that the patient was suffering from an infectious disease, whether lassa fever or anything else, or even whether there were any strong grounds for such a suspicion. Had the general practitioner entertained the possibility of Lassa fever, he would have been well advised to consult the medical officer for environmental health and special ambulance transport could have been arranged, but such action would have been unnecessary if, for example, he suspected the presence of malaria. Lassa fever itself occurs only in a very few parts of Africa and, indeed, no patient suffering from it has come to this country for several years.
  In the event, the use of a taxi did not—happily—present any threat to public health. However, it must have caused the taxi driver great anxiety. My medical advice is that in general it would be inappropriate to use a taxi if there were real grounds for suspecting the presence of any communicable disease. That is the first assurance that I can give my hon. Friend. I would certainly like to express my regret that, because of the reasonable precautions taken at the hospital, Mr. Coulter was put not only to inconvenience but, no doubt, to considerable worry and distress.
  Mr. Coulter's employer subsequently complained to the medical practice concerned but was, apparently, met with a response which seemed to him to convey indifference. The employer then wrote to the British Medical Association. In its reply—as my hon. Friend said—the association indicated that it was not in a position to investigate complaints or advise members of the public on

  793
  such matters. The association did, however, go on to point out that the name given to it by the employer in his letter was not listed in the medical register and that it was possible, therefore, that he was not a medical practitioner. Accordingly, the association suggested that the employer might like to write to the General Medical Council, as the council is the registering body for doctors. It is also, of course, the body charged with statutory disciplinary functions regarding doctors generally.
  On 7 November, Mr. Coulter's employer wrote to the General Medical Council. Its reply of 5 January said that the matter had been brought to the attention of the chairman of the preliminary proceedings committee. That is a committee of the council that decides whether a matter involves an allegation of serious professional misconduct and should therefore be the subject of attention by the professional conduct committee, which has disciplinary powers. The council went on to say, however, that there was not on the medical register anyone of the name—or any similar name—which the employer had quoted. It added that if the correct spelling of the name could be provided, together with initials or forenames, so as positively to identify the person in question, the matter would be considered further.
  Mr. Coulter accordingly then made further inquiries but was not successful in contacting either the original doctor or anyone in the hospital who remembered the incident. He then wrote to my hon. Friend with a view to further investigation being undertaken. My hon. Friend wrote to the Minister on 19 January.
  The Department then got in touch with the Kensington and Chelsea and Westminster family practitioner committee as the body responsible for the administration of general practitioner services in the area. As we were able to give the family practitioner committee the address of the practice concerned, it was able to tell us the name of the principal practitioner and that of his assistant, himself a registered medical practitioner. It was then apparent that it was the assistant's name which had been misquoted by Mr. Coulter's employer to the British Medical Association and the General Medical Council. The immediate question then for my hon. Friend the Minister for Health was what, if any action he could properly take as far as any complaint against the GP was concerned.
  The general practitioner's terms of service in the NHS require him
  "to render to his patients all necessary and appropriate personal medical services of the type usually provided by general medical practitioners. Such services include arrangements for referring patients as necessary to any other services provided under the Health Services Acts".
  Ordinarily, that covers the referral of a patient to the hospital and specialist services. It does not, however, specify how the arrangements for referral shall be effected.
  If a patient, or someone acting on his behalf, considers that his doctor has failed to comply with the terms of service, he may make a written complaint to the family pracitioner committee. The committee's medical services committee has power to investigate such complaints and report to the committee, which then decides whether the doctor is in breach of his terms of service. If he is, the committee will recommend to the Secretary of State what, if any, action should be taken by the Secretary of State. Usually, such action would be a warning to comply more
  794
  closely with the terms of service in future or a recommendation that an amount be withheld by the committee from the doctor's remuneration. There is statutory provision for either party to appeal to the Secretary of State against an adverse decision by the committee.
  It was against that background that my hon. Friend the Minister for Health wrote to my hon. Friend the Member for Harrow, East on 3 February on the following lines. He explained that the relevant regulations provided that a complaint should be investigated if it related to an alleged failure by the practitioner to comply with his terms of service
  "in respect of any person who was, or who claimed to be, entitled to the provision of general medical services".
  My hon. Friend the Minister for Health went on to say that Mr. Coulter could not be regarded by the family practitioner committee's medical services committee as such a complainant as he had not been seeking medical services. The Minister pointed out that there was, nevertheless, provision for the medical services committee to investigate any matter referred to it by the FPC which related to the administration of general medical services. He arranged, therefore, for a copy of the correspondence and his reply to my hon. Friend to be sent to the Kensington and Chelsea and Westminster family practitioner committee for its consideration.
  I should add here that in his reply to my hon. Friend the Minister felt bound to point out that the decision whether the matter should be referred to the medical services committee for investigation is entirely for the family practitioner committee as the doctor would have a right of appeal to the Secretary of State. The Minister also pointed out that while, for the reasons given, neither Mr. Coulter nor his employer could be accorded the status of complainant with the attendant right of appeal, they could be regarded as material witnesses at a hearing before the medical services committee. Finally, the Minister added that if Mr. Coulter and his employer wished to take up the matter again with the General Medical Council—on the question of professional conduct—the names and initials of both doctors should, of course, be quoted.
  The family practitioner committee considered the matter at its next meeting, which was on 19 March. On 25 March, the committee wrote to inform the Department that, having discussed it, it had decided not to refer the matter to the medical services committee, Its reason was that the doctor concerned—who was answerable also for any acts or omissions by his assistant—could not be held to be in breach of his terms of service by any of the circumstances known to the Committee.
  However, the committee's letter went on to say that, following its decision, the chairman had instructed the committee's administrator to arrange to visit the doctors in order to ascertain the circumstances surrounding the incident so that the committee could then make a report to the Department. I understand that the administrator has been in touch with the principal doctor and learned from him that the doctor more personally concerned, the assistant doctor, is at present on holiday. When he returns, the administrator will see both doctors and then report back to the chairman. A report will then be made to the Department.
  There is a possibility that, in the light of further evidence, the medical services committee will be asked to review the matter again. The House will appreciate that in

  795
  the circumstances I cannot comment further on the role of the general practitioner in this case as the matter could still come to the Secretary of State on appeal, following a medical services committee investigation. However, I undertake to keep my hon. Friend fully in the picture on future developments; and it is still open to Mr. Coulter to refer the matter to the General Medical Council.
  Whatever may be the outcome in this particular case, our consideration of it tonight highlights the need for there to be clearly established arrangements for the handling of persons with, or suspected of having, infectious diseases and these must be known to GPs and others in the health services who may be concerned with such treatment. Members of the public, including those who may otherwise be especially at risk such as taxi drivers, need to have protection as far as possible from the hazards of infection. Such arrangements in fact exist within the statutory framework for the control of infectious diseases. I hope that it will reassure my hon. Friend and the House if I refer briefly to this framework and the related arrangements.
  Provisions for preventing the spread of infectious diseases are contained in the Public Health Act 1936 as amended by the Health Services and Public Health Act 1968 and in various sets of regulations. Under these provisions, medical practioners are obliged to notify certain diseases to the local authority. Under the 1936 Act as amended there are only five notifiable diseases—cholera, plague, relapsing fever, smallpox and typhus. However, regulations provide that a further 23 infectious diseases must be notified to the local authority, including malaria, and lassa fever.
  I should emphasise that in law we refer to notifiable diseases or diseases which have to be notified; they are mostly communicable, that is, infectious diseases. The law does not refer to tropical diseases as such and many infections which occur in tropical countries are not notifiable. Patients coming into this country with one of most such conditions would create no hazard here.
  As for the transport of persons suffering from notifiable diseases, legislation requires that no one having the care of a person whom he knows to be suffering from a notifiable disease shall permit that person to be carried in any public conveyance used for the conveyance of persons at separate fares; or in any public conveyance without previously informing the owner or driver thereof that that person is so suffering. There are fines for contravention, and provision for payments to cover losses incurred by those providing transport.
  I am advised that taxis, which are hackney carriages, qualify as public conveyances. I hope that my hon. Friend will accept the legislative framework which will help to avoid the unacceptable risks to which he referred.
  The two diseases quoted by my hon. Friend in the correspondence he sent on 19 January to my hon. Friend
  796
  the Minister of State for Health were malaria and lassa fever. Medical practitioners are required to notify these diseases to the local authority—that is, to the medical officers for environmental health—but I must point out that the provisions regarding public transport to which I have referred apply to lassa fever but not to malaria. It should also be noted that, for an offence to have been committed under the Act knowledge rather than mere suspicion of a disease is required; and lassa fever, for example, is not easy to diagnose without various tests which have to be carried out in a designated laboratory.
  In addition to these statutory provisions" the Department issues advice from time to time on specific diseases. The memorandum on lassa fever, issued in 1976, gives guidance on the action to be taken on the discovery of a suspected or known case of lassa fever. The memorandum advises medical practitioners that if they have reason to suspect lassa fever in certain circumstances the medical officer for environmental health should be alerted and an expert in tropical medicine or a consultant in infectious diseases should be consulted. The memorandum goes on to specify the subsequent action to be taken by the medical officer for environmental health, including isolating the patient in designated hospital accommodation using a special ambulance if transport is required. The memorandum advises that the ambulance control station should always be told in advance that lassa fever is suspected so that the necessary safety measures may be taken.
  When making a request for an ambulance, a doctor would be expected to give sufficient details of the patient's condition for the ambulance controller to determine the type of transport required—and, in the case of an infectious disease patient, for special precautions to be taken. The transport of infectious disease patients is one of the subjects dealt with in the basic training of ambulance men.
  Those are the general provisions for the protection of the public and those who may be involved in the transport of potentially infectious patients. As I have said, there are still uncertainties surrounding the facts of the case raised by my hon. Friend. It is not possible to say at this stage whether what happened reveals any potential weakness of those arrangements and, if so, what remedial action might be appropriate. But it is certainly a matter to which we shall, if necessary, give further consideration when we have the further report from the family practitioner committee to which I have referred.
  I am grateful to my hon. Friend for raising this important matter in the House.
  Question put and agreed to.
  Adjourned accordingly at twenty-five minutes past Eleven o'clock.

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  Unoccupied Commercial Properties (Rating)
  Welsh Office (Potted Plants)
  Welsh Office (Potted Plants)
  Gateshead and Newcastle Inner City Partnership
  Gateshead and Newcastle Inner City Partnership
  Homesteading Scheme (Wandsworth)
  Homesteading Scheme (Wandsworth)
  Shorthold Tenancies (Repossession)
  Shorthold Tenancies (Repossession)

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Oxford.
The Lord Lawrence—Sat first in Parliament after the death of his father.

Zimbabwe: Aid Donors' Conference
Lord Brockway: 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 what conclusions were reached at the Aid Donors' Conference at Salisbury, Zimbabwe.
The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne): My Lords, before I answer this Question, may I say that my noble friend Lord Soames had intended to answer this Question himself, and indeed the following one, but he is unfortunately indisposed and therefore unable to do so.
The Zimbabwe Government's conclusion, with which we agree, was that this was an outstandingly successful conference. According to the figures released by the Zimbabwe Government, total international aid pledged to Zimbabwe before and during the conference now stands at about £890 million, of which more than half was pledged at the conference itself by a large number of countries and agencies.
Lord Brockway: My Lords, I should like to express my sympathy with the noble Lord, Lord Soames. Is the Minister aware that we shall want to congratulate the Zimbabwe Government and all concerned, including especially the noble Lord, Lord Soames, for the success of this conference? Is it not the case that this is a remarkable result and that the
figure will be increased by donors still to make their contributions? Does the Minister agree that the purpose of the conference was rural development? Can he say how much of the British contribution which we welcome, and which was increased by £25 million amounting now to £140 million, is for rural development and how much is for the writing off of debts for loans for railway expansion and for grants to students in this country?
Lord Trefgarne: My Lords, I absolutely agree with the noble Lord that, as I said, the conference was indeed a great success. With regard to the additional £25 million which my noble friend Lord Soames was able to announce at the conference as coming from the British Government, £10 million of that will be used for land settlement in Zimbabwe; £5 million will be used for Zimbabwean trainees both in the United Kingdom and in Zimbabwe; and the remaining £10 million will be used for regional projects particularly those discussed at the SADCC Conference which was held at Maputo recently.
Lord Alport: My Lords, during the conference what consideration was given to the financing of the surplus maize crop in Zimbabwe in order to ensure that it is available for sale and purchase by neighbouring countries which are at present facing a very serious shortage of foodstuffs? Also, can my noble friend say whether some consideration has been given to make it possible for this crop to be transported to those countries concerned?
Lord Trefgarne: My Lords, my noble friend has indeed lighted upon a very important matter which was certainly raised at the Aid Donors' Conference. However, the financing of purchases of that maize for other countries would, of course, relate to the aid allocations to those other countries. As for the transportation arrangements to which my noble friend referred, it is certainly true that the transport infrastructure in that part of the world does need some development and that, indeed, is likely to be the purpose for which the final £10 million of our new £25 million, to which I referred, will be used.
Lord Goronwy-Roberts: My Lords, may we then take it that the bulk of the £890 million pledged by various countries at this conference will be devoted to capital developments in Zimbabwe, but that the question of extra aid to contiguous countries, arising from their difficulties with food supply, will be looked at with a view to enabling them to take from Zimbabwe the very heavy surplus of maize, among other things, which it is already producing?
Secondly, would the noble Lord consider letting the House have these figures in a categorical manner, possibly by way of a Written Answer, grouping the amounts under various countries and certainly under various regions; that is, the United States, Africa itself, Western Europe and Eastern Europe?
Finally, will the noble Lord convey to his noble friend our deep sympathy with him in his indisposition and that we hope that his wonted influence will substitute itself for his temporary influenza?
Lord Trefgarne: My Lords, I shall certainly convey those sentiments to my noble friend and I shall also consider what can be done to give the House additional details of the various pledges that were made at the Salisbury conference. The noble Lord referred to the various other countries that were there, in particular the Eastern bloc countries. I have to tell the noble Lord that the Eastern bloc was conspicuous by its absence from this conference. So far as I know, not a single penny was pledged by the Eastern bloc countries during the course of the conference, although one Eastern nation was, I think, present.
Lord Ritchie-Calder: My Lords, will the Government please encourage the six oil companies to contribute, in view of the letters which have been sent to them from Church leaders in Britain, America, France and the Netherlands by way of compensation for the breach of sanctions during the illegal régime?
Lord Trefgarne: My Lords, I am not sure that I ought to rise to that bait. If the noble Lord is referring to the Bingham Report, for example, which referred

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to these matters, then I must remind him that the report itself, while interesting and valuable, did not in fact lead to prosecutions in this matter, and I would not want, therefore, to follow the noble Lord along the line which he is suggesting.
Lord Hatch of Lusby: My Lords, is the noble Lord the Minister aware that those of us who have been most critical of the present Government's attitude towards Zimbabwe are filled with admiration for the stand which the noble Lord, Lord Soames, has made in persuading his less enlightened colleagues to support him on this issue? Will the noble Lord convey that to the noble Lord, Lord Soames?
I should like to refer to the debate on an Unstarred Question that we had about 10 days ago. Can the Minister tell the House what was the amount that was set aside by Britain at this conference for regional development? Will he agree that Zimbabwe is in a pivotal position as regards Southern Africa, and that the expenditure of money and resources on its part on regional development is all-important as a consequence of this conference?
Lord Trefgarne: My Lords, the noble Lord is right when he says that, of course, regional projects are important, if not essential, for that part of the world. Indeed, that was the reason why £10 million of the £25 million, which my noble friend announced at the recent conference, will be devoted to those purposes.
Lord Brockway: My Lords, can the Minister give some explanation of the representation at that conference?—for most of the 267 delegates were from the West and neutral countries. Is it not a fact that only three countries of Eastern Europe were represented; namely, Bulgaria, Romania and Yugoslavia? Why was not the Soviet Union represented, even when its ambassador was in the hotel where the conference was taking place?
Lord Trefgarne: My Lords, I have not the slightest idea why the Soviet Union was not represented at the conference. I understand that only one Eastern bloc country was represented; namely, Bulgaria.

Members' Declarations of Interest
2.45 p.m.
Lord Brockway: 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 the Leader of the House whether he will take steps to establish a register, as has been done in another place, requiring Members of this House to record their financial interests.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lord, this is essentially a matter for your Lordships' House. Up to now the House has been content to rely upon the requirement that, if a noble Lord decides that it is
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proper for him to take part in a debate on a subject in which he has a direct pecuniary interest, he should declare it. This derives from the long-standing custom of the House that noble Lords always speak on their personal honour.
Lord Brockway: My Lords, in view of the fact that we are a legislative assembly, sharing that task with the other place, is it not desirable that we should be accountable to the public, of whom we are the servants? Is it not desirable and in favour of open government not only that we should declare our interests when we speak but that the public should be able to judge them when we vote in the Lobbies?
Earl Ferrers: My Lords, as I say, this is essentially a matter for the House. In 1974 the Procedure Committee considered this possibility and set up a sub-committee. The sub-committee suggested—and the Procedure Committee agreed—that any such suggestion should be approved only as a result of the Procedure Committee agreeing and your Lordships' House agreeing, and neither of those actions came about.
Lord Derwent: My Lords, does my noble friend think that the noble Lord, Lord Brockway, would like me to declare my overdraft?
Earl Ferrers: My Lords, it would be a fascinating revelation, but I doubt whether that was the purpose of the noble Lord's Question.
Lord Ardwick: My Lords, is the noble Earl aware that some of us on this side would be embarrassed if the pathetic modesty of our means was declared to the public and to our potential creditors?
Earl Ferrers: My Lords, that peculiarity may not reflect only upon noble Lords opposite.
The Earl of Lauderdale: My Lords, will my noble friend not agree that, if open government is the purpose of this Question, there may be some case for investigating interests, other than financial, which prompt Questions in this House?
Earl Ferrers: My Lords, that also is perfectly true and no doubt would be covered by any such investigation.

Civil Servants in the Ministry of Defence
Baroness Vickers: 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 will state the numbers of non-industrial and industrial civil servants employed by the Ministry of Defence.
Viscount Long: My Lords, including the Royal Ordnance Factories, there were, on 1st March 1981, 114,200 United Kingdom non-industrial staff and 116,700 United Kingdom industrial staff employed by the Ministry of Defence. In addition, there were 10,900 locally-engaged non-industrial staff and 24,900 locally-engaged industrial staff employed overseas.
Baroness Vickers: My Lords, I thank my noble friend for that reply. However, is he able to say what proportion of industrial and non-industrial personnel went on strike recently and, should there have been an emergency at the time, can he say what action the Government could have taken in order to ensure that these establishments were properly run?
Viscount Long: My Lords, 48,000 United Kingdom-based non-industrial staff took part in the one-day protest on 9th March and on 1st April 9,000 members also went on strike. About 500 are involved in continuing selective action, but operational effectiveness is not impaired. I can assure the House that I have no doubt that, if national security were at stake, all our staff would respond.

Back Injury and Paraplegia
2.50 p.m.
Lord Hale: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they are taking to minimise the danger of paraplegia arising from the handling or moving of victims of back injury suffering temporary loss of sensation in the limbs.
Lord Cullen of Ashbourne: My Lords, Her Majesty's Government are aware of the need for special treatment of patients with injuries of the back involving the spinal cord and recognise that proper care and treatment can minimise the danger of aggravating the injury. Ambulancemen are most often involved in handling and moving patients before admission to specialised spinal units. Their basic training includes the management of casualties with spinal injuries with emphasis on the loading and unloading to and from the ambulance. They are also trained in the use of the specialised equipment for spinal injuries which is available in ambulances used for emergencies. Education in the care of patients with spinal injuries is part of a doctor's normal training in the general care of accident victims.
My right honourable friend's department was closely involved in the preparation of the Spinal Injuries Association's booklet on the treatment and care of people with spinal injuries. This provides detailed information for nursing staff who are not specialists in spinal injuries on handling patients in the period before they reach the specialist units. It has been widely distributed in the National Health Service. I can assure the noble Lord that the Government will continue to keep a careful watch to see if there are other ways in which they can help in this important field.
Lord Hale: My Lords, I sincerely thank the Minister for that thoughtful and careful Answer. Is the noble Lord aware that I too am aware of the frightful dilemma and frightful possibilities, and the extreme difficulty for ambulancemen of diagnosing the precise condition and deciding whether there is an exposure of the spinal cord if the patient is unconscious? Is he also aware that the Stoke Mandeville Unit has an immense and almost legendary reputation in this respect, but
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that one of the things that are needed is ample money for research and co-operation with the World Health Organisation and the medical establishments? Further, there is need for the provision of special transport—or it should be readily available—to deal with injuries and lifesaving at sea. Is the noble Lord aware that all this would contribute to human knowledge and understanding?
Lord Cullen of Ashbourne: My Lords, I fully agree with the noble Lord how important it is that everybody should be taught how to move patients on these occasions. I understand that one of the things which we are all inclined to do, unless we are told not to, is to take off our jacket and roll it up as a pillow and put it behind the head of the person who is injured. This can have an extremely serious effect on the person's neck if it is injured. One is most certainly advised not to do so.
Baroness Masham of Ilton: My Lords, in declaring an interest in this Question because I am chairman of the Spinal Injuries Association, I should like to ask the Minister whether he is aware that many of the general public are the people who encounter an accident and are the first on the spot? Therefore, does he agree with me that not enough is done in our schools, from primary school upwards, to provide first-aid training? Is he aware that all children in Scandinavia are taught first-aid in the schools?
Lord Cullen of Ashbourne: My Lords, the noble Baroness has made an extremely important point. I shall certainly pass on her views to my right honourable friend the Secretary of State for Education and Science. I entirely agree that first-aid should certainly include information on how to treat people with spinal injuries.
Baroness Hylton-Foster: My Lords, does the noble Lord agree that, apart from teaching first-aid in schools, which is already done by the Red Cross, one of the most important things is to educate the public? Does the noble Lord agree that it would be a great help if the Government were to advise the public to take advantage of the courses currently being run by the two voluntary aid societies, St. John and Red Cross, so that they could learn the importance of not moving a patient with a back injury until professional help arrives?
Lord Cullen of Ashbourne: My Lords, I entirely agree with the noble Baroness. I think that the House knows full well what marvellous training is given by the St. John Ambulance and the Red Cross organisations. Whether the Government can in point of fact influence the public to take these courses I am not sure. I should have thought that the response could be very much helped by the media. I would hope that they would perhaps advise the public how important it is not only for themselves but for other people.
Baroness Masham of Ilton: My Lords, is the noble Lord aware that two Sundays ago "That's Life", the television series, put out a programme on this very matter and that we in the Spinal injuries Association

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have had numerous calls from members of the public and from caring and medical people on this subject? Will he perhaps encourage the Government, who do put out items on television from time to time, to put out "plugs" on what to do when you find a person with spinal injury? It is not just a matter of keeping the person still. If he is unconscious and vomiting or bleeding—as I was with a haemorrhage—you turn him over like a rolling pin so that the air passage is free.
Lord Cullen of Ashbourne: My Lords, I shall certainly pass on that suggestion to my right honourable friend. I might also add to what the noble Baroness said that it really takes four people properly to lift somebody who has a spinal injury so that they are kept absolutely level and flat, with one person holding the head and neck and the others down the body to keep it absolutely flat.
Baroness Masham of Ilton: My Lords, may I say, to correct myself and for the information of the House, that you do not turn them over; you turn them on their side.
Lord Lloyd of Kilgerran: My Lords, is the noble Lord aware that this kind of training is so important in relation to sporting activities in athletic clubs and sporting clubs of all kinds? If I may first declare an interest as the chairman of the Institute of Sports Medicine, may I ask whether the noble Lord is aware that in a small way a unit has been formed at Cambridge and a fellowship has been adopted in New Hall, Cambridge, to deal with sports injuries, including this very serious matter that often arises, particularly in inter-collegiate sports?
Lord Cullen of Ashbourne: My Lords, I was not aware of that, and I am grateful to the noble Lord for pointing it out.

Charterhouse Japhet Bill
The Lord Chairman of Committees (Lord Aberdare): My Lords, Charterhouse Japhet Bill: I beg to move that this Bill be now read a third time.
Moved, That the Bill he now read 3a.—(Lord Aberdare.)
Lord Elwyn-Jones: My Lords, can the noble Lord enlighten us as to who, or what, Christopher Japhet is?
Lord Aberdare: My Lords, it is Charterhouse Japhet, who are a bank, and it is in connection with their take-over of Keyser Ullmann, which the noble and learned Lord probably also realises is a bank, that this Bill is concerned.
On Question, Bill read 3a, and passed.

Companies (No. 2) Bill [H.L.]
3 p.m.
Lord Trefgarne: My Lords, I beg to move the Motion which stands in my name on the Order Paper.
Moved, That the amendments for the Report stage be marshalled and considered in the following order:

Clause 1 and 2

Schedule 1

Clauses 3 to 17

Schedule 2

Clauses 18 to 75

Schedules 3 and 4.—(Lord Trefgarne.)

On Question, Motion agreed to.
Report received.
Clause 1 [General provisions with respect to the form and content of accounts]:
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 1:
Page 1, line 12, after ("company") insert ("including a job ownership company as defined in section 74 of this Act").
The noble Lord said: My Lords, the first clause of the Bill concerns general provisions with respect to the form and content of accounts and in line 12 on page 1 we find the first mention of "company". To clarify the situation relating to job ownership companies, a subject which has been discussed with your Lordships, my amendment would, after the word "company", insert the words:
"including a job ownership company as defined in section 74 of this Act".
With the leave of the House, I shall speak also to Amendment No. 73, which relates to a new clause enabling a company to purchase its own shares. The object of that amendment is to make it clear that a job ownership company can also purchase its own shares. Your Lordships will remember that clauses regarding the purchase of its own shares by a company were introduced for the first time in Committee. I shall, with the leave of the House, speak also to Amendment No. 97, which deals with the definition of "job ownership company".
On Second Reading I submitted that it was desirable—for reasons I shall not go into now—to establish a new class of company, known as a job ownership company, which, as I said, would be of considerable assistance, for instance, in enabling family firms to enter into worker partnerships and employees with a lot of redundancy money at the present time to form themselves into groups. In Committee, when we considered an amendment in the names of myself and the noble Lord, Lord Seebohm, who is noted for the great work he has done in relation to job ownership companies, the Minister said that the Government would consider our proposals on job ownership companies.
I am happy to say that, following the Committee stage, the Government kindly invited the noble Lord, Lord Seebohm, and myself to a meeting. It was attended by four Ministers and about 12 civil servants and there was thrashed out, as Lord Seebhom and I understand it, an arrangement that today the noble

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and learned Lord, Lord Mackay of Clashfern, would be making a statement on the subject. If I am right, then I shall not be pressing the amendment. Meanwhile, I beg to move.
The Lord Advocate (Lord Mackay of Clashfern): My Lords, I am grateful to the noble Lord, Lord Lloyd of Kilgerran, for introducing this matter and for referring to the meeting which he and the noble Lord, Lord Seebohm, attended at the department last week, and perhaps I should mention that the size of the team to which he referred is an illustration of the importance we attach to the issue.
There is a question relating to the provisions of Section 54 of the Companies Act 1948 which we shall be discussing later. Subject to that, it was agreed at the meeting that the Government's own proposals to enable a company to purchase its own shares, which were carried in Committee on 19th March, would facilitate the formation of job ownership companies by providing an alternative to the holding by trustees of shares in such companies between their purchase from a departing worker/shareholder and their subsequent re-sale to a new worker/shareholder. The Government's proposals do not provide for the holding by a company of its own shares—sometimes described, following North American usage, as the holding of shares "in treasury"—because the necessary statutory provisions would add further to the complexity of company law without creating any significant advantages. The cancellation of shares on purchase and the subsequent issue of new shares can be a more straightforward operation.
The Government's proposals for companies to purchase their own shares therefore do all that is necessary to permit a job ownership company to operate in the manner required. The only outstanding issue on these amendments is whether the Companies Act should contain a definition of a job ownership company if no statutory consequences are to flow from it; if, in other words, it will be treated in all respects under company law as any other private company. We took the view—and I understood this view to be accepted—that as no additional statutory provisions are required to facilitate the formation of job ownership companies, there is no requirement for any statutory definition.
While we recognise the apparent attractiveness of the argument that some form of statutory recognition would be helpful in publicising job ownership companies, I am sure the House will appreciate the Government's view that not only would such action be an inappropriate use of a statute but that the Government can offer more useful help in publicising the potentialities of job ownership companies through the extensive network of Government services and agencies concerned with the promotion of industrial and commercial development and employment. We considered in detail at the meeting how this might be done, and we shall of course carry that forward further with noble Lords as the subject develops.
I hope your Lordships will feel that this is the correct solution to this interesting problem. It received support from noble Lords in all parts of the Committee. I am particularly grateful to, and should like to thank on behalf of the Government, the noble Lords, Lord
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Lloyd and Lord Seebohm, for giving us so much time and for helping us to reach a solution which I believe is in the interest of simplicity, of company law generally and of job ownership companies in particular.
Lord Bruce of Donington: My Lords, we on this side wish to thank the noble Lord, Lord Lloyd of Kilgerran, for having raised this issue again and we wish to express our appreciation for the constructive attitude the Government have shown towards the matter. We shall follow developments with interest and support any kind of publicity the Government propose to give so that the public at large may be made well aware of job company schemes.
Lord Seebohm: My Lords, I do not propose to put forward any of the arguments; I have said quite enough loud and clear already on the subject. Although I am disappointed that the amendment will not be accepted, I am grateful for the way in which the Government have expressed their willingness to help to publicise the matter, with possibly the publication of demonstration memorandum and articles and giving publicity through the Small Businesses Advisory Service, the Scottish Development Agency, the Welsh Development Agency and probably CoSIRA, although we did not mention that at our meeting. The general help that was offered us was, I am sure, genuine and will be of great assistance to my colleagues when they start preparing the demonstration model. I am also grateful to the many noble Lords who supported me in the debate.
Lord Lloyd of Kilgerran: My Lords, I am grateful to the Minister for his kind words about me and to the Government for being so appreciative of what is a real problem. With the noble Lord, Lord Seebohm, I look forward to other meetings with the noble and learned Lord's staff, who have been most helpful in the matter, so as to make the public further aware of this important development. At this time I can see no need for a statutory provision—I agree with the Minister about that—and in those circumstances I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 2 not moved.]
Lord Lyell Lord Lyell moved Amendment No. 3:
Page 2, line 35, leave out from ("the") to ("and") in line 36 and insert ("Companies Act 1976 (taken with section 150 of this Act);").
The noble Lord said: My Lords, on behalf of my noble friend I beg to move Amendment No. 3 which, as I hope your Lordships will see, is a drafting amendment. We hope that it achieves further clarity in the Bill, and for that purpose I beg to move.
On Question, amendment agreed to.
Schedule 1 [Accounts]:
3.11 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 4:
Page 83, line 15, at end insert—
("12A. Profit or loss on ordinary activities before taxation.").
The noble Lord said: My Lords, with the leave of the House I should like to discuss Amendments Nos. 4, 5, 6 and 7 together, since they all relate to the same point.

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During the debate on this particular matter at the Committee stage the noble Lord opposite saw fit to resist the amendment. In doing so he indicated, as reported at column 672 of the Official Report, that the accountancy profession was entirely happy with the points that he made on that occasion. All that the amendment seeks is the insertion in the formats which have now been laid down for company accounts a particular item that has always featured in accounts that have been prepared and published in the United Kingdom. If the noble Lord has seen published company accounts, in particular those relating to public companies, that have not shown quite clearly and directly what was the profit or loss before taxation, I should very much like to learn the names of those companies. In companies in the United Kingdom it has been the invariable practice to prepare the accounts in such a way that the profit or loss before taxation is always shown.
I put the point to the noble Lord in Committee and he indicated that it would be easy to combine—or subtract, as the case may be—the net profit or loss after taxation and the actual taxation charge and that by the method of combining the two one could achieve a result. Is there any reason at all why, after over 100 years of the presentation of accounts not only to the general public but to the Inland Revenue and everyone else, we should abandon the practice of stating the profit or loss before taxation? The profession to which I have the honour to belong has already reiterated its general misgiving that there should at all be an Act of Parliament laying down a precise format of accounts. Accountancy techniques have developed in this country over a far longer period of time than they have in the countries of the EEC—the directive of which of course lies behind this particular Part of the Bill. Is there any real reason why we should abandon the practice? In this country we have much more experience of accounting than has any other country in Europe. in the United Kingdom we have nearly three times as many qualified accountants—I am speaking now of proper qualifications—as there are in the whole of the EEC. Therefore, is there any particular reason why we should abandon the practice?
It is not as though the directive itself lays down specifically that the formats that are set out should invariably be followed. Article 2.6 of the directive states that:
"The Member States may authorise or require the disclosure in the annual accounts of other information as well as that which must be disclosed in accordance with this Directive".
Furthermore, in Article 4.1, the EEC directive itself states:
"A more detailed subdivision of the items shall be authorised provided that the layouts are complied with. New items may be added provided that their contents are not covered by any of the items described by the layouts. Such subdivision or new items may be required by the Member States".
So why is it necessary to abandon one of the salient features of British accounting methods that is accepted by the Revenue, by the public, by investors, by everybody, in favour of the particular formats that are set out in the Bill itself and in the EEC directive? In asking that question I need refer only to the accounts of GEC, which I believe is quite a reputable company.
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The accounts state—this is almost universal practice with public companies—that the profit before taxation was so much. There is then stated the amount of taxation, and thereafter the profit after taxation, What is wrong with that?
Following the debate in Committee on 17th March I once more had an opportunity to meet representatives of the consultative committee, and I put it to them that it had been said that they were, in the words of the noble Lord, Lord Lyell, entirely happy with the explanation that had been given to them when they had gone along to the Ministry. There must have been some misunderstanding here because the representatives of the consultative committee informed me that although they acquiesced with what was said to them on that occasion, they certainly were far from happy, and indicated the fact.
We in this House must be capable of coming to our own independent judgment, and certainly the Government are entitled to do likewise. The role that the consultative committee sought to assume was to advise. It was not its function to indicate acceptance or otherwise of the Government's view. It is not up to the consultative committee to argue with the Government. A Government who did not take account of the consultative committee's views would be unwise. But the committee's views were quite clearly stated, and I am given to understand by the committee that its views remain precisely the same.
I consider it would be a retrograde step if it were not made a requirement of the Bill and of this particular schedule, which lays out the formats, that the profit and loss account formats should include the statements which are incorporated in these four amendments. There is no case whatsoever for abandoning the practice that we have had for many years and, if it is necessary to have a format, for not confirming in that format the practice we have had in this country almost since the Industrial Revolution of putting in these figures. I am hopeful that this is not a party matter. Accountancy subjects, particularly those of detail, are not such that acquire the sparkling interest that attends occasions of high drama in this House, but if we are to discharge our functions as I am sure we conceive them to be, then we must pay attention to this kind of matter to make quite sure that all the details are correct before the Bill passes from this House.
I repeat: this is a non-party matter. I am aware that should these amendments go to a Division there will then be, of course, a Division on party lines, and noble Lords will come in from other parts of the House, both on the noble Lord's side and on mine, who have not had the interest in this particular detail to enable them to form an independent view. This is quite normal, and I make no complaint about it; but it does not make it easy to argue through and succeed in this House in the case of amendments which are presented with no party division whatsoever, which do not seek in any way to be destructive and which propose nothing revolutionary, but which merely, certainly in the mind of the professional, are just plain common sense. In that sense, I beg to move.
Lord Morris: My Lords, I believe this series of four amendments to be totally unnecessary. I believe the

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noble Lord, Lord Bruce of Donington, does this House a disservice to suggest that this Bill in any way diminishes what is recognised to be a very good practice. If he would care to turn to paragraph 3(1) of the Schedule, he can read, just as everyone else can read:
"Any item required…to be shown in a company's balance sheet or profit and loss account may be shown in greater detail than required by the format adopted".
I believe that these amendments are not necessary for the very simple reason that the consultative committee of the accountancy bodies has advised any company that if they wish to have a side heading for a deduction giving the resultant profit and loss before taxation, so be it, but I cannot see that it is necessary to legislate for it. It is purely a matter of personal style and personal choice. If the noble Lord suggests, as he has suggested, that this House should divide on a matter of minutiae, I think I would be a waste of your Lordships' time and very unfortunate.
Lord Lyell: My Lords, perhaps I may take the last speaker first and thank my noble friend for his support. Of course, it is interesting that the first three speakers on this amendment should perhaps have to declare an interest in this matter, since I understand that my noble friend and Lord Bruce and myself are all members of various august bodies which have to do with the specialist presentation of these matters. The main thrust of
these four amendments was put forward by the noble Lord, Lord Bruce, as he has pointed out, at an earlier stage. I think he quoted certainly one column number, but if the noble Lord would look at column 670 of our proceedings at an earlier stage I think he will find there the same point moved by himself previously and my reply to him.
In my reply then, and in the reply which I am able to give him today, I have to point out that paragraph 3(6) of Schedule 1 already contains the requirement:
"Every profit and loss account of a company shall show the amount of the company's profit or loss on ordinary activities before taxation".
We on this side of the House, certainly, and I suspect all round the House, agree with the noble Lord that it is a very important item that should appear in every company's profit and loss account, but I should like to impress upon the noble Lord that his Amendments Nos. 4, 5, 6 and 7 would not achieve the purpose that he seeks and that he has proposed. If we were to take the item, "Profit or loss on ordinary activities before taxation" and were to insert it as an additional item in the profit and loss account formats, this would create uncertainty as to whether or not the item was covered by the power which is conferred on companies in paragraph 3(4) of Schedule 1. This little power allows companies to combine items in the profit and loss account and to show the breakdown only in the notes to the accounts. In a case where this happens, the amount would not actually appear separately in the accounts, but the reader or the analyst would have to search through the notes.
I believe that at the earlier stage I also stated that we believe that the profit or loss on ordinary activities before tax is indeed a crucial figure which should always appear in the profit and loss account proper, and should not be capable of being relegated to the notes to the
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accounts. I would assure the noble Lord that this position is achieved by paragraph 3(6) of the schedule. He will find that on page 75. But the series of
amendments which is proposed by the noble Lord would not serve the purpose that he intends. Indeed, we would expect that the power which is granted to companies by paragraph 3(4)(b), which reads,
"the combination facilitates that assessment",
about a third of the way down page 75, would enable companies to combine the items in the profit and loss account format, and this may be used to produce the amount of profit before tax which is called for by paragraph 3(6).
This would allow the present practice of presenting this particular amount as the most prominent amount in the profit and loss account to continue. The detail
which would be omitted would be, as now, shown in the notes to the accounts. All of us appreciate that these amendments which have been proposed by the noble Lord have been proposed in the spirit of co-operation, and indeed we thank him for the spirit in which he has spoken today; but, in the light of my explanation, I hope he will accept that his purpose is already achieved in the Bill as it is printed, and that he will be satisfied with that.
Lord Bruce of Donington: My Lords, I am very grateful to the noble Lord for his reply. In answer to the noble Lord, Lord Morris, I would point out that the power to which he refers does not give the power to insert new items; it gives the power to subdivide existing ones. There exists no power, as I see it, to introduce new items. This is what is proposed here. But even if it were so, I can see no reason why it cannot be inserted as part of the normal accounts within the format, in the same way as in the accounts of all public companies. This is done at the present time as part of the normal accounts.
Following the noble Lord's intervention in the Committee stage, I have taken a careful look at paragraph 3 of the schedule and subsection 4(b) and, indeed, (a) which refer to individual amounts which are not material—and by no stretch of the imagination can one regard the net trading results before taxation as being other than material to the whole accounts; and subsection 3(b) refers to the combination that would facilitate the assessment. I do not think that that takes us any further with the indispensibility of having the item stated, as it has always been stated, as a separate figure as part of the accounts. I cannot see why we should follow the French bilan which is more or less what these formats follow. Our colleagues across the Channel have been the predominant influence in the devising of these formats; but there is no reason why we should abandon the principle which has been for the convenience of commerce and industry, of investors and of everybody else for as long as profit and loss accounts and balance sheets have been produced in this country. I regret that I shall have to ask the House to divide on this.
On Question, Whether the said amendment (No. 4) shall be agreed to?
Their Lordships divided: Contents, 56; Not-Contents, 90.

CONTENTS

Airedale, L.

Janner, L.

Amulree, L.

Leatherland, L.

Ardwick, L.

Listowel, E.

Banks, L.

Llewelyn-Davies of Hastoe, B.

Barrington, V.

Lloyd of Kilgerran, L.

Beaumont of Whitley, L.

Northfield, L.

Beswick, L.

Paget of Northampton, L.

Blyton, L.

Pargiter, L.

Brockway, L.

Peart, L.

Bruce of Donington, L.

Ponsonby of Shulbrede, L.

Byers, L.

Ritchie-Calder, L.

Collison, L.

Sainsbury, L.

Cooper of Stockton Heath, L.

Seebohm, L.

Crowther-Hunt, L,

Shinwell, L.

David, B.—(Teller.)

Spens, L.

Davies of Leek, L.

Stamp, L.

Davies of Penrhys, L.

Stewart of Alvechurch, B.

Denington, B.

Stewart of Fulham, L.

Elwyn-Jones, L.

Stone, L.

Gaitskell, B.

Strabolgi, L.

Goronwy-Roberts, L.

Strauss, L.

Gosford, E.

Taylor of Mansfield, L.

Greene of Harrow Weald, L.

Underhill, L.

Greenwood of Rossendale, L.

Wallace of Coslany, L.—(Teller.)

Grey, E.

Hale, L.

Wells-Pestell, L.

Hanworth, V.

White, B.

Hatch of Lusby, L.

Wynne-Jones, L.

Henderson, L.

NOT-CONTENTS

Ailesbury, M.

London, Bp.

Alexander of Tunis, E.

Long, V.

Alport, L.

Loudoun, C.

Atholl, D.

Lyell, L.

Auckland, L.

McFadzean, L.

Avon, E.

Mackay of Clashfern, L.

Balfour of Inchrye, L.

Mackintosh of Halifax, V.

Bellwin, L.

Macleod of Borve, B.

Buckinghamshire, E.

Melville, V.

Campbell of Croy, L.

Mersey, V.

Cawley, L.

Milne, L.

Chelwood, L.

Morris, L.

Clancarty, E.

Mowbray and Stourton, L.

Clwyd, L.

Noel-Buxton, L.

Cockfield, L.

Northchurch, B.

Colwyn, L.

Nugent of Guildford, L.

Cromartie, E.

O'Brien of Lothbury, L.

Cullen of Ashbourne, L.

Orkney, E.

Dacre of Glanton, L.

Portland, D.

Davidson, V.

Rawlinson of Ewell, L.

De Freyne, L.

Reay, L.

Denham, L.—(Teller.)

Redcliffe-Maud, L.

Derwent, L.

Redmayne, L.

Drumalbyn, L.

Roberthall, L.

Dundee, E.

Romney, E.

Effingham, E.

St. Aldwyn, E.

Ellenborough, L.

St. Davids, V.

Elton, L.

St. Just, L.

Erroll of Hale, L.

Sandford, L.

Fraser of Kilmorack, L.

Sandys, L.—(Teller.)

Gainford, L.

Selkirk, E.

Gormanston, V.

Sharples, B.

Gridley, L.

Skelmersdale, L.

Grimston of Westbury, L.

Sligo, M.

Hailsham of Saint Marylebone, L.

Strathcarron, L.

Strathclyde, L.

Halsbury, E.

Strathspey, L.

Home of the Hirsel, L.

Sudeley, L.

Hood, V.

Swinfen, L.

Hylton-Foster, B.

Tenby, V.

Ilchester, E.

Trefgarne, L.

Kemsley, V.

Trumpington, B.

Kinloss, Ly.

Vaux, of Harrowden, L.

Kinnaird, L.

Vivian, L.

Knutsford, V.

Willoughby de Broke, L.

Lawrence, L.

Resolved in the negative and amendment disagreed to accordingly.
[Amendments Nos. 5, 6 and 7 not moved.]
3.41 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 8:
Page 88, line 17, leave out ("realised") and insert ("earned").
The noble Lord said: My Lords, this is a somewhat complex question. It may be a little difficult to resolve because it refers to the definition of profits for inclusion in the accounts themselves. In Cmnd. 7654, which was the document put out by the Government, at page 35 the Government discuss what they term "realised profits". I am quoting from the consultative document:
"The requirement in Article 3.1(c)(aa) that only profits made at the balance sheet date may be included in the accounts is interpreted as meaning that profits should not be anticipated but, in accordance with the purdence concept, only included where earned and ascertained".
Your Lordships will recall that when this was first mooted in the Committee stage I sought to leave out the word "realised" and to put in the word "made", which is in accordance with the directive and in complete concert with the Government's own consultative document. The reason that I gave your Lordships on that occasion was that, in both accounting and in legal terms, the term "realised" has rather a different connotation than is popularly supposed.
In Committee, I ventured to quote one definition which arose in the case of the Oxford Building Society, in which it was said that the word "realised" must have as its ordinary meaning, which if not equivalent to reduced to actual cash in hand, that which must at least be rendered tangible for the purpose of division. The meaning of the word is the direct converse of "estimated".
The problem is this. The term "realised" has become synonymous with a state of affairs where an asset is either in cash itself or is capable of immediate realisation into cash. This concept is out of tune with the whole concept of profits earned and ascertained because, particularly in the case of long term contracts such as a big building business engaged in long term contracts, if they were only able to take profits into account that had been "realised" it would mean they would not able to prepare their accounts on an accruals basis at all. They would only be able to take into account the profit on the completion of the contract. This is in complete conflict with the whole system of accruals accounting which has developed over the past 100 years or more.
It is not a matter on which it is possible to be dogmatic. However, it is something upon which I think your Lordships ought to give some guidance and, if possible, resolve. Whatever the provisions of the new Interpretation of Legislation Bill (which is at the Report stage in your Lordships' House at the moment) its provisions, so far as one can understand, will be of no assistance to those members of the legal profession—particularly those occupying judicial office—when they come to interpret this term "realised" when used in conjunction with "realised profits"
It is quite clear that already there has grown up in the courts the practice of treating "realised profits"

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in precisely the terms to which I have referred to them this afternoon. There have been several cases and I shall provide the references because they may be of assistance at a later stage. In the Inland Revenue Commissioners v. Old Bush Mills Distillery Company Limited, which is a 1928 case in 12 Tax Cases at page 1,148, it was held that the liquidator was merely realising the assets of the company and was not engaging in any trading operation.
I am aware that this particular case is a tax case; but, nevertheless, still implicit here is that the realisation of the assets of the company is something, when referred to in those terms, meaning realising them for cash and getting the money in, as distinct from engaging in a normal trading operation which itself includes the realisation of the stock in the form of sales and the collection of such debts that arise from sales.
When we are applying it within the trading context, we call them "sales"; but when it is a realisation in this particular sense, we call it "realised". Exactly similar sentiments are expressed in other cases: Cohan's Executors v. Inland Revenue Commissioners, a 1927 case, in Appeal Court Reports at page 327. And we see exactly the same again in Haig's (Earl) Trustees v. the Inland Revenue Commissioners, a 1939 case at 725, 22 Tax Cases, where the Trustees were not trading but merely realising capital assets. There are other cases as well. There is a further case where it was held that a company was trading and not merely realising its capital assets. It is the intrusion of the word "realised' into the whole question of profit that is causing the profession, and not merely the accountancy profession, some misgiving since at some time or other these matters are likely to come before the courts. They may not necessarily be tax cases, although the bench are very prone to refer to any case which will help them in making any kind of definition.
I am quite sure that the intention of the Government, which we entirely support, is to bring the definition within the whole intent of the directive itself and within the whole sense in which they have interpreted it in the quotation from the consultative document to which I have referred. The real intention is that it should be profit, whether realised or not, that should be taken into account and what we are really concerned with is that profits that are earned, whether realised or not, should be brought into account. If it were otherwise, and if the courts ultimately interpreted it otherwise, it would be the complete end of accruals accounting in this country as we know it. It would mean, if the decision went that way, that no longer could we determine profits earned within a particular accounting period.
I put this forward with some diffidence. There is certainly nothing in it on which one could dogmatise, but I would have thought on the basis of the implied definitions of "realised" that emerge from the cases which I have cited that it would be far safer to use the word "earned" rather than "realised". Such is the view of my profession and I think that most businessmen and most company directors would probably take the same view. I am therefore very hopeful that the Government will agree to this amendment, which is put forward constructively, so that there can be no further doubt about this matter. I beg to move.
Lord Strathclyde: My Lords, could the noble Lord tell us whether what he has been saying is in line with the advice given by the various institutes of chartered accountants throughout Great Britain?
Lord Bruce of Donington: Yes, my Lords; I am happy to say that the amendment has the complete support of the consultative committee, comprising all the leading organisations belonging to it, including the Institute of Chartered Accountants, the Institute of Certified Accountants and the remainder.
Lord Morris: My Lords, I am astonished to hear that, for the very simple reason that the cases cited by the noble Lord and from which he sought to draw comfort were all examples of companies which were not carrying on business as a going concern but were companies on break-up. In addition to that, I believe he is seriously confusing income with profit. I cannot see that the word "earned" will be of any help whatsoever. On the contrary, I think it would cause more harm than the term "realised". There is a problem with the latter word, as I think everybody appreciates, but it is a well-established term and, as I understand it, has been in English jurisprudence for a very long time in this context. I cannot see that this amendment is going to assist this Bill in any way.
Lord Mackay of Clashfern: My Lords, I am grateful to the noble Lord, Lord Bruce of Donington, for the constructive way in which he approaches this particular problem and I am grateful also to my noble friends who have displayed an interest in it. As the noble Lord has said, it is a complex matter and it is not easy to be sure that one has it correct. But the Government's intention—and there is not much doubt about this from what the noble Lord, Lord Bruce, said—is that we should try to get a concept here which is in accordance with the understanding of the professions so as to introduce reasonable flexibility into the matter.
When this was suggested before, the noble Lord, Lord Bruce, as he has told us, used the word "made". He is now suggesting the word "earned" instead of the word "realised". I believe that "earned" is more closely equated with "realised" and therefore I see in this alteration that the noble Lord is moving a little closer to accepting the term "realised". It seems to us that the use of the word "made" would not have made any difference to the application of the prudence concept of accountancy practice, as stated in SSAP 2, which is embodied in paragraph 12(a) and we cannot see that the term "earned" would assist in this either.
Paragraph 12, in which this amendment seeks to substitute the word "realised" for the word "earned", starts with a preamble which refers to the prudent basis and that is intended to set the scene in which this matter is to be considered. In our view, the use of the word "earned" would create the same sort of confusion as the use of the word "made" by implying that different principles applied in connection with Part III of the 1980 Act relating to distributable profits and also in paragraph 34 of this schedule where the word is used in dealing with the transfer of revaluation surpluses to the profit and loss account.

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As I said at the Committee stage, the terms "realised" and "unrealised" are exhaustive of the whole classes of profits, and paragraph 34 of Schedule 1 makes it clear that unrealised profits must be carried to a revaluation reserve and profits may only be carried to profit and loss account if they are realised. As with the word "made", if "earned" is intended to mean more than "realised" in this sense it would include unrealised profits which may not, in accordance with that paragraph, be carried to profit and loss account. If so, it is inconsistent with the policy of the Bill and with Article 33.2(c) of the directive.
The noble Lord has referred to the danger to the accruals accounting system from the use of the word "realised". I would really put the matter the other way. Paragraph 13 of this schedule makes it clear that the accruals basis is to be used and on a construction by the court of the word "realised" in this context one would expect the court to take account of that fact and thus support an argument in favour of a wider construction of the word "realised" than might be appropriate in tax cases.
It is true, as the noble Lord has said, citing from a number of tax cases, that in some contexts in relation to tax the word "realised" may be given a fairly restricted and narrow interpretation. But it is well established, I suggest, in tax cases that the principles to be used in determining a matter of this kind for tax purposes are different from the principles to be used in determining a matter for accounting purposes. I can cite a good number of authorities in support of that, if need be. It has usually been, I must say, the other way round, that the accountants have sought to rely on the accounts as showing what is profit, and the courts have said: "When we are looking at this for tax purposes, we have to make a distinction." But whichever way it goes, it emphasises the distinction between accounts for purposes such as these and accounts for tax purposes. Accordingly, while we acknowledge the importance, the complexity and the difficulty of the point, we take the view that in this context the word "realised" is the most appropriate to give effect to what we believe the accountants and the Government think is the correct result in this area.
4.2 p.m.
Lord Lloyd of Kilgerran: My Lords, I have been trying to follow this technical matter, but I could not see how the noble and learned Lord relied upon Article 33.2(c) to justify his feeling that the word "earned" is not better than the word "realised". It may be that I have misunderstood his argument, but he cited that article. It may be that he was citing it about a different point, in which case I apologise to him for not having understood his argument. But the reference to Article 33.2(c) seemed to me to be irrelevant to the basic issue which the noble Lord, Lord Bruce of Donington, was submitting to the House.
Lord Mackay of Clashfern: My Lords, I feel sure that it is entirely my fault, but the basic requirement, which this paragraph is trying to mirror in our legislation, arises from the provision in the directive. The translation that has been adapted there is the word "made", which is why I think, on the last occasion,
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the noble Lord tended to go for that as his preferred substitution for the word which we have used, which is "realised". I understand that in other texts of the directive the equivalent word for "realised" is what has been used, but I was not making that point earlier. The point that I was trying to make earlier was that when one looks at the directive as a whole, and at what we have done here as a whole, the word "realised" in its context is the best word to mirror the concept at which the directive was aiming. That is what I have been trying to say.
Lord Bruce of Donington: My Lords, I am greatly obliged to the noble and learned Lord for his reply. For the avoidance of doubt, the question was raised as to whether this amendment had the support of the Consultative Committee of Accountancy Bodies. With your Lordships' permission, I should therefore like to read out precisely what they had to say about it, in order to clear up that part of the matter. They said:
"Paragraph 12(a) in Part II of Schedule 1 provides that, only profits realised at the balance sheet date shall be included in the profit and loss account'.
We have strong reservations about the use of the word 'realised' in this context. The fourth directive, Article 31.1(c)(aa), uses the word 'made', which has a broader and, in our view, more acceptable meaning. The problem, as we see it, is that the restriction of profits to those realised confuses the recognition of profit with its distributability and would conflict with important and generally accepted principles for the measurement of profit".
Those are the precise words that were used by the Consultative Committee of Accountancy Bodies.
I am, of course, well aware that in tax cases it is mainly taxation matters that are under consideration and, certainly, I would not wish to extend the appropriateness of tax law to other sections of the British statutes. I referred to them only to indicate that there is this doubt, and that wherever realisations are referred to they are within the context of turning something into cash for the purpose of getting money, as distinct from the purpose of trading.
It is not true that all the cases that I have cited today consist of cases where there is something terminal; where something is being wound up and assets are being realised. There has been a genuine distinction that the court has had to make as to what constituted a realisation of an asset, in the cash sense of the term, and what constituted normal trading activities. I should just like to clear that up for the benefit of the noble Lord, Lord Morris.
I am well aware of the provisions to which the noble and learned Lord has drawn the attention of the House, in connection with the Statement of Standard Accounting Practice No. 2, in which this question of realisation was first raised on the profession's own responsibility. I am bound to say that, if the noble and learned Lord had been constrained to make a stricture on the profession for having caused the ambiguity in the first place, the profession would have been disposed to agree with him. In fact, I learn unofficially that it is already under consideration whether it is now time to make a drastic revision of SSAP2.
But I should like to refer the noble and learned Lord to the other part of the conflict, which essentially arises in the case of long-term contracts and work in progress, which, of course, is very apposite to this whole question of realisation. With the noble and learned Lord's

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permission, and with the indulgence of the House, since we are, after all, concerned in correcting these matters of detail—it is one of the basic functions of your Lordships' House to pay particular attention to details of this kind, so that Bills which go down are as near as possible, perfect—I should like to quote, as follows:
"Separate consideration needs to be given to work in progress arising from long term contracts. Owing to the length of time taken to complete such contracts, to defer taking profit into account until completion may result in the profit and loss account reflecting not so much a fair view of the activities of the company during the year, but rather results related to contracts which have been completed by the year end. It is therefore appropriate to take credit for ascertainable profit"—
and here the word "ascertainable" crops up again, as it did in the Government's consultative document—
"while contracts are in progress, subject to the limitations of paragraph 8 below".
The limitations in paragraph 8 below are:
"The profit, if any, taken up needs to reflect the proportion of the work carried out at the accounting date and to take into account any known inequalities of profitability in the various stages of the contract".
This is a statement of current accounting practice, where it is not at all a question of realisation. It is a question of what profit is earned in a particular period, which may differ from the term "realised".
The noble and learned Lord can doubtless say that this particular statement of Standard Accounting Practice No. 9 is in conflict with No. 2. In certain respects it is, and I have already explained that SSAP2 may have to be revised. But the broad normal practice of the profession and of business generally over the years has been on this accruals basis, although there are cases where for taxation purposes one can use what is termed the conventional account which takes account only of receipts and payments, an indulgence permitted by long-suffering inspectors of taxes to an equally long-suffering tax-paying community. But the normal way is on an accruals basis.
Our fear is that the insertion of this term "realisation", particularly when allied to the question of distribution which was raised by its inclusion in the Companies' Act 1980, may give rise to misunderstanding. It is unfortunate, as your Lordships probably know, that the courts are not permitted to take account of interpretations of Hansard proceedings in order to obtain guidance as to how they should interpret statutes. The Government's intention behind the particular wording of a particular Act may be quite clear when one reads Hansard or, more particularly, when one hears the intonation of a voice or the emphasis and timing when an announcement is made either in the other place or in your Lordships' House. But the courts are not permitted to take account of that. They are permitted to take account only of the statute itself. If the new Interpretation of Legislation Bill finally becomes an Act, they will also be able to take into account the titles, the sub-titles and the indents.
But this is not a case where the courts can pay any attention at all to the very wise and sensible remarks which have fallen from the lips of the noble and learned Lord opposite. Were they permitted to do so they could so construe the statute, but they are not permitted to do so. They can rely only on the precedents. I ventured during the Committee stage to quote one precedent which had a bearing on the non-taxation
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aspect of the matter. Today I have ventured, purely for guidance and in the full knowledge of all the limitations, to quote some cases to your Lordships which have taxation connotations but which illustrate the broad general principle which is applied in matters of this kind.
I am still hopeful that the noble and learned Lord may see fit to have yet further thoughts upon it. I cannot understand why there should be this abandonment of the word that was used in the consultative document. The document said "ascertainable". I presume the Government did not insert that word frivolously. I assume that the consultative document was prepared with due care—nay, was examined even by the lawyers and, who knows, perhaps by the accountants themselves. If this wording was good enough for inclusion in the consultative document, if it was good enough and appropriate enough to win the support of most of the accountancy profession who are vitally concerned in the matter as well as lawyers, I should have thought it was good enough to incorporate in the Bill.
Nevertheless, I have no wish to drive the Government too hard. I have tried to be as non-controversial as my somewhat explosive temperament permits. Indeed, I had hoped to persuade the Government that I was right and that the accountancy profession were right. I have not succeeded and I express considerable regret that it has not been possible to do so. I venture to predict that much difficulty will come from the Government's decision not to accept this amendment, which I beg leave to withdraw.
Amendment, by leave, withdrawn.
4.15 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 9:
Page 89, line 9, after ("asset") insert ("to which a purchase price on production cost is ascribable and").
The noble Lord said: My Lords, the amendment is an endeavour to be of assistance to the Government in clarifying this particular paragraph. With the leave of the House I shall move it in conjunction with Amendment No. 14, which raises precisely the same point. It is entirely non-controversial. If the Government see fit to accept it, naturally I shall be pleased, but if they decide not to do so then I shall view their decision with equal equanimity. I beg to move.
Lord Morris: My Lords, I believe that the noble Lord, Lord Bruce of Donington, would be unhappy if Amendment No. 9 were to go through in the form in which it appears on the Marshalled List. I believe that the word "on" in the second line of the amendment should read "or". It should read "or production costs" rather than "on production costs".
Lord Bruce of Donington: My Lords, yes. There has been a typographical error for which my disreputable calligraphy is entirely responsible. If, with the leave of the House, the word "on" could be
altered to "or", I should be greatly obliged. If that alteration makes the amendment even more acceptable to the Government, I shall be highly delighted. I am most grateful to the noble Lord for having corrected me.
Lord Lyell: My Lords, I await with eagerness the intimation of the noble Lord, Lord Bruce of Donington,

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as to whether an amendment should be accepted or rejected by the Government. It seems that the noble Lord is going to be pleased, whichever way this amendment is treated. I look forward to keeping him in suspense until the close of my brief comments.
We are happy that the noble Lord, Lord Bruce of Donington, has dealt with Amendments Nos. 9 and 14 together. As he will appreciate, they deal with the same point. The words "purchase price or production cost" are not appropriate to all fixed assets. We accept that these amendments have been moved by the noble Lord, Lord Bruce of Donington, in an attempt to resolve a somewhat technical problem. The problem in my view is created by the text of the directive which, as your Lordships will see at Articles 35 and 39, requires that all fixed and current assets shall be valued at the purchase price or at production cost. In the real world of business and accountancy, there are a number of assets where the words "purchase price or production cost" are not entirely appropriate.
The Bill uses the wording of the directive because the Government took the view that this approach would enable any areas of uncertainty to be resolved by accounting practice. This approach, in the Government's opinion, would be preferable to any attempts to deal with the matter in a detailed code in the statute, where in any case it would be virtually impossible to provide an exhaustive coverage of all the areas of uncertainty.
Amendments Nos. 9 and 14 seek to resolve this difficulty in a general way without referring to any specific areas of uncertainty. We recognise that the amendments are intended to be helpful to the Government. However, we believe that, by limiting the general rule for the amount to be included for assets to those assets to which a purchase price or production cost is ascribable the question of what amount is to be included for other assets is still left open. We believe that this highlights rather than resolves this particular problem.
In addition, if the problem is to be resolved in any way in the legislation, it might be more appropriate to try to do so by amending paragraph 17 of Schedule 1 rather than paragraph 18, as proposed by the amendments. I am afraid the Government cannot accept these amendments as they are, but certainly we recognise that there is a technical problem and we give an undertaking that we shall consult further with the accountancy body in our attempt—and we hope a general attempt—to achieve a solution which is mutually acceptable. We are not entirely convinced that we can improve the drafting of the Bill in this particular area, but certainly we shall make every endeavour to resolve the doubts of the profession.
Lord Bruce of Donington: My Lords, I am most grateful to the noble Lord, Lord Lyell, for that encouraging response, but, for the sake of the record, I should like to point out that Amendment No. 9 does refer to paragraph 17. In what he said he seemed to imply that it did not. Nevertheless, I am most grateful that the noble Lord has undertaken to have further consultations with the profession on this, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lyell Lord Lyell moved Amendments Nos. 10 to 13:
Page 89, line 24, at end insert ("; and any such provisions which are not shown in the profit and loss account shall be disclosed (either separately or in aggregate) in a note to the accounts.")
Page 89, line 29, at end insert ("; and any such provisions which are not shown in the profit and loss account shall be disclosed (either separately or in aggregate) in a note to the accounts.")
Page 89, line 33, at end insert ("and any amounts written back in accordance with this sub-paragraph which are not shown in the profit and loss account shall be disclosed (either separately or in aggregate) in a note to the accounts.")
Page 89, line 34, leave out sub-paragraph (4).
The noble Lord said: My Lords, I hope it may be for the convenience of the House if I move these amendments en bloc. As a group the amendments cover the same point. They are minor amendments which are necessary because reference is made on page 89 of the Bill, at line 37, to the disclosure of provisions for what are called "write backs" and then your Lordships will see in brackets the words "(either separately or in aggregate)". In the view of the Government, it is not entirely clear whether these words mean: first, the individual provisions or write backs which fall under paragraphs 19(1), 19(2) and 19(3) with no aggregation; or possibly to these words applied to the aggregation of individual provisions or write backs under (a) into separate totals for paragraphs 19(1), (2) and (3); or, thirdly, do the words refer to the aggregation of all the individual provisions and write backs into one net total for paragraphs 19(1), (2) and (3) combined?
The amendments make it clear that if, for example, any individual provision made under paragraph 19(1) is not shown in the profit and loss account then it must be shown either separately in the notes to the accounts or aggregated with other provisions made under paragraph 19(1) similarly not shown in the profit and loss account. An identical position arises in the case of provisions made under 9(2) and write backs under 19(3). Aggregation of write backs under paragraph 19(3) with provisions under paragraphs 19(1) and 19(2) would be contrary to Article 35.1(c) (cc) as this article only deals with provisions and not with write backs. The amendments bring the provisions of paragraph 19 fully into accordance with Article 35.1(c)(cc) of the Fourth Directive. I beg to move.
Lord Bruce of Donington: My Lords, we are grateful to the noble Lord for having given an explanation of these four amendments. He has explained the position quite adequately and we entirely support the Government in their amendments.
Lord Morris: My Lords, I am a little puzzled as to why the Government saw fit to use in the Bill the term "write back" when a perfectly adequate term has been in use for many years, namely "provisions no longer required", which I think is understood by everybody and which describes the position more elegantly than the Bill does at present. If the noble Lord would consider that point, I should be much obliged.
Lord Milne: My Lords, may I ask whether the question of materiality comes up in these matters, because they might be very small items.
Lord Lyell: My Lords, if I may assist with the point raised by my noble friend Lord Morris, I am sure that there are terms which have been in use for many years and which explain the position very clearly. These four amendments are very much in accord with the Fourth Directive, which of course is what we are implementing in this Bill. Perhaps I may take further advice on the points raised by my noble friend, and if I find that there is a major point I will communicate with him in writing before the next stage of the Bill.
The noble Lord, Lord Milne, raised the question of materiality. I understand that materiality is dealt with in paragraph 84 of this schedule, and I think the noble Lord will find that at page 110. I hope that will cover the point raised by the noble Lord, Lord Milne, who we are very pleased to see here today.
On Question, amendments agreed to.
[Amendment No. 14 not moved.]
4.28 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 15:
Page 91, line 45, at end insert—
("Provided that such method is appropriate in all the circumstances").
The noble Lord said: My Lords, this is another effort to try to clarify the position and I hope the House will give it their consideration. Paragraph 27 of the Schedule provides as follows:
"(1) The purchase price or production cost of—

(a) any assets which fall to be included under any item shown in a company's balance sheet under the general item 'stocks'; and

(b) any assets which are fungible assets (including investments);

may be determined by the application of any of the methods mentioned in sub-paragraph (2) below in relation to any such assets of the same class".
to which the amendment seeks to add the words:
"provided that such method is appropriate in all the circumstances".
This point arose at the Committee stage, in column 687, in an endeavour to help to resolve the situation where some of the methods, including those which are prescribed in the statement of standard accounting practice, are not always appropriate and this is designed to make the clause fully comprehensive to cover that particular point; that one lays down no particular method but that such a method as is appropriate in all the circumstances is the best way of putting it. I beg to move.
Lord Lyell: My Lords, as always, we are grateful to the noble Lord, Lord Bruce, for moving this amendment, which we recognise is intended to shed a little light on quite a thorny problem that has afflicted the accountancy profession and indeed the presentation of accounts in this particular area. The purpose of this amendment seems to be to alleviate the alleged inconsistency between an accounting standard that deals with the accounting treatment of stock and work in progress and what is found in paragraph 27 of Schedule 1 to the Bill.
The Government must declare at the outset that we do not accept that there is any inconsistency between that accounting standard and the provisions in the Bill. The purpose of SSAP 9 has been to indicate which
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methods of a variety which are available were considered to best fulfil the true and fair view required, and in doing this it states that the use of last in first out—commonly referred to as LIFO—would not normally be appropriate. But the standard does say that in selecting methods for calculating the cost management must exercise its judgment.
The position hitherto has been that the law did not impose any limits upon methods of stock valuation other than the general requirement that the accounts should give a true and fair view, but implementation of the Fourth Directive by this Bill requires the methods of stock valuation permitted by law to be made explicit instead of being merely implicit. However, the specific reference to LIFO in paragraph 27 of Schedule 1, which reflects its specific reference in the directive, does not call into question the validity or indeed the authority of SSAP 9.
The Government recognise that the accountancy bodies have expressed very considerable concern in this area which the amendment is designed to resolve. However, in the Government's view this amendment adds nothing to what is already contained in the Bill, because the true and fair view which is required will require that only methods appropriate in all the circumstances of the company can be used. We therefore would be very reluctant to agree to any addition which is superfluous. I hope the noble Lord, Lord Bruce, and indeed the noble Lord, Lord Milne, will accept our undertaking that we will consult further with the accountancy bodies and the profession on this particular point. If indeed the accountancy bodies can persuade the Government that the principle of this amendment does provide an acceptable and proper and meaningful addition to the Bill, or if some other form of words can be agreed mutually which will allay the concern of the accountancy bodies, then the Government would be prepared to come forward with their own amendment. But I would stress that we are not entirely convinced that the Bill is unsatisfactory in this area. I hope, having given that undertaking, the noble Lord will be satisfied with what I have had to say.
Lord Bruce of Donington: My Lords, I am getting a little disappointed with the noble Lord this afternoon. He is showing a far lower degree of accommodation than I sincerely hoped would be forthcoming from him. Indeed, it has been I who have tried to accommodate the noble Lord. If the noble Lord will refer to the Committee debate that took place on 17th March at col. 688, the noble and learned Lord, Lord Mackay of Clashfern, said this:
"The noble Lord"
—that is me—
"read from Accounting Standards … What that says about this particular matter is: 'It is not usually appropriate'".
Then the noble and learned Lord continued:
"That suggests that there may be circumstances in which it might be appropriate. We have sought to make it available where it is appropriate".
It was precisely those words uttered by the noble and learned Lord that prompted me to put down the amendment, which precisely encapsulates what he said. I did that in the hope that there would be consistency and that the noble and learned Lord, having enunciated the principle in such clear terms, would permit me to

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enshrine it in an amendment for the approval of the House.
Lord Lyell: My Lords, I hope that there is consistency between my noble and learned friend and myself on this point. I think I have been most accommodating; at least I trust so. In dealing with Amendment No. 15 we look forward to consulting further with the accountancy bodies. I have said that it is the true and fair view that must predominate, and I hope that the noble Lord will accept that this particular method of valuing stock, which may or may not be appropriate, should be included. As I said, the Fourth Directive requires that methods of valuing stock should be explicit and not implicit. I think everything I have said is consistent. I think I have been accommodating and I hope the noble Lord will accept the concept that we have held this afternoon.
Lord Bruce of Donington: My Lords, with the leave of the House, I should just like to emphasise one point arising from the noble Lord's use of the words "true and fair view". I think it highly dangerous, and I think on reflection the noble Lord will agree, that to call in aid the expression "true and fair view" every time a matter of detail is referred to is probably not the most appropriate way of using the term "true and fair view", which is designed specifically to reflect the situation of the accounts as a whole, so that the totality is presented as a true and fair view of the state of the company's affairs. I do not think we ought to call in aid "true and fair view" every time we get into a difficulty about specific wording relating to very specific and limited circumstances.
On Question, amendment negatived.
4.38 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 16:
Page 93, line 6, leave out]"(Those")and insert ("The historical cost accounting").
The noble Lord said: My Lords, this is a purely drafting amendment on which I do not desire to pass any comment. It may be regarded as a simple suggestion for clarification. I beg to move.
Lord Lyell: My Lords, I hope the noble Lord, Lord Bruce, would accept that the Government believe that this amendment does not add anything to the present meaning of paragraph 29(2). Paragraph 29(1) refers to "the historical cost accounting rules", and sub-paragraph (2) follows immediately with the words "Those rules". Clearly to everybody, accountants and non-accountants, this is a reference to the historical cost accounting rules. Therefore, I hope the noble Lord will accept that the proposed change is unnecessary.
On Question, amendment negatived.
Lord Lyell Lord Lyell moved Amendment No. 17:
Page 93, line 19, leave out ("Fixed asset").
The noble Lord said. My Lords, in moving Amendment No. 17 I hope it will be for the convenience of the House if I speak also to Amendments Nos. 18, 28, 29,
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30 and 31. Your Lordships may recall that in Committee the Government accepted in principle the amendment of the noble Lord, Lord Bruce, to allow current asset investments to be included at current cost. As I seem to recall, I stated that the Government supported the objective of providing scope for the future development of current cost accounting. The amendments to which I am speaking at the moment give effect to that undertaking by allowing current asset investments falling under item C.III in the balance sheet formats as well as fixed asset investments to be included on either of the bases mentioned in paragraph 31(3)(a) or (b) of the schedule. The following amendments are consequential to Amendment No. 17. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 18:
Page 93, line 20, leave out ("item B.III") and insert ("either item B.III or item C.III").
The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 19:
Page 93, line 30, at end insert—
("(5) Current asset investments may be included at their current cost").
The noble Lord said: My Lords, I beg to move Amendment No. 19. This amendment is proposed for inclusion at the end of paragraph 31. It follows from the debate that we had in Committee when the Government undertook to have a look at the whole business. It is intended to be helpful. I do not know whether it is appropriate to the paragraph as now amended, but if it is, then I offer it to the Government as a contribution towards their own efforts in this respect. I beg to move.
Lord Lyell: My Lords, we are very grateful for the kindness shown by the noble Lord, Lord Bruce, and indeed I am instructed that this amendment which he has put forward has been met by Amendments Nos. 17 and 18 to which I have spoken. Nevertheless, we thank the noble Lord, Lord Bruce.
On Question, amendment negatived.
4.43 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 20:
Page 94, line 48, at end insert—
("33A. Where a profit and loss account for any period has been prepared in accordance with any or all of paragraphs 29, 30, 31 and 32 of this Schedule the amount of the profit or loss on ordinary activities as determined by the application of Historical Cost Accounting Rules set out in section B of this Schedule shall be stated separately on the account as in a note to the accounts.").
The noble Lord said: My Lords, I beg to move Amendment No. 20. This amendment raises an important question of principle. Your Lordships will recall that when we were debating the whole question of current cost accounting at the Committee stage I asked the noble Lord that if the alternative that was proposed in Section C of the schedule were adopted, which gives the option of adopting current cost accounting, then the amount of the company's profit

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or loss determined on an historic cost accounting basis should, in fact, be shown. So the new amendment proposes:
"33A. Where a profit and loss account for any period has been prepared in accordance with any or all of paragraphs 29, 30, 31 and 32 of this Schedule the amount of the profit or loss on ordinary activities as determined by the application of Historical Cost Accounting Rules set out in section B of this Schedule shall be stated separately"—
and there is then a manuscript correction because the next word should be "in" and not "on", so that it reads:
"in the accounts or in a note to the accounts".
We had a long argument about that in which I ventured to express some misgivings that a method should be adopted which resulted in no obligation being laid on a company who decided to adopt the current cost accounting rules to disclose the profit determined on an historic cost account basis. The Government did not seem to think that this was at all necessary. Indeed, the noble and learned Lord, Lord Mackay of Clashfern, said at column 683 of the Official Report:
"As I said, the overriding necessity is to give a true and fair view of the position of the company. If the auditor has taken the view in one case that the historic cost method is the right method and in another case that it should be the current cost method, that must be because of a fundamental difference between the situations of the two companies.".
I am amazed that such an observation could be made. The decision of an accountant or of a company to adopt either the historic cost accounting method of presenting its accounts or of presenting its accounts on a current cost accounting basis has nothing whatever to do with the situation within the company; it is merely two different ways, two different perspectives, of the company's affairs according to what assumptions one uses.
I sought to explain—and your Lordships were most indulgent in listening to me on the last occasion—that the historic cost accounting method is the one that has been used in this country since accounts began to take the form which they have taken for the past 100 years. It is universally accepted as being a photograph of a business at a given moment of time, reflecting the development of the company's affairs based on the actual transactions that have taken place from one accounting period to the end of the accounting period for which the accounts are prepared.
The whole reason for the adoption and, indeed, the putting forward of suggestions for current cost accounting arises because, immediately following the end of the accounting period, the management anticipates and, indeed, anticipates continuously, that the asset values stated in the accounts do not bear any relationship to their replacement cost when ultimately they have to be replaced. It is an endeavour to allow for inflation. If your Lordships will bear with me, I said on that occasion that of course it is very proper for management purposes that some endeavour to assess the impact of inflation on the future of a business should be made. It is very necessary for managerial purposes.
The question which we then discussed was whether it was wise that accounts which incorporated an element of far greater conjecture than ever arises on the drawing up of historic cost accounts, ought, in fact, to be
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adopted as the firm's official accounting base, which is really what happens with the adoption of current cost accounting. I am well aware that your Lordships defeated this proposition when I ventured to carry it to the Division Lobbies. In my view it remains as true now as when I ventured to enunciate it in Committee in your Lordships' House. Nor am I alone in this. It might be held that I speak on this subject purely professionally and that, therefore, perhaps in some academic fashion—and I shudder at the term when applied to myself—I was pursuing a matter of pure pedantry.
So, with your Lordships' permission, I should like to cite what the noble Lord, Lord Weinstock, observed in his maiden speech in this place on 27th November at column 235 of the Official Report. The noble Lord is one of this country's leading industrialists. His company appears to enjoy some considerable success. Without praising him unduly, or more than he would wish, I venture to suggest that his observations on this subject bear some air of authority; indeed, possibly far more authority than my own. This is what he said:
"We are all concerned about the impact of inflation on our businesses. We know that the cost of replacing our assets is greater than the depreciation allowed at the usual rates based on historical values. The fact is that no one has yet been able to produce a generally acceptable system which objectively and universally presents the consequences of inflation on business accounts. Every attempt at such a system has been subjective, and neither universally applicable nor universally true".
Then he goes on to say, in some lament, to which I draw your Lordships' attention:
"No longer, my Lords! Now we have not only to record our transactions in the old meticulous manner in order to know what is happening, but to run another set of accounts calculated according to arbitrary criteria called 'current cost accounting'.".
He goes on to discuss the preoccupation of an industrial manager and executive, of whom he says:
"He struggles to find the means to a condition of happy understanding with his employees, often in the face of obsolete and destructive attitudes; and accumulating social pressures lay ever-increasing burdens on him. It is not clear to him, nor indeed can I think it will be at all clear to your Lordships' House, how, faced with all this, statistical juggling can help reduce his costs or improve the quality and reliability of his products—for these are the things that really matter. It complicates his already over-complicated life".
Then he goes on in somewhat disrespectful terms about my profession, with which I cannot be expected to agree. He says:
"Our managers are being brainwashed by academics and the high priests of the accounting profession into believing that the mumbo-jumbo of current cost accounting contains remedies to the problems caused by inflation".
That is an observation by an industrialist who, from the more controversial sections of the noble Lord's maiden speech, one would gather was not exactly a friend of the Labour Party. But those sections were certainly incisive.
I do not want to rehash the whole argument concerning the misgivings that I have—and I might say that they are shared quite widely in the profession—about the adoption of current cost accounting as an alternative, official way of presenting accounts. However, I insist, and I invite your Lordships to insist, that, where the alternative is selected and where the company is given the option of presenting its accounts on the

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basis of current cost accounting, at least the result that would have been provided for on the old historic cost accounting basis ought, in fact, to be shown. This is exactly what this amendment is designed to do.
It is perhaps apposite that I should present, once again, the accounts of GEC, which I repeat is a very reputable company which enjoys considerable esteem in various sections of industry. Here we have accounts that are presented in two ways: on the current cost accounting basis by way of a note on the right hand side of the consolidated profit and loss account (and I am now talking for the year ended 31st March 1980, the latest accounts available) and on the other side accounts based on the historic cost accounting basis are set out. That is the traditional method on which the accounting profession has always operated until recent times of high inflation and until this cost accounting hiatus that has resulted from it.
Will the noble and learned Lord say that the accounts as presented by GEC are misleading because that company has presented both methods? I should like to point out to noble Lords that the practice followed by the General Electric Company is one that is sanctioned in the Statements of Standard Accounting Practice No. 16, which, once again, is supported by the Consultative Committee of Accountancy Bodies.
I have abandoned my efforts in this House to ensure that, whenever accounts are prepared on the current cost accounting basis, the historic cost accounting figure should be shown alongside, which is almost exactly the same as has already been done in the accounts of GEC. My observations did not find favour with the House, and therefore, the House decided, in my view very mistakenly, that this ought not to be done. But at least the House ought to insist—and this is what Amendment No. 20 is designed to do; even though, for reasons that are obscure to me, the Government want to bury historic cost accounting wherever possible—that at any rate one comparative figure ought to be included: the net profit achieved on the historic cost accounting basis. What is wrong with that? What commercial confidentiality is violated? What expectations of shareholders for more dividends, on the one hand, or employees for more wages, on the other, are suddenly brought alive by the insertion of that one small figure?—which, as I say, is available in extenso in the accounts of GEC, in the accounts of most public companies and, indeed, in the accounts of most other companies which, within the SSAP 16 rules, have elected to go for one of the options that are put out as standard accounting practice.
I hope that the noble and learned Lord will not persist in this suggestion that if the auditor has taken the view in one case that the historic cost method is the right method, and in another case that it should be the current cost accounting method, that must be because of a fundamental difference between the situations of the two companies—because the situations of the two companies have no relevance to it at all. It is merely two different ways of looking at the accounts, and the presentation of them both gives rise to no conflict at all. In fact, it makes the accounts even more informative. Nobody is likely to think the companies more or less prosperous by the presentation of the two together or by the presentation of the two
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sets of figures together. I hope that on this occasion I may command the support of your Lordships in seeing that at least this minimum residual connection with reality as distinct from accounting astrology is retained in company accounts in the United Kingdom. I beg to move.
The Deputy Chairman of Committees (Lord Drumalbyn): Amendment proposed, page 94, line 48, at end insert the words on the Marshalled List with the substitution of the word "in" for the word "on" and the word "or" for the word "as" in the last line but one.
5.1 p.m.
Lord Mackay of Clashfern: My Lords, before I speak to the detail of this amendment I should like to take up a quotation from what I said on Committee to which the noble Lord has referred. The context has to be brought into mind, because I agree with him generally speaking, that there is available to an accountant a discretion as to which particular form of accounts he should adopt, and that it by no means follows that a true and fair view could only be given in relation to a particular company by one method of laying out these accounts. On the other hand, as I think I made reasonably plain in the passage which followed that to which the noble Lord drew attention, the purpose of developing accounting standards in this area is to give uniformity so far as the primary set of accounts is concerned. I should have thought that SSAP 16 was very relevant to that particular development.
I certainly want to make it clear that so far as concerns both our own legislation and the directive, the requirement is that the accounts should show a true and fair view and not the true and fair view. Accordingly, so far as the legislation is concerned, there is no single or exclusive view of a company's affairs, and thus no single set of accounts embodying that view, which must be given to comply with the law. A set of accounts dealing with those affairs and which meets the standards I have outlined before would, in my view, be accounts complying with the law.
This is recognised in the Bill by which accounts drawn up under the historical cost convention, or under the alternative methods specified in section C of Part II of Schedule 1, are both regarded as normally capable of giving a true and fair view, and there is no question whatever of the Government seeking to bury the historic accounting method in this way. The possibility of laying out accounts in that way is perfectly well preserved by the Bill.
The requirements of the schedule as to the disclosure of accounting policies and as to the information to be disclosed where the alternative accounting rules are used to determine the amount of assets, will give the reader of the accounts full details of the basis on which the accounts have been prepared and on the accounting conventions adopted. With this information the reader will be able to assess the manner in which the particular set of accounts seeks to give a true and fair view of a company's affairs.
I should emphasise, therefore, that though there may be more than one way in which a true and fair view can be given, in many, perhaps most, circumstances the requirements to give such a view are, and must

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remain, overriding both under present law, which already permits a choice to be made between different accounting policies—for example, historic cost or current cost—and under the directive and under the Bill. Before choosing any particular accounting policy the directors of a company must satisfy themselves that it is appropriate to give a true and fair view. It will not be sufficient for directors to present such a view in accordance with any policy they choose. The true and fair view requirement is, and must remain, overriding.
The point I was seeking to deal with on the previous occasion was really the point that this is going to depend, so my noble friend Lord Hawke was inclined to think, on the whim of the particular accountant. Well, for myself I certainly do not believe that that is correct. I believe that it will depend, as accounting practice develops, on rules which are generally accepted in the accounting profession, as to which is the preferable method in particular circumstances. That is what I was seeking to get at or to state on the previous occasion.
So far as the present amendment is concerned, it is, as the noble Lord explained, not going back to the fundamental question but is dealing with what would be required assuming the current cost accounting rules, or some other alternative, were adopted. The amendment would require any company drawing up its statutory accounts under the alternative accounting rules of this Bill to disclose in a note to those accounts its profit or loss on its ordinary activities calculated on the basis of the historical cost accounting rules. The Fourth Directive requires that in such a case when a departure is made from the historical cost accounting rules certain historical cost information must be disclosed in respect of each balance sheet item, except stocks. This requirement is implemented by paragraph 33 of the schedule. However, the amendment goes further than the directive, and the Bill, by requiring certain profit and loss account information to be disclosed in historical cost form.
The Government believe that this is unnecessary. We do not wish to impose legal burdens upon companies over and above the changes that they will have to adopt as a result of the implementation of the Fourth Directive by this Bill. Whever possible we believe it is right that, where the directive permits, detailed accounting matters should be left to accounting standards and the accountancy profession to deal with. I should have thought that that was in accordance with the general principle that the noble Lord, Lord Bruce of Donington, spoke for at the beginning of our discussion of this Bill in Committee.
Such self-regulation has the ability and great advantage of adapting itself to changes in practice and events in a way that the law, as set down in legislation, never can. The subject of this amendment is a good example of this principle in action. When a company has adopted current cost accounting in its statutory accounts, compliance with SSAP 16 will result in the company showing separately in its profit and loss account its profit or loss on the historical cost basis, followed by the individual adjustments necessary to that profit or loss and the current cost accounting operating profit resulting. The directive and the schedule have been deliberately designed to permit this form of profit and loss account to be adopted. For example, para-
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graph 32(3) of Schedule 1 enables the total depreciation charged to be split between historical cost and current cost elements. Therefore, because of the requirements of SSAP 16, it is unnecessary to include this particular requirement in the law. So that in our view all that the noble Lord has praised, for example, from the GEC accounts will be perfectly permissible under our proposals.
Furthermore, if a company has not adopted a full current cost accounting approach in its accounts but only revalued its assets on a selective basis, perhaps only in respect of a single asset, it seems unduly burdensome to require, as proposed by this amendment, special information in such restricted circumstances. This would be a departure from the present position whereby many companies have revalued certain of their assets without having to state what their profits would have been had they not done so. I therefore would invite your Lordships not to give support to this amendment. In our view, the full flexibility which the noble Lord has prayed for is safeguarded by our proposals, and to accept this amendment would be to impose an additional statutorily unnecessary burden on the community.
Lord Milne: My Lords, the Minister made out that companies are burdened with information, which is not so, but nevertheless the Inland Revenue is still relying on historic cost; all the figures exist and I believe there will be an even greater division between shareholders and their companies if historical accounts are abandoned completely. At present it is a new concept; nobody understands CCA and if we are to have CCA accounts only, without the amendment which the noble Lord, Lord Bruce of Donington, has proposed, nobody will look at accounts at all, bar the accountants, because people will not understand them. They do not understand much now, but they will not understand them at all in future and for that reason the amendment is reasonable and I shall support it.
Lord Mackay of Clashfern: As I said, my Lords, standard accounting practice will require substantially that information to be given in the cases to which it applies; and our view is that it is not necessary, to achieve the sort of good result the noble Lord mentioned, for it to be imposed as a statutory burden.
Lord Bruce of Donington: My Lords, I am rather mystified by the Minister's reply. Am I to understand that all the principles in SSAP 16—I refer to page 246, paragraph 48, of the Accounting Standards for 1980—are to be overridden by what is in the Bill? If SSAP 16 is still valid, notwithstanding anything in these provisions, then, to quote from SSAP 16, any company has three alternatives:
"This requirement to include current cost accounts in addition to historical cost accounts or historical cost information can be complied with by:

(a) presenting historical cost accounts as the main accounts with supplementary current cost accounts which are prominently displayed; or

(b) presenting current cost accounts as the main accounts with supplementary historical cost accounts",

and either of those two methods is immediately acceptable to me and, were they made alternatives in the Bill, I should unhesitatingly give them my support,

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but they are not. The options in the Bill are set out in paragraph (b), which is made specifically subject to (c), and (c) gives the current cost accounting alternative, which is the third alternative set out in SSAP 16:
"(c) presenting current cost accounts as the only accounts accompanied by adequate historical cost information".
That is the option on the basis of the EEC directive which the Government have adopted in the Bill. It continues:
"The historical cost disclosure requirements will be clarified when the EEC Fourth Directive is enacted in UK/Irish law".
They can say that again!
"Meanwhile, an entity preparing current cost accounts as its only accounts should provide at least sufficient information to enable the user to ascertain the historical cost profit of the period under existing conventions".
It is that last paragraph behind which the Minister is sheltering. He says it will be mandatory to provide at least sufficient information to enable the user to ascertain (presumably for himself) the historical cost profit for the period under existing conventions, but if it is all that simple, why can it not be stated? If the Government accept the position that the information to be published under (c), which is the alternative the Government have laid before us, must disclose sufficient information to enable the user to ascertain the profit, why cannot the profit figure be stated? It is not as though it involves an extra accounting effort or extra cost to the firm concerned. All accounts for presentation, for example to the Inland Revenue, have to be prepared on an historical cost account basis, so all the figures are there, as is all the information, even the figures under the heading, as to what was the profit or loss before taxation.
That figure is used to determine corporation tax liability. First you start with the profit before taxation and then you add back certain items and deduct certain items in your corporation tax computation. It is not as though an extra effort or expense must be entered into to produce the figure. Why, therefore, cannot the Government make it mandatory to include the figure for profit or loss? Is there something shameful about a figure produced under the historical cost accounting basis? What do they want to conceal by not making it mandatory for the historic cost accounting profit to be revealed?
The answer given by the Minister is, "They can still do it if they want; it will still be permissible to state the historic cost accounting profit if it is desired to do so". Why should it not be made mandatory for it to be done in all cases—for the information of the public, of the creditors and the shareholders, not all of whom will be able readily, on the basis of these provisions, in particular (c), to calculate back and determine what the historic cost profit may be? It may be easy for accountants and for some sophisticated lawyers with experience of accounts and auditing, and I suspect it would be possible for the noble Lord, Lord Weinstock, but we are not all quite in that category and some of us are not familiar with the principles and detail enshrined in (c) as proposed by the Government.
It is indispensable for shareholders, creditors, employees of the company and for trade unions to know what, on an historic cost basis, the profit was.
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All concerned could be invited to take into account what the profit would be on the basis of current cost accounting, which sounds a note of caution and seeks to take account of events stretching into the future. But to fail to insist on the production of the historic cost account profit or loss is an abdication of any sense of real responsibility by the Government, who are bringing forward a proposal that it should not be made mandatory.
5.19 p.m.
On Question, Whether the said Amendment (No. 20) shall be agreed to?
Their Lordships divided: Contents, 61; Not-Contents, 84.

CONTENTS

Airedale, L.

Llewelyn-Davies of Hastoe, B.—(Teller.)

Amherst, E.

Ardwick, L.

Lloyd of Kilgerran, L.

Aylestone, L.

McNair, L.

Balogh, L.

Mais, L.

Banks, L.

Milne, L.

Beaumont of Whitley, L.

Nathan, L.

Beswick, L.

Noel-Baker, L.

Boston of Faversham, L.

O'Brien of Lothbury, L.

Brockway, L.

Peart, L.

Brooks of Tremorfa, L.

Ponsonby of Shulbrede, L.

Bruce of Donington, L.

Ritchie-Calder, L.

Caradon, L.

Ross of Marnock, L.

Cledwyn of Penrhos, L.

Seear, B.

Collison, L.

Sefton of Garston, L.

Cooper of Stockton Heath, L.

Shinwell, L.

David, B.

Spens, L.

Davies of Leek, L.

Stamp, L.

Davies of Penrhys, L.

Stewart of Alvechurch, B.

Gaitskell, B.

Stewart of Fulham, L.

Gladwyn, L.

Stone, L.

Goronwy-Roberts, L.

Strabolgi, L.

Gosford, E.

Strauss, L.

Greene of Harrow Weald, L.

Taylor of Mansfield, L.

Greenwood of Rossendale, L.

Underhill, L.

Hale, L.

Wallace of Coslany, L.—(Teller.)

Hatch of Lusby, L.

Hooson, L.

Wells-Pestell, L.

Houghton of Sowerby L.

Whaddon, L.

Janner L.

Wigoder, L.

Jeger, B.

Wynne-Jones, L.

Listowel, E.

NOT-CONTENTS

Airey of Abingdon, B.

Elton, L.

Alexander of Tunis, E.

Erroll of Hale, L.

Atholl, D.

Faithfull, B.

Auckland, L.

Ferrers, E.

Avon, E.

Fortescue, E.

Bellwin, L.

Fraser of Kilmorack, L.

Boothby, L.

Gainford, L.

Buxton of Alsa, L.

Gibson-Watt, L.

Cawley, L.

Gormanston, V.

Chelwood, L.

Gridley, L.

Cockfield, L.

Grimston of Westbury, L.

Colville of Culross, V.

Hailsham of Saint Marylebone, L.

Colwyn, L.

Cork and Orrery, E.

Halsbury, E.

Craigavon, V.

Home of the Hirsel, L.

Cromartie, E.

Hornsby-Smith, B.

Cullen of Ashbourne, L.

Hylton-Foster, B.

Dacre of Glanton, L.

Ilchester, E.

Davidson, V.

Kemsley, V.

De Freyne, L.

Kinnaird, L.

Denham, L.—(Teller.)

Knutsford, V.

Drumalbyn, L.

Lauderdale, E.

Eccles, V.

Linlithgow, M.

Ellenborough, L.

Long, V.

Elliot of Harwood, B.

Lyell, L.

397

McFadzean, L.

Sharples, B.

Mackay of Clashfern, L.

Skelmersdale, L.

Mackintosh of Halifax, V.

Strathcarron, L.

Macleod of Borve, B.

Strathclyde, L.

Mancroft, L.

Strathspey, L.

Morris, L.

Sudeley, L.

Noel-Buxton, L.

Swansea, L.

Nugent of Guildford, L.

Swinfen, L.

Orkney, E.

Swinton, E.

Rawlinson of Ewell, L.

Tenby, V.

Romney, E.

Trefgarne, L.

St. Aldwyn, E.

Trenchard, V.

St. Davids, V.

Trumpington, B.

St. Just, L.

Vaizey, L.

Sandford, L.

Vaux of Harrowden, L.

Sandys, L.—(Teller.)

Vivian, L.

Seebohm, L.

Willoughby de Broke, L.

Selkirk, E.

Resolved in the negative, and amendment disagreed to accordingly.
5.27 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 21:
Page 95, line 29, leave out ("treatment for taxation purposes of") and insert ("accounting treatment of taxation related to").
The noble Lord said: My Lords, Schedule 1, Part II, paragraph 34(4) states:
The revaluation reserve shall be reduced to the extent that the amounts standing to the credit of the reserve are in the opinion of the directors of the company no longer necessary for the purpose of the accounting policies adopted by the company; but an amount may only be transferred from the reserve to the profit and loss account if either—

(a) the amount in question was previously charged to that account; or

(b) it represents realised profit".

Sub-paragraph (5) states:
"The treatment for taxation purposes of amounts credited or debited to the revaluation reserve shall be disclosed in a note to the accounts".
The amendment seeks to delete the words "treatment for taxation purposes of" and replace them with the words:
"accounting treatment of taxation related to"
This matter was dealt with in Committee, as reported at column 690 of the Official Report, to which I should like to refer your Lordships. The noble and learned Lord, Lord Mackay of Clashfern, explained the Government's intentions behind the provision as it then stood in the Bill. He said:
"It is not intended to raise the question of the returns made by the company to the Inland Revenue but to the treatment adopted in the company's accounts".
Precisely, my Lords! That is exactly what the amendment seeks to do. It seeks to translate the noble and learned Lord's clearly expressed intention into the actuality of the legislation. The words are almost precisely those used by the noble Lord, and it certainly clarifies the position. We are concerned, not with the treatment of taxation as such in the returns of the company, but with the accounting treatment of the taxation related to the particular item in question. I hope that on reflection that is so self-evident that the noble Lord may now see fit to adopt the suggestion that I most generously laid before him at Committee stage. I beg to move.
Lord Mackay of Clashfern: My Lords, we have, as I undertook on the last occasion, looked at this again,
398
and I remain of the view that the words in the Bill are appropriate to carry out the intentions which I then expressed; and they are exactly in accordance with the wording of Article 33 of the Fourth Directive on this matter. Accordingly, I do not feel it would improve the Bill to give effect to this amendment.
Lord Bruce of Donington: My Lords, I am very disappointed to learn that from the noble and learned Lord. Are we to assume that the words of the EEC directive enshrine all universal wisdom in the matter, and that once the EEC has spoken in words that it chooses to use they become immediately and automatically binding upon Her Majesty's Government? It would be a shame, surely, if we were to accept as a precedent the wording used in every regulation that is brought forward by the EEC on the basis that that wording, because it is in a directive, is the best wording to incorporate in our own legislation? This is carrying imitation too far.
The words being suggested here are words that are approved by the accountancy profession itself, which has much more experience in these matters than have most of the EEC Commissioners and those responsible for drafting all put together. I would suggest that it is occasionally wise to heed the advice of those whose whole life it has been, over many years, to follow these affairs, and to use the wording that they have put forward after much careful study based on very long and careful experience, both in accounts and in the law. I am very disappointed.
Lord Lloyd of Kilgerran: My Lords, before the noble Lord sits down, would it be helpful if I were to ask the noble and learned Lord where in Article 33 he sees the words that he has referred to as being there? According to my copy, Article 33 occupies quite an area of space. There are hundreds of words here. I am extremely sorry, but I was trying to follow the noble and learned Lord when he said that the Government are adhering to the wording in Article 33, and after some little exploration of all these sub-articles I have yet to find those very words. If they are there, I apologise to the noble and learned Lord in advance.
Lord Mackay of Clashfern: My Lords, if the noble Lord would be kind enough to look in the Green Paper at page 82, the passage I have in mind is in paragraph 2(a), where it says:
"The treatment of this item for taxation purposes must be explained either in the balance sheet or in the notes to the accounts".
It is the phrase, "The treatment of this matter for taxation purposes" that I had in mind.
Lord Bruce of Donington: The noble and learned Lord has really now explained it. The noble and learned Lord has used the term again, "The treatment of this item for taxation purposes", whereas what we are concerned with is the treatment adopted in the company's accounts. We are concerned with the accounting treatment as such; and, indeed, the noble and learned Lord has himself put it forward in his own speech. I cannot understand why he should prefer the EEC directive's wording in this case, which goes completely against all common sense.
On Question, amendment negatived.
5.35 p.m.
Lord Lyell Lord Lyell moved Amendment No. 22:
Page 96, line 14, leave out from ("shares") to end of line 15 and insert ("the following information shall be given—").
The noble Lord said: My Lords, on behalf of my noble friend Lord Trefgarne I beg to move this amendment, No. 22, which your Lordships will find to be a drafting amendment. At present, paragraph 38(2) of Schedule 1 requires the information specified in heads (a), (b) and (c) of that paragraph to be given in the same note as that giving the information which has to be stated under paragraph 38(1). The amendment I am proposing simply allows paragraph 38(2) information to be given separately. We believe that this adds to the clarity, and I beg to move.
Lord Bruce of Donington: My Lords, the amendment is an entirely sensible one, and we support it.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 23:
Page 97, line 28, leave out ("any asset") and insert ("assets falling to be included under that item").
The noble Lord said: My Lords, this is another small, technical and drafting amendment which, we hope, makes it clear that the assets which are referred to in paragraphs 42(2) of Schedule 1 are the same as those referred to earlier, in sub-paragraph (1)(a) of paragraph 42; that is, those assets falling under the general item "fixed assets". We hope that this, too, will add to the clarity of the Bill. I beg to move.
Lord Bruce of Donington: My Lords, I do not in any way dissent from the purpose behind this amendment, but I would be glad if the noble Lord could clear up a point for me. When I was reading through sub-paragraph (2) of paragraph 42 I chanced on sub-paragraph (1), and I always read previous sub-paragraphs because they tend to refer back or to make provisions, which can easily fog one unless one is very careful. I see that in the first line of paragraph 42, which is line 9, it says:
"In respect of each item which is or would be but for paragraph 3(4)(b) above…".
I was working on this for some time yesterday, and it may be that I was a little tired and my mind was moving rather slowly. If the noble Lord can help me I would be genuinely grateful to him, but I cannot find this paragraph 3(4)(b).
Does it refer to the schedule, or does it refer to the clauses in the Bill? Because the same thing arises again in later amendments, where reference is made
to this paragraph 3(4)(b). It arises in the case of Amendment No. 24, and in another place as well, Amendment No. 27, where it says,
"would but for paragraph 3(4)(b) above be…".
It may be that I have been singularly obtuse, and I certainly apologise if I have been, but I cannot find this and I would be grateful for the noble Lord's elucidation. But I support the amendment.
Lord Lyell: We are grateful for the support of the noble Lord, Lord Bruce, for the amendment I have moved. I agree with the noble Lord that once one
400
begins to read these paragraphs and finds that they refer back, the language can become rather odd and interesting. But the noble Lord has said that he was looking in the first line of paragraph 42, where it says,
"Would but for paragraph 3(4)(b) above…".
I myself would look at paragraph 3 of this particular schedule, which takes us back to page 75, line 13. I think the noble Lord will find that we have had a minor skirmish earlier this afternoon over this particular line. The noble Lord will find paragraph 3(4)(b) of Schedule 1 to contain the words:
"the combination facilitates that assessment".
This is the answer to the noble Lord's question; and paragraph 3(4)(b) refers back to the third paragraph of Schedule 1 under "Section A, General Rules with Respect to Form and Content of Accounts". I hope that satisfies the noble Lord.
Lord Bruce of Donington: My Lords, I was drawn to Page 75 on the basis that 3(4)(b) referred to the schedule but I could not see the relevance of (4)(b). I have no wish to weary the House. I will sort it out before the Bill comes back. We support the amendment.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 24:
Page 98, line 12, after ("amount") insert ("which is or would but for paragraph 3(4)(b) above be").
The noble Lord said: My Lords, I should like to speak to Amendment No. 27 in moving Amendment No. 24. These are minor technical amendments inserting references in paragraphs 44 and 54(3) of Schedule 1 to paragraph 3(4)(b) of that schedule. This parallels references to paragraph 3(4)(b) in other paragraphs of the schedule which deal with information supplementing the balance sheet and profit and loss account. Such references recognise the fact that items to which an arabic number are assigned in the balance sheet and profit and loss account formats may have been combined in a company's accounts if the combination facilitates assessment of the company's profit or loss and state of affairs. In such a case the amendments make it clear that the information concerned is still required. I beg to move.
Lord Bruce of Donington: My Lords, we support the amendments.
On Question, amendment agreed to.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 25:
Page 101, line 12, leave out from beginning to ("are") and insert ("section (Financial assistance for purchase of own shares, etc.) (3)(b) or (c) of the Companies Act 1981").
The noble and learned Lord said: My Lords, this minor amendment is consequential to the new clause with which we propose to replace Section 54 of the Companies Act 1948. It replaces a reference to Section 54 in Part III of Schedule 1 to the Bill with a reference to the relevant subsection of the new clause. I think it appropriate to discuss the new clause when we come to that and merely to introduce this particular item with that explanation. I beg to move.
The Earl of Selkirk: My Lords, I would thank the noble and learned Lord for the step he has taken.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 26:
Page 101, line 41, leave out ("provided") and insert ("set aside").
The noble Lord said: My Lords, this seems to be an amendment to which we find the names of my noble friend the Minister and the noble Lords, Lord Bruce of Donington, and Lord Ponsonby. I understand that all our minds are in unison on this particular aspect and the Government wish to substitute the words "set aside" for the word "provided". I beg to move.
Lord Lloyd of Kilgerran: My Lords, we agree with this amendment.
Lord Bruce of Donington: My Lords, I am grateful to the noble Lord. Perhaps I could enlarge on it by saying that this amendment was originally moved by me at the Committee stage and the Government undertook to give it favourable consideration. The fact that the Minister's name appears on the amendment is a positive indication that at least on one amendment they have accepted the advice proferred from this side of the House. We thank them, nevertheless.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 27:
Page 102, line 32, leave out ("the following items shown") and insert ("the amounts which is or would but for paragraph 3(4)(b) above be shown under the following items").
The noble Lord said: My Lords, I spoke to this amendment when moving Amendment No. 24. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendments Nos. 28, 29, 30 and 31:
Page 107, leave out lines 35 to 42.
Page 107, line 44, leave out ("fixed asset or current asset").
Page 107, line 46, leave Out from ("above") to end of line 3 on page 108.
Page 108, line 18, leave out from ("assets";") to end of line 22.
The noble Lord said: My Lords, perhaps it may be for the convenience of the House if I move these amendments en bloc. I spoke to them when moving Amendment No. 17 today and I hope that I explained these technical amendments at that time. I beg to move.
Lord Bruce of Donington: My Lords, we agree the purpose and wording of these amendments.
On Question, amendments agreed to.
Lord Lyell Lord Lyell moved Amendments Nos. 32 and 33:
Page 108, line 28, leave out ("1980 Act") and insert ("Companies Act 1980")
Page 108, line 34, leave out ("1980 Act") and insert ("Companies Act 1980").
The noble Lord said: My Lords, I hope that it is convenient to the House that I move Amendments
402
Nos. 32 and 33 together. These are drafting amendments which change references to the "1980 Act" to references to the "Companies Act 1980". We believe that this will add clarity to the Bill. I beg to move.
On Question, amendments agreed to.
Clause 6 [The exemptions for individual accounts]:
5.48 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 34:
Page 9, line 42, at end insert—
("Provided that such modified balance sheet shall contain a note stating the amount of the company's profit or loss on ordinary activities both before and after taxation as shown by its profit and loss account").
The noble Lord said: My Lords, I fear that we are again on slightly more contentious ground. Clause 6 at page 9 refers to the exemption for individual accounts in respect of any copies that have to be delivered to the Registrar of Joint Stock Companies. Your Lordships will note that the directors of a small company shall not be required under Section 1(7)(a) to deliver to the registrar a copy of the company's profit and loss prepared in respect of that period under the section. They have to submit only a balance sheet. It is not necessarily a balance sheet in conformity with the format. It is a balance sheet under Section 1 of the 1976 Act, as I read it.
We have to face the circumstance in which there is going to be filed not (as is the requirement now in the case of a small company) a balance sheet with a profit and loss account giving some indication of the profitability of the firm, but a mere balance sheet in which the balance on the profit and loss account will be stated. It gives no clue as to what kind of profit the firm has made during the year that has ended on the date to which the actual balance sheet itself pertains.
This has been represented by the Government as some kind of concession to small businesses. It is nothing of the kind. The shareholders are still entitled to receive the profit and loss account and the balance sheet. The balance sheet and the profit and loss account still have to be rendered to the Inland Revenue for corporation tax purposes. There is no saving of any kind of labour to the small company. The profit and loss account has to be produced anyway. It would not involve any particular hardship if the profit and loss account were sent along with the balance sheet to the Registrar of Companies.
The accounting profession take a very simplistic view about this, which may or may not commend itself to your Lordships. It is one to which the accountancy profession have adhered for a number of years: that is, the creditors should have as much information as shareholders. This has been an axiom which has hitherto prevailed. Shareholders are entitled to certain information and so should the creditors be so entitled. Outside shareholders or shareholders who have no particular right to the more detailed information that is available to the directors of a company, may therefore receive a profit and loss account different from that available to the directors or to the Inland Revenue. That is possible.
In all cases so far where the shareholders have been entitled to accounting information, creditors have also

403
been so entitled. In order that one may be quite sure where the accountancy profession stands in this, perhaps I may refer your Lordships to their detailed comments put out in the document, the Consultative Committee of Accountancy Bodies' memo on the Companies Bill 1981. Paragraph 14 reads—and I read it to authenticate the position I am putting forward—as follows:
"Clause 5(1) entitles small and medium-sized companies to the benefit of the accounting exemptions provided by Clause 6. The effect of this is that the accounts delivered to the registrar of companies, and hence available to creditors and the public, will contain less information than that which is contained in the accounts which are sent to shareholders. In our memorandum to the Department, Company Accounting and Disclosure, of December 1979 and again in our memorandum, The filing of abridged accounts, of September 1980, we said that, in our view shareholders and creditors should all receive the same information about a company. Furthermore, the preparation of modified accounts would involve companies in extra expense, the accounts would be less useful and, in certain circumstances could actually be misleading. This remains our view and we should prefer to see the provision for filing modified accounts deleted".
I am suggesting to your Lordships that that is a view that ought to be taken into account. I think that that position is fortified by the directive itself. I want to refer to the more practical aspects: for many years I, like to many of my colleagues, have been accustomed to investigate cases of alleged fraud. We have been accustomed to try to find out on behalf of creditors exactly what has gone wrong with a company in circumstances that do not always give us the right of access to the actual books and documents of the company concerned. The sole information available to us in those circumstances is the information on the file.
All the modified balance sheet would show to the public and all that it is required to do under the directive would be to disclose the balance on the profit and loss account. I do not think that that is good enough. I do not see how people can form any assessment as to the viability of a company or anything else unless they have information at least on how much profit the company has made in the year which is terminated by the balance sheet. It is impossible to derive any historic information about the company's development by reading a succession of these modified balance sheets, because they do not contain sufficient particulars. The noble Lord indicated at column 713 of Hansard at the Committee stage—because I mentioned this matter on the Question, That the clause stand part—that the Government would give some consideration to this matter. I have only just remembered that! I ought to have addressed the noble Lord in far more dulcet tones in order to enable him to accept the amendment. However, I hope that, taking it on its merits, he may see fit to do so.
It puts creditors, and those who make inquiries on behalf of creditors, in an impossible position. It should be borne in mind that it is small and medium-sized firms which are themselves in most instances the actual creditors. To represent the requirement no longer to put a balance sheet on the file as some kind of concession to them may, taken over the whole spectrum of small and medium-sized businesses, be small reward indeed and may work to the detriment of all concerned. I am not asking for the restoration
404
of the filing of the profit and loss account. That has been rejected before; but at least there ought to be included a note stating the amount of the company's profit or loss on ordinary activities both before and after taxation as shown by its profit and loss account. I beg to move.
5.57 p.m.
Lord Mackay of Clashfern: My Lords, this amendment would remove a significant part of the exemption given to small companies in Clause 6(2)(b) whereby they need not file a profit and loss account with the Registrar of Companies. By requiring the profit or loss, both before and after taxation, to be disclosed in a note to the modified balance sheet, which is filed, small companies would be placed in a less favourable position than under the Bill.
In our consultations on implementation of the Fourth Directive it was impressed on the Government that certain information contained in the accounts is particularly sensitive for small companies and can place them at a competitive disadvantage if it is required to be placed on the public file. The Government, therefore, in considering to what extent the exemptions allowed by the directive should be taken advantage of, decided upon an overall package which reflects a fair balance between the various interests of users and preparers of accounts. Under this package no advantage is taken of the exemptions allowed by the directive on the accounts which are drawn up and sent to shareholders, or on the audit of such accounts; but, for small companies, full advantage is taken of the exemptions permitted for the accounts which are placed on the public file. To require disclosure of a small company's profit or loss as required by this amendment would upset the fair balance we have arrived at after full consultations with all the interested parties.
It is worth stressing that the information required to be disclosed by this amendment will be contained in the accounts which are drawn up for shareholders and in many cases it is likely that small companies will not go to the trouble of preparing modified accounts for the public file but will file their full accounts In cases where the information is likely to be sensitive, however, going to the additional trouble might well be worth their while. In those cases where a small company does not wish to disclose its profit and loss account and accordingly decides net to place it on the public file, the information it contains will exist and it will be open to those with a legitimate interest in the company to request that it is made available to them.
I should also point out that other member states are likely to take full advantage of the exemptions contained in the directive on disclosure by small companies. To accept this amendment might well place our small companies at a disadvantage as compared with their European counterparts—a result which I believe your Lordships would regard as unacceptable. I think I am also right in saying that during the time when the exempt private company régime was operating the difference between shareholders and creditors referred to by the noble Lord, Lord Bruce, would have existed. There is, of course, also the point that a creditor, before becoming a creditor, could take steps to secure his position if he wished. However, the information will remain in existence and I would respectfully suggest

405
to your Lordships that, in the light of the considerations I have adduced, your Lordships should not support this amendment.
Lord Bruce of Donington: My Lords, I must once again express regret that the Government have not seen lit to accept this amendment. The suggestion that the disclosure of the profit made in a year by a medium or small-sized firm would somehow expose them to the unfair and harsh rigours of competition of the EEC is, if I may say so with the greatest possible respect, a lot of nonsense. It is stretching to an almost ridiculous extreme the whole circumstances of competition and the expression of interests of individual firms. No question of lack of competitiveness arises on this.
What in fact has happened—and I am sorry now to have to be political, being under some provocation—is that it is politically necessary to convey as a cosmetic to the Government's programme of support or alleged support for small businesses, small items of this kind which are supposed to be a concession to them. I repeat that the information has to be provided anyway. It has been provided over a number of years and nobody has complained before about the harshness of competition. Moreover, the provisions of the directive do not in any way inhibit the steps proposed in my amendment. If the Minister refers to Article 2.6 of the directive, it states:
"The Member States may authorize or require the disclosure in the annual accounts of other information as well as that which must be disclosed in accordance with this Directive".
There is no restriction on that.
This pretence that one is somehow inhibited by an EEC directive from doing what one knows is in the best interests of all concerned in one's own country, can be carried too far; just as many of your Lordships may feel that the whole standardisation of accounts is now getting almost in the same category as the standardisation of mayonnaise and icecream. But nobody yet has proved successfully what results are supposed to emerge from the standardisation of accounts throughout Europe, aside from the intellectual satisfaction it may give for underworked members of the staff of the European Commission.
But that is another story. The idea that we cannot retain our own flexibility and continue with our own traditions here is quite ridiculous. I suggest that the failure to accept this amendment will prove a serious hindrance not only to the profession but to creditors generally, and indeed, if they are going to say they only have to have a balance sheet in these terms, the next step will be not to require them to file a balance sheet at all. This would enable the noble Lord to proceed with further economies in the Registry, which would no doubt please those who want to reduce Government staffs at the present time.
Lord Harmar-Nicholls: My Lords, I do not think the noble Lord ought to be allowed to get away with that. There is no doubt about it that this is an advantage to a small firm. Should we decide not to accept the amendment, what it does, is to leave small firms to make up their own minds as to whether they disclose certain details which they think, if they were disclosed, might work to their disadvantage among competitors. Anyone who has to work with small
406
firms knows how embarrassing it is sometimes to disclose for statutory reasons figures which you know will give information and advantages to competitors who do not deserve them. There is nothing cosmetic about having the choice as to whether you disclose the profit and loss account or not, as distinct from having to disclose it if this amendment is passed. There is nothing cosmetic about it.
I would hope that the Government will go on removing a lot of these unnecessary pieces of legislation which add an extra burden to the people who are having to run the business of this country. However small, any relief from it is very welcome indeed; and from the businessman's point of view I am very interested in the noble Lord's concern for creditors. The creditors are perfectly capable of making up their own minds as to whether somebody is a worthy customer before they give him credit; and, if they are not capable of doing that, they are the people who get into some sort of trouble. But if we have got to run our businesses now on all sorts of disclosed detail to satisfy Governments and the accountants—and now you have to think in terms of satisfying the creditors, who have all got their own means of saying whether or not a customer is a good risk—to try to run small businesses is going to be quite unbearable. Therefore, small though the concession is, I am glad that the Government, through the noble and learned Lord, have said they are going to retain it.
6.7 p.m.
On Question, Whether the said amendment (No. 34) shall be agreed to?
Their Lordships divided: Contents, 46: Not-Contents, 105.

CONTENTS

Ardwick, L.

Llewelyn-Davies of Hastoe, B.—[Teller.]

Beswick, L.

Boston of Faversham, L.

Lloyd of Hampstead, L.

Brockway, L.

Milne, L.

Brooks of Tremorfa, L.

Mishcon, L.

Bruce of Donington, L.

Noel-Baker, L.

Caradon, L.

Peart, L.

Cledwyn of Penrhos, L.

Ponsonby of Shulbrede, L

Collison, L.

Ritchie-Calder, L.

David, B.—[Teller.]

Ross of Marnock, L.

Davies of Leek, L.

Sefton of Garston, L.

Davies of Penrhys, L.

Shepherd, L.

Elwyn-Jones, L.

Shinwell, L.

Gaitskell, B.

Spens, L.

Goronwy-Roberts, L.

Stewart of Alvechurch, B.

Greenwood of Rossendale, L.

Stewart of Fulham, L.

Gregson, L.

Stone, L.

Hale, L.

Strabolgi, L.

Hatch of Lusby, L.

Underhill, L.

Houghton of Sowerby, L.

Wallace of Coslany, L.

Hutchinson of Lullington, L.

Wells-Pestell, L.

Jeger, B.

Whaddon, L.

Kirkhill, L.

White, B.

Wynne-Jones, L.

NOT-CONTENTS

Adeane L.

Avon, E.

Airedale L.

Banks, L.

Airey of Abingdon B.

Beaumont of Whitley, L.

Alexander of Tunis, E.

Bellwin, L.

Amherst, E.

Boardman, L.

Ampthill, L.

Brougham and Vaux, L.

Atholl, D.

Buxton of Alsa, L.

Auckland, L.

Chelwood, L.

407

Colville of Culross, V.

Mais, L.

Cork and Orrery, E.

Mancroft, L.

Craigavon, V.

Montagu of Beaulieu, L.

Cromartie, E.

Morris, L.

Cullen of Ashbourne, L.

Mountevans, L.

Davidson, V.

Nathan, L.

De Freyne, L.

Noel-Buxton, L.

Denham, L.—[Teller.]

Onslow, E.

Drumalbyn, L.

Orkney, E.

Eccles, V.

Portland, D.

Ellenborough, L.

Rawlinson of Ewell, L.

Elliot of Harwood, B.

Reay, L.

Elton, L.

Romney, E.

Erroll of Hale, L.

St. Aldwyn, E.

Faithfull, B.

St. Just, L.

Ferrers, E.

Saint Oswald, L.

Fortescue, E.

Sandford, L.

Fraser of Kilmorack, L.

Sandys, L.—[Teller.]

Gainford, L.

Seear, B.

George-Brown, L.

Seebohm, L.

Gladwyn, L.

Selkirk, E.

Glendevon, L.

Shannon, E.

Gormanston, V.

Sharples, B.

Gowrie, E.

Skelmersdale, L.

Grimston of Westbury, L.

Strathclyde, L.

Hailsham of Saint Marylebone, L.

Strathspey, L.

Sudeley, L.

Harmar-Nicholls, L.

Swansea, L.

Home of the Hirsel, L.

Swinfen, L.

Hooson, L.

Swinton, E.

Hornsby-Smith, B.

Tenby, V.

Hylton-Foster, B,

Terrington, L.

Kemsley, V.

Teviot, L.

Kinnaird, L.

Thorneycroft, L.

Knutsford, V.

Trefgarne, L.

Lauderdale, E.

Trenchard, V.

Linlithgow, M.

Trumpington, B.

Lloyd of Kilgerran, L.

Tryon, L.

Long, V.

Vaizey, L.

Lyell, L.

Vaux of Harrowden, L.

McFadzean, L.

Vickers, B.

Mackay of Clashfern, L.

Vivian, L.

Mackintosh of Halifax, V.

Wigoder, L.

Macleod of Borve, B.

Willoughby de Broke, L.

McNair, L.

Winterbottom, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.15 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 35:
Page 10, line 7, leave out from ("by") to ("section") in line 8.
The noble Lord said: My Lords, like the previous amendment, this amendment relates to paragraph (d) of subsection (2) of Clause 6, which, in its present form, exempts small companies from disclosing directors' emoluments. I shall not go over the same ground as I went over in Committee on this subject. I rather hoped that, on mature reflection and after looking at the arguments that were then put forward, the Government would have come round to the point of view that it is desirable that Section 196 of the 1948 Act, which requires the aggregate amount of directors' salaries et cetera to be disclosed, should be allowed to remain intact.
Such is the view of the Consultative Committee of Accountancy Bodies, who said:
"We maintain the view that, as profit after emoluments in a small company is often an arbitrary amount, both shareholders and creditors are more likely to be interested in profits before aggregate directors' emoluments".
If all that is required to be stated is simply a net figure, then it gives shareholders and creditors no clue as to
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what are the true profits of a firm. On its ordinary trading activities, a firm may make a profit of £50,000 before charging directors' fees, but after directors' fees the figure may be down to £500. In other words, the final, disclosed figure of profit gives no idea of the profitability of the firm. We still maintain that shareholders and creditors should be entitled to the same information.
This afternoon in your Lordships' House, I apprehend from the response of some noble Lords that they believe that it is in the interests of small and medium-sized traders that these requirements, and others like them, should not be kept, even though that involves the possibility—in fact, the probability—that creditors of many companies will not be able to get the information which they normally need. May I remind your Lordships that there are thousands and thousands of small and medium-sized firms that are, themselves, creditors to other firms and when one is seeking to strike a balance, one should seek to strike a fair balance. One should not lean over, to prefer one section to the other.
It has been proved that the provisions of the 1948 Companies Act in regard to the disclosure of directors' emoluments have been a valuable guide to those who are interested in the profitability of firms. There is no good reason why, taking a balanced view as between creditor and debtor, the previous practice should not continue. I am quite convinced that it does not cause any kind of hardship to the reputable, ordinary, small or medium-sized business which conducts its affairs soundly and with propriety. Such firms have nothing to fear from this. In fact, they have been accustomed to disclose matters of this kind for many years. The people who will rejoice in this concession are those who deliberately want to conceal something; not those who are merely apprehensive about the effect upon competition. I take the view, and I invite the House to take the view, that unless these requirements are complied with, the interests of one section of the community, notably the creditors who comprise very large numbers of individuals in small firms, will be prejudiced to a degree that has not obtained over the past 30 years. I beg to move.
Lord Mackay of Clashfern: My Lords, once again this amendment relates to what statutory burden should be placed upon small companies. In our view, and in the light of the consultation undertaken in connection with the implementation of the directive, it is true to say that in a small company the emoluments of the directors are both very personal and of real competitive interest. As allowed by the directive, we believe that small companies—I must stress that here we are dealing with small companies only—should be able not to place information of this nature on the public file.
The directive would also allow this information not to be included in the accounts drawn up for shareholders, but we have, I think rightly, decided not to go that far. We believe that this is information which is of significance to
shareholders and that it should be included in the accounts which they receive. But we consider also that companies should not be required to disclose information of this kind to others who do not have such a direct interest in the company's affairs as do their shareholders.

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So far as creditors are concerned, the noble Lord has said a good deal about them. If a creditor wishes to make an arrangement for receiving the accounts as a condition of becoming a creditor, there is nothing in this legislation which would prevent that from being enforceable. I would invite your Lordships to reject the amendment.
On Question, amendment negatived.
Clause 8 [Small and medium-sized companies]:
6.22 p.m.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 36:
Page 15, line 45, at end insert—
("(13) In respect of small companies having together with their subsidiaries or associated companies a turnover not exceeding £250,000 and a balance sheet total not exceeding £125,000, the Secretary of State may by regulations made by statutory instrument make, and from time to time may vary, such provisions of this Act as may appear to him appropriate including the total turnover and balance sheet total prescribed in this subsection.
(14) No regulation shall be made under this subsection unless a draft of the instrument containing the regulations has been laid before Parliament and has been approved by resolution of each House of Parliament.").
The noble Lord said: My Lords, at this late hour this is a plea for small businesses, those of the order of five or 10 employees, whose interests are not adequately looked after in the Bill. I recognise that in Clause 8 of the Bill the Government have made a real advance in that, at last, statutory recognition has been given to the position of small and medium-sized companies. The definition of "small companies" in the Bill is those companies which have a turnover of less than £1.4 million.
This amendment is an attempt to deal with a very difficult situation, particularly at the present time when hundreds of small firms are going bankrupt, and to get the Government to consider the position of those small companies which do so much for the economic position of this country but which at present are not being considered.
The amendment consists of two additional subsections to clause 8, subsections (13) and (14). Subsection (13) begins:
"In respect of small companies …".
Now what kind of small companies are meant here? They are small companies:
"…having together with their subsidiaries or associated companies a turnover not exceeding £250,000 and a balance-sheet total not exceeding £125,000,…".
Therefore the first step of my amendment is to direct attention to a company with that kind of trading facility. There is no magic in the figures £250,000 and £125,000. I could very well have introduced figures relating to employees; I could have said, say, from five employees up to 25 or even 50 employees. In this amendment I wish specifically to direct the Government's attention to these small firms and to ask the Government to allow them greater concessions.
I fully realise—and the amendment reflects this view—that in a Companies Bill it is difficult to legislate for every case. Therefore, in the first part of the amendment I have tried to delineate to your Lordships the kind of company with which I am concerned,
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whether by the amount of its turnover or by the number of its employees. Subsection (13) continues:
"…the Secretary of State may by regulations made by statutory instrument make, and from time to time may vary, such provisions of this Act as may appear to him appropriate including the total turnover and balance sheet total prescribed in this subsection".
As I have said before to your Lordships, I am never very happy about giving to the Secretary of State powers to administer things by regulation. But this is a specific class of British industry which requires constant consideration, particularly at the present time.
The safeguard which I apply is in the suggested subsection (14):
"No regulation shall be made under this subsection unless a draft of the instrument containing the regulations has been laid before Parliament and has been approved by resolution of each House of Parliament".
These small companies, as I again emphasise, require careful consideration, quite apart from the progressive kind of measures contained in this clause which deal with the so-called small companies, as there defined. I listened with great attention to the noble Lord, Lord Harmar-Nicholls—I am sorry that he is not in his place—when he urged, while the House was considering another amendment, how essential it is to reduce, so far as possible, the number of regulations dealing with small companies. To paraphrase his words, he said, rather rhetorically, "Let the small companies do the work without being inhibited by regulation after regulation".
As I have already said, in a statute of this kind it is difficult to set down the particular concessions which could be made to these small firms. Therefore, may I ask the Government to consider the suggestion which I have made: that the Secretary of State could legislate by means of regulations for small companies, however they are defined, whether the Government agree that they should be companies with a turnover of less than £250,000 or companies with only five, 15 or 20 employees. It is that kind of company which I have in mind.
I listened with great attention the other day to the chairman of the Conservative Party when he said on television that it was the objective of the Government to assist small companies. He did not indicate the kind of small companies to which he wanted concessions to be given. This Bill gives concessions only to any company which has a turnover of under £1.4 million. That is too high in the context in which I am speaking. It is necessary to carve out from that classification of small companies these much smaller companies which have done so much and which are doing so much for the country, many of them being forced into bankruptcy because they have to do things which are expensive in relation to their own turnover.
No doubt the noble and learned Lord the Minister, who may reply to this amendment—or one of his colleagues—will say that according to the statutory instrument of the EEC they are unable to deal with it. I have studied that lengthy document and in my submission there is no inhibition upon the Government to act in accordance with the amendment that I have suggested. At the present time there are severe problems relating to the small company. I do not want to take a political point on this, but I think it is agreed by all parties that special consideration must be,

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and should be, given to the companies in this country which employ only a few people. I beg to move.
Lord Mackay of Clashfern: My Lords, the noble Lord, Lord Lloyd of Kilgerran, has underlined the policy of Her Majesty's Government in the assisting of small companies and we were grateful for his support in relation to the exemptions that we have been able to give, which were attacked under the preceding amendments. However, I have to say that in relation to the present amendment so far as the filing of accounts is concerned we have gone as far as we are permitted to go by the Fourth Directive. Therefore I think I should take a minute to deal with the point about that.
I agree that the directive is a little long and somewhat complicated, but its structure is to place obligations on the United Kingdom as a member state in relation to companies that are incorporated—to take the exact words, which are on page 64 of the Green Paper—"public companies limited by shares or by guarantee"—
Lord Lloyd of Kilgerran: My Lords, I am sorry to interrupt the noble and learned Lord, but I have not got a copy of the Green Paper, so perhaps he can give me the article number concerned.
Lord Mackay of Clashfern: My Lords, it is Article 1 and it is the list of the matters to which the registration has to apply. The noble Lord will see a list which tells us that the directive is to apply to the following types of companies. Articles 11 and 27 provide the basis for exemptions, and what we have done is to use Articles 11 and 27 to the full. The first is for what we have called small companies, and the second for medium-sized companies. As I understand the position, we have taken as full account as we can of the exemptions which these provisions give us in relation to the filing of accounts. The desire to keep this matter flexible is of course covered by the powers conferred upon the Secretary of State in Clauses 5 and 18 of the Bill, in relation to modification of the requirements to which the first Part of the Bill applies.
There is another matter which may be of some importance in this connection. The Government are aware of the difficulties that are faced by small companies of the sort described by the noble Lord, Lord Lloyd of Kilgerran, and it has occurred to those Ministers who have responsibility for this matter in the Department of Trade that this ought to be looked at further. The way in which it has been suggested that one should look at this is to consider a new form of incorporation for small firms and that has been the subject of a Green Paper which was published on the 19th February, Cmnd. 8171.
Our view is that the kind of relief that the noble Lord has in mind may perhaps best be sought for along that line. We are extremely grateful for his interest in this matter and we hope that this may enable us to develop a form of structure which will enable small businesses to flourish without the necessity of the kind of burdens which are the minima to be expected of companies having the benefit of corporation and therefore subject to the particular provisions of the Fourth
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Directive. Accordingly, I fear that I could not advise your Lordships to support this amendment although we have every possible sympathy with the spirit that the noble Lord was anxious to emphasise in putting it forward.
Lord Lloyd of Kilgerran: My Lords, I am grateful for the expression by the noble and learned Lord of his great sympathy for the theme which I had in submitting that there was a class of companies in this country—the small firms—which should have very special consideration. I had looked at the Green Paper to which he referred and I thought that possibly, with this amendment giving the Secretary of State such powers, it might have been opportune for the Government to consider that my amendment, perhaps with improved drafting, would have been acceptable.
The noble and learned Lord referred to Clause 18 of the Bill as providing flexibility in relation to the matters I had in mind. It is certainly true that the Secretary of State may, by regulations made by statutory instrument, add to the classes of document and modify certain requirements of the Companies Act and reduce the classes of document delivered to the registrar. It seems to me that if the Government have gone thus far they could go a little further, to deal with the class of firms which I have in mind. It is the small firms with five, 10, 15 or 20 employees which require special consideration and far greater flexibility in dealing with matters than this Bill gives at the present time.
I am in some difficulty as to what I should do at the present time. I understand the great sympathy of the Government. I should like to see the Government act more positively in relation to these matters, and therefore I wonder whether, even at the Report stage, I could ask the noble and learned Lord to consider once again before the Third Reading this special case of the very small firms. I do not know whether the noble and learned Lord would want to respond in any way to my invitation, with the leave of your Lordships.
Lord Mackay of Clashfern: My Lords, with the leave of your Lordships, as I said, the situation of such businesses is always very much in our minds. Indeed, I think I could say that it is the subject of almost constant consideration. The difficulty in saying anything very positive with regard to this matter before Third Reading is that the directive places obligations upon us and it is unlikely that at a time like that we should be able to bring forward the consultation on the Green Paper, but certainly we will consider what the noble Lord has said.
Lord Lloyd of Kilgerran: My Lords, I am much obliged to the noble and learned Lord and, in those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 37 not moved.]
Clause 14 [Directors' report to give particulars of acquisition of company's own shares]:
6.40 p.m.
Lord Lyell Lord Lyell moved Amendment No. 38:
Page 23, line 40, after ("are") insert ("purchased by the company or are").
The noble Lord said: My Lords, if I may, I shall speak to Amendments Nos. 38 and 41 together. These are minor amendments which follow the introduction of the new provisions in Part III of the Bill which enable a company to buy its own shares. As a result of the European Community's Second Directive on Company Law, disclosure must be given in the directors' report of the particulars of any of its shares which are purchased by the company. With that very brief explanation, I beg to move Amendment No. 38.
On Question, amendment agreed to.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 39:
Page 24, line 8, leave out ("or").
The noble Lord said: My Lords, this is purely a drafting amendment designed to assist the Government. I beg to move.
Lord Lyell: My Lords, I understand that Amendments Nos. 39 and 40, which are in the names of the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Ponsonby, are covered by the amendments to which I have just spoken, Nos. 38 and 41. With that very brief explanation, I hope that the noble Lord, Lord Bruce, may be satisfied.
Lord Bruce of Donington: My Lords, I immediately accept the noble Lord's assurance. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 40 not moved.]
Lord Lyell Lord Lyell moved Amendment No. 41:
Page 24, line 16, at end insert—
("( ) the number and nominal value of the shares so purchased, the aggregate amount of the consideration paid by the company for such shares and the reasons for their purchase;").
The noble Lord said: My Lords, I spoke to this amendment a moment ago. I beg to move.
On Question, amendment agreed to.
[Amendment No. 42 not moved.]
Clause 16 [Certain provisions of the Companies Acts to cease to have effect]:
Lord Lyell Lord Lyell moved Amendment No. 43:
Page 26, line 5, leave out ("section 41(11)") and insert ("sections 39(8) and 41(11)").
The noble Lord said: My Lords, I am somewhat startled by the suddenness with which these technical amendments flow upon the House. I hope it may be for the convenience of the House if I speak to Amendments Nos. 43, 44 and, much further on, Nos. 50, 113 and 118. All these are minor technical amendments. The repeal of Section 39(8) of the 1980 Companies Act reflects the Fourth Directive's requirement that all
414
assets have to be classified as either fixed or current assets. If we accept this, we find that Section 39(8) is now obsolete. But the provision is retained for those companies which continue to comply with the existing accounting requirements—that is what we call the Schedule 8A accounts. Amendment No. 43 repeals Section 39(8), and Amendments Nos. 113 and 118 save it as appropriate. All the other amendments are consequential drafting amendments. With that brief explanation, I hope I shall have satisfied the House. I beg to move.
Lord Bruce of Donington: My Lords, we support this amendment. At the same time, we should like to draw the attention of noble Lords once again—and this will arise on succeeding amendments—to the paramount necessity for some consolidation Act of the whole series of Companies Acts, as made abundantly clear by the whole series of cross-references and contortions which one has to go into to trace all the legislation through.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 44:
Page 26, line 6, leave out ("investment").
The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Schedule 2 [Preparation of accounts under Schedule 8A to 1948 Acts]:
Lord Lyell Lord Lyell moved Amendment No. 45:
Page 112, line 30, leave out ("149A and 152A of the 1948 Act") and insert ("149A(2) and 152A(3) of the 1948 Act for the words "the Eighth Schedule" and in section 149A(3) of that Act").
The noble Lord said: My Lords, this amendment is a drafting and technical amendment. It is designed to reflect more accurately the incidence of the words "the Eighth Schedule" which we find in Sections I49A and 152A, which, as your Lordships are doubtless aware, have been renumbered under Clause 1. We hope that this is somewhat more correct. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 46:
Page 112, line 45, leave out paragraph (b) and insert—
("(b) in paragraph 11(2A)—

(i) after the word "are" in the first place where it occurs, there shall be inserted the words "purchased or are"; and

(ii) the following paragraph shall be inserted immediately before paragraph (a)—

"(aa) the number and nominal value of the shares so purchased, the aggregate amount of the consideration paid by the company for such shares and the reasons for their purchase;").
The noble Lord said: My Lords, on behalf of my noble friend, I beg to move Amendment No. 46. This is again another one of the many minor amendments in my noble friend's name. This one follows the introduction of the new provisions in Part III of the Bill enabling a company to purchase its own shares. This amendment provides for information about the

415
amount and consideration for the shares which are purchased by companies. These companies in this particular case are companies which are using the accounts in the old form required by Schedule 8A. These are the companies which are allowed to deviate temporarily from the provisions in the new Schedule 1, such as banks, insurance companies and indeed shipping companies. Section 16A of the 1967 Act is to be inserted by Clause 14 of this Bill, which will not apply to such companies. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 47:
Page 113, line 41, leave out from ("any") to end of line 44 and insert ("Schedule 8A accounts").
The noble Lord said: My Lords, I hope it will be for the convenience of your Lordships if I speak to Amendments Nos. 47 and 49, which is over the page. Amendment No. 47 is consequential on Amendment No. 49, so I hope I may deal with them in reverse order, starting with No. 49. Amendment No. 49 is in respect of Schedule 8A accounts. These are the companies presenting their accounts in the traditional format. Amendment No. 49 disapplies that amendment to Section 56(2)(a) of the 1967 Act. That subsection defines references in Part I of the Act to balance sheets and profit and loss accounts and includes references to things called "documents annexed to those statements". This particular definition is not compatible with what we call the new accounting regime laid down by the Fourth Directive. Therefore, we are amending this definition for the Fourth Directive purposes. The definition does remain appropriate for the old régime, the Schedule 8A accounts, and the amendment retains the definition for that particular purpose.
The second point is that Amendment No. 49 provides for the purposes of the 1967 Act a definition of Schedule 8A accounts. This particular definition is couched in the same terms as the definition which is the tailpiece to paragraph 8 of Schedule 2 to this Bill.
That brings me back to Amendment No. 47. By this particular small definition Amendment No. 47 is made possible. Amendment No. 47 refers to paragraph 5(1) of Schedule 2 to the Bill and this inserts the new paragraph 1B into Section 4 of the 1967 Act. This particular insertion disapplies certain provisions in respect of accounts which are prepared under the old régime, and a simple reference in the new subsection (1B) to Schedule 8A accounts, as now defined in new subsection (2A) to Section 56 of the 1967 Companies Act, is now sufficient. That, I am afraid, is a slightly tortuous explanation, but I hope that it will satisfy your Lordships. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 48:
Page 113, line 44, at end insert—
("(1A) In section 11(1) of the 1967 Act for the words from "to be shown" to the end there shall be substituted the words "to be given in a note to the company's accounts is given in a note to any Schedule 8A accounts prepared by the comany in respect of any financial year, the corresponding amount for the immediately preceding financial year shall be included in that note.".").
The noble Lord said: My Lords, I beg to move
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Amendment No. 48 and it might be convenient if I speak to Amendments Nos. 109 and 115. All of these amendments are minor, technical amendments which are consequential to the Government's decision to harmonise within the companies code on references to what are called "notes to" a company's accounts, in preference to the phrase "statement annexed to". All three amendments simply preserve, in respect of the old régime Schedule 8A accounts, the existing requirement for the immediately preceding year's figures to be given in relation to such information as is given in a note to the accounts, being information on such things as directors' salaries and emoluments and also employees' salaries which are required by Section 196 of the 1948 Act and also by Sections 6, 7 and 8 of the 1967 Act.
The other two amendments—Amendments Nos. 109 and 115—preserve Section 11 of the 1967 Act and the reference to it in Schedule 2 to the Companies Act 1980 (that covers the point about the increase of penalties for misdemeanours et cetera). The first amendment amends the wording of Section 11, so that information in respect of the preceding year, in the old format, is required in respect of those particular accounts—that is, Schedule 8A accounts. These are all technical amendments. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 49:
Page 114, line 11, at end insert—
("(6) The amendment made to section 56(2) of the 1967 Act by paragraph 27 of Schedule 3 to this Act shall not apply in relation to any Schedule 8A accounts; and the following subsection shall be inserted in section 56 after subsection (2)—
"(2A) References in this Part of this Act to Schedule 8A accounts are references to accounts prepared in pursuance of paragraph 1 or 2 of Schedule 2 to the Companies Act 1981 which state that they are prepared in compliance with section 149A or 152A of and Schedule 8A to the principal Act.".").
The noble Lord said: My Lords, I beg to move Amendment No. 49. I have already spoken to this amendment with Amendment No. 47. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 50:
Page 114, line 16, leave out ("Section 41(11)") and insert ("Sections 39(8) and 41(11) of the 1980 Act").
The noble Lord said: My Lords, I spoke to this amendment with a series of amendments, starting with Amendment No. 44. I think that the House has heard enough. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 51:
Page 114, line 23, leave out ("repeal of section 43(2)") and insert ("repeals in section 43").
The noble Lord said: My Lords, I beg to move Amendment No. 51 and I should like to speak to Amendments Nos. 104, 105, 114 and 119. All of these are technical amendments which are consequential to Amendment No. 170 which was made in Committee. Under the accounting exemption provisions, the accounts filed with the registrar can differ from those which are laid. Only the latter accounts—those are the ones which are laid—are to be the accounts

417
for determining whether a company can make distributions. Accordingly, these amendments, starting with Amendment No. 51, delete references to accounts filed leaving only accounts laid as the relevant accounts for Part III of the 1980 Act. I beg to move.
On Question, amendment agreed to.
Clause 22 [Prohibition on registration of certain names]:
6.55 p.m.
Lord Mishcon Lord Mishcon moved Amendment No. 52:
Page 29, line 30, leave out paragraph (c) and insert—
("(c) which is the same as a name appearing on the index kept by the registrar in pursuance of section 23 of this Act or which is so similar to such a name that in the opinion of the Secretary of State confusion is likely to be caused;").
The noble Lord said: My Lords, I beg to move Amendment No. 52. If I may say so, this is a most important amendment which was dealt with in Committee before an attenuated body of highly intelligent persons at a very late hour, and because of the lateness of the hour it was decided that the amendment should be withdrawn so that it might be debated before your Lordships at this stage.
I should like to remind your Lordships that this amendment deals with the following situation. Up to now, the Companies Registry has seen to it that an undesirable name of a company should not be allowed to go on the register, and part of the procedure in regard to the undesirability of a name is, indeed, the similarity of a name to another name. Your Lordships will find that this Bill seeks to remove from the registrar and the duties of his registry, the ability to exclude a name which is similar: the sole basis of an exclusion is that the name is the same. On the last occasion in Committee, so far as I recollect, nobody supported the Government's stand in regard to this matter save for a very eloquent Front Bench. Indeed, all the Lords Temporal, apart from the Front Bench, seemed to support the amendment and, if I may say so, there seemed to be a sympathetic look even from the Lords Spiritual on the basis that one should not put a snare before the unwary.
I should like to deal with the matter in the following way, and I do so with complete seriousness. In the view of a great many bodies—organisations which hold great respect in this kingdom—this is a licence to cheat and a licence to blackmail, because the ability for people to register similar names is an invitation to both. I should like to quote an example without in any way—in spite of the protection which is given for utterances in this House; and many of us think that one ought to be rather careful about that protection—suggesting either an intention to cheat or an intention to blackmail. But, while the registry was going through some industrial difficulties, it was well known that the registry was not, in fact, searching for similarity of names. However, there happens to be a very well known company called Aurora Holdings Limited, which is a quoted company on the Stock Exchange. I shall read to your Lordships a letter that was sent to the company secretary in June last year. It reads as follows:
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"Dear Sir,
Aurora Limited.
"My partner and I recently registered and incorporated the above company in England and Wales with an authorised capital of £5,000 (issued £200) to act as the vehicle for a trading venture.
"In view of the publicity given to your Chairman's recent appointment we have been made aware of the similarity between the names of your company and ours and accordingly we enquire whether you would wish to purchase our company before we commence any commercial activity.
"The company would be a useful vehicle for your Group to hold even though you may have no immediate requirement.
"In view of the preparatory work which we have carried out and also the delay which we will experience in reforming a suitable company, we would expect a consideration of £4,000 for the issued share capital.
"May I add that the similarity between your Group name and that of our company was coincidental and was in no way premeditated.
"I look forward to hearing from you shortly".
The gentleman remained "Yours faithfully" of Aurora Holdings Limited.
As I said, there are organisations greatly respected in our national life which support the amendment that I venture to put before the House tonight. Quickly, I should like to mention them. They include the Chambers of Commerce, the Institute of Directors, the Law Society, the Law Reform Committee of the Senate of the Inns of Court of the Bar, the Consumers' Association, the Consultative Committee of Accountancy Bodies, the Finance Houses' Association, and many other bodies of a similar nature. Therefore, we have a pretty serious duty to perform tonight.
At the Committee stage the spokesman for the Government Front Bench—I believe I am right in saying that it was the noble and learned Lord the Lord Advocate—gave only one reason why the Government were not able to accept this amendment. It was that the administrative difficulty was very great, now that there were some 800,000 names on the register. The noble and learned Lord also felt that it was a judicial, and no longer an administrative, duty to deal with similarity of names. The noble Lord, Lord Lyell— whom I am delighted to see in his place—decided to amplify the answer that was given by the noble and learned Lord the Lord Advocate, and he amplified it by giving some figures, which were rather interesting and which were seized upon not only by me but by the very athletic figure of the noble Lord, Lord Mottistone, who seizes upon anything that is capable of being seized upon to advance an argument that he wants to progress before your Lordships.
The noble Lord, Lord Lyell, said, presumably in support of the Government, that, indeed, with 800,000 names on the register and with a slightly less careful duty imposed upon the registrar, there had been only 300 complaints. Quite obviously, your Lordships will see how successful the registrar must have been, even with a slight loosening of his duties, if there were only 300 complaints. Of course, this was at a time when people were not registering similar names because, if they could, they were careful enough to search in the first instance to make sure that they were not doing that; and, of course, they knew that the registrar, if I may put it this way, would catch them out if they were foolish enough to register a similar name.
To what are we really opening the doors?—obviously, in the first instance, to people who want to try to take advantage of a name which has earned respect, whether in a locality or in connection with a trade, in order to

419
see whether they cannot get in on the ticket of the name, and do so deliberately. There are others who might do it by mistake. We seek to protect the people who are entitled in our commercial and industrial life to have the benefit, unscathed, of their good commercial tradition and the name that they bear, and we seek to ensure that no one is misled.
When one is then referred to a judicial administration of this matter, or a judicial decision upon this matter, what an extraordinary answer it is from a Government Front Bench—which is entitled to take a great deal of credit for this Bill for the way in which they are protecting small businesses from unnecessary expenditure—that they will drive people into the courts, and those people will have the sole remedy of a passing-off action. Lawyers well know the difficulties of the five stages through which one has to go in order successfully to succeed in a passing-off action. To drive people to the expense of such an action, and the risk of that, is surely absolutely iniquitous when one knows that in the past the Registrar of Companies has been able to fulfil this task with great ability and, indeed, has been able to protect consumers and people in commerce and industry alike. I wonder whether tonight we can protect those who deserve to be protected, including the small businessman.
I should have mentioned that I am also speaking to Amendment No. 107, which is referred to in the Marshalled List under Schedule 4. The Government seek to repeal two sections which until now have given that protection. The last few minutes of my address to your Lordships will be taken up purely and simply in ensuring that your Lordships are not misled by seeing another amendment on the Marshalled List—namely, Amendment No. 55—which refers to "Preparatory steps before registration of company".
As I said at the Committee stage, this is a longstop; this is not the amendment that I would commend to your Lordships. I shall not speak to it now, but it deals with having to advertise in the London Gazette every time a name is to be registered in order to give people a chance of looking at the name and then objecting. Obviously, it is not as satisfactory a procedure as we now have; but because through the portals of your Lordship's House there may pour people who have not had the benefit of listening to the debate tonight but who, nevertheless, will possibly be registering their vote, I had that as a longstop. But it is not a longstop that I want to have or that all the professional and other organisations that I have mentioned to your Lordships would wish to have, either. Therefore, I commend this amendment to your Lordships, and repeat that if this is not an amendment which is supported by a revising and careful body on a Bill of this kind, frankly I do not know what is.
The Deputy Speaker (Lord Greenwood of Rossendale): My Lords, I must tell your Lordships that if this amendment is agreed to, I shall not be able to call Amendment No. 53.
The Lord Bishop of London: My Lords, I am glad to support this amendment, but I do so on less abstract and more practical grounds than the noble Lord, Lord Mishcon, has attributed to the Bench of Bishops.
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I want to say a few words on behalf of the charities, which have been advised that they are in grave danger should it be possible for some company to register in a name which is very closely related to their own and which might, therefore, deflect gifts and interests from a particular charity which the donor would wish to benefit. Therefore, for the charities this is an important issue. I hope also that it may be made as simple as possible because it is difficult for charities always to keep an eye on the London Gazette and know what is happening. They would wish that this should be done as easily as possible.
There is a particular area of which I am entirely ignorant but as regards which I am told that it is a practical possibility for this matter to be computerised and that a computer could indicate if a name was similar to something that was already registered. A warning light would go up, and the appropriate authority would be able to see that the matter was remedied. It is difficult for charities constantly to keep an eye on publications that might be carrying this information, and therefore they hope that they can be protected and that it can be done as simply as possible.
Lord Trefgarne: My Lords, the noble Lord, Lord Mishcon, during the course of his remarks indicated that he would want to move this amendment separately and then, one way or another, move, or at least speak to, subsequent amendments which suggest a rather different approach to this problem. My response will, I hope, subsume both this amendment and subsequent amendments. Certainly my answer to this amendment will, I hope, be helpful to some extent to the noble Lord.
I am therefore suggesting to your Lordships that we in fact have a single debate on this matter. It is not open to me of course to dictate to your Lordships on this or any other matter, but I shall make my principal speech on this topic now and I hope that that will be agreeable to your Lordships. I should like first to outline briefly the considerations relating to company names, as distinct from registered business names, to which we shall come later in the Bill, which caused the Government to draft the relevant clauses of this Bill as we did.
For some years now the discretion vested in the Secretary of State to refuse to allow similar or confusing names for new companies, or companies seeking to change, has been exercised only with the greatest difficulty. The noble Lord, Lord Mishcon, referred to industrial difficulties, as indeed there have been, but there have been others as well. Indeed, during the last two years or so it has been possible to give only the most cursory inspection to proposed names, and inevitably therefore some names are now being allowed which in former times would not have been permitted. Indeed, the noble Lord, Lord Mishcon, referred to a specific example. Thus one at least of the principal purposes for which the registrar maintains his staff and his facilities is not being achieved.
These difficulties are not of the registrar's making. They stem from the large number of applications and existing companies to which he must give his attention, and indeed the fact that the ingenuity of those whose task it is to devise new names is approaching its limit.

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Another difficulty with the old system is that the responsibility for turning up resemblances and associations between names rested solely on the department. The registrar's staff had to check tens of thousands of applications annually against the index—in many cases twice over. It is this aspect of the 1948 Act which has proved incapable of proper administration, as the number of incorporations has increased. We have had some help from modern technology, and company names (with other details) are now all recorded in a computer. That will enable the registrar to continue to take the responsibility for sifting out names which duplicate existing names, as the Bill provides in Clause 22(1)(c). But the computer does not help when it comes to the subjective question of whether one name is in practice likely to be confused with another. That involves a human judgment, and the question is how we can keep within manageable bounds the number of cases to which that judgment has to be applied.
Thus, in the context of our general policy relating to the need to contain and where possible reduce the size of the apparatus of Government, we came to the conclusion that we should in future rely on other measures to prevent this mischief. Accordingly, we proposed that the registrar should in future only disallow a name which was identical to an existing one and that in other cases the remedy of a "passing off" action should be available.
These proposals have been the subject of considerable comment, not least in your Lordships' House. The Government have therefore looked again at this matter to see if there was any way we could modify our ideas so as to meet in whole or in part the concerns expressed without unduly eroding the envisaged saving in resources. It seemed to us that our proposals as drafted, logical and effective though they were, overlooked one particular point, namely, the psychological effect upon would-be promoters of the Registrar's discretion. The noble Lord, Lord Mishcon, and others have brought forward certain proposals, the essence of which is contained in Amendment No. 55.
The Government are therefore now willing in principle to agree to amendments akin to those proposed. For the reasons I have described we cannot agree to go along the road proposed by this amendment, giving the Secretary of State wide discretion, which is also the burden of the amendments tabled by my noble friend Lord Mottistone. I regret that I cannot accept Lord Mischon's Amendment No. 55 exactly as drafted because, for example, it does not provide for an accelerated registration procedure where this is desirable. However, the Government accept in principle the amendment and undertake to bring forward appropriate amendments either at Third Reading or during consideration in another place.
With that assurance, I hope that noble Lords who have expressed concern about this matter will be satisfied, anyway for the moment, and will not press this amendment, or indeed the others relating to the same point. I think they include Amendments Nos. 59 and 60, which relate to the question of change of company names, to which of course the same criteria could apply.
Lord Mishcon: My Lords, I have heard the expression that half a loaf is better than none, but I feel that I
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am being offered a fraction less than half a loaf, and in accepting it would not be protecting, not would your Lordships, those whom we ought to be protecting. Only one sentence and I shall have finished. If the noble Lord the Minister had quoted again to the House what was quoted last time, I think he would have nullified most of his arguments. The figure quoted last time, with all the 800,000—and I must repeat it to your Lordships—was that only 300 objecttions came forward, which meant perfectly simply that the registrar was managing to cope and was doing his duty, and doing it very well.
Lord Trefgarne: My Lords, I hope that the noble Lord will not mind my intervening. The noble Lord complained bitterly that the registrar was not doing his duty. He drew your Lordships' attention to a case which I think he regarded as regrettable.
Lord Mishcon: My Lords, the noble Lord the Minister, I am sure, does not wish to mislead the House. I made it absolutely clear that this occurred during the time when there was industrial trouble in the registry, and when therefore what the Government now seek to do was in fact the practice, unfortunately, of the registry for that short time; namely, there was no check for similarity of names. This is what happens, and these are the demands that occurred.
I do not feel that I can carry the argument any further than I have done already. I hope that your Lordships will feel that this is a duty we have regardless of any political point at all. There is no politics in this that I can see. Therefore, I hope that the amendment will find favour with the House.
7.20 p.m.
On Question, Whether the said amendment (No. 52) shall be agreed to?
Their Lordships divided: Contents, 43; Not-Contents, 58.

CONTENTS

Amherst, E.

Mishcon, L.

Ardwick, L.

Monson, L.

Aylestone, L.

Noel-Baker, L.

Balogh, L.

Oram, L.

Beaumont of Whitley, L.

Peart, L.

Beswick, L.

Ponsonby of Shulbrede, L.

Boston of Faversham, L.

Ritchie-Calder, L.

Bruce of Donington, L.

Ross of Marnock, L.

Collison, L.

Seear, B.

David, B.—[Teller.]

Seebohm, L.

Davies of Leek, L.

Spens, L.

Elwyn-Jones, L.

Stewart of Alvechurch, B.

Greenwood of Rossendale L.

Stewart of Fulham, L.

Hale L.

Stone, L.

Hatch of Lusby, L.

Strabolgi, L.

Houghton of Sowerby, L.

Taylor of Mansfield, L.

Howie of Troon, L.

Underhill, L.

Kilmarnock, L.

Wallace of Coslany, L.

Llewelyn-Davies of Hastoe, B.—[Teller.]

Wells-Pestell, L.

White, B.

Lloyd of Kilgerran, L.

Wigoder, L.

London, Bp.

Wynne-Jones, L.

NOT-CONTENTS

Airey of Abingdon, B.

Brougham and Vaux, L.

Atholl, D.

Chelwood, L.

Avon, E.

Cockfield, L.

Belstead, L.

Colville of Culross, V.

Boardman, L.

Craigavon, V.

Bolton, L.

Davidson, V.

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De Freyne, L.

Macleod of Borve, B.

Denham, L.

Noel-Buxton, L.

Drumalbyn, L.

Norfolk, D.

Eccles, V.

Northchurch, B.

Ellenborough, L.

Orkney, E.

Elliot of Harwood, B.

Portland, D.

Elton, L.

Rawlinson of Ewell, L.

Ferrers, E.

Reay, L.

Fortescue, E.

Romney, E.

Gainford, L.

St. Aldwyn, E.

Gormanston, V.

St. Just, L.

Greenway, L.

Sandys, L.—[Teller.]

Grimston of Westbury, L.

Selkirk, E.

Home of the Hirsel, L.

Sharples, B.

Hornsby-Smith, B.

Skelmersdale, L.—[Teller.]

Hylton-Foster, B.

Strathclyde, L.

Kemsley, V.

Swinton, E.

Lauderdale, E.

Teviot, L.

Linlithgow, M.

Trefgarne, L.

Long, V.

Trenchard, V.

Lyell, L.

Trumpington, B.

Mackay of Clashfern, L.

Vaux of Harrowden, L.

Mackintosh of Halifax, V.

Vivian, L.

Resolved in the negative, and amendment disagreed to accordingly.
7.28 p.m.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 53:
Page 29 line 30, after ("as") insert ("or too like").
The noble Lord said: My Lords, this may commend itself to your Lordships especially for its brevity. According to the Bill as drafted, it is possible to prevent a company from being registered only if the name is the same as that appearing on the index. My amendment is designed to insert after "the same as" the words "or too like". Some of your Lordships may say that this is identical to the previous amendment, but it is not; it is totally different in many respects, in particular because I am quoting from Section 18(2) of the Companies Act 1948.
Those of us who have been in practice at the Patent Bar or have been associated with chartered patent agents, Institute of Trade Marks agents or business people on this question of the similarity of names and the confusion that it causes, are somewhat unhappy about using the phrase "confusion is likely to be caused", which was the wording in the previous amendment. The simplest way to say it, in our view, is to say that if one name is too like another in the opinion of the registrar, then that name should not go on the register. The words "too like" are small, simple, Anglo-Saxon words and are preferable to "confusion is likely to be caused", and I therefore commend the amendment as one which is supported by industry at large to avoid the piracy of trade names which, as I have said, is rampant. I beg to move.
Lord Trefgarne: My Lords, I had rather thought that the reply which I offered to the last amendment would have covered this one as well. I accept that the proposal put forward by the noble Lord, Lord Lloyd of Kilgerran, is not the same as the proposal put forward by the noble Lord, Lord Mishcon, in his amendment which your Lordships have just considered. All the same, I hope that the noble Lord, Lord Lloyd of Kilgerran, will agree that the concession which I indicated that I was prepared to consider in respect of an amendment which we shall reach very shortly will indeed cover the matter that is worrying him and that therefore he will not see fit to press his amendment.
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There are a number of difficulties of a technical nature regarding the noble Lord's amendment. I could go into these if the House is interested, but I hope that what I have already said will be sufficient to persuade the noble Lord not to press the amendment.
Lord Lloyd of Kilgerran: My Lords, the concession which the noble Lord has made does not seem to me to go anywhere towards dealing with the question that is established in statute in the Companies Act 1948 with regard to the question of registration where two names are too alike each other. In my view, this is a matter of very considerable importance. The concession made by the noble Lord the Minister with regard to the previous amendment did not carry much weight, apparently—we had to divide. In the circumstances, I wish to press this amendment.
7.33 p.m.
On Question, whether the said amendment (No. 53) shall be agreed to?
Their Lordships divided: Contents, 39; Not-Contents, 47.

CONTENTS

Amherst, E.

Llewelyn-Davies of Hastoe, B.

Ardwick, L.

Lloyd of Kilgerran, L.—[Teller.]

Aylestone, L.

Balogh, L.

Mishcon, L.

Beaumont of Whitley, L.—[Teller.]

Monson, L.

Morris, L.

Boston of Faversham, L.

Oram, L.

Brooks of Tremorfa, L.

Peart, L.

Bruce of Donington, L.

Ponsonby of Shulbrede, L.

Collison, L.

Ritchie-Calder, L.

Craigavon, V.

Ross of Marnock, L.

David, B.

Seear, B.

Davies of Leek, L.

Stewart of Alvechurch, B.

Elwyn-Jones, L.

Stewart of Fulham, L.

Goronwy-Roberts, L.

Stone, L.

Greenwood of Rossendale, L.

Underhill, L.

Hale, L.

Wallace of Coslany, L.

Hatch of Lusby, L.

Wells-Pestell, L.

Houghton of Sowerby, L.

White, B.

Howie of Troon, L.

Wigoder, L.

Kilmarnock, L.

NOT-CONTENTS

Airey of Abingdon, B.

Long, V.

Avon, E.

Lyell, L.

Belstead, L.

Mackay of Clashfern, L.

Boardman, L.

Mackintosh of Halifax, V.

Bolton, L.

Macleod of Borve, B.

Colville of Culross, V.

Noel-Buxton, L.

Cullen of Ashbourne, L.

Norfolk, D.

Denham, L.—[Teller.]

Northchurch, B.

Drumalbyn, L.

Orr-Ewing, L.

Ellenborough, L.

Portland, D.

Elliot of Harwood, B.

Reay, L.

Elton, L.

Romney, E.

Ferrers, E.

St. Aldwyn, E.

Fortescue, E.

St. Just, L.

Gainford, L.

Sandys, L.—[Teller.]

Glendevon, L.

Skelmersdale, L.

Greenway, L.

Strathclyde, L.

Grimston of Westbury, L.

Teviot, L.

Harmar-Nicholls, L.

Trefgarne, L.

Home of the Hirsel, L.

Trenchard, V.

Hornsby-Smith, B.

Trumpington, B.

Kemsley, V.

Tryon, L.

Linlithgow, M.

Vivian, L.

London, Bp.

Resolved in the negative, and amendment disagreed to accordingly.
7.41 p.m.
Lord Mottistone Lord Mottistone had given notice of his intention to move Amendment No. 54:
Page 29, line 37, at end insert ("or undesirable").
Lord Morris: My Lords, I am speaking on behalf of my noble friend Lord Mottistone, who deeply regrets his inability to be here tonight. I can only say that his regret is matched only by my own. The purpose of the amendment is to try to regain the position as it was previously. The repeal of Section 17 of the 1948 Act has led to an unfortunate position. The test of "undesirable" was very plain. It was fundamentally intended to avoid misleading names—names that suggested various connections that did not exist. The rule has been that registration would be refused if the name of a company is too like the name of an existing company. This has worked perfectly adequately for 32 years. I am convinced that any change in this will cause harm.
I was astonished to hear my noble friend reiterating the same argument as in Committee, that this was really awfully difficult and expensive, and a problem that could not be handled by the Company Registrar in Cardiff. I cannot understand how Her Majesty's Government can believe they are still in the days of 1948. I will remind my noble friend of the computer application of this sort of work. Without any question of doubt, to search is the simplest application of computer work that can be imagined. Any computer company would gladly take on this task; and one girl with a reasonable computer and the proper software could process in the twinkling of an eye 500 applications with ease. That brings us up to 125,000 names per year, and the department itself has said that there are new registrations of approximately 60,000.
I am convinced that no one could belie that. There is something lying underneath the determination of the Government not to give way on this point, and I believe that in the long-term they will bitterly regret it. I think the answer which has been given is unsatisfactory. I believe that my noble friend Lord Mottistone would like me to say that he has not seized the point that Lord Mishcon suggested that he should, but he has been seized upon himself by yet another august body; namely, the CBI. They feel very strongly indeed about this point, and I feel sure that he will advise the CBI, as indeed I shall, to follow this point up with vigour when this Bill reaches the other place. With that, my Lords, I do not move this amendment.
7.44 p.m.
Lord Mishcon Lord Mishcon moved Amendment No. 55:
After Clause 22, insert the following new clause:
("Preparatory steps before registration of company
.—(1) Application shall not be made for registration of a company under the 1948 Act or for re-registration under that Act or the 1980 Act until 21 days after notice of intention to apply has been published in the Gazette, stating the proposed name of the company.
(2) Any person, being a body the name of which is entered on the index of names kept by the registrar in pursuance of section 23 of this Act, may make to the Secretary of State an objection in writing within 21 days after the publication in the Gazette of notice of intention to apply for registration or re-registration, but such objection shall be limited to an objection
426
on the grounds that the proposed name of the company is so similar to the name of the person making the objection that confusion is likely to be caused.
(3) The Secretary of State shall take account of any objection under subsection (2) above before deciding whether to permit the registration or re-registration of a company by a name to which objection has been made.").
The noble Lord said: As was indicated earlier, this is the longstop, the alternative that I would not have wished to commend to your Lordships, but the Division has spoken for the moment and in those circumstances I move this amendment. As I understood the noble Lord the Minister, he was saying that in principle this amendment is accepted as an alternative, the Government realising that something has got to be done to protect people—charities, companies, firms—against the possibility of a similar name. The procedure suggested in this amendment is one by which an advertisement is to appear in the Gazette showing what the name is proposed to be, and then giving an opportunity to objectors.
As the right reverend Prelate said, this is a difficult thing for people to do, and I am hoping very much that the Government, when considering the principle of this amendment (which, as I understand it, they are accepting), will also think of other ways to protect people, that being, as I understood from the majority of the speeches made tonight and at Committee, the desire of this House. I beg to move.
Lord Trefgarne: My Lords, I do not think I need to amplify the assurance I gave when speaking to the earlier amendment on this subject. I have undertaken that the Government will bring forward amendments embodying the spirit (if that is the right word) of what the noble Lord has proposed. There are certain additional features which we shall need to include and which do not appear in the amendment tabled by the noble Lord, but I hope that with that assurance he will feel able to withdraw his amendment.
The Lord Bishop of London: My Lords, I supported the previous amendment on the grounds of simplicity. I am grateful to the noble Lords who have tabled Amendment No. 55, and to the Government for having indicated that they accept it in principle, because this is a very important protection, especially, as I have been saying, for charities. I am grateful to the Government for accepting the principle of this amendment.
Lord Morris: My Lords, may I ask my noble friend whether Her Majesty's Government will be in time to table amendments on this particular point at Third Reading, or will that have to wait until the Bill reaches the other place?
Lord Trefgarne: My Lords, I cannot give an undertaking that amendments will he tabled by Third Reading. We shall do our best, but the pressures on the draftsmen being what they are, I fear that it may not be possible. But, of course, if the amendments are then included by the other place in this Bill, your Lordships will have a chance to consider them when the Bill comes back to us, as doubtless it will, in due course.
Lord Mishcon: My Lords, in view of what the noble Lord the Minister has said, and with as much gracious-

427
ness as I can command, I ask your Lordships' leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Trefgarne: My Lords, I understand that the usual channels have agreed that we should go no further tonight. Accordingly, I move that further consideration of this Bill on Report be adjourned.
Moved accordingly, and, on Question, Motion agreed to.

Criminal Attempts Bill
Brought from the Commons, read 1a, and to be printed.
British Railways (Victoria) Bill [H.L.]
Reported from the Unopposed Bill Committee with amendments.
  IMMIGRATION: APPLICATIONS FROM INDIAN DEPENDANTS
  IMMIGRATION: APPLICATIONS FROM INDIAN DEPENDANTS
  IMMIGRATION APPLICATIONS: BLOOD TESTS
  IMMIGRATION APPLICATIONS: BLOOD TESTS
  PRISONERS IN SEGREGATION
  PRISONERS IN SEGREGATION
  EEC REPORT ON LABOUR MARKET POLICY
  EEC REPORT ON LABOUR MARKET POLICY
  ST. GEORGE'S HOSPITAL, HYDE PARK CORNER
  ST. GEORGE'S HOSPITAL, HYDE PARK CORNER
  ARGENTINE EMBASSY STAFF: ALLEGATIONS
  ARGENTINE EMBASSY STAFF: ALLEGATIONS